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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.

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