Latin America currently has “the best financial system in the world”, said Francisco Luzón, member of the Board and head of the Latin American Division of Spain’s Banco Santander (NYSE:STD), the biggest bank by market capitalization in the Eurozone.
“Markets have not yet really caught on to the spectacular moment the region (Latin America) is living with a really enviable situation”, he added anticipating that “this is the great recovery decade for Latin America.”
Francisco Luzón said that Latin American financial institutions have done things “seriously, calmly, and they are working really well something that did not happen ten or fifteen years ago.” He also underlined that the region’s banking system has better levels of leverage, liquidity and arrears payments than Asian banks.”
Santander Bank (NYSE:STD) forecasts Latin America is going to expand an average 6% this year in spite of some risks of “over-heating”, but since monetary authorities have learnt lessons of the past “the region has learnt it’s better to grow at a sustained 5% than in spasmodic cycles.”
Luzón said that Spain represents 30% of the overall business of Santander but through several acquisitions in the last three years, the bank “is targeting Latin America, the United Kingdom and United States, which will eventually be more important.”
“The geographic diversification is to continue,” indicated Luzón who added that Spain’s growth will be closely linked to Latin America’s strong development. The consolidation of a dynamic middle class in most countries of the region with an average per capita income of 10.000 US dollars (14.000 in Chile) “will be the springboard for the great leap forward.”
Another area to target is expanding consumer banking services which currently stands at 35% compared to Asia’s 52%. Chile the most advanced in the extended use of banking services has a penetration of 77% while in Mexico it is only 13% and in Argentina, 12%. That is why Santander is going to play heavily is expanding banking services parallel to the region’s expansion, said Luzon: “the crucial areas are the middle class and financing small and medium enterprises.”
As to the performance of the Latin American financial system during the global crisis, Luzón described it as “an example to the world”. For the first time in many years in the region “the banking system played a significant role in boosting economic activity.”
On Wednesday, Santander announced that first-quarter profit rose 5.7% as growth in Brazil and the UK countered a serious slump at Spain. The bank reported a net income of 2.22 billion Euros from 2.1 billion Euros a year earlier, exceeding analysts’ estimates of 2.11 billion Euros.
Santander has been “very active” in gathering funds to cover its financing needs, lining up 30 billion Euros in deposits and 15 billion Euros in debt issues in the first quarter to cover long and medium-term debt maturities of 29 billion Euros in 2010, Chief Executive Officer Alfredo Saenz said in a statement. The bank’s financing position looks “very comfortable” through 2011, he added.
“Santander is demonstrating the advantages of its geographical diversification,” Chairman Emilio Botin said in a statement accompanying earnings. “We maintain the capacity to generate recurrent profit and are improving in liquidity, efficiency and solvency.”