Banco Santander, S.A. Q4 FY2025 Earnings Call

Good evening, everyone, and thank you for joining Santander's 2025 Results Presentation. We are delighted to be joined by Executive Chair, Ana Botín; our CEO, Héctor Grisi; and our CFO, José García 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 2025 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, Héctor 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. Héctor, 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 EUR 14.1 billion in 2025, 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 an 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-on-year and, excluding 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 EUR 37 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 2025. 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 2025. 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 2025 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 2025 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 2025 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 2025, 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 EUR 10 billion to our shareholders through share buybacks for 2025 and 2026, subject to the regulatory approvals. The Board approved a new buyback program of up to EUR 5 billion, including EUR 3.2 billion generated from the sale of Poland and EUR 1.8 billion against the second half 2025 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 2025 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 EUR 10 billion for 2025-2026. 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 2026, which brings us to the bolt-on acquisition of Webster. Ana, over to you.

Thank you very much, Héctor. 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 on an organic path. So let me just give you the highlights, but let me start by saying that over the last three years, actually 2023 to 2025, profits have grown by over 30% and that the EUR 1.7 billion PAT in the U.S. gets us to the 15% adjusted RoTE that we guided at 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 EUR 5 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 EUR 12.2 billion for Webster. That is a P/E of 6.8x, including the synergies that we have identified and feel very comfortable with in our due diligence. We expect to deliver close to EUR 800 million pretax cost synergies. That's circa 19% of the combined cost base. As a result, Santander U.S. RoTE would increase to 18% and will deliver 7% to 8% EPS accretion in 2028. 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 EUR 10 billion share buybacks while remaining close to the top end of our 12% to 13% 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 six 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 10x 2028 consensus P/E or 2x Q4 2025 tangible book value. As a reminder, we sold Poland at 2.2x 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 2026 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 EUR 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 Openbank, 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 EUR 10 billion buyback commitment. As Héctor has mentioned and as part of that commitment, we will begin our EUR 5 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 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 a 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. 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 Santander 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 and Lead of Integration. He will report directly both to John Ciulla as CEO of 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 President and CEO of Santander U.S. And they 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 Openbank front-end platform for consumers, whilst we will take Santander Bank Commercial onto the Webster platform. Through the integration, we have identified close to EUR 800 million in cost synergies fully phased in by the end of 2028. Headquarters efficiencies and branch optimization will reduce EUR 480 million in cost. Technology and operations will reduce EUR 280 million in cost and other initiatives, EUR 35 million in cost. In addition to these synergies, One Transformation will reduce over the same time period around EUR 200 million in cost, landing at a combined cost base of around EUR 3.5 billion. We have identified also EUR 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 one-time costs; 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 2028. 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 2028. 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, Santander 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, would add another 2 percentage point uplift to returns. Based on consensus forecast and our identified synergies, the combined Santander U.S. franchise will be top three in cost efficiency among the top 25 U.S. banks and in the top five by profitability by 2028 based on current analyst forecasts. 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 three percentage points or higher. Again, the combined U.S. business is expected to deliver RoTE of 18% by 2028, 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 CET1 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 2027, 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 EUR 10 billion share buybacks for 2025 and 2026 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 Santander U.S. more efficient, more profitable, reaching 18% RoTE in 2028 and very importantly, improving the hard currency mix in terms of loans to 80% of total for the group. Eighty percent 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. The 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, it increases the share of hard currency earnings, 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 2025 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 2028. As we have indicated in previous results, 2026 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 2026, we just closed that. We expect to close TSB in Q2 of 2026. We expect to close Webster in 2026 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 2026, so ex M&A in 2026, this is what we're expecting. First, revenue to grow mid-single digit in constant euros, double digit including M&A in 2026, 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 2026 over 2025, again this is ex M&A and a CET1 to be close to 13%, somewhere between 12.8% and 13% by the end of 2026. Looking ahead further into 2027, 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 the 25th of February.

We are now going to move to the Q&A session. We have the details of the phone line on our website if you'd like to join. The operator provided instructions. We have five questions lined up already from analysts. Can we go to the first question, please? I think it's from Álvaro Serrano.

A couple of questions, please. One on the cost synergies, the EUR 800 million. Obviously, it's a big number. I've seen the slide, and I listened to you, Ana, talking through it, but maybe you can give a bit more color on the EUR 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 U.S. was subscale in some businesses. So maybe you can walk us through there. And then the second one is more difficult, is 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 U.S. is a market with mixed results over the last few years. So how would you explain to investors, which could be sort of questioning the geography, which was the U.S. 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, Álvaro. So going first to the question on synergies. First to highlight that 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 long-standing 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 auto finance. 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 as what we said in TSB. We have done extensive due diligence. And the way we split this on the EUR 800 million is headquarters and overheads, EUR 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 EUR 280 million of the total. That's a big number. We are very comfortable with that number. On the commercial side, we're basically going to shut down our systems and go on to theirs. It'll move to Fiserv. 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 national launch, but we're going to get a much better front end for Webster customers. And the back end — we're going to be very pragmatic and again go to Fiserv. APIs are easy. We know how they work. So we feel very comfortable with those numbers on synergies. Again, think of this: we are buying Webster, but the operational model in terms of the bank is theirs. If you want to think about a high number, first, the combined is not such a high number, it's 19%. Again, very similar to what we said in the U.K. 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 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's 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 showing 15% ROIC, we are being very consistent with our capital hierarchy. The spread between share buybacks when we did TSB and today is exactly the same. So at EUR 11, the share buyback is 9%, ROIC is 15%, that's six points. That's exactly the difference between the earlier announcement. Finally, you say mixed results in the U.S. Well, I respectfully disagree. We are very focused on shareholder value creation. I have said it during the presentation, I want to reiterate over the last five years, the U.S. has been top three in terms of the geographies of Santander in value creation. And again, the U.S. 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. Yes. 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. Kind of 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 kind of close your Santander branches in the region? And then my second question would be on the 140 basis points capital impact that you guide for. Can you just give us numbers that you kind of assume in terms of goodwill impact and other kind of adjustments to capital that we should be aware of from this transaction?

Okay. Apologies if I misunderstood correctly, but I would say that, obviously, what Webster does is it converts Santander U.S. 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 U.K. 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 in the last three years. We have turned Santander U.S. into a sustainable, profitable business, but it was more of a monoliner focused on consumer. What we did is expand the digital bank, greatly reduce the cost of funding. We got USD 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 U.S. 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 makes us a very, very competitive bank in the United States, again, in the Northeast. Importantly, what we are saying is that this will take us, and of course, we'll give you more detail to the group RoTE being above 20% by 2028. In terms of the 140 basis points, José can give you the detail on the capital impact calculations.

It's José. The price we've paid in euros is EUR 10.3 billion. Sixty-five percent 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 EUR 61 million, EUR 62 million. The difference between EUR 110 basis points and EUR 140 basis points is twofold. On the one hand, the impact of deferred tax assets and, second, a slight increase in risk-weighted assets as we translate U.S. 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.

I would like to ask — so it seems the funding cost synergies 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 cost for the auto business point of view? And also, how should the transaction maybe — how should we think about the improved... (technical difficulty) Sorry, Borja, I don't think we got the second part of your question. Yes. Do you mind repeating the second question, please? Yes. Sorry. Sorry, my bad. I would like to ask, given the fact that the business is now more diversified and better funded now with a 100% loan-to-deposit ratio, could that allow for better growth going forward for the combined business?

Yes, the answer is yes. As you said, loan-to-deposit goes to 100%. But very importantly, the average cost of deposits 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-type deposits that are 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 on 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 U.S., this is the mix that you would see in any of the regional banks. 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.

Just a quick question from my side actually on the deal integration. So actually two questions. But basically, in Slide 27, you make a bridge in CET1 evolution. I was wondering if you could describe as well the expected impact from the Polish sale and TSB so that we could have a bit of additional color on the overall bridge until year-end 2026. And then on the second question, are you issuing new shares — 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 are 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. Excluding M&A, as I said, mid-single-digit revenue growth, cost down and profit up during 2026. 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 cost and then include the synergies. So we'll give you that detail. But what's important is that for 2027, 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 profits up mid-teens in constant euros. So again, 2027 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 are exiting a country at 2.2x book. Again, that at the time, that was six points better than buybacks. We are doing two bolt-on acquisitions, which for the group are bolt-ons, but strategically, it takes both the U.K. and the U.S. to be at scale in retail commercial banking and, very importantly, best-in-class profitability in both markets. And that combination is quite unique, which means we're now at scale in all of our core markets. 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 gave that news right now — the EUR 5 billion share buyback that starts tomorrow. There is still another buyback in the second half of this year on 2026 earnings and of course, in the first quarter of 2027 on the second half of 2026. So on a net basis, the EUR 5 billion will be compensated by an issuance of shares to Webster shareholders. There will be an AGM shareholders' meeting to approve that.

Just to give a detail that is probably important 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 profit up in 2026 excluding Poland and excluding TSB — that is exactly what we mean. In 2026, we will not have Poland and without the contribution of TSB, we expect profits to be higher than the reported figure in 2025. That's what we mean by up without Poland, without TSB, and without Webster.

Thank you, Ana. Could we go to the next question, please? I think it's from Britta from Autonomous.

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 versus 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 U.S.? 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 euros, but current euros. Maybe you can just confirm that.

Yes. The EUR 14.1 billion is the reported profit. So if you look at 2026, we're talking about revenues and costs in constant euros, but we're talking about profits in euros, and they would compare with the EUR 14.1 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 of both TSB and Webster. 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, yes, that's all considered in the returns that we have provided, as José explained, we have considered the group capital implications, and that's the 140 basis points. There's nothing more that we have seen, and we have been very rigorous in our due diligence. In terms of the commercial book, again, we have people in the U.S. 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. On restructuring costs, we expect one-time restructuring costs for the deal; these are expected to be largely booked in 2026 and, as we said, largely offset by the gain on sale from Poland. Overall, that is considered in the numbers and the returns that we are providing both in TSB and now in Webster. Regarding the merging of the businesses, yes, they will all be merged into the bank. We have a process ongoing for that already. That is a big improvement as we merge the banks and capture the synergies. The timing and more detail will be provided, and we are available to follow up after the call.

No additional detail, just to clarify, the profit up in 2026 excludes the capital gain from Poland, obviously. And on the restructuring, we estimate the one-time restructuring costs for Webster at an appropriate level and these are considered in our numbers and how we plan to offset them with the Poland gain.

Britta, we will 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.

I have two questions. The first one is on capital generation. If I just look at the plan 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 basis points? I think it's a bit higher than what I would have in mind. Is there more SRP or is it just the fact that the profitability is improving? And the second question I have is on the revenue potential funding synergies: just to be clear on that, there is no funding synergies incorporated into the 7%–8% EPS accretion?

So the answer is there's no funding synergies in the EPS accretion. That's upside. There's no revenue synergies in the EPS accretion. We are 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 asked before in the sense that we will be able to grow our auto and consumer faster because we have a cheaper funding. So I think that is really interesting. And as you know, we are very competitive there. On the capital generation that we are putting in for 2026, it's exactly the same as what we did this year. José or Héctor can comment on how we have done it. We are generating a lot of capital, and this is something we can do again. We've done it already. We know how to do it. We have very granular tools.

The capital generation is the same as in 2025, as Ana just said. 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.

I have three questions. First, I think some investors will be kind of upset because they thought you're not going to do any big acquisitions. 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 the EUR 800 million will be captured by 2028. It seems pretty quick. But perhaps it's because of the U.S., but also I was wondering, are there any more synergies to come after 2028?

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. We don't — but very importantly, it's not that I say we don't — the important thing is that we are now at scale. We had an issue in the U.K. and the U.S. where it was taking us too long. As I've said many times, the U.S. 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 EUR 2 billion down the road. I think those are rough numbers to get us to 18% between the synergies and the P&L impact. This gets Santander U.S., including CIB, to 18% profitability. In terms of shareholder approvals, 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 we are 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 are the best because of what Héctor explained: we have a very complementary business, revenue synergies, funding synergies and very important cost synergies. And so it does transform and is significant strategically for Santander U.S. while the bolt-on risk for the group is low. What's the other one? Beyond 2028, I think we said that there will be additional benefits beyond 2028. If we can accelerate the integration, especially in the U.S., where things work faster for many reasons, we will then continue with One Transformation. So we'll focus One Transformation more on countries like Brazil, Mexico, Spain, Chile. Gravity, for example, we're going to roll that out 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 U.K. and U.S.

Yes. Just to give you a very brief idea of what we are doing. It's very important to understand that the business has grown significantly. In 2023 we made EUR 1 billion PAT; in 2024 EUR 1.5 billion; and 2025 EUR 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 grew: revenue grew 9% in the U.S. year-on-year. Auto, the consumer business made EUR 5.7 billion in revenue. CIB was EUR 1.9 billion in revenue, that's basically 33% up year-on-year. Private Banking around EUR 700 million and the retail and commercial bank was around EUR 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. 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 funding, which is not taken into account in these numbers as Ana explained to you. There is a lot of synergies in terms of cross-selling and things that we can do within the two businesses and within CIB and the commercial business. Remember that Webster is about 80% commercial, 20% retail. So it's exactly what we needed in order to combine our business and to take it to the next level. This doesn't take into account that it also makes us into a EUR 200 billion total assets bank, which basically allows us to do more. So these are things that we'll be working over the next two years, but there are huge opportunities that will help us reach 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 we are the best owner. When we sold Poland, the reason was clear. Erste was a better owner for Poland. I think that having Webster under Santander is the best owner scenario for that franchise. The timings: we are very confident because we're going to be very pragmatic. It's a great question, and one of the things we are going to do in the U.K. and U.S. is we will prioritize integrations. We will slow down other One Transformation rollouts in those specific countries so we can focus on the integrations. We will deliver the numbers we are telling you. There will be additional benefits beyond 2028, and we will continue to work hard on execution.

Thank you, Ana. We've got two more questions left. The next one comes from Paco Riquel at 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 U.S. 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 U.S. to date?

So the answer is yes. 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% target, and we are very confident we can get to that 10% with the new combination. So again, we are top five in the footprint and 8% is a very attractive market share. Clearly, we are not going to stop the Openbank national rollout. That continues. Now what we are going to do is we will slow down the rollout of some products because we're going to focus on the integration. So we will delay by about a year the national rollout for some products. The national digital bank: the goal of Openbank national was to access cheaper funding than wholesale, and we have achieved part of that by gathering deposits. There will be a delay — we have rolled out high-yield savings and CDs. The rest of the products will have to wait. 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 SBNA, which will be the same systems and same platform, leveraging the global systems. So there is no change in the strategy with Openbank. We just will delay some parts by about a year. The goal is that by around April–May 2027 we will be able to roll out the full product suite for consumers. We are prioritizing integration to deliver the 18% RoTE in the U.S. by 2028.

The next question comes from Andrea Filtri.

I've got two. Your business plan is in a few weeks, but this move feels like an introduction to it. You fixed the U.K. and the U.S. 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 over 20% by 2028. I think the U.K. improvement is worth more than one percentage point for the group. The U.S. is contributing another one. Can you fill the gap of where you intend to complete the climb to over 20%?

So thank you, Andrea, for that question. And the answer to the first is yes, absolutely. 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 see both capital return and investment. 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 focus on organic growth. As I've said, we are at scale in all our core markets. The combination of the two bolt-ons gives us scale in the U.K. and the U.S. In terms of how we get from about 16% to above 20% by 2028: the U.S. is a major contributor with the Webster acquisition taking U.S. RoTE to 18% by 2028. The U.K. with TSB will contribute meaningfully — we expect U.K. RoTE to reach around 16% by 2028. Beyond that, Brazil should improve substantially, Spain should continue to improve, and there is still upside in subscale businesses and capital-light businesses such as commercial bank globally and insurance. Consumer bank also has upside when we complete planned integrations and remove one-offs. We will provide more detail at Investor Day, but you should expect the sum of these items — U.S., U.K., improvements across Brazil, Spain, consumer and capital-light growth — to take us above 20% RoTE by 2028.

Thank you, Ana. The last question we have is from Ignacio Cerezo at UBS.

Just clarifications really. The first one is if you can give us some detail on how you calculate the 15% return on capital invested. The second one, can you confirm the distribution policy or the annual payout you're embedding in the 20% RoTE by 2028. 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 there will be revenue synergies. The return is a cash-on-cash ROIC over three years.

I'm going to ask Raul to give the details. But again, this is a three-year return on the capital invested today. It's calculated in the same way we calculated the TSB return on capital invested, which is the usual way the industry calculates this number.

So Ignacio, we can take you through the details if you like. But as you know, the transaction consideration is EUR 12.2 billion and that gives you a number that gets you to capital employed if you take into account the capital impact, the 140 basis points, plus the share issuance. That gives you the capital employed. In terms of the returns, if you take consensus estimates for Webster for 2028, you will get the net profit number. You can add to that the cost synergies, and that should get you relatively close to the circa 15% number. There is a point about the marks, but we can take you through the detailed part of the calculation offline. On the distribution question, we will give you more details at Investor Day. But safe to say, Ana has reiterated the 50% payout policy, and she has reiterated that we will apply our capital hierarchy to CET1 above 13%. We expect to be above 13% in 2027 and 2028. We will apply capital hierarchy, but no more bolt-on 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% RoTE by 2028. 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 e-mail address [email protected] or through the usual phone lines that are on our website. And obviously, we look forward to seeing many of you at our Investor Day on the 25th of February. Thank you very much, and this concludes our call.

Thank you very much.