Alfredo Sáenz Abad, Banco Santander

Wednesday 15th July 2009

With a history of pulling banks out of crisis and turning them around, Alfredo Sáenz Abad has the Midas touch when the industry is in difficulties. By Katie Llanos-Small

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Banking is not the happiest sector at the moment, but one could forgive Banco Santander chief executive Alfredo Sáenz Abad for being a bit optimistic. The Spanish bank has so far proved to be one of the most resilient against the international recession, scooping up weaker rivals and maintaining a solid credit base. And while the economy may be terrifying others in the industry, he has been through a banking crisis before.

The 67-year-old Spaniard comes across as rather chuffed at Banco Santander’s successes in one of the toughest years for banking ever.

“I believe we can be proud of our results in 2008,” he wrote in his letter to shareholders in the 2008 annual report.
“Although in absolute terms, we did not grow as much as in other years, in relative terms, compared to the rest of international banks, we probably had the best year in our history.”

Indeed, 2008 confirmed Banco Santander’s place among the titans of the banking sector. As banks around the world were rattled by the financial meltdown, Santander took advantage of its solid capital base to grab bargains.

In the US, it took three-quarters of Sovereign Bancorp; in Europe, it went for GE’s consumer finance operations; in the UK, it scooped up Alliance and Leicester, Bradford and Bingley’s branches and deposits, and the consumer finance arm of the Royal Bank of Scotland. Together with Abbey National, which it purchased in 2005, Santander now owns 10 percent of retail bank branches in Britain.

Of course, for Sáenz, a banking crisis is nothing new. Spain experienced something similar in the early 1980s, when he worked for Barcelona-based Banca Catalana. Spanish banks had lent widely with poor analysis of the risks – and, as the world has seen in the sub-prime crisis, such a strategy can have dire consequences. Sáenz helped pull the bank back from the brink.

As chairman, he established an internal credit risk monitoring system and introduced guidelines to avoid the bank becoming over leveraged. Five years after the crisis began, Sáenz presented a glowing progress report on the bank, and the rapid clean up was praised by the Spanish media. A year on, a symbolic dividend was distributed to investors for the first time since the banking crisis.

Sáenz’s work stabilising Banca Catalana caught the attention of the Spanish Central Bank. When Madrid-based Banesto ran into trouble in 1993, the central bank took control and picked him to be its chairman.

Four years later, he proudly declared Banesto was back to full health. Through a strict recovery package, Sáenz had overseen the bank’s delinquent debt fall from 9.5 percent to 3.5 percent, and operating costs drop by 17 percent. Attributable net profit was up 26 percent.

In an unusual move, when Santander bought most of Banesto in 1994 they kept Sáenz on as chairman – a sign his work at Banesto had been ‘very important’, Peter Farley, EMEA managing director at Financial Insights, an analysis firm, says. In 2002, Sáenz moved up the ladder, taking over as CEO of Santander.

So what is the secret to Saenz’s success? He has consistently been cautious with risk, managed staff well, and focused on maintaining efficient systems, Farley believes.

Born in the Basque area of northern Spain – just a hundred kilometres from the town that would lend its name to his future employer, Santander – Saenz conforms to the regional stereotype of being a hard worker. He also has a reputation for treating his staff well.

In the most recent annual report, he credits Santander’s employees, calling them “one of the best teams of professionals among international banks”. Sáenz expects them to work hard though. Since his time at Banca Catalana, Sáenz has maintained a set of five key areas which he reminds his employees to pay attention to. These core principles, which include values like a focus on the customer and a focus on efficiency which, “pop up on staff computers from time to time”, says Farley. 

Prudence toward risk is a ‘hallmark’ of the way Sáenz has operated throughout his career, Farley says. As a result, Sáenz’s banks may not see ‘stellar growth’ – but they avoid serious losses.

Sáenz’s drive for efficiency, especially in technology, is also a major factor in his achievements.

When Sáenz arrived at Banesto, he ordered the computing system to be ‘rebuilt from scratch’, Farley says. He oversaw the introduction of a new IT setup that was ahead of its time in the banking world: staff in one part of the business could easily access customer information from another division, meaning they could assess credit risks much more efficiently.

Santander saw the value of the IT system when it began its acquisition of Banesto, and implemented it throughout the wider company. Today, the system still remains in place at Santander, albeit much evolved and known by its new name, Parthenon.

Sáenz’s focus on technology has paid off. Santander spends a much smaller proportion of its operating costs on IT than its competitors  Farley says. Solid computing systems enabled it to integrate new acquisitions, like the UK’s Abbey, very quickly. And by making data more accessible, a customer’s credit risk can be calculated accurately and efficiently.

Santander is “on a roll right now”, Farley says. With a chief executive as experienced at leading banks through difficult circumstances as Sáenz, that is little surprise.

Alfredo Sáenz Abad CV

Born:1942, Getxo, Vizcaya (Spain).

Education: BA Degree Law and Economics, Universidad de Deusto.

Salary (according to Forbes): ¤3,126,000.

Career:1994 – Chairman, Banesto, 2002 – Second Vice Chairman and Chief Executive Officer of Santander.