Globalization Culture of Execution Key to Globalization
By Kim Jae-kyoung
Staff Reporter
``Execution, discipline in the use of capital, and global management through local teams.''
These are three key success factors that have led to Santander's successful globalization, according to a senior executive of the global lender.
In an interview with The Korea Times, Jose Manuel Varela, head of Asia Unit, Group Santander, said that its culture of execution has enabled the lender to plan and carry out the integration of newly acquired units according to a timetable and to generate the expected results ― cost savings and increased revenues.
``We have done this throughout Latin America and the U.K. and will do in the U.S. Santander is known for its culture of execution. Also, we are very disciplined in our use of capital, especially in acquisitions,'' he said.
``Any acquisition must meet strict business and financial criteria. On the business side, this means we will only invest in our core businesses, in markets that we know well,'' he added. ``On the financial side, acquisitions must contribute to earnings per share within three years after the investment, and must generate a return on capital greater than the cost of capital''.
He pointed out that the unique global management model makes it possible for all its banks to stay focused on the group's core business.
``We have a global management model, but executed through local teams with the ability to make the right business decisions for their own markets,'' he said.
``Thus, all our banks have the same focus on retail and commercial banking, with global support in risk management, technology, human resources, purchasing and other areas,'' Varela added. ``But they can take decisions about products, prices and priorities that make sense in their own markets.''
The veteran banker stressed that the most important thing in globalization is to choose core businesses and concentration on them.
``There is no magic behind Banco Santander's success in globalization, but a lot of hard work and focus on our core business. At Santander, we have a very clear business model, focused on retail and commercial banking, staying close to the customer and maintaining strict risk management and control,'' he said.
``This model produces predictable, recurring revenue. We have been able to export this model to other markets where we work, always focusing on local customers. That is why we have more branches than any other international bank,'' he said. ``Before entering a new market, we get to know it very well, so we can be sure before we invest that our model will give us a competitive advantage.''
Varela said that its acquisition in 2004 of Abbey of the U.K, then that country's sixth biggest lender well illustrates how Santander has undergone an expansion path.
At the time, the bank met with much skepticism in Britain about its ability to turn Abbey around. Moreover, the acquisition was paid for in shares of Santander, denominated in euros, not pounds
``We overcame these doubts, however, and once we acquired Abbey we announced a three-year plan to cut costs, increase revenue and enter new segments where the bank should be stronger,'' he said.
``Three years later, Abbey was the leading new mortgage lender in the country, strong enough to acquire a competitor, Alliance & Leicester, and take on the branches and deposits of another bank, Bradford & Bingley,'' he added.
He pointed out that the simple but important lesson from Abbey's case was to follow the principle ― ``investigate, plan and execute.''
``We knew Abbey well when we acquired it. Santander had a longstanding relationship with the Royal Bank of Scotland that helped us get to know and understand the U.K. market. We knew what we wanted to do with Abbey once we bought it. Then we did it,'' he added.
Santander Creates Critical Mass in Key Markets