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Santander's Botin bets on tech revamp starting with US consumer banking

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Santander to roll out new platform in US, globally - Botin

Hiring in US CIB starting to pay off, exec chair says

Spanish bank recently became most valuable lender in euro zone

By Jesús Aguado, Tommy Reggiori Wilkes and Elisa Martinuzzi

LONDON, June 12 (Reuters) -Spain's Santander SAN.MC plans to make the United States the launch pad for a revamped platform serving consumer customers that it will roll out globally, Ana Botin, Executive Chair of the euro zone's biggest bank by market value told Reuters.

Santander, which relies on 10 key markets for the bulk of its business, wants to use its third-biggest market by revenue, the U.S., to build its own technology platform for consumer banking, including digital-only banking and consumer finance.

It will then adopt that platform across its retail and commercial operations globally, which account for nearly half of Santander's overall profits.

The bank is in the middle of a transition from older technology to modern cloud-based IT infrastructures and the new platform is part of a wider strategy to extract savings and boost profits with better technology and lower funding costs.

"Our goal is to build a common platform for our retail and commercial business, using our own technology. It is coming together in the U.S. this year, but we'll be slowly, but steadily rolling it out across our footprint," Botin said.

Santander has not revealed the costs of the platform migration but has said it has already saved 237 million euros since 2022, with 50 million euros alone in the first quarter, thanks to technology upgrades.

Santander's U.S. investment reflects its preference for the Americas, where it sees higher growth potential than in more mature European markets. Therefore, even though Botin expects more consolidation in European banking following arch-rival BBVA's BBVA.MC shock hostile bid for Spanish peer Sabadell SABE.MC, Santander does not plan on being part of it.

The bank will launch its digital Openbank - which already serves more than 2 million customers across Europe - in the U.S. and Mexico later this year.

"In the U.S. we are starting with a high yield savings product as by raising deposits outside of our existing footprint we can expand our customer base and replace the more expensive wholesale funding for our auto business," said Botin, who took the bank's helm in 2014 after the death of her father.

"We will then offer other products and services over time," she added.

Santander, like other banks, has benefited from higher interest rates, but growth in its key Latin American markets has given it an edge over more European-dependent rivals that have scaled back their presence in the Americas.

BBVA quit the U.S. market in 2020, spending the proceeds on share buybacks. HSBC HSBA.L and BNP Paribas also sold their U.S. retail-focused operations.

Thanks to a 23% rise in its shares this year, Santander recently overtook BNP Paribas BNPP.PA to become the euro zone's most valuable lender.

It has promised that the recent roll-out of its five global units - retail, consumer, payments, wealth, and corporate and investment banking - will make the bank globally simpler and more efficient.

A successful launch of a fully digital offering in the U.S. will be crucial because Santander's U.S. business has been generating subpar returns and caused some headaches in the past.

Its subprime auto lender in 2020 agreed to make changes to its underwriting practices as part of a $550 million settlement over subprime loans it had made.

In the first quarter, Santander's U.S. business reported a return on tangible equity ratio of 7.98%, against 14.9% at group level.

Hiring expenses and higher provisions caused a 6.8% year-on-year fall in U.S. first quarter profits.

Santander has hired around 200 staff for its corporate U.S. bank and Botin said the new hires - many of them well-paid bankers from collapsed bank Credit Suisse - were already bringing in more business.

"What the new team give us is the ability to support those clients with other fee-based services. And it is already starting to pay off," Botin said, adding that headcount expansion was largely done.


BBVA's bid for Sabadell, Nationwide's play for Virgin Money VMUK.L in Britain and some supervisor and lawmaker comments have revived expectations for more consolidation in the fragmented European banking industry.

Botin said she expected more deals, though national rather than cross-border.

"I think there will be more M&A. It's going to happen in Germany. It's going to happen in the UK. It's going to happen in Italy," Botin said.

"But I don't see that much cross-border because it is far harder to justify the investment as, among other reasons, euros are effectively ring-fenced at a national level," she added.

Right now banks in the euro zone cannot raise deposits in one country and lend them out in a different country.

European cross-border banking deals are rare. Hurdles include differing regulations and labour laws, the lack of a euro zone-wide deposit insurance scheme and political resistance.

Reporting by Jesús Aguado, Tommy Reggiori Wilkes and Elisa Martinuzzi
Editing by Tomasz Janowski


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