Sovereign seen unaffected by European fiscal woes

 / BLOOMBERG FILE PHOTO/ANGEL NAVARRETE
/ BLOOMBERG FILE PHOTO/ANGEL NAVARRETE

By this time next year, Sovereign Bank will have completed its national transformation to Santander Bank, part of the Spanish-owned Banco Santander SA, one of the largest banks in the world.
The name change is part of a broader strategy for Santander to become a truly global brand. Santander has injected capital into the Boston-based bank it purchased two years ago, revamped its operations and reduced its portfolio of troubled loans.
But recent worries about the European Union and the economic health of Spain have left some speculating Santander and, by connection, Sovereign are in trouble.
Over the last five years Santander has spent more than $6 billion purchasing Sovereign and New York-based Independence Community Bank Corp. and S.I. Bank & Trust. Sovereign Bank had been severely affected by losses related to auto loans and stock in Fannie Mae and Freddie Mac. In mid-May, Santander was among 16 Spanish banks that were downgraded three levels by Moody’s Investors Service, which cited a recession and mounting loan losses. Banco Santander’s stock price has fallen by half over the past year amid growing concerns about financial and economic problems in Spain.
But Santander officials say the European turmoil has not affected Sovereign, and the company continues to invest in its U.S. subsidiary, including a recent upgrade of the firm’s computer platform.
The bank has more than 800 employees in Rhode Island and provides millions of dollars in grants to nonprofit organizations in its market. They have also invested more than $8 million in education through its Universities Program.
Raymond W. Fogarty, director of the Chafee Center for International Business at Bryant University, believes events in Spain will have little effect on Sovereign. “In the long haul, every country has its crisis and everyone gets over it.”
He said business plans of this magnitude consider both the short- and long-term solutions. “You have to identify where your opportunities are, especially in the short term,” he said.
“Sovereign is among the strongest U.S. banks with a 13 percent capital ratio,” insisted Kathy Klinger, chief marketing officer & director corporate communications for Santander. “Its strong capitalization supports its continuous growth and investment plan in the Northeastern and mid-Atlantic U.S. footprint.”
And Sovereign spokesperson Jayne Holly Berry-Steel says she has the data to prove it. Sovereign grew its deposit base by 12 percent in 2011, almost double the industry average, and its loan production to small businesses has surged 30 percent since 2010. In May it launched a new proprietary technology platform to act as the foundation from which to continue a wider breadth of products and services to their customers. Santander is a household name in much of Europe and Latin America; the bank has more than 14,600 branches globally, more than any other bank in the world, and about 80 million customers in 40 countries. The bank has $1.2 trillion in deposits and customer funds under management, more than 180,000 employees and 3 million shareholders.
Sovereign has nearly $77 billion in assets and 723 branches in nine states, with 2,300 ATMs and about 8,500 employees.
Because of its international diversification and focus on retail and commercial banking, Santander has generated profit every quarter since the recession began and has continued to pay a dividend. Profit was 1.6 billion euro in the first quarter and 5.35 billion euro in 2011. Not bad for the biggest bank in continental Europe by stock market value, well ahead of banks such as Deutsche Bank of Germany and BNP Paribas of France.
Santander, founded in 1857, is highly diverse and generates just 12 percent of its profit in Spain. Latin America accounts for 52 percent, (28 percent from Brazil), the U.K. 13 percent and the U.S. 10 percent.
Sovereign started in 1902, when it was established as a building and loan association helping Pennsylvania textile workers become homeowners. Its transformation as part of the Santander family so far has been slow and deliberate.
This year, on Jan. 27, Sovereign announced it had converted from a thrift to a national bank, setting the stage for a new plan of future growth. Once governed by the Office of Thrift Supervision, Sovereign is now the responsibility of the Office of the Comptroller of the Currency, which oversees the biggest U.S. banks including Bank of America, Wells Fargo, JPMorgan Chase, and Citibank.
So far, visible changes at Sovereign have been subtle, such as Santander’s logo is now pictured on Sovereign’s website. Sphere, the bank’s newest Visa card, is the first since the bank became a part of Santander and is branded with the Sovereign/Santander dual logo.
“As a well-capitalized and financially autonomous business, Sovereign continues to invest in line with its growth strategy,” said Klinger. “Sovereign continues to invest and is poised for growth.” •

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