Diversification, key to the growth and strength of Banco Santander

One of the characteristic features of Banco Santander’s strategy is geographic and business diversification, which allows it to take advantage of its global scale and be a solid base for growth, especially in times of uncertainty. This is how Ana Botín, president of the financial group, explained it during her speech to the shareholders at the general meeting held last April: “Our model based on customer focus, scale and especially diversification is, in times of crisis, more resilient than that of our peers. Diversification proved to be a competitive advantage during the 2008 financial crisis, during the 2011 sovereign debt crisis, and during the pandemic. And she explains why Santander has always had one of the best results among European banks in the stress tests of the European Central Bank. It generates greater resilience in results, with our earnings per share being the least volatile among our peers in the last twenty years”.

The entity’s latest results demonstrate, once again, the effectiveness of this model. Until March, the entity has obtained an attributed profit of 2,543 million euros, 58% more than in the same period of the previous year. By region, Europe occupies first place in the first quarter and represents 34% (1,018 million euros); followed by South America, with 30% (900 million); and North America, with 27% (806 million). Digital Consumer Bank, which combines the consumer finance business (through Santander Consumer) and the technological capabilities of Openbank, consolidates its leadership in Europe and accounts for the remaining 9% (282 million).

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In addition, the bank is confident of achieving the objectives for 2022: revenue growth of around 5%; an ordinary RoTE above 13%; an efficiency ratio of 45%; and a fully loaded CET1 capital ratio of 12%. It also expects to maintain its policy of distributing 40% of ordinary profit to shareholders, divided equally between cash dividend and share buyback.

The entity is accelerating the transformation into One Santander, which it considers to be one of the key opportunities for the group in the coming years to grow organically. And the first step is One Europe. The project involves taking advantage of economies of scale in a way that allows for greater growth and a more efficient operating model. At the same time, this model will provide the bank with the necessary agility to respond more quickly to changes in the environment, and improve the offer and service to customers.

“Our goal is to create a better bank, in which customers and teams are connected, generate value in a sustainable way for our shareholders and have a positive impact on society,” they point out from the bank. For this, it has an action plan defined on three main blocks: increase the quality of the service through simplification at the regional level and the value offer; improve digital capabilities to offer comprehensive experiences (for example OneApp); and create a common operating model leveraged at scale in the region and within which technology is integrated.

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By country, the United Kingdom, with a profit of 375 million euros, and Spain, which obtained 365 million, lead the ranking of results in the region. For its part, the result of Portugal was 128 million, while Poland contributed another 112.

In South America, the strategy is focused on strengthening the connection and sharing best practices between countries, capturing new business opportunities. Santander hopes that the synergies will allow it to continue growing profitably, and increase customers and their loyalty. For the entity, this region “continues to have great growth potential, with opportunities for banking and progress in terms of financial inclusion.”

Brazil continues to be the undisputed market, with an ordinary profit of 627 million euros. The second position is occupied by Chile, which earned 188 million; followed by Argentina, with 59 million. Uruguay, Peru and Colombia, which added another 102 million, complete Santander’s map in South America.

Also in North America, which includes the United States and Mexico, the entity’s objective is to accelerate profitable growth and unify the regional approach, simplifying the business model to generate efficiencies and relying on the strengths of each country and on a joint value proposition. to improve the customer experience. The bank has already launched joint initiatives, such as promoting the commercial corridor between both markets.

Santander US continues to contribute sustainably to the group’s profit: it contributed 583 million euros. The subsidiary continues to make progress in simplifying its business model to concentrate it on four lines: consumption, companies, wealth management and corporate banking. In the case of Mexico, with a profit of 249 million, the focus is on multichannel innovation, the promotion of digital channels and the strengthening of the value offer to customers.

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By last, Digital Consumer Bank It is the European leader in consumer finance. The entity has a presence in 18 countries (16 in Europe, with recent launches in Greece, China and Canada) and more than 130,000 associated points of sale between car dealers and shops. In addition, it is developing direct and client-to-client financing capabilities. Openbank is the largest European 100% digital bank. Currently, it develops its activity in Spain, the Netherlands, Germany and Portugal, although it hopes to continue its expansion throughout Europe and America.

The increase in income and the improvement in the cost of credit boosted the profit of this business by 11% year-on-year, to 282 million in the first quarter of the year. For this exercise, the challenges are to strengthen its position in digital consumer loans, both in auto and in consumption in general; improve efficiency efficiencyby moving from autonomous banks to European hubs; and drive the rapid transition to the digital world to support the expansion of the customer base using these channels.

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