WEBVTT - Banco Santander Executive Chairman Ana Botin Talks Private Credit Market

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio News.

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<v Speaker 2>One of the major topics of conversation at the IMF

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<v Speaker 2>and World Bank meetings is the state of the banking environment,

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<v Speaker 2>specifically for European lenders. Joining us now for more on

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<v Speaker 2>this is on a Boutein, Santander Executive Chairman, ANDIIF Chair.

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<v Speaker 2>She is the first woman to chair THEIF board in

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<v Speaker 2>its history, and she is joined by Bloomberg's Lisa Bromwoods,

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<v Speaker 2>who was with her in Washington.

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<v Speaker 1>Lisa Scarlette, great to see you, Thank you so much.

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<v Speaker 1>And yes, she is the chair of the Institute of

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<v Speaker 1>International Finance. Anna Botein also the chair of Santander. And

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<v Speaker 1>when we talk about all of the different discussions that

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<v Speaker 1>people are having here, obviously it's the election, Obviously it's

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<v Speaker 1>what's going on with the global economy. But how much

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<v Speaker 1>is it the divergence between the situation right now in

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<v Speaker 1>Europe versus a situation in the United States.

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<v Speaker 3>Well, it's been a very busy day, but I'd say

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<v Speaker 3>that the topics are not very different from what they

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<v Speaker 3>were a year ago. So we're still about how do

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<v Speaker 3>we get growth to accelerate, And yes, Europe is growing less,

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<v Speaker 3>but actually on a relative basis, Europe should do better

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<v Speaker 3>next year than this year. In the US we're seeing

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<v Speaker 3>a slowdown. So it's about world growth. How do we

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<v Speaker 3>get growth going again in an economy that we're very

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<v Speaker 3>happy that it's still growing and it's soft landing it seems,

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<v Speaker 3>but we need to get growth to be faster.

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<v Speaker 1>How much are people talking about the necessity of scale,

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<v Speaker 1>of size of scope at a time of we're talking

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<v Speaker 1>about UniCredit possibly taking over Commerce Bank, We're talking about

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<v Speaker 1>the fact that the behemoths in the US are getting bigger.

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<v Speaker 1>Is that something that's expected to continue now?

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<v Speaker 3>Absolutely, and you know sometime that is one of the

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<v Speaker 3>biggest banks in the world by number of customers, which

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<v Speaker 3>is what matters. We have one hundred and sixty eight

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<v Speaker 3>million customers across Europe and Americas, so we have a scale.

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<v Speaker 3>We have the global scale, we have the in market scale,

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<v Speaker 3>and that is a unique combination. That's what matters. We

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<v Speaker 3>have investments in technology that are in the billions. We

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<v Speaker 3>are rolling out global platforms. We set today that will

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<v Speaker 3>have a fully digital bank by the end of twenty

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<v Speaker 3>five in the United States we launched a few weeks ago.

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<v Speaker 3>So yes, scale matters.

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<v Speaker 1>Scale matters.

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<v Speaker 2>But I'm curious because Lantaer hasn't made a big acquisition

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<v Speaker 2>in years, what you're thinking about in terms of arge scale,

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<v Speaker 2>M and A in the current environment in the near term.

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<v Speaker 3>We haven't made a major acquisition because we don't need it.

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<v Speaker 3>We are growing profitably. As of June, we were growing

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<v Speaker 3>our top line at ten percent. We have grown sixty

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<v Speaker 3>million customers in the last ten years. But very important,

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<v Speaker 3>we're growing profitably, and we're rolling out our global platforms

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<v Speaker 3>now in retail and consumer with our own tech stack,

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<v Speaker 3>and so we're able to compete, you know, with our

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<v Speaker 3>current size, and we're going to continue to invest in

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<v Speaker 3>technology and people on different skills and making sure we're

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<v Speaker 3>there where our customers want us to be. We is

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<v Speaker 3>launched in Germany with Apple and Amazon our digital merchant Xenia,

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<v Speaker 3>so we feel we have what it takes to be

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<v Speaker 3>competitive in today's.

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<v Speaker 2>World and in the US, sant and There is pushing

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<v Speaker 2>really hard to grow towards corporate and investment banking unit

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<v Speaker 2>as well as the launch of open Bank. I'm curious

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<v Speaker 2>to hear what you think your competitive advantage is as

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<v Speaker 2>you look to compete against the existent big investment banks

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<v Speaker 2>and retail giants.

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<v Speaker 3>Here in the US, we're mostly retail commercial consumer bank,

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<v Speaker 3>so we are at scale auto lender in the United

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<v Speaker 3>States well, number five here nationwide, with the number one

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<v Speaker 3>auto lender in Europe and Latin So we have the scale,

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<v Speaker 3>we've proven that for many years. We have a retail

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<v Speaker 3>bank that we have said a year ago we're going

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<v Speaker 3>to make digital through the global platform, and that's what

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<v Speaker 3>we've done a few weeks ago. So we are bringing

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<v Speaker 3>our global scale to benefit our regional banks so we

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<v Speaker 3>can accelerate the past taking in the United States, and

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<v Speaker 3>this is really unique.

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<v Speaker 1>Centendre has a reputation of providing consumer loans, like you say,

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<v Speaker 1>and right now there's such a big question about what

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<v Speaker 1>the consumer health really is, how able people are going

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<v Speaker 1>to be to pay things back at a time where

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<v Speaker 1>a lot of policy roomakers are saying we're reaching it,

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<v Speaker 1>this is the off landing nirvana, and all the consumers

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<v Speaker 1>are saying, we just don't feel it. How do you

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<v Speaker 1>see the performance of these loans? Are you're seeing signs

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<v Speaker 1>of the sentiment that's more negative seeping into those loan performances.

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<v Speaker 3>So we're not seeing an increase in non performing loans

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<v Speaker 3>beyond the seasonal trends. There's always seasonal trends in the

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<v Speaker 3>consumer And so you know, if you ask me this

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<v Speaker 3>question a year ago, beginning of this year, we actually

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<v Speaker 3>better than we thought would be. So nothing out of

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<v Speaker 3>the ordree absolutely in line with what we expected, even

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<v Speaker 3>marginally better than we expected.

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<v Speaker 1>So if there's nothing really wrong with consumer credit, the

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<v Speaker 1>economy is not going wild, but it's not terrible. Is

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<v Speaker 1>it really just the concern about the election in the

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<v Speaker 1>US that's kind of holding people back from being overly

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<v Speaker 1>ebulliant or coming up with big plans.

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<v Speaker 3>So yes, inflation is hitting a lot of the consumers

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<v Speaker 3>across the United States has been hitting. It's cumulative, right,

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<v Speaker 3>so it's been going on even though it's coming down.

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<v Speaker 3>It's better. But yes, we you know, we feel that

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<v Speaker 3>both on the talking about the US now, so we

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<v Speaker 3>feel there is pent up consumer demand. So we think

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<v Speaker 3>there will be a pickup for example, in cop purchases.

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<v Speaker 3>We get the feeling consumers holding back a bit, and

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<v Speaker 3>businesses too. I believe that you could see a pickup

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<v Speaker 3>in investment after the election.

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<v Speaker 2>And I want to ask you about private credit as well,

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<v Speaker 2>because a lot of banks are partnering with investment firms

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<v Speaker 2>to set up private credit partnerships and thinking about City

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<v Speaker 2>Group and Apollo for instance. What is sometimes there thinking

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<v Speaker 2>about these kinds of tie ups and the opportunities that

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<v Speaker 2>they may present. Are you doing anything similar or thinking.

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<v Speaker 3>About it now? Absolutely? We've been a leader in the

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<v Speaker 3>originator to distribute model because banks are no longer the

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<v Speaker 3>best holders of many of these loans because we have

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<v Speaker 3>increased capital requirements. We have the distribution as I said,

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<v Speaker 3>one hundred and sixty eight million customers full million corporates

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<v Speaker 3>across the world. So we are originating a lot of

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<v Speaker 3>loans that we are then placing with the private equities.

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<v Speaker 3>We work with all the major firms and we believe

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<v Speaker 3>that is something which is you know, good for our shareholders,

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<v Speaker 3>and we believe, you know, this is something we will continue.

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<v Speaker 1>Before I let you go, I do want to say,

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<v Speaker 1>looking forward, what do you think is going to be

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<v Speaker 1>the most important development in this next year for the

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<v Speaker 1>banking sector. We talk about regulation, People don't want to

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<v Speaker 1>talk about regulation like that's boring, but we talk about

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<v Speaker 1>the geopolitical sphere and that could be something or is

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<v Speaker 1>it the path of interest rates? And just how much

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<v Speaker 1>they actually can go down in the divergence to the

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<v Speaker 1>US and Europe.

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<v Speaker 3>So the big question is, you know, the structural trends

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<v Speaker 3>that are inflationary, right, so if you think about demographics,

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<v Speaker 3>you think about defence spending, you think about climate transition,

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<v Speaker 3>those are all informationary trends. So the big question is

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<v Speaker 3>what is the terminal or neutual interest rate that is

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<v Speaker 3>going to you know, let's say, be more consistent going forward.

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<v Speaker 3>Probably the US as a higher one than in Europe.

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<v Speaker 3>Four percent is three percent. The question is can the

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<v Speaker 3>economy continue to grow with that level of rates? And

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<v Speaker 3>the answer it seems yes. What we've seen in the

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<v Speaker 3>last couple of years with relative high rates, companies have

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<v Speaker 3>continued to invest and the economies have continued to grow,

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<v Speaker 3>maybe not as much as we'd like. So you know,

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<v Speaker 3>for a bank like Hours, interest rates in Europe of

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<v Speaker 3>tour two and a half percent, high employment levels. That's

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<v Speaker 3>why you know, our non performing loans are doing well.

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<v Speaker 3>We're growing, we have a very large amount of very

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<v Speaker 3>small accounts, and so as long as interest rates are

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<v Speaker 3>two two and a half, we're going to do pretty

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<v Speaker 3>well on our margins and we're going to do pretty

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<v Speaker 3>well on provisions, so it's not a bad place for banks.

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<v Speaker 1>Annabot it. Thank you so much for being with us

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<v Speaker 1>an about in a bank of Santander.