Finance & Economics

Banco Santander Plans to Expand Business in US Investment Banking

Banco Santander, which is currently the largest financial institution in the Spanish banking sector, intends to expand its operations in the United States.

Banco Santander Plans to Expand Business in US Investment Banking

The specified lender plans to increase its presence in US investment banking. Last Thursday, November 9, during a speech at the Reuters NEXT conference in New York, the executive chairman of Banco Santander, Ana Botin, said that the strategy of the lender she heads will focus on renewable sources of financing, auto lending, and wealth management. According to her, this concept of the bank’s activities is appropriate in the framework of the desire to increase the level of competitiveness with the prospect of obtaining better positions in the industry compared to other players in the context of normalizing interest rates.

The specified financial institution has recently been forced to direct part of its forces to overcome various difficulties. However, this circumstance did not become a barrier for the bank in increasing net profit for the third quarter of this year. The mentioned indicator showed an increase of 20% year-on-year. The positive result is that high indicators in Europe were able to compensate for the weakening of trade in the United States and an increase in reserves.

According to the results of the third quarter of this year, the bank, which is the second largest lender in the Eurozone by market value, received a net profit of 2.9 billion euros. This indicator exceeded the expectations of analysts, who predicted its value at 2.77 billion euros.

In the past, the financial institution considered Latin America as the most favorable area of activity in terms of economic conditions and prospects. In this case, the lender to some extent sought to compensate for the costs associated with strict industry rules in Europe. However the external environment tends to transform, and the bank was able to verify this on its own experience. The lender is currently benefiting from higher interest rates in its domestic market. Bank’s European competitors are also using the current circumstances to its advantage.

In Europe, Banco Santander’s net profit for the third quarter showed an increase of 64% year-on-year. At the same time, in South America, this figure fell by 7% compared to the result for the same period in 2022.

Ana Botin, commenting on the results of the bank’s activities for the third quarter, said that the level of uncertainty in the external environment is increasing, but she is convinced that the financial institution she heads will be able to achieve its goals in 2023, despite adverse circumstances. Her confidence in the future is based on the current positive dynamic of the lender.

Ana Botin also said that the bank expects to maintain positive trends in its activities next year. The lender’s goals for 2023 envisage double-digit revenue growth and achieving a return on equity ratio, which is an indicator of profitability, at a level of more than 15%.

The financial institution’s reserves for possible loan losses increased to 3.27 billion euros in the third quarter. This indicator showed an increase of 19% year-on-year.

The lender’s ambitious plans to double its business in the American investment banking sphere were made public against the background of generally not the worst results for the third quarter, but these reports do not negate the fact that there are some problems. Banco Santander has faced loan losses, higher funding costs, and scaling-up expenses.

To support its growth plans, the lender is recruiting about 150 bankers, mainly in the United States, from Credit Suisse. These actions of the financial institution are evidence of commitment to expanding its activities in this country.

Ana Botin called for equal conditions to be created in the payment industry for banks and technology companies. In this context, she stressed the importance of ensuring fair competition and stated the need for equal treatment in terms of taxes and transparency.

Banco Santander is currently investing in its PagoNxt payments business. The financial institution intends to compete with such players in this market as Apple Pay. The payment sector has been a reliable source of income for banks, but investors have become cautious about this sphere due to inflated valuations.

In the US, LendingClub said in September that it had selected Santander Consumer as the main provider of credit services for its auto finance portfolio.

In April, Santander Bank N.A. announced the start of a partnership with DailyPay to offer an on-demand payment benefit. As a result of this cooperation, clients of Santander commercial banks in the USA have been able to provide their employees with instant access to wages as they receive it.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.