Detailed narrative
FY25 Performance Highlights
Banco Santander reported a record annual profit of EUR 14.1 billion in FY25, marking a 12% year-over-year increase (15% excluding Argentina). This strong performance was underpinned by solid underlying growth across all businesses, with revenue up 4% in constant euros and fee income growing 9%.
The company achieved an efficiency ratio of almost 41% and a post-AT1 RoTE of 16.3%, while strengthening its balance sheet with an all-time high CET1 ratio of 13.5%.
Strategic Webster Acquisition
Santander announced the acquisition of Webster Financial Corporation for EUR 12.2 billion, a strategic bolt-on transaction aimed at accelerating the transformation of Santander U.S. This acquisition is expected to significantly enhance U.S. profitability, targeting an 18% RoTE by 2028, and deliver 7-8% EPS accretion in 2028.
The deal is projected to position the combined U.S. entity as a top 3 cost-efficient and top 5 profitable bank among the top 25 U.S. banks.
Synergies and Integration Benefits
The Webster acquisition is anticipated to generate close to EUR 800 million in pre-tax cost synergies by the end of 2028, primarily through headquarters efficiencies, branch optimization, and technology integration. The combination will improve the U.S. business's loan-to-deposit ratio to approximately 100% and reduce the combined cost of deposits from 2.7% to 2.4%.
The transaction also brings a lower risk profile, reducing the combined U.S. cost of risk to around 1.3%.
Capital Allocation and Shareholder Returns
The company reaffirmed its commitment to distribute at least EUR 10 billion to shareholders through share buybacks for 2025 and 2026. A new EUR 5 billion buyback program was approved, funded by EUR 3.2 billion from the Santander Polska sale and EUR 1.8 billion from H2 2025 results, commencing immediately.
The Webster acquisition, financed 65% cash and 35% shares, is expected to yield a return on invested capital (ROIC) of nearly 15%, aligning with the company's capital hierarchy.
U.S. Business Transformation and Outlook
Santander U.S. has demonstrated strong organic progress, with profits growing over 30% from 2023 to 2025 and achieving a 15% adjusted RoTE. The Webster acquisition is considered a crucial step to achieve best-in-class profitability and efficiency in the U.S. market.
The group expects to achieve an overall RoTE in excess of 20% by 2028, with the Webster deal increasing the share of hard currency loans to 80% of the total group portfolio, enhancing long-term value creation.
FY26 and FY27 Outlook
Management outlined expectations for 2026 as a transition year, with revenue (ex-M&A) projected to grow mid-single digit in constant euros, costs to be lower, and cost of risk broadly stable, leading to higher attributable profit. Including M&A, revenue growth is expected to be double-digit. For 2027, guidance includes double-digit revenue growth, mid-teens net profit growth, and a CET1 ratio exceeding 13%.