Santander wants to succeed in European investment banking

Santander intends to become a major force in the European investment banking system by challenging Wall Street power plants, which have dominated the industry.

Ambition obviously goes to Europe’s largest retailer, which has spent most of the past four decades Building a consumer banking empire consisting of 20 countries, from the Spanish domestic market to Poland to the United States.

It also highlights the pressure on Santander to avoid the consequences of low interest rates, which have eroded the profits of its retail business. But as European competitors like Deutsche Bank reduce their investment banking, Santander believes there is an opportunity to take advantage of what he believes is growing. dominance US creditors.

“In Europe, it is fair to say that we have probably started a second or third tier [investment bank]Said Jose Maria Linares, who joined JPMorgan to expand Santander’s corporate investment banking division. “The ambition is to be one of the leading European banks.”

Jose Linares. “The question [when I arrived] it was not profitability, it was my size “

Investment banking accounted for 15 percent of Santander’s income in the first quarter of this year – 28 percent of its pre-tax profit, but most of it comes from the traditional strongholds of the Iberian Peninsula, Latin America.

For Santander CEO Anna Botin, who chaired the bank last year first annual loss During its 164-year history, when the epidemic devastated its consumer business, investment bank plans are highly dependent. Although Santander’s performance improved first quarter, the bank’s shares have continued to fall by almost 40% over the last four years.

Section Chart Chart as a Proportion of Total Gross Profit (%) of the Group, which shows Investment Banking is becoming more important for Santander

Linares acknowledged that the bank was never “everything for everyone”, but said it had already made great strides in several markets, rising in the standings of relative strength, such as high-quality loans.

Last year, it was the largest provider of project funding, providing funding for large-scale infrastructure և industrial projects, up from eighth in 2018, according to Inframation, an infrastructure data provider.

According to Bloomberg, the lender has retreated to the 16th largest player in the European investment-level debt capital markets in 2018 from the fifth of this year.

Linares, who joined the bank four years ago, hopes to expand his creditworthiness by building new businesses in areas such as M&A consulting, particularly working with private equity firms.

Competitors take Santander’s efforts seriously, but warn that the increase in scale is easier said than done.

“You do not become the top three just because you make a decision,” said the head of a European rival investment bank.

Efforts to enter the first row of investment banks in Europe have continued, despite Santander’s 2018 decision. To thwart the plan, hire Andrea Orsel, one of Europe’s most efficient business executives.

The expansion of the investment bank was part of a 10-point plan that Orsell made to Santander, according to an acquaintance, but his appointment ended in a massacre and ongoing legal battle.

Nor is Santander the only European lender with a chance. BNP Paribas prepares A similar drive, but before the epidemic, it had a much larger base of € 12 billion a year in its corporate-investment banking division compared to Santander’s € 5.2 billion.

Both banks benefited as US competitors reduced their appetite for European deals at the height of the epidemic. Until the first half of 2020, BNP topped the European charts of syndicated loans, according to Dealogic, Santander fell 15 places to third, although the Spanish bank is out of the top 10 this year.

“Europe must have a strong, healthy banking system, no doubt,” Linares said. “Obviously Americans can make a competitive bid, but I think our European customers in particular want to see European banks with them.”

The Madrid-based bank is also betting that a wave of deals related to the EU’s energy transition and digitalisation will help it achieve its goals in Europe, as well as Santander’s relationship with Europe’s small Mittelstand-style companies.

However, Santander is also pursuing his ambitions without a significant increase in staff. The balance of assets of the corporate investment banking system has risen from 4,350 in 2018 to 4,550 today, which remains weakened by people like Deutsche Bank և BNP.

But Linares insisted it was not an obstacle. “It has not grown tremendously, but what you have seen is a significant modernization of the human caliber,” he said. “I think it’s a business where you can have some really good people more than legionnaires.”

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