One of the world’s biggest banks may have to focus on niches to break “barriers” in Canada

With 168 million customers worldwide, Banco Santander SA boasts a strong presence globally

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Published Apr 03, 2025  •  2 minute read

Santander's presence in Canada dates back about 10 years, when it spent $300 million to buy Edmonton-based Carfinco Financial Group Inc., which provided vehicle loans to borrowers unable to obtain financing. Photo by PAUL ELLIS/AFP via Getty Images/Postmedia files

Competing with Canada’s Big Six banks isn’t going to be easy, but the recent entry of Banco Santander SA, one of the world’s largest financial institutions, could potentially provide Canadians with better options in the future, some analysts say.

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The world’s 16th-largest bank by total assets received a licence for its subsidiary to operate in Canada last month, something confirmed by a notice published in the Canada Gazette, the government’s official newspaper, on March 29.

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Being granted a banking licence means Santander Consumer Bank (SCB) can now take deposits from consumers.

“Expansion of activities by banks such as SCB may provide the impetus to increase competition, which should be beneficial for Canadians in the form of more choice and better pricing on both loans and deposits,” Sailie Ashtekar, senior analyst, North American Financial Institution Credit Ratings, at Morningstar DBRS, said.

But she said competing with the Big Six is “easier said than done” since the group dominates the market.

“Nonetheless, any developments that add potential new entrants or initiatives that increase access to the Canadian market … are opportunities to increase competition,” she said.

Santander’s presence in Canada dates back about 10 years, when it spent $300 million to buy Edmonton-based Carfinco Financial Group Inc., which provided vehicle loans to borrowers unable to obtain financing.

The company hasn’t disclosed what its approach in Canada will be, but Ashtekar said she believes the most likely avenue forward will be to “bolster the existing auto financing franchise” by reducing funding costs by replacing wholesale funding with cheaper customer deposits and then working to expand into other retail products and services.

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“Any strategy must be built on the premise that the dominant positions of the Big Six will remain intact going forward,” she said. “Any strategy will need to target specific niches, most likely focusing on consumer/retail financial services, an area in which Santander has a strong reputation globally.”

Santander has focused on “specific niches where they feel they can compete more effectively” in the United States and Mexico, Ashtekar said in a note on March 31.

With 168 million customers worldwide, Santander boasts a strong presence globally. The company has largely achieved its goal of attaining at least a 10 per cent market share in each of its core markets outside Spain, except in the U.S., the note said.

The bank could leverage each of these strengths to grow in Canada, Ashtekar said.

“The bank could pursue cross-selling of already developed solutions elsewhere that could benefit the Canadian market, such as private banking, asset management and perhaps trade finance of international payments.”

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But the Big Six, accounting for 95 per cent of the total bank assets in Canada, represents a “material barrier to entry,” Ashtekar said.

“It is commonplace for Canadians to open their very first bank account with one of the Big Six and remain loyal for decades,” she said. “Additionally, Canadians who use multiple banking services and products are less likely to switch banks.”

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