Santander Plans Expansion of Investment Bank, Hiring 50 Bankers Primarily in the US

Santander, Spain’s largest bank, is intensifying its growth in the investment banking sector by recruiting at least 50 bankers, primarily in the United States, according to sources familiar with the matter. While Santander is well-known as a retail lender in Europe and Latin America, the bank aims to establish a stronger presence in investment banking under the leadership of chairperson Ana Botin, a former JPMorgan banker.

The expansion strategy includes the recruitment of a minimum of 50 bankers, with many being targeted from troubled financial institution Credit Suisse, as per the sources. Over 20 bankers have already been hired, mainly in the United States, with an announcement regarding the overall recruitment drive expected in the coming weeks. The new recruits are anticipated to begin their roles in August.

Jose M. Linares, the former JPMorgan banker and current head of Santander Corporate and Investment Banking, is overseeing the recruitment process.

Currently, Santander is considered a minor player in U.S. investment banking. However, the bank aspires to become a “tier two” participant over time, positioning itself behind major Wall Street players like Goldman Sachs, according to one of the sources. The hiring efforts will primarily focus on areas such as leveraged finance and corporate services for multinational companies with a presence in Europe and Latin America.

In addition to the United States, Santander will also bring on new investment bankers in the United Kingdom and Spain.

The number of employees in Santander’s corporate and investment banking division in the U.S. has risen from around 500 at the end of 2019 to approximately 900, aided by the acquisition of U.S. fixed-income broker Amherst Pierpont. In the same period, the staff count in Britain has increased from 350 to around 700.

Gonzalo Lopez, an analyst at Redburn, noted that investors may express concerns about a strategy that could potentially erode Santander’s capital buffer, which stood at 12.2% at the end of March—lower than many European counterparts.

Lopez highlighted that a primary area of concern revolves around Santander’s stringent capital ratios. Historically, this has posed a significant challenge for expanding an investment banking business due to the larger capital requirements involved.

Earlier this year, Santander unveiled plans to expand its investment banking operations in the United States with an accumulated growth rate of 20% between 2023 and 2025, as outlined in a strategy update. In 2022, this segment generated revenues of $779 million in the U.S. Santander recently appointed Christiana Riley, formerly of Deutsche Bank, as its regional head.

The move to enhance the investment banking division is viewed as an effort to increase income from corporate clients while scaling back subprime car lending, which remains Santander’s largest business in the United States. The bank’s first-quarter results saw a nearly 50% decline as provisions for bad loans rose.

The contribution of the overall investment bank to Santander Group’s earnings rose to 32% in the first quarter of 2023, compared to approximately 20% in 2019. Between 2019 and the end of 2022, Santander’s corporate and investment bank witnessed a notable growth of approximately 60%, with profits reaching 2.8 billion euros ($3.2 billion).

 Historically, Santander has leveraged the growth in Latin America to counter challenging conditions experienced by European banks. The bank’s expansion efforts in the investment banking division align with its goal of establishing a prominent position in the sector. Despite concerns regarding capital ratios, Santander aims to strengthen its presence in the United States and bolster its contribution to overall group earnings through the growth of its investment bank.