The Santander business model

Transcription

1 The Santander business model Commercial focus Efficiency Disciplined use of capital and financial strength Santander brand Prudence in risk Geographic diversification and model of subsidiaries Banco Santander s business model provides substantial recurrence in results. Retail banking generates 87% of revenues. Santander has 102 million customers who are tended to via 14,756 branches, the largest network of any international bank. Geographic diversification in 10 core countries provides Santander with an appropriate balance between mature and emerging markets. The Bank s international expansion was achieved with subsidiaries autonomous in capital and liquidity, giving us advantages when financing and limiting the risk of contagion. The Group s technology and its control of costs make Santander one of the world s most efficient banks. Santander complied with the European Banking Authority s core capital requirement of 9% six months ahead of schedule. Santander did not need public funds at any time during the crisis and is one of the world s most solid and solvent banks. In an environment of tensions in financial markets, Santander s liquidity position has remained comfortable. Grupo Santander s non-performing loans ratio is below the sector s average in the main countries where it operates. Santander was recognized by Brand Finance as the fourth most valuable brand in the world. 18

2 Santander branch in Madrid, Spain Commercial focus The customer is the focal point of Banco Santander s activity. Grupo Santander s customer base has grown notably in the last few years and more than doubled between 2003 and (from 41 million to 102 million). The geographic distribution of customers was as follows: 40.8% in Latin America, 31.3% in continental Europe, 26.2% in the UK and 1.7% in the US. The Bank s retail business focus sets it apart from other global competitors, underlined by the fact that 99.8% of the Group s customers are in the segments of commercial banking and consumer finance. Branches help generate and maintain more lasting, greater value-added relationships with customers. Santander has 14,756 branches, the largest network of any international bank. In, Grupo Santander increased its distribution capacity with the addition of 674 branches, mainly as a result of the incorporation of new businesses in Poland and Germany and programmes to open new branches in high growth countries such as Brazil, Mexico and Argentina. In addition to this network, the Bank also has other channels, available around-the-clock, such as online banking, mobile telephone banking and telephone banking. In, Santander stepped up its investment in its call centres in the UK in order to improve its customer service. It also launched applications that enable it to operate via iphone and other mobile telephone means in some of the Group s banks. Group customers (Million) Santander Branch Network Banesto Portugal Bank Zachodni WBK Santander Consumer Finance Rest Total continental Europe United Kingdom Brazil Mexico Chile Argentina Uruguay Colombia Puerto Rico Peru Rest Total Latin America United States-Sovereign Total customers Customers Million Branches Number ,660 14,082 14,

3 Santander branch in Germany Quality of service and customer satisfaction Quality of service is a fundamental part of Banco Santander s strategy. In, customer satisfaction with the services provided by Banco Santander through various channels (branches, telephone and Internet) improved. Some 88.2% of customers said they were satisfied, generating greater linkage, proximity and loyalty, as well as higher customer revenues. In order to improve the quality of service, the Group has a corporate model called META 100, which has been extended to more countries year after year. The main objectives of META 100 are to reflect the voice of customers and integrate it into the Bank s businesses; establish a culture of quality (i.e. an organisation that is closer to and focused on customers) and generate dynamics of continuous improvement, centred on customer satisfaction. There was also a significant advance in in implementing the corporate model of complaints, which aims to unify the criteria applied in managing the customer attention services of the Group s various units. This model revolves around three elements: Policies to improve customer attention, confidence and satisfaction. Decision-taking structure based on agile and efficient governance systems, with reports made to the first executive level. Management of complaints in accordance with the prevailing regulations as well as the good banking practices that regulators require in each country. Banco Santander s professionals receive continuous training in order to inform and advise customers transparently and rigorously and provide the best service. In the last quarters of, programmes to foster this culture were put into effect such as El año del servicio in Chile, Nuestro estilo in Argentina and Impulsa tu lado Pro in Banco Santander Spain. The corporate function of Brand Customer Experience was also created, which oversees the consistency and coherence between the promise of the brand and the customer s experience. Santander has an advanced model for managing incidents called MIRÓ, which channels all the disagreements that the customer transmits to the Bank via various channels. The objective of MIRÓ is to achieve a quick resolution of complaints. It channels internally its treatment to specialised units and keeps the customer informed of the state of the incident. MIRÓ also identifies the main reasons why customers are not satisfied and the causes of the incidents so that steps can be taken to correct them. Customer satisfaction % of individual customers satisfied Santander Branch Network Banesto Portugal United Kingdom Argentina Brazil Chile Uruguay Mexico Puerto Rico Total Customer satisfaction by channel % of individual customers satisfied Branches Telephone Internet

4 Santander branch in Mexico Products and services Banco Santander has a wide range of financial products and services based on the risk profile of its customers and characterised, in all its markets, by anticipation and dynamism when launching new value offers. Of note among the products and services launched in were: In the UK, more than 100, Cashback credit cards, which return money to customers on the basis of the usage, were sold in the first two months after its launch. In Spain, Santander gave those customers with difficulties as a result of the crisis the possibility of a three-year moratorium on capital repayments of mortgages on their main home. Almost 6,000 customers have benefitted from the offer. In Brazil, agreements were signed with major companies, such as petrol distributor Shell and telecoms company Vivo (Telefónica), to launch credit cards with added advantages for the Bank s customers. In the US, the SMEs area of Sovereign launched the Boost Your Business programme, designed to attract new customers and increase the already existing linkage. This programme offers SMEs very attractive interest rates, new financial products and advice shared by specialists. Santander branch in Brazil Corporate school of commercial banking In order to improve Grupo Santander s commercial banking skills, the corporate school of commercial banking was created in. This project is supported and involves Banco Santander s senior management: the governing board of the school is headed by Mr. Alfredo Sáenz, the chief executive officer, and comprises senior executives responsible for the main countries and divisions. The school s mission is to gather the best commercial and business practices which make up the Group s commercial banking and promote their transmission in order to drive business development in the various units. The school also enables new countries that integrate into the Group to quickly and efficiently adapt to Banco Santander s commercial banking model. The school is structured into knowledge areas that respond to the various fields and/or segments of commercial banking. Each area has someone in charge and consists of expert teams for each of the matters arising from the countries in which the Group operates. The school capitalises on the best commercial practices of countries, in terms of products, services, quality, business intelligence, etc, and thereby becomes an extra competitive tool for the Group. The first phase of the school concentrated on individual customers. In, it also began to work on company and SME banking, taking advantage of the experience acquired and incorporated the new countries to its sphere of action (the US, Poland and Germany). Advertising campaigns in Brazil, the UK and Mexico 21

5 Grupo Santander City, Boadilla del Monte, Madrid, Spain Disciplined use of capital and financial strength Capital Strengthening the balance sheet is a priority for Banco Santander, which has quickly and efficiently adapted to the new capital requirements of international and European banking authorities, such as Basel III, regarding globally systemic banks, and the new requirements of the European Banking Authority (EBA). Banco Santander carried out various measures regarding capital in the last months of, allowing it to achieve a core capital ratio of 9% six months ahead of the EBA s deadline of June 30, According to the EBA, Banco Santander s additional capital needs amounted to EUR 15,302 million. This amount has been reached as follows: EUR 6,829 million of Valores Santander, which have to be converted into shares before October EUR 1,943 million through the exchange of preferred shares for ordinary new shares. EUR 1,660 million through the application of the Santander Dividendo Elección (scrip dividend) programme at the time of the final dividend for fiscal year. EUR 4,890 million through organic capital generation and the transfer of certain stakes, mainly in Chile and Brazil. Regarding the latter, Santander reached in December an agreement (implemented during the first week of 2012) to transfer 4.41% of Santander Brazil to a major international financial institution which will deliver such shares to holders of convertible bonds issued in October,, by Banco Santander, when these mature, pursuant to the terms of said convertible bonds. Liquidity Santander finances most of its loans with customer deposits, maintains comfortable access to wholesale funding and has many instruments and markets in which to obtain liquidity. In, Banco Santander continued to strengthen its liquidity with an increase of more than EUR 16,000 million in customer deposits, and debt issues that exceeded the year s maturities by more than EUR 8,000 million. All these issues were carried out without state guarantees. Active management of the business portfolio Santander made some selective sales in and obtained EUR 1,513 million of capital gains: The strategic alliance with the insurer Zurich to develop business in Latin America which generated EUR 641 million of capital gains. The entry of new partners into the capital of Santander Consumer USA. This operation valued the unit at $4,000 million and produced EUR 872 million of capital gains. Santander also reached an agreement to sell the Group s businesses in Colombia for $1,225 million (net gain of EUR 615 million to be recorded in 2012). Core capital BIS II. criteria. % Loan-to-deposit ratio ( * ) % Santander is one of the world s most solid and well-capitalised banks, and at no time has had to seek public funds. As a result, it has one of the best ratings among international banks (*) Includes retail commercial paper in Spain. 22

6 Grupo Santander s new data-processing centre in Cantabria, Spain Prudent risk management Prudent risk management has been a hallmark of Banco Santander since it was founded more than 150 years ago. Everyone is involved in risk management, from the daily transactions in branches, where business managers also have risk objectives, to senior management and the board, whose risk committee comprises five directors and meets for some 300 hours a year. Of note among the corporate risk management principles is that the risk function is independent of business. The head of the Group s Risk Division, Matías Rodríguez Inciarte, third vicechairman and chairman of the risk committee, reports directly to the executive committee and to the board. A low and predictable risk profile The board sets the Bank s risk appetite at a medium-low level. Some 86% of Grupo Santander s risk comes from retail banking. Proximity to the customer enables us to act rigorously and with anticipation when granting, monitoring and recovering loans. Santander has units dedicated to recovering unpaid loans, which, under a corporate model, are integrated as a business area in the Group s various countries and divisions. Santander has a highly diversified risk profile, with concentration of exposure to customers, business groups, sectors, products and countries subject to limits. These additional needs will be entirely met in 2012 as follows: EUR 1,800 million already charged against the Group s fourth quarter results, which lifted coverage of repossessed properties to 50% from 31%. EUR 2,000 million are a capital buffer required by the rules and which are covered by capital already held by the Group. The remaining EUR 2,300 million will be covered through capital gains which may be obtained during the year including EUR 900 million from the capital gain on the sale of Banco Santander Colombia and through ordinary contributions to provisions during Santander s exposure to real estate developers represented 14% of its total lending in Spain at the end of and only 4% of the Group s total loans, including repossessed homes. Santander s market share of this business is estimated at 10%, well below that of the Group s total business in Spain (14%). Moreover, Santander assigned EUR 1,513 million of capital gains obtained in to strengthening the balance sheet. *** Banco Santander s risk management principles are treated in more detail on pages 148 to 151 of this annual report. The Group has the most advanced risk management models, such as use of tools for calculating ratings and internal scoring, economic capital, price-setting systems via return on riskadjusted capital (RoRAC), use of value at risk (VaR) in market risk, and stress testing. Risk quality The Group s non-performing loan ratio increased to 3.89% in, but remains below the average on all the countries where it operates. In Spain, the NPL ratio was 5.49%, also well below the sector s average. After approval of Royal Decree Law 2/2012, which sets new requirements for cleaning up bad property loans in Spain, the Bank announced that the amount of provisions Grupo Santander in Spain needs to meet these requirements is EUR 6,100 million. Non-performing loan ratio % Coverage ratio %

7 Geographic diversification Grupo Santander has a geographic diversification balanced between mature and emerging markets (46% and 54% of profits, respectively, in ). The Bank focuses on 10 core markets: Spain, Germany, Poland, Portugal, the UK, Brazil, Mexico, Chile, Argentina and the US. The global areas also develop products that are distributed in the Group s commercial networks and tend to global clients. Contribution to the Group s attributable profit % United States 12% Mexico 10% Brazil 28% Chile 7% Argentina 3% Rest of Latin America 3% 24

8 Main countries. Other countries where Banco Santander has retail banking businesses: Peru, Puerto Rico, Uruguay, Colombia, Norway, Sweden, Finland, Denmark, Netherlands, Belgium, Austria, Switzerland and Italy. United Kingdom 12% Germany 5% Poland 3% Spain 13% Portugal 2% Rest of Europe 2% 25

9 Santander branch in Sao Paulo, Brazil Subsidiaries model Grupo Santander s international expansion was carried out via subsidiaries that are independent and autonomous in capital and liquidity: Capital: the local units have the capital required to develop their activity autonomously and meet regulatory requirements. Liquidity: each subsidiary develops their financial plans, liquidity projections and calculates their finance needs, without counting on funds or guarantees from the parent bank. The Group s liquidity position is coordinated by the ALCO committees (assets and liabilities). The model of subsidiaries autonomous in capital and liquidity, with some of them listed, such as Santander Brazil, Santander Chile and Banesto, has strategic and regulatory advantages: The autonomy of the subsidiaries limits the possibilities of contagion between the various Group units during a crisis, thereby reducing systemic risk. The subsidiaries are subject to double supervision (local and global) and internal control. This model facilitates crisis management and resolution while generating incentives for good local management. The listed subsidiaries allow access to capital efficiently and quickly, always choosing the best alternative for shareholders, and are subject to market discipline. The shares of the subsidiaries are an attractive currency for acquisitions in the local market and an alternative to investing the Group s capital. They give visibility to various business units in the Group s valuation. They guarantee a high level of transparency and corporate governance and reinforce the brand in various countries. Banco Santander combines the financial flexibility of its subsidiaries with their operations as an integrated group that creates high synergies. The corporate systems and policies that Banco Santander implements in all the Group s units enable the following: Synergies in costs and revenues, by developing with global strategies the Santander retail banking model and sharing the best practices among countries and units. A stronger Santander culture, with particular importance attached to managing risks at the global level and controlling the business units. Greater efficiency in investment by sharing systems globally. All of this enables the Group to obtain better results than each local bank would have achieved on its own. Santander branch in Madrid, Spain Santander branch in London, United Kingdom 26

10 The Santander brand The Santander brand transmits the Bank s corporate values to customers, shareholders, employees and society in general. These values are: dynamism, strength, innovation, leadership, commercial focus and quality service, professional ethics and sustainability. Santander has a significant presence in the brand rankings of the main consultancy firms, such as Interbrand, Millward Brown and Brand Finance. In, the brand continued to consolidate itself in the Group s key markets, boosting its recognition in Brazil, the UK and Germany. In the US and Poland, the transition toward the Santander brand continued to make progress. Meanwhile, Santander continues to unify its identity in global segments, such as Select for personal banking, in order to align the positioning in these markets with the Group s values. Banco Santander has an international advertising strategy, which helps to strengthen and consolidate the Bank s international positioning and business. In, when banking was particularly hard hit, the Bank s corporate message was focused on solvency and the geographically diversified business model, without overlooking our positioning of proximity, confidence and commitment to the customer. Corporate sponsorships have proved to be a key platform for increasing Santander s brand awareness, consolidate the Bank s international positioning and support business. In, Santander sponsored for the second year running the Formula 1 Ferrari team, an excellent business tool, as underlined by more than 370,000 Santander-Ferrari credit cards sold throughout the world. Santander continues to sponsor the McLaren team, the main advertising tool in the UK. In Latin America, Santander continued to work to be the football bank, sponsoring the Santander Libertadores Cup, the America s Cup in Argentina, the South American Cup and the agreement in Brazil with the football player Neymar. In 2012, and via the strategic committee of corporate marketing and brand, chaired by the CEO, the Bank will continue to foster brand unification in all countries, bolstering its global positioning, maximizing corporate sponsorships and working to create a good brand experience for all customers. Efficiency Santander has a leading-edge IT and operations platform, enhancing its productivity and enabling to know and have a full overview of customers financial needs. The Bank is also making a continuous effort to improve its processes, customer service and its business support areas in order to provide the best service. Santander continues to advance in implementing its corporate technology platforms in all its business units, which is creating value through revenue synergies and cost savings. In, integration of Santander s IT platforms and those of Real in Brazil were consolidated. The branches acquired from the Swedish group SEB in Germany, and Bank Zachodni WBK in Poland, were integrated into the Group. A new data-processing centre began to operate in in Cantabria, Spain, which joins the Group s network of such centres that provide service from Madrid-Boadilla del Monte (Spain), London (UK), Querétaro (Mexico) and Sao Paulo (Brazil). The new centre boost the capacity for processing the Group s operations, guarantees business growth in the future and reduces operational risk with customers to a minimum. The Bank s recurring growth in revenues, the culture of controlling costs and the high degree of productivity of branches makes Santander one of the world s most efficient banks, with a cost-to-income ratio of 44.9%. The continuous improvements in efficiency are leading to greater value-added for customers. The Bank, in some of its core markets, decided to eliminate commissions for its linked customers: in Spain, with the We want to be your Bank plan in the Santander Branch Network and in the UK wih the Santander Zero Current Account. 27