Santander launches US digital bank to cut cost of auto lending

MADRID/NEW YORK, Oct 21 (Reuters) – Spain’s Santander SAN.MC launched its digital bank in the United States on Monday, which could help fund up to $30 billion in loans for vehicle purchases and broaden its retail business in the country, the bank’s U.S. CEO Tim Wennes told Reuters.
The euro zone’s third-biggest lender by market value is one of the few European banks with a retail presence in the U.S. market following the exit of rivals BBVABBVA.MC and BNP ParibasBNPP.PA.
Santander has over $45 billion in retail deposits at its 409-strong U.S. branch network, mainly in nine states in the northeast, and over $60 billion for auto-related loans.
“We have north of $30 billion of auto assets that are not funded by the bank today, that are wholesale-funded,” Wennes told Reuters in an online interview late on Friday.
Funding via the wholesale market is more expensive than if the bank funds the assets directly, but Wennes did not say how much the bank could save by moving to cheaper funding.
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The launch of Openbank, which is Europe’s largest digital bank with over 18.5 billion euros in deposits, is part of Santander’s global strategy to become a digital bank with branches.
To try and gain market share in deposits in the U.S., Santander is initially offering a yield of 5.25% on its savings account, higher than Goldman Sachs’ GS.N digital bank Marcus that gives 4.1% on its online savings account, or the up to 4.7% from CIT Bank’s platinum savings account.
U.S. banks such as JPMorgan JPM.N and Bank of America BAC.N hold the largest share of bank deposits in the country.
The two U.S. banking giants have been redesigning their branches to focus on in-person sales of products such as mortgages and investments, instead of routine teller transactions. The shift came as digital banking services proliferated.
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Openbank, Wennes said, could also offer small business deposits at some point. Santander U.S., meanwhile, has no plans for now to return to mortgage lending as it lacks scale. Santander exited the mortgage lending business in 2022.
Wennes said that the launch of Openbank, which the bank also aims to roll out in other countries such as Mexico, would involve a “very limited” number of hirings as for the most part it can shift resources from within Santander U.S..
A successful launch of a fully digital offering in the U.S., where Santander has 4.5 million customers in total, will be crucial because the bank’s U.S. business has been generating sub-par returns.
Hiring expenses and higher provisions resulted in a 0.4% year-on-year fall in net profit in the U.S. in the first half.
Wennes said the bank would analyze how best to grow this digital platform and “certainly evaluate if partnership opportunities would make sense”.
He also said Santander was “comfortable today” with current resources deployed at its corporate investment bank in the U.S. following its expansion after last year hiring former executives from the collapsed Credit Suisse.
(Reporting by Jesús Aguado in Madrid and Saeed Azhar in New York; Editing by Susan Fenton and Barbara Lewis)