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Santander Bank;Strategy analysis
Within this section we will analyze the strategies adopted by the Santander Group, both in terms of objectives, and development areas and plans and relations with the company’s environment. It is important to note that the previous strategic cycle (2015-2018) of the group greatly affects the strategy that is developed today.
As for the objectives, as the president of Banco Santander Doña Ana Patricia Botín has highlighted on the company’s culture in terms.Fair ”, being these three strategic pillars, the main ones of your corporation. In the letter written on the occasion of the publication of the 2018 Annual Report, he said that the company has metrics to verify compliance with these objectives. One of these metrics is their remuneration format to managers which is based not only on what objectives meet but how they do it, and so up to eight behaviors that foster among their managers.
On the other hand, Don José Antonio Álvarez, vice president of the company, delves into the strategic pillars, to mark what he calls the fundamental aspects in the group’s strategy: first, a business model, with an extensive networkof offices and a unique and personalized relationship model, adapted to the different demanding needs. Second, a geographical diversification, in order to have a balance between emerging and developed markets, which according to them has proven to be the key in obtaining what they call recurring and predictable results. And in the last place, their leadership position in most countries where the company is present, which allows them to capture economies of scale to be references in the main markets.
Of course it seems remarkable to point out the objective we understand as a priority in a company of this caliber, which is to lead its sector and become (in this case) the most important bank. In this regard, the company contributes the following objectives in the medium term: "reach our medium -term objectives of a rotation between 13% and 15% and a CET1 FL ratio from 11% to 12%". Being the Rote, (Return on Tangible Equity), an indicator used to assess the tangible heritage of the company. In the case of an evolution of the ROE, which measures the performance obtained by shareholders in the funds invested to society. As for CET1 FL, it is a quality solvency ratio.
The company’s development plans revolve around five points, which we will develop below:
The first of these five points is about improving the positioning of the company, focusing on high -level signings in key positions (group, digital or technologies and operations) and indicate that this signing policy is added to an objective that for2025 30% of the management positions are women.
The second point would be to focus on the improvement of profitability, specifically this strategy seeks that 90% of the capital generate returns higher than cost. This strategy highlights the objective of improving the allocation of capital (specifically the case of Santander Bank in the United States, where, thanks to a greater contribution of the group, they seek to continue with the path of its growth). This improvement in the allocation is joined by an approach to the company’s inorganic growth, with acquisitions such as Deutsche Bank in Poland or Banco Popular in Spain, (the latter made last year, looking for a quick sale of immobilized assetsTo soon recover the investment), and business called strategic as the case of Allfunds in the United States.
The third section would be Digital’s. Part of the company’s strategy is focusing on this aspect of vital importance in our day. They have done it through many media such as adding to their group: Santander Analytics, where they have signed more than 200 specialists from these environments, such as mathematics, Data Science, statistics, engineering … and who also focus on the well -known "Machine Learning". In this regard, the creation of Superdigital in South America, applications such as OnePay FX, in Europe or OpenBank, the virtual bank that uses blockchain technology also stands out.
The fourth point would be a responsibility strategy. Santander takes a step forward and undertakes to use his positioning and role to commit to society’s challenges. And this is demonstrated by projects such as “Prospera” that together with Santander Microcredit have made Santander a leader among all multinational banks in microcredit and SME financing.
The last strategic point where focus is made in the group’s future vision. The vision of the company of Doña Ana Botín in this regard is that within what they call a very volatile macroeconomic scenario, continue with its priority, the linking of the clients. At this point they think that years of a certain prosperity approach due to the rise of bank services that think they will be given due to the demographic changes that can be expected.
Apart from these development plans, it seems important to note that among their most remarkable strategies, its "risk culture" stands out, which self-do "Risk Pro", to which they grant the achievements of resisting variations in the economic cycle as greater reliability, face the continuous and changing demands of customers, and to efficiently face a massive increase in competition (called Fintech, for example). This risk management strategy is based on five points:
The responsibility: "All units and employees must know the risks they incur and be responsible for their identification, valuation, management and report".
Resilience: "All employees must be prudent, avoid risks that do not know or exceed the established risk appetite, and be flexible, adapting to new environments and unforeseen scenarios".
The challenge: "Continuous debate is promoted within the bank on how to manage risks to anticipate future challenges".
Simplicity: "Clear processes and decisions, easy to understand by employees and customers".
The orientation: "Good risk management contributes to the progress of people and companies".
As for relations with the environment, the company is aware of the new challenge that this environment means. Governments, regulators and society themselves are increasingly demanding, not only with compliance with laws and norms, but with the way of managing the business.
The company’s strategy in this aspect is: "Ensure that we have culture, capacities, corporate governance structure and appropriate business practices". In addition to a second challenge, that of sustainable and inclusive growth (to respond to a world more sensitive to climate change and inequality among others). The answers they have given in recent years are that of the Universities Program, financing policies in support of renewable energy and other important initiatives.
So far the analysis of strategies and objectives of the Santander group that we have made. Without a doubt, this section is of vital importance in the company, since it will mark the future of the company in the coming years, and we think that the group’s approach is adequate taking into account the business, macroeconomic and geopolitical environment to which we faceIn this immediate and not so immediate future.