Banco Santander (NYSE:SAN) Q4 2025 Earnings call February 03, 2026 02:00 PM ET Company ParticipantsAlvaro Serrano Saenz de Tejada - Managing DirectorAna Botín - Executive ChairFrancisco Riquel Correa - Head of Equity ResearchHéctor Grisi - CEOJosé García Cantera - CFORahul Sinha - Head of Investor RelationsConference Call ParticipantsAndrea Filtri - Equity Research AnalystCarlos Peixoto - Equity Research AnalystIgnacio Cerezo Olmos - Equity Research AnalystIgnacio Ulargui - Equity Research AnalystRahul Sinh ...

Financial Data and Key Metrics Changes - The company reported a record quarterly profit of EUR 14.1 billion for 2025, marking a 12% year-over-year increase, and 15% excluding Argentina [2][4] - The efficiency ratio improved to almost 41%, with Return on Tangible Equity (RoTE) increasing from 8.1% to 16.3% [3][18] - The Common Equity Tier 1 (CET1) ratio reached an all-time high of 13.5%, reflecting strong organic capital generation [3][21] Business Line Data and Key Metrics Changes - The Corporate and Investment Banking (CIB), Wealth, and Payments segments experienced strong revenue growth, with double-digit fee increases driven by network effects [6][15] - Retail profits grew by 9% year-on-year, supported by a 5% increase in Net Interest Income (NII) [12][6] - Wealth profits surged by 27% in 2025, driven by strong commercial activity and fee growth [16] Market Data and Key Metrics Changes - The customer base expanded by 8 million to 180 million, indicating robust customer activity across all business lines [2] - The company reported a 9% increase in payment volumes, with PagoNXT EBITDA margin closing above 34% [17] Company Strategy and Development Direction - The company is focused on "One Transformation," aiming to simplify products and enhance operational efficiency through a common operating model [9][11] - The acquisition of Webster is expected to enhance the U.S. operations, aiming for a RoTE of 18% by 2028, positioning the company among the top banks in profitability [28][49] - The strategy includes maintaining a commitment to at least EUR 10 billion in share buybacks for 2025 and 2026 [19][51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the U.S. market, highlighting its attractiveness and potential for growth, particularly in the Northeast region [53][70] - The company anticipates mid-single-digit revenue growth in 2026, with double-digit growth including M&A activities [56][84] - The outlook for 2027 includes expectations for revenue growth in the double digits and net profit growth in the mid-teens [56] Other Important Information - The company completed the disposal of Santander Polska, generating around 95 basis points of capital, which will be used for share buybacks and acquisitions [22][50] - The integration of Santander Consumer Finance and Openbank into a single entity is expected to simplify operations and enhance customer experience [14] Q&A Session Summary Question: Can you provide more details on the $800 million cost synergies? - Management explained that the $800 million in synergies includes $480 million from headquarters and overheads, and $300 million from technology integrations, emphasizing the significant duplication in operations [59][62] Question: What has changed regarding the West Coast market? - Management clarified that the acquisition of Webster allows Santander to operate as a full-service retail commercial bank in the Northeast, which was not feasible previously [70] Question: What is the expected capital impact from the Webster acquisition? - The capital impact is estimated at 140 basis points, with 110 basis points attributed to the cash portion of the acquisition [68][73] Question: How will the transaction affect funding costs? - The average cost of deposits for the combined bank is expected to decrease by about 40 basis points, improving overall funding costs [78] Question: Will there be new shares issued for the Webster acquisition? - Yes, 35% of the acquisition will be paid in new shares, with the exchange ratio set at 2.0548 Santander shares per Webster share [85][86]

Banco Santander (NYSE:SAN) Q4 2025 Earnings call February 03, 2026 02:00 PM ET Company ParticipantsAlvaro Serrano - Managing DirectorAna Botín - Executive ChairBorja Ramirez - DirectorFrancisco Riquel Correa - Head of Equity ResearchHugo Cruz - DirectorHéctor Grisi - CEOJosé García Cantera - CFORahul Sinha - Head of Investor RelationsConference Call ParticipantsAndrea Filtri - Equity Research AnalystBritta Schmidt - Senior AnalystCarlos Peixoto - Equity Research AnalystIgnacio Cerezo - Equity Research Analy ...

Financial Data and Key Metrics Changes - The company reported a record quarterly profit, achieving EUR 14.1 billion in 2025, with a year-over-year profit increase of 12%, and 15% excluding Argentina [1][2] - Revenue grew by 4% in constant euros, with fee income up 9% in constant euros, while expenses decreased by 1% in absolute terms [2] - The cost of risk ended the year at 1.15%, aligning with guidance for 2025, and the return on tangible equity (ROTE) increased from 8.1% to 16.3% [1][2][9] Business Line Data and Key Metrics Changes - The Corporate and Investment Banking (CIB), Wealth, and Payments segments experienced strong revenue growth, driven by fee increases and network effects [3][8] - The consumer business saw net interest income (NII) rise by 5% year-on-year, while group NII, excluding Argentina, grew by 3% [3][6] - Wealth profit increased by 27% in 2025, supported by strong commercial activity and double-digit fee growth [8] Market Data and Key Metrics Changes - The customer base grew by 8 million to 180 million, indicating strong customer activity across all business lines [1] - The company maintained a fully loaded CET1 ratio of 13.5%, well above the target range of 12-13% [10][28] Company Strategy and Development Direction - The company is focused on "One Transformation," aiming to simplify products and improve efficiency, which has resulted in a cost-to-income ratio of 39% [5][6] - The acquisition of Webster is expected to enhance the U.S. operations, aiming for an ROTCE of 18% by 2028, and is seen as a strategic move to strengthen the retail and commercial banking presence in the U.S. [14][18][29] - The company plans to maintain a commitment to at least EUR 10 billion in share buybacks for 2025 and 2026, while also pursuing bolt-on acquisitions [9][28] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the U.S. market, highlighting its attractiveness and potential for growth, with expectations of achieving a ROTE in excess of 20% by 2028 [30][31] - The integration of TSB and Webster is expected to provide significant operational synergies and enhance profitability [31][32] - The company anticipates mid-single-digit revenue growth in 2026, with double-digit growth including M&A, and profits expected to rise in constant euros [32][60] Other Important Information - The company completed the disposal of Santander Polska, generating around 95 basis points of capital, which will be used for share buybacks and acquisitions [10][11] - The integration of Webster is projected to yield approximately $800 million in cost synergies, with a focus on operational efficiencies and technology integration [23][39] Q&A Session Summary Question: Can you provide more details on the $800 million cost synergies? - Management explained that the synergies are derived from significant overhead reductions and technology integrations, with a focus on eliminating duplicative structures [35][38] Question: What is the rationale behind the 15% ROIC target? - Management stated that the target aligns with the company's capital hierarchy and reflects a consistent approach to shareholder value creation [41][42] Question: How does the acquisition of Webster change the strategy in the U.S. market? - The acquisition allows the company to operate as a full-service retail commercial bank in the Northeast, enhancing its competitive position and profitability [46][48] Question: What are the expected impacts from the Polish sale and TSB integration? - Management indicated that the sale of Poland and the integration of TSB will lead to improved profitability and operational leverage in 2027 [60][61] Question: Are new shares being issued for the Webster acquisition? - Yes, 35% of the acquisition consideration will be paid in new shares, while a share buyback program is also being initiated [61][62]

Financial Data and Key Metrics Changes - Banco Santander reported a record annual profit of EUR 14.1 billion for 2025, representing a 12% year-over-year increase, and a 15% increase excluding Argentina [3][4] - The annual dividend per share grew by 14%, and earnings per share rose by 17% due to solid profit generation and a lower share count following buybacks [4][12] - The CET1 ratio increased by 70 basis points to an all-time high of 13.5%, reflecting strong organic capital generation [4][13] Business Line Data and Key Metrics Changes - The Consumer business saw a net interest income (NII) increase of 5% year-on-year, while overall group NII performance, excluding Argentina, grew by 3% [5][9] - Wealth profit increased by 27% in 2025, driven by strong commercial activity and double-digit fee growth [11] - Payments volume rose by 9%, with PagoNxt EBITDA margin closing above 34% [11] Market Data and Key Metrics Changes - The customer base grew by 8 million to 180 million, indicating strong customer acquisition across all markets [3] - The retail profit grew by 9% year-on-year, with a cost-to-income ratio of 39% [8][9] - The U.S. market showed significant growth, with profits increasing by over 30% from 2023 to 2025, and the U.S. ROTE reaching 15% [16][46] Company Strategy and Development Direction - The acquisition of Webster Financial Corporation is a strategic move to enhance Santander's U.S. operations, aiming for a ROTE of 18% by 2028 [2][18] - The company is focused on a "One Transformation" strategy to simplify products and improve operational efficiency, which has already resulted in a 41% efficiency ratio [3][6] - The integration of Webster is expected to deliver approximately $800 million in cost synergies, enhancing the overall profitability and efficiency of the combined entity [21][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the U.S. market's potential, highlighting its attractive risk-return profile and growth opportunities [33] - The company anticipates achieving a ROTE in excess of 20% by 2028, supported by ongoing strategic initiatives and acquisitions [34] - The outlook for 2026 includes mid-single-digit revenue growth in constant EUR, with double-digit growth expected when including M&A [35] Other Important Information - The board approved a new buyback program of up to EUR 5 billion, with EUR 3.2 billion generated from the sale of Poland [13][31] - The acquisition of Webster is expected to close before the end of 2026, with a significant focus on integrating operations and realizing synergies [20][22] Q&A Session Questions and Answers Question: Can you provide more details on the EUR 800 million cost synergies? - Management explained that the synergies are derived from significant overhead reductions and technology integrations, with a focus on eliminating duplicative structures [41][42] Question: Why is the expected ROIC set at 15%? - The rationale for the 15% ROIC is consistent with the company's capital hierarchy, and management highlighted the U.S. market's strong performance in value creation over the past five years [45][46] Question: What has changed regarding the West Coast market? - Management clarified that the acquisition of Webster allows Santander to operate as a full-service retail commercial bank in the Northeast, which was not feasible previously [50][51] Question: What are the implications of issuing new shares for the Webster acquisition? - The company will issue new shares for 35% of the acquisition consideration, while also launching a EUR 5 billion share buyback program [66][67]

Financial Data and Key Metrics Changes - The company reported a record quarterly profit of EUR 14.1 billion for 2025, marking a 12% year-over-year increase in profits, and 15% excluding Argentina [1][2] - The return on tangible equity (ROTE) increased from 8.1% to 16.3%, with a cost-to-income ratio of 39% [1][5] - The fully loaded CET1 ratio rose by 70 basis points to 13.5%, exceeding the target range of 12-13% [10][28] Business Line Data and Key Metrics Changes - The Corporate and Investment Banking (CIB), Wealth, and Payments segments experienced strong revenue growth, with Wealth profit up 27% and Payments volume increasing by 9% [3][8] - The retail business saw a profit increase of 9% year-on-year, with a reduction in cost-to-serve by around 4% [5][6] - The consumer business reported a net interest income (NII) growth of 5% year-on-year, while overall group NII, excluding Argentina, grew by 3% [3][6] Market Data and Key Metrics Changes - The customer base grew by 8 million to 180 million, reflecting strong customer activity across all business lines [1] - The company maintained a prudent approach to risk, with a cost of risk ending the year at 1.15% [2] Company Strategy and Development Direction - The company is focused on "One Transformation," aiming to simplify products and improve operational efficiency [1][4] - The acquisition of Webster is expected to enhance the U.S. operations, aiming for an ROTE of 18% by 2028, and is seen as a strategic move to strengthen the retail and commercial banking presence in the U.S. [11][18] - The company plans to maintain a commitment to at least EUR 10 billion in share buybacks for 2025 and 2026 [9][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the U.S. market, highlighting its attractiveness and potential for growth, with expectations of achieving a ROTE in excess of 20% by 2028 [31][32] - The integration of TSB and Webster is expected to provide significant operational leverage and enhance profitability [32][64] Other Important Information - The company completed the disposal of Santander Polska, generating around 95 basis points of capital, which will be used for share buybacks and acquisitions [10][28] - The integration of Santander Consumer Finance and Open Bank into a single entity is aimed at simplifying the structure and enhancing customer experience [7] Q&A Session Summary Question: Can you provide more details on the $800 million cost synergies? - Management explained that the $800 million in synergies includes $480 million from headquarters and overheads, and $280 million from technology integrations, emphasizing the significant duplication in operations [36][39] Question: Why is the expected ROIC set at 15%? - Management stated that the 15% ROIC aligns with the company's capital hierarchy and reflects the current market conditions, emphasizing the U.S. market's strong performance over the past five years [37][43] Question: What has changed regarding the West Coast market? - Management clarified that the acquisition of Webster allows Santander to operate as a full-service retail commercial bank in the Northeast, which was not feasible previously [46][50] Question: What are the expected impacts from the Polish sale and TSB integration? - Management indicated that 2027 would be a clean year for assessing the full benefits of both TSB and Poland, with expectations of double-digit revenue growth and mid-teens profit increases [61][63] Question: Will new shares be issued for the Webster acquisition? - Management confirmed that 35% of the acquisition consideration will be paid in new shares, with a share buyback program also in place [64][65]

Regulatory Issues - Banco Santander was fined 40 million euros ($47 million) by Spain's anti-money laundering watchdog, Sepblac, due to past deficiencies in internal processes at its digital unit, Openbank [1][2] - The issues leading to the fine were described as "dating back some years" and have been fully addressed, according to a Santander spokesperson [3] Openbank Operations - Openbank operates in six countries: Spain, Germany, Portugal, the Netherlands, Mexico, and the United States [4] - In October, Santander announced the merger of Openbank with its consumer finance business, planning to operate its European consumer finance businesses under the Openbank brand [5] Market Expansion - Openbank launched in the United States in October 2024, marking a significant expansion of Santander's U.S. consumer banking operations [7] - Openbank surpassed $2 billion in deposits in the U.S. four months after its launch and gained over 100,000 customers in the first six months [8]

Core Insights - Santander reported a record attributable profit of €10.3 billion for the first nine months of 2025, marking an 11% increase year-over-year, driven by sustained customer growth and digital transformation efforts [2] - The bank's long-term profitability strategy focuses on streamlining its technology stack and enhancing digital relationships with its 178 million customers, which is a 7 million increase from the previous year [2] - The integration of Santander Consumer Finance and Openbank in Europe aims to simplify operations, reduce costs, and enhance product offerings, strengthening the bank's position in key markets like Germany [3] Digital Transformation - Santander's CEO emphasized the importance of simplification, automation, and technological capabilities, which are exceeding expectations for the end of 2025 [2] - Openbank, Santander's digital banking unit, has successfully attracted $6.75 billion in deposits and 162,000 new customers in the U.S., which is its fourth largest market [2] - The bank is transforming its retail operations to become a digital-first bank, combining advanced technology with the expertise of its teams [2] Payments Division Performance - Santander's payments division, PagoNxt, is performing well, with an EBITDA margin that has already surpassed the 2025 Investor Day target, reaching 32% [4] - The bank's U.S. business holds a significant share of the auto finance sector, which has faced scrutiny due to recent bankruptcies in the industry [5] - Santander's exposure to the auto finance sector includes a $77 million loan to First Brands, although this exposure is not considered material for the bank [6]

Core Insights - Santander reported a record attributable profit of €10.3 billion for the first nine months of 2025, marking an 11% increase year-over-year, driven by sustained customer growth and digital transformation efforts [2] - The bank's long-term profitability strategy focuses on streamlining its technology stack and enhancing digital relationships with its 178 million customers, which is a 7 million increase from the previous year [2] - The integration of Santander Consumer Finance and Openbank in Europe aims to simplify operations, reduce costs, and enhance product offerings, strengthening the bank's position in key markets like Germany [3] Digital Transformation - Santander's CEO emphasized the importance of simplification, automation, and technological capabilities, which are exceeding expectations for the end of 2025 [2] - Openbank, Santander's digital banking unit, has successfully attracted $6.75 billion in deposits and 162,000 new customers in the U.S., which is its fourth largest market [2] - The bank is transforming its retail operations to become a digital-first bank, combining advanced technology with the expertise of its teams [2] Payments Division Performance - Santander's payments division, PagoNxt, is performing well, with an EBITDA margin that has already surpassed the 2025 Investor Day target, reaching 32% [4] - The bank's U.S. business holds a significant share of the auto finance sector, which has faced scrutiny due to recent bankruptcies in the industry [5] - Santander's exposure to the auto finance sector includes a $77 million loan to First Brands, although this exposure is not considered material for the bank [6]

Core Insights - Santander anticipates achieving its higher profit targets by 2025, driven by lending growth in the U.S. and efficiency improvements, despite challenges in Brazil [1] Financial Performance - Underlying net profit in the U.S. increased by 64%, attributed to higher lending income from lower funding costs and increased fees from corporate and investment banking [2] - Net profit in Brazil decreased by 5.9% due to currency depreciation, while Argentina saw a 26% decline in net profit, primarily due to risks associated with the peso [2] - In Spain, underlying net profit fell by 10%, despite a 1.7% increase in lending income, largely due to a drop in gains on financial transactions [3] - The UK market experienced a 15% rise in net profit, aided by lower provisions, although full results were not published pending regulatory clarity [4] Revenue and Efficiency - Santander reported a 4% increase in fees and a 1% rise in revenues, positioning the bank to meet its full-year return-on-tangible-equity (ROTE) target of 16.5% and revenue target of approximately 62 billion euros [5] - The efficiency ratio improved slightly to 41.1% from 41.2%, reflecting the bank's shift towards a more digital and integrated model [6] - Net interest income fell by 1% year-on-year to 11.1 billion euros, slightly below analyst expectations [6]