Change in the management of the largest Spanish financial institution. Banco Santander announced this Friday to the National Securities Market Commission (CNMV) that it has proposed Hector Grisi Checa to replace José Antonio Álvarez as the group’s CEO from January 1, 2023. The company is thus completing a delayed process following the frustrated signing of Italian Andrea Orcel in 2018. Grisi, born 55 years ago in Mexico City, has been with the bank for just over six and a half years, currently CEO of Santander Mexico and responsible for the North America region, and before that he worked for Credit Suisse for 18 years. The appointment is subject to the relevant approvals, including the green light from the ECB. Álvarez will remain associated with Santander as a non-executive vice president. Investors took the announcement positively, with shares of the bank up nearly 2.5% two hours after the close on a bullish day for Capricorn.
The new number two will take up the post after a “rigorous succession process” carried out by the council’s nominations committee, Santander said in the statement. Upon taking up his duties, he will report directly to the Board of Directors as set out in the new governance structure the Bank announced on February 24 this year and will be responsible for all regions, countries and global businesses. The Anglo-Saxon governance model adopted in the company corresponds to the requirements of the European Central Bank (ECB). Internally, this meant the transfer of power from President Ana Botín to the CEO, who was given executive roles, so there is more balance between the two positions.
The transfer of powers did not take place at the time due to a requirement from the ECB. However, financial sources pointed out even then that Santander anticipated this obligation. That means he made the move ahead of the CEO change expected in the coming months, which actually happened. In doing so, he avoided that at the time European banking regulators required the transition as a condition of his approval of the new board, approval which has not yet been given to Grisi, although financial sources assure it had already been in talks informally. “According to the previous experience of [Andrea] Orcel, the bank, was very cautious and asked Eurobank beforehand, although in Grisi’s case there would be no problems because he was already a senior executive at the bank and meets all the requirements,” these sources add.
The search for candidates had accelerated in recent months and industry sources indicated that this time Santander would not be looking outside to find the ideal person: all the pools pointed to the heads of the bank’s regions themselves as Main candidates for the position of CEO. Internally, this creates more trust and security, as it is a person from the house who knows the ins and outs of the entity, quite the opposite of the doubts that overran the group in 2018. At that time, however, the replacement of Álvarez by Orcel was planned. This signing failed and ended in a legal dispute between the company and the Italian.
Grisi’s landing was meant to heal those wounds. The fiasco of Orcel’s failed hiring was costly. From an economic point of view, the court ordered Banco Santander to pay 51.4 million euros, an amount that, while not significant to its accounts, is high in the event of a labor dispute. And in terms of reputation, the announcement of his signing, subsequent resignation and litigation also came at a cost to the company.
Bank President Ana Botín thanked José Antonio Álvarez for his work: “His leadership and commitment have been fundamental to Santander’s success and he has been a very important support to me over the years. I am pleased that he will remain on the board as non-executive vice president and I am sure that he will continue to play a key role.” And he also praises the profile of the new CEO: “He has decades of experience and in-depth knowledge of our markets and our business areas. In addition, over these years he has demonstrated his leadership skills, teamwork and ability to create value for our customers and shareholders.”
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The Mexican banker’s appointment comes at a time when the company plans to grow in Mexico, the market it knows best. Santander is among companies that have expressed an interest in buying Banamex, Citigroup’s subsidiary in that country. In fact, Grisi was responsible for leading the previous polls and reporting internally on the benefits the operation would bring to the group and whether or not it was a good opportunity. In other words, he knows in detail a possible operation that could be of great importance for Santander and would significantly increase the bank’s turnover in the country. In the first quarter, the Mexican subsidiary contributed 249 million to profit, up 32%, spurred by the increase in revenue (+7%) and the bank’s 25% reduction in provisions. And in 2021, it was the fifth-biggest market by profit, after the US, Brazil, the UK and Spain.
The announcement of Grisi’s landing also comes four months after the controversy sparked by Mexican President Andrés Manuel López Obrador over his criticism of Spanish companies based in the country, words that raised concerns about the heavy presence of Spanish companies in Mexico. Grisi and Botín met with López Obrador in April to defuse tensions. “We have a very good relationship,” said the Mexican President at the end of the meeting. Still, the fact that they’re the only foreign group that has so far shown a firm interest in buying Banamex could put them against going ahead with the operation.
Married with three children, Grisi is virtually unknown in Spain having worked across the Atlantic. On his LinkedIn profile, he describes himself as a “family man, husband and reading lover”. And he says: “Passionate about the financial market”. His education was forged between his country and Canada. He holds a degree in finance from the Universidad Iberoamericana in Mexico City, graduating with honors. He has completed postgraduate studies in markets and finance at various schools including the New York Institute of Finance. And he is currently a board member of the Mexican Stock Exchange and patron of the Universidad Iberoamericana. In her trips to Mexico, Ana Botín has shown signs of maintaining good personal attitude with her next number two.
On a visit to Mexico and in front of the impressive Diego Rivera murals in the National Palace, I shared with Héctor Grisi how we have taken the country forward over the past 25 years @SantanderMx absorbs Mexico. pic.twitter.com/EjnPuLZRze
– Ana Botin (@AnaBotin) March 12, 2019
His career in the group started directly in the position of CEO of Santander Mexico in 2015. Since then, “it has driven a major transformation of the business that brought the return on adjusted ordinary tangible capital to 31% at the end of March 2022,” the bank highlights. In addition, the number of active customers has grown by almost 50% to almost 10 million during this period. And Santander has positioned itself as one of the first in the country in the SME, Corporate, Mortgage and Project Finance sectors.
Grisi’s most significant rise up the bank’s organizational chart to date came ahead of the pandemic in 2019, when he was appointed regional head for North America, whose primary markets are Mexico and the United States. Last year, the group achieved its best-ever result in the United States, with profits of $2,750 million compared to 648 million in 2018, becoming the country that contributed the most to the group’s profits, just beating Brazil . In addition, on the US market, it carried out the takeover of the broker Amherst Pierpont for around 600 million dollars (around 570 million euros at current exchange rates). On the other hand, Grisi’s departure from the Mexican subsidiary opens a succession process in the position of CEO of Santander Mexico.
Step aside Alvarez
Álvarez joined the group in 2002. Two years later he was appointed CFO and in 2015 CEO. Once the discharge goes into effect early next year, he will become non-executive vice president and remain on the bank’s board. “It has been a privilege to be part of the Santander team over the past 20 years. I am very proud of what we have achieved together and have every confidence that under Ana’s leadership [Botín] and Hector [Grisi] The bank will continue to grow and prosper,” he said.
Santander highlights in its statement that since Álvarez took over as CEO, the group has increased its return on tangible capital (ROTE): from 11% in 2014 to more than 14% in the first quarter of this year. In addition, the CET1 capital ratio has increased from 8% to over 12% in the same period. “Revenues have increased by 35% in constant euros and the bank has added almost 40 million customers, bringing the total number of people and companies it serves to 155 million at the end of March 2022,” the bank points out. A development that has made it possible to distribute 15,000 million euros in cash dividends to shareholders in these years.
The group also announced that Ramón Martín Chávez, currently the bank’s external director, will leave the board effective July 1. “Chávez will continue to attend meetings of Santander’s International Advisory Council and will continue to serve as director of PagoNxt, the group’s payments business,” Santander explains in the statement.