Santander Launches Digital Bank in the U.S.

By Jesús Aguado and Saeed Azhar
MADRID/NEW YORK (Reuters) – Spain's Santander launched its digital bank in the United States on Monday, which will help fund over $30 billion of auto lending assets and expand its retail business in the country, according to U.S. CEO Tim Wennes.

Santander is the euro zone's third-largest lender by market value and one of the few European banks maintaining a retail presence in the U.S. market after the exit of BBVA and BNP Paribas.

The bank hosts over $45 billion in retail deposits within its 409-branch network across nine northeastern states, and it controls more than $60 billion in auto lending assets. Wennes stated, "We have north of $30 billion of auto assets not funded by the bank today, that are wholesale funded."

Although funding via the wholesale market is costlier, the specific savings from switching to direct funding were not disclosed. The launch of Openbank, the largest digital bank in Europe with over 18.5 billion euros in deposits, aligns with Santander's global strategy to operate as a digital bank with physical branches.

To attract more deposits in the U.S., Santander is offering a competitive yield of 5.25% on its savings accounts, surpassing offerings from Goldman Sachs' Marcus (4.1%) and CIT Bank's platinum accounts (up to 4.7%).

In the U.S., major banks like JPMorgan and Bank of America dominate the market for bank deposits. Given that Santander has 4.5 million U.S. customers, successfully launching its digital platform is essential, especially considering that the U.S. business has been yielding subpar returns.

An increase in hiring expenses and higher provisions led to a 0.4% year-on-year drop in net profit for the U.S. in the first half. Wennes expressed the bank's intention to explore the best ways to grow this digital platform and evaluate potential partnership opportunities. He also mentioned the bank's comfort with its current resources in its corporate investment bank following recent expansions involving former executives from collapsed Credit Suisse.