Santander – who is behind the world's 5th most profitable bank?

He is known as El Faraon, the Pharaoh: Emilio Botín Sanz de Sautuola García de los Ríos – the 74-year-old godfather of Spanish banking.

What does it take to almost single-handedly catapult a sleepy Spanish bank from a position of relative obscurity to the world’s fifth most profitable financial institution?

One anecdote serves to illustrate Botín’s ruthless determination and business acumen. In 1999, Botín recognised that Santander needed to gain critical mass to achieve its plans for global expansion. A merger was struck with rival Banco Central Hispano (BCH) that would make Santander a partner in what was at the time the eurozone’s third-largest bank by market capitalisation, as well as the top foreign player in Latin America, with a combined investment of $4.3bn in 11 countries. At a stroke, the combined group had a 20% share of the Spanish banking system and 22 million customers, making it the world’s biggest bank in relation to domestic market size. In the final meeting before the launch, Botín suggested the name should be Banco Santander Central Hispano. The BCH team, lead by CEO Ángel Corc-stegui, protested: it was too much of a mouthful and the market would almost certainly shorten that to “Santander”.

Botín shrugged his approval, and on the way out of the meeting he was heard to mutter, “We’ll see what it’s called in a few years’ time.” And so it came to pass, with the eventual acrimonious departure of the BCH leadership and the reinstatement of the Santander franchise. As one analyst put it, “Botín was Botín, Corc-stegui was an employee.”

Very happy birthday
Last year, Santander celebrated its 150th birthday and it had good reason to celebrate the event, as the world’s 12th largest bank by market cap, the 7th in terms of profit and the bank with the largest retail network in the western world, with 10,852 branches. But 2008 represents another landmark in the bank’s history: it was 50 years ago that Botín joined the “family bank” — the Botín clan is believed to own up to 15% of the group’s share capital, in direct holdings and nominee accounts.

Botín has never shied away from the role of mould-breaker, nor is he unduly concerned about raising hackles in the banking community. In 1989, with Botín occupying the dual posts of chairman and CEO, Santander broke rank with its rivals by launching the “super cuenta”, Spain’s first high-interest current account that effectively abolished a cosy cartel and opened the market to a period of ferocious competition.

That same year, Botín launched Santander on the international stage by agreeing an alliance with Royal Bank of Scotland, taking a 2.6% stake in the UK bank in exchange for selling 2.8% of Santander to RBS. It was clear that Botín, apart from having access to St. Andrews to indulge his passion for golf, was determined to exploit his Scottish connection to master the art of Anglo-Saxon banking. One of the first fruits of this effort came in 2003, when he set up Santander Consumer by merging German company CC-Bank, the Italian Finconsumo, Hispamer in Spain and other group companies. This consumer banking franchise now has a presence in 12 European countries (Spain, UK, Portugal, Italy, Germany, Poland, Czech Republic, Netherlands, Austria, Hungary, Norway and Sweden), in the US through Drive Finance, and it has recently struck an agreement to start its first operation in Chile.

In the habit
The Great Leap Forward came in 2004 when Botín shocked the international banking world by taking over Abbey, Britain’s sixth largest bank. At that time few analysts bothered to cover Santander and almost no one in Britain had ever heard of the Spanish bank. But that all changed with the recent addition of mortgage lenders Alliance & Leicester and Bradford & Bingley to the Santander stable. Suddenly, Santander is a major force in British banking, with more than 10% of the UK mortgage market.

Botín knows the financial markets will eventually emerge from the current downturn and he can afford to wait. The bank has been virtually unscathed by the credit crunch, in no small measure thanks to the ultra-conservative policies of the Bank of Spain, Europe’s toughest regulator, which refused to allow banks to hold the toxic products that brought down the likes of Lehman Brothers and Merrill Lynch. Hence Santander is in a position to record another year of healthy growth.

Of course, Botín is not the bank’s sole decision-maker ­ the market and shareholders would never put up with a one-man-show at one of the world’s largest banks. CEO Alfredo Sánez, senior VPs Matías and Juan Rodríguez Inciarte and Francisco Luz-n, have fulfilled the role of key strategists in the group’s expansion in Latin America, Europe and the US. Nor should one overlook Botín’s daughter, 47-year-old Ana Patricia, whom Forbes lists as one of the world’s 100 most powerful women and who is viewed as a strong contender for her father’s job. Lest she get her hopes up, Botín once replied to a question about his successor at a press conference by saying, in her presence, “There are many contenders for the top spot.”

But to the world at large, the names of Emilio Botín and Santander are inse parable. Four years ago, Botín moved the entire Madrid central operations and 6,800 employees to Santander City, a sprawling, (euro) 480m state-of-the art complex covering 370 acres of scrubland 11 miles from the city, which has been dubbed “Botínopolis”. The new headquarters reveals Botín’s determination to remain on top. From his enormous glass-enclosed office, Botín enjoys a panoramic view of the 7,000-foot Guadarrama range a few miles to the north. He also has a bird’s-eye view from which to observe the activities of his executive staff.

Botín shows no interest in putting his feet up and if he follows in the footsteps of his forebears, Ana Patricia and other hopefuls will need patience. Botín’s father, and namesake, was 84 when he reluctantly stepped down as chairman.

WORLD'S BEST
Santander was recently named Best Bank in the World by Euromoney. Emilio Botín couldn’t attend the London awards ceremony, but accepted the award via a videolink from Spain.

After the usual words of thanks, Botín said he would like to say a few words to the London financial community. His words must have made many a banker choke on their pudding: “Santander is one of the few banks to have successfully come through the turbulence of last year unaffected by toxic instruments,” Botín said. “You may ask how it is possible. Well, let me tell you. If you don’t fully understand an instrument, don’t buy it. If you will not buy for yourself a specific product, don’t try to sell it. If you don’t know very well your customers, don’t lend them any money. If you do these three things, you will be a better banker, my son.”

Simple words, and wise – and available on YouTube.