Banco Santander stunned the banking world this evening by announcing the reversal of its decision to appoint Andrea Orcel as its new chief executive because of the cost of compensating him for leaving his previous role.
The bank had announced the high profile appointment of Orcel, former head of investment banking at UBS, in September.
He was expected to take over from current boss Jose Antonio Alvarez early this year.
“It has now become clear that the cost to Santander of compensating Mr Orcel for the deferred awards he has earned over the past seven years, and other benefits previously awarded to him, would be a sum significantly above the board’s original expectations at the time of the appointment,” Santander said in a statement.
“The board considers that for Santander to pay this amount to facilitate the hiring of one individual, even one of the calibre and background of Mr Orcel, would be unacceptable for a retail and commercial bank such as Santander.”
Alvarez will remain in place as chief executive, the Spanish bank said.
He had been due to switch roles and become vice-chairman of Banco Santander, and the executive chairman of its Spanish division.
Italian-born banker Orcel joined UBS in July 2012 from Bank of America Merrill Lynch.
Famously hardworking, he was credited with reshaping the Swiss bank, cutting thousands of jobs and reducing its balance sheet by more than half.
Orcel advised Santander on its purchase alongside RBS and Fortis of ABN Amro, a deal from which Santander was seen to be the major winner as it acquired the Italian business – which it later sold for a profit – and the lucrative Brazilian division.
Read more: Profile: Andrea Orcel
RBS and Fortis were later nationalised by the British and Dutch governments, respectively, after collapsing in the wake of the financial crisis.
“The board and I are certain that this decision, although difficult to take, is the right one,” said Ana Botin, executive chairman of Santander upon the announcement of the U-turn.
Orcel previously advised Emilio Botin, father of Ana, on a series of deals which helped to make Santander Spain’s biggest bank.