Building a Global Bank

Guillen and Tschoegl, both academics at Wharton, wrote a study of Banco Santander's expansion from a mid-sized Spanish regional bank into one of the largest banks in the world.

The analytical question is how a bank from a peripheral European economy achieved this when banks from larger economies did not. Their answer combines several factors. The Botin family's continuous control across generations supplied strategic consistency that professionally managed competitors could not match. The Spanish domestic market's deregulation in the 1980s forced consolidation, and Santander was aggressive in it, using a high-rate deposit account to take share and then acquiring rivals including Banesto and later Banco Central Hispano.

The international expansion followed a specific logic. Santander entered Latin America early and heavily, acquiring banks in Brazil, Mexico, Chile and Argentina, on the argument that language, legal traditions and the presence of Spanish corporate customers gave it advantages that American or British banks lacked. It then entered Britain through Abbey National and later Alliance and Leicester and Bradford and Bingley.

The operating model the authors emphasise is retail banking as a standardised business. Santander built a common technology platform and imposed it on acquisitions, treated retail banking as a cost and efficiency business rather than a relationship business, and measured acquisitions by whether they could be integrated onto the platform and their cost-to-income ratio reduced.

The book was published in 2008, before the Spanish property collapse and the eurozone crisis tested the model, and before Santander's subsequent difficulties in Britain and the changing economics of retail banking. The account of platform-driven acquisition integration is the durable part.