Bank chief rides out the business cycle

Although Isidro Fainé has long been regarded as one of the most powerful people in Spanish finance, the discreet and softly spoken chairman of La Caixa has tended to shun publicity. After years of attempts to secure an interview with him, it was only the imminent listing of Caixabank – the operation carved out of the group in the latest move to restructure Spanish savings banks – that persuaded him to relent.

When he speaks, the 68-year-old executive sounds nothing like a typical banker. He talks candidly about his background and unusual career and converses in a disarming, stream-of-consciousness style.

Perhaps this is not surprising for someone who started working at the age of 13 in a bicycle repair shop and later wangled his first job in a bank by marching into the chief executive’s office and promising to work hard and learn about finance.

Born in rural Catalonia, he moved with his family to a working class suburb of Barcelona when he was a child. “I come from a peasant family,” he says, recalling how going to school in the city meant that he educated his parents rather than the other way round. “I taught my parents to read and write. I taught my father to add and subtract – but not to multiply.”

Hard work – the root of his name even means “worker” in Catalan – has been crucial to to Mr Fainé’s success. But his career in banking came about almost by accident. As a young man he had a job reconditioning electric motors but he needed the shorter working hours of a bank branch to allow him to finish his education and pursue a course in physics. So one evening in 1961 he walked into the headquarters of the Banco Atlántico in Barcelona and so impressed the chief executive with his evident determination that he secured the first of his many jobs in banking. “They put me in a mahogany-panelled office, a very grand office, and there I was without a tie; I really felt out of my element. And then this very serious gentleman comes in – I’m telling you this because of the importance it had in my life – and he said, ‘Right then, why are you here?’

“The conversation moved gradually from awkwardness to friendliness and ended very well. That person was Guillermo Bañares, the CEO of Banco Atlántico.”

As well as having an aptitude for mathematics, Mr Fainé also cites the homespun wisdom of his mother, who ran a dairy shop in Barcelona and taught him the importance of pricing goods, discounting and bargaining. “My mother used to bargain a lot [and] taught me how to do it, and one day I asked her, ‘Why do you bargain so much, Mum?’ and she said, ‘The buyer names the price’. Since she had a shop and they wanted to bargain with her, she never advertised discounts up front.”

Mr Fainé continues: “Your livelihood depends on your vision. If you want to win customers you can’t offer the same discount to someone who comes every day as to someone who comes once in a lifetime.”

Caixabank, which will be quoted from July 1 after taking over the listing of Criteria, La Caixa’s industrial holding group, is expected to be the 10th biggest lender in the eurozone by market capitalisation, between France’s Crédit Agricole and Germany’s Commerzbank.

It will have 10.5m customers and €265bn ($379bn) in assets, and is being reborn at a critical time for Spanish banking, with the sector suffering since 2008 from the collapse of the domestic property bubble and Lehman Brothers, and now from the spreading sovereign debt crisis in the eurozone.

“In the 21st century we live in, you can’t be a financial institution after what has happened without being in the markets, without transparency and access to capital,” he explains of the listing.

Mr Fainé is philosophical about the crisis. He says that even if more savings banks have to turn to the Frob – the Spanish bank rescue fund – because they cannot raise capital from private investors, it will not be the end of the world. “In any case, when you have a crisis, you have to keep calm,” the 68-year-old says with a confidence born of experience. “I think that we’ll come out of this crisis, as we have from others, but with a sense of realism.”

Known in the banking world for his unspectacular but highly effective corporate strategy and his passion for charitable works, Mr Fainé joined Catalonia-based La Caixa as deputy chief executive in 1982 and took the top job of chairman in 2007.

As an unquoted savings bank with a traditionally opaque ownership structure and a charitable mandate, La Caixa could have succumbed – like some of its Spanish rivals – to damaging interference by regional politicians. But Catalonia generally kept its hands off and allowed the professionals to run the operation. Mr Fainé pursued a number of commonsense strategies that have allowed La Caixa to expand, while keeping its bad loan ratio among the lowest in the sector in the midst of a financial and economic crisis.

Mr Fainé believes in a universal banking model characterised by a big network of branches (Caixabank will have more than 5,200 of these and more than 8,000 ATMs) staffed by sales people who can sell fee-generating products and services directly to customers. What he does not believe in is a surfeit of managers and administrators. Only 6.2 per cent of La Caixa’s employees, he says, are at head office, compared with 20-30 per cent at some other European banks.

And as a dedicated retail banker, he appears shocked not only by Wall Street greed but by the investment banking business model and the damage done by the collapse of Lehman. “The thesis I defended [when I was at] Harvard in 1986 was that financial sector profits in the future would come more from services than from the taking of risks,” he says. “Spain’s recovery will be slow. But don’t forget that we are the family bank and we have a lot of ‘capillarity’. That means that our network is very close to families and the basic services they need. People are paid salaries, they pay pension contributions, insurance, savings – everything financial. We’re very close by and giving retail services in all these places. We have offices in every town of more than 20,000 inhabitants, and in 90 per cent of those of between 5,000 and 20,000.”

Mr Fainé says La Caixa has a 32 per cent market share in Spanish internet banking – three times its share of business on the high street – and was the first in the country to introduce an ATM machine that would update savings books for small customers. The increasingly numerous Chinese residents of Spain turned to La Caixa because it was the first to show instructions in Chinese on its ATM screens.

But what really distinguishes the best Spanish cajas and their managers from the world of commercial banking is their commitment to charitable works. La Caixa contributes €500m a year to fight poverty and disease, provide care for the elderly and finance environmental programmes, making the unit that operates this one of the biggest such funds in Europe after the UK’s Wellcome Trust.

“I believe in banking and in the banking business and I think we’ll do this very well,” he says. “But at the same time I want to stand up for the original nature of La Caixa ... I believe in social capitalism. I could be working at any top bank earning much more money – I’ve had offers – but it’s a matter of vocation.”

In nearly two decades at La Caixa, Mr Fainé has quietly established himself as the force behind the success of one of Europe’s leading financial institutions – a future of which he had no inkling on that day half a century ago when he walked into Banco Atlántico looking for a job.