Spanish banking

An interesting article appeared today in The Independent today which appears to validate a recent article I wrote about the credit crisis and its effects on property on the Costa del Sol.

This is of course the story of Santander taking over Bradford & Bingley. This is after having already acquired Abbey National and Alliance & Leicester.

Santander’s strength rests on what it calls its five pillar system.
These are:
Customer-focused management
Credit risk quality
Capital discipline
“Multi-local” management with a global vision

Using these strategies managed to turn around the failing Banesto (Spain) in only five years. This was followed by Banco Central Hispano (Latin America) and within a decade had become the largest bank in South America. And now, as we can see European banks are next on the list.

To get an idea of the size of the group, Santander currently consists of 131.819 employees, over 65 million customers, 11,178 branches and 2.27 million shareholders.
Its strength is in the fact the most of its revenue is generated in retail banking (82%). Retail banking refers to doing transactions directly with consumers, rather than large companies or other banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth. Unlike many US & UK banks which have been relying more and more on doing transaction with other banks to generate their profits. SIV’s being a good example.

This combined with regulation put in place by the Bank of Spain (again see previous article property for sale Costa del Sol) potentially means that it is therefore largely immune from market swings.

This is backed up by the article which states the group has made a 9 billion euro profit this year, that’s a 19.3% increase on the previous year. Normally impressive, in the current climate that is extraordinary!

Of course this might not be good news for everyone. Although Santander works on the premise of having many branches, as can be seen throughout the Costa del Sol, this is a lean company that has no compunction in shedding what it sees as wasteful. This will benefit its customers but might cost jobs.

What does the future hold for Santander? Simple really, like any good investor you have to keep your eye out for bargains.

Andrew Bellés

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2 Responses to “Spanish banking”

  1. Nick Hall says:

    I wonder if Santander will crack the american market given their current predicament, i’m sure they can find a bargain there?

  2. Andrew says:

    Dear Nick,

    interestingly enough, it appears that Santander will be cracking the US market, see link below

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