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(Bloomberg) — When the Iowa Tribe of Oklahoma recently sought to finance a casino between Oklahoma City and Tulsa, it turned to Banco Santander SA to find investors. 

Spain’s biggest bank would have been an unlikely bookrunner several years ago, when it counted on one hand the leveraged loans it arranged in the US. But after a hiring spree that included dozens of former investment bankers from Credit Suisse’s Wall Street outpost, Santander has been rapidly climbing the league tables, with more than a hundred deals in the US this year already.

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The new recruits and the flurry of transactions they’re reeling in are starting to reshape the retail-lending giant, whose stock has lost a third of its value under the decade-long tenure of Chairman Ana Botin. In what is arguably its biggest Wall Street expansion ever, the firm acquired Amherst Pierpoint Securities for $600 million about three years ago and has since added hundreds of investment bankers in the US and UK, with some 200 joining since early last year.

With that bet come some growing pains, including significant upfront expenses. While the recruits are making inroads into businesses such as leveraged finance, some of their pay packages far exceed what longtime staffers get, leading to consternation at a firm where consumer and commercial lending remain the heart of the business, according to people familiar with the matter. 

The number of material risk takers making at least €1 million has more than doubled in three years. That’s adding to pressure on investment bank profit, with the unit’s US arm reporting a pretax loss last quarter. 

This story is based on conversations with about a dozen people who have insight into the Spanish lender’s effort to expand the investment bank. They asked for anonymity discussing internal matters.

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“Over the past 18 months, we have strengthened our US team significantly,” said a spokesperson for Santander. “By combining this additional, complementary, expertise with the scale of the Santander network, we are delivering new products and services and deepening relationships with clients across the group.” 

For much of its 167-year history, Santander was a regional lender few outside northern Spain had heard of. Ana Botin’s late father Emilio Botin transformed it into an intercontinental powerhouse with dozens of acquisitions in Mexico, Brazil, Chile, Poland, the UK and US. Investment banking, however, remained an afterthought.

Not so for Ana Botin, 64, who started her career at JPMorgan Chase & Co. in the 1980s. She joined Santander at the age of 28 and took over from her late father in 2014. Under her leadership, Santander brought in Jose Linares, who now runs the investment bank, and Hector Grisi, a former Credit Suisse banker who eventually became chief executive officer. 

Both are playing a key role in the effort to reshape Santander’s securities and advisory business. Linares, an ex-JPMorgan banker, oversaw the purchase of Amherst Pierpoint, one of 25 primary dealers for the Federal Reserve. The deal strengthened its position in fixed income and provided it with access to more than 1,300 institutional investors.

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It also kicked off an expansion in US investment banking that was turbocharged by the dismantling of Credit Suisse’s investment bank. The Swiss bank’s troubles afforded Santander an opportunity to hire a slew of talent, including in New York. Among them are Steve Geller, the former head of M&A at Credit Suisse, and leveraged finance banker Jeff Cohen, who spent more than two decades there. David Hermer, who oversaw equity and debt capital markets for the Swiss firm, now runs Santander’s investment bank in the US.

At the same time, a number of Santander’s veterans departed. They include Frederic Hauteville, the former head of corporate and investment banking for France and Benelux, Javier Sobrini, who oversaw energy infrastructure, and Jorge Gil. Alexandra MacMahon, the head of Santander’s investment bank in the UK, recently left to join ING Groep NV.

The new hires helped Santander post €6.26 billion revenue in the investment bank during the first nine months of this year, or almost 14% of the group’s top line. That compares with a little over 10% five years earlier. The business is Santander’s second-most important contributor to profit, after retail and commercial banking. 

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Profit at the unit, however, declined almost 5% in the first nine months as expenses rose. The US investment bank reported a pretax loss.

Analysts have said expanding the investment bank may help lift Santander’s share price. RBC analyst Benjamin Toms estimated in May that the investment banking unit alone is worth about €18 billion, or a quarter of the bank’s total market capitalization.

The unit “is a material tailwind to the bank’s future story,” Toms wrote. “Management have the sensible ambition to be the most profitable rather than the largest” in the business.

Santander has said it doesn’t want to take on the biggest Wall Street banks head-to-head. It said last year that it planned to double the size of its investment banking operations in the US, where it employed around 900 staff at the time. That figure has since grown to about 1,300, including support staff. Not all of them are new hires. Areas where the firm says it’s making inroads include merger advisory, equity and debt capital markets.

One business where Santander has been particularly busy is leveraged finance, overseen by former Credit Suisse banker Cohen, with help from Jonathan Moneypenny and Max Lipkind, who also came from the Swiss bank. After their appointment, some existing staffers transferred to new positions as the unit expanded and more Credit Suisse bankers joined.Then-head of US syndication, Paul McDonald, moved into origination. Another senior Credit Suisse banker, Craig Jeffers, took on the syndication role, according to a person familiar with the matter and their LinkedIn profiles. Santander also hired Joel Kent as head of leveraged finance trading, Bloomberg reported. 

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Cohen, Jeffers, Moneypenny, McDonald, Kent and Lipkind didn’t respond to requests for comment.

With mergers and acquisitions still stuck in a lull and leveraged buyouts struggling to make a comeback, one business Santander has been focusing on is helping companies refinance or reprice their debt. It has done 110 leveraged loan deals in the US this year so far, including some for new acquisitions, compared with 21 in the same period a year earlier, according to data compiled by Bloomberg. 

The $200 million debt deal in Oklahoma for which Santander had been sounding out investors has since priced. The proceeds will go to pay for the construction of a new resort branded as a Harrah’s casino, Bloomberg reported.

With Donald Trump returning to the White House, bankers are expecting a revival in deals and buyouts. That could revive demand for new financings, which have been hard to come by until now as most borrowers were focused on refinancings. 

Despite those pressures, the Spanish lender is keen to ensure its culture doesn’t change and clients remain the driver of new business, said two of the people. While many of the top investment bankers are ex-Credit Suisse, the risk committee that decides on large deals is mostly composed of legacy Santander bankers.

For Botin, expanding the investment bank is only one leg of a larger effort to grow in the US. Santander recently launched its digital branch Openbank in the world’s largest economy, which could help boost deposits, a cheap source of funding.

“I’m not going to take many customers from JPMorgan,” Botin said in October. “But I do hope to get a few.”

—With assistance from Manuel Baigorri, Laura Noonan, Todd Gillespie and Jeannine Amodeo.

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