WEBVTT - Banco Santander Chair Ana Botin Talks "Soft Landing"

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

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<v Speaker 2>It's the latest this morning. The ECB and Federal Reserve

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<v Speaker 2>on diverging past. The ECB looking to count rates as

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<v Speaker 2>soon as this summer in the United States. Fed officials

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<v Speaker 2>are warning cuts may not come at all this year

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<v Speaker 2>and about saying it's looking to navigate these challenges and more

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<v Speaker 2>as share of Bank of Santander and theif ANA joint

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<v Speaker 2>us in Washington this morning, and a good morning to you,

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<v Speaker 2>Good morning, thank you so much for being with us today.

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<v Speaker 2>We had a guest with us about five minutes ago.

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<v Speaker 2>It was pretty depressing, very down beyond cooperation in Washington,

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<v Speaker 2>the future for growth outside of the United States, how

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<v Speaker 2>down beating you and your team about the same things.

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<v Speaker 1>Well, you know, first of all, we are at war.

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<v Speaker 1>We have two wars, which is a human tragedy, and

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<v Speaker 1>our thoughts of with all the people that are suffering.

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<v Speaker 1>But aside from those very important issues which obviously we

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<v Speaker 1>must deal with first, the economy does not look bad.

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<v Speaker 1>So you know, we have managed to bring down inflation.

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<v Speaker 1>Remember we were around nine ten percent, were around three

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<v Speaker 1>to four in most countries. Really important. That's the one

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<v Speaker 1>thing we cannot allow to get out of control. We

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<v Speaker 1>have growth, yes, lower growth, but growth overall. And third,

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<v Speaker 1>we have very high employment levels. If I think about

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<v Speaker 1>sometimes there's Europe and America's footprint. Every single one of

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<v Speaker 1>our countries is at historically high levels of employment. So

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<v Speaker 1>you know this is not bad. A year ago you

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<v Speaker 1>had asked many people where are we going to be?

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<v Speaker 1>Anybody that said soft landing, you would say, oh, you're

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<v Speaker 1>being too optimistic. We have a super soft landing. So far,

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<v Speaker 1>so far, so good.

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<v Speaker 2>The growth profile is certainly much better than we thought

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<v Speaker 2>it would be, not just twelve months ago, but maybe

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<v Speaker 2>even three months ago. Though we still have two wars.

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<v Speaker 2>We also have increased protectionism. It's but a key feature

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<v Speaker 2>of the meetings this week, as you well know, a

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<v Speaker 2>backslide towards industrial policy in places like the United States.

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<v Speaker 2>Can I ask you, as someone who leads a bank,

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<v Speaker 2>does that make it more difficult to be an international

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<v Speaker 2>bank against that backdrop?

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<v Speaker 1>The key thing we're all looking to, and this is

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<v Speaker 1>not different from what everybody is saying, is that the

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<v Speaker 1>most difficult and you know the key risks now are geopolitical.

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<v Speaker 1>As I said, the macro looks much better at least

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<v Speaker 1>for now. So as we think about what is happening

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<v Speaker 1>and what these geopolitics mean for supply chains for our business,

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<v Speaker 1>understanding that this is going to mean more structural inflation

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<v Speaker 1>because you know you're going to have higher cost Understanding

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<v Speaker 1>that you need to prioritize the defense or national security

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<v Speaker 1>or in the case of companies, you know, diversification, which

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<v Speaker 1>again is a key asset at least for us, and

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<v Speaker 1>this is really very valuable. So these are the things

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<v Speaker 1>you need to think about. How do I protect my

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<v Speaker 1>business at the time when the world is increasingly volatile

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<v Speaker 1>where you're having a big shift in terms of we

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<v Speaker 1>want secure supply chain. Yes, we want it to be affordable,

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<v Speaker 1>good prices, but security is paramount. And of course we

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<v Speaker 1>also want to ensure that we can manage the green

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<v Speaker 1>under climate transition.

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<v Speaker 3>If geopolitical rests are in number one concern and I

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<v Speaker 3>can potentially meet as spike in inflation, do you expect

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<v Speaker 3>the EASYB to then what's been pretty much forecasted by everyone,

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<v Speaker 3>go ahead of the fad and have this rate cut

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<v Speaker 3>in June.

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<v Speaker 1>So you know, what we are thinking about is what

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<v Speaker 1>is the terminal rate? Where does this end up? That

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<v Speaker 1>is the key question and of view and as an

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<v Speaker 1>institution is that that terminal rate is not going to

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<v Speaker 1>be the same in Europe as in the US. It's

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<v Speaker 1>probably be around if you top the most economist four

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<v Speaker 1>percent in the US around three percent in Europe. What

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<v Speaker 1>it means is that let's say rates will end up

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<v Speaker 1>around those levels, around three percent four percent, And that

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<v Speaker 1>is really what we That is what allows us to plan. Again,

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<v Speaker 1>that is not a bad thing for commercial banks for

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<v Speaker 1>the sector. Negative rates were unsustainable risky for the system.

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<v Speaker 1>Very high rates kill the economy. You know, low rates,

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<v Speaker 1>maybe we are going to have too low growth. And

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<v Speaker 1>that is the one thing we need to focus on.

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<v Speaker 1>How do we manage an economy where terminal rates are

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<v Speaker 1>a bit higher because all the structural factors not just

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<v Speaker 1>defends demographics, the carbonization, so you have structural trends that

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<v Speaker 1>are more inflamation than before slow growth. What do we

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<v Speaker 1>do about it?

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<v Speaker 2>So I know that you're in a quied period, so

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<v Speaker 2>you can't talk directly about the financials, but can you

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<v Speaker 2>help me understand how do you plan for things like

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<v Speaker 2>net interesting income when you're across so many different regions,

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<v Speaker 2>with so many different policies and so many different so

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<v Speaker 2>called terminal rates. How do you plan for that kind

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<v Speaker 2>of thing? What does that look like?

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<v Speaker 1>Look sometimes that is a global bank, but basically it's

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<v Speaker 1>Europe and the Americans. We have one hundred and sixty

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<v Speaker 1>six million customers. First thing is the versification is key,

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<v Speaker 1>not just for us, for anybody. And we have the

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<v Speaker 1>versification by businesses five global businesses, and by regions and countries.

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<v Speaker 1>So that means that if something doesn't go well in

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<v Speaker 1>one country, usually it gets compensated by another. And so

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<v Speaker 1>what you try is to really have a context for

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<v Speaker 1>risk appetite. Do we take more risk? Less risk? We

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<v Speaker 1>don't manage interest rates right? As I said, the context

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<v Speaker 1>is really good for financial institutions, especially commercial banks like ours.

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<v Speaker 1>Why because negative rates meant that with a big retail base,

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<v Speaker 1>you're not charged. But you were being charged by the

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<v Speaker 1>central banks for twenty percent of our deposits and we

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<v Speaker 1>couldn't charge. So positive rates, low growth, high and employment

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<v Speaker 1>is a not a bad scenario for commercial banks.

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<v Speaker 2>So some other banks have pulled bank from the United States.

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<v Speaker 2>International banks I'm thinking specifically of HSBC being preparable are

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<v Speaker 2>still there. They still have a presence. You've been leaning

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<v Speaker 2>in a little bit more. Could you develop that for

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<v Speaker 2>us this morning? What are you planning in the United States?

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<v Speaker 2>How big is your presence going to be going forward

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<v Speaker 2>from here.

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<v Speaker 1>We're very excited about the opportunities in the United States.

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<v Speaker 1>We're very confident we'll reach the fifteen percent return on

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<v Speaker 1>tangible equity, and we're keeping it simple. Play to our strengths.

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<v Speaker 1>Where do we have global scale that helps us in

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<v Speaker 1>this market, make sure that we're leveraging our network. And

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<v Speaker 1>so in the biggest business, which is the consumer, we

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<v Speaker 1>have something none of the other foreign banks have or had,

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<v Speaker 1>which is at scale auto business. We're number five in

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<v Speaker 1>the US, we're number one in Europe. We bring our

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<v Speaker 1>OEMs here and second, we have scale to invest in

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<v Speaker 1>our own technology. So we're going to deploy our own

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<v Speaker 1>technology to launch a digital bank to make sure we

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<v Speaker 1>can fund the auto business competitively.

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<v Speaker 2>Simple and this was brilliant. I know you've got a

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<v Speaker 2>super busy morning, so we appreciate you carving out some

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<v Speaker 2>time for us here at Bloomberg. Thank you so much.

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<v Speaker 2>Great to be here. And what's in there? The bankos

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<v Speaker 2>Santander Chairman