Santander Group Annual Report The Santander Group in 2003

Size: px

Start display at page:

Download "Santander Group Annual Report The Santander Group in 2003"

Asher McDonald
5 years ago
Views:

1 10 Santander Group The Santander Group in 2003

2 Santander Group 11 The Santander Group in 2003 Our activity 12 Our businesses 14 Our geographical presence 16 Our brand 18 Vertical Torus, 2003 Richard Serra South façade, Encinar building Santander Group City

3 12 Santander Group Our activity The Santander Group generated record net attributable income The Santander Group achieved its highest profit ever, EUR 2,611 million. The result, an increase of 16.2% from the previous year, was the highest ever recorded by a Spanish financial entity was the year when the world economy began to recover, particularly because of the spurt in the US and, more modestly, in the Euro zone, whose growth was only 0.5% compared with Spain s 2.4%. In this environment we ended 2003 as the world s 11th largest bank in terms of market capitalization, said Matías Rodríguez Inciarte, Third Vice-Chairman and responsible for the Santander Group s risks, with a clearly defined business model based on four values: business drive, strength, innovation and leadership. A clear strategy The Santander Group wants to consolidate among the 10 largest banks in the world by market capitalization. To achieve that goal it has a business model that has proved its competitiveness during the nearly 150 years that Santander has engaged in retail banking. The Group has a multi-local presence, which combines a common business model with local management, which provides in-depth knowledge of the markets where it operates. According to Mr. Rodríguez Inciarte, the Group s management model is distinguished by making the business drive compatible with strict control of risks and a constant desire to grow. As a result we have created a group that is able to continually gain market share and, at the same time, maintain a strong balance sheet. I have never seen our Group better prepared for the challenges of the future. A significant factor at play here is investment in technology as a key element to boost the Group s efficiency and productivity and improve customer service. The Partenón and Altair IT platforms are spreading the best technologies to all the group s banks. This way of doing business has been transferred to the banks making up the group. All share a common business model which, on the basis of solid foundations of profitability, efficiency and financial soundness, aims for the sustained creation of value for shareholders, customers, employees and for society as a whole. Good results The good results obtained in 2003 are due to the strong performance in retail banking, to the growing contribution to net income of consumer finance and the global business areas, -Wholesale Banking, Asset Management and Private Banking-, and to the proven capacity of the Group s banks in Latin America to manage difficult business environments. Net operating income rose 2.8% in 2003 or 16.6% if the exchange rate impact is excluded and net attributable income 16.2%. There was also a significant improvement during 2003 in the main ratios measuring our business. The efficiency ratio (personnel and general expenses as a percentage of net operating revenue) improved to 49.34% from 52.28%. Profitability, measured by net income as a percentage of equity, increased to 14.48% from

4 Santander Group 13 Our activity 12.42%. Solvency, measured by the BIS capital adequacy ratio, remained at a high level of more than 12%. Ambitious goals In order to become one of the world s 10 largest banks by market capitalization, we launched the i-06 Plan to generate more revenues in all the group s business units in the next few years. Its aim is to boost the pace of growth in operating income. According to Francisco Gómez Roldan, Chief Financial Officer, the key to attaining this goal is to achieve significant growth in revenue while keeping costs stable, a sound balance sheet and asset quality, all of which are hallmarks of the Group. The i-06 Plan covers 70 projects in all areas of the group and sets specific targets for each business in terms of market share, number of customers and financial results, added Gómez Roldán. Together with the i-06 Plan, the Group is also developing this year five corporate projects whose main objective is to ensure Santander remains one of the best. These projects arose from replies to the Chairman after he sent a letter to employees asking them for suggestions on how to make Santander better. The projects cover five key issues: improving customer attention and service; making employees more motivated and committed; turning technology into a competitive advantage; speeding up risk management and reinforcing the Group s identity. In 2003, the Group recorded its highest profit ever. Activity increased throughout all business areas and in all countries where the Group is present. 5 projects to make Santander even better Customers Develop a model that fosters ties with customers by increasing their satisfaction and strenghthening their loyalty. The i-06 Plan, which will quicken the pace of revenue growth, and the five corporate projects, focused on customers, management resources, risk management and group identity, will enable us to keep on improving. Management resources Risks Technology Group Increase motivation and commitment via international mobility, career plans, training plans, etc. Speed up management and increase the coordination between the business and the risk units. Greater efficiency and enhanced service, making technology a source of competitive advantage. Define common hallmarks to reinforce the Group s identity.

5 14 Santander Group Our businesses The Group s three main business lines performed better than expected in 2003 Retail Banking, Wholesale Banking and Asset Management and Private Banking stepped up their business growth in Net attributable income grew by 28% in the case of Wholesale Banking. We offset the very low level of interest rates with greater cost control and revenue generation through a stronger drive in all businesses, said Francisco Gómez Roldán. This was underscored by the launch of innovative products in mortgages, cards, treasury products and mutual funds. Retail Banking The Santander Group s retail banking business generated EUR 4,983 million of net operating income, 84% of the Group s total. Its net attributable income was 6.1% more than in These positive results were due to the development of successful products and continued cost saving policies. Of note among the new products in 2003 were the Superselección fund of Santander Central Hispano, Super Negocio in Mexico, and Campaña Consumo DVD in Chile. In 2003, a special effort was also made in the companies segment with the launch of dedicated products, such as the Banespyme of Banesto. In all countries we have winning products designed for customers and ahead of our competitors, said Jesús Zabalza managing director in the Latin America Division. Of particular note was the growth in mortgages, which surged by 28.8% in Spain in The launch of successful products such as Superselección funds and the Hipoteca Superoportunidad by Santander Central Hispano, which in its first six months generated EUR 5,000 million in mortgage loans, enabled the group to gain market share in the fastest growing area of in the Spanish banking sector, said Enrique García Candelas, managing director of Santander Central Hispano s Retail Banking division. The results of Consumer Banking were once again excellent, said Juan Rodríguez Inciarte, who heads Santander Consumer Finance, which manages specialized entities in Europe (Hispamer, CC-Bank, Finconsumo...), and whose strategy is very focused on specific segments, such as auto finance. The Group has issued 23.9 million cards to customers, of which 12.2 million are credit cards and 11.7 million debit cards. The strategy consists of offering differentiated products, such as the Serfin Light card in Mexico and Visa Banesto in Spain. Banesto issued close to 200,000 new cards in According to Ana Patricia Botín, the Chairman of Banesto, this clearly shows a philosophy of work that distinguishes us from our competitors and a spirit to win where everything is possible.

6 Santander Group 15 Our businesses Breakdown of net attributable income by business lines % Asset Management Insurance and Private Banking Global Wholesale Banking Global Wholesale Banking embraces Corporate Banking, Investment Banking and Treasury. These areas generated EUR 226 million, or 7% of the Group s net attributable income in 2003, 28% more than in 2002, boosted by better conditions in financial markets and improvements in the management structure. Corporate Banking focuses on providing financial services to multinationals. We changed our business strategy in 2003 and introduced a new system in which one person coordinates all the needs of each client, said Adolfo Lagos, who heads Global Wholesale Banking. Investment Banking improved its earnings during the year. Of note in 2003 was the positive and clear recovery in Corporate Finance, Equities, Custody and Structured Finance, said Mr. Lagos. In all of them we reached notable positions in the rankings of the countries where we operate. The strategy of the Treasury area is focused on providing value added services to corporate clients and support to the various business networks. Asset Management and Private Banking generated net attributable income of EUR 320 million, 2.3% lower than in Excluding the exchange rate impact, growth was 15.4%. The volume of mutual and pension funds managed at the end of 2003 amounted to more than EUR 100,000 million, 16.7% higher than in 2002, said Jorge Morán, who heads Asset Management and Insurance. This makes us one of the world s largest fund managers. The faster pace of growth in this business, said Mr. Morán, was due in the first part of the year to the success of guaranteed mutual funds and to real estate funds, and in second part to the recovery of investment in equities and to the launch of new dynamic management funds. Insurance business grew strongly in 2003, both the number of policies as well as the premium income. The strategy of focusing on life and household products produced adequate results and enabled us to gain market share significantly, added Mr. Morán. In Private Banking, Banif, the Group s specialized entity, is the leader in Spain. In 2003 we managed EUR 20,000 million and the balance of targeted clients rose 20%, said Javier Marín, Banif s chief executive. International Private Banking increased its managed funds by 19% in dollar terms. Of note was the acquisition of the Latin American business of Coutts, which contributed 1,400 new customers and US$2,600 million of managed funds according to José Manuel Maceda, who heads this business unit. The Group s main business line is Retail Banking, which generates 84% of net attributable income. The importance of Retail Banking is one of the features than distinguishes the Santander Group from other large international banks. Our solid base in this business is a source of competitive advantages to develop global activities Wholesale Banking, Asset Management and Private Banking in the countries where we operate.

7 16 Santander Group Our geographical presence A multi-local strategy as a base for leadership The Santander Group is a European and Latin American group which combines the best local management -in markets with more than 500 million peoplewith a common business model, based on efficiency, financial strength and the capacity to steal a march on its competitors. Europe The Santander Group s presence in Europe is concentrated in spain and Portugal, in Retail banking, and in Germany and Italy in consumer banking. In Spain, business in is conducted by two commercial banks Santander Central Hispano and Banesto and specialized entities - Banif in private banking, Hispamer in consumer banking and Patagon in on-line banking. All of them have leadership positions in their sectors. The market share, combined with Banesto s, is 18%. The Santander Central Hispano network increased its net operating income by a spectacular 19.8%. Moreover, the central services and global areas are also in Spain. Spain, overall, contributes 50% of net operating income and accounts for 34% of the total number of employees. In Portugal, Totta is the third largest banking group with a market share of 11%. Our main business is retail banking, where we have 1,700,000 customers, said Horta Osorio, Chairman of Totta, our goal is to become the best and most profitable bank in Portugal. In Germany, Italy, Austria, Poland, the Czech Republic and Hungary, the Santander Group focuses on offering consumer financing products, coordinated by Santander Consumer Finance. In Germany, CC-Bank is the second largest entity in this sphere with a market share of 16% and 2.5 million customers. Finconsumo, the group s arm in Italy, has a market share of 5% and more than 500,000 customers. Our strategy in Europe is completed by the alliance with the Royal Bank of Scotland, which is unique in the international banking world. Latin America We are the leading financial group in Latin America, says Francisco Luzón, Director and Executive Vice-President of the Latin America Division, with a strong presence in the markets with the greatest potential, Brazil and Mexico, and in the most stable markets, Chile and Puerto Rico. We also have significant positions in Argentina, Colombia and Venezuela. This is the time to set sail, because to grow in Latin America is to win, Luzón added. The group s 4,052 branches in Latin America have more than 12 million retail banking customers and 500,000 business clients. The region generated net attributable income of US$1,201 million, 32.7% more than in 2002, excluding the exchange rate effect. The Santander Group is the second largest entity in Corporate Banking in Latin America and its Asset Management unit has US$30,312 million in assets under management. In Treasury, we are the

8 Santander Group 17 Our geographical presence Countries where the Group concentrates on Retail Banking Branches Market Share* Customers** (number) (%) (millions) Spain 4, Portugal Brazil - São Paulo 1, Mexico 1, Chile Germany*** Italy*** Puerto Rico Venezuela Colombia Argentina * ** *** In Retail Banking Clients are the main account holders and co-holders, following a homogeneous criterion for the whole Group which may be different to that used by some of its banks. Retail Banking and Asset Management clients are included in auto financing strongest in each of the local markets where we operate. In Brazil, Grupo Santander Banespa increased its net attributable income 4.8% in dollar terms. It has close to 22,000 employees and 1,874 branches. We focus our efforts on the country s highest potential regions and entities, said Gabriel Jaramillo, Chairman of Santander Banespa. The drop in interest rates will fuel economic and business growth, which, together with our cost control policy, will enable us to continue to boost earnings in 2004, he added. Grupo Santander Serfin in Mexico has around 1,000 branches. Our main line of business is retail banking, said Marcos Martínez, Head of Santander Serfin. We are also in asset management via Santander AFORE which has three million customers and manages around US$3 billion, The Group s entities in Chile are Santander Santiago, Banefe and Summa Santander. Santander Santiago is the country s largest bank by size and profitability, Banefe is a leader in consumer finance related activities and in loans to small firms and Summa Santander manages more than US$5,000 million and has over 500,000 customers, said Mauricio Larraín, Group Chairman in Chile. Following the completion of the merger of Santander Chile and Banco Santiago in April 2003, besides enhancing business capacities, the merger has generated significant cost savings, seen in the 27.5% increase in net profit from the previous year. Mr. Larraín added. The Santander Group is also present in Puerto Rico, Venezuela, Colombia and Argentina, where the main business is retail banking. In Bolivia, Paraguay, Peru and Uruguay business has a more selective and specialized approach. The Santander Group is leader in Spain, enjoys a unique position in Portugal, a growing presence in consumer finance in Europe and has a unique alliance with the world s fifth largest bank, the Royal Bank of Scotland. In Latin America, the Santander Group is the premier financial services franchise. Its presence is focused on the markets with the greatest potential, Brazil and Mexico, and in the most stable markets, Chile and Puerto Rico, with a significant presence in Venezuela, Argentina and Colombia. Through our efforts in 2003 we gained market share in lending, one of the main goals we had set, and where we want to reach 20%, Mr. Martínez added.

9 18 Santander Group Our Brand The Santander Group brand is a key element of the Group s identity The brand was presented in July 2003, transmitting a global reality compatible with the local brand used in many of the countries where we operate. The Santander Group s corporate identity reflects the reality of a large international group which combines global skills and common polices in areas such as risks and auditing, with a deep knowledge of the markets where it operates, wich are locally managed. Strategy and brand creation The Santander Group brand encompasses all businesses independently of the regional strategy applied to each market, distribution channel or product, facilitating a centralized vision and idea, and a unique positioning that strengthen it. Belonging to a leading Group is a competitive advantage for each of the member entities and generates value for the various segments with which the Bank interacts: Customers: because they value the advantages of dealing with an institution that meets their needs on a local basis and which has the strengths of a world leader Shareholders: because they trust their investments to one of the best-capitalized institutions in the world, one with a proven record in financial strength and sound management, as well as a commitment to growth Employees: because to work for the Group is a motivating force, opening up major career development opportunities, both locally as well as internationally, while facilitating the attraction and retention of talent. Investors and markets: because they value the Group more than the sum of its parts. Opinion leaders: because through a solid Group image they are aware of its true dimensions Communities where it is active: because the Group is committed to supporting them. Its visual expression Part of the work involved in creating a brand is its visual representation. The Santander Group is perceived as synonymous with dynamism, innovation and agility. The symbol of the flame transmits light, transparency, warmth and humanity, and the colour red evokes energy, strength, courage and control. The Group s visual trademark is the fruit of the effort to preserve the values of the brand and strengthen them in line with the Group s trends and strategy. Its spirit Defining the essential characteristics, the spirit, of a brand is the key to creating the bonds by which the public identifies it. Strength, dynamism, security are the essential characteristics of the Group, through which it inspires quality, leadership, satisfaction, a strong personality and credibility. The Group s commitment to society, education and the environment make it an approachable brand and one perceived to be concerned for the wellbeing of its spheres of influence. The motto Value from ideas reflects the constant selfrequirement to continue innovation and anticipate trends, always procuring the best ideas. It sums up the spirit of the brand, and of the Group: valuable ideas and ability to put them into effect.

10 Santander Group 19 Our Brand The platform and brand value For a leading financial company in markets comprising more than 500 million inhabitants, and whose activity is based on transmitting confidence, the brand is an essential asset. In spite of the difficulties inherent in quantifying the value of a brand, analyses carried out by specialized consultants place the Santander Group brand second among the most valuable in the Spanish market and the first in the financial sector. Its international diversification, financial strength, its portfolio of brands reorganized and simplified and the strongly positioned image in Latin America are among the elements that distinguish the Santander Group from its competitors. Evolution of brand architecture In 2003 steps were taken in two directions: to reinforce the presence of the Santander Group brand in all Grupo Santander s brand vision aspects of corporate activity and to bring the design of local brands up to date in order to facilitate their identification with the Group and its associated values. The Santander Group is the umbrella brand that centralizes our identity at a global level and which coexists with leading brands in various countries examples being Totta, Banespa, Serfin and Santiago. These local brands are progressively incorporating the key elements of corporate identity such as the flame logo, the colour red and the Santander name. The objective is to continue the transition from the previous architecture of independent brands, towards one where the master brand predominates while remaining consistent with the design of local brands. Coherence must go beyond the brand design and cover other aspects the relate the Company to its customers and employees, such as advertising, internal communication, the Website and office design. The Santander Group brand encompasses all businesses and centralizes the Group s position at the global level,facilitating a centralized vision and idea, and a unique positioning. This transmits a global reality and provides customers, employees, shareholders, analysts and society as a whole with the benefits of belonging to a leading international group. America Europe Spain The Group s brand architecture combines a master brand (Santander Group) with strong local brands.

Grupo Santander achieved healthy, geographically balanced and sustainable growth. Alfredo Sáenz Second Vice-Chairman and Chief Executive Officer

Grupo Santander achieved healthy, geographically balanced and sustainable growth. Alfredo Sáenz Second Vice-Chairman and Chief Executive Officer Letter from the Chief Executive Officer Grupo Santander