Banco Santander (NYSE:SAN)
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2 Months : From Oct 2019 to Dec 2019
By Julie Steinberg
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 5, 2019).
Spanish bank Banco Santander SA agreed to acquire a stake in a U.K.-based payments platform for GBP350 million ($453 million), as European banks hobbled by ultralow interest rates target growth areas.
Santander will purchase just over 50% of Ebury, according to company officials, a banking platform through which small and medium-size companies trade internationally. The acquisition is aimed at bolstering Santander's global payments business and help the bank compete more broadly in trade finance, Executive Chairman Ana Botín said in an interview with The Wall Street Journal.
Santander, one of the world's largest retail banks, is bulking up its commercial business when low rates and political and economic uncertainty are squeezing it and other European lenders, driving them to look beyond their traditional strengths to bolster their businesses. Such banks have alternated between competing with and working alongside fintech companies trying to disrupt established banking operations.
Santander reported last week that its third-quarter net profit fell steeply due to a EUR1.49 billion charge to its U.K. business, which has been hurt by Brexit and regulatory charges. Net profit for the period fell 75% to EUR501 million, while total income rose 6% to EUR12.47 billion.
Ms. Botín said the service is geared toward companies with up to around $50 million in revenue. Currently, Santander helps those companies based in Spain and the U.K. with their global trade, but relies on so-called correspondent banks in other countries to facilitate payments. The transaction will allow clients to conduct their foreign exchange through Santander, Ms. Botín said.
Banks are increasingly relying on transaction banking, encompassing trade finance and cash management, because it serves as a stable contributor to revenue, according to a recent report from Deloitte LLP. At the 10 largest transaction banks by revenue, transaction banking revenue in Europe, the Middle East and Africa has been largely steady since 2015, according to research firm Coalition.
Ebury operates in 19 countries and processed $16.7 billion in payments in 2018. Some GBP70 million of Santander's investment will be used to help the company expand in Latin America and Asia. The transaction is expected to value Ebury at around GBP700 million and close in the first quarter of next year, Ms. Botín said.
Santander is potentially looking to acquire other merchant-acquiring startups, which process payments on behalf of merchants, she added.
Write to Julie Steinberg at email@example.com
(END) Dow Jones Newswires
November 05, 2019 02:47 ET (07:47 GMT)
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