A positive sign for Spain and its financial institutions
FOR years staff at the Abbey branch on Kensington High Street viewed their neighbour, Bradford & Bingley, with suspicion. From tomorrow, customers will be able to walk between the two banks through a hole knocked in the wall.
There will be one sign over the door: Santander, the Spanish financial giant that now owns both banks, as well as Alliance & Leicester.
Santander is starting to reap the rewards from its raid on British banking, which has transformed it into one of the country’s biggest financial institutions. Having acquired Abbey in 2004, it picked up both Alliance & Leicester and Bradford & Bingley’s savings business at the peak of the credit crunch.
A £30m rebranding campaign to be launched tomorrow will result in 1,000 bank branches carrying the Santander name by the end of the month, bringing the curtain down on the Abbey and B&B names, which are both 160 years old. By the end of the year, Alliance & Leicester’s 300 branches will also be rebadged with the Spanish conquistador’s fiery logo.
That’s just the visible element of one of the biggest integration programmes experienced by British business, which will see the three banks knocked into one.
Its UK business is already bigger in mortgages and savings than Royal Bank of Scotland (RBS), Barclays or HSBC.
Some bankers reckon Santander has gone as far as it can. Then there are those who think Antonio Horta-Osorio, the smooth-talking chief executive of Santander’s UK business, could be on the verge of creating the real powerhouse of British banking. It could even eclipse Lloyds Banking Group.
“Antonio is streets ahead of pretty much anyone else out there,” said one senior investment banker. “I would put my money on him to end up with a big smile on his face once we’re through all this.”
Santander is one of a small group of global banks that managed to duck the worst of the financial crisis. It avoided disaster in American sub-prime mortgages. It was the only bank that made money from the disastrous takeover of ABN Amro, the Dutch bank it acquired in a consortium with RBS and Fortis, the Belgian financial group. Somehow, it seems to have suffered only flesh wounds from the collapse of Spain’s property market.
Banks around the world have had to raise capital from investors to shore up their balance sheets but Santander raised £5 billion by floating off its fast-growing Brazilian business — which was set up by Horta-Osorio, a Portuguese.
In the UK, it was the only bank that grew its profits right through the credit crunch.
“Among the UK banks Santander [Abbey] has come through the crisis the best,” said Brian Caplen, editor of The Banker magazine, which named Santander as its global bank of the year for 2009.
“Horta-Osorio took the bold and much criticised move of pulling back on mortgage lending at the height of the boom because margins were too thin. The bank was then able to take advantage of the financial turmoil.”
While Abbey has been continuing to lend money at profitable margins to mortgage customers, Santander’s British operations have also been making a stack of money from the financial markets. About one third of its profits in the first half of last year came from its global banking and markets arm. The little-mentioned investment bank creates guaranteed savings products for other institutions, including the Post Office, but also dabbles in things like foreign exchange.
A big chunk of the profits came from a bet on interest rates, according to banking sources — a bet expected to continue churning out profits for the next year or so.
“Santander is a one-trick pony,” said one analyst. “It’s a mortgage bank that’s no better than anyone else’s but which has been flattered by the profits made on the side from this investment banking stuff.”
Abbey has about 15% of Britain’s mortgage market. It is estimated to have written £5 billion of new business last year, as rivals, such as building societies, dropped out of the market. Barclays and Lloyds are thought to have produced similar figures. HSBC and RBS, however, are estimated to have lent more than twice as much to homeowners.
If Horta-Osorio is to succeed in becoming the dominant force in British banking, a lot hinges on his integration plan.
More than 400 Abbey staff have been seconded to B&B branches to help make the transition a smooth one. Changing the signs on the branches has required 1,200 different planning applications to be pushed through in just three months. The bank has also had to dispatch 18,000 Santander-branded uniforms to its staff.
A new advertising campaign, fronted by Formula One driver Lewis Hamilton, debuts during tomorrow’s Coronation Street to help spread the message to the bank’s 25m British customers. Horta-Osorio will be hoping they are glued to their screens.
