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XI Santander-Latin America Meeting - Jesús Zabalza: "We are focused on growth in Latin America"

  • From 1999-2000 Banco Santander reinvested 61% of the profit it earned in Latin America, or US$27 billion,  back into the region. That is in addition to $39 billion of net investment in Latin America, which takes the total to $66 billion.
  • The Group is focused on organic growth, which goes hand in hand with countries’ economic development, without ruling out selective acquisitions. 
  • Santander is committed to extending the use of banking services in the region and to helping small and medium-sized enterprises export their goods and services.

Santander, June 27, 2012 - Jesús Zabalza, head of Banco Santander’s Latin America division, said today: “The bank’s goal in Latin America is clear. Our focus is on growth, not on selling.”

Zabalza took part in the XI Santander-Latin America meeting, organised by the bank and the Universidad Internacional Menéndez y Pelayo (UIMP), where he spoke on “The role of Latin America in the new world economic order: Its strength and importance in the current decade.”
He said he was confident that the region’s recent good performance – it now accounts for 8.8% of global GDP – would continue in the coming years.

“There are reasons to believe that Latin America will continue to do very well,” he said. The first is its demographics. Seventy million young people joined the workforce in the last decade and another 70 million will do so in the next ten years. More than 100 million people have joined the middle classes in the last decade while the number living in poverty fell by 56 million. “This will provide solid support for democracy to progress and for the economy to develop,” he noted. “According to our estimates, in 2020 the middle classes will make up 65% of Latin America’s population, rising to 72% if we include the wealthiest as well.”
 
Zabalza highlighted the region’s enormous export potential, both in raw materials and manufactured goods, and the increasing inflow of direct foreign investment. Last year it attracted $153 billion, or 10% of all foreign investment worldwide. He also said the regional economies and financial systems, with limited inflation, in step with the pattern of growth, falling interest rates, a steady rise in the levels of countries’ reserves and moderate, declining debt levels, both in terms of public and foreign debt.

“Even though demographic trends, access to financial services and economic growth have driven the increase in credit, asset prices are not overvalued and we are not concerned about possible asset bubbles and the subsequent risk of a credit crunch,” he said.

Zabalza said the “central scenario was for the region to keep growing at rates of around 4% in the coming years.” There are some risks and challenges ahead that could have an impact, such as the generalized closure of global financial markets, any material change in the economic forecasts of our main trading partners, or a sharp downturn in the price of major raw materials.

He added that he was sure the region’s financial systems would show double-digit growth in the coming year and this would increase the amount of credit in the systems to around 50% of GDP by 2015, based on Santander’s forecasts.

“Financial systems are well capitalized, with average capital ratios of 15%, and well financed with no liquidity problems. This guarantees their growth and sustainability,” he said.

Diversification

Zabalza summarised Santander’s business in the region: it has a significant presence in seven countries (Argentina, Brazil, Mexico, Chile, Peru, Puerto Rico and Uruguay); 41 million customers; more than 6,000 branches and 88,000 banking professionals. 

“That makes Santander the clear regional leader, with a market share of 10% in these countries. We have a unique franchise, which can’t be reproduced.” Latin American represents 19% of group assets and 52% of group attributable profit. “The advantage of Banco Santander’s diversification is proven, more than ever, as is the success of our continuing faith in the individual countries and the region as a whole.”

Zabalza added that the bank’s presence in Latin America gave it unique competitive advantages. “In practical terms, that means we can serve our customers and communities better in the regions where we operate by being more productive, efficient and profitable.” He said the bank’s business model emphasizes continual improvement in quality and customer satisfaction levels. Its cautious policies in managing risk, capital and liquidity are among the advantages of belonging to a group that is simultaneously global and adapted to Latin America, he said.

He also stressed the importance of Santander’s model of subsidiaries that are autonomous in capital and liquidity as “the best way to protect the group’s financial health and an additional guarantee for the financial systems of the countries in which we operate.” He reiterated that the only flow of funds from subsidiaries to the parent bank is through dividends due to it as shareholder. Group policy is to reinvest at least 50% of attributable profit and distribute the rest.

“Santander reinvested 61% of profits in Latin America between 1999 and 2011, which is equivalent to $27 billion. In addition to the $39 billion of investment in the region, this brings the total to $66 billion.”

Zabalza reiterated the bank’s desire to expand in Latin America. He said the strategy was to intensify the existing model, focusing on increasing business and supporting countries’ economic development and on organic growth, but without ruling out selective acquisitions.

“In terms of our size, we have the highest share of business and profit. That means we are the most productive, profitable and efficient.”

 Zabalza said he was committed to extending the penetration of banking services to the population and to continuing to support SMEs in their international expansion. “Since 2011, more than 1,000 companies have carried out international projects with our support. That takes the volume of our lending to SMEs and other companies to more than $1 billion. This will be a central part of our activity in the future.”

Latin America is going through an extraordinary moment. I am sure that Europe and the rest of the developed world will not be a negative factor, but instead will provide an element of stability. The right conditions are firmly in place and Latin America deserves this opportunity. Governments, financial systems and banks have the duty to make it all possible.”

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XI meeting Santander-Latin America

Jesús Zabalza, senior vice president of the Americas Division of Banco Santander, at the XI meeting Santander - Latin American.

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