Business & Tech

Santander announcing $11 billion program

Mark Lennihan/Associated Press/file

When Santander Bank executives on Monday unveil an $11 billion, five-year pledge for community investments across the company’s eight-state footprint, they might as well be kicking off a comeback tour for the bank.

Santander Bank, one of the US arms of Spanish financial giant Banco Santander, has had a tough run in recent years.

The Boston-based division failed its capital stress test with federal regulators three years in a row. The bank was restricted by the Federal Reserve from paying dividends to its parent company. And a series of three settlements to resolve accusations by regulators of illegal credit practices culminated in a rare “needs to improve” rating for its Community Reinvestment Act compliance in February.

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But the bank has turned the corner under a team led by chief executive Scott Powell, and in June it finally passed the stress test, which gauges how a bank would fare should there be a widespread financial crisis like the 2008 meltdown. As a result, the bank received clearance to pay dividends in August.

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Its new “Inclusive Communities” plan will represent about a 50 percent increase in annual community reinvestment spending from 2015 levels.

“You can almost call it a pivotal year, because of the significant things that have happened,” Powell said.

The Inclusive Communities plan has been in the works for months, and involved input from dozens of groups across the Northeast. Most of the spending will involve loans to underserved communities, including mortgages for low- and moderate-income families, small-business loans and community development loans.

John Taylor, chief executive of the National Community Reinvestment Coalition, said the bank’s leadership was clearly motivated by the “needs to improve” grade.

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“They’ve been struggling to get their mooring,” Taylor said. “It was good that the executives [at Santander] got it in their head that this was something they needed to do.”

The federal Office of the Comptroller of the Currency’s CRA rating reflected the 2011-2013 time period, even though the evaluation results didn’t become public until this year. Bank executives hope to shake the “needs to improve” label after an evaluation that’s underway for 2014-2016. They also hope the additional strides included the Inclusive Communities plan will ensure an “outstanding” rating, the highest possible grade.

“We want people to recognize the efforts that we’re making in the community,” Powell said. “You always want to be an ‘A’ student.”

Gwen Robinson, the bank’s director of corporate social responsibility, said the bank’s community reinvestment commitments totaled $1.4 billion in 2015. That grew to $1.7 billion in 2016. The new plan calls for an average of $2.2 billion each year, including this year, through 2021. The figure also includes $55 million in charitable contributions over that time, essentially tripling what the bank spent in the last five years. The bank has also established an advisory board consisting of activists and nonprofit representatives.

“We want to make sure our efforts are having a real impact in neighborhoods, and not just giving lip service to our CRA commitment,” Robinson said.

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The bank’s quest to drop its “needs to improve” label isn’t just for public relations. There are regulatory consequences as well. Santander can’t make acquisitions, for example, or take on new business with a number of state agencies until it has either a “satisfactory” or “outstanding” grade.

Clark Ziegler, executive director of the Massachusetts Housing Partnership, said Santander appears to be one of several big banks whose CRA scores suffered primarily because of consumer compliance complaints, not inadequate investments in underserved communities.

Santander is the top lender in MHP’s first-time home buyer program known as One Mortgage, Ziegler said. It and Sovereign — Santander’s predecessor — helped to finance thousands of affordable apartments in the state in the past 15 years.

“Whatever the issues have been with the CRA rating, none of those issues were particularly relevant to us,” Ziegler said. “Our relationship has been consistently positive.”

Jon Chesto can be reached at jon.chesto@globe.com. Follow him on Twitter @jonchesto.