Santander chooses the opposite of Orcel as CEO

The second time is the charm for Banco Santander. After failing to hire Andrea Orcel as CEO in 2019, CEO Ana Botín and the board of directors announced a more cautious choice on Friday, that of Héctor Grisi, the credit institution’s North American head. In many ways, he is the complete opposite of the former head of UBS. That’s probably a good thing.

The key sticking point in the Orcel affair was money. Santander’s board of directors, led by Botin, named him chief executive in September 2018, but changed its mind in January 2019, saying the cost of compensating the Italian banker for his deferred salary from UBS was higher than expected. Orcel sued, and a Spanish court last year ordered Santander to pay him 68 million euros, a decision the bank has appealed.

Nothing as dramatic is likely to happen with Grisi, who joined Santander in 2015 as Mexico CEO. As an executive who oversees the businesses that contributed a third of the group’s underlying profits last year, he is a household name. And, as an insider, he won’t demand much. It has been more than three years since Botin annulled Orcel’s appointment, meaning the board has taken a more considered approach this time. The delay has allowed them to develop an internal pool of stronger candidates, according to people familiar with the process.

Grisi, like Orcel, has investment banking in his DNA, having spent 18 years at Credit Suisse. However, he does have practical experience in the retail banking operations that make up the bulk of Santander’s business. Last year, the Mexican unit obtained a juicy adjusted return of 29% on tangible capital. Since 2019, Grisi has also been responsible for the United States, where Santander also has an automobile financing branch. It has helped drive Mexican and US businesses to save money by sharing more technology.

That is exactly what the group as a whole needs to do to show that Santander’s business mix is ​​worth more than the sum of its parts. Investors doubt it. The bank, whose operations stretch from Britain to Brazil, is valued at 5.2 times expected earnings for the next 12 months, according to Refinitiv data. The average of European credit institutions trades at 7.4 times. Grisi will not have the decisive word, as Botín has maintained responsibility for the strategy under Santander’s unusual governance structure. But he is as well placed as anyone to tackle the bank’s listing problems.