Banco Santander to give attention to niches to interrupt ‘obstacles’
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The world’s Sixteenth-largest financial institution by whole property obtained a licence for its subsidiary to function in Canada final month, one thing confirmed by a discover revealed within the Canada Gazette, the federal government’s official newspaper, on March 29.
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Being granted a banking licence means Santander Client Financial institution (SCB) can now take deposits from shoppers.
“Growth of actions by banks equivalent to SCB might present the impetus to extend competitors, which ought to be useful for Canadians within the type of extra alternative and higher pricing on each loans and deposits,” Sailie Ashtekar, senior analyst, North American Monetary Establishment Credit score Scores, at Morningstar DBRS, mentioned.
However she mentioned competing with the Massive Six is “simpler mentioned than achieved” for the reason that group dominates the market.
“Nonetheless, any developments that add potential new entrants or initiatives that improve entry to the Canadian market … are alternatives to extend competitors,” she mentioned.
Santander’s presence in Canada dates again about 10 years, when it spent $300 million to purchase Edmonton-based Carfinco Monetary Group Inc., which supplied automobile loans to debtors unable to acquire financing.
The corporate hasn’t disclosed what its method in Canada might be, however Ashtekar mentioned she believes the more than likely avenue ahead might be to “bolster the prevailing auto financing franchise” by decreasing funding prices by changing wholesale funding with cheaper buyer deposits after which working to develop into different retail services and products.
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“Any technique should be constructed on the premise that the dominant positions of the Massive Six will stay intact going ahead,” she mentioned. “Any technique might want to goal particular niches, more than likely specializing in shopper/retail monetary companies, an space wherein Santander has a robust status globally.”
Santander has targeted on “particular niches the place they really feel they will compete extra successfully” in america and Mexico, Ashtekar mentioned in a word on March 31.
With 168 million clients worldwide, Santander boasts a robust presence globally. The corporate has largely achieved its aim of accomplishing not less than a ten per cent market share in every of its core markets exterior Spain, besides within the U.S., the word mentioned.
The financial institution might leverage every of those strengths to develop in Canada, Ashtekar mentioned.
“The financial institution might pursue cross-selling of already developed options elsewhere that might profit the Canadian market, equivalent to non-public banking, asset administration and maybe commerce finance of worldwide funds.”
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However the Massive Six, accounting for 95 per cent of the full financial institution property in Canada, represents a “materials barrier to entry,” Ashtekar mentioned.
“It’s commonplace for Canadians to open their very first checking account with one of many Massive Six and stay loyal for many years,” she mentioned. “Moreover, Canadians who use a number of banking companies and merchandise are much less more likely to change banks.”
• Electronic mail: nkarim@postmedia.com
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