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WorldNovember 1 2017

Ana Patricia Botín looks to maintain Santander's global momentum

The executive chairman of Santander Group, Ana Patricia Botín, tells Brian Caplen about the bank's purchase of Popular in Spain, what its global strategy entails, how it is meeting digital challenges, and why staff behaviour is as important as delivering results.
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Ana Patricia Botin

Q: The purchase of Popular has been described as the best deal in Santander’s history. Is that true?

A: Deals are good once you have executed them. And I think it’s a very, very attractive transaction in terms of the entry point, in terms of where Spain is, and its economy is in the cycle. But there’s a lot of work to be done now to make it a really excellent transaction.

Q: It’s a very different acquisition style from when Santander [under Ms Botín's late father Emilio] paid a very high price for Brazil’s Banco Banespa back in 2000?

A: The world has changed. We’re in a very different environment. My team and I don’t believe in paying too much. We think we have a fantastic opportunity to grow organically. But if there are opportunities in our core markets we will look at them and if we can get them at a good price we will take that opportunity.

Q: Why does Santander stick to 10 core markets, with a roughly 10% market share in each?

A: Retail banking is about critical mass; it’s many other things, but critical mass is a pre-condition, and we believe that being a top three bank or having the potential to be top three is very important. There is no hard number but we think a 10% market share is sort of where we can really compete and have a very competitive offer for our customers. That gives us the opportunity to grow

Q: How is the situation in the US, where the bank took several attempts to pass the stress test and the consumer operation has had accounting and consumer protection issues?

A: I said it would take us three years [to fix matters in the US] and it’s been three years, and we believe we are well on the way to being in the right place with the supervisors. For the first time since 2011, Santander US has paid a dividend to the group this year. It’s a small dividend, but it’s a signal that the supervisor believes we are on the right track. That is hugely important. 

We are showing much better numbers at Santander Bank NA. We are closing the gap with our peers in terms of margins, in terms of growth. And at Santander Consumer we’ve just appointed Scott Powell as country head in the US. He used to run the consumer business for JPMorgan Chase. He is one of the best CEOs we could have to run the consumer business. So we're already in a much better place.

Q: Now let’s turn to Brazil, which is contributing about one-quarter of Santander's group profits. Is that too much?

A: The past three years we’ve made huge progress in Brazil and Mexico. We’ve closed the gap in terms of return on equity, we’re the best in the country [in Brazil]. We’re very excited about the progress in Brazil, and what we now want is other countries to catch up with Brazil, so that is exactly the model to follow.

By the way, in some years Brazil is going to do better [in group terms], and at other times the UK [or somewhere else] is going to do better. And that is precisely the Santander model where for 15 years we’ve been delivering consistent profits, which is very rare for a bank.

Q: How is Santander approaching the digital challenge?

A: We think about the digital transformation in several ways, and one is transforming what we call the 'super tankers', the big commercial banks. And that is not just about transforming for efficiency, but really being what the customer wants us to be, and in the way the customer wants to do business with us today.  We also have initiatives that run parallel to that, and one of them is Openbank [relaunched as a 100% digital bank in June].

[Openbank] is amazing. With 70 [staff], it’s managing 1.1 million customers, almost €8bn in customer deposits. And it’s really very simple, easy to use and it does everything we do in the physical branches or in call centres. You can do [it all] on the mobile app in Spain. And we’re trying a new core system which might work for the rest of the group.

Q: How do you make the digital front end work with the existing IT?

A: It’s a lot of work, and it’s first about changing the front-end, it’s about having application program interfaces that allow you to connect with other parties – we’re working with third parties and other fintechs. That will then allow you to change the core. So the strategy is to reduce the core to the minimum level possible. The cloud strategy – which for us would be a hybrid cloud, because we’ll always have an internal cloud ourselves, as we’re big enough to do that – gives us flexibility but it also gives us security, and resilience to have both, to have a combination. So Openbank is a testing ground for that new core system.

Q: How are you working with fintechs?

A: We want to offer fintechs [through] Santander platforms, [which can be utilised] if our customers ask for services that we’re not able to give them, [we can point them towards, for example, US small business lender] Kabbage [which received money from Santander’s InnoVentures fund]. If we’re not approving certain [types of] loans, we then say: ‘Okay, but we’ll give you the opportunity to get these approved, and get the loans through Kabbage.’ What we want is to be very customer focused [in order] to bring [to our customers] the best that’s out there. If we can give it to you, fine, but if not, we are going to open up so others can work with us and with our customers.

Q: How does the bank share ideas such as the Santander Wallet across different countries?

A: It works like an internal open source, where one country develops [something and the idea is passed along]. That’s happening more and more in a very open way. We don’t force it. [Santander operations in some] countries are seeing what other countries are doing, and taking it and then improving it themselves, and then taking it to the next level. So it’s like an open source programme within Santander, that is really working well, because it gets improved all the time. It gets personalised for the market, but also it’s getting better for the customer.

Q: How important a development is blockchain in banking?

A: I don’t think it’s a [total] panacea. I don’t think today, at least, it works for [doing] millions of transactions a day or a minute, but it works for international payments, for example. We’ve tested it with our own people, with our own teams, and it works. We’re testing it now for our customers. It can make payments, especially international payments, cheaper and faster, and we have expectations that it’s going to really help us be more competitive.

Q: So it will be more suitable for commercial rather than retail banking?

A: It works for retail, but we still need to ensure that it’s scalable and can handle the kind of volumes that banks handle.

Q: And what about crypto-currencies?

A: Crypto-currencies are interesting and we are looking at some.  InnoVentures tries to find the best investment in each area. So in blockchain it has identified the two or three players that we believe have the most potential, and we are trying to partner with them for different projects.

Q: Santander has also been active in biometrics and voice recognition. What is the potential there?

A: There’s huge scope in the area of security and also for convenience. People forget their passwords, people write them down, tell people on the phone about them, so it really makes it a much safer and easier experience. In Chile we have our Work Café. You have facial recognition, there are no papers, it’s open to non-customers; it’s a bit like Starbucks, but it doesn’t look like a bank and customers love it. And non-customers become customers once they come to the Work Café.

Q: How is digital take up among Santander customers?

A: The target [which has been achieved] was to double [the number of digital customers] in three years, so go from 15 million to 30 million [out of 130 million customers in total]. We think that it’s going to grow exponentially and mobile customers are growing even faster. Brazil and the UK are the faster [digital] growth markets for us. In our 10 markets there are 1 billion people, and in Latin America there are 160 million people unbanked, so there’s a huge potential to grow in [mobile] products.

Q: Will many of the unbanked go straight to digital?

A: That’s what’s happening. One of our digital initiatives is [an app] called Superdigital. It has grown to half-a-million customers in just a few months. It’s actually not a bank account but it allows the client to pay and receive money.

Q: One of the big changes you have made is to corporate culture. What was your thinking?

A: I always say you need to change when things are going well, so from a position of strength. And Santander was in a very good place, but I think to succeed 10 years, 15 years down the road, we needed to change and make much more explicit what has been at the root of Santander’s success for 160 years.

Q: What does the logo 'Simple, Personal, Fair' mean?

A: It means that when you [an employee] don’t have a paper or a guide that is written, in terms of how to do things, how to develop a product, how to talk to a customer, how to treat a colleague, those are the three words that you need to go back to. We want to do things in a way that is simple and personal and fair for our teams, our customers, our shareholders and our communities. And that is the one thing you need to think about every day, all the time, as you go about your day to day job.

Q: How important is cost control for giving good customer service?

A: The only way we’re going to deliver fantastic service and fantastic products is if we’re very efficient ourselves. But I also care about being efficient in the right way – that is the big change from before. We were always very efficient but we didn’t always do things the right way, which goes into the culture. I care as much about how you do things as I do what you do and [whether to get] results.

Q: Will the cost-to-income ratio stay at about 46%?

A: We said three years ago it was going to be broadly stable. We’re investing a lot for the future, so the numbers don’t tell the whole story. We are investing a huge amount. We’re also saving in other areas and we’ll [clarify the target] in a new three-year plan next year. But I think what’s important is that we deliver every single one of our commitments in our three-year plan.

Q: How important is the 123 account in building customer loyalty?

A: The 123 account is at the heart of the strategy of Santander. It’s about loyalty, it’s about you banking with Santander, and Santander being your bank, your main bank. If I ask [a customer] ‘Who is your bank?’, they answer ‘Santander’.

Q: Currently 16 million customers out of 130 million would say that?

A: The goal is to grow by about 1 million a year, to go to 17 million by the end of 2018. We were at about 16.3 million as of June, so we’re making very good progress. And for our shareholders these customers are three times more profitable because they do more business with us.

Q: So is there a target on the fee income this would produce?

A: There’s not a goal. We don’t want a financial goal, we want more customers, happier customers who are going to do more business.  As a result, the fees will grow, and that’s the way we think about it today.

Q: You are also trying to encourage new types of employee behaviour such as speaking up. That’s not always easy in a large bank.

A: If people don’t speak up [about issues] we’re never going to get better, and it’s key that we need to improve every day and faster [than before]. We’re in a very fast-moving world and if we don’t hear from our people, if our people are not open to ideas from outside, it’s very hard. So speaking up is hugely important, but the other [new behaviours] are too, such as active collaboration.

Q: How do you measure success in this initiative?

A: One of the key things is that my incentive, payment and bonus and [that of] all my team, is based on behaviours more than on results. Don’t get me wrong, we want results; it’s a pre-condition and people that don’t deliver will not be here. But we want results in the right way, so we also want people to have the right behaviours because we believe that is the way to deliver for our customers and shareholders… Sometimes people do a great job but not in the right way and we need to ask them to leave.

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