Customer-friendly features and services offered by Banco Santander
The Banco Santander is one of the leading banks having a global presence that provides customer-friendly features and services including the waiver of monthly fees, automatic savings feature and low initial deposit on checking account. It is established and operates across Europe, Asia, north and south America. Amongst the various subsidiaries, the American subsidiary is the most revenue productive where employees have rated one of the most flexible and suitable workspaces and being awarded as top workplaces in the USA in the years 2021 and 2022. The bank’s overall presence and performance are significantly contributed by the American region (both by the North and South) and the revenue and profit after tax available to the parent company are majorly dominated by the operations in the United States.
While evaluating the credit risk and non-performing loans of the bank across the globe the American region is significant and require major attention while determining the corporate governance policy or any other standard by the group to maintain the congruency of the financial policy and position as a group.
In the year 2020, due to covid-19 in the UK the GDP comes to -9.9% and mainly impacted the service sector and unemployment remained at 0.6% in December 2020, whereas in the US, the GDP comes to -3.5% and the government has to announce various relief measures to save the economy where the unemployment rate remains to 6.7% in December 2020.
Banco Santander is one of the leading international banks having its origin in Spain but being globalised and spread across the world. In this paper, only two subsidiaries the United Kingdom and the United States are being compared and analysed in light of the performance of the bank in 2020 after the evaluation of consolidated financial statements of 2020. (santander.com, 2022)
In 2020, the Profitability of the bank shows the profit available being 5081 million euros where United Kingdom subsidiary`s share is 530 million euros (10.43%) and North and South America (combined the US)`s share is 4420 million euros (86.99%) means both of these subsidiaries covering almost 90% of the profit available for distribution to the parent and among this, the major portion is being contributed by the US.
The Net interest income being the operating revenue of the bank comes to 31994 million euros and among this UK`s share is 3808 million euros (11.90%) and US`s share is 19192 million euros (59.99%) therefore the US covers the majority of the total group revenue in the year 2020.
In the comparison of net profit before tax, the UK subsidiary covers only 7.20% whereas the US subsidiary covers only 78.81% of the total group profit before tax. Showing better profitability obtained from the US subsidiary collectively from both North and South America.
In the evaluation of efficiency ratio (operating expenses/Total income) used to measure the company`s short term performance UK`s efficiency ratio comes to 60.90% however the efficiency ratio of North America is 42.10% and of south America is 35.80%. This ratio indicates that the United Kingdom subsidiary is more efficient to meet its operating expenses in comparison to the United States.
Significant contribution of the American region to the bank’s overall presence and performance
In the evaluation of credit risk, the Non-performing loans (NPL) are considered as credit risk indicators where the UK`s NPL is compared with the total risk of each business area and respective % of NPL out of total risks are compared. In this UK non-performing loans comes to 1.21% only whereas North America`s NPL is 2.23% and South America`s NPL is 4.39% being higher than the UK NPL ratio, showing greater credit risk of United States subsidiary due to poor quality in assets in the form of loans advanced to customers.
To adjust for covid-19 impacts, the NPL ratio in the United Kingdom grew in 2020 to 1.21 per cent (+20 bps vs yearend 2019), led by the corporate and commercial banking category.
Due to provisions resulting from the covid-19 epidemic, the NPL ratio in the United States grew to 0.81 per cent (+12 basis points) in December 2020, and credit increased to 0.85 per cent.
Due to the risk involvement of bad debt or non-recoverability of loans and advances the banks have to follow strict regulatory requirements and have to comply with the provision relating rules. This provision of non-performing loans is evaluated by the coverage ratio. When this coverage ratio of the company is evaluated based on business area, the coverage ratio of United Kingdom subsidiary comes to 47.90% whereas the coverage ratio of North America is 182.50% and South America is 97.40% only, therefore this shows how better or poor the shock-absorbing capacity of the respective subsidiaries. This ratio shows the better capacity and over the provision of total non-performing loans advanced by North and South America regions whereas the United Kingdom region has made provision of only 47.90% leaving a large gap of provision and poor shock-absorbing capacity.
Whenever new mortgage loans are accepted, all properties are carefully evaluated in compliance with Group Santander’s risk assessment criteria. Following industry standards and regulations, the property values used as security for approved mortgages are constantly updated by an impartial agency using a computerised appraisal system.
Credit exposures are concentrated in the South East of the United Kingdom and the London metropolitan area. As mentioned in the key metrics part of the consolidated financial statements of 2020, the company’s credit risk with clients is geographically distributed among our primary markets (27 per cent in the United Kingdom, 22 per cent in Spain, 10 per cent in the United States, 8 per cent in Brazil, and so on).
The UK economy is predicted to grow at a rate of about 4.5 per cent this year. Covid-19 vaccines help to accelerate predicted normalisation by progressively removing several activity-suppressing confinement measures. However, 2021 will be a year of adjustment to the new position outside of the European Union, which again will surely cause friction in investment and monetary and fiscal policy, which we anticipate to remain accommodating. They also helped over 150,000 enterprises in the United Kingdom by providing GBP 4.6 billion through government initiatives. We’re still working on expanding our international offering; we staged 80 online business events and raised the number of trade lanes from three to twenty. They’ve assisted 373,000 retail clients with payment vacations, covering mortgages and consumer loans, which represents a significant operational effort.
They improved their activity promotes to provide an outstanding consumer experience. The usage of electronic consumers increased by 8% year over year to 6.3 million. They kept 68 per cent of refinanced home loans online, up 8 percentage points year over year. They also used digital methods to open 82 per cent of current accounts and 90 per cent of credit cards, up 30 per cent and 28 per cent year over year, respectively. They launched Chat, a new digital channel that provides 24/7 assistance via a chatbot and access to employees via Live Chat, to complement this enhanced digitization. They’ve observed over 3.7 million chats since April, with daily volumes increasing from 1,000 to over 25,000.
The United Kingdom’s financial assistance actions in reaction to the covid-19 epidemic are described in detail below:
- Initially, the moratoriums were issued for three months.
- most of the moratoriums began to expire in June. There have been further extensions between June and July. further three months’ worth about 11 billion euros, so that starting from August onwards, practically all of the laws that remained in effect were extensions.
- In October, the administration authorised the moratoriums. Might be applied for until March 31, 2021, as long as the client had not yet completed six months of services in total, there are moratoriums.
- The approved moratoriums resulted in a principal and interest deferral. Moratoriums have been given to 323,265 clients as of December 31, 2020, for a total of EUR 43,944 million, or 19.05 per cent of the loan portfolio. The following is a breakdown of moratoriums by investment:
Santander US has continued to serve its clients, staff, and communities while pursuing its strategic goals during the covid-19 issue. The NPL ratio maintained at 2.04%, which is considered modest (-16 bps in the year). However, as a result of the uncertain macroeconomic situation, the cost of borrowing increased slightly to 2.86 per cent (+1 basis point year over year).
In 2020, the US economy moved from its deepest downturn in history to one of the quickest recoveries ever. During the spring and summer, states relaxed covid-19 lockdown restrictions. Fiscal and monetary stimulus programmes were put in an unprecedented place. Unemployment fell to 6.7 per cent in December, but it was still more than double the pre-pandemic record of 3.5 per cent, with job increases taking longer.
- They are a major vehicle financing lender in the United States with Asset origination and servicing skills that have been proved suited to build a reputation for itself as a full-spectrum independent combined competency enable them to operate.
- As a result of various online awareness campaigns Consumers are adopting digital and branch technologies at a faster rate. to improve the consumer experience, as well as maximising the stability of its deposit base to boost the loan growth economy
- Commercial maintains strong client ties by taking advantage of its improved service and worldwide value while supervising the expansion of a prominent company a high-quality commercial real estate (CRE) franchise structure of credit.
References
- com, 2022. Annual report. [ebook] santander.com. Available at: <https://www.santander.com/content/dam/santander-com/en/documentos/informe-anual/2020/ia-2020-annual-report-en.pdf#page=420> [Accessed 25 March 2022].
- no, 2022. Pillar 3 Report 2020. [ebook] Available at: <https://www.santanderconsumer.no/globalassets/om-oss/investor-relations/basel-pillar-3-disclosures/santander-consumer-bank-pillar-3-disclosure-2020.pdf> [Accessed 25 March 2022].
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