Banking across Borders
Summary
In 2004 Banco Santander announced the acquisition of Abbey National which turned out Santander to be the 10th largest bank in the world and 4th largest bank in Europe The deal would primarily generate revenue from the retail activities and involving crossborder transaction in European retail bank industry
The banking industry comprised three business parts investment bank wholesale banking business and retail banking In Europe and US many retail bank had experienced M&A but just happened within a nation and selected national market In Latin America and Eastern Europe concentration also increased through foreign ownership and penetration of foreign investors
Recently two regulatory changes had a great impact on the banking industry the Basel II agreement and the new International Accounting Standards The first one requires financial institution keep a minimal capital reserve to confront unexpected situation The latter one was expected to increase transparency and standardize across national borders
Santander expanded rapidly in both domestic and international market Since 1989 they shows their strong ambition by three major moves which are Supercruenta acquisition of Banesto and merger with Banco Central Hispano Santander created to be the largest Spanish financial group since then
Long time ago Santander already started to expand their international market In 1988 they signed an alliance with RBoS and became a larger shareholder in RBoS During 90’s they dramatically expanded their customers across the whole Latin America and Europe
Abbey National Building Society has deep local roots in UK and two main business divisions The first one is the personal Financial Services Division although Abbey was the largest residential mortgages provider and also provides retail saving
account and personal account it generated a very limited income compared to other domestic competitors The second one is Portfolio Business Unit Because Abbey’s stated intention was to shrink or exit these business while focusing on its Personal Financial Services Division which resulted in Abbey’s poor financial performance
Santander’s acquisition was expected to benefit Abbey’s customers and shareholders They will more focus on retail banking with revenues from retail activities They project to reach the target of cost saving in several areas including implement IT program Partenon purchase saving sales cost reduction and reduction in administrative expense Moreover Santander was hoping to generate more revenue by crossselling of financial products to Abbey’s existing customers
Although there is alternate bidder had the potential to block Santander’s offer Emilio Botin is very confident of the acquisition and both banks’ future
Recommendations
Banco Santander should concentrate on research and development information technology including online banking services and mobile banking services The reasons are firstly this is a crossborder acquisition So Santander and Abbey need to improve their communication technology and internet technology in order to reduce costs and save time Secondly due to fierce competition in banking industry providing easy convenient and efficient services is more important to Banco Santander It will satisfy and attract more customers
Santander can take the advantage of the participation and name of Abbey in the UK to offer financial products in retail banking to get more revenue As the case says Abbey concentrated its commercial banking activities in mortgages generating less revenue in the last years Retail banking includes financial products for individuals through large distribution networks
The acquisition of Abbey by Santander was a smart and a risky decision that will allow Santander to get 11 of the UK market We also recommend for the near future to expand and reinforce operations in the European Union Asia and North America doing respective financial economical and market analysis
It is important to align the culture of the organizations and to integrate ABBEY in Santander Group to get better results and to keep employees focused on their tasks It is essential to reinforce communication to employees through training programs workshops to gain acceptance and to strength the feeling of belonging to employees and customers
Ratio Analysis financial ratio analysis is important to measure performance for Santander and Abbey and to get a better understanding of the case We will make financial analysis to measure for example asset performance how well the money from shareholders is being employed financial stability and liquidity of the bank
The importance of information security (IS) in the banking industry has grown tremendously over the past years due to a combination of factors And Banco Santander should also pay attention to the development of
Banco Santander should concentrate on research and development information technology including online banking services and mobile banking services The reasons are firstly this is a crossborder acquisition So Santander and Abbey need to improve their communication technology and internet technology in order to reduce costs and save time Secondly due to fierce competition in banking industry providing easy convenient and efficient services is more important to Banco Santander It will satisfy and attract more customers
Banco Santander should concentrate on the development of information technology and at the meanwhile improve banking service quality
Banco Santander should concentrate on the development of information technology and on the meanwhile improve their banking service quality New technologies will bring banks enormous changes to officers employees and customers And advances in technology will give Santander the probability to offer their products and service much more conveniently and effectively than ever before – thus creating new bases of competition Santander should fully aware of customer's need for new services and plan to make them available
Good quality of customer service is always the key to success because it can bring with considerable amount of customers Suppose now the Santander owns the maximum number of loyal customers all around the world there’s no doubt that Santander can beat all other competitors That means if Santander want to win in today’s fierce competition they may first need to satisfy their customers And what are the demands of customers today To do their banking whenever they want and wherever they like And the only way to provide instant and effective service is by means of using the most advanced information technologies and by means of welltrained people who can use these technologies
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