Banco Santander is nearing approval to expand its operations in Canada, positioning itself as a potential disruptor in the country's banking sector. With over 168 million customers globally, Santander aims to challenge the dominance of the Big Six Canadian banks, which reported profits of approximately $54 billion in 2024.
Experts highlight that while the Canadian market presents attractive margins, gaining a foothold will be difficult. Andrew Spence, author of 'Fleeced: Canadians versus their banks,' noted that despite the market's ripe potential for disruption, historical trends indicate a resistance to change.
Canadian banks have consistently outperformed their U.S. and European counterparts in earnings relative to equity. For instance, Royal Bank of Canada (RBC) reported $4.2 billion in profits from 17 million customers last quarter, while Santander generated about $4.9 billion from a significantly larger customer base.
Despite the promising landscape, Santander's strategy remains unclear. The bank is currently awaiting final approval from the Canadian banking regulator after the finance minister endorsed its application in April. Industry analysts suggest that attracting deposits in a market saturated with banking options will be a significant hurdle.
Historically, international banks have faced challenges in Canada. While ING Bank successfully introduced no-fee online banking in 1997, others like HSBC struggled before divesting their Canadian operations. Johann Scholtz, an analyst at Morningstar, expressed skepticism about Santander's potential success, citing the highly concentrated market structure.
Even if Santander manages to establish a presence, experts caution that it may not lead to substantial changes within the Canadian banking framework. Vass Bednar from McMaster University suggested that the real competition might emerge from the tech sector, particularly with the potential introduction of open banking policies. Without significant reforms, Canada risks remaining stagnant in its banking practices.