Banco Santander
Banco Santander S.A., trading as the Santander Group, is a Spanish multinational financial services company based in Santander. It is the fourth largest bank in Europe by assets, with 2.251 trillion dollars in assets, and the sixteenth largest banking institution in the world.
| Banco Santander S.A. | |
|---|---|
| Type | Public |
| Traded as | BME: SAN, NYSE: SAN |
| Industry | Banking, financial services |
| Founded | 1857, Santander, Spain |
| Headquarters | Santander and Boadilla del Monte, Spain |
| Area served | Europe, North America, South America, Asia |
| Key people | Ana Botín (executive chair), Héctor Grisi (CEO) |
| Products | Retail banking, corporate banking, consumer finance, wealth management |
| Services | Santander UK, Santander Bank, Santander Consumer Finance, Openbank |
| Total assets | US$2.251 trillion |
| Subsidiaries | Santander UK, Santander Bank N.A., Santander Brasil, Santander Consumer Finance |
| Website | santander.com |
Although best known for its European operations, Santander has extended across North and South America and more recently into continental Asia, and maintains a presence in most global financial centres. It is designated a systemically important bank by the Financial Stability Board and has been a Significant Institution under European Banking Supervision since late 2014, directly supervised by the European Central Bank. It is a component of the Euro Stoxx 50 and ranked 49th in the 2023 Forbes Global 2000.
The bank is chaired by Ana Botín, the daughter and granddaughter of former chairmen, a continuity of family leadership unusual among banks of its size.
History
Origins and Latin American expansion
Banco Santander was founded in 1857 as Banco de Santander, serving the trade of the northern Spanish port from which it takes its name.
It expanded substantially in Latin America during the mid-1990s and early 2000s through a series of acquisitions, including Grupo Financiero InverMexico in 1996 and Grupo Financiero Serfin of Mexico in 2000. These operations became an important source of group earnings in subsequent decades, and particularly after the financial crisis of 2007 and 2008, when the diversity of its geographic base cushioned the effect of the Spanish property collapse.
Historical research has emphasised that the success of the Latin American expansion depended not only on the acquisitions themselves but on the integration of management practices and on how the group deployed information technology across the region, allowing it to run acquired banks on common systems.
Merger with Banco Central Hispano
In 1999 Santander merged with Banco Central Hispano, itself formed by the 1991 merger of Banco Central and Banco Hispanoamericano. The combined institution, Banco Santander Central Hispano, was presented as a merger of equals in which the senior executives of both predecessors would share control.
The arrangement did not hold. Former Banco Central Hispano executives soon accused the Santander chairman Emilio Botín of pursuing his own agenda and threatened legal action. The dispute was resolved when the executives José Amusátegui and Ángel Corcóstegui accepted severance payments, retired and ceded control to Botín, at a cost to shareholders of 183 million euros.
The size of the payments produced considerable negative comment, and Botín was brought to trial on criminal charges of misappropriation of funds and irresponsible management. In April 2005 the court cleared him of all charges, finding the 164 million euros in retirement payments lawful and made as compensation for services provided to the bank. In the same year the anti-corruption division of the Spanish public prosecutor's office cleared him in a separate insider trading case.
The bank reverted to the name Banco Santander in August 2007.
British and American acquisitions
On 26 July 2004 the group announced the acquisition of Abbey National plc. The transaction was approved by shareholders, 95 per cent of Abbey votes being cast in favour despite vocal opposition from many present at the meeting, and Abbey became part of Santander on 12 November 2004.
In June 2006 Santander bought almost 20 per cent of Sovereign Bank, with an option to acquire the whole bank exercisable from the middle of 2008, when its market value was around 40 dollars a share.
In May 2007 the bank joined Royal Bank of Scotland and Fortis in an offer for ABN AMRO, taking a 28 per cent share of a consortium bid funded by a new share issue. In October 2007 the consortium outbid Barclays and acquired ABN AMRO. Santander took the Brazilian subsidiary Banco Real and the Italian subsidiary Banca Antonveneta. The ABN AMRO transaction proved catastrophic for Royal Bank of Scotland, which required government rescue the following year, but Santander emerged well from it, having taken assets it could integrate and sold what it did not want.
It sold Banca Antonveneta to Banca Monte dei Paschi di Siena in November 2007, excluding the subsidiary Interbanca, which it sold to GE Commercial Finance in March 2008 in exchange for GE Money businesses in Germany, Finland and Austria and GE's card and vehicle finance operations in the United Kingdom, integrated into Santander Consumer Finance.
In July 2008 the group announced the purchase of Alliance and Leicester, holding 24 billion pounds in deposits across 254 branches, completing in October. In September 2008 it acquired the savings business of Bradford and Bingley, with 22 billion pounds of deposits, 2.6 million customers, 197 branches and 140 agencies, after that bank was nationalised. By the end of 2010 both had been merged with Abbey National under the Santander UK brand.
In October 2008 the group agreed to acquire the 75.65 per cent of Sovereign Bancorp it did not already own for approximately 1.9 billion dollars. Because of the financial crisis, Sovereign's share price had collapsed, and Santander paid less than three dollars a share rather than the 40 dollars it would have cost in 2006. The purchase gave it its first retail bank in the mainland United States, rebranded under the Santander name in October 2013.
Later developments
In November 2009 HSBC Finance Corporation agreed to sell its United States vehicle loan servicing operations and one billion dollars of receivables to Santander Consumer USA for 904 million dollars in cash, closing in the first quarter of 2010.
In September 2010 Santander purchased Bank Zachodni WBK from Allied Irish Banks, and in February 2012 agreed with KBC Bank to buy its Polish subsidiary Kredyt Bank. The two were merged to create the third largest bank in Poland, valued at about five billion euros, with 9.6 per cent of deposits, 8.0 per cent of loans, 899 branches and more than 3.5 million retail customers. Santander held 76.5 per cent of the combined bank, KBC about 16.4 per cent, and KBC subsequently sold its remaining stake.
In 2017 Santander acquired Banco Popular Español for one euro under the European resolution framework, after the Single Resolution Board determined the bank was failing. The transaction wiped out Popular's shareholders and junior bondholders and gave Santander a substantially larger position in Spanish small business lending, and it was the first use of the European Union's new bank resolution regime.
Ana Botín became executive chair in September 2014 following the death of her father Emilio Botín.
Controversies
Madoff exposure
On 14 December 2008 it emerged that the collapse of the Bernard Madoff Ponzi scheme could mean losses of 2.33 billion euros for Banco Santander, the greater part of it through its Optimal hedge fund business, which had placed client money with Madoff. Santander subsequently offered compensation to affected private banking clients in preferred shares, an arrangement criticised by some investors as providing less than full restitution while protecting the bank's capital position.
Banco Popular resolution
The one euro acquisition of Banco Popular in 2017 generated extensive litigation. Former shareholders and bondholders argued that the valuation underpinning the resolution was flawed, that information provided before Popular's earlier capital raising had been misleading, and that the process favoured Santander. Spanish and European courts have largely upheld the resolution, and Santander made voluntary compensation offers to retail investors, but cases continued for years.
Andrea Orcel appointment
In 2018 Santander announced the appointment of the UBS banker Andrea Orcel as chief executive, then withdrew the offer in January 2019, citing the cost of compensating him for deferred pay forfeited on leaving UBS. Orcel sued for breach of contract. A Madrid court awarded him approximately 68 million euros in 2021, reduced on appeal to around 43 million euros. The episode was an unusual public dispute over executive pay at a major European bank and was widely reported as a governance failure.
Mis-selling and conduct
Santander UK has been subject to regulatory action over conduct, including a 12.4 million pound fine by the Financial Conduct Authority in 2014 for unsuitable investment advice, and a 107.8 million pound fine in 2022 for anti-money laundering failings in its business banking division. The group has also faced claims in Spain relating to the sale of complex products to retail customers, including the convertible instruments issued during its 2007 capital raising.
Vehicle finance in the United States
Santander Consumer USA, a substantial subprime vehicle lender, settled with attorneys general of more than 30 American states in 2020 for approximately 550 million dollars over allegations that it had extended loans to borrowers it knew were likely to default and had failed to monitor dealer conduct adequately.
Family control and governance
The succession of three generations of the Botín family in the chairmanship has attracted recurrent comment from governance specialists, who question the concentration of influence in a systemically important institution where the family's direct shareholding is small relative to its control. The bank's position is that appointments are made by the board on merit and are subject to supervisory approval.
See also
References