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Grupo Santander (Spain)

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Grupo Santander is Spain's largest financial group by far, also the biggest by value in Europe and one of the world's top ten outside China. In terms of retail branches, it is also one of the biggest, with 12,950 outlets spread across 40 countries. Because of its concentration on retail rather than investment banking, the group successfully sidestepped the credit derivatives crisis which eviscerated so many of its US and European rivals during 2008. Instead, through sure and steady expansion, it has established itself as the largest financial services group in Latin America, and the third largest consumer finance business in Europe. It acquired the UK's Abbey in 2004, followed by Sovereign Bank of the US, and got bigger still in 2007 following acquisition of ABN Amro's interests in Latin America. The extraordinary turbulence of 2008 provided several further acquisition opportunities, establishing Santander as Europe's biggest bank by market value. However, Spain's domestic financial problems took a little of the shine off overall performance over the following few years until the country's recovery after 2013. It strengthened its domestic position even further in 2017 with the rescue of failing rival Banco Popular for a nominal sum.

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Click here for Adbrands Account Assignments. Santander reported advertising expenses for 2014 of €654m

Competitors

Santander's principal rivals in Spain are BBVA and Caixabank. See Financial & Insurance Sector for other companies

Brands & Activities

Santander was named Best Bank in the World in 2005 by trade publication Euromoney, the first time that award had ever been made to a Spanish bank. It captured the prize for the second time in 2008, and then again in 2012. It was named the Best Bank in Spain for four consecutive years from 2008 to 2011, and took the country award for Argentina, Poland, Mexico, Portugal and the UK in 2012. Few would argue with the repeated accolades. In a period in which many of its rivals came close to collapse, Santander showed itself to be virtually immune from such troubles. As a result of its focus on retail banking, which now generates more than 70% of revenues, it was prohibited by Spanish regulations from diversifying into the sort of securitised assets which lay at the heart of the subprime crisis, and the bank has also long maintained careful control over its levels of debt.

Another key factor in the high regard in which Santander is generally held is its stated focus on products and service that are always "simple, personal and fair", and on a mission to earn "the lasting loyalty of our people, our customers, shareholders and communities".

As a result, although its asset portfolio was certainly affected by the brutal decline in property prices, Santander was one of the few European banks more or less unscathed by the market turbulence. Another key advantage is that it derives the majority of its funding requirements from its own customer deposits rather than from capital markets. Nevertheless, not even Santander was immune from the fallout from the subsequent Bernard Madoff investment fraud. Although the bank itself lost only €17m in that giant scam, it had invested more than €2.3bn of wealthy clients' money with Madoff. Clients from Latin America were worst affected. Santander agreed to pay out a total of €500m in compensation, and the former head of the wealth management unit which made the investments was subsequently charged with criminal mismanagement of client funds.

Santander is quite tightly focused on retail and commercial services in nine main countries in Europe and the Americas, although it has a presence in many more. It serves a total of around 117m customers - of whom around 53m are considered to be active customers, and 12.2m "loyal" regular customers - through what is now the world's largest banking network, comprising 12,950 branches.

The core of its business lies in Spain, where it until recently it has operated through two retail brands, Santander itself and the separate Banesto banking business. Santander was the bigger of the two, more than twice Banesto's size by gross revenues. Banesto was positioned as primarily a small business bank, while Banif was the group's private banking business. During 2013 the Banesto and Banif brands were phased out in favour of a single unified Santander. It maintains a separately branded online banking service under the Openbank brand. Total customer numbers were 12.6m in 2014. Santander Totta is the third largest bank in neighbouring Portugal.

In 2017, Santander strengthened its position in the domestic market even further with the rescue of struggling rival Banco Popular for the nominal price of just 1 euro. Popular had already put itself up for auction, but most bidders were frightened off by the potential failure of the bank. Santander will raise €7bn in capital from its own shareholders to refinance Popular's balance sheet. The deal significantly boosts Santander's profile among small and medium sized businesses, an area where Popular is considered to be especially strong.

The group's second most important European market is now the UK, where it snapped up a string of troubled local businesses during the 2000s to build a commanding local presence. The first of these was Abbey, rescued from near-collapse in 2004, and nursed back to financial health. In a clear demonstration of that turnaround, in the same year that Santander was named for the second time as the best global bank, Abbey was named as the best British bank, an accolade that would have been unthinkable four years earlier. In the heat of the year's banking crisis, Santander seized the opportunity to add two more UK brands to its portfolio with the acquisition of both Alliance & Leicester and Bradford & Bingley. As a result, Santander ended 2008 as the country's second largest mortgage lender and the #3 bank by deposits. All three businesses merged under the Santander name during 2010.For 1Q 2016, Santander had approximately 13.5% share of the UK financial services market (according to GfK / JGFR), in second place by brand behind Barclays. It was the #3 mortgage lender, behind Lloyds and Nationwide, with 11.9% share of gross lending.

Also on 2010, Santander acquired a 70% stake in Poland's Bank Zachodni WBK, and launched a bid for the remaining shares in early 2011, with a total valuation of $5.8bn. In 2013, Zachodni merged with local rival Kredyt Bank to create Poland's #3 bank.

A succession of other purchases, including the local vehicle finance and credit card businesses of RBS and GE Money, have established the group as a major force in consumer lending in several other European markets including Germany, Italy and Scandinavia. Santander's credit card portfolio now includes more than 67m cards in 11 countries. It is already the leading consumer finance house in Germany, and extended its presence there further in 2010 by acquiring the local branch network of Swedish bank SEB for €555m. That gives it a collection of more than 300 outlets in Europe's largest economy.

The group is also now the largest financial services group in Latin America, holding leading positions in major local markets including Brazil, Mexico, Chile and Argentina. This dominance too has also been built through acquisition, most recently of ABN Amro's Banco Real in Brazil, now merged into the existing Santander Banespa business. As a result, the group operates almost 6,100 branches across the continent. It is now the #3 private sector bank in Brazil by assets, #3 in Mexico, #1 in Chile and #1 among private banks in Argentina. In Autumn 2009, the group issued an IPO for its Brazilian subsidiary under the banner of Banco Santander Brazil, raising $7bn in funds. It was the world's largest public offering in the year, and the biggest ever in Brazil. A similar exercise in 2012 floated 25% of Santander Mexico, raising almost €3.3bn. Reversing its strategy on the back of strengthening economic conditions, Santander offered €4.69bn in 2014 to buy back the publicly held shares in its Brazilian business.

The group took its first steps into North America in 2005 with the acquisition of a minority stake in Sovereign Bank, operating mainly in the US Northeast. In 2008, Santander agreed to acquire the remaining shares of the now struggling Sovereign at a tenth of the price it paid for the initial stake. It expanded its consumer lending operations in 2010 through the acquisition of a large portfolio of car loans from HSBC for around $4bn in cash. Sovereign has a network of just over 720 branches, and 1.7m customers. In 2013, following the strategy already executed in the UK, Sovereign rebranded as Santander USA.

In addition to its main retail banking businesses, Santander has a growing presence in other sectors including wholesale and commercial banking and asset management. For now, though, these areas contribute only a small proportion of revenues and profits.

The group's marketing portfolio includes a role as lead sponsor for the Ferrari Formula 1 racing teams (until at least 2017), as well as driver Fernando Alonso, and of McLaren drivers Lewis Hamilton and Jenson Button; and also the Santander Copa Libertadores football championship in Latin America. These were used as the primary focus for the rollout of the global Santander brand in place of acquired local brands.

Financials

Gross income peaked in 2012 at €44.99bn, before slipping back in 2013. The figure for 2014 was €42.61bn, up 2% on the year before. Net income has fallen from the highs of over €8bn recorded between 2007 and 2010, largely because of write-offs and provisions against bad loans in Spain and other markets. For 2012, attributable net profit plunged to a low of €2.28bn as a result of a €6.1bn provision against real estate loans in Spain, but has steadily improved since then, reaching €5.82bn in 2014. Total assets were €1,266bn at the end of the year.

Brazil is the group's single biggest market, generating 28% of gross income (€12.0bn) and 20% of operating profits. The UK and Spain generated 21% and 15% of profits respectively, with an additional 12% from global consumer finance.

Emilio Botin was the architect of the modern group, as well as a descendant of one of families which founded the original Banco Santander in the 19th century. He remained chairman until his death in 2014. Although he held only a small shareholding in the business, he wielded considerable influence, and two other family members sit on the board. His daughter Ana Patricia Botin, formerly chief executive of Santander UK, succeeded him as executive chairman in Sept 2014.

Background

The current group was formed from a series of mergers between Spain's leading banks during the 1990s. The original Banco Santander was founded 1857 by royal decree by Queen Isabel II of Spain to trade between the port of Santander and Latin America. The business expanded steadily over the course of the 20th century as a result of the acquisition of local rivals, but it remained primarily a regional bank until the arrival of executive chairman Emilio Botin in 1986. He launched the business on an aggressive but cautious expansion drive. Botin steered Santander towards acquisitions which would complement existing strengths rather than expose the group to risk merely for the sake of growth. Santander won a public auction for state-controlled Banesto in 1994, and became Spain's biggest financial institution four years later as a result of a merger with 3rd-ranked Banco Central Hispano.

At the same time, the group acquired a string of regional banks throughout Latin America, including Banespa of Brazil and Serfin of Mexico. Subsequently, the group moved into non-Hispanic markets with a series of purchases in Europe. Most of these were in the consumer finance sector, but in 2004 the group made an agreed offer for struggling British bank Abbey.Towards the end of 2007, Santander came close to agreeing the purchase of another UK mortgage lender, Alliance & Leicester, but talks foundered because of a disagreement over price. The following summer, reflecting the continuing squeeze in the market, A&L surrendered to a revised offer from Santander, worth around £1.3bn. According to press reports, that figure was less than half the offer rejected a year earlier. As the banking squeeze turned into a full-blown crisis in September, Santander was able to expand its UK profile still further, agreeing to take over the retail network and £20bn of customer deposits from another failing lender, Bradford & Bingley, for just £400m. B&B's £50bn mortgage and loans portfolio was nationalised by the UK government. The combined assets of Abbey, Alliance & Leicester and Bradford & Bingley transformed Abbey into one of the UK's biggest banks. All three businesses adopted the main Santander name during 2010. That summer, Santander agreed to acquire an estate of 316 additional bank branches from Royal Bank of Scotland for around £1.7bn. However completion of the deal was delayed repeatedly by IT problems and falling profitability at the branches in question. Santander eventually pulled out in Autumn 2012.

In the mean time, Santander had also continued to expand elsewhere. Its first move into the US came at the end of 2005 with the purchase of a minority holding in Sovereign Bank. In April 2007, Santander teamed up with the Royal Bank of Scotland and Fortis of Belgium to contest an agreed €67bn purchase of Dutch banking giant ABN Amro by UK's Barclays. The consortium successfully won that contest, and ABN Amro was broken up, with Santander taking control of various assets including its Latin American business, such as Banco Real of Brazil.

In a sign of the dealmaking skills of chairman Botin, one of the other businesses acquired in the ABN Amro break-up was Banca Antonveneta of Italy. Having acquired that business for around €6.6bn, Botin sold it on a week later for €9bn, making a €2.4bn on the turn.In 2008, the group acquired several consumer finance businesses in the UK and Germany from General Electric's GE Money, and snapped up UK mortgage lender Alliance & Leicester for around half the price it had offered in unsuccessful negotiations a year earlier. Later the same year it also rescued the branch network and customer deposits of another UK lender, Bradford & Bingley.

However, at around the same time, a shadow was cast over Santander's CEO Alfredo Saenz in relation to Banesto, the bank acquired by the group in the 1990s. In 2009, Saenz, who had then headed Banesto, was found guilty by a Spanish court of making false accusations of fraud during the 1990s against four of the bank's heavily indebted clients in order to pressure them to repay their loans. Although he lost a subsequent appeal, the Spanish government pardoned him in 2011 because of his long years of service to the financial industry. This, and other cases of political lenience towards Spanish bankers, prompted outrage in the media, and Spain's financial regulator eventually agreed in 2013 to consider whether bankers with criminal convictions should be barred from holding office. To avoid the embarrassment of a public ban, Saenz agreed to resign voluntarily as CEO in April 2013.

Last full revision 28th July 2016

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