Market Research
Latin American Subsidiaries Now Critical Businesses For Spain's Big Banks
The Latin American subsidiaries of the major Spanish banking groups have become critical to their business models, according to research from Velhon Partners, a consultancy firm.
The issue is important for wealth managers because these major networks provide access to potential customers in a region with $7.1 trillion of wealth owned by high net worth individuals, according to the RBC/Capgemini World Wealth Report 2012.
In fact, 49 per cent of the combined net banking income (NBI) of giants Santander and BBVA is generated in Latin America. These two Spanish players hold 62 per cent of the foreign bank market share.
On the retail banking side, the continent represents 26 per cent of worldwide distribution (52.7 million customers) for Santander and BBVA.
Santander holds a 75 per cent foreign bank market share in Brazil; 17 per cent in Mexico; 59 per cent in Chile, and 60 per cent in Argentina.
BBVA holds a 30 per cent share among foreign banks in Mexico; 4 per cent in Chile; and 35 per cent in Argentina (it has no retail banking operations in Brazil).
“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,” said Velhon Partners.
“Until now, asset disposals have been limited to non-core activities or specific geographical areas. The management of these vast operations, like in Brazil (37 per cent of Santander’s NBI) and Mexico (24 per cent of BBVA’s NBI), will count even more in the future.
“The market conditions (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,” it added.
Last year Latin America’s GDP expanded, and the continent’s wealthy population grew by 5.4 per cent, according to the World Wealth Report. It is home to around 0.5 million high net worth individuals, and 12,000 ultra high net worth individuals. However, the overall wealth of this population saw the largest regional drop last year, at 2.9 per cent.
