Just as the banking world mourns the loss of one of its elder statesmen, the death of 79-year old Emilio Botin, the executive chairman of Grupo Santander who did so much to create what has become a global banking behemoth, has been met with a barrage of corporate governance issues and questions.
You’d imagine the board had been dealing with the issues emanating from the potential death of don Emilio for some time; that’s what boards are supposed to do. In the circumstances, the cacophony around the succession is unseemly. That said, there is an immediate gap that needs filling to pacify shareholders and other stakeholders.
Ana Patricia Botin is the right person to succeed her father.
People have been casting aspersions about banking dynasties in the wake of the Espirito Santo debacle but this is different. Ana Botin has spent the past quarter century running group companies. She took over as CEO of the group’s UK operations in 2010 after Antonio Horta Osorio left to become CEO of Lloyds Banking Group. Prior to that, she spent years at the helm of Banesto, one of Spain’s previously ‘Big 7’ commercial banks (and a Santander subsidiary). She also served as CEO of Santander Investment, the group’s emerging markets-focused investment banking unit.
At the time, I recall well that Santander had one of the Street’s biggest EM prop trading desks and Ana built a reputation as someone with drive and an aggressive appetite for risk in those early swashbuckling days of the EM debt trading world of the early 1990s.
And that’s the point here: Ana Botin is no ‘lady that lunches’ billionaire’s daughter. She’s sharp, savvy and has experience of running both retail and investment banking businesses. There has been some chatter that she isn’t ready to take over as yet; I’m not entirely sure why people are saying that, but I disagree. She’s in her mid-50s and I think is perfectly placed to take over, providing some much-needed continuity and stability.
People have been moaning that don Emilio had far too much power over the board and over the direction of the bank – far more than the family shareholding warranted – so it would be inappropriate to appoint his daughter. I can see why on paper it might look a little odd in today’s world, but let’s face it, it’s all noise. In the real world of banking, the group needs someone who can carry on the mission and who is imbued with the culture
The house that Emilio built over the past two decades has been predicated on a dizzying array of takeovers in the group’s target markets. Don Emilio was a dealmaker extraordinaire: Santander made out like a king in the aftermath of the RBS/Santander/Fortis/ABN AMRO disaster. Santander ended up with Brazil’s Banco Real (one of the country’s leading banks) and was able to flip Italy’s Banco Antonveneta to Monte dei Paschi di Siena days after taking control of it for a €2.4bn profit.
Global footprint
On the globalisation theme, it’s noteworthy that Spain accounted for just 13% of first-half ordinary attributable profits. By the way, second quarter profits were the best of the past nine quarters, and the bank crowed that its first-half profit of €2.75bn was 22.2% higher year-on-year, or +40.1% excluding FX effects.
On the Spain number, sure you can argue that it says as much about Spain as it does about the don Emilio’s quest for globalisation. But the numbers are the numbers. Latin America accounted for 39% of those H1 profits; the UK 20%. And in terms of provenance of earnings, it was 69% retail, just 23% wholesale with the remainder private banking and wealth management.
The 1990s and 2000s were periods of massive growth. Santander and BBVA redrew the banking map in Latin America, engaging in an arms race to build market share in the region’s leading economies. Over a 10-year period – between 1997 and 2007 – Santander acquired Banco Geral do Comercio, Banco Noroeste, Banco Meridional, Banco Bozano Simonsen (a leading independent investment bank), Banco do Estado de Sao Paulo and then Banco Real in 2007. And that was just in Brazil.
Earlier in 2014, the group bought out the remaining 25% of its quoted Brazilian subsidiary for €4.69bn. That latest deal was seen as a strong pro-Brazil shout, which did rankle with some bank analysts, but at the end of the day it’s a business call about Brazil and its prospects.
Similarly in the UK, Santander acquired former building society Abbey National in 2004, followed by Bradford & Bingley and Alliance & Leicester in the depths of the financial crisis. Santander is the third biggest player in UK retail and consumer finance today.
What’s needed now is someone who knows the group inside-out who can take a profitable banking platform and transform it into one better suited to banking in the new paradigm – i.e. a bank focused less on making bolt-on acquisitions in a too-big-to-fail world and pushing relentlessly for revenue growth – one that has a more balanced approach and pushes equally for control of costs and risks.
Bring on Ana Botin.
Full disclosure
Which brings me to transparency: my first (tiny) mortgage was with Abbey National back in the mid-1980s and, as such, I was granted 100 free shares when Abbey demutualised in 1997. Naturally, when Santander took over Abbey in 2004 my share ownership transferred.
Following a series of rights offerings and capital raisings in which my rights were sold away from me, I am still the owner of a double-digit number of shares in Santander – on which I pay tax twice by the way: Spanish withholding tax and UK income tax. I just can’t be bothered to call the IR people to save the one euro and change I pay annually – consider it my contribution to Spain’s fiscal rescue plan.
Given there are almost 12 billion Santander shares outstanding, the level of my shareholding is whatever comes a couple of layers below infinitesimally pointless. Nonetheless, consider my statement one of due disclosure.
And no, I won’t be attending the EGM next week.
