Interviewed By Foo Boon Ping
Group executive chairman of Banco Santander, Ana Botín, called on Europe to lead a coordinated response to the COVID-19 crisis with greater support for businesses and protection of jobs, even as she and her management team take voluntary salary cuts for medical relief fund
Describing the COVID-19 outbreak as a global health crisis that will cause economic and social distress on a scale unseen in generations, Ana Botin, group executive chairman of Banco Santander (Santander), said that unity among the Spanish people and solidarity with Europe is needed to confront the unexpected crisis. In a speech at the bank’s annual general meeting, she implored Europe to come together, act decisively to lead a “faster and more coordinated response.”
Europe has been the hardest hit region in the world with more than 759,000 confirmed COVID-19 cases and 61,000 deaths, accounting for about 53% and 72% of global total respectively, according to World Health Organisation’s statistics as of 9 April 2020. Spain has the highest number of cases in Europe and second highest death toll after Italy.
She noted that European and Spanish authorities have understood that coordinated actions and collaboration are required to fight the pandemic and have prioritised measures to contain its spread and impact on people. A key part of which involves lockdowns that require the population to stay at home which inevitably slows down the economy dramatically.
Europe cannot be left behind
Citing the enormity of the crisis, Botin commented: “It is essential to prioritise the necessary temporary support, giving an adequate fiscal response similar to that given by the European Central Bank (ECB), while supporting our businesses and foreign and local investment, which are key to recovering the growth path and creating jobs as soon as possible.”
The ECB and regulators in the region have been taking timely and important steps to support affected countries, including Spain. ECB for instance has rolled out two key measures, including a new targeted lending facility that provides up to around $3.28 trillion (EUR 3 trillion) in liquidity to banks at a negative rate, as low as -0.75%. This will encourage the banks to do about $136.78 billion (EUR 125 billion) more in lending to affected businesses, especially the small and micro enterprises and self-employed. It is also continuing its $1.09 trillion (EUR 1 trillion) bonds and asset-buying programme until the end of the year.
The European Commission is also taking measures such as the creation of a common $108.66 billion (EUR 100 billion) employment insurance fund to protect jobs and support businesses. Meanwhile, European Union (EU) finance ministers have also agreed to a $590 billion (EUR 540 billion) stimulus package that is pending final approval by leaders of the respective member states.
“Europe cannot be left behind in this crisis. Now is the time for Europe to rise to the occasion and lead a faster and more coordinated response,” Botin said.
Banks are part of the solution
Santander, which is the largest bank in Spain and fourth largest in Europe with total assets of $1.71 trillion as of June 2019, has introduced a number of initiatives to help employees, support customers and through the pandemic, including setting up a $27.17 million (EUR 25 million) fund, to provide medical equipment and supplies to help limit the spread of the virus. It will be financed by a reduction in senior management and board compensation, as well as voluntary contributions from employees.
Botin announced that to kickstart the fund, she and Jose Antonio Alvarez, the bank’s CEO and vice chairman, will forgo 50%, while non-executive directors will forgo 20% of their total compensation for 2020.
Unlike the collapse of the banking and financial system that precipitated the global financial crisis in 2008, Botin underlined that banks are now part of the solution to help economies survive the fallouts of COVID-19.
“We are much stronger and prepared to tackle global challenges like COVID-19,” she said.
Banks, such as Santander, with strong capital bases and buffers in excess of minimum regulatory requirements, have been given flexibility to use the surplus to help them respond to the crisis and support businesses and families.
Santander, for example, has rolled out $21.7 billion (EUR 20 billion) in pre-approved lending facilities or offered mortgage or unsecured loan repayment holidays for affected customers in Spain and most of the 10 main markets that it operates in. However, the bank is prepared and intends to go further.
“We need maximum flexibility so that we can do even more for the communities in the months ahead,” she said.
In line with the ECB recommendation for financial institutions to preserve maximum capital by cancelling dividends from both 2020 and 2019 earnings, Botin declared that Santander’s board has agreed to do likewise for its 2020 and 2019 dividends.
The 2019 dividend cancellation will free up additional $2.48 billion (EUR 1.6 billion) in capital – enough to provide $32.61 billion (EUR 30 billion) more in loans for families and businesses, while the ending of 2020 dividend translates into another $65.2 billion (EUR 60 billion) in loans.
All in, this represents $97.81 billion (EUR 90 billion) of additional available loans, which would represent 80 basis points of proforma capital based on 2019 underlying profits, she shared.
“By helping people and businesses now, we will help the economy get back on its feet faster, help people back into work, and help generate the growth that will power our business – as well as deliver shareholder returns – in the future,” she added.
Protecting employees and supporting customers
At the outset of the pandemic, the bank also implemented a work from home policy and told all employees who are eligible to do so. Over 100,000 of its staff are currently working from home. It also suspended the operations of a significant share of its branches to minimise employees’ exposure. It is committed to not make any temporary employee dismissals during the crisis.
“It is essential to maintain employment now so people who work in the bank can count on their salary to overcome the crisis and help those close to them,” highlighted Botin.
On top of this, the bank has contributed 2,000 beds to a field hospital in Madrid, contributed over two million masks and 500 non-invasive ventilators to the health ministry in Spain, and invested an additional $2.17 million (EUR 2 million) to acquire more ventilators for hospitals.
Despite the pandemic, Botin confirmed that the bank’s first quarter 2020 performance will be in line with the results of the same period in 2019, and that it has had limited impact. Average daily loan volume in March increased 16% compared to February, which she believes reflected the support that it is giving to customers.
“We are making the utmost effort and our priority is to fulfil Santander’s commitments to support our teams, customers and society. And that is in the interest of all our shareholders,” she said.