Recent years have not been kind to the banking sector, nor to its reputation. Even as we see tentative signs of recovery from the global financial and economic crisis, for which – unfairly or not – bankers are still blamed, along comes a fresh scandal in the shape of the Co-op.
There is, however, at least one bank, Santander, which believes it has emerged untainted and in a strong position, despite the travails of Spain, where it originated and which is the home of its global HQ. In Yorkshire Santander’s regional director of corporate and commercial banking is Neil Williams.
He explains: “In the UK Santander is a ring-fenced subsidiary and we have a completely separate balance sheet. Santander came through the credit crunch very strongly. There were a few reasons for it. It’s geographically very well spread, we operate across 40 different countries around the world. Spain at the time only contributed 13% of group profit.
“The vast majority of its business was with traditional businesses and retail personal customers as opposed to some of the – what in hindsight were – fairly risky investment products which, as soon as there was a problem in America, burnt a lot of the banks.’’
Santander is one of the top 10 largest international banks by market capitalisation and has more than 90 million customers worldwide. In the UK, it has more than 1,300 branches and over 25 million customers.
Its size and lack of exposure to toxic debt meant it was able to lend to businesses while other banks, frantic to repair their balance sheets, were turning away businesses desperate for support. In Yorkshire the bank has provided more than £1bn of funding to corporate and commercial clients over the past four to five years.
Williams says: “To put it in context, the Yorkshire business over the five years has performed better than the Midlands, Wales and even the North West, so we have punched above our weight over that period from a Santander perspective.’’
In recognition of that, he has won the bank’s internal award for regional director of the year twice in that period.
“Which shows how successful this region has been against a background that has been quite tough,’’ he says.
Santander in Yorkshire has even been lending to sectors seen as being particularly weak during the recent economic downturn.
Williams explains: “For instance, we have supported a local residential house builder which historically would have been one of the more difficult sectors for banks to support. We’ve also supported pubs and restaurants and hotels. The leisure sector historically tends to be rely on discretionary spend, so as you enter a recession they are the first ones that feel the pinch and they are the last ones to feel the benefit. For us to have helped and supported those businesses is testament that we are open in all sectors and our model serves a purpose in that we really do understand the business.’’
Williams has a team of 50 working for him in corporate and commercial banking across Yorkshire and he is continuing to recruit.
In fact, Santander feels it has been so successful in Yorkshire it is planning new offices and will split the territory into two – North and South Yorkshire. Currently, its main offices are in Leeds and Sheffield with people also based in Hull, Bradford, York, Huddersfield and Doncaster.
Williams says: “In Yorkshire we continue to recruit. We’ve grown the team considerably this year and next year we are looking to open new offices and continue to recruit high quality directors in various locations. Our plan nationally is to have 15% market share and we are currently at around 6% so the ambition is there. Following the decision to not acquire RBS the bank has the capital on its balance sheet to fund this sort of organic growth
over the next two to three years.
It’s about recruiting the right people in the right locations. “The plan is to start moving directors into territories where we are not currently fully represented. Places under consideration for new offices are: Halifax; Chesterfield; Scunthorpe; Harrogate and Scarborough. These are the immediate places that spring to mind.’’
This record of growth is even more impressive given how recently Santander entered the UK corporate and commercial banking market. Santander Corporate Banking was established June 2009, building on more than 40 years of corporate and commercial banking heritage from Alliance & Leicester.
Williams was working for Alliance & Leicester’s commercial banking operation in Newcastle in 2008 when he was brought to Yorkshire.
“I was given the responsibility of inheriting a small Alliance and Leicester team but then driving it forward under the new Santander banner and that was replicated around the country,’’ he says. “Santander’s strategy was always to build a corporate and commercial bank in the UK and when Santander bought Alliance & Leicester it suddenly had a platform to do that: it had 20 offices, it had a few hundred people, it had a product range, it had some IT, so it suddenly had the foundations at that point which otherwise Santander would have had to build from scratch.
“So, as soon as it acquired Alliance and Leicester it suddenly had some capability which it didn’t have previously and at a time when the other banks were starting to batten down the hatches and hit the financial crisis Santander was in growth mode, recruiting people and doing deals.’’
Recruiting people was central to his growth strategy.
He says: “For me coming into Yorkshire at that time, the key was to attract the right people. You are only as good as the people on the ground.
“At the time a number of the other banks were changing their strategy and were struggling to lend to and support local businesses, so a number of people joined me who had become somewhat disillusioned with their existing employers and some of the messages that they were having to give local businesses. Over the first six to nine months I recruited a number of really good people.’’
Apart from that, it was a question of going out and winning business.
“Then it was a case of just being proactively visible in the market and contacting the various professionals, but, more importantly, clinically targeting businesses across all sectors in Yorkshire to make sure people were aware that we were here and wanting to help.’’
Which sounds straightforward, but, I remind him, this was at a time when the rest of the financial world seemed to be in meltdown, when businesses were going bust because terrified banks could not and would not support them. Surely Santander could not have been oblivious to all that?
Williams concedes: “There was certainly a lot of talk in the various meetings we had with professionals and potential clients about the financial crisis, about the impact it was having on our competition.
“Interestingly, Santander seems to have sailed through the financial crisis in a strong position. The only real conversation we were having was people trying to understand the Spanish connection and once you have explained the ring-fenced subsidiary and that Spain is a relatively small part – some 15% of the global empire of Santander - then people got more comfortable with us.
“It has been interesting to see the strategies adopted by the competition. In the financial crisis all the banks adopted different strategies and our strategy was one of growth and trying to build a business at what was clearly a very difficult time but I believe it has paid dividends locally and also nationally. We have managed to build a fairly strong business in a fairly short period of time.’’
But weren’t they tarred with the same brush as other banks and accused of not doing enough to support businesses?
“We came through that by using a number of our customers as our advocates,’’ explains Williams.
“When you look at the lending growth that we have done: putting over £1bn out to new clients and new customers over the last four or five years and that was funding that wasn’t there before because we weren’t in the market.
“People can say banks aren’t lending but I think it’s genuinely quite difficult to point the finger at Santander when we’ve been opening new offices, recruiting new people and we have a number of what we call deal evidences of transactions we have done across all sectors, so we can prove we are doing it. We are able to demonstrate with the deals that we did and people locally could see that we were out trying to generate business and trying to do the right thing to support the economy.’’
With all the usual caveats about complacency, there is a consensus that some kind of recovery is underway. Does he see that in Yorkshire?
“It’s easier for businesses to do business today than perhaps 12 months ago and it has gradually improved but that doesn’t mean that times are not still difficult because I think they are,’’ he says. “There are some businesses out there that have done the right things over the last four or five years and are in a much stronger position today, so I think businesses that have survived this so far are in a really good position. I think we have been quite innovative or creative or made some tough decisions and are therefore in a better
Santander does its corporate banking through a system of `credit partners’. This means that rather than a banker going to see a potential borrower, looking at the business and then submitting a proposal to the credit department for rejection or approval, credit is involved at an early stage.
Williams explains: “If a business wants to borrow anything more than £1m, someone from credit who’s based in Yorkshire will go out with me and my team, meet the customer and work with the customer and their advisors to get the deal approved. They are called a credit partner in that they partner with the business and me to ensure that we do the right things.
“It’s good from the customer’s perspective because a lot of the criticism around banks is that decisions are made by people who have never been to Yorkshire or met local businesses or management and are therefore very reliant on the quality of the director that represents their bank. But those credit partners get to understand the business and get to understand the management and understand the strategic direction and are then able to do the transactions whereas other banks have perhaps not spent enough time to understand.
“We have a team of credit partners in Yorkshire but they are a separate team which will normally be completely remote from the customer and from my team. It isn’t just my say-so that this is a really good business. They can say: `I have met management, I’ve had a look at the factory, I’ve checked what they’ve said and actually I really like this’. So, it isn’t just my word for it, it’s someone else’s opinion.
“Clearly, it can work both ways and therefore the bank is managing its own risk in not entering into transactions that perhaps we shouldn’t have done. But then, if we can’t do it, it enables us to articulate why we don’t want to do it at an early stage and perhaps be able to shape it so that we could do it. Customers and professionals think it’s really good.’’
Santander also has its Breakthrough programme to support fast growing SMEs. It includes trade missions, master classes from already successful entrepreneurs, SME summits, subsidised graduate internships and a £200m Breakthrough fund.
Williams explains: “It’s for those businesses that don’t want to give equity away because they want to continue to own the business 100%, but are looking for funds a bank wouldn’t normally be able to provide because they would be deemed too risky. Normally a bank would lend up to a point and above that point private equity would come in and you’d have to give some equity away. We have this mezzanine fund which sits between the two, so it’s high risk funding but we don’t take any shares. It’s there to unblock this vicious circle that high growth businesses hit. They can’t get bank funding, they don’t want to give away equity so they slow down their growth.’’
It is through such schemes that Santander aims to make inroads into the SME market.
“Our intention for Santander in the UK is to have a business which is 50% retail and personal banking and 50% corporate and commercial. At the moment it’s probably 90% retail and 10% corporate and commercial,’’ says Williams. “So our intention over the next five years is to build an SME business and to become the best bank in the UK for SMEs.
That’s why we are trying to grow to a 15% market share. Our support for the SME sector is on record from the chief executive.’’
Williams is determined that his team in Yorkshire will make a major contribution to fulfilling this ambition and it will do so by continuing to place its emphasis on people.
Williams says: “The people I’ve recruited specifically for this job are those that are best suited to relationship banking, good at looking after customers and trying to deliver as close as possible to what the customer requires. People buy from people.’’