| SANTANDER, Spain
SANTANDER, Spain Banco Santander (SAN.MC), the euro zone's largest by market value, said on Friday that it aims for a modest 5 percent increase in its dividend this year, the same as last year, as it seeks to preserve money to strengthen its capital.
Chairman Ana Botin told shareholders in the Spanish port city of Santander that the bank would pay a dividend of 0.22 euros (0.17 pounds) per share against 2017 earnings, 5 percent more than last year.
Botin said the bank would pay three dividends in cash this year and one in shares or cash, known as a scrip dividend, against this year's earnings. Santander aims to pay 30 to 40 percent of its recurring profits in cash dividends.
Botin slashed the dividend in 2015 soon after she took over from her late father, Emilio Botin, who died of a heart attack the year before. In 2016, Santander increased the dividend by 5 percent and has said it aims to continue to increase it only gradually as it wants to strengthen its capital position.
Santander's shares have risen 60 percent over the past year, outstripping a near 30 percent rise on the European STOXX banking index .SX7P as it benefited from strong business in Brazil, its largest market. Its shares were flat on Friday.
Brazil helped it through a squeeze on margins in Europe, which are pressuring its peers.
While banks continue to struggle with ultra-low interest rates, Botin said the focus was on increasing market share with growth in fee income, mainly in cards, insurance and funds, which have more stable returns.
"We have a great platform to keep growing profitability. If IMF estimates are met, 2017 will be the first year since 2010 when there will be economic growth in our top 10 markets," she said.
Another priority was to sort out Santander's business in the United States, where it has failed stress tests for three years in a row despite its efforts to meet the standards, Chief Executive Jose Antonio Alvarez said.
Alvarez said Santander would improve risk control and better comply with regulations in the United States in 2017, adding that it had made significant progress last year in complying with requirements.
"We know what needs to be done to compete successfully," Botin later told shareholders in a speech.
Santander pledged to improve its consumer protections in an agreement with the U.S. Federal Reserve announced last month.
Santander has been under fire since 2015 when U.S. regulators faulted the bank for charging unfair rates for auto loans.
(Editing by Angus Berwick and Susan Fenton)