Banco Santander SA (SAN) 2025 Q4 法說會逐字稿

Good evening, everyone, and thank you for joining Santander's 2025 Results Presentation. We are delighted to be joined by Executive Chair, Ana Botin; our CEO, Hector Grisi; and our CFO, Jose Garcia Cantera. We are going to have a short presentation with Ana leading the way. Ana, it's my pleasure to hand to you.

Thank you, Raul, and good evening, everyone. Welcome to our '25 results presentation. So alongside our strong results today, we are announcing the acquisition of Webster Financial Corporation, an important strategic step for the group. So for that reason, today's presentation will follow a slightly different structure. First, Hector will kick off with an overview of our results.

Then I will explain the transaction in detail, including the strategic and financial rationale and implications, and I will then wrap up with some closing remarks, and our outlook for 2028.

Hector, over to you.

Thanks, Ana, and welcome to our full year results presentation. This was another record year for Santander with a customer base growing by 8 million new customers to 100 million. Our quarterly profit hit a new record. And with EUR14.1 billion in '25, we have reported our best ever annual results driven by solid underlying growth across all our businesses.

We achieved this by focusing on one transformation, making excellent progress towards a common operating model and simplifying our products. This has enabled us to improve our efficiency to almost 41% and to increase our RoTE post AT1 to 16.3%. We have further strengthened our balance sheet, ending the year at all-time high CET1 ratio of 13.5%, reflecting our ability to generate capital organically.

And finally, we once again delivered strong shareholder value creation with TNAV plus dividend per share growing by 14%. Our profits are up 12% year-over-year and ex Argentina up 15% year-on-year. We delivered strong growth in our top line with revenue up 4% in constant euros, supported by customer activity across all our businesses.

Fee income is up 9% in constant euros, supported by significant growth in customers and the network benefits we're capturing through our global businesses. Expenses grew well below revenue, down 1% in absolute terms, showcasing the positive effects of our transformation, and we delivered record net operating income of almost EUR37 billion.

Our prudent approach to risk is also evident in our cost of risk, which ended the year at 1.15%, in line with our guidance for '25. The combination of our global businesses with geographical diversification continues to drive profitable and resilient growth.

CIB, Wealth and Payments delivered strong revenue growth underpinned by solid fee increases driven by network effects and enhanced capabilities. At the same time, while higher interest rates benefit our retail franchises in Europe, other parts of the group performed better with lower rates. Our consumer business is a great example of this with NII up 5% year-on-year.

In addition, our strong customer focus and product track record in active balance sheet management explained the resilient group NII performance, which, excluding Argentina, grew 3% year-on-year. At the same time, we are beginning to see the benefits of our global platforms.

Our global and diversified model allows us to both improve customer experience and efficiency and the ability to allocate capital in a dynamic way across global businesses and geographies, something very few can replicate. Combined with our capital discipline, and focus on profitability, this is driving higher RoTE with the group and most of our global businesses above the targets we set for '25.

This is despite adverse macro on a net basis compared to our base scenario. Our consistent execution has driven positive operating leverage. The key driver of this was one transformation driven by simplification and automation, which resulted in 265 basis points of efficiencies followed by our global businesses, which contributed 108 basis points and our global tech capabilities with another 87 basis points.

And there is still much more to come. We see further upside as we roll out common operating model and tech platforms across retail and consumer, while we also capture network effects across our global businesses, particularly on wealth and insurance, CIB and payments. And very importantly, all this is something that is entirely under our control.

In retail, One Transformation improved our operating leverage by combining the deployment of our global platforms with a strong local execution and network benefits. We grew active customers by around 2%, while reducing our cost to serve by around 4%, closing '25 with a 39% cost-to-income ratio and almost 80% post AT1 RoTE, exceeding the objectives we set for the year.

This performance reflects progress on the transformation of both the operating and the business models in parallel and the beginning of tech platform deployment. First, we are rolling out common business models across the countries through our global businesses. Second, we are moving towards common operating models by simplifying products and customer journeys.

And third, we are making good progress on automation through our global platforms with Gravity and One app now deployed across green markets. As a result, retail profit grew 9% year-on-year with cost declining in real terms. In consumer, we made progress in the transformation by the scaling of Openbank as our global consumer platform.

We are seeing a strong growth in our digital bank across key markets, including the U.S., Mexico and Germany, attracting strong customer and deposit inflows, and supporting our deposit gathering strategy to lower funding cost. At the same time, we continue to spend and consolidate partnerships, offering global best-in-class embedded finance solutions with leading platforms and OEMs.

TNAV continued to scale through new strategic partnerships, including Amazon and Apple, reaching more than 2 million customers and expanding installment and co-branded solutions across Europe. Finally, a major milestone in our transformation was the integration of Santander Consumer Finance and Open Banking Europe into a single legal entity under the Openbank brand, simplifying our structure and enabling a more consistent and seamless experience for our customers and partners.

As a result, Consumer delivered a strong financial performance in '25 with profit growing 8% year-on-year, supported by solid NII growth and improved cost of risk. Across wealth, CIB and payments, we are driving double-digit fee growth through the network effects and global platforms.

In CIB, we are focused on our markets where we have invested to build a world-class franchise to better serve corporate and institutional clients across all the footprint. These investments resulted in another record year in revenue with high single-digit fee growth while maintaining our low risk profile.

We are building the best wealth and insurance manager across Europe and the Americas, supported by our leading global private banking platform and the best-in-class products. Wealth profit was up 27% in '25 on the back of strong commercial activity and double-digit fee growth. Looking ahead, insurance is one of the biggest upside for fees in the group.

In payments, we hold a unique position as we operate on both sides of the value chain. We're capturing scale and seizing a growing opportunity through our global platforms, principally as an enabler to group platforms, but increasingly also in the open markets. In '25, payments volume was up 9% and PagoNxt EBITDA margin closed above 34%.

Looking ahead, CIB, wealth and payments will remain a key growth engine and key drivers of fee growth for the group. Our strong operational and financial performance is driving higher profitability and double-digit value creation. Post AT1 RoTE reached 16.3%, up nearly 1 percentage point year-on-year, reflecting our disciplined approach to capital allocation.

Pre-AT1, we are above our original target of 17% RoTE set at the last Investor Day. Earnings per share rose 17%, supported by solid profit generation and lower share count, following the buybacks. As a result, TNAV plus cash dividend per share grew by 14%. We maintain our upgraded target to distribute at least EUR10 billion to our shareholders through share buybacks for '25 and '26, subject to the regulatory approvals.

The Board approved a new buyback program of up to EUR5 billion, including EUR3.2 billion generated from the sale of Poland and EUR1.8 billion against the second half '25 results. As the ECB has already granted the corresponding approval, the program will begin tomorrow. Moving on to capital.

Over the past few years, we focused on improving capital productivity and accelerating organic capital generation. Our fully loaded CET1 ratio increased 70 basis points in '25 to 13.5%, well above our 12, 13 target, supported by record organic capital generation after investing in profitable growth, remunerating our shareholders and absorbing regulatory impacts.

At the beginning of January, we completed the disposal of Santander Polska at 2.2 price to tangible book, generating around 95 basis points of capital. This excess capital has been deployed with discipline in line with our capital hierarchy. First, we used half of it to accelerate the delivery of our share buybacks within our target of at least EUR10 billion for '25, '26.

Second, we deployed some of our excess capital into the acquisition of TSB, which will improve our U.K. RoTE to 16% by 2028. Given our improving profitability and strong momentum, our excess capital is likely to build further in '26, which brings us to the bolt-on acquisition of Webster. Ana, over to you.

Thank you very much, Hector. And before I turn to Webster, I would like to spend a couple of minutes on where Santander U.S. is today. In a nutshell, Santander U.S. has made huge progress, and you can see that in the numbers into building a sustainable and more profitable model every year in an organic path.

So let me just give you the highlights, but let me start by saying that over the last three years, actually '23 to '25, profits have grown by over 30% and that the 1.7 PAT in the U.S. gets us to the 15% adjusted RoTE that we guided in Investor Day. Very importantly, it has been one of the top countries in value creation for Santander shareholders over the last five years.

Actually, a top three geography. So in consumer, Openbank has continued to scale very, very fast, reaching around EUR5 billion in deposits, over 200,000 customers, and reducing our deposit funding cost. In commercial, we are a top 10 multifamily lender, underscoring our very strong position in this U.S. asset class.

And our strategic investments in CIB, you've seen that again in the results with a business that is delivering a return on tangible equity of 18%, driven by revenue growth, but very substantial growth in fees and very disciplined capital allocation. We also remain the market leader in wealth for LatAm, high net worth offshore. We'll continue to leverage the group's global network to build further scale in this business.

So, the acquisition of Webster is going to accelerate this transformation that, as you have seen in the numbers, is ongoing and doing well. But the goal now is to be best-in-class in terms of both profitability and efficiency relative to the major U.S. banks. This is a key focus, I would say, the key focus in all our core markets, be one of the most profitable banks.

And let me give you the highlights. We're going to pay $12.2 billion for Webster. That is a P/E of 6.8 times, including the synergies that we have identified and feel very comfortable with in our due diligence. We expect to deliver close to $800 million pretax cost synergies. That's circa 19% of the combined cost base. As a result, Santander US.

RoTE would increase to 18% and will deliver 7% to 8% EPS accretion in '28. Santander Group CET1 ratio is expected to be at 12.8% at closing, close to the 13% target this year. And we will keep, and we maintain and reiterate our commitment to do at least EUR10 billion share buybacks while remaining close at the top end -- to the top end of our 12% to 13% target -- operating target for CET1.

Very importantly, this transaction is fully aligned with our capital hierarchy, and it is expected to deliver circa 15% return on invested capital that is almost 6 percentage points above returns today from share buybacks. So moving to some of the key details of the transaction. Webster is a bolt-on for Santander. As we've said, this is the kind of M&A we'll do in our core markets. The asset base represents just 4% of group loans.

The headline price translates into 10 times'28 consensus P/E or 2 times Q4 '25 tangible book value. As a reminder, we sold Poland at 2.2 times price to tangible, and we have reinvested the proceeds to improve our deposit franchises in both the U.K. and the U.S. We will pay 65% of the price in cash using our excess capital optionality and the remaining 35% we will pay for in Santander shares.

We expect to complete the transaction before year-end '26 with a joint integration team led by John Ciulla, who is the current Chairman and CEO of Webster, and will become the CEO of Santander Bank NA with Christiana Riley remaining Country Head of Santander U.S. The strategic rationale and the financial rationales are both very compelling. The transaction scales our U.S.

Northeast franchise to the 10th largest retail and commercial bank in the United States by assets and importantly, the fifth largest by deposits in our Northeast footprint. This is going to bring benefits from economies of scale and a better competitive positioning.

Second and importantly, our businesses are highly complementary. Webster has a lower cost of deposits, loan-to-deposit ratio of 81%. Combining this with our nationwide and top consumer franchise with what Webster brings a very strong commercial franchise in its footprint and funding advantage, this will be a key driver for continuous growth opportunities and synergies, both on cost and revenues.

In the due diligence, we've identified approximately $800 million of cost synergies. This is supported and will be supported and led by a management team with a proven integration track record and, of course, complemented by Santander's own experienced tech people and teams.

Together with One Transformation, our current organic growth plans in the U.S. and transformation and open bank Webster enhances significantly our U.S. RoTE to 18% by 2028. This is best-in-class amongst other U.S. regional banks and actually among the top 25 banks, one of the best. It's a highly accretive acquisition for our shareholders.

We will deliver 7% to 8% EPS accretion and a return on invested capital of close to 15%, while allowing us to deliver on our at least EUR10 billion buyback commitment. As Hector has mentioned and as part of that commitment, we will begin our EUR5 billion share buyback. So Webster is a compelling combination with Santander.

It's a great opportunity for Santander to strengthen and become much better in our U.S. deposit and lending franchises. Webster operates across consumer, commercial, health care, financial services with a strong presence in affluent markets and middle market lending. It has a leading health service account franchise, which is -- and provides a stable low-cost funding base.

While not as large as other peers, Webster has shown a strong track record of growth, profitable growth, and M&A integration. Its latest results show a best-in-class financial performance with close to 17% RoTE, a 46% efficiency ratio and a 0.4% cost of risk. On a combined basis, this will raise our deposit share to 8%.

That is top five position in the Northeast, an economic area that is as large as the U.K. economy. We will be a top 10 national retail and commercial bank by assets in the U.S. And again, our U.S. deposit franchise together with Webster becomes more stable and diversified. Importantly, the combined banks will have a significantly improved loan-to-deposit ratio around 100%.

So a bit more detail for those of you that don't know Webster. You can see here a detail of both loans and deposits breakdown. They have -- Webster has a much greater focus on C&I, which we don't. This results in a much more balanced loan mix and overall portfolio. It brings a lower risk profile, reducing our cost of risk around 1.3% which compares with 1.6% for San U.S. stand-alone.

Importantly, the deposit base, the funding mix brings sticky low-cost deposits with our cost of deposits -- combined cost of deposits falling from 2.7% to 2.4%. And finally, again, I said this already, the combined franchise will help close the commercial funding gap to close to 100% loan to deposit.

So I want to stress that a key part of this transaction for us is the team. We value very highly the team that John Ciulla leads together with Luis. They have done a great job over the last few years, not just in integration, but in making their bank one of the most efficient and most profitable among regional banks.

They have a proven track record in M&A. And John, current Chairman and CEO of Webster will become CEO of Santander Bank NA, including Webster reporting to the SHUSA Board. Luis Massiani, currently President and COO of Webster will become the Head of Integration, Lead of Integration.

He will report directly both to John Ciulla as CEO of the banks or the new bank and Christiana Riley as President and CEO of Santander U.S. and our SHUSA Holding. Christiana Riley, again, remains Country Head and CEO -- President and CEO of Santander U.S. And they have -- all of them will have incentives aligned with the financial performance of the combination and the creation of long-term shareholder value.

A combination that, as I've mentioned, will have both revenue and efficiency benefits, combining investment efforts synergizing operational overlaps and bringing Webster onto our open bank front-end platform for consumers, whilst we will take Santander Bank Commercial Bank onto the Webster platform.

Through the integration, we have identified close to $800 million in cost synergies fully phased in by the end of '28. Headquarters efficiencies and branch optimization will reduce $480 million in cost. Technology and operations will reduce $280 million in cost and other initiatives, $35 million in cost.

In addition to these synergies, one transformation will reduce over the same time period, around $200 million in cost, landing at a combined cost base of around $3.5 billion. We have identified also $100 million from balance sheet optimization with additional upside potential. And very importantly, we have not included joint revenue opportunities, which clearly will be there.

Restructuring costs are expected to be around onetime cost synergies, along with the TSB integration costs will be largely booked in 2026 against the gain on sale from Poland. Overall, this evolution will translate into positive jaws that will push the combined efficiency ratio below 40% by '28. The transaction accelerates our three year organic plan.

As I've mentioned at the beginning, it was a very ambitious plan. Now with Webster, we aim and our target is to lift U.S. RoTE from around 10% today to 18% on a post AT1 basis by '28. This level of profitability will allow us to grow our business organically by investing in our customers, our technology and our people.

Reiterate again that on a stand-alone basis, San U.S is already on track to improve returns in a very significant way, driven first by the full integration of Auto and Consumer Banking. This is expected to deliver cost and funding benefits and result in a 3 percentage point improvement.

Second, growth in capital-light business, including CIB, which would add another 2 percentage point uplift to returns. Based on consensus forecast and our identified synergies, the combined San U.S. franchise will be top three in cost efficiency among the top 25 U.S. banks and in the top 5 by profitability by '28 based on current analyst forecast.

I want to reiterate, as I said at the beginning, that being one of the most profitable banks in our core geographies is a key target for Santander and the Webster acquisition gets us there. Webster provides this final step change that we needed in the U.S. by lifting the returns by the 3 percentage points or higher.

Again, the combined U.S. business expected to deliver RoTE of 18% by '28, which is close to or at best-in-class among U.S. banks. During 2026, organic capital generation, net of distributions, regulatory headwinds and other factors is expected to be circa 70 basis points.

At the time of expected closing for this deal, our CET ratio is expected to be close to 13% in the range of 12.8% to 13%, again, very close to the upper end of our operating range. The acquisition of Webster is expected to have an impact of around 140 basis points on Santander Group CET1 ratio.

And in '27, we expect to be back above 13% CET1, creating further capital optionality for additional shareholder remuneration subject to our capital hierarchy. Importantly, as this is a bolt-on acquisition, we're able to reiterate our capital return commitments to remunerate shareholders with a 50% ordinary payout, and at least EUR10 billion share buybacks for '25 and '26 earnings.

In summary, we're using excess capital in line with our capital hierarchy for a bolt-on acquisition that represents only 4% of group assets, which delivers a cash-on-cash close to 15% ROIC with Webster offering a perfect fit for Santander U.S. and a combination that will be very competitive in its footprint.

Second, together with the improvements that are already in plan from One Transformation will make San U.S. more efficient, more profitable, reaching 18% RoTE in '28 and very importantly, improving the hard currency mix in terms of loans to 80% of total for the group. 80% of all the loans for Santander Group will be in hard currency.

And third, that brings a strong management team with an excellent track record on successful integration and a culture and values similar to Santander. We have a culture like Webster of being a community bank close to our customers in every geography in which we operate.

So let me just add to this that this transaction, together with TSB, will accelerate our journey to be the most profitable bank in all our core markets. U.S. is among the most attractive banking markets globally with very attractive risk returns, a growth economy and favorable regulatory environment.

As is the case of the U.K., the U.S. has very strong connectivity with the rest of our global franchises, and there will be additional network benefits across our global businesses and geographies. And as I just said, increases the share of hard currency earnings, which is a good -- which is overall a good thing for us and for value creation for our shareholders.

So, looking forward, what is the outlook? Well, this transaction, together with a very significant progress you've seen in our strategy, in our numbers, you've seen the '25 results. We're headlining some of our key targets. Obviously, we'll give you more detail at Investor Day.

Following the acquisition of Webster, the integration of TSB, Santander will be at scale in all its core markets with near to a best-in-class profitability. And as a result of this and based on the current macro outlook, we expect to achieve an RoTE in excess of 20% in '28.

As we have indicated in previous results, '26 is a transition year, I would say, also an excellent year from a BAU, but also capital reallocation point of view because we are selling Poland in Q1 '26, we just closed that. We expect to close TSB in Q2 of '26.

We expect to close Webster of '26 and continue running our legacy and new platforms in parallel for a few months as we migrate our global platforms in both the U.K. and the U.S. Excluding these corporate transactions in '26, so ex M&A in '26, this is what we're expecting.

First, revenue to grow mid-single digit in constant euros, double digit, including M&A in '26, with fee growth higher and surpassing net interest income growth, cost to be lower in absolute terms in constant euros, cost of risk broadly stable. attributable profit to increase, so a higher profit in '26 over '25.

Again, this is ex M&A, and a CET1 to be close to 13%, somewhere between 12.8% and 13% by the end of '26. Looking ahead further into '27, our guidance right now is revenue to grow double digits, net profit to grow mid-teens and CET1 to be over 13%.

So exciting times ahead for Santander. We have a lot more detail for you at our Investor Day and obviously, more detailed targets. We will detail how we will execute on the strategy, and I hope to see you all there at Investor Day on February 25.

Thanks. We are now going to move to the Q&A session. (Event Instructions) We have five questions lined up already from analysts. Can we go to the first question, please? I think it's from Alvaro Serrano.

A couple of questions, please. One on the cost synergies, the $800 million. Obviously, it's a big number. I've seen the slide and I listened to you, Ana, on talking through it. But maybe you can give a bit more color on the $800 million because it's more than half of the cost base of Webster.

I realize you're pointing out the combined, but they still look pretty substantial. Obviously, some of the US was subscale in some businesses. Maybe you can walk us through there.

And then the second one is more difficult. It's just to try to understand the rationale. When Poland was disposed, I remember the message was 20% hurdle rate. Look, 15% is still reasonable in today's world. But the concept of 20% was the group is making [15] or so. We've got to get compensated for execution risk.

And the US is a market with mixed results over the last few years. So how would you explain to investors, which could be questioning the geography, which was US investment was played down back then? Is 15% enough? Why do you think it's the right region? And how do you get paid for execution risk?

Yes. So going to -- first to the question on synergies. First, to highlight, we do expect actually quite significant revenue synergies, but that's not in the numbers.

Webster has a very strong commercial operation with very strong bankers and very longstanding customers. They don't have a capital markets or CIB capacity. So actually, we're very excited about those opportunities. There could be funding synergies. It's going to allow us to grow faster in autofinance. That's not in the numbers.

In terms of how we split the synergies, that is roughly the same number in terms of the combined cost base, I think, of what we said in TSB. We have done extensive due diligence. And the way we split this on the $800 million is: headquarters and overheads, $480 million.

Remember that we have very significant duplication in headquarters in Boston, Dallas, New York, and Connecticut. We think that is a very significant opportunity there, running retail networks. You don't need two structures to run retail networks. So that is something that is significant.

Second, the technology integrations, we estimate somewhere around $300 million of the total. That's a big number, $280 million. We are very comfortable with that number. We are going to go on the commercial side.

We're basically going to shut down our systems and go on to theirs, simple. It's going to go on to Pfizer. Our commercial bank is relatively small, but it's not that small. So that's all upside.

On the front end, for the consumers, we're going to use Openbank, which is up and running. It will delay slightly the Openbank launch national, but we're going to get a much better front end for the Webster customers.

On the back end, we're going to be very pragmatic and, again, go to Pfizer. Our APIs are easy. We know how they work. So we feel very comfortable with those numbers on synergies.

Again, think of this. We're buying Webster, but the operational model in terms of the bank is theirs. And so think about -- if you want to think about high number, first, the combined is not such a high number. It's 19%, again very similar to what we said in the UK.

But if you think about our cost base, it's a very different story. And it's our cost base which is still relatively higher. So again, finally, the team.

As we've said, John Ciulla will stay on as CEO of the combined bank. Luis is number two, will stay on as COO of the bank and will double hat at the group level and will run integration, reporting both to Christiana and to John.

He will be, of course, complemented by group resources and global platform. So again, I'm not saying this is easy; but we are very confident that this is a realistic number. And, again, there is zero in terms of all the numbers you're seeing, in terms of revenue synergies. And we know there will be.

In terms of why we are 15% ROIC, we are being very consistent with our capital hierarchy. And again, the spread between share buybacks when we did TSB and today, it's exactly the same. So think that at EUR11, the share buybacks is 9%, ROIC is 15%. That's six points. That's exactly the difference between 14% and 20% we had when we announced TSB.

Finally, you say mixed results in the US. Well, I respectfully disagree. We are very focused on shareholder value creation. I have said it, I think, during the presentation; I want to reiterate.

Over the last five years, the US has been top three in terms of the geographies of Santander in value creation. And again, the US results have gone up by 30% over the last three years.

We've taken accounting RoTE from 5% to 10%. But very importantly, on an adjusted basis, as we said at Investor Day, it's 15%. So I believe that is the explanation.

Thank you, Ana. Could we go to the next question, please? It's from Sofie from Goldman Sachs.

This is Sofie from Goldman Sachs. So just going back to the previous question around the West Coast -- because it's not that long ago you exited your operations in the West Coast. What has changed now that you see that as a very attractive market, given that a few years ago, you decided to run down your mortgage lending and closed your Santander branches in the region?

And then my second question would be on the 140 basis points capital impact that you guide for. Could you just give us the numbers that you assume in terms of goodwill impact and other adjustments to capital that we should be aware of from this transaction?

Okay. Apologies if I understood correctly, but I would say that obviously, what Webster does is it converts Santander US into the same kind of retail commercial bank that we run in every other country. We are not pretending to be a retail commercial bank across the United States. Our focus is the Northeast. It's a country or an economy the size of the UK. There, we're going to be top five combined with the global scale of Santander.

But the very strong community banking, commercial bank of Webster, what you're getting is a full-service retail commercial bank, which is something we could not do without Webster. That is why pre-Webster, we were very clear.

And by the way, you have the numbers of what we've done the last three years. We have turned Santander US into a sustainable, profitable business; but it was more of a monoliner focused on consumer. What we did is expand the digital bank, greatly reduced the cost of funding.

We got $8 billion in about 15 months, which reduced our cost of funding, allowed us to fund profitably consumer loans; but it was a monoliner, a consumer bank. Now with Webster, Webster brings a very strong commercial bank, which complements our consumer bank.

So we become -- and now we're integrating also the auto operation. So this is what you're seeing if you look at the way we get to 18%, and that is the key number. Webster acquisition takes Santander US to be best in class, top five among the biggest 25 banks in the United States by profitability.

This is our goal. This is where we want to be. This is our goal in Mexico, in Spain, everywhere. And so being 18% RoTE with the scale that we get with Webster in the northeast region, it makes us a very, very competitive bank in the United States, again, in the northeast.

Importantly, what we're saying is that this will take us, and of course we'll give you more detail, to the group RoTE being above 20% by '28. This will make us, again, a top bank in profitability.

Importantly, this is a bolt-on acquisition if you measure it in terms of 4% of our loans, but it greatly increases the hard currency proportion. It's a strategic transaction in the US. But at the group level, it is a bolt-on acquisition, whether you look at it in terms of market value, 7%; or loans.

Again, the ultimate goal is profitability; and we get to that by having the in-market scale and the diversified model that Webster brings to our retail commercial bank. In terms of 140 basis points --

Hi, Sofie. It's Jose. The price we've paid in euros is EUR10.3 billion. 65% of that is cash, which is the capital impact. In basis points, that is 110 basis points. Remember that in our case today, 1 basis point is around EUR61 million, EUR62 million.

The difference between 110 and 140 is twofold. On the one hand, the impact of the DTAs; and second, a slight increase in risk-weighted assets as we translate US dollar-based models into European-based models. And that explains the 30 basis points difference.

Could we move to the next question, please? I think it comes from Borja Ramirez at Citi.

Borja Ramirez, Citi.

I would like to ask. So it seems that our funding costs synergy is from the deposit side of Webster. So I would like to ask, please, how should we look at the funding and the deposit funding, allowing maybe better funding costs for the auto business point of view? And also, how should the transaction -- how should we think about the improved (technical difficulty)

Sorry, Borja, I don't think we got the second part of your question. Do you mind repeating the second question, please?

Yes. Sorry, my bad. I would like to ask. Given the fact that the business is now more diversified and better funding, now 100% loan to deposit ratio, could that allow for better growth going forward for the combined business?

The answer is yes. As you said, loan to deposit goes to 100%. But very importantly, the average cost of deposit for the combined bank goes down by about 40 basis points, which is quite significant.

One of the great businesses that Webster has is the HSA. That is very sticky retail deposits. They're very good at that. And that is a very cheap cost of funding that they manage very well. That is one of the very attractive parts of the business.

But obviously, they have a very strong retail presence also in commercial funding. So overall, that improves our loan to deposit and should allow us to grow faster on the consumer side.

By the way, not just because of the funding, but also by the diversification, we now have a bank that looks like a traditional retail commercial bank, which we run in other markets. And in the US, this is the mix that you would see in any other regional bank. So again, it should allow us to grow faster overall, as well as reducing the overall cost of funding.

Maybe we can go to the next question. That comes from Carlos at CaixaBank.

Carlos Peixoto, CaixaBank.

Just a quick question from my side, actually, on the deal integration. So actually, two questions. Basically, in [527], you make a difference for [bridge and C21] evolution. I was wondering if you could describe as well how it plays on the expected impacts from the Polish sale in TSB so that we could have a bit of an additional color on the world bridge until year end 2026.

And then on the second question, are you issuing new shares? I mean, I'm sorry if I missed this. But are you issuing new shares for Webster, or are those shares coming from the share buybacks being carried out?

In case you're issuing new shares, what was the rationale behind this option of issuing new shares while carrying out these buybacks? And why not carrying out the deal in cash and canceling the share buybacks that were previously announced?

So Carlos, I hope I understood your question. So I think you're asking TSB and Poland, what this means in terms of impact by year end. Ex-M&A, as I said, mid-single-digit revenue growth costs down and profit up during '26.

With M&A, we expect double-digit revenue growth. We haven't said much in terms of cost because we need to -- again, we need to bring in a lot of costs and then include the synergy. So we'll give you that detail.

But what's important is that for '27, which will be a clean year where you will get the full benefit of both TSB and Poland, what we are saying is double digit in constant euros, positive operational leverage, and up -- profits up mid teens in constant euros. So again, '27 would be a full year with both TSB and Poland.

I think the more important strategic message is that we are getting two countries in one year. First, we're exiting a country at 2.2 times book. Again, at the time, that was 6 points better than buybacks. We're doing two bolt-on acquisitions, which for the group are bolt ons, but strategically takes both the UK and the US to be at scale in retail commercial banking; and very important, best-in-class profitability in both markets.

And that combination is quite unique, which means we are now at scale in all of our core markets. Again, we could get organically there. As we said in the US, we had a good plan. You can see it on the slide, significant uplift over the next couple of years. But getting to 18% profitability with a US bank is really a major achievement, as in the case of TSB to 16%.

So again, two add-on acquisitions, which basically give us the scale we needed on the retail commercial side. In terms of the new shares, we will be issuing new shares for 35% of the consideration. We are launching tomorrow. Actually, we've approved today -- and we gave that news right now -- the EUR5 billion share buyback that starts tomorrow.

There is still another buyback in the second half of this year on '26 earnings and, of course, in the first quarter of '27 on the second half of '26. So on a net basis, EUR5 billion will be compensated by an issuance of [3.5 billion] shares that will have to go to shareholders. On our side, there will be an AGM, a shareholders meeting, to approve that.

Just to give a detail that is probably important for -- as you build your models, the exchange ratio is 2.0548 Santander shares per Webster share. That's the number of shares that will be issued.

And probably just to clarify the up profit in 2026, ex-Poland and ex-TSB, that is exactly what we mean. In 2025 -- 2026, sorry, we will not have Poland. And without the contribution of TSB, we expect profits to be higher than the reported figure in 2025, just the reported figure in 2025. That's what we mean by up without Poland, without TSB.

And without Webster. And of course -- so that is -- just to clarify again, '26 ex-M&A, i.e., excluding Poland because it's no longer in the numbers, excluding TSB, and excluding Webster, these would be the numbers. Obviously, we will have some months of both TSB and Webster. And that's why I said including M&A, we would have double digit revenue growth already in '26.

We're not giving you any more numbers because we want to make sure they're clear when we do that. And we'll do that at Investor Day. But profits will be up ex-M&A. Ex-TSB and Poland and Webster, profits will be up in '26.

Next question comes from Britta at Autonomous.

Britta Schmidt, Autonomous Research.

I've got a few, please. Maybe firstly, with regards to the lending exposure, could you comment a little bit on the commercial real estate portfolio at Webster, which is relatively large and I think where the NPL level is a little bit elevated for those peers? Maybe you can give us some comfort around that.

The second one would be around the level of restructuring costs, which looks perhaps a little bit low. Maybe you can comment on what your due diligence has uncovered there.

And then thirdly, just structurally, do you intend to merge Webster into the Santander business at some point in time? Are any of the synergies dependent on merging the business? And would this have any capital implications for Santander US? So might there be perhaps some capital transferred into the business?

And then lastly, just a clarification on what you just mentioned. The 2026 profit increase versus 2025, ex-M&A, I'm reading the slide for that to be not in constant euro, but current euro. Maybe you can just confirm that.

Yeah. EUR14.1 billion is euros, right? So if you look at 2026, so we're talking about revenues and costs in constant, but we're talking about profits in euros. And they would compare with the EUR14.1 billion we just reported in 2025.

So again, profits, once you take out Poland and without putting TSB or Webster in the numbers -- and you will have some months. We don't have exactly the number of months yet. We are assuming Q2 closing for TSB and second half for Webster, profits will be up. Okay. So -- and that is in euros, yes.

In terms of capital implications, yeah, that's all considered in the returns that we have provided. As Jose explained, we have considered the group capital implications, and that's in the 140 basis points. There's nothing more that we have seen, and we have been very – we've done quite a rigorous due diligence.

In terms of the commercial book, again, we have people in the US that understand this business. They've looked at the books. We think they're absolutely clean. They have a strong portfolio. They know the customers really well. They're quite diversified.

So we're quite comfortable with that. Restructuring cost, the question was that it sounded – it's EUR1 billion, right?

1x, circa 1x.

1x. Sorry, 1x, so $800 million. Yeah, $800 million. And we will actually – both the restructuring cost of TSB and Webster, subject to auditors. But we believe we will offset most of those in '26 with the accounting gain from selling Poland, which is quite substantial.

So again, that is considered in the numbers and the returns that we are providing, both in TSB and now in Webster. You want to say –

No. And obviously – and we haven't clarified this. But now that you mention it, it's important. The profit up in 2026 excludes the capital gain from Poland, obviously.

So in regards with Santander, yes. So part of the uplift in RoTE to 18% before Webster was coming. And you have that in the slide, if you can put up the slide with the synergies. So first, as I said, Santander US profit has gone up by 30% in two years -- in the last three years.

You can see that the way we get from 10% accounting RoTE measured as US banks to 18% -- you can see here on the slide that we're just showing on the screen, there's a standalone improvement from merging already. And yes, they would all be merged into the bank. We have a process ongoing for that already. That is a big improvement on ourselves as we merge the banks.

Then there's the cost synergies of Webster with the bank. So again, that is what takes us from 48% to 40%. On the right-hand side of the slide is for the whole of Santander US that includes CIB. On the left, it's excluding CIB, so you can have clarity of what the retail commercial bank of Santander, including the auto business, plus Webster and then the synergies on that slide.

So we go from EUR4.4 billion to EUR3.5 billion. Again, some of it, as you can see on the left, is Santander US organic plan. You can see that, obviously, our cost base was still high pro forma, and the combination is what takes you down then to the EUR3.5 billion. Is that helpful?

Britta, we'll be around if you've got further details after the call as well, and we can follow up. Could we go to the next question, please? I think it's Ignacio Ulargui.

Ignacio Ulargui, BNP Paribas.

I have two questions. The first one is on capital generation. If I just look to the plan, to the slide 27 of the presentation, could you just explain a bit what is the reason behind the stronger buildup of capital that you have in 2026 before completing the transaction, the 70 BPs? I think it's a bit higher than what I would have in mind. Is there more uncertainties, or it's just the fact that the profitability is improving?

The second question I have is on the revenue potential funding synergies of what's there. Just to be clear on that, there is no funding synergies incorporated into the 70% EPS accretion.

So the answer is there's no funding synergies on the EPS accretion. That's upside. There's no revenue synergies. We're only giving you the synergies that we know we can count, we can measure, and we can deliver for sure. But I am certain that there will be some funding synergies.

I think this was as before in the sense that we will be able to grow our auto consumer faster because we have a cheaper funding. So I think that is really interesting. And as you know, we're very competitive there.

So there is upside, not just because of cross-selling of our CIB capital markets products to commercial customers; but also, we'll be able to grow faster than we had in our own organic plant. That's not in the numbers.

The cap-gen that we're putting in for '26, it's exactly the same as what we did this year. So again, Jose or maybe then Hector can comment on how we have done it. We are generating a lot of cash, and this is something we can do again. We've done it already. We know how to do it. We have very granular tools. But Jose, can you --

The cap-gen is the same as in '25, as Ana just said. What are the assumptions in these numbers? Regulatory and supervisory headwinds of between 20 to 25 basis points; the same amount of asset rotation as in 2025, not more.

Obviously, profitability, as we just discussed, is going to be higher. So we will be generating a bit more capital through profits. But all the other components, we expect them to be very, very similar to 2025. So that's how we come up with the 70 basis points, which again is the same number as in 2025.

The next question comes from Hugo Cruz at KBW.

Hugo Cruz, KBW.

I have three questions. So first, I mean, I think some investors will be, right or wrong, upset because they thought you're not going to do any big acquisition. So I was wondering if you can give them any comfort that this is the last one. Or will you think about others once you digest this?

Second question, is there any risk that this transaction is not approved by Santander or Webster's shareholders?

And third, the timing of the synergies. I understand from the slide that all the $800 million will be captured by 2028. Seems pretty quick, but then perhaps it's because of the US. But also, I was wondering, are there any more synergies to come after 2028? That's it.

So the answer is very simple, no more bolt-on acquisitions. I'm not going to say never; but the next three years, clearly not. But very importantly, it's not that I say we don't. The important thing is that we're now at scale.

We had an issue in the UK and the US where it was taking us too long. As I've said many times, the US was doing huge progress. You've seen it in the numbers. But our goal is to be the most profitable bank in each one of our geographies.

This acquisition, again, is a bolt-on for the group. We were very transparent. It follows our capital hierarchy. This is really important. We've been very consistent.

Share buybacks at today's price return 9% to shareholders. This will return 15% to shareholders. It will add about EUR2 billion down the road -- I think those are rough numbers -- to get us to 18% between the synergies and the P&L of [REN].

This gets Santander US -- now I'm talking about the whole, including CIB -- to 18% profitability at scale, global scale and local scale, in the US and the UK. At the group level, we're guiding to RoTE above 20%. We'll give you more details at Investor Day.

That is a huge turning point for Santander, both in the US and the UK, but also at the group. So I don't know if that's clear enough. If you have any doubts, please ask me again. I will repeat it.

We're at scale in our major markets, our core geographies. We have always been very clear the US is a core geography. I've said that for 10 years.

We, today, can say that we have a full service Santander retail commercial bank, again, in the footprint, which is an economy as large as the UK, with a top team that has proven integration capacity. And, by the way, the timings, we're very confident because we're going to be very pragmatic.

It's a great question, and maybe, Hector, you can help me here. But one of the things we are going to do in the UK and US, we're going to slow down One Transformation. Why? Because it's hard to do two things at the same time.

So we're going to be delivering the numbers we're telling you; but, yes, there will be, for sure, additional benefits in the US and UK beyond '28. And hopefully, if we can deliver -- I know Hector is going to say that three years, '27, '28, is already a short time period.

But if we can accelerate the integration, especially in the US, where things work faster for many reasons, we will then continue with the one transformation. So we'll focus One Transformation more on countries like Brazil, Mexico, Spain, Chile.

Gravity, for example, we're going to roll out that in Brazil this year. So there's also the front end systems. There's many things that we can do in other markets while focusing on integration in the UK and US. Do you want to talk on the timings of One Transformation in the US a bit more?

Yes. I mean, just to give you a little brief idea of what are we doing. So it's very important to understand that the business has grown significantly. In '23, we made $1 billion PAT; in '24, $1.5 billion (sic - see slide 17, "$1.2 billion") ; in '25, $1.7 billion in the results that you're seeing today.

So it's very important to understand exactly what we're doing. Also, look at the spread of how the revenue basically. Revenue grew 9% in the US year on year. Auto, the consumer business, made [$5.7 billion] in revenue. CIB, $1.9 billion in revenue. That's basically 33% up year on year.

Private banking, around [$700 million]. And, SB&A, basically, I mean, the retail bank, basically did, retail and commercial is [$500 million]. So what we're telling you is this is the last part of the puzzle that we needed to take this bank to the next level.

So this is exactly what we needed in terms, and it's going to help us not just in the synergies we're talking about, which are huge, but also what we're doing in terms of what the funding, which is not taken into account in these numbers as I explained to you. And there is a lot of synergies in terms of cross-selling and things that we can do within the two businesses, within CIB and the commercial business.

Remember that Webster is 80% commercial, 20% retail. So it's actually exactly what we needed in order to combine our business and to take it to the next level. So it's going to help us quite a lot in that sense because it is exactly what we needed to take the business up, to be able to grow it to an 18%.

So the return is great, as you have seen, and basically gives us an opportunity to become a much more competitive bank with a deposit base that we don't have today. So that combination is going to help us a lot.

This doesn't take into account that also makes us into a [$200 billion] total assets, which basically allows us to do some -- I mean, you know that we're very disciplined on the supreme business that we do, but that's helped us in the funding. And we basically integrated in the whole operation of the bank.

So these are things that we'll be working over the next two years, but there are huge opportunities that is going to give us, I mean, to take the returns that we are telling you and probably a little bit more if we're really good at executing.

Yes. I think you asked about shareholders. Yes, we do need shareholder approval, both Webster and ourselves. This should happen in the next couple of months.

We don't anticipate any issue. We believe this is a very good transaction for both sides because I like to say we're the best owner. When we sold Poland, the reason was clear. Erste Bank was a better owner. They could get more network effects, more benefits.

I think, of all the options, we were the best because of what Hector just explained. We have a very complementary business; revenue synergies, again, not in the numbers; funding synergies, not in the numbers, but very important cost synergies. And so it does transform and is significant strategically for Santander US whilst they're both on low risk for the group.

What's the other one? Yeah, beyond '28, I think we said that, no? Beyond '28, One Transformation because we're going to really try to not get in the way of the integrations. We have a very concrete plan on the integration, by the way.

We know what we're going to do. We know the systems. I think I said it. We're going to go onto their system on the commercial side 100%. We're going to go onto their back end also on the consumer, but our Openbank front, which is clearly better.

And that, again, is going to bring all the consumer customers, both Openbank, SB&A, and Webster consumers, onto a single modern cloud-based platform. And that can happen pretty fast.

We've got two more questions left. The next one comes from Paco Riquel at Alantra.

(Operator Instructions) Francisco Riquel, Alantra.

My first question is -- you have mentioned in the past that 10% market share was the target scale in any country where you operate. You will now get to 8% in the northeastern region, much less nationwide. So do you think Webster will give you the scale and platform to be competitive with the large US banks in the longer term?

And my second question is, why do you think that the Webster acquisition is a better alternative than rolling out Openbank nationwide, as you have been defending your digital strategy in the US to date?

So the answer is yes. I have said it. It's on the slide. We're at scale in all our core markets. When we think about the retail commercial business in the United States, we don't think about the whole country. We think about the northeast.

There, we have a market share of 8%, which is very close to the 10%. And we are very confident we can get to that 10% with a new combination.

So, again, we're top five in footprint, and 8% is a very, very attractive market share. Clearly enough, I want to repeat it again, we're at scale in all our core markets.

We're not going to stop the Openbank rollout national. That continues. Now, what we are going to do is we will slow down the rollout of other products because we're going to focus on the integration. So we will delay by about a year the national digital bank.

Remember that, again, we were focusing on shareholder value creation in the short term. So the goal of Openbank national was to access cheaper funding than wholesale. That, we have achieved. That's what's behind part of the increase to EUR1.7 billion where we have reduced the funding cost.

So there will be a delay. So we have rolled out, I think, high-yield savings and CDs. The rest of the products will have to wait. And when we roll them out, there will be the same platform for both Openbank national, where you will be able to have a full-service digital bank across the United States, as well as in the footprint of the combined Webster and SB&A, which will be the same systems and same platform, leveraging the global scale of our system.

So there is no change in the strategy with Openbank. We will delay that by about a year. The goal is -- I know it's very ambitious, and don't write this one down. But the goal would be that by, say, April, May of '27, we will be able to have and roll out the full product suite, again, for all the consumers.

Hector is telling me a bit more. Maybe one month more, Hector, but not more. But, yes. Is that sufficient, Alvaro? Who was this, Alvaro? Paco. Perdón, Paco. Perdón, Paco.

But again, we can go into more detail. But we want to make sure we deliver the 18% in the US in three years. And for that, we have to choose where we want to prioritize. And again, delaying one year we think is worth it for us to have a common system, common platform for both Webster, Santander, SB&A, and Openbank in the United States.

The next question comes from Andrea Filtri.

Andrea Filtri, Mediobanca.

I've got two. Your business plan is in a few weeks, but this move feels like an introduction to it. You fixed UK and the US now. Can we take this as a strategic move, now that capital has also been addressed, as a pivot towards growth over building up capital return, which you're confirming at 50% total payout between buyback and cash dividend?

And the second is, if you could walk us through the buildup from the current 16% or thereabout RoTE to the over 20% of 2028. I think the UK improvement, it's worth more than 1 percentage point for the group. The US is contributing another one. Can you fill the gap of where you intend to complete the climb to over 20%?

And the answer to the first is yes, absolutely. So we have built the capital. We had two pending core geographies where we're not at scale locally, and the businesses were not at the level that we could get to that profitability in a reasonable time period. So yes, you can expect that you will compound.

We think of ourselves as a compounder dividends, compounding tangible book and dividend growth through the cycle. And we think this is an incredibly important step. It's a turning point.

We do obviously focusing on organic growth. As I've said, we are at scale in all our core markets. The 8% market share in our footprint is huge. What's really important, we're buying a really good bank.

So yes, we're paying two times tangible. But because we are the best owner, we can deliver for shareholders a 15% return on investment capital. That's cash on cash, which I think is incredibly attractive against a 9% share buyback.

So yes, you should think of us now as growth, and you should think of us as a compounder. And we should be very close to 13% by the end of 2026 and above 13% by the end of 2027. And I take you back to our capital hierarchy, organic growth, again distributions, no more bolt-ons -- I can tell you that -- and TNAV and dividend per share accretion, as we discussed.

In terms of how we get from the 16% to 20%, well, US, as I said, above 20%, yes. I think he said 20%, but it's above 20%. Thank you, Raul. We should be above 20%. And as you know, we always deliver. So the 20% is like set in stone, and then obviously, hopefully more upside.

So 16% in the UK, 18% in the US. Brazil should improve substantially. Spain should continue to improve. There's a lot of businesses we're still subscale where we don't need to buy organic. Insurance is one of them.

Commercial bank globally is another one. That's why this bank in the US is so important because they have a very strong commercial franchise with strong network effects, which was the reason that Poland strategically did not make sense for us and made a lot more sense for Erste. So this makes a huge amount of sense for us.

Nobody has asked, why Webster? But we have been looking at opportunities and the relationship with Webster -- we've known them for a number of years. Something that is hugely important, and I mentioned it in my presentation, the culture.

They have the Santander culture in commercial banking. That's huge, and I think that is something which will help on the 18% for the US. But again, the 20% we'll give more Investor Day. But I would say Brazil -- Spain still has upside.

Consumer bank has upside. You've seen that the improvement was not as good this year in consumer, if you had time to see the presentation. But the delta, as we've said, was like [500 million], and this should continue to go up.

And one of the reasons that this year was not so great was quite a number of one-offs, which we don't expect in the future, motor finance and Swiss francs and some things. So did I miss anything? No? Investor day, Andre, we'll give more detail on that. Is that satisfactory?

The last question -- we've got one more question from Ignacio Cerezo at UBS.

Ignacio Cerezo, UBS.

It's clarifications, really. The first one is if you can give us some detail on how you calculate a 15% return on capital invested. The second one, if you can confirm the distribution policy or the annual payout you're embedding in the 20% RoTE by 28. And the third one is if you foresee the possibility of having to raise the offer. And how would you respond to that?

So no, we do not consider raising the offer. We think this is a very balanced price for both sides. And again, the shareholders in Webster have upside through the share portion. The numbers for us work well -- again, a combination of our global platforms and expertise, but very importantly, the synergies we've identified and the confidence we have that it will be revenue synergy.

So do you want to explain? This is a cash on cash, basically, ROIC.

I'm going to ask Raul to give the details. But again, this is a three-year return on the capital invested today. Exactly. Yes.

Exactly. It's a cash on cash calculation. Exactly. Is that simple?

Raul, you're up.

So we can take you through the details if you like. But as you know, the transaction has $12.2 billion in consideration. And that will give you a number that gets you to a capital employed -- if you take into account the capital impact, you take the 140 basis points, to work out the capital impact plus the share issuance. That gives you the capital employed.

And in terms of the returns, we've been quite clear. If you take consensus estimates, visible alpha, for 2028 for Webster, you will get the net profit number. You can add on to that the cost synergies. And that should get you relatively close.

There is a point about the marks, but we can take you through the detailed part of the calculation. But that should get you pretty close to the circa 15% number. And obviously, feel free to give us a call. The investor relations team will be --

Which is the same the same way we calculated the TSB return on capital invested. And this is the usual way the industry calculates this number. So this is standard.

On the distribution question, Ignacio, we will give you more details at Investor Day. But safe to say, Ana has reiterated the 50% payout. And she has reiterated that we will apply capital hierarchy to CET1 above 13%. We expect to be above 13% in '27 and '28.

We will apply capital hierarchy, but no mobile acquisitions. Again, happy to take you through our existing guidance on that. And that should get you pretty close to some sense of what we assume in terms of a greater than 20% return on taxable equity.

I think we've got no more questions left in the queue. I just wanted to thank you all for joining us at short notice this evening. We in the investor relations team will be available all night to speak and answer your questions. You can get in touch with us directly through our email addresses, raul.sinha@gruposantander.com, or through the usual phone lines on our website. And obviously, we look forward to seeing many of you at our Investor Day on February 21.

Thank you very much, and this concludes our call.

Thank you very much.