Spain’s banks should look at Latam for growth, says Velhon Partners

In a gloomy context for European markets, Latin America represents more than a simple growth driver for Spanish banks, according to independent consultancy firm Velhon Partners.

The Latin America subsidiaries of Spanish banking groups have gradually developed over time, and their contribution to the overall income has now become critical, in particular for biggest Spain’s banking groups.

It represents 49% of the combined net banking income of Santander and BBVA.

The combined banking networks of Santander and BBVA, which account for 62% of foreign bank market share, are equivalent to over half that of the national leaders in Latin America, where they have expanded their footprint in the past three years.

“Given the weakness of the parent companies in Spain, the subsidiaries in Latin America, previously viewed as simple bridges to growth, have become bases of support and defence,” the consultancy said.

Their positioning in Latin America has also become more valuable with the establishment of a retail banking model in an average of eight Latin America countries. These include Brazil and Mexico, which have 52.7 million customers, or 26% of worldwide distribution networks for both Santander and BBVA.

“Until now, asset disposals have been limited to non-core activities or specific geographical areas. The management of these vast operations, like in Brazil and Mexico will count even more in the future. The market conditions with growth and risks costs, where these subsidiaries operate, will have to be monitored all the more closely, in view of the fact that they have helped offset the simultaneous downturn in other operational zones, like the UK,” Velhon Partners said.

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