SAN's Business Restructuring Initiatives Driving Growth: Time to Buy?

Core Viewpoint - Banco Santander is streamlining operations and focusing on high-growth markets in Europe and the Americas, highlighted by the sale of a 49% stake in its Polish banking business for €6.8 billion ($7.7 billion) [1][2]. Group 1: Transaction Details - Banco Santander sold approximately 49% of Santander Bank Polska to Erste Group for €6.8 billion, with an additional acquisition of 50% of the asset management business for €0.2 billion, totaling €7 billion [1][2]. - The transaction is expected to close by year-end and will result in a €2 billion net capital gain for Banco Santander [2]. - Post-transaction, Banco Santander will retain around 13% of Santander Polska and plans to acquire the remaining 60% of Santander Consumer Bank Polska [3]. Group 2: Financial Impact - Following the transaction, Banco Santander will temporarily have a CET1 ratio above its target of 12-13%, with plans to return to this range by strategically deploying capital [4]. - The bank intends to distribute 50% of the released capital, approximately €3.2 billion, through share buybacks, contributing to its €10 billion buyback target for 2025-2026 [4]. - The transaction is projected to be accretive to earnings by 2027-2028, supporting further growth through share buybacks and strategic acquisitions [5]. Group 3: Digital Expansion and Transformation - Banco Santander plans to close about 20 U.S. branches, approximately 5% of its U.S. retail network, to streamline operations and adapt to digital banking trends [9]. - The U.S.-based digital platform, Openbank, has surpassed $2 billion in deposits since its launch in October 2024, becoming Europe's largest fully digital bank by deposit volume [10][11]. - The One Transformation program, initiated in 2014, focuses on digital transformation and operational efficiency, contributing to a strong first-quarter 2025 net profit of €3.4 billion, marking a 19% year-over-year growth [12][13]. Group 4: Analyst Sentiments and Market Performance - The Zacks Consensus Estimate indicates a 3.6% decline in revenues for 2025, but a 3.4% growth is expected in 2026, with earnings projected to increase by 12.1% and 12.2% for 2025 and 2026, respectively [18]. - Banco Santander's shares have risen 62.3% year-to-date, outperforming the industry average of 16.1% [20]. - The current trading valuation of Banco Santander at 1.25X P/TB is below the industry average of 2.18X, indicating it is relatively inexpensive compared to peers [24][28].