In a new book titled, Santander, The Bank, by Mauro Guillén, director of the Joseph H. Lauder Institute of Management and International Studies, and Adrian Tschoegl, professor of management at Wharton, the two authors analyze the history of Banco Santander and show how creativity can lead to success in the global economy. The rapid rise of the Spanish bank, which has become one of the 10 largest in the world, illustrates that the best way to be a leader is to act decisively while assuming calculated risks, according to the authors. In an interview with Universia-Knowledge at Wharton, Guillén provides a look at the visions and viewpoints outlined in this book.


Universia-Knowledge at Wharton: What message do you want to communicate about Banco Santander in this book?


Mauro Guillén: That Banco Santander is an example of the big Spanish multinational enterprises that have figured out how to transform themselves. In the course of only 20 years, it has changed from having a local presence to becoming one of the 10 largest institutions in the world. It is a source of pride that a Spanish company with these characteristics has [do this] in such a short period of time, and that it is now a feared competitor throughout the world.


The second message is a paradox. On the one hand, this transformation has been very difficult. On the other hand, it has been easily accomplished. At the moment, Santander has a very significant presence in Spain and Portugal as well as Latin America. It also has a presence in some isolated European markets, and a little less in the U.S. and Asia. Adding all these markets together, it reaches about 15% of the world’s territory. It still has to win over the remaining 85%. Now, with the acquisition of Holland’s ABM Amro (which it is negotiating for along with the Royal Bank of Scotland and Belgium’s Fortis), Santander would take a major step forward. A lot still remains to be done, and it doesn’t help to relax or go to sleep.


UKnowledge at Wharton: What are the key factors that have permitted Santander to move from being a modest provincial bank to becoming one of the leaders in the euro zone and one of the most important banks in the world?


M.G.: I believe there are two things. On the one hand, it is a bank that has had no internal problems. It is very quick at making decisions, and it has taken advantage of the opportunities that have presented themselves. This is crucial in a sector like banking, where there have been a lot of changes. The internal model for decision-making has been key; it is a determining factor. It’s not just us who say that but also its [Santander’s] competitors who have pointed to this strength of the bank. It has demonstrated audacity and speed at taking advantage of business opportunities that enable it to grow more quickly.


Another factor is that the banking sector in Spain is very efficient and well regulated. Traditionally, it has been very dynamic. There has been enormous competition among the big banks, always within an environment – the Spanish market – that is very competitive, where you have to work very hard just to maintain your position. In such a dynamic context, Santander has managed to expand to the point where it has become what it is today. It has developed in a country that has grown enough to get plugged into developments throughout Europe. Ultimately, this is what has permitted the Santander boom.


UKnowledge at Wharton: Has luck played a role?


M.G.: Without doubt. There was an opportunity to grow in Latin America during the 1980s, at a time when Latin American banks needed foreign investors. If there had been such a need 10 years earlier, when Spain was living under the dictatorship [of General Francisco Franco], Spanish banks would not have had the opportunity to jump into foreign markets, at a time when they needed to grow. Latin America was a part of the world where they could do that because they had knowledge and skills, and Santander knew how to do that very well.


UKnowledge at Wharton: How do you define the evolution of Spanish banking in your book?


M.G.: Twenty-five years ago, the Spanish banking system was undergoing a terrible crisis. During the 1980s, it was emerging from that crisis. On the one hand, I believe that it was a good thing that this process took place because that was how those banks that did not function efficiently were eliminated from the market. Those that remained became more sophisticated and had stronger foundations.


UKnowledge at Wharton.: And political leaders had an influence on this?


M.G.: To a large degree, the system got stronger because of political leaders who understood that it was very important then for the Central Bank of Spain to supervise the banking sector. That institution has always played quite a constructive role. It provides a model that other countries can imitate. Twenty-five years ago, no one could have predicted the smooth functioning of today’s Spanish banking system.


UKnowledge at Wharton: What view does the rest of the world have of the development of Spanish banking?


M.G.: There is a lot of ignorance about our [financial] development. When Spanish banks left Spain to buy and invest, first in Latin America, it was a good idea but it was not applauded by the rest of the world nor viewed as an achievement by Spanish banks. It wasn’t until the end of the 1990s that people realized that Spanish banks were serious competitors. That idea was confirmed in 2004, above all, when Banco Santander became widely recognized as one of the most competitive players on a global level.


UKnowledge at Wharton: And then, in recent years, it has become the leading phenomenon?


M.G.: Yes but I continue to believe, generally speaking, that there is widespread ignorance about our banks’ high level of skills because their presence is limited only to Spain, Portugal, Latin America, the U.K. and some countries of Eastern Europe.


UKnowledge at Wharton: What has been the key to Banco Santander’s successful globalization?


M.G.: No matter what they have had to pay, they have taken advantage of all the business opportunities presented to them. They have been very quick to make decisions, and are very audacious. Santander has known how to face the future.


UKnowledge at Wharton: What is its strategic approach?


M.G.: Its strategy is to focus on growth. That’s an approach that some people criticize, but it has made it one of the world’s leaders.


UKnowledge at Wharton: During its 150-year history, what have been the greatest challenges and most serious mistakes the bank has had to overcome?


M. G.: The first mistake that people identify — although I don’t consider it a mistake — concerns the Banco Santander de Negocios [Santander Business Bank], which was an investment bank in Latin America that had to close. Nevertheless, it prepared the territory [for Santander], and provided the experience it needed for launching a retail bank later on. The second thing people say is that it [Santander] always pays too much for its acquisitions. That criticism has always been made above all against Emilio Botín – the current president – but I believe it is unfounded. You have to assess the benefits that it has derived [from those acquisitions]. The third criticism is that it has not cared enough about its customer base. Banco Santander gets more complaints from customers each year than any bank does. It is a very important issue that remains to be resolved. They need to pay more attention to their customers and improve the quality of the service they provide.


UKnowledge at Wharton: Could they get a higher return from their base of available customers?


M.G.: They could offer more sophisticated services, such as Banco Popular has done. Banco Popular has gotten stronger by setting up more sophisticated services for its customer base. At best, Santander hasn’t had enough time. Twenty years ago, it ranked 52nd among the world’s banks. Now it is among the top 10. Its rise has come too quickly. At best, it is a question of dedicating more time to pampering its customers.


UKnowledge at Wharton: Three generations of the same family. What have been the keys to this succession of managers?


M. G.: When things started out, there were no ties between the family and the bank. The clear link began in 1950. The father of the current president then held the same post for 36 years, although he never played a major role in the bank’s ownership. During the 1950s, Santander was a tiny bank. It barely had a presence in [the Spanish cities of] Santander, Palencia, Leon and a small part of Madrid. Then it transformed itself, and bank shareholders saw the senior Emilio Botín as their savior. From that point on, we all know the story.


UKnowledge at Wharton: How do you characterize the role played by the junior Emilio Botín, the bank’s current president?


M.G.: During the 36 years when he was president [of Santander], his father [the senior Botín] showed that he could manage a bank very effectively. It seemed as if no other Botín could have skills superior to those of his father. The current president didn’t become chief executive until he was 54 years old, and he had a great desire to change the bank. He revolutionized relationships between the bank and its customers; provided interest on accounts, and made other changes over time. And he demonstrated that he had the same talent as his father, the same passion for growth and for always being loyal to the bank’s origins and its 150 years of history.


UKnowledge at Wharton: Will the next Botín generation lead Santander?


M.G.: The Bank has become totally professionalized. It has thousands of professional managers who have nothing to do with the family, and who could do a perfect job in that role.


UKnowledge at Wharton: What significance does the bank give to its use of red as its corporate color?


M.G.: Banco Santander has taken its corporate identity very seriously, even to the point where Emilio Botín wears a red necktie during all his presentations. They have created a coherent corporate culture shared by employees throughout the organization. In 2008, they want all of their brands to be totally unified. In all the countries where Santander has a presence, its brand will be recognized by its red flame.


UKnowledge at Wharton: Now that Asia has been awakened, will the bank look in that direction?


M.G.: They have already done so for years. However, their minds are still fixed on Europe and the United States, perhaps because those continents are closer and they seem to offer more opportunities. In Asia, it makes sense to have a different sort of presence. They are looking, above all, at commercial and retail banking. They already have some representation but it is purely in support activities. I believe that the big problem is for professionals to be prepared for performing their jobs. They don’t have the personnel who have enough knowledge to become established over there. I believe that the time for moving into Asia has not yet arrived.


UKnowledge at Wharton: In your view, what is Banco Santander’s current challenge?


M.G.:  I believe they have two. In the first place, they have to provide better service to their current base of customers — more value added. In the second place, the bank is strong in only 15% of the global economy. That means they still have to win over the remaining 85%. A bank that aspires to be one of the 10 largest banks in the world cannot have a presence in only 15% of the world. Over the next 15 years, they should have a presence in between 50% and 60% of the world, and on every continent.


UKnowledge at Wharton: Do you think it is viable over the medium or long term to have a merger between Santander and BBVA, which is the second largest Spanish bank?


M.G.: You can never say that there is no probability, but I think that there is little probability because I believe a merger of this sort would awaken all sorts of suspicions about controlling the market, not only in Spain and Portugal but also in Latin America. Over the last decade, both banks have become very big, and I believe that anti-trust authorities could create a lot of problems for this kind of merger. I also believe that it would be very negative for both banks because, over the past five years, they have pursued two different growth strategies that are now firmly implanted. Earlier, they [Santander and BBVA] were identical but now each of them is strong in different markets.


UKnowledge at Wharton: So, for both banks the best thing would be to differentiate their strategies?


M.G.: It would be very healthy because both are global players. Five years ago, I wondered when they were going to realize that it was not all about watching what the competition is doing and doing just what the other team is doing. Nowadays, it is a very good thing that they have differentiated their areas of operational activity, and are not focused on copying each other.