Santander's Ana Botin on US Growth, Debt, AI and the Global Economy — The David Rubenstein Show

[00:00:00] Speaker 1: How's your week been? Nope, nothing good's happened yet. What was your birthday this week? I don't count those. That's a bad example. The best part about being an interviewer is you get to meet a lot of interesting people. Very often you have a chance to meet people you wouldn't otherwise get to meet, and to see what makes them tick. I didn't really see myself as an interviewer initially. What's very interesting to me is finding out why certain people who became leaders, became leaders. How do they rise up from nowhere to somewhere? One of the most successful banks in the world is actually based in Spain but operates all over the world. It's Banco Santander. For four generations, the Botin family has controlled and led Banco Santander and helped build it into a global behemoth in the banking world. I had a chance to sit down with the executive chairman, Ana Botin, to talk about how she's operating in the new world of banking, particularly as artificial intelligence comes into this world. What is it about Banco Santander that enabled it to grow from a city in Spain to a global bank? What would you say is the single or the two most important things that enabled you to be this successful? [00:01:25] Speaker 2: We have a culture of constantly reinventing ourselves, of disrupting ourselves. We have always been brave on that side. We were the first to have the automated tellers, the first to build our own core technology back in the 90s, which we then actually, we got behind. So we're trying to do that in a better way. So reinventing yourself. Be willing to disrupt yourself with three things in mind. First is remaining relevant to your customers. So it's not how I see the product. It's how you as a customer see the product. You know, an example is unsecured lending. It's the same thing as buy now, pay later, but from the customer point of view, it's not the same. So customer point of view, trust, super important, and really staying true to your values. You know, think what comes next. [00:02:16] Speaker 1: You must have observed there are very few women at the top of major commercial banks. Why do you think that is? And do you think it's changing? [00:02:24] Speaker 2: It takes time because, you know, I think women have a bigger issue with speaking up and raising their hand and saying, I can do that job and I can do more. It's something I've seen for years. Hasn't changed. A lot of the ways that people get promoted is because they have strong relationships. They go and play golf. They go and do things that are usually men. And so that also doesn't help at all. So we need to be actively helping women because otherwise they don't get the same chance. I think everybody should get the same chance. [00:03:02] Speaker 1: Your last quarter was very strong. You had strong earnings growth. What areas did the growth come from? And what made you optimistic about the future based on the last quarter? [00:03:13] Speaker 2: So our first quarter results were very much on track towards our three-year targets. We did especially well on our retail bank and especially well in Europe retail. So Spain is growing four times as fast as the rest of Europe and that has been a key growth market this year. Mexico is doing really well. Again, a country that's growing more this year than last year. But importantly, we did three M&A transactions last year. We sold Poland and we bought into the UK and US. So one of the things that will give Santander, as we've said in the first quarter, a differential increase in return on tangible equity and earnings per share will be the integration of the M&A. [00:03:56] Speaker 1: After the Great Recession, many European banks suffered a bit. American banks suffered, but they came back. And now the American banks tend to be more dominant than the European banks were. Banco Santander is an exception. But why do you think the European banks haven't played as big a role on the global scene as the American banks have lately? [00:04:18] Speaker 2: So that's a great question and there's no easy answer. It's a number of factors. One is the size of the market. So Europe is not really a single market in services or banking. The US is. It took us six years to launch our digital bank in Germany. It took us two years to launch Open Bank across the United States. So size of the market, growth. Europe has grown slower than the United States has over the last decade, much slower. And the third factor is regulation and supervision. That's a huge tax on businesses and people and economies. And it has been tougher in Europe than it has in the US. So a combination of all those things, I think, is what's behind it. I do not think we run banks worse in Europe. On the contrary, I think we run banks in general pretty well. [00:05:07] Speaker 1: Now, you also have a very big presence in Latin America, particularly in Brazil. How did you get to be so big in Brazil? That's not a Spanish-speaking country. [00:05:17] Speaker 2: Things happen sequentially. So we started in the Spanish-speaking markets like Mexico, Chile. Brazil was in the '90s. Actually, I was the one in charge of Latin America at the time. We started with a small bank, but very importantly, with a local team. So we started actually with a corporate bank and knowledge of the market. And then from there, when there were opportunities to acquire banks, we started with a small one and then a bigger one. We became very good at integrating banks and we became very good in technology. And that is what allowed us to grow in Brazil into the second largest private bank. [00:05:52] Speaker 1: Now, you've made an acquisition in the United States, Webster Financial, for which I think you paid about $12 billion. What is Webster Financial and is that making you a bigger presence in the United States now? [00:06:03] Speaker 2: You should think of us as a global bank with a very strong presence in Europe and the Americas. And so that is the essential core of Santander. What Webster brings is precisely the commercial bank business that we didn't have in the United States. You think of Webster as integrating with Santander Bank, which was a consumer bank. So it's a very complimentary business. It's a very cheap funding. So they have a lot of retail deposits. And so the combination of very attractive funding with the commercial bank side, which is essentially what Santander is in other countries, make it the perfect match. [00:06:41] Speaker 1: You expect to make other acquisitions in the United States or this will be the core acquisition around which you'll build your business in the United States? [00:06:48] Speaker 2: We have always said, and I continue to say, that we have a lot of organic profitable growth. This is unique compared to other banks. When we see very strong strategic fit that makes financial sense, i.e. it's above a cost of equity, buybacks, and it competes well with organic profitable growth, then we consider acquisitions. But we are very focused on integration right now. [00:07:11] Speaker 1: Is the biggest source of your profitability consumer banking or is it commercial banking? [00:07:17] Speaker 2: Consumer and commercial together is 70%, probably 80%. The rest is the corporate investment bank and wealth management. So around 80% of our business is retail and commercial. And that is about half and half. Half is consumer and individuals. The other half is the 4 million SMEs and commercial customers. [00:07:38] Speaker 1: Now, many European banks say that the regulations in Europe are tougher than they are in the United States and more difficult. Have you found that to be the case? Is the American regulatory scheme more likable to your top people than what you have in Europe? [00:07:53] Speaker 2: So my view on regulation is we should turn it into a competitive advantage. Banking is all about trust. Highly regulated entities, you know, at the end do have a lot of safeguards. And so at the end, Europe has a lot to do in terms of being more competitive. Smarter regulation is a key goal for us in Europe. The U.S. is ahead. The U.K. is ahead. But I believe Europe is catching up. [00:08:20] Speaker 1: Now, when interest rates go up, is it better for banks because they can charge more, but they have to give more from deposits? So the ECB not long ago increased interest rates. Is that a good thing for European banks or banks like yours? [00:08:34] Speaker 2: So the answer is it depends on the type of business. This is one of Santander's great strengths that people overlook. It's not that the geographic diversification, it's the business diversification. So on the retail and commercial side, it's an advantage, slightly higher rates, as long as they don't go too high. So then bad loans increase. So we're at the sweet spot. It's like loan loss is very low. Employment is high. So slightly higher rates is good for our retail commercial. It's not as good for our consumer lender, which is open bank. Net-net, it's a positive. Why? It's retail commercial within retail that's bigger than the pure consumer lender. [00:09:14] Speaker 1: The biggest challenge for the banking community in Europe and the United States now, is it inflation or is it the uncertainty of artificial intelligence? [00:09:23] Speaker 2: The biggest uncertainty right now is the lack of growth or lack of enough growth. We need to accelerate growth because of all the challenges we have to finance pensions, to finance the energy transition, to finance the fence. So we need faster growth, not least because of the high level of government debt. So I think that's the biggest challenge the world faces. [00:09:45] Speaker 1: Speaking of government debt, in the United States we've got $34, $35 trillion of debt, not counting the unfunded Social Security and Medicare obligations. Europe has a fair amount of debt as well. Do you worry that the debt burden in the United States may really hurt the U.S. economy in the foreseeable future? Or do you think it can be managed? [00:10:04] Speaker 2: Debt is only a problem if you don't grow enough. And so the U.S. traditionally has been able to go from having a lot of debt to much less because it can, you know, grow fast enough to actually pay for that debt. So, by the way, the level of taxes overall in the U.S. is very much lower than in Europe. So I think there's a lot of levers the U.S. has to tackle the debt, which is higher than in Europe, by the way. Europe, if you take Germany, which is obviously part of Europe, has a much lower debt, but much lower growth. [00:10:34] Speaker 1: Now, the United States has gotten itself in the middle of a war in Iran. And it seems to be, as we talked today, still going on. Has that had any impact on your bank yet or on the economy in Europe or, in your view, on the economy in the United States? Has it fueled inflation or has it not yet been seen? [00:10:52] Speaker 2: So as far as our bank is concerned, we reiterated all our targets after Q1. So we will deliver the numbers that we predicted for the year. So energy, inflation obviously impact our business. But because of the diversification on a net basis, it will be the same. This is one of the great strengths of Santander. Again, business and geographic diversification. We do believe that inflation will tend to come down if the conflict ends soon. So that is the tendency we're seeing for next year. [00:11:28] Speaker 1: Now, based on your knowledge of what's likely to happen in the U.S. economy or what you've seen so far, what do you think the U.S. economy will be doing in the next quarter or two quarters or three quarters? And what do you think about Europe? Are you optimistic or are you nervous about the economic growth in these areas? [00:11:45] Speaker 2: If I had to summarize in one sentence what's going on on both sides of the Atlantic, I would say it's remarkable resilience. So both the U.S. and Europe are growing with relatively low inflation, very low unemployment in a context of very high geopolitical uncertainty. So I do think remarkable resilience, the consumer is suffering at the bottom end, but actually overall doing pretty good. And investment is picking up. So as long as the geopolitical situation comes down a bit, I think next year will be better than this year. So if you're the executive chair of a bank that's based in Spain, but it's all over Europe, and is in the United States. [00:12:26] Speaker ?: And Latin America, how much of your time is on an airplane? A lot. And how do you avoid jet lag? Oh, my God. I measure everything in life. So, you know. I measure and like a good banker, I measure twice. So I have URA and I have 30 seconds. I have 30 seconds. I have 30 seconds. I have 30 seconds. I have 30 seconds. I have 30 seconds. I have 30 seconds. [00:12:44] Speaker 1: So I have 30 seconds. So if you're the executive chair of a bank that's based in Spain, but is all over Europe and is the United States and Latin America, how much of your time is on an airplane? [00:12:54] Speaker 2: A lot. [00:12:55] Speaker 1: And how do you avoid jet lag? [00:12:58] Speaker 2: Oh, my God. I measure everything in life. So, you know, I measure and like a good banker, I measure it twice. So I have URA and I have Fitbit. For the five, six years, I've measured what makes me sleep better, what happens when I have jet lag, how sports affects me. And so I try to improve by measuring and getting better at what helps me have more energy. It's essential, taking care of yourself. [00:13:25] Speaker 1: Now, where were you born? [00:13:27] Speaker 2: I was born in Santander. I lived in Santander until I was 13 years old. And then for the next 20 years, I lived in six or seven different countries. I went to university in the United States, but I lived in the UK. I went to school. I went to Austria. I went to France. So I lived in many different places. [00:13:45] Speaker 1: And your undergraduate degree is from Bryn Mawr? [00:13:47] Speaker 2: It's from Bryn Mawr. [00:13:48] Speaker 1: And did you think when you were Bryn Mawr that you would ever be running a major bank? Never. But did you have interest in finance then? Or did your father say you will like it eventually? [00:13:57] Speaker 2: My father never said anything to me. I joined J.P. Morgan. I was in J.P. Morgan for eight years just because they came to recruit. Even though my degree is from Bryn Mawr. Actually, my last year I was at Harvard. So I was recruited into J.P. Morgan. And I was there for eight years. And then I came back to Spain and started working for Santander. [00:14:17] Speaker 1: And it wasn't preordained that you would become the executive chair, I guess, right? [00:14:22] Speaker 2: No. It was not. [00:14:24] Speaker 1: Now, there is a woman who's the head of the ECB, Christine Lagarde, in Europe. And was that a job you would ever aspire to have? No. Not interested in public service in that way? Or just you like being executive chairman of the Bank of Santander? [00:14:36] Speaker 2: Well, first, I love my job. At the end, if you go into public service, at least if I were to consider doing that, it would be because I can have an impact. That's really what motivates me, having a big impact. And with 180 million customers across Europe and the Americas, and indirectly impacting over 500 million people, that's a population of the United States. If you take companies and people that work for those companies, I can have a much bigger impact where I am. [00:15:06] Speaker 1: What do you do when you're not banking? You are running this large bank. You're the executive chairman of it. But do you have any outside interest? [00:15:13] Speaker 2: My biggest interest is my family. I spend a lot of time with my family. I think that is what gives me balance. I have a great partner in my husband. He's helped me 50/50, you know, with raising our sons. I love playing golf. I love hiking. I love nature. I like music. I still play the piano. My mother founded a very prestigious, you know, globally recognized music school. [00:15:37] Speaker 1: What's the great pleasure of the job you have now? What's fun about being the executive chairman of Bank of Santander? [00:15:42] Speaker 2: So I was lucky to be outside banking for three years. I started a private equity fund. I was literally in a nice way asked to leave by my father after it was this big merger in Spain because I was apparently a threat to the new CEO. It's a long story. It's a long story. So I set up a tech company. I set up a private equity fund and two foundations. And I found that being on the other side of the table from a bank was actually pretty hard if it were a small business. So my passion is visiting small customers and helping them. It's amazing. Like just a few days ago, my makeup artist tells me I've been trying to buy a home. Every single bank in Spain has said they cannot give me a mortgage. And being able to understand what that person needs and, you know, getting your company to not just fix it for him, but potentially for thousands of others, that is the best thing in the world. And so, you know, I love seeing big customers, but I love helping, you know, entrepreneurs, the self-employed or small companies get financing and be able to do what they need to do in life. [00:16:54] Speaker 1: So if you were a young person coming out of college or graduate school today, why should you want to work in a large commercial bank? [00:17:01] Speaker 2: Because what we do matters because we have a purpose, which is to help people, businesses prosper. We've done that for 170 years and in the AI age, we have a huge advantage. [00:17:22] Speaker 3: Nearly 170 years ago, a bank was founded in the Spanish port city of Santander to help finance trade between Spain and the Americas. Today, Santander is one of the world's largest banks with operations spanning Europe and the Americas. At the center of much of that transformation, the Botin family. Four generations of the family have helped lead the bank. Today, Ana Botin is Santander's executive chair, overseeing a business that has gradually shifted from a collection of local banks into a more integrated global operation. And now, Santander is making an even bigger push into the U.S. The bank just completed its largest ever U.S. acquisition, a $12.2 billion deal for Webster Bank. The deal is expected to make Santander one of the largest retail and commercial banks in the country by assets. As Santander continues to grow through acquisitions, Botin is also betting on technology to keep the bank competitive, not just against traditional rivals, but a new generation of fintech companies. And now, a bank born in the age of exploration is aiming to reinvent itself for the age of artificial intelligence. [00:18:41] Speaker 1: Not long ago, I interviewed somebody who started a fintech company in Europe called Revolut, and it seems to be doing quite well. Do you worry about companies like Revolut as kind of taking away some of your core business, or do you think you can do the same thing they're doing? [00:18:56] Speaker 2: They're definitely one of the better, if not the best, fintech company in the world. My job is to, and I will, and we will as a team, build a better product pretty soon, so that you can instantly pay across all our footprint and beyond in three seconds, make payments cross-border. [00:19:16] Speaker 1: As you look at what you're doing, what are you most proud of what you've achieved so far? [00:19:21] Speaker 2: So I'm most proud of having been able to deliver the numbers the right way, which I describe as not just delivering this quarter, but investing for the future. A big thing right now is OneTransformation, it's how do you take a group of banks and convert them into a truly global institution. So OneTransformation is all about changing the business model and global platforms. So OpenBank, it's our front end, it's our Revolut. It's our core system, so really building platforms that are going to be able to deliver in a much better way. [00:19:55] Speaker 1: So in the future, do you think that there will be physical banks where people go and put their money in and borrow money and actually talk to tellers? Or is that going to be a thing of the past in five or 10 years? [00:20:07] Speaker 2: I believe in the personal relationship, I believe in the experience, and that's what we're building. So I truly believe it's people talking to people, but leveraging, you know, a very strong digital offering. So we're only as good as we're on our iPhones, but we also need people in branches with an experience. Being the bridge between Europe and the Americas is huge. There's nobody else like Santander that can do that. You know who's the biggest trading partner for the United States? European Union. Do you know that Mexico is the third largest trading partner? The UK, the sixth largest. So we're unique to connect all these companies. And what's really important in today's economy, there's a huge number of self-employed. And they want to go global. Even one single person with AI can do amazing things. Santander is the best way to connect with many countries. Again, Europe and Americas, instantly. [00:21:03] Speaker 1: Now, there's a concern in the AI world that AI will produce a lot of job losses for people. In Bank of Santander, are you worried that job losses will occur? Or do you think it will actually produce more jobs for the bank? [00:21:18] Speaker 2: Well, if you look at the numbers across all our co-markets, we're at historically high employment levels. There's definitely a change, so the jobs will be different. There could be some adjustment as we go through this. But we're not seeing right now any big impact in terms of employment. Now, it might happen, for sure will happen at some point. [00:21:38] Speaker 1: AI seems to be dominated now by American technology companies. Do you think Europe is falling behind in the AI race? [00:21:45] Speaker 2: We're working with all the LLMs. We're working on what we call an orchestration layer. And there's many things that we can build. You can build very efficient vertical models. You don't need the most advanced models for some task. And so what we do is we have our own teams. And all of that is embedded in the businesses where we work with the large companies. And then we decide which one we use. But very importantly, we're building our own agents. We have 280 AI agents up and running inside Santander. And we do that within a very secure perimeter to make sure that we do that safely. That is what you get with a highly regulated bank. So we think there's a huge opportunity for a bank like ours. [00:22:26] Speaker 1: So you're a role model for executives in the banking world because you are heading up a major bank. So what does it take to be a global banker? [00:22:34] Speaker 2: It's all about the team. So having the team that is going to get you where you want and be great at their jobs and work well together is the key. And for that you need to have a vision. You need to tell them where it is you're going. You also have to be good at attracting. I've always said people that what they do are better than you, better than I am. And that is absolutely essential. [00:22:56] Speaker 1: So if you are a young person coming out of college or graduate school today, why should you want to work in a large commercial bank? Why not go work in private equity or hedge funds? Isn't it more lucrative to do that? And why should somebody want to come work at a bank like yours? [00:23:10] Speaker 2: Because what we do matters because we have a purpose, which is to help people businesses prosper. We've done that for 170 years. And in the AI age, we have a huge advantage for the first time in years because of the amount of data we have, because of the AI tools that we are putting in place. We can actually use that data in a much better way. And this is what I call squaring the circle. We can personalize every single one of our products for 180 million customers and do that profitably. The possibilities of AI mean that we are attracting top talent, not just from Europe, from the United States, coming to work for us at Santander. So I'm very excited about what this means for us and for the potential of the bank.