Banco Santander's Brazilian unit, the biggest IPO of the year, lagged far behind much smaller Warren Buffett-backed Verisk Analytics in their stock market debuts on Wednesday -- a sign that valuation remains a key concern as the IPO market revives.

Initial public offerings by Santander and Verisk together raised nearly $10 billion and could pave the way for more flotations in the coming months as investors' appetite for risk gradually increases.

Shares of Santander Brasil closed their first day trading at 22.62 reais, down 3.7 percent in Sao Paulo, and at $13.01, or down 2.9 percent, on the New York Stock Exchange. Verisk finished at $27.22, up 23.7 percent on Nasdaq in one of the best debuts of 2009.

But while Santander Brasil executives tried to focus on the sheer size of a deal that raised 14.1 billion reais ($8.05 billion) with its IPO in Sao Paulo and New York, investors wondered whether it had been priced too aggressively.

The bank's price-to-earnings ratio of 17 times was above the market average of 15 for Brazilian banks, said Joao Augusto Frota Salles of consulting firm Lopes Filho in Rio de Janeiro.

The offering was very large and demand would have to be compatible with that, Salles said. You'd have to find enough investors that didn't enter the IPO to want to buy the stock today for the price to rise, and that's not what's happening.

The first sign of potential trouble came after shares priced at 23.50 reais, in the middle of the estimate range on Tuesday, rather than near the top or even above the range.

Normally, a new stock seeking a place in a portfolio with established comparable companies needs to price at a discount.

Rival Brazilian banks Bradesco and Itau Unibanco each fell more than 3 percent in Sao Paulo, likely adding to some downward pressure on the Santander unit.

The size of the float was not enough to explain the decline in the share price, an analyst with Connecticut-based investment firm Renaissance Capital said, pointing to the 28 percent first-day jump of credit card operator Visa Inc, after its record setting $19.6 billion IPO in March 2008.

The offering will add 1.43 billion euros in capital gains for the bank's Spanish parent, Santander said in Madrid.

Still, that the market absorbed two major IPOs in one day bodes well, one analyst said.

The size of the deals point to the market coming back ... Obviously if the deal is right, you will see tons of interest, said Bill Buhr, the IPO strategist for research firm Morningstar IPO Service.

BETTER PRICED, HIGHER JUMP

Verisk, in contrast, jumped 23.7 percent after it completed a $1.88 billion IPO, the largest by a U.S. company since Visa.

The company, which collects actuarial and underwriting data related to U.S. property and casualty insurance risks and was owned by a group of leading property and casualty insurance companies, will get none of the proceeds in the IPO.

A report by research firm Morningstar earlier this week said Verisk shares could be worth between $25 and $30, well above the $19 to $21 Verisk had estimated in its prospectus.

Verisk Chief Frank Coyne told Reuters that the company would hope to have a follow-on share issue once it is allowed to do so.

The company's connection to a well-known investor helped, analysts said. Warren Buffett's Berkshire Hathaway Inc was the only major Verisk shareholder not to sell shares in the IPO.

It immediately gives credibility because if he (Buffett) owns it you know he has done his work, and it is a positive vote on management, said Paul Lountzis, president of Lountzis Asset Management.

BRAZIL IPO OUTLOOK

Brazil's economy, the largest in Latin America, has emerged from a brief six-month recession and is expected to expand as much as 5 percent in 2010, which should boost demand for consumer finance and corporate loans.

Optimism over Brazil's growth has also thrust the country to the forefront of global capital markets. Two of the world's top three IPOs this year were by Brazilian companies -- the Santander sale on Tuesday and the VisaNet offering in July.

The Santander offering also surpassed the IPO by China State Construction Engineering Corp, which raised $7.3 billion in July.

The Santander IPO capped months of torrid activity in Brazil's stock market, which has had about 21.8 billion reais in share sales since late June. The offering also benefited from a growing appetite for emerging market securities that has pushed the Bovespa index .BVSP 68 percent higher in 2009.

Exchange operator BM&FBovespa is expecting strong IPO activity in the first half of 2010 as companies revive plans that had been shelved earlier this year because of the turmoil in global financial markets, Chief Executive Edemir Pinto said.

The Santander IPO is a victory for the local capital markets and it's proof of our capacity to host the largest offerings in the world, Pinto said. We are the hottest emerging market in the world at the moment.

($1=1.762 reais)

(Additional reporting by Guillermo Parra-Bernal in Sao Paulo and Phil Wahba in New York; Editing by Gerald E. McCormick, Bernard Orr)