Martin Vander Weyer’s Any Other Business
Santander is a port in northern Spain with a population the size of Swindon’s. It is also the eurozone’s largest banking group, an institution that has far outgrown its origins to become the owner, in Britain, of Abbey, Alliance & Leicester and the branch network of the crippled Bradford & Bingley. Having spent more than £35 billion on acquisitions around the world in recent years, it is currently spending another £2 billion to buy 318 Royal Bank of Scotland branches, has just spent £1.7 billion to buy out Bank of America’s stake in a Mexican joint venture, and is hoping to pick up some more branches in Germany. Under the leadership since 1986 of third-generation chairman Emilio Botin, Santander has apparently gone from strength to strength while other major banks have tottered and failed.
Yet Santander’s home market is now regarded by investors as the most worrisome eurozone economy — as heavy selling of its government bonds this week confirmed. Four times bigger than Greece in GDP terms, Spain has unemployment close to 20 per cent and a fiscal deficit similar to our own. The results of its real-estate bust have until recently been buried in an opaque banking system — but are now surfacing in local savings banks such as CajaSur, which was bailed out last month. Botin says Santander has diversified away from Spain, retains a strong balance sheet and has relatively modest exposures to sovereign debt. He argues that traders who have driven its shares downwards (and driven upwards the price of insuring its debt) are simply misjudging its qualities.
Well, maybe: I know nothing concrete to the contrary, except that banks which build themselves up to be the biggest and most diversified have always come unstuck in the end — Bank of America in the late 1980s, Citigroup and RBS in the recent crisis — partly because the challenge of risk control across such a vast portfolio of businesses becomes impossible, and partly because they become complacent believers in their own propaganda.
Comments
Join the debate for just £1 a month
Be part of the conversation with other Spectator readers by getting your first three months for £3.
UNLOCK ACCESS Just £1 a monthAlready a subscriber? Log in