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Emilio Botín: No home advantage

Sep 1, 2013

Latin America will continue to bolster Spain’s Banco Santander, as it has already for over two decades, says its chairman Emilio Botín

By Katie Llanos-Small

At its height in 2012, Spain’s financial crisis prompted a $50 billion EU-led bailout of the country’s banking sector. Amid the chaos, it was hard to find any positive news for or about Spanish lenders, a handful of which went bust.

The two largest, BBVA and Banco Santander, however, had something their peers lacked: a global reach which had succeeded in keeping them profitable, even while they were forced to scale back on their international operations.

Banco Santander traces its origins in Latin America to the 1950s, when it opened offices in Argentina, Cuba, Mexico and Venezuela. Its first Latin acquisition was Banco El Hogar Argentino, which it bought in 1963, and over the following decades it deepened its engagement by picking up local lenders in the Dominican Republic, Ecuador, and Costa Rica among other countries.

In the mid-1990s, Santander launched an aggressive acquisition phase in Latin America. Led by its chairman Emilio Botín, the Spanish lender picked up stakes in numerous counterparts across the region. As the highest-profile participant in a broader trend for global banks to acquire Latin operations, Santander’s expansion earned Botín LatinFinance’s Man of the Year award in 1998.

"Latin America has been one of the main drivers of growth for Banco Santander for the last 20 years and I am sure it will continue to be in the coming decades," Botín tells LatinFinance, adding that he is "optimistic" about the outlook for the region and its banks.

Growing populations increase the opportunities for banks in the region, he says, noting that the combined population of Mexico and Brazil – 317 million – is approaching that of the eurozone, which has 331 million.

But other demographic shifts are playing a part. Botín points to stronger economic resilience across the region: more diversified exports, stronger internal markets, better-balanced government budgets, and record-high international reserves.

"Latin America has developed solid and stable political and economic institutions," he says. "These in turn foster the emergence of the middle classes, which are increasingly accessing financial services."

Still, despite the opportunities available away from home, Spain’s banking crisis has pushed lenders to trim their international holdings to boost capital ratios. Since 2011, Santander has sold stakes in its Brazilian, Chilean and Mexican subsidiaries, and dropped all of its Colombian assets. The sale of a quarter of its Mexican unit through a $4.1 billion IPO was the largest of its kind in that market.

Despite scaling down operations abruptly, there is little question that Santander will continue its presence in Latin America.

The interplay between local and global banks in Latin America is symbiotic, says Botín, describing it as a "two-way street". Latin and Spanish banks can each learn from best practice risk management, crisis prevention, and commercial strategy, he says.

That’s not to say the rivalries are not fierce. "Competition in the region is high," he says. "Some of its banks are among the best in the world." LF

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