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The world\u2019s 16th-largest bank by total assets received a licence for its subsidiary to operate in Canada last month, something confirmed by a notice published in the Canada Gazette, the government\u2019s official newspaper, on March 29.<\/p>\n<\/div>\n
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Being granted a banking licence means Santander Consumer Bank (SCB) can now take deposits from consumers.<\/p>\n
\u201cExpansion of activities by banks such as SCB may provide the impetus to increase competition, which should be beneficial for Canadians in the form of more choice and better pricing on both loans and deposits,\u201d Sailie Ashtekar, senior analyst, North American Financial Institution Credit Ratings, at Morningstar DBRS, said.<\/p>\n
But she said competing with the Big Six is \u201ceasier said than done\u201d since the group dominates the market.<\/p>\n
\u201cNonetheless, any developments that add potential new entrants or initiatives that increase access to the Canadian market \u2026 are opportunities to increase competition,\u201d she said.<\/p>\n
Santander\u2019s presence in Canada dates back about 10 years, when it spent $300 million to buy Edmonton-based Carfinco Financial Group Inc., which provided vehicle loans to borrowers unable to obtain financing.<\/p>\n
The company hasn\u2019t disclosed what its approach in Canada will be, but Ashtekar said she believes the most likely avenue forward will be to \u201cbolster the existing auto financing franchise\u201d by reducing funding costs by replacing wholesale funding with cheaper customer deposits and then working to expand into other retail products and services.<\/p>\n<\/div>\n
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\u201cAny strategy must be built on the premise that the dominant positions of the Big Six will remain intact going forward,\u201d she said. \u201cAny strategy will need to target specific niches, most likely focusing on consumer\/retail financial services, an area in which Santander has a strong reputation globally.\u201d<\/p>\n
Santander has focused on \u201cspecific niches where they feel they can compete more effectively\u201d in the United States and Mexico, Ashtekar said in a note on March 31.<\/p>\n
With 168 million customers worldwide, Santander boasts a strong presence globally. The company has largely achieved its goal of attaining at least a 10 per cent market share in each of its core markets outside Spain, except in the U.S., the note said.<\/p>\n
The bank could leverage each of these strengths to grow in Canada, Ashtekar said.<\/p>\n
\u201cThe bank could pursue cross-selling of already developed solutions elsewhere that could benefit the Canadian market, such as private banking, asset management and perhaps trade finance of international payments.\u201d<\/p>\n Recommended from Editorial<\/p>\n