It’s now just over two years since Banco Santander restructured its IR and communications department to provide a more focused approach to the various audiences we deal with. We separated the functions into four distinct areas which would work separately to provide the focus we believe our audiences require, while also co-operating closely with each other to provide a uniform approach.
The thinking behind this change was led by Francisco Luzón, the former chairman of rival Spanish bank Argentaria, who joined our board in 1996 and took responsibility for strategy, communications and institutional relations. Prior to his appointment I had worked in a wider IR unit which we established in 1993. During those years a team of five dealt with all work relating to IR. We would spend time dealing with the sell-side, the buy-side and retail investors, using every communication method that we deemed appropriate to reach these audiences.
Today, along with my colleague Pedro Sánchez Lladó, my working week is spent entirely on communicating with institutions – both domestically and internationally. This function is supervised by Victor Barallat, manager of IR, and Antonio Aparicio, head of corporate office staff. We work closely with a five-strong analysis team, which is also responsible for developing relationships with the sell-side; a shareholder center, which spends its time communicating with 480,000 retail shareholders; and a corporate communications department, which devote its time to media relations in Spain and abroad.
The new structure enables us to focus our efforts on our target audiences while drawing on the experience and knowledge of the rest of the group. The four units are distinct but by no means separate – it is a flexible structure that allows for a great deal of interaction between the various teams.
From my point of view, being allowed to focus my time solely on institutions means I can develop a greater understanding of what information they want, what their thinking is and how we can improve our communication to them. The various units can tailor the emphasis of information to the needs of their audiences. Pedro and I find that institutional investors want a broader picture of strategic matters and where our group is heading; my colleagues dealing with the sell-side can spend more time on number-crunching and forecasts; and retail shareholders have a dedicated team dealing with their specific information needs.
Opening up
Of course, the changing structure was designed to increase the overall transparency of the group. Over the past ten years the company has grown substantially and it has therefore become more complicated to follow. We’ve tried to ease the process by splitting the information we provide on the group down into six separate areas: Banco Santander – retail banking in Spain; Banesto (a subsidiary focused on retail banking in Spain); retail banking abroad; Santander Investment (investment banking); corporate banking, treasury and capital markets; and corporate activities, which include holding company functions.
My role includes keeping an eye on best practice in financial reporting and to that end I am continually analyzing annual reports from other firms in our sector – on an international basis – and others that lead the reporting world in any industry. Benchmarking our operations against the best in the world is something which applies throughout the bank, not just in the IR function.
Our international view goes hand-in-hand with a belief in the value of broadening our shareholder base. The company is currently listed on the Spanish, New York, London, Paris, Frankfurt, Tokyo and Swiss exchanges and we are in the midst of planning two other listings in Milan and Lisbon. The international listings help to enhance the profile of the bank in other markets. Some 40-50 percent of our shareholder base is held outside of Spain which requires us to ensure that our disclosure is prompt, accurate and comprehensive in Spanish and English. Our quarterly and annual reports are released simultaneously in both languages.
Off and on, the formal reporting process probably takes up around two months of the year including the preparations before each quarter and year-end and the follow-up process. All of the communications units work together on preparing the reports, presentations and press releases which make up the information package. And, on the institutional investor side, we are heavily involved in follow-up presentations, one-on-ones and the like which follow each release as well as investor meetings throughout the year.
Home and abroad
We arrange formal presentations to investors in Madrid and London each quarter and usually do the same in New York at least every other quarter. In between times, my colleagues and I spend several weeks out on the road visiting these and other key centers in Europe, the US and Asia as well as meeting fund managers when they visit our headquarters in Madrid. These visits to headquarters are ongoing throughout the year although there tend to be peaks and troughs of visitors dependent on their schedules. This year we have been focusing on continental Europe where, for example, we have been working at building up our following in Italy as we develop our business there and in the run-up to the listing. This has meant more frequent trips to Milan and Rome both for investor meetings and for discussions with the stock exchange.
Recent times have also seen Japanese shareholders becoming more prominent in our shareholder base as they look to develop their holdings overseas to improve returns. Much of our contact with them has been through their staff in London. Most of our roadshows – whether one or two days or longer tours – are drawn up to a tight schedule to keep costs as low as possible relative to the value we obtain from them.
We try to tailor our presentations and one-on-ones to suit the needs of each investor. We draw on a database of slides for each roadshow and will obviously alter presentations according to current news and what we deem to be the interests of those we are meeting. For example, different countries tend to dictate different approaches. In Italy we have found that currently investors are fairly generalist in their following of Spanish stocks and still building up their teams in preparation for the euro. If we’re meeting institutions that don’t know our market that well we will spend more time talking investors through more detail on the Spanish economy and financial sector.
In order to target current and potential investors we spend a good deal of time on shareholder identification. UK-based investors probably account for around half of our international shareholders and that means frequent trips to London and Scotland. US institutions are the next most significant chunk with 10-15 percent of the total shareholder base. The remainder of the foreign holdings (5-10 percent) are in continental Europe and, to a lesser extent, Asia.
Identifying shareholdings is by no means a perfect science – affected as it is by nominee accounts, time lags and the need not to offend institutions by constantly calling them to check up on holdings. We try to keep informed on movements in our shareholder base by using information that is publicly available and then adding in our own detective work through regular contact with the market. The monitoring gives us a good reference point for targeting current and potential investors, while allowing us to react quickly to any concerns.
Probably one of the most crucial elements of our role is feeding the institutions’ thoughts back to management to ensure a two-way flow of ideas. We prepare reports on all our meetings with investors and put together summaries of roadshows to provide an assessment of the concerns of those we’ve met. It’s not just a matter of detailing what has been said, more providing an analysis of what the important issues are and a commentary as to possible reactions.
All of these reports are fed through to Francisco Luzón and, when appropriate, to other senior management including chairman Emilio Botín. This information flow ensures that senior management is heavily involved in the investor relations function, reinforcing the bank’s policy of transparency which is an integral part of our commitment to create shareholder value.
