Santander-Amazon Deal: Sensible, Incremental But Small

Santander (SANTAN: Baa1/A-/A-) reported nearing a deal with Amazon to provide pan-European financing options for buyers using the platform. Amazon already has elements of finance provision for buyers built into its US business (and for some retailers) and this would be a useful source of relatively high quality retail bank revenues for Santander. Likely immaterial for a number of quarters but positive.

• BBG is reporting Santander close to a deal with Amazon to provide financing options for Amazon users, starting in Germany and then moving more widely across Europe. Santander already makes around two thirds of its revenues from retail banking and, within that, around 20% is within the “digital consumer bank”, we estimate.
• Amazon has already piloted funding options for its retailers in the US, using its huge data insights of both customers and retailers to better inform credit decisions. Much of this has been funded from Amazon’s own cashflow but it is thought to be exploring banking tie-ups more widely.
• Deal appears sensible but would likely be incremental and small and therefore not a spread mover near-term, we feel.