Banesco challenges hard Spanish banks’ market share

Venezuelan group Banesco’s interest in taking a position in Spain is not unfounded since its bussiness model is commercial: retail and corporate banking, which is dominant in Spain. The question is if they will be able to survive and grow in such a competitive market as Spanish is. It would be very difficult if starting from zero, but the office network that the old Betanzos city’s bank Etcheverría (located at northern Galicia) contributes with, and the powerful, though damaged, regional cashier system grid, will be crucial to build a self-sufficient bank, profitable and competitive. However, the undertaking will need a good deal of management to normalize clients and margins.

The experience of foreign banks in Spain is bad. Many of them have tried and most failed. The Spanish banking industry has a very solid position and it is not easy to win market share from it. US, French, British and German firms with commercial experience and financial muscle such as Citi, BNP or Barclays attempted to. Some were gone and others hold little significant market shares.

The previous Spain’s banking crisis in the 80’s opened the door to foreign entities as purchasers of rescued banks. That annoyed Spanish a lot but it was the only possible solution. Barclays bought Bank of Valladolid, Citi acquired Levante, BNP López Quesada Bank and so on, but none of these operations resulted brilliant, or won enough market share to justify the efforts. They were positive for Bank of Spain’s Deposit Guarantee Fund which attracted buyers, but not for these.

The case of Venezuelan in Galicia is peculiar and even could success. The Fund of Orderly Restructuring of the Banking Sector (FROB, in its Spanish acronym) that run NovaCaixaGalicia did not have any option. They were authorized and qualified buyers and their offer beat the rest of bidders’-important names such as La Caixa, BBVA, Santander and Guggenheim and JC Flowers funds. The awarding is correct, but it comes now the definitive test to obtain recurrent profitability in an organisation that have suffered a lot.

Banesco is the biggest private bank in Venezuela, having a balance of more than €25.000 million and a staff of 14.000 employees. Its president is the Spanish-Venezuelan businessman Juan Carlos Escotet.