As many banks refocus on their home markets, Banco Santander is an increasingly rare example of an international retail and commercial lender. Its effort, within this strategy, to develop a global franchise for small and medium-sized enterprises is even rarer today.
The aftermath of Covid-19 could see even more banks cut foreign operations and capital deployments, but Santander has shown the advantages that being part of an international franchise can bring.
The Spanish lender counts about four million SME customers around the world. In recent years, its acquisition of Banco Popular – which already had one of Spain’s best SME franchises – has given it a leading 25% market share among SMEs in its home market, with technological and branch integration completed in mid 2019. In Brazil, its acquisition of merchant payments system Getnet has proven a particularly effective way of boosting SME wallet share in Latin America’s biggest economy.
Santander’s home country was one of the first to be hit hard by the coronavirus. The bank’s quick reaction there – especially for its SME clients – gave leadership to other Spanish banks and, in particular, for the other parts of its own network.
“We’re going to support the economy as much as we can, in a prudent and responsible way,” Santander’s group executive chairman Ana Botín told Euromoney in April. That support saw the bank provide liquidity amounting to more than €45 billion to businesses in Spain after the coronavirus lockdowns hit in March. Even before the Spanish government unveiled a €100 billion state-guaranteed loans programme, Santander set up a €20 billion SME liquidity fund, with a special focus on the hard-hit and economically vital Spanish tourism and hospitality industries.
“We had done a lot of the legwork,” Botín said of the liquidity fund, “so when the government programme came we were ahead, as we had done a lot of the risk analysis already and we could actually disburse the funds to the companies much more quickly.”
Pattern
There is a similar pattern elsewhere in the network, with the bank often distributing proportionally more coronavirus liquidity than its existing SME market share in any given country. In Portugal, for example, it took 36% of the first tranche of that state’s business loan guarantee scheme. In Chile, where it is the country’s biggest bank, it made €5.4 billion available in pre-approved loans, including those for SMEs. Meanwhile, in Brazil, it joined the federal government and other banks in a fund set up to distribute €6.5 billion of SME loans and it introduced working capital loans for micro-entrepreneurs.
In many of Santander’s core markets it is now the only large international retail bank remaining. But it is working harder than ever to make sure this global network does not just offer income diversification for its shareholders but also product synergies and technology transfers for its clients.
We’re going to support the economy as much as we can, in a prudent and responsible way
Ana Botín
The creation of Santander Global Platform last year came largely in recognition of the greater ease of building an international SME franchise, especially in payments, in an era of increasing digitalization. The subsequent international rollout of Santander Merchant Platform Solutions – leveraging the success of Getnet in developing its SME business in Brazil – started in Mexico in April 2020, when the bank also bought out its local merchant payments partner Elavon México.
In another nod to its global offering, in November 2019, Santander spent £350 million buying Ebury, a UK-based trade and foreign exchange fintech company for SMEs around the world. The bank’s North America strategy is focused on developing the US-Mexico trade corridor, including for SMEs. Furthermore, October 2019 saw the formal launch of the Trade Club Alliance, a global 14-bank network for SMEs, similar to an airline alliance, and piloted by Santander. Santander also signed a bilateral SME referral agreement with France’s Crédit Agricole last year.
International benefits
The Covid-19 crisis has allowed Santander to demonstrate the benefits of being an international SME bank – even for companies too small to benefit from its global trade links and international transaction banking capabilities.
Take Poland, another country where Santander is the biggest international bank left standing and where the state has stepped in to replace other exiting European groups, such as UniCredit. Here too, Santander has distributed more government-backed liquidity than its existing SME market share – about Zl10 billion ($2.7 billion) – after it contacted firms early on to offer them payment holidays and overdrafts without fees. It has also made use of its strong IT platform: in the first three months of 2020 Santander saw a 12-fold increase in the opening of SME accounts through digital channels.
Elsewhere, Santander’s SME franchise has also stepped up to meet increased demand for digital solutions during the coronavirus crisis. As part of the internationalization of its payments business, the group launched e-Spug alongside Getnet Mexico, allowing merchants to make sales without having to use physical point-of-sales terminals.
