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Emilio Botín:
"Twenty years ago I would
never have dreamt that we
would be the ninth-largest
bank in the world" |
Botín: the man and his mission | Getting back to the Abbey habit | Awards for excellence - Best bank
EMILIO BOTÍN CALLS him the dealmaker. So when Juan Rodríguez Inciarte flew into London in the summer of 2004, it was with a specific – if surprising – purpose in mind.
Inciarte spent three days visiting branches of troubled UK retail bank Abbey. He took with him an expert in UK retail banking.
Inciarte, the CEO of Santander Consumer, turned up unannounced and pretended to be a customer, attempting to find out more about the bank's products. He wanted to know everything about Abbey's business – branch location, the quality of customer services, the scope of products.
After Inciarte flew back to Spain to meet his chairman, a decision was quickly made. Abbey had been identified as a chance to break into Europe's largest and most profitable banking market. Santander's expertise in retail banking would quickly halt, and then reverse, Abbey's slide in profitability.
Inciarte arranged to meet Luqman Arnold, the former UBS banker who in October 2002 had been appointed CEO of Abbey to sort out the mess on its balance sheet caused by the collapse of Abbey National Treasury Services.
Did Arnold know what was coming? He did not have to wait long to find out. Inciarte headed straight into questions about the business, such as the average number of customers per branch and the average number of products taken up by each customer. Arnold was a brilliant investment banker but had little experience of the retail market. These were not the sorts of numbers he had immediately to hand. Inciarte jumped in for the kill. "This is the reason why we should run Abbey," he is alleged to have told Arnold. A few days later, a deal was agreed. The Abbey board announced its recommendation of an all-share offer from Santander valuing Abbey at £8.5 billion ($15.5 billion).
Despite a concerted attempt by Abbey's rival HBOS to scupper the bid, the ground-breaking takeover was completed just 108 days after the initial offer.
The Abbey deal completed a remarkable two decades for the Santander group, during which it had grown from being the world's 152nd largest bank by market capitalization to the ninth largest, and the seventh largest by assets. It is widely regarded as one of the best – if not the best – retail banking groups. It operates in more than 20 countries, with growing businesses in Latin America and central Europe. And its successful takeover of Abbey, the largest cross-border bank merger in Europe to date, looks set to inspire a wave of consolidation throughout the continent's retail banking industry.
Stuff of dreams
"Twenty years ago I would never have dreamt that we would be the ninth-largest bank in the world, with projected earnings of over €5 billion," Botín, the chairman of Santander, tells Euromoney. "In the mid 1980s our profits were just €200 million."
But he says that the basic model has not changed throughout those 20 years. "We are always conservative and risk averse," he says. "Banks fail because they make bad loans. We are much more conservative than the industry in general."
Although now in his eighth decade, Botín still exudes enormous energy, with that hint of mischief that marks out the truly successful. His tie is red, the same hue as Santander's corporate colour. So are the ties of all his colleagues around the table. For someone who takes branding so seriously, Santander's corporate logo – a flame – is somehow appropriate. The fire still burns strongly within Botín, despite almost 50 years at the bank.
When Botín took over the reins of Santander from his father in 1986 at the age of 52, the bank was only the sixth largest in Spain. "We knew there had to be consolidation in Spanish banking, and that to survive and prosper Santander had to be one of the three largest banks in the country," he says.
Botín has become one of the greatest consolidators in the history of modern banking. Ask him the total number of acquisitions he has made in the past 20 years and he is unsure of the exact figure – it is at least 49. But he has no doubt which of them was the most important.
"We are very proud of Abbey, which represents one-third of the Santander group today. The takeover of Central Hispano was also crucial. But without a doubt the most important development in our recent history was buying Banesto. It changed the fabric of the bank. We knew if we wanted to be an international player, we needed to be the number one bank in our home market. Banesto made that possible. It was a quantum leap for Santander."
Tales of the purchase of Banesto are now the stuff of legend. The bank had run into trouble under the stewardship of its previous CEO, Mario Conde. It had been rescued by the Bank of Spain, which put it up for auction in 1994. At a board meeting, the price Santander should pay was discussed. After several hours, Botín called an end to the meeting and, away from prying eyes, wrote down the figure he thought would secure Banesto before sealing the envelope. Botín's bid won, but he and the board were worried he might have overpaid. They don't believe that now. "When we submitted the bid for Banesto we knew we could not afford to lose the opportunity. So we bid high. But what was €100 to €200 million in relation to the long-term success of the business?" Botín says.
The success wrought from the Banesto acquisition drives Botín's strategy to this day. "Banesto taught us that when a unique opportunity arises you have to take it. That was the case with Abbey. It was the only opportunity to get into the UK banking market. Now everyone is looking to go cross-border, but we have at least a 12-month head start."