What would it take to make Santander a serious contender in the small business banking sector?
Until their acquisition of Abbey National in 2004 Santander was practically unheard of on the British high street. This has all changed. Not least because of their purchase and rebranding of the Alliance & Leicester and Bradford & Bingley branches but perhaps mostly because of their Formula 1 sponsorship deal with Lewis Hamilton! We may not own a single major car manufacturer but that doesn’t seem to diminish our ‘Top Gear’ obsession with fast cars and winning at sport.
In the UK, Santander is 2nd in terms of mortgages, 3rd in terms of deposits and 5th in terms of branches operated. It has over 25 million customers.
But how can Santander turn this impressive performance on the racetrack and high street into a winning formula for small business banking? The competition is tough. There are already many strong incumbents such as Barclays. But would a Spanish bank have a better chance than anyone else?
There are a few of factors that might influence the outcome.
- The relationship between Spanish and British people is largely positive. Our last serious direct conflict was centuries ago and we have an interest in each other’s cultures and climates! Of course, there are issues around Gibraltar and the number of British citizens residing in Andalucía. Did you know that in 2008, 590,000 people left the UK and 430,000 arrived? And, after Australia, where did the British citizens leaving go? Yet, the Spanish remain largely positive about the British.
- UK banks and bankers have a somewhat tarnished public image, which extends into the business sector. This might just be a ‘window of opportunity’ for a new non-UK contender to enter the market. Of course, small businesses might be slow to move their banking. However, over 1 million of them don’t seem to be too happy (http://bit.ly/abAgQh).
- The most taught foreign language in Spanish secondary schools is English. In the UK all secondary schools offer French and 76% offer Spanish, more than German. French is declining at GCSE level yet Spanish is increasingly popular.
I’m writing this blog mid-way through teaching (fortunately for me in English!) entrepreneurship to a group of MBA students at the University of Salamanca. I’m also receiving Spanish tuition at one of the many language colleges in this beautiful city. Interestingly, Santander recently sponsored a major programme of Spanish business school professorships and an entrepreneurship programme for researchers and faculty with Babson College – a recognised global leader in this field.
Oh, by the way Santander has just made a significant move. They are the only bidder for the RBS branches, which serve some 2 million small businesses in the UK (http://bit.ly/b79YJV). It looks like they have just shifted into second gear!
I wonder if one of their next steps will be to get involved in university based enterprise programmes in order to influence the graduate entrepreneurs of the future.
Dr Nigel Lockett
Director of Centre for Entrepreneurship and Innovation Management (CEIM)
www.bradford.ac.uk/ceim
www.nigellockett.com
One Response to “What would it take to make Santander a serious contender in the small business banking sector?”
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Since last January the intentions of Botín were clear – introducing the bank (Santander) into the UK. Using the UK banking crisis was an opportunity for him – which he faced without fear. In UK Santander has 25 million customers, 13% of the mortgages, more than 10% of savings and this numbers are increasing. For that reason I think the Santander is a serious contender already.
From my point of view, the key is the diversification strategy that the bank employs at all the levels: we must not forget that this strategy, in principle, in crisis creates value. In this sense, you can see the recent working paper of Villalonga in which she demonstrates that the diversification discount in crisis is lower relative to other periods. Also is very relevant the geographical diversification (Santander is the first global bank settled in 10 relevant markets) the diversification in emergent and mature countries and of course, diversification for products, as the banking sector does.
In fact, it is difficult to enter in a new market but as they have entered in Latin American countries, they will try in Europe. Besides, the crisis is a good time to entry in other countries; it allows taking advantage from new and good opportunities and exploiting other aspects, as the cultural aspects between Spain and England, as Nigel points out.
Yes, probably the next step is the University; this is the strategy employed in Spain since many years: to be near the universities financing activities, to be near the students so that each one of the students have a relation with the bank, through the University portal web, etc.