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Building a Global Bank

Building a Global Bank: The Transformation of Banco Santander

Copyright Date: 2008
Pages: 280
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  • Book Info
    Building a Global Bank
    Book Description:

    In 2004, Spain's Banco Santander purchased Britain's Abbey National Bank in a deal valued at fifteen billion dollars--an acquisition that made Santander one of the ten largest financial institutions in the world. Here, Mauro Guillén and Adrian Tschoegl tackle the question of how this once-sleepy, family-run provincial bank in a developing economy transformed itself into a financial-services group with more than sixty-six million customers on three continents.

    Founded 150 years ago in the Spanish port city of the same name, Santander is the only large bank in the world where three successive generations of one family have led top management and the board of directors. But Santander is fully modern. Drawing on rich data and in-depth interviews with family members and managers, Guillén and Tschoegl reveal how strategic decisions by the family and complex political, social, technological, and economic forces drove Santander's unprecedented rise to global prominence. The authors place the bank in this competitive milieu, comparing it with its rivals in Europe and America, and showing how Santander, faced with growing competition in Spain and Europe, sought growth opportunities in Latin America and elsewhere. They also address the complexities of managerial succession and family leadership, and weigh the implications of Santander's stellar rise for the consolidation of European banking.

    Building a Global Banktells the fascinating story behind this powerful corporation's remarkable transformation--and of the family behind it.

    eISBN: 978-1-4008-2833-3
    Subjects: Finance, Sociology, Business

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
    (pp. ix-xii)
  4. 1 Family-Led Banks in the Global Economy
    (pp. 1-17)

    Banco Santander is an oddity in the big leagues of global banking. Barely two decades ago, this proud financial institution was no more than a second-tier player in Spain, a country rarely if ever regarded as being on the cutting edge of banking. Nowadays, Santander is not only one of the worldʹs ten largest banks but also the pioneer in European cross-border banking acquisitions with its 2004 takeover of Abbey National in the United Kingdom, a deal worth US$15 billion. This book tells the story of Santanderʹs striking transformation from being a medium-sized Spanish bank to becoming the largest financial...

  5. 2 A Family Bankʹs Origins
    (pp. 18-31)

    The origins of Banco Santander have deep roots in the vicissitudes of the Spanish political economy of the nineteenth century, as the country struggled to adopt a political and economic model that would enable it to catch up with the more developed parts of Europe. During its first half century, the bank merely grew with the rest of the economy without differentiating itself from its rivals, its operations confined to a relatively small part of northern Spain in which it competed with other local banks. It was not until the early twentieth century that Santanderʹs executives made some crucial decisions...

  6. 3 The Industrial Group
    (pp. 32-50)

    If Banco Santander has a distinctive characteristic that sets it apart from its domestic competitors, it is its reluctance to get involved in the development of industrial or infrastructural activities. The bank has bought and sold stakes in nonfinancial companies, but has rarely seen itself as a long-term shareholder. After becoming a national bank during the 1940s and 1950s, Santander found itself at a crossroads during the 1960s. Spain had just embarked on a set of liberal economic reforms that, in due course, generated very rapid growth. The Franco regime—after two decades of economic stagnation—switched from autarky and...

  7. 4 Survival of the Biggest?
    (pp. 51-72)

    There are two schools of thought in retail banking, both in Spain and elsewhere. One point of view holds that only the fittest, that is, the best-managed banks, survive and succeed. In this view, building a strong capital base, developing risk management capabilities, investing in human resources and information systems, engaging in product differentiation and astute marketing, managing cash efficiently, and keeping costs low are the keys to high performance. According to this logic, both small and large banks can attain high levels of profitability.

    The other perspective claims that, with the unification and globalization of financial markets, size is...

  8. 5 The New World
    (pp. 73-110)

    Santander expanded in Latin America in two waves (Cardone-Riportella and Cazoria-Papas 2001). The first wave commenced shortly after World War II and ended at the start of the ʺLost Decadeʺ of the 1980s. The second wave, which involved Santander in the acquisition of major local banks and brought it to its present position, began in the early 1990s and really accelerated in the mid-1990s. The second wave represented Santanderʹs shift of the focus of its growth strategy toward Latin America. This significant change in focus was a response to a series of rather momentous trends and events that transformed the...

  9. 6 Alliances and Their Limits
    (pp. 111-130)

    If Santander disposed of most of its stakes in industrial firms while enjoying large capital gains in the process, its policy during the 1980s and 1990s of signing alliances with other European banks, which in some cases involved equity cross-shareholdings, has also resulted in substantial financial payoffs. The banking and financial services alliances we discuss in this chapter differ from the industrial stakes that we discussed in chapter 3 in that banking alliances are with firms in related businesses and so offer opportunities for learning, cost reduction, and future options; because industrial alliances are alliances with firms in unrelated businesses...

  10. 7 Back to Europe
    (pp. 131-154)

    Spain entered the European Economic Community in 1986, the same year that the Single European Act was adopted, a program of market integration and liberalization to come into affect on 1 January 1993. These events triggered much speculation about the future prospects of large Spanish firms in general and the banks in particular. As we explained in chapter 5, Spanish companies reacted by expanding throughout Latin America so as to grow in size and avoid unwanted takeovers. By the mid-1990s, the momentum toward the creation of a single currency accelerated, and in 1996 the conservative José María Aznar defeated the...

  11. 8 Managerial Style, Governance, Succession
    (pp. 155-188)

    From the point of view of corporate governance, Banco Santander represents a puzzle. It grew rapidly to become one of the worldʹs top ten banks while members of a family owning about 2.5 percent of the equity influenced strategic decision making by virtue of occupying the top managerial position and several board seats. The Botín family has managed to exercise influence over decision making well in excess of ownership not because of obscure legal provisions, pyramid schemes, or dual-class shares, but rather through a web of alliances and cross-shareholdings. This has in turn provided the bank with a measure of...

  12. 9 The Future of a Global Group
    (pp. 189-214)

    Santanderʹs remarkable trajectory is open-ended. It is hard to assess with accuracy how much the bank can continue growing and delivering good returns, whether it will successfully weather changes in the regulatory and competitive environment, and for how long members of the Botín family will continue to exert a decisive influence over governance and strategic decision making. In this concluding chapter, we look toward the future based on the trends of the past, while keeping an eye on possible contingencies and discontinuities. We begin by assessing Santanderʹs performance in terms of growth, efficiency, shareholder returns, and the quality and impact...

  13. Appendix A Chronology of Banco Santander
    (pp. 215-232)
  14. NOTES
    (pp. 233-240)
    (pp. 241-254)
  16. INDEX
    (pp. 255-266)