Banco Santander is the largest bank in the Eurozone by market capitalization (€85 billion, as of 19 May 2017). Geographic diversification in Europe and the Americas balances the profits of this retail and commercial bank between emerging and developed economies. Its strategic focus on organic growth through earning customer loyalty has pushed it to leading positions in customer satisfaction in nearly all of its markets while boosting fee income.
The company’s CEO since January 2015, José Antonio Álvarez has been tasked with continuing that growth agenda in an increasingly competitive and disrupted marketplace. Key to the company’s strategy is the notion of earning customers’ loyalty so that they see Santander as their primary banking institution. “Our performance shows that our strategy is working,” says Álvarez. “In the last 12 months, the number of ‘loyal’ customers increased by 1.5 million to 15.5 million.” And while these numbers have catapulted the bank to the top of the heap in customer satisfaction rankings in most of its core markets, Álvarez says he still sees plenty of upside for his organization. “In total, we serve 128 million customers worldwide,” he says. “This means we still have huge potential for increasing the number of loyal customers, even within our existing customer base.”
Asked about the company’s most pressing investment priorities these days, Álvarez was quick to cite the bank’s technology spend, which is currently €1.9 billion per year - an investment he says that is focused primarily on helping the company to better serve its customers via digital channels. “We’re looking at how new technologies can allow us to have more commonality across the group on the operational side and pushing in that direction,” he says.
On the risk management side, Álvarez noted that, as is the case with all banks, Santander’s performance is linked closely to the economies of the countries in which it operates. “That is why our unique business model is so important, as we have a balanced presence across both mature and developing markets. This means our fortunes are not tied to a single economy,” he says.
Like many of its peers in the financial services space, Santander is starting to study and implement a number of emerging technologies, including artificial intelligence (AI). He says AI, in particular, has the potential to reduce processing times for products such as mortgages, which have historically required significant back- and middle-office processing. Álvarez also says that it’s vital in a commoditized business, such as banking, to keep a close eye on costs. “Our efficiency is one of our main advantages,” he says. “The efficiency ratio of our peer group is in the 60s. At 46 percent, our ratio is top-three among our peers. Maintaining this advantage is critical.”
In an age of increased automation in financial services, Álvarez says that success requires CEOs, “…who are capable of bridging the gap between the digital world, which is shaping the future, and the knowledge and expertise of a conventional, trusted institution that’s been in business for 160 years,” he says. “We need to be able to strike a balance between those two worlds.”
When asked which personal attributes have become more important in his work as CEO, Álvarez referred to his belief in ‘straight talk’: “I was known for not beating around the bush,” he says. “In my conversations with our teams, speaking clearly and the ability to listen show up again and again as a valuable attribute.”