| BUSINESSWEEK ONLINE : FEBRUARY 1, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- EUROPEAN BUSINESS
A Titan Looks Way Past the Pyrenees (int'l edition) Can Banco Santander Central Hispano make it in Europe? Breakfast is the forgotten meal in Madrid, a late-night city if ever there was one. So what better way to map out a secret bank merger, the biggest in Spanish history, than over quiet breakfasts in Spain's capital? For the past two years, four powerful bankers did just that. Their early-morning meetings at the plush downtown headquarters of two banks, Banco Santander and Banco Central Hispano, laid the groundwork for the Jan. 15 merger announcement--an $11.4 billion deal that took Spain utterly by surprise. This first bank merger in the era of the euro creates a southern titan. The newly named Banco Santander Central Hispano unites Spain's No. 1 and 3 banks. Its huge market capitalization of $36 billion places it first in Europe, ahead of Deutsche Bank's $32 billion, while its assets of $290 billion rank eighth in the euro zone. The new bank is huge in Latin America, with $88 billion in assets from Peru to Mexico. Since those holdings face shaky times as market convulsions hit that region, the pressure will be on the new BSCH to boost its network of alliances in Europe and develop a strategy well beyond the Pyrenees. Indeed, the Spanish megamerger itself may ignite a fire of further deals that could heat up the tempo of bank restructuring in Europe. But how the new bank will shape its European strategy will depend largely on who's running the show. That issue is still open. The trouble is that each of the two merging banks brings its own heir apparent to the deal. The leading candidate to run the combined bank now is Angel Corcostegui, the 47-year-old turnaround whiz who worked wonders at BCH. A graduate of Wharton, with an MBA and PhD, he pushed hard for the merger during those secret breakfasts and has been named chief executive. But Santander Chairman Emilio Botin, 65, will share command of the bank with Jose Maria Amusategui, chairman of the former BCH. And Botin's daughter, Ana Patricia Botin, now senior vice-president for global investment, has long been considered a top candidate to be his successor. Whether this rivalry shapes up into a battle likely hinges on how Corcostegui handles the tricky merger. First, he must cut risk in Latin America, especially in the Santander portfolio. The region accounted for 33% of the bank's estimated '98 earnings, and it faces a nasty write-down in Brazilian assets. In Spain, Corcostegui must slash BSCH's 6,450 branches by a third. That will prove hard, since unemployment is near 20%. As a CEO from the smaller bank, Corcostegui's margin for error is thin. Still, cleaning up banking operations in the wake of a merger is Corcostegui's forte, a job he has pulled off twice. The first was when Banco Bilbao and Banco Vizcaya merged at the start of this decade. In 1994, after losing a battle for the chairmanship, he moved to BCH, which was reeling from merging Banco Central and Banco Hispano Americano two years before. Corcostegui cut staff from 34,000 to 20,000 at BCH and reduced the branch network by a third. BOTIN POWER. While Corcostegui wrestles with the bank's strategy, Ana Botin will be running global investments and corporate banking. Analysts predict the geography of her new job will say much about her prospects. More work in Latin America, where she built up Santander's now troubled portfolio, means she's on clean-up patrol. But duty in Europe would position the bank--and her career--for growth. One factor weighs in Botin's favor: Four Botins sit on the new bank's board, and only one Corcostegui. Analysts expect BSCH to start in Europe by building on the network it has in place. Through Santander, it gets 10% of Royal Bank of Scotland Group PLC, and a 5.2% stake in Italian bank San Paolo. BCH owns 3% of Germany's Commerzbank and 1.3% of Societe Generale in France. The new bank is expected to target Italy and France first. If a merger binge engulfs the euro zone, the new Spanish giant should have the clout to deal with Europe's big banks--no matter who's running things in Madrid. By Margaret Popper in Madrid, with Kerry Capell in London and Stephen Baker in Paris To read a letter to the editor about this story, click here. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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