Madrid-based bank Banco Santander, which boasts of a leading presence in key markets of Latin America, plans to capitalize on the growing trade and investment flows between Latin America and Asia to expand its presence in this region, but is taking it one step at a time.

 

Edvaldo Morata, Santander’s Asia-Pacific CEO, says the bank for the time being will focus on growing organically and cautiously in the region, taking advantage of its strength in its core markets in Europe, Latin America and North America.  “We will grow in Asia by focussing on our strength in core markets and by focussing on what we know,” says Morata.

 

Morata says the bank’s expansion strategies have always been “starting small”, leveraging on its existing client relationships and not being aggressive to expand. In Asia too, the bank will take a bottom-up approach initially focussing on corporate and wholesale banking, where it can leverage on its existing client base. The next step, he says, will be to move to retail banking but only when the bank sees opportunities in that market segment.

 

“Asia is still not our core market. It’s a new market for us, but we have a big enough platform to grow upon,” says Morata. Santander opened its first branch in Asia in January 2008 with the opening of its Hong Kong branch. It currently employs over 100 staff in Asia and has branches or representative offices in Shanghai, Beijing, Tokyo, Seoul and Sydney.

 

“The establishment of the Hong Kong office was an easy decision because Hong Kong is the way to China,” says Morata. “China has become the most important trading partner for Latin American economies – for example Brazil,” he says.

 

Santander has seen its business in Asia growing in line with expanding trade between Asia and Latin America, Morata says. In 2007, Santander's Asia business focussed on trade financing but today its services have expanded to include corporate banking and asset management. The bank is expecting growth in business volume by about 50% in the next 2 to 3 years.

 

China’s growing imports of commodities from Latin America and the country’s increasing foreign direct investment in the region as well as the flow of manufactured goods from China to Latin America are creating enough business opportunities for banks.

 

In addition, the Chinese government’s recent initiatives to broaden the use of renminbi for trade settlements between China and its trading partners in Latin America has brought further opportunities for banks like Santander which has a strong local currency business in Latin American economies.

 

The bank is in the process of applying for a licence to locally incorporate its business in China, he says, but adds that it is too early to say when it will obtain approval.

 

“China is still a big challenge for foreigners. No doubt about that,” says Morata, but he adds that the opportunities are also vast.