The banker the credit crisis couldn't touch

Emilio Botin has made Spain's Santander a global player, acquiring Abbey and Alliance & Leicester on the way. But his strategy for growth does not involve being reckless, writes Elizabeth Nash in Madrid
Click to follow
The Independent Online

Emilio Botin sees no crisis. Financial turmoil may be engulfing lesser players but the chairman of Santander, the biggest bank in the eurozone and seventh in the world by market value, sees only triumph and opportunity.

The energy of this 73-year-old patriarch of Spain's greatest banking dynasty shows no sign of flagging as he pursues his ambition to become the world's top banker. Having picked up Alliance & Leicester for a song this month, complementing the acquisition four years ago of Abbey, he plans further expansion in Britain. But he's in no hurry. He might acquire another institution, a spokesman said recently, or develop what he's got, depending on circumstances.

You can explain the rise of Emilio Botin partly in terms of the acumen of a man with nimble reflexes, razor-sharp timing and mastery of the world in which he works. But it is also about the history of Spain.

The first Emilio started a modest operation in 1857 to finance trade between Spain's northern Cantabrian port of Santander and Latin America. His son Emilio II made the little local bank a financier for Spanish industry during General Franco's dictatorship.

His breakthrough came in the 1950s when the cash-strapped Barcelona Football Club was looking to replace its tatty little stadium. He agreed to provide 95 per cent of the funds if the club's 30,000 members opened accounts in his bank. Barcelona built Europe's biggest stadium and Banco Santander penetrated Catalonia, Spain's richest region.

Despite profiting under Franco's rule, the Botins swiftly adapted when the dictator died in 1975. Within a year, the present chairman's father announced he favoured legalising the Communist Party – a controversial decision that nevertheless proved crucial in consolidating Spain's peaceful transition to democracy.

Today's patriarch, who became chairman in 1986 when his father stepped down aged 84, stays close to political power. He introduced Jose Maria Aznar, the Spanish Prime Minister from 1996 to 1994, to City financiers in London when the Conservative leader was barely known. But when Aznar's government was defeated by the Socialist Jose Luis Rodriguez Zapatero, Botin was the first to congratulate Zapatero on his surprise victory. The endorsement steadied jittery Spanish markets.

Emilio III transformed the family firm into a global operator. He "lives for banking", he says, quoting his father: "The ambition is to be second to none". He works Sundays and holidays, shows no sign of retiring and tests loyalty by calling snap meetings on Christmas Eve.

In 1988 he chummed up with another little regional bank on its country's northern fringes, Royal Bank of Scotland, gaining a seat on the board and a window on the world.

Spain lost the knack of trade centuries ago when its seaborne empire collapsed, and it never experienced a manufacturing revolution. It produced neither a mercantile elite nor an industrial bourgeoisie. Entrepreneurial spirit was channelled into banking, which became the road to wealth and power.

Spain's brightest youngsters went into banking rather than commerce or industry. A clutch of Spanish business schools, ranked among Europe's finest, produce a sophisticated executive class – a steely bankocracy of international standing.

Spanish bankers are mostly cautious and austere. They display none of the buccaneering recklessness of some international counterparts that are now suffering in the credit crunch. The Botins are rich, with a fortune put at $1.1bn (around £550m), but frugal and philanthropic. They don't appear in the Spanish version of Hello! and attend social gatherings only to endow a university or science park.

Spain's top banks are untouched by the crisis. Santander announced net profits of €9bn this year – a staggering 19.3per cent improvement on last year. While the world financial system juddered, it declared its exposure to high-risk mortgages was "zero".

"We don't have those strange things," says Botin.

Spanish banks learned a painful lesson in the 1970s when a crisis shook the industry, prompting them to adopt the tautest regulatory environment in Europe. When he took over from this father in 1986, Botin shattered a cosy interest-rate cartel foisted by Spain's top banking families upon their compatriots, by launching high-interest accounts that doubled customers within a year. His treachery unleashed a shark fight that ended with him circling the waters unchallenged.

In 1995 he rescued Banesto, a multi-million-pound black hole ruined by the parvenu fraudster Mario Conde, and doubled Santander's branches. Conde was jailed and disgraced; the Banesto bank recovered within five years.

Botin plunged into telecommunications, energy and construction when these sectors were privatised in the 1990s, then sold on profitably to focus on banking. In 1999 he swallowed rival Central Hispano, whose links with Latin America helped launch Santander's conquest of the region.

This bucking bronco of a venture had colleagues covering their eyes in terror, but a decade on Santander dominates Latin America, which produces about a third of the group's profits. The region is shaping up as launchpad for an eventual offensive north of the Rio Grande.

Botin concentrates on retail banking, accumulating an international network of branches that serve individuals and small firms. It is Santander's strength. "We focus on retail," he told investors last month. "We are prudent in risks. This produces high-quality, recurrent earnings."

That philosophy means Santander was never, by strategy or temperament, tempted to trade repackaged junk mortgages. "If you don't understand an instrument, don't buy it," he crowed the other day, when Euromoney magazine voted Santander the world's best bank. "If you wouldn't buy a product for yourself, don't try to sell it. If you don't know your customers well, don't lend them money."

It sounds obvious – advice that anyone with a long view might follow. Further, the Bank of Spain imposes iron controls against assuming high-risk assets. But how do you explain the instinct that prompted Botin, at the peak of Spain's property boom a year ago, to sell Santander's 1,200 properties, including gorgeous wedding-cake palaces in the smartest corners of Spain's major cities? The biggest bricks-and-mortar deal in Spanish history, pulled off just before the market crashed, netted more than €4bn – funding last year's purchase, jointly with Royal Bank of Scotland, of the Dutch bank ABN Amro.

Santander remains a tenant in its old sites, moreover, with an option to buy back after 40 years. The sale even includes the group's purpose-built megalopolis outside Madrid, completed four years ago. The deal now closing on Santander City would double what the bank paid for it.

Botin even emerged unscathed from bitter lawsuits over huge pension payoffs to Central Hispano bosses when the two banks merged – and over gifts of Ban- esto shares to 13 Santander directors. Spain's Supreme Court shelved the last case in February.

As for the future, the head of Banesto, the 47-year-old Ana Patricia Botin, a Harvard-educated economist with 28 years' banking experience, has inherited her father's skills and discretion. She is tipped to succeed him, eventually.

Meanwhile Emilio III, pockets stuffed with cash, calmly scans the devastation around him in search of another bargain. Today's crisis, he says, "is like a child's fever" – intense, but soon over. And anyway, he adds, in his predatory fashion: "In times of crisis, being better than the others is a big advantage."