Santander: White Knight or What?

Santander: White Knight or What?

A crisis might be a time for action rather than questions but with the scale of the problems facing the UK banking sector escalating, one particular question regularly bubbles to the surface.

Is Grupo Santander any more likely to emerge from the credit crisis in sound shape than some of its failing European rivals?

Santander became a household name in the UK when it acquired Abbey for £9.5 billion, back in 2004.

In July of this year it rescued troubled mortgage lender, Alliance & Leicester, and is now taking ownership of Bradford & Bingley’s savings business and branch network.

The reasons for Santander’s confidence in these troubled times are well known.

It is predominantly a retail bank and its conservative investment strategies left it clear of exposure to the US sub-prime mortgage fiasco.

In addition, its profits have been bolstered by the acquisition of businesses in the fast growing economies of Latin America.

Last year, the group emerged from its joint purchase (with Royal Bank of Scotland and Fortis) of Dutch Bank ABN Amro, with ABN’s asset management business in the region.

On the downside for Santander, the collapse of the Spanish property market will inevitably impact on its fortunes, although opinions on the extent to which it could damage the group’s balance sheet vary widely.

In addition, expectations of a sharp slowdown in the global economy could jeopardise its Latin American profits and ambitions.

The bank is regarded as well diversified but its sheer pace of growth in the past 15 years could leave it vulnerable.

Possibly the group’s greatest asset is its chairman, Emilio Botin, who has been the driving force behind Santander’s highly successful recent history.

Strong management by one powerful individual has its attractions but questions about Santander’s corporate governance have been raised in the past, not least by Vince Cable, the Liberal Democrat Treasury spokesman, at the time of the Abbey acquisition.

Santander now describes itself as one of the world’s leading banks by market capitalisation and “number one in the euro zone”.

What only a few months ago would have read as a proud boast on the group’s website now prompts a sharp intake of breath; the mighty are falling like nine pins.

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