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Price: $12.46
Discount category: Close to intrinsic value
Next earnings: 2027-01-28
Next earnings is estimate: Yes
Company name: Banco Santander
Sector: Banking
About: Banco Santander is a Spanish bank group with 189 million customers and 186,000 employees in Europe and the Americas. It has five global businesses: Retail & Commercial Banking, Openbank (digital banking and consumer finance, which includes auto loans), Corporate & Investment Banking (CIB), Wealth Management & Insurance, and Payments, which includes Getnet and Ebury. Its main markets are Spain, the United Kingdom, the United States, Brazil, Mexico, Portugal, Chile and Argentina. In 2026 it sold its Polish bank and bought TSB in the United Kingdom and Webster Financial in the United States. Total income was €46.8 billion in the first nine months of 2026. The shares trade in Madrid, and each American depositary share (ADS) on the New York Stock Exchange is one share. The bank reports in euros.
Thesis: The market doubts that Santander can keep its higher returns. Many investors still see a bank with large risk in Latin America, where Brazil and Argentina have high credit costs and weak currencies, and with a history of low returns. In 2026 Santander also took on two large purchases. TSB and Webster add integration costs and lowered the CET1 ratio to 12.7% at September 30, 2026. UK motor finance complaints added provisions in the first half of 2026. The results now point the other way. Underlying profit rose 16% to €11.2 billion in the first nine months of 2026, underlying RoTE was 16.0%, and costs fell 1% without the two purchases. For the gap to close, four things must be true. Profit for 2026 must be above the €14.1 billion of 2025, and the CET1 ratio must reach 12.8% to 13% at year end, as the targets say. TSB and Webster must deliver their cost savings and add to profit. Credit costs in Latin America must stay under control. RoTE must move toward the 2028 target of above 20%, with profit above €20 billion. The full-year 2026 results, expected in late January or early February 2027, give the next test. If these checks pass, the gap can close over the next four to six quarters. The main reason it may not close is a shock in Latin America or a fall in interest rates that lowers net interest income.
Risks: A large part of profit comes from Latin America. In the first nine months of 2026, loan-loss provisions rose 13%, mainly because of Argentina. A recession, high interest rates or a weaker currency in Brazil, Mexico or Argentina can lower profit in euros. Santander must integrate TSB and Webster at the same time. Integration costs were part of €666 million of charges in the first nine months of 2026. Delays or lost customers can lower the expected savings. The CET1 ratio was 12.7% at September 30, 2026, after the Webster purchase. If profit falls or new purchases use capital, buybacks can become smaller. UK motor finance complaints added a provision of €207 million in Q1 2026, and Santander added more in Q2 2026. The final cost depends on the UK regulator's redress scheme. Net interest income was 74% of total income in the first nine months of 2026. Lower interest rates in Europe or the Americas can lower it.
Balance sheet: Santander is a bank group, so capital and credit quality matter more than net debt. Total assets were €2,102 billion and total equity was €118.4 billion at September 30, 2026. Customer deposits were €1,222 billion and loans to customers were €1,207 billion. The CET1 ratio was 12.7%, down from 14.0% at June 30, 2026, because the Webster purchase took 1.47 percentage points. The total capital ratio was 17.0%. The ECB requires a CET1 ratio of 9.92% from January 1, 2027. The non-performing loan ratio was 2.90%, with a coverage ratio of 64%, and the cost of risk was 1.16%. Tangible net asset value per share was €5.92. Santander targets a CET1 ratio of 12.8% to 13% at the end of 2026. It pays about 50% of underlying profit to shareholders, about half as cash dividends and half as buybacks. For a bank, net debt is not a useful measure, so this profile does not show debt figures. As of 2026-09-30.
Checkpoints: Jan 28, 2027 (estimate): Full-year 2026 results and capital. Pending. Watch: Profit above €14.1 billion without M&A, a CET1 ratio of 12.8% to 13% and stable Latin American credit costs pass; a lower CET1 ratio or a sharp rise in provisions fail. 2028 (estimate): 2028 targets: RoTE above 20%. Pending. Watch: RoTE that rises each year toward above 20%, with profit toward above €20 billion, passes; RoTE that stays near 16% fails.
Recent events: 2026-10-28: Santander reported results for the first nine months of 2026. Underlying profit rose 16% to €11,176 million, and attributable profit rose 20% to €12,405 million, with a €1.9 billion gain from the sale of Santander Bank Polska. Total income rose 8% to €46,807 million, and costs fell 1% without TSB and Webster. Underlying RoTE was 16.0%, and the CET1 ratio was 12.7%. Santander kept its 2026 targets. 2026-10-28: Santander completed its buyback of up to €1,825 million against first half 2026 profit. It bought 150,595,100 shares, about 1.03% of its share capital, and it will cancel them. 2026-10-28: The European Central Bank set Santander's minimum CET1 requirement at 9.92% from January 1, 2027, against a CET1 ratio of 12.69% at September 30, 2026. 2026-09-29: The board approved an interim cash dividend of 12.7 euro cents per share against 2026 profit, payable from November 2, 2026. 2026-08-20: Santander completed the purchase of Webster Financial, a US retail and commercial bank with 4.2 million customers. The price was USD 12,509 million, 65% in cash and 35% in 329,846,438 new Santander shares. The purchase lowered the CET1 ratio by 1.47 percentage points. 2026-07-30: Santander said that it intends to offer new Santander shares for the about 10% of Banco Santander Brasil that it does not own. The offer has a maximum value of about €1,908 million and needs regulatory and shareholder approvals. 2026-07-22: Santander reported first half 2026 results. Underlying profit rose 15% to €7.3 billion, and the CET1 ratio was 14.0% after the TSB purchase. 2026-04-30: Santander completed the purchase of TSB from Banco de Sabadell for GBP 2,867 million in cash. TSB has more than 4 million customers in the United Kingdom. 2026-04-29: Santander reported Q1 2026 results. They included a provision of €207 million for possible UK motor finance complaints. 2026-02-25: At its Investor Day, Santander set targets for 2028: RoTE above 20%, profit above €20 billion and more than 210 million customers. 2026-02-03: Santander agreed to buy all of Webster Financial for USD 48.75 in cash and 2.0548 Santander shares for each Webster share. It also reported 2025 profit of €14,101 million. 2026-01-09: Santander completed the sale of about 49% of Santander Bank Polska and 50% of its asset manager to Erste Group for €7,035 million in cash. The sale gave a net gain of €1,895 million and added 95 basis points to the CET1 ratio.