23 March, 2010

Spain Bank Mergers & Acquisitions (Banco Santander)

Photo: Banco de Santander's old head office building in Santander, northern Spain. Banco Santander celebrated its 150th anniversary in 2007.

With special thanks to Steve Wong for allowing me to use his photo. You can view his photo stream on flickr.com via this link:

Banco Santander, S.A.

(Formerly Banco Santander Central Hispano)

Banco Santander

Banco de Santander was established in the city of Santander in 1857 under a Royal Decree signed by Queen Isabel II. Banco Santander’s home market of Cantabria in northern Spain at the time had strong trading ties with Spain’s colonies in Latin America, and the bank flourished from trade financing between the two continents.

For much of the 20th century, however, Spain endured turbulent times: World War I disrupted the Spanish economy as it did to other European nations. Following the Great War, the Spanish economy recovered and entered a phase of rapid industrialization. But the 1929 Wall Street Stock Market Crash sent shock waves across the Atlantic and a number of major Spanish banks failed, though Banco Santander withstood the crisis. Just two years later in 1931, the Spanish monarchy was yet again replaced by a republic form of government, and political unrest boiled over between the Nationalists and the Republicans. In 1936, Spanish Civil War broke out and devastated the economy and social order that took the country decades to recover.

In 1939, Dictator Francisco Franco’s forces won the civil war and imposed strict political oppression and economic controls. Banks were banned from entering new areas of business but were allowed to merge with each other. Banco Santander acquired Banco de Ávila in 1942, gaining its first foothold in Madrid, and then acquired rival Santander-based Banco Mercantil in 1946. By 1957, Banco Santander’s 100th anniversary, it was the No. 7 bank in Spain.
Banco Santander’s international expansion began in 1960 with the purchase of Argentina's Banco El Hogar Argentino. In 1965, Banco Santander and Bank of America jointly founded the Banco Intercontinental Español (Bankinter). One year later, Santander bought the First Nacional Bank de Puerto Rico, followed by the 1982 purchase of Banco Español-Chile. During the 1980s, the bank established presence across Latin America, in such countries as Brazil, Costa Rica, Dominican Republic, El Salvador, Guatemala and Uruguay.

In 1987, the bank bought auto finance provider CC-Bank in Germany, representing its first acquisition in Europe outside of Spain. It also bought a stake in Portugal's Banco de Comercio e Industria.

By 1994, Banco Santander had built up a 60% stake in Spanish rival Banco Español de Crédito (known as Banesto, founded 1902). In 1995, it launched a major expansion in Latin America including Argentina, Brazil, Colombia, Mexico, Peru and Venezuela. In 1998, the bank took full control of Banco Español de Crédito (Banesto).

Banco Central Hispanoamericano

Banco Central was founded in 1919 in Madrid by several wealthy aristocrats. The new bank took advantage of the post-World War I economic growth and became a major force in financing Spain’s heavy industries such as coal, steel, iron, and shipping. In 1931, like many countries around the world, the Banco de España, formerly a joint-stock commercial bank, became Spain’s central bank and withdrew from the deposit-taking and lending business. Banco Central promptly filled the retail market void left by Banco de España.

During the 1940s and 1950s, Spain’s economy remained severely depressed and underdeveloped compared to most of Western Europe. In 1958, with the help from the International Monetary Fund and other agencies, Spain began to take steps to control its spending and debt, remove its price controls and wage freeze, while encouraging foreign investment. Banco Central once again relied on its expertise in providing long-term credit to finance hydro-electric and petroleum projects. A decade of economic reforms finally led to a gradual rise of the middle-class in the late 1960s. Banco Central then began to expand its retail banking business by offering chequing accounts and consumer credit.

Despite these changes, Spain’s banks, including Banco Central, were still considered smallish, bureaucratic, over-staffed and uncompetitive by international standards. In anticipation of EU’s adoption of the Euro and cross-border competition from other member nations, Spain’s banks entered a phase of frenzy consolidation beginning in the late 1980s.

In 1988, cousins Alberto Alcocer and Alberto Cortina, who were married to sisters Esther and Alicia Koplowitz, owners of Spanish construction giant Construcciones y Contratas (Conycon), attempted to gain control of Banco Central’s board by accumulating a 12% stake in the bank. Banco Central’s chairman then orchestrated a merger plan with Banco Español de Crédito (Banesto) in an attempt to dilute los Albertos’s stake and control. Los Albertos (as Alberto Alcocer and Alberto Cortina were nicknamed by the popular press) responded by buying up a stake in Banesto also to exert influence in both banks. After a nine-month deadlock, los Albertos agreed to sell their stake in Banesto providing that the Banco Central-Banesto merger be called off. In a bizarre twist of events, the Koplowitz sisters divorced their husbands in 1990 following a much publicized extramarital affair conducted by Alberto Cortina, and los Albertos lost their seats in Conycon and Banco Central. Both Banco Central and Banesto’s chairmen survived the assault and kept their positions. The original Banco Santander eventually bought 73.5% of Banesto in 1994 for about USD $2.07-billion (ESP 285-billion).

Recent transaction(s):

  • In 1991, Banco Central took over the ailing Banco Hispanoamericano (founded 1900). The merged bank became known as the Banco Central Hispanoamericano S.A. and promptly cut 10,000 jobs and closed 20% of the branches.
  • In 1996, Banco Santander acquired 93.4% of Banco de Venezuela from the Venezuelan government for about USD $351-million. Founded in 1890, the bank was nationalized in 1994 before being sold to Banco Santander. In 2008, Venezuela once again nationalized Banco de Venezuela.
  • In early 1999, Banco Santander bid USD $12.6-billion for Banco Central Hispanoamericano to form the new Banco Santander Central Hispano (BSCH).
  • Later in 1999, BSCH also bought Banco Totta & Açores and Crédito Predial Português, gaining a 10% market share (1999 figure) in Portugal. BSCH had intended to buy all four banks controlled by the Champalimaud Group, but its proposal was opposed by the Portuguese government. The European Union subsequently ruled against Portugal and forced it to approve the sale of Totta & Açores and Crédito Predial Português to BSCH.
  • In 2000, BSCH bought a 66.5% voting stake (33% economic stake) in Brazil's No. 3 bank Banco do Estado de Sao Paolo (known as Banespa) for USD $3.80-billion (Eur 4.38-billion). Within a few months, BSCH acquired the rest of Banespa for another USD $1.07-billion (Eur 1.20-billion), bringing the total cost to USD $4.87-billion (Eur 5.58-billion). Banespa had 577 branches in Brazil.
  • Also in 2000, BSCH bought 97% of Brazil's Grupo Financeiro Meridional S.A., consisting of Banco Meridional and Banco de Inversiones Bozano Simonsen.
  • Also in 2000, BSCH bought Mexico's Grupo Financiero Serfín from Mexico's government-controlled banking regulator Instituto para la Porteccíon al Ahorro Bancario (IPAB).
  • Also in 2000, BSCH acquired a stake in Chile's Banco Santiago.
  • Also in 2000, BSCH bought Venezuela's Banco de Caracas. BSCH then merged Banco de Caracas into its 97%-owned Banco de Venezuela to create the country's largest bank.
  • Also in 2000, BSCH bought 75% of Miami-based Internet-based brokerage company Patagon.com International for USD $529-million. Patagon.com specialized in the Spanish- and Portuguese-speaking markets in Latin America.
  • In 2002, BSCH bought a further 35.45% of Banco Santiago from the Chilean central bank for USD $685-million (Eur 772-million). BSCH subsequently merged Banco Santiago into its Banco Santander Chile subsidiary.
  • In 2002, BSCH sold 24.9% of Mexico's Grupo Financiero Santander Serfín to Bank of America for USD $1.60-billion.
  • In 2003, BSCH bought Italian consumer finance company Fincosumo from Italy's Sanpaolo IMI for Eur 140-million.
  • In 2004, BSCH made a surprise GBP 8.5-billion (USD $15.75-billion) bid for British mortgage bank Abbey National. This represented the first cross-border acquisition of a major British bank by a Eurozone bank. Back in 2001, the British anti-competition commission vetoed Lloyds TSB's bid to take over Abbey National.
  • In 2005, in a complex agreement, BSCH bought 19.9% of U.S. bank Sovereign Bancorp for USD $2.4-billion. In turn, Sovereign Bancorp took over Brooklyn, New York-based Independence Community Bank Corp. for USD $3.6-billion.
  • In 2006, BSCH's Abbey National plc subsidiary agreed to sell its life insurance businesses to Resolution plc for GBP 3.6-billion. The sale mainly consisted of Scottish Mutual Assurance plc, Scottish Provident Ltd. and Abbey National Life plc.
  • In 2007, BSCH sold its pension fund management business in Mexico, Chile, Colombia and Uruguay to the Netherlands' ING Groep for Eur 945-million (USD $1.3-billion). The business division sold to ING had more than Eur 13.8-billion (USD $19.9-billion) of assets under management. BSCH planned to use the proceeds to fund its share of the proposed Eur 71.1-billion (USD $98.1-billion) offer (with RBS and Fortis) for ABN Amro Holding NV (see below).
  • In June 2007, Banco Santander Central Hispano, S.A. changed its name to Banco Santander, S.A.
  • In October 2007, after a six-month battle with Barclays plc, Banco Santander SA, along with Fortis SA/NV and The Royal Bank of Scotland Group plc, won the control of ABN AMRO Holding NV with a Eur 70.0-billion (USD $101.1-billion) cash-and-stock offer. The deal was the world's biggest banking merger ever. The tri-bank consortium planned to break up ABN AMRO's global operations with Banco Santander taking over ABN AMRO's Brazilian and Italian operations, namely Banco ABN AMRO Real and Banca Antonveneta. Click here for a detailed timeline of the battle for ABN AMRO Holding.
  • In November 2007, in a surprise move, Banco Santander "flipped" ABN AMRO's Italian unit Banca Antonveneta to Italy's Banca Monte dei Paschi di Siena (MPS) for Eur 9.0-billion (USD $13.21-billion). Banco Santander, Fortis and the Royal Bank of Scotland (RBS) had just jointly bought out ABN AMRO Holding NV (including Banca Antonveneta) for Euro 70.0-billion (USD $101.1-billion) deal less than a month earlier.
  • In 2008, Santander and GE Money reached a deal to swap European assets worth Eur 2.0-billion (USD $3.16-billion) in total. Under the agreement, Santander obtained GE Money's German, Finnish and Austrian divisions, plus its credit card and automotive financing operations in Britain. In exchange, GE Money took control of Santander's Interbanca, the corporate banking unit of Italy's Banca Antonveneta that was purchased by Santander in 2007 as part of ABN AMRO Holding NV.
  • In 2008, Santander bought British mortgage bank Alliance and Leicester plc for GBP 1.26-billion (Eur 1.58-billion, USD $2.51-billion). Alliance and Leicester shares had been languishing since the U.S. housing bust and global banking crisis began in early 2007. With Alliance and Leicester's 254-branch network, Santander would have 959 branches in the United Kingdom and 7.6% of the market.
  • In 2008, Venezuelan de facto dictator President Hugo Chavez announced that the country would nationalize Banco Santander's local unit Banco de Venezuela.
  • British mortgage bank Bradford & Bingley plc became insolvent over the 2008-09-29 weekend, and was nationalized by the British government. Under a complex transaction, Banco Santander acquired Bradford & Bingley's client deposits and 197 branches for GBP 612-million (Eur 766-million, USD $1.11-billion). Banco Santander already owned Britain's mortgage lenders Abbey National and Alliance & Leicester. The Bank of England and HM Treasury provided GBP 19.1-billion (USD $34.5-billion) of guarantees to Santander to take over the lender. The British government would be left with Bradford & Bingley's mortgage loan, personal loan and other assets with a book value of GBP 50-billion. The government insisted that it would get the GBP 19.1-billion back by either slowly selling off Bradford & Bingley's loan portfolios, or when the borrowers repay their loans.
  • In October 2008, Santander privatized Sovereign Bancorp Inc. for USD $1.9-billion in stock. Santander first acquired 24.9% of Sovereign for USD $2.9-billion between 2005 and 2006, the current price of USD $1.9-billion for the remaining 75.1% highlighted how much bank valuation has dropped during the Great Banking Crisis of 2008.
  • In May 2009, the Venezuelan government and Banco Santander reached a deal regarding the nationalization of Banco de Venezuela. Venezuela paid USD $1.05-billion to Banco Santander in cash and promissory notes to take control of Banco Venezuela, the country’s No. 1 bank with more than 300 branches.
  • In October 2009, Santander sold 18.5% of its Brazilian unit Banco Santander (Brasil) S.A. in an IPO and raised BRL 14.1-billion (Eur 5.47-billion, USD $8.09-billion). Santander Brasil included the former Banespa and Banco Real, and had 3,612 branches and more than 21-million clients with a 10% market share.
  • In June 2010, Santander bought back the 24.9% of Santander Mexico held by Bank of America since 2003 for USD $2.5-billion. Santander was Mexico's No. 3 bank.
  • Also in June 2010, Santander bought a USD $3.2-billion (Eur 2.59-billion) auto loan portfolio from CitiFinancial Auto at 99% of the portfolio's face value.
  • In August 2010, Santander agreed to buy from the Royal Bank of Scotland 311 RBS branches in England and Wales, and 7 NatWest branches in Scotland for Eur 1.99-billion (GBP 1.65-billion, USD $2.63-billion). The 318 branches served 1.8-million clients. Following the the purchase, Santander would have over 1,600 branches in the U.K (see update below).
  • In September 2010, Santander agreed to buy the 70.4% of Poland's Bank Zachodni WBK S.A. and 50% of BZWBK AIB Asset Management held by Allied Irish Banks plc for Eur 3.09-billion (USD $3.97-billion). Bank Zachodni WBK was Poland's No. 3 bank and had 512 offices.
  • In February 2010, Santander made a public tender offer to buy out the 29.6% minority shareholding of Poland's Bank Zachodni WBK. The latest offer valued the entire Bank Zachodni WBK at PLN 16.58-billion (Eur 4.29-billion, USD $5.83-billion).
  • In October 2012, Santander's agreement to buy 316 British branches from the Royal Bank of Scotland Group collapsed citing operational difficulties and unreasonable delays.
  • In September 2012, Santander floated 25% of its Mexican operations Santander México and raised about Eur 3.18-billion (MXN 52.8-billion, USD $4.13-billion) from the IPO.
  • In December 2012, Santander acquired the 10% of Banesto that it didn't already own for Eur 260-million (USD $342-million).  Santander would end the Banesto brand and the consolidation would result in the closure of 700 branches between Santander and Banesto.
  • In June 2014, Santander acquired GE Capital's GE Money Bank AB of Sweden for EUR 700-million (USD $952-million).  GE Money Bank AB provided personal loans and credit cards in the Nordic region, with Sweden accounting for 55% of its loan portfolio, Norway accounting for 26% and Denmark accounting for 19%.  The business had a total loan portfolio of EUR 2.35-billion.  Following the purchase, Santander's Nordic consumer finance operations would count over 1.2-million clients.
  • In June 2017, Banco Santander bought Banco Popular Español (Banco Popular) for a symbolic EUR 1 (EUR 1 = USD 1.1276) from EU authorities that had just taken control of the insolvent bank, which has been struggling financially since the global banking crisis began in 2008. In recent weeks, Banco Popular had experienced an increasingly debilitating bank run as nervous depositors withdrew money from the bank. Banco Santander would raise EUR 7.0-billion in new equity to shore up Banco Popular’s balance sheet. The ailing bank was carrying over EUR 37-billion of non-performing real estate loans and properties when it failed. Banco Popular had over 4.6-million clients, almost 12,000 employees and over 1,700 offices.
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