The past few months have been challenging for banks between $50 billion and $250 billion in assets. Santander US is in that category. What has been your experience? We’ve navigated the challenges quite well. As a wholly owned subsidiary of a global systemically important bank, our capital and liquidity requirements are similar to those of large global U.S. banks, so we’re in a strong position. Also, our deposits have been relatively stable, as nearly two-thirds are FDIC-insured, and we have a very diversified deposit base. That’s important because deposits are going to contract under quantitative tightening. This already started happening last year. Deposits are even more competitive today than they were pre-March, which means liquidity will become increasingly important. That’s going to constrain loan growth — not just for regional banks, but for all banks. What’s the best way to compete for deposits? Relationships are important. So are services. For banks, having operating balances with companies can create stability and security. The cumulative impact of Fed moves over the last 14 months has created meaningful opportunities in cash alternatives. Also, with the digitalization of banking, online offerings have become far more prevalent, making it easy to move money and take advantage of rates. Hence why depositors can get FDICinsured CDs at 4% or more for the first time in 15 years. Do you think the turmoil in banking is over? What we are seeing is relative stability in the marketplace. While the events of March were idiosyncratic to specific institutions and their business models, we expect greater pressure on margins and higher funding costs going forward. We saw some NIM expansion last year, and that’s starting to flip. We’ll also need to keep our eye on commercial real estate and office exposure, as there are clearly challenges in that segment. Do you think federal regulators will raise capital requirements? Many experts are reviewing and opining on what may come out and the impacts. From our perspective, we would urge policymakers to be thoughtful about any policy response and look at what tools were available that could have been more helpful in preventing this. Blanket approaches of more capital or liquidity requirements will impact the industry’s ability to lend and increase the cost of capital, among other implications. We all want the industry to be safe and sound. Banking is about trust and confidence. At the same time, our job is to facilitate commerce, help companies grow and provide capital to the markets. You’re saying there’s a balance. Indeed. A bank can only grow its loan book to the extent it’s growing its deposit book. If deposits shrink (to be expected with quantitative tightening), there’s not going to be rapid loan growth. In fact, bank balance sheets may contract. That’s going to slow the economy and help the Fed tame inflation. You told American Banker in April that Santander US was becoming a “full-spectrum auto lender that goes beyond subprime lending and includes prime and super-prime borrowers.” What’s behind that shift in strategy? Historically, we did a lot of business with super prime, mainly on new cars, and we did lower-credit lending primarily on used cars. Santander Consumer, our auto business, used to be a separate, publicly traded legal entity. Last year, we took it in house and became a 100% owner. Now, we’re leveraging our bank deposits to help fund some of those loans. This allows IN THE UNITED STATES, OUR OPTIMISM, RESILIENCE, AND ADAPTABILITY ARE OUR GREATEST STRENGTHS. INDEPENDENT REPORT | 13
RkJQdWJsaXNoZXIy MTg3NDExNQ==