Banco Santander(SAN) - 2025 Q4 - Earnings Call Transcript

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]