Banco Santander has reiterated, during the presentation of its strategic plan for the 2023-2025 triennium, that efficiency will be essential to keep costs anchored, which will grow around 4-5% per year at constant euros, despite the fact that inflation is will still remain high in all the geographies in which it operates. According to the forecasts advanced by the entity for this year, prices in Spain will close below 5%, but there will be some regions such as the United Kingdom and Brazil that will far exceed these levels (with 9% and 6% respectively).
It must be taken into account that, although costs grew by 5% at constant euros in 2022, these were contained, since the explosion began to escalate due to the energy crisis triggered by Russia’s invasion of Ukraine. In this sense, many of the contracts that had been signed at the beginning of the year, especially in the administration and provision of services section, had been done at lower prices. On the other hand, and by 2023, this account should be pressured upwards by the salary increase that for the workforce in Spain will be 4.5%.
To achieve this and not depend on the moderation of inflation due to the intervention of the ECB, the entity’s management team has reiterated, during the Investor Day held in London, that it will focus on simplifying and automating processes with the use of common platforms and creating synergies in all areas. “We need to be better than the best digital banks with a service in the branches that will add value and make us different”, explained the president of the entity, Ana Botín, during her speech, who pointed out that the optimal circumstances now exist to give complete this digital transformation.
Grisi’s experience in Mexico
In this sense, both the new CEO of Santander, Héctor Grisi, and the financial director of the entity, José García Cantera, have indicated that this will be carried out with the commercialization of optimized products and automation processes thanks to a technological infrastructure and use in software programs. And to reiterate the message, Santander has used two examples. First Portugal, where the activity of the branches has been reduced to 10%, compared to 20-50% of the rest of the geographies. Another is the United States, where the bank plans to reduce the number of retail banking products from the current 315 to 25.
The bank argues that digitization with the implementation of artificial intelligence will also reduce the percentage of activity in the branches, which would allow the client’s cost to be cut. This will mean that the efficiency ratio will go from 45.8%, a level at which closed 2022, up to this 42% that Santander has set as a target for the end of 2025.
And in this process, Grisi’s experience will be a degree. The banker launched, first in Mexico, and then in the United States division, a digital transformation process, which entailed an increase in connectivity between the markets of the region, taking a step towards boosting cross-border business. As a result, efficiency was improved, and allowed the bank to advance the bank’s goal of building a common operating model (One Santander). “In Mexico, where we follow this approach, we doubled our profits between 2015 and 2022,” Grisi reiterated.
