Edvaldo Morata, Chief of Staff to the CEO and Managing Director of Corporate Banking at Sovereign Bank, fits right in at Fletcher. With 25 years of experience in international finance, his career has spanned four continents and included stints at four major international financial services firms. With Santander’s acquisition of Sovereign Bank, Morata now helps lead a subsidiary of the world’s fourth-largest bank by profits and its eighth largest by stock market capitalization. The bank is ranked among the world’s 10 largest financial institutions—a remarkable achievement for a firm that has pursued such conservative decision making. In his November 17th presentation at The Fletcher School, hosted by the International Business Center, Morata spoke passionately about Santander’s regional and global strategies, its approach to acquisition integration, and its path forward.
Twenty-four years after Emilio Botin, Santander’s Chairman, launched the Spanish banking revolution, Santander is facing a very different environment. Today, Santander operates in both emerging and developed markets. It faces a tougher environment in mature economies, as regulators seek to protect national markets from the devastating effects of the most recent financial crisis. In the wake of this upheaval, banks are facing new challenges to profitability including deleveraging, deposit margin pressure, and high delinquency rates. These forces have slowed growth and forced firms to adopt sustainable strategies to earn profits.
One strategy that has served Santander well in its global expansion has been its pursuit of defensive measures. Not only does the bank control costs to best-in-class benchmarks and target revenue growth according to the strongest market player, but it also monitors asset margins closely and keeps a low risk profile. Morata stressed Santander’s lean model as a key reason for its aggressive competition in the industry.
Citing industry price wars, Morata noted that Santander “normally has good antibodies to compete through prices” due to its tight cost structure. In fact, Santander is typically one of the last players to lower prices. In an industry that has had to tighten its belt, Santander’s story is encouraging; it shows that there are indeed institutions capable of producing profits while running a tight ship. For these reasons, Time Magazine quipped that Santander is the “most boring bank you know.”
Aside from its defensive strategies, Santander also practices its “attack skills” by focusing on emerging markets, which Morata explained can still grow and be leveraged up. According to Morata, the levers of growth in these markets include economic growth, bancarisation, and market share gains due to lower client penetration.
Santander’s corporate ethos plays a critical role in its success. The Santander model promulgates the importance of being relevant everywhere it goes. Although Santander is only present in 40 countries, compared to Citi’s and HSBC’s presence in more than 100 countries, Santander understands that it must reach a minimum level of critical mass to justify its investment in a given region. Because of this, Santander focuses on achieving around at least 10 percent market share in each of its geographies. Also interesting is Morata’s explanation of how Santander handles its acquisitions: it is not afraid to get out of a market when the time is right.
On managing multicultural organizations, Morata explained that sorting out what clients want is critical preparation for hiring the right employees to carry out Santander’s mission. Though client needs are usually the same everywhere, Morata believes that cultural differences necessitate different service delivery methods in each geography. In respect to merging cultures, Morata noted that management teams in each geography are constructed to be multinational. With this foundation, Santander does three things to manage diversity: 1) acknowledges cultural differences, 2) accepts and respects these differences, and 3) finds common solutions to conflicts.
Morata briefly discussed Santander’s best practices, all of which are common sense precepts that any firm should practice. He highlighted its talent recruitment program and its career development principles in particular. Morata sees recruiting as critical because successful implementation can only be accomplished with engaged, motivated, and competent employees. Morata emphasized flexible career development as another best practice, acknowledging Santander’s belief that everyone has the right to determine what is in his or her best interest and capabilities. While Santander provides its employees with the necessary conditions to plot their futures, it is the individual’s responsibility to actively manage their career advancement.
After his talk, Morata took questions from the audience and pointed out that the Northeastern Seaboard is the second-largest economy in which Santander operates. He also discussed in which areas he would invest and where he would taper off investment .
As one of its last events of this semester, the International Business Center outdid itself. Morata’s affable demeanor and sharp wit made him a delightful speaker; the talk was enlightening, entertaining, and thought provoking—just what one would expect to find at The Fletcher School.
Kim Liao F11