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Argentina Best Bank: Banco Santander Río

Nov 1, 2012

The Argentine government doesn¹t make it easy for banks. Although they mostly remain in good shape, a slowing economy has thrown up yet another challenge for the country¹s financial institutions.

The government forecasts growth of 3.4% in 2012, down from 8.9% last year, while output in 2013 ­ as a growing number of forecasters now predict ­could be still slower.

Banco Santander Río is the biggest bank in the country and the strongest in retail lending, which remains the largest business line for the country¹s banks. Its $10.65 billion in assets as of year-end 2011 grant it a cushion that leaves it well positioned to deal with a deteriorating economic climate.

³In the past two or three years Santander Río has been the best performer in terms of growth, profitability and cost efficiency,² says Santiago Gallo, an analyst at Fitch.

Retail lending has been the focus for the bank¹s growth. Commercial lending is growing too, but uncertainties facing the private sector are a challenge.

³In the coming years most of the growth in Argentina will be in retail lending,² Gallo says. ³The government¹s economic model is based on strong local demand and consumption. That fosters retail lending.² Santander Río has the largest private-sector loan portfolio (8.8% market

share) and deposit base (9.7% market share) in Argentina. During 2011, Santander Río says the bank accounted for 36% of the total system¹s expansion in new branches.

The bank¹s net income in 2011 was $406 million, up 5% year-on-year. It is also the most profitable with a return on equity of 43%. Santander Río continues to be the most efficient private-sector bank compared to peers with a cost-to-income ratio of 46%.

³Banks in Argentina are in good shape,² Gallo says. ³The risk mainly comes from the economy, from the government and the political environment.² So far there have been no adverse effects from any troubles from its Spanish parent. Santander plans to float part of its profitable Argentine operation ­ just as it did with its Mexican unit in September in an operation that appears to have been successful so far. Santander Río¹s connection to Santander has also allowed it to have one of the top capital markets operations in the country.

Argentina¹s economic slowdown could lead to a deterioration in asset quality, though Gallo says Santander Rio¹s strengths leave it in a strong position to face these risks, and historically it has always maintained a high asset quality.

Gallo points out there are some factors benefitting the country¹s economy, such as a high soy price. Nobody is expecting a crisis, but Santander Río is again the best prepared to face any challenges ahead. LF

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