Banco San­tander now looks to China

China Daily (Hong Kong) - - WORLD - By WANG JINHUI wangjin­hui@chi­nadaily.com.cn

De­spite slug­gish growth in the bank­ing in­dus­try, Spain’s Banco San­tander is tid­ing over the chal­lenge through its unique busi­ness model, said a se­nior ex­ec­u­tive at the euro zone’s largest lender by mar­ket value.

Juan San Ro­man, CEO of the bank’s Asia Pa­cific re­gion, said that to boost prof­itabil­ity, San­tander’s usual pol­icy is to fo­cus just on the mar­kets where it can achieve a sig­nif­i­cant mar­ket share, which al­lows for a bet­ter cost ef­fi­ciency ra­tio.

“We are not like other in­ter­na­tional banks, which like to have a pres­ence in all coun­tries around the world re­gard­less of its po­ten­tial mar­ket share,” said San Ro­man.

He added the goal for San­tander is to “ob­tain crit­i­cal mass”.

The bank cur­rently has 10 core mar­kets across the globe in­clud­ing Spain, Por­tu­gal, the UK, Ger­many, Poland, Brazil, Ar­gentina, Chile, Mex­ico and the US.

San­tander is play­ing a key role among all the banks in those coun­tries, par­tic­u­larly in re­tail and com­mer­cial bank­ing.

It is the largest bank in Chile by as­sets and eq­uity, with a mar­ket share of more than 20 per­cent, the sec­ond- largest in Ar­gentina and the third in Brazil.

By the end of 2012, Latin Amer­ica con­trib­uted about 50 per­cent of the group’s to­tal prof­its. San Ro­man said that is in part be­cause the bank has “used tra­di­tion­ally its cash flow from more ma­ture mar­kets to in­vest in the emerg­ing mar­kets”.

An­other as­pect of San­tander’s busi­ness model is its “pru­dent risk cul­ture”, he added.

It is one of the most ef­fi­cient banks in the world with the low­est cost-to-in­come ra­tio, even in the most ad­verse eco­nomic sce­nario, the CEO said.

In the past three years, its aver­age re­turn on eq­uity has been some 8 per­cent, ac­cord­ing to an in­dus­try re­port.

“Sep­a­ra­tion of risk from the busi­ness line has been crit­i­cal in pre­serv­ing fi­nan­cial san­ity,” said San Ro­man, not­ing that the risk man­age­ment op­er­a­tion at San­tander has al­ways re­ported di­rectly to the board.

Last July, San­tander was named Best Bank by the pres­ti­gious mag­a­zine EuroMoney.

The bank is also strongly com­mit­ted to sup­port­ing higher ed­u­ca­tion through its well-known San­tander Univer­sity Pro­gram.

Started 17 years ago, the pro­gram whose mis­sion is to “in­vest in cul­ture” be­gan to help uni­ver­si­ties han­dle schol­ar­ships, pro­fes­sor­ships, ex­changes of stu­dents and other aca­demic ac­tiv­i­ties.

Last year, it in­vested some $170 mil­lion in the pro­gram.

More than 1,000 uni­ver­si­ties have now es­tab­lished part­ner­ships with San­tander, in­clud­ing Ren­min Univer­sity, Fu­dan Univer­sity and Peking Univer­sity in China.

Busi­ness in China

In ad­di­tion to close aca­demic ties, San­tander also be­gan to shift its fo­cus to the huge do­mes­tic mar­ket in China, the sec­ond-largest econ­omy in the world.

In 2008, the bank opened its first branch in Shang­hai to serve the grow­ing trade and in­vest­ment flow be­tween China, Spain and the rest of the world.

“Shang­hai is a very large in­dus­trial cen­ter for multi­na­tion­als, and we have a lot of clients who have com­mer­cial ac­tiv­i­ties in the city,” said San Ro­man.

San­tander then started do­ing busi­ness with Chi­nese com­pa­nies in­vest­ing in Latin Amer­ica and Europe.

“That is the sec­ond phase of our cus­tomer de­vel­op­ment. Most of the com­pa­nies have a pres­ence in Bei­jing,” he added.

In China’s sec­ond-and third-tier cities, San Ro­man said the short-term dif­fi­culty lies in find­ing the “right strate­gic part­ner” to help fi­nance trade flows be­tween lo­cal op­er­a­tions and the bank’s global mar­kets.

San­tander is try­ing hard to find part­ners in China and has done well in car fi­nance, he added.

In De­cem­ber 2011, its sub­sidiary San­tander Con­sumer Fi­nance signed an agree­ment to cre­ate the joint ven­ture For­tune Auto Fi­nance with auto man­u­fac­turer Anhui Jianghuai Au­to­mo­bile Co, or JAC.

The joint ven­ture is now pro­vid­ing car loans through JAC’s deal­er­ships across the na­tion.

In April 2013, Banco San­tander was granted the ap­proval from China Bank­ing Reg­u­la­tory Com­mis­sion to be­come a strate­gic in­vestor of the Bank of Bei­jing Con­sumer Fi­nance Com­pany.

It will also take a 20 per­cent stake of BOBCFC, which is one of the four pilot com­pa­nies in China au­tho­rized by the State Coun­cil to of­fer con­sumer fi­nance prod­ucts to re­tail cus­tomers in the coun­try.

On Au­gust 1, Banco San­tander re­ceived a pre­lim­i­nary ap­proval from CBRC to es­tab­lish a Bei­jing branch. The branch is ex­pected to open dur­ing the first half of 2014.

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