Building a Global Bank: The Transformation of Banco Santander

Building a Global Bank: The Transformation of Banco Santander. By Mauro F. Guillen and Adrian Tschoegl. Princeton: Princeton University Press, 2008. ? + 266 pp. Figures, tables, bibliography, notes, index. Cloth, $35.00. ISBN: 978-0-691-13125-2.

Reviewed by Jes�s M. Valdaliso

In describing the recent success story of Banco Santander, one of the world's top ten banks and currently the largest in the euro zone, Mauro F. Guillen and Adrian Tschoegl comment that it "is an oddity in the big leagues of global banking" (p. 1). There are several reasons for its distinctiveness: it is based in Spain, whose development lags behind that of other European countries and whose banks are hardly considered to be on a par with those of Germany, France, or the United Kingdom; it functions mainly as a commercial bank, has fewer products, and covers less territory than its leading competitors; and it is "the only large bank in the world in which three successive generations of the same family have held the top executive position" and maintained a minority stake in the equity (p. 2).

Banco Santander celebrated its 150th birthday in 2007, but its meteoric climb from seventh to first place in Spain, to first place in Latin America and the euro zone, and from 152nd to tenth (now seventh) in the world, took place over the past twenty years. Moreover, this remarkable record of ascent does not seem to be slowing, despite the upheaval taking place in the world's financial markets and in the banking sector. Between the fall of 2007, when this book was submitted to the publishers, and the autumn of 2008, Banco Santander successfully navigated the rough tides that have damaged so many other financial institutions, managing to buy the American bank Sovereign, and to acquire the British bank Alliance & Leicester and the deposits and branch network of Bradford and Bingley, the Brazilian Banco Real, and the Italian Interbanca. How was Santander able to carry off these remarkable feats despite the events that were shaking the banking world? Learning the story of this accomplishment is a reason, though not the only one, to recommend the book.

The authors draw from a number of sources, including interviews, internal documents, reports, press articles, and bibliographies, combining anecdotal evidence with solid theory and appending a useful and detailed chronology to their nine chapters of text. Chapters two and three trace the bank's history, from its humble origins in Santander, a small town in northern Spain, to the country's entry into the European Union in the mid-1980s. When that occurred, Banco Santander was still a minor player. Its rise in the domestic market began in 1994 with the acquisition of Banesto, followed by a merger with Banco Central Hispano in 1999. By the end of the twentieth century, Santander had become the leading Spanish bank.

Subsequent chapters describe Banco Santander's expansion in Latin America and Europe, which began in the 1980s and has continued to the present. The authors explain its growth in the context of Spanish banking, comparing its rising fortunes with those of its main competitor in both Spain and Latin America, Banco Bilbao Vizcaya Argentar�a (BBVA), one of the top twenty banks in the world and currently ranked third in the euro zone.

In chapter eight, Guillen and Tschoegl consider the Bot�n family's managerial style and look at the issue of succession, in anticipation of the transition of the leadership to a fourth generation, represented by Emilio's daughter Ana Patricia. To support their view that Emilio Bot�n Ill's strong, decisive governance and leadership has given the bank an advantage over its competitors, they analyze three of his critical decisions: the acquisition of Banesto in 1994; the battle for control of the new bank that resulted from the merger of Santander and Central Hispano in 1999; and the acquisition of Abbey National in 2004. In addition to Botin's success in shepherding the bank through the events rocking the financial world, the family's policies of cross-holdings and voting agreements with other shareholders have enabled it to hold on to three out of eighteen seats on the board of directors, despite owning only 2 percent of the share capital.

In concluding, the authors tackle the future of Banco Santander as a global group. In evaluating the performance of Banco Santander from 1986 to 2006, they compare its shareholder returns with those of the major global banks and with Spanish banks (see the useful Tables 9.1 and 9.2), and draw two main lessons from Banco Santander's experience. The first is that commercial banking is potentially successful in the global banking sector, a view reinforced by recent events and by the disappearance of old American investment banks, such as Lehman Brothers, Merrill Lynch, and Bear Stearns.

Guillen and Tschoegl arrive at the second lesson from an examination of Banco Santander's strong family leadership, which enabled it to respond quickly to business opportunities and conveyed an impression of solid governance control to the outside world. Santander's case, in their view, supports their opinion that "family influence may prove to be more enabling than constraining," and that "family ownership, control and/or strategic decision making are not necessarily at odds with professional management, meritocracy, shareholder orientation . . . and other similar attributes of what some consider characteristics of the 'modern' business corporation" (p. 214). To sum up, this a book I highly recommend for those interested not only in Spanish banking but in global banking as well.

[Author Affiliation]

Jes�s M. Valdaliso is professor of economic history at the University of the Basque Country in Bilbao, Spain. He has written numerous books and articles on nineteenth- and twentieth-century Spanish business history, most recently BBK, 1907-2007 (2007). At present, he is conducting a research project on the historical origins of clusters in the Basque Country.