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Santander aims to become the leading force in European investment banks by challenging the Wall Street powers that have come to dominate the industry.
It is an ambitious exit for Europe’s largest retail lender, which has spent much of its past four decades building an empire of consumer banks across 20 countries, from the Spanish international market to Poland and the USA.
He also stresses the pressure on Santander to escape the effects of low interest rates, which have ruined profits in the retail business. But as European rivals such as Deutsche Bank are shrinking their investment banking operations, Santander believes there is an opportunity to take advantage of what they believe is growing unrest. dominance U.S. lenders.
“It’s fair to say in Europe that we probably started at two to three levels [investment bank]”, Said José María Linares, who has been hired by JPMorgan to expand the corporate and investment banking division in Santander. “The intention is to be one of the leading banks in Europe.”
Investment banking activities accounted for 15% of Santander’s revenue and 28% of pre-tax profits in the first quarter of this year, but most of it comes from the usual strongholds of the Iberian Peninsula and Latin America.
For Santander’s executive president, Ana Botin, who headed the bank last year first loss of the year When the pandemic destroyed the business of consumers in its 164-year history, there is a lot going on in investment banking plans. Despite improving Santander’s performance the first quarter, the bank’s shares have fallen by almost 40% in the last four years.
Linares acknowledged that the bank will never be “all things to all people,” but said it has made strong progress in several markets, raising league levels with relative strength as in high-level loans.
Last year it was the largest provider of project financing worldwide – providing funding for large infrastructure and industrial projects – compared to the eighth in 2018, according to Inframation, the infrastructure data provider.
According to Bloomberg data, the lender has gone from being the 16th largest player in the European investment debt capital markets in 2018 to the fifth this year.
Linares, who joined the bank four years ago, hopes to complete his credit skills by creating new businesses in areas such as M&A consulting, especially working with private equity firms.
Rivals are taking Santander’s efforts seriously, but beware that it’s easier said than done to add scale.
“You’re not the only one deciding to become one of the top three,” said the head of investment banks at a rival European.
Efforts to reach the top level of European investment banks have continued in 2018, despite Santander failing to secure a contract to hire Andrea Orcel, one of Europe’s top sellers, as CEO.
Expanding the investment bank was part of Orcel’s 10-point plan for Santander, according to a person who knew the subject, but naming his proposal was an honest and ongoing legal struggle.
Santander is also not the only European lender that sees the opportunity. BNP Paribas is doing it a similar boost but from a much larger base, with annual revenues of € 12 billion before the pandemic in the corporate and investment banking division compared to € 5.2 million in Santander.
Both banks benefited as U.S. rivals at the height of the pandemic reduced their hunger for European agreements. While the BNP outperformed the European tables of union loan agreements in terms of value in the first half of 2020, Santander rose to 15th place in third place, according to Dealogic data, although this year the Spanish bank came out of the top 10.
“Europe definitely needs to have a strong and healthy banking system,” Linares said. “Of course it’s good that Americans have a competitive offer, but I think it’s mostly because our European customers want to see European banks with them.”
The Madrid-based bank is committed to helping the EU achieve its goals in Europe in a flood of agreements linked to its push for energy transition and digitalisation, as well as Santander’s relations with small European Mittelstand-style companies.
However, Santander continues its intentions without increasing its staff. The number of corporate and investment banks has gone from 4,350 in 2018 to 4,550 today, which is down from those like Deutsche Bank and BNP.
Linares stressed that this was not an obstacle. “It hasn’t grown tremendously, but what you’ve seen is improving the level of people,” he said. “I think it’s a business where it’s more important to have very good people than legions.”
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