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November 18, 2019

Executive’s Corner: Interview with Paul Cronin, Head of Asset Based Lending & Restructuring Finance, Santander Bank

Link to article here.

In this installment of our series of “Executive’s Corner,” featuring articles from guest writer Charlie Perer of SG Credit Partners, the author sits with Paul Cronin to understand his views on leadership, joining Santander and competitive environment, among other things.

Charlie Perer: Thank you for your time Paul. To begin, can you please talk about your background as you have run different business lines over the years?

Paul Cronin: Thanks Charlie. This is a great series of discussions you are doing and very helpful in informing and developing the market. You are right, I started in banking about 27 years ago and have worked in different areas of corporate and commercial banking over the years, both here in the U.S. and internationally. I have worked and led teams in Capital Markets, Corporate and Leveraged Finance, Middle Market Commercial Banking, Specialized Industry Banking and International Banking. And, of course, most recently in Asset Based Lending.

Perer: What is it about ABL that excites you given your experience across different banking businesses?

Photo of Paul Cronin - Head of Asset Based Lending & Restructuring Finance - Santander Bank, N.A.

Cronin: ABL is a great business with a long tradition in the U.S. The industry is a close-knit community and has great characters and stories. It is ultimately a highly customer-focused industry where the starting point is the client need. This includes growth capital for small and mid-sized companies expanding their markets, financing support of new investments and M&A, larger syndicated transactions where there is significant scale and capacity, and, of course, financing to assist customers through volatile or difficult times. It is this range of opportunity and need that is exciting. In every instance we get to deal with the principals and the business owners looking for specialized capital and credit solutions to help them reach these business goals.

Perer: You are operating in a very competitive market segment. What was it that made you join Santander?

Cronin: ABL, and of course banking in general, has always been hyper-competitive and probably is even more so at the moment with significant amounts of capital chasing limited opportunities. This means that every player must find a way to differentiate itself, whether it be relationship focus, scale and reach, product set depth, or capabilities such as ability to serve international needs. I believe Santander has all of this and more.

What I’m really excited about at Santander is the strength of the team already in place, the plans to continue building out the ABL business and commercial bank more broadly, and how the bank’s scale and depth helps clients marry international financing with ABL in the U.S.

Perer: Where does Santander fit into the competitive market in today’s ABL universe?

Cronin: Santander of course is a bank player with unique strengths and capabilities, one of the most powerful being the global advantage we offer by being one of the world’s largest banks. We get to work on financing opportunities and in markets where we can make the biggest impact, especially in sectors and companies with international and cross-border needs. We see good deal flow driven internally from our middle market and corporate bankers, our own direct origination team and from our capital markets group.

But we do so much more than lending. As I referenced, our international scope is important but also our top capabilities in cash management, capital markets, trade/supply chain, among others. We look at ABL as one of many solutions for our commercial banking clients, rather than putting it in a silo from other parts of the bank the way it is at some institutions.

Perer: Can you please speak to the international nature of the platform? Many banks talk about international, but Santander is a Spanish bank that aggressively markets cross-border capabilities.

Cronin: We are unique with our international approach in that we are a top market player with a deep, local presence in a number of our key countries. In Europe and Latin America we are among the top market share players, and in many other regions we have established institutions and boots on the ground to help deliver local insights. In our view, it works both ways — we can serve clients in the U.S. doing business overseas and support our non-U.S. customers who are setting up operations here.

Our international desks sit alongside bankers in all geographies and help facilitate collaboration across units of the bank, with the aim of providing clients with the best, seamless service.

Perer: Is ABL treated as a business line or product support for the commercial bank where the commercial bank RM always manages the account?

Cronin: ABL is a product within Santander. We work with our relationship managers in the commercial bank who have primary responsibility for how the client interacts with the bank and vice versa. It is important to our clients to have consistency through the lifetime relationship with Santander and that includes situations and times when they may not be utilizing ABL. Continuity is provided by the relationship manager. It is important to note that many times the ABL team members develop a close and understanding relationship with the clients and it is also important that we recognize this and are adaptable enough to have multiple touch points.

Perer: As each major bank treats ABL very differently, does Santander view it as a distinct business unit or as a product that is integrated with a C&I team?

Cronin: I personally prefer the product approach in a commercial bank where there is a broad platform of solutions available to the client and where the relationship is maintained and serviced through various economic and client specific cycles, and I also believe most clients prefer that approach. It works well when all parties within the bank support the approach to serving clients with the solutions that meet each need that may arise rather than trying to sell a product. And there is clear and open communication.

Perer: Where do you stand in your team building process and how hard is it to recruit top talent in this market?

Cronin: Talent is and will always be a critical factor in commercial banking. Today, there is typical competition from other banks and especially in the more junior space from non-banks including fintechs, consulting firms and investment banks. Of course, in the lending arena there has been significant competition from non-bank direct lenders in the last few years. For retention and attraction, it’s key to demonstrate the long-term stability of a bank, the history and legacy, the multiple product depth from both a client interest point of view and career development view, and of course the collaborative culture of commercial banking.

Our starting position today in ABL at Santander is strong with excellent talent across all dimensions and activities. We have a strong base on which to continue to build the team for the growth we expect in the coming years. In addition, our analyst hiring and credit training program is an important proposition in brining on new talent, and we are seeing great success there. We also continue to invest in training and development of our more senior team members.

Perer: What is your leadership style?

Cronin: I cannot say there is any one style as it has adapted over time and different circumstances call for different styles. Common to all situations is ensuring that the best team is being built, then providing role clarity, supporting the bankers doing their job, and ensuring that, through coaching, I serve the team and their needs and not have them serving me. I’ve found that it’s critical to reward the best behaviors. It’s essential to support the teams in optimizing their activities especially around risk and client service.

Perer: At what point in the market cycle do you go from competing with other large banks to non-banks?

Cronin: Competition is everywhere right now whether bank or non-bank. We just have to be disciplined about our marketing, client selection, strategic positioning and our credit management.

Perer: How have you seen the sentiment change at the senior management level at big banks when it comes to ABL?

Cronin: Over the years, I suspect ABL has moved from being a less important part of the thinking to a major contributor to growth and opportunity. ABL has moved beyond the place where we send customers that cannot be lent to elsewhere. Now, it is a core solution that can be well aligned with capital markets, M&A and middle market client acquisition. It is important in client retention through cycles but also there is the realization that ABL borrowers are loyal consumers of cash management services and capital markets products.

Perer: Why do senior bank executives seem skittish on the ABL risk profile?

Cronin: In many instances but not all, ABL borrowers will be at the higher end of the credit risk spectrum. These credits typically require a higher level of attention, review and oversight. That starts with how well the ABL team is organized and its disciplines. ABL teams have to continuously earn the trust of risk management and senior bank executives by demonstrating discipline in all areas — client selection, underwriting, portfolio management, collateral management, restructuring thinking, and communication/collaboration across the bank. If we do not earn this trust, senior executives should be skittish.

Perer: Does a European bank with significant non-U.S. assets plan for a U.S. recession differently than your peer competitor banks in the U.S.?

Cronin: We see a broad economic spectrum through our global presence, which of course some of our U.S. peers can claim. I would say we have a different perspective than purely domestic banks especially when we service customers with cross-border needs or impacts, which has been a trend for most middle market companies. We see what is actually happening on the ground in multiple geographies and are able to bring that perspective to the table with our advice to clients, so we can plan our business but also help our customers plan their businesses better for all scenarios.

Perer: Lastly, tell us something you are worried about that the rest of the market has yet to figure out.

Cronin: I won’t call it a worry and certainly there are better minds than me figuring this one out, but I believe longer term technological tools (including AI) have the potential to dramatically change the lending space and especially ABL. There are still significant information handoffs, human decisioning and manual processes which can easily be automated with tools. There is some resistance to this simple idea even before we get to AI level thinking. This resistance is not without basis as the regulatory environment, legacy systems including investment priorities and of course client buy-in are all real areas that must be considered.