Finance case study

Financecase study

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FinanceCase Study

TheSantander Consumer Finance (SCF) was founded in the 1987, since ininsertion, it has partnered with different financial partnersincluding the Royal Bank of Scotland. These partnerships have provedto be very influential on the development of Santander’s consumerfinance business. Among other things, the partnerships helped thefinancial institution to understand the growth of the consumerfinance market in the United Kingdom, giving the organization manydifferent insights of the business. Mergers that have followed haveaccorded them exposure to consumer lending, with the company makingfurther expansions in the European market such as Italy, Germany, andFrance among other European markets. With consumer finance markethaving grown to match up the largest market, which is the UnitedStates, Santander Consumer Finance has faced its share success andchallenges in European market as it expand in this newly foundedmarket as it illustrated in this essay.

Assumptionsand Methods/ Success by Santander

Santanderhas been able to establish the stable source of funding from itsoperations in Germany, Spain, Portugal, and Italy. From these sourcesthey get cheaper funding avoiding costs of doing currency swaps. Inaddition, Santander has been able to establish car loans which havebecome increasingly important sources of funding for the financiallender.

Santanderbuilds on the strengths of the diversity and averts business modelsoffering the same or identical product to everyone. Thus, from amarketing and pricing perspective, the financial organization adjuststo the local territories. In addition, supportive supervision isgiven for markets it expands to, and having people who understand thelocal needs of the markets they venture into (Perez and Del Bosque,2009).

Lendingstrategy followed by Santander / business impact

Santanderhas taken to exporting know-how from the US financial marketsoperations to the European market. Thus, Santander is learning how toprice the products to the consumer’s risk, which is a process thatthe European market has started to adopt now. The business models arewell aligned to the needs of the segment of the risk that they serve.Thus, Santander works on the basis that when they build a businessfocused on a particular segment of risk, with clear ideas of thelikely rate of default, the number of vehicles they might require torepossess and how these products are to be remarketed allowsSantander to make a lot of money. Strategists at Santander understandthat if business models do not make sense, even where products arehighly priced, the company stands to lose a lot. Owing to regulatoryrestrictions, loans are only securitized on a country by countrybasis Santander is not allowed to securitize loans across countrieseven if it would be advantageous for the organization to pool riskacross different countries (Peppard, 2000).

Country/PoliticalRisk faced Santander Consumer Finance

Accordingto Trumbul, Corsi, and Barron (2010), the consumer group issusceptible to the present distractions and instabilities in theglobal financial coupled by government actions intending to alleviatethe effects of the current financial crisis. As of august 2007, theglobal financial system has been experiencing difficult credit andliquidity conditions and disruptions caused by governmentinterventions. This has resulted to less liquidity, greatervolatility, general widening of the spread and, in some instance alack of price transparencies on the interbanks lending rates. Inaddition, global financial markets have in several times deterioratedsharply exposing significant difficulties to different to differentfinancial institutions.

Santanderhas moved to expand across Europe, how this has been met with severalminor hitches. Where they have invested in countries with a higherGDP per capita for instance, they have been met with high levels ofcompetition (Peppard, 2000). Countries outside Europe posed differentchallenges, for instance, in Russia when Santander joined thismarket, the financial sector was under transition controlled by thecountry’s financial regulation, meaning that this body could issueor revoke license of any bank that lost money for three consecutivemonths, this was definitely a challenge to a consumer lender, thusSantander had to enter the Russian market as a financial firm ratherthan a bank.

Thedifferent European countries presented Santander with a different setof challenges considering different government systems and policiesthat change with regimes. This prompted Santander to be extremelyflexible by having different models for different countries beingforced to focus on what it can achieve and living out that it cannotachieve in a particular country. For example, when Santander enteredthe Germany market, it was less focused on mortgages, governmentpolicies had set mortgage interest rates very low limiting thefinical lender’s opportunity to sell other things since theirmortgage clients would be forced to pay large installments and for along time (Trumbull, Corsi, and Barron, 2010).


Inconclusion, despite the numerous risks involved in the emergingEuropean financial market, Santander has been able to establish itspresence in various countries through product mix, and utilizingdifferent business model for the different countries to ensuresuccess in business depending with the particular country governmentpolicies in place.


Peppard,J. (2000). Customer relationship management (CRM) in financialservices. European Management Journal,18(3),312-327.

Perez,A., &amp Del Bosque, I. R. (2009). The social role of financialcompanies as a determinant of consumer behaviour. InternationalJournal of Bank Marketing27(6),467-485.

Trumbull,G., Corsi, E., &amp Barron, A. (2010). SantanderConsumer Finance.New York: Harvard Business School.