Spanish bank Bankinter SA (BKT.MC) intends to raise new capital to finance the purchase of the remainder of its Linea Directa insurance business, Chairman Pedro Guerrero said Thursday.

Bankinter last week said it would buy Royal Bank of Scotland Group PLC's (RBS) 50% stake in the Spanish car and motorcycle insurer for EUR426 million.

"This transaction will consume capital," Guerrero told the lender's annual general meeting. Considering the advantages of the deal and the support of big shareholders, the call for funds will be "well-received" by investors, Guerrero added.

Terms of the cash call will be determined at a later date, he added. Linea Directa had a 2008 pretax profit of EUR100 million.

Analysts had expected Bankinter to move to boost its capital to pay for Linea Directa, as capital ratios were stretched even before the purchase.

At the end of 2008, Bankinter's core Tier 1 capital - the tightest measure of a bank's ability to withstand credit losses - stood at 6.33%.

Nomura Securities analyst Daragh Quinn estimates that Bankinter would need to raise EUR330 million to rebuild its capital base following the purchase. Considering that recent cash calls have had discounts of 40%-50%, such a capital increase would increase Bankinter's share base by 21%.

Guerrero said the capital increase would allow Bankinter to improve its solvency levels, not just keep it at current levels, implying that the call for funds would be bigger than strictly necessary. Bankinter last raised new capital with shareholders in 1990.

At 1417 GMT, Bankinter shares were the biggest decliner in Spain's IBEX-35 benchmark index, down 2.7% at EUR9.

Bankinter is down 7.4% over the past 12 months, making it Spain's best-performing banking stock in the period. The Madrid-based bank has so far done better than peers in the current downturn, having the lowest non-performing loan ratio of all of Spain's banks.

Bankinter's largest shareholder, French bank Credit Agricole SA (ACA.FR), has in recent months raised its stake in the small Spanish lender to 22%. Nobody was immediately available at Agricole to say if it will take part in the capital increase.

Both Agricole and Cartival SA - an investment vehicle for Spanish banker Jaime Botin that owns 16.3% of Bankinter - have authorization from the Bank of Spain to reach a holding of up to 29.99% in the lender before May 31.

RBS is selling its stake in Linea Directa just months after the U.K. government took over majority control of the ailing lender. Hard hit by the global financial crisis, the bank has been exploring various ways to raise new capital.

Company Web site: www.bankinter.com

-By Christopher Bjork, Dow Jones Newswires, +34 91 395 81 23, christopher.bjork@dowjones.com

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