Angel Santodomingo, Santander Brasil’s CFO, has had a ringside seat for the latest round of consolidation in the country’s retail banking sector. As HSBC and then Citi put their Brazilian retail operations up for sale, the Spanish-headquartered bank (although it is listed in Brazil) participated in both auctions. It was not to be successful in either of its bids, with the country’s two dominant private-sector banks each taking one apiece.
Analysts had been quick to point out that either would have been better for Santander, which is currently ranked third-largest private bank with its 12% market share, than it was for Itaú or Bradesco. For these domestic players, neither acquisition can be labelled ‘transformational’.
But as Santodomingo greets Euromoney on the 27th floor of a shiny tower that casts its shadow over one of São Paulo’s newest, most expensive – and not coincidentally emptiest – shopping malls, he appears far from dismayed at being priced out of these opportunities for acquisitive growth. Because gradually but surely, Santander is becoming the momentum story in the market.
“The interesting thing with big inorganic operations that make strategic sense is that they contain a hidden cost, which is destruction,” he says.
“That cost is difficult to evaluate, but it is there. You have to stop doing [your current strategy] and you have to integrate. You have clients that are really unhappy with the level of service [during the integration].”
Santodomingo is speaking from experience. Today’s Santander Brasil is the product of a merger with Banco Real. That 2008 transaction caused digestive issues for years afterwards – not helped by the financial crisis of the same year. There were times when what had once been seen as the crown jewel of Santander’s global operations was considered an underperformer relative to its bigger peers.
However, the bank has begun to hit its stride. In 11 of the past 12 quarters it has reported an increase in net profits – the one exception being impaired by provisioning. It has been following a policy of organic growth-plus. The ‘plus’ being small tactical acquisitions that round out the bank’s offerings: specifically, according to Santodomingo, the 2014 acquisition of card payment processor Getnet; the acquisition of 60% of Banco Bonsucesso Consignado (payroll loans) in the same year and the digital banking platform ContaSuper in 2016.
“We identified where we had gaps in terms of products, and we went out and either found good partners or we did acquisitions,” says Santodomingo. “At the end of the day you need to acknowledge where you need help. We needed help in these three areas, and that’s what we did to complete the prateleira (literally, shelf).”
Santodomingo says the power of the acquisitions has been not only to fill revenue gaps, but also to strengthen the bank’s competitive positioning. For example, one of the reasons the bank now has such a strong relationship with the petrol distribution firm Raizen is that the client was attracted to the Getnet card-processing product. Getnet offers a market-leading transaction processing speed of two days, whereas the competition often takes more than a week to process payments.
The Getnet product was introduced to the client by one of Santander’s investment bankers. This depth and breadth of sales is something the bank has been working to instil for years and Santodomingo says is now paying off.
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