After only a few months at the helm, Banco Santander’s (LSE: BNC) (NYSE: SAN.US) new chairman Ana Botín has made some drastic changes to the bank and the way it operates.
Indeed, over the past couple of weeks Santander’s management team has been shaken up, the bank conducted a capital raising to bolster its balance sheet, and the dividend has been cut. Alongside these drastic measures, the bank also announced a sharp increase in profit for the three months to the end of December. Net profit jumped to €1.46bn, compared to €864m as reported in the same period last year.
Under the leadership of Ms Botín, Santander is now focused on growth and digital technology is now a key part of the bank’s growth strategy.
Digital growth
Santander has 92m retail customers globally, of which only 12.2m do most of their banking with Santander. Management has stated that it wants to hike this figure to 17m by 2017, which the bank believes could add €2bn to €3bn of additional income.
Key to this growth will be the streamlined provision of internet banking services. So, in order to reassure customers about the security of their online accounts, Santander is to be the first global bank to offer cloud data storage services to corporate clients.
This is more than just a move by the bank to improve security. Santander is fighting back against some of the world’s biggest technology groups, which are muscling in on Santander’s market. If anything, this move should only improve Santander’s standing with corporate clients, many of whom are worried about whether or not they can entrust their data with tech groups.
It’s estimated that large established banks could lose a fifth of their consumer banking revenues to digital rivals in the near future.
And Santander’s is already making progress expanding its cloud services offering. In particular, the bank has forked out £230m to build a vast data centre in Leicester. The centre is only holding data for the bank at present, but there’s room for client data storage. Santander plans to make extra cash by leasing out storage capacity to clients.
Profitable market
If Santander’s move into the cloud computing space goes to plan, the bank could have discovered a new, highly profitable revenue stream. Salesforce.com, for example, is one of the world’s largest cloud computing companies and reported a gross profit margin of 76% last year.
In addition, Santander is planning of offers clients a value-added cloud service. Merging cloud computing with other banking services, which will drive demand for the bank’s new digital offering. As a result, the bank could quickly turn into a fast-growing technology company.
Changing rapidly
Santander’s recent overhaul has lead me to change my opinion on the bank and its outlook, as the new management team seems to be focused on growth, as well as stability.
