Banco Santander plans to exit U.S. residential mortgage lending and review its stateside presence in certain commercial segments as part of a broader overhaul of its American franchise.
Santander will focus on growing its U.S. auto lending and consumer lending segments, the Spanish banking giant said Wednesday. It also plans to concentrate on banking middle-market clients in this country, and on working with corporate clients across its global footprint.
The changes are part of a multiyear effort, internally called One Santander, that has already included an exit from retail banking in Puerto Rico and the downsizing of the company’s Northeast U.S. branch footprint.
“We are simplifying our business to focus on those areas where we can be successful with clients and deliver solid returns,” Tim Wennes, president and CEO of Santander Bank and its U.S. holding company, said in an interview.
Profits from Santander’s U.S. business more than doubled to $2.3 billion last year on higher revenues and a lower cost of credit, Banco Santander said Wednesday. Its U.S. businesses contributed 22% of the parent company’s profits in 2021, up from 7% in 2019, Executive Chairman Ana Botin said during a conference call.
Last year, Madrid-based Banco Santander announced a buyout of the minority shareholders in Santander Consumer USA, its Dallas-based auto lending unit. That process was completed on Monday, according to disclosures filed with the Securities and Exchange Commission.
Santander’s U.S. holding company is also awaiting regulatory approval of its acquisition of Amherst Pierpont Securities, a New York-based independent broker-dealer. That deal, first announced in July 2021, is expected to give Santander a larger foothold in fixed-income trading, which surged during the pandemic.
Santander Bank, which has $89.5 billion of assets, said that it plans to stop originating new mortgages and home equity loans later this month because of a lack of scale in those areas. The company reasoned that its capital and resources could be better spent on more profitable growth areas, such as auto lending and priority segments within commercial lending, Wennes said.
“We didn’t see a clear path to above cost-of-capital returns and made a decision to stop new originations,” Wennes said. The decision should have no immediate impact on customers in Santander’s mortgage servicing portfolio, he added.
Over time, Santander intends to originate more auto loans on the balance sheet of its Boston-based bank, and to use retail deposits gathered through the bank to fund prime auto loans originated by Santander Consumer, according to the company.
Santander’s U.S. consumer banking unit will also continue to focus on making unsecured personal loans, issuing credit cards and offering small-business loans, the company said.
While Santander is reviewing certain segments within commercial and industrial lending, the company said it intends to ramp up its middle-market business banking. And through its corporate and investment bank, Santander plans to connect with larger international corporate clients that have connections in some of its other markets, like Spain and Chile, the company said.
