Santander Targets $1.4 Billion Cost Savings as Europe Drags

(Bloomberg) -- Banco Santander SA pledged to cut 1.2 billion euros ($1.4 billion) of annual costs and ramp up investment in digital and its prized Brazilian business as the Spanish lender seeks to revive its moribund share price.

The Spanish banking group plans to achieve the cost cuts over three to four years while investing 20 billion euros in digital and technology, according to its new business plan. The company also raised a profitability target in Latin America, its most lucrative region in recent years.

The plan reflects the diverging fortunes of Santander’s global businesses. With relief from negative interest rates postponed yet again, the focus in Europe is on finding ways to reduce spending. In Latin America, Santander plans to increase its investment to more than 30 percent of risk-weighted assets from the current 27 percent.

The bank is also seeking to turn the page on a difficult six months dominated by the bungled attempt to hire Andrea Orcel from UBS Group AG as chief executive officer. The bank has come under pressure from some investors over its core capital levels, which was below the average among European peers in the fourth quarter. Chairman Ana Botin said she expects the bank to end 2019 with a CET1 ratio above last year’s 11.3 percent.

The bulk of cost cuts in Europe will be driven by IT improvements, especially in cloud-based platforms, the bank said. Santander also plans to intensify the process of consolidation at Banco Popular, the struggling Spanish lender it bought for 1 euro in 2017.

The lender said it will reorganize its management structure, appointing regional heads to improve coordination between its country units. Gerry Byrne will be regional head for Europe, Sergio Rial, the current CEO of Brazil, will head South America, while Hector Grisi and Scott Powell will share the role in North America.

The bank raised its target for return on tangible equity in Latin America to between 20 percent and 22 percent, from the current 19 percent.

Santander rose as much as 2.1 percent in Madrid trading and was up 1.8 percent at 4.35 euros as of 10:44 a.m.

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