Angel Ron

Angel Ron

As a concession to strategic planning, he now has a three-year plan but he won't look further ahead than that. The current strength of the economy makes it easy to forget how much Spain has changed and how quickly. As Angel Berenguer of the University of Alcalá de Henares in Madrid commented in the aftermath of last month's traumatic elections: " Spain is a very old country but a very young democracy."

Ron has lived through the end of a dictatorship, the assassination of a president, a failed coup, a banking crisis and an economic boom. On the day we met, Andalucian shipbuilders were demonstrating on the street outside, and the conversation was punctuated by angry shouts and firecrackers. A week later, there were explosions in Madrid and the reverberations were felt around the world.

Ron comes from Santiago de Compostela, an ancient Christian pilgrimage site on the wild Atlantic coast of the northwest. Perhaps his origins explain his manner. He is calm, humble, reflective. It seems it's more the fact that he speaks quietly and people listen that marked him out for the job.

Ron has been with Popular ever since he left university. After four years in the regional offices in Santiago, he moved to Madrid, until he was posted out again to be regional head of Asturias-Cantabria. And then back to Madrid as head of the branch network.

Twenty years immersed in the machinery are reflected in his management style. "The key to our success," he says, "is to focus on our key objectives and transmit those values to every branch. Everything is oriented towards profitable growth."

International renown

Popular might be dwarfed by SCH and BBVA, the big two of Spanish banking but it is widely considered to be one of the best-run banks in the world. More important, it has the strongest credit rating and the highest return on equity in the Spanish market. It has grown 45% and added a million new clients since Ron took over as CEO three years ago.

Ron faced an intimidating legacy when he took over the reins from Luis and Javier Valls, brothers who are legendary figures in the Spanish banking market. They remain involved in the bank as co-chairmen, but they are removed from day-to-day decision-making.

Ron is at his most self-effacing when asked how he went about establishing his own authority as the boss. "Obviously it's important to have a strong leadership in place," he says. "But it's also fundamental that the objectives and criteria of the bank can be identified with the leader. In that sense, the bank doesn't have any leadership problems because we still have the figures who formulated the strategy."

For Ron, Banco Popular is an idea, and the role of the management is to interpret that idea within an evolving context. "The brothers defined our strategy and our main challenges," he says. "It is up to the current management team to try to adapt that strategy for changing circumstances."

That has meant deepening the commercial culture ? a greater emphasis on cross-selling and more incentivization for branch managers. "Historically, managers' packages have been based largely on fixed compensation," he says. He has already introduced one bonus scheme that can amount to 25% of salary for managers and the new three-year plan (2004-07) has a further incentive plan on top of that.

He has introduced a system in which customers can earn a discount on their mortgage repayments by buying additional products. Across the group, Popular averages three additional products to each mortgage client.

In the next three years, Ron wants to see the bank's net earnings break through the e1 billion barrier. Last year they were e714 million. It won't be easy. He senses a renewed push for business from the big two in the domestic market. And the market itself is shifting.

For the past few years, Spanish banking has been driven by a mortgage boom. But the historically low rates that have fuelled it cannot last for ever. Ron has been predicting the end of that particular gravy train since 2002. Last year's strategy was designed to prepare the bank for it.

"We've used a period of relatively benign conditions to prepare for a more difficult period that we see ahead. We were positioning ourselves to capitalize on whatever takes the place of mortgages while our competitors were busy with mergers or subsidiaries in Latin America."

In 2002, mortgages were responsible for 80% of the bank's growth. In 2003, that was down to 66.6% and Ron expects it will continue to decline in importance.

If there is a flaw in the Popular approach, it is over-reliance on the Spanish market. Some commentators have suggested that the bank will be vulnerable when the big two return their attentions to the home market, or if the Spanish market were to stutter.

Steeped in Spain

But Ron acknowledges that the business remains primarily local. "We've decided to focus on Spain because it's what we know. It's true that we're concentrated, but also that we're set up to survive different phases in the Spanish market." He argues that Popular is set up to respond quicker to changing circumstances than the competition.

Nevertheless, Popular has now begun to make tentative steps at diversification. Last year it acquired Portuguese bank BNC in a e520 million deal. On the prospect of further deals he says little. "Our main advantage in the long term is that we have a model that works," he says. "We are in the process of exporting it for the first time with our Portuguese acquisition. It's not easy to see how things will play out in future, but it certainly could work in other markets."