Andrea Filtri

Andrea Filtri asked if the Webster acquisition signals a strategic pivot towards growth over capital return, now that capital has been addressed. She also requested a breakdown of how Santander plans to increase its ROTE from the current 16% to over 20% by 2028, specifically asking for details beyond the UK and US improvements.

Answer

Ana Botín (Executive Chair) confirmed that the move signifies a pivot towards growth, positioning Santander as a 'compounder' with scale in all core markets. She outlined the path to over 20% ROTE by 2028, including 16% ROTE in the UK and 18% in the US. She also highlighted expected substantial improvements in Brazil and Spain, as well as growth in businesses like Insurance and Consumer Bank, with more detailed targets to be provided at the upcoming Investor Day.

Andrea Filtri asked if the Webster acquisition, following the TSB integration, signals a strategic pivot towards growth over capital return, given the confirmed 50% total payout. He also requested a detailed breakdown of how Santander plans to increase its ROTE from the current 16% to over 20% by 2028, specifically asking what fills the gap beyond the 1% improvement expected from the U.K. and U.S. each.

Answer

Ana Botín, Executive Chair of Santander, confirmed that the move is an absolute pivot towards growth, emphasizing that Santander is now at scale in all core markets and will focus on organic growth and compounding. She reiterated the 50% payout and capital hierarchy for CET1 above 13%, with no more bolt-on acquisitions. Regarding the ROTE increase to above 20% by 2028, Ms. Botín cited 16% ROTE in the U.K. and 18% in the U.S., with substantial upside expected from Brazil, Spain, and the consumer bank. She also mentioned insurance and the global commercial bank as key areas for organic growth, with more details to be provided at Investor Day.

Andrea Filtri asked if the Webster acquisition, following the UK and US market adjustments, signals a strategic pivot towards growth over capital return, and requested a detailed breakdown of how Santander expects to increase its ROTE from the current 16% to over 20% by 2028, beyond the contributions from the UK and US.

Answer

Executive Chair Ana Botín confirmed that the move signifies a pivot towards growth, emphasizing Santander's role as a compounder of tangible book and dividend growth. She reiterated the commitment to a 50% ordinary payout and capital hierarchy for CET1 above 13%. For the ROTE increase, she cited 16% in the UK and 18% in the US, with additional upside expected from Brazil, Spain, and capital-light businesses like insurance and global commercial banking, promising more details at the upcoming Investor Day. CFO José García Cantera added that the 20% ROTE target is 'set in stone'.

Andrea Filtri from Mediobanca asked if the Webster acquisition, following the U.K. and U.S. market fixes, signals a strategic pivot towards growth over capital return, while still maintaining the 50% total payout. He also requested a detailed breakdown of how Santander plans to build up from the current 16% RoT to over 20% by 2028, specifically asking for contributions beyond the U.K. and U.S. improvements.

Answer

Ana Botín (Executive Chair, Banco Santander) confirmed an 'absolute yes' to the strategic pivot towards growth, emphasizing that they have built capital and addressed scale issues in core geographies. She reiterated the 50% payout and commitment to capital hierarchy for CET1 above 13%, with no more bolt-on acquisitions. Regarding the RoTE increase to 'above 20%' by 2028, she cited 16% in the U.K. and 18% in the U.S. as key drivers, with substantial improvements also expected from Brazil, Spain, and other businesses like Insurance and Commercial Bank globally. She noted that the Consumer Bank also has upside, despite some one-offs in the current year.

Andrea Filtri asked if the benefits of the 'One Transformation' program are nearly complete given the proximity to targets, and what the next stage entails. He also questioned why the Consumer segment is a drag on group RoTE and when an improvement can be expected.

Answer

CEO Héctor Grisi Checa asserted that current results are just the 'tip of the iceberg' for One Transformation, with significant future savings expected from decommissioning legacy systems. CFO José García Cantera explained the Consumer segment's performance is mixed: Openbank and US Auto are doing well, but Consumer Europe is weak due to lower volumes. He anticipates a normalization of returns as new, higher-profitability loans replace the older book.

Andrea Filtri questioned the rationale for selling only a 49% stake in the Polish bank, the progress of the digital transformation, the outlook for Brazil's cost of risk, and the reason for high provisions in the U.K.

Answer

Executive Hector Blas Grisi Checa declined to comment on the specifics of the Poland transaction. He described the digital transformation as being in a 'transition phase' that is successfully driving customer growth, noting a gain of 9 million customers in a year. He stated that actions to de-risk the portfolio in Brazil should lead to an improving cost of risk over time.

Andrea Filtri of Mediobanca pressed for more specific 2024 targets, asking for an absolute net profit figure implied by the 16% RoTE guidance and a nominal euro target for group costs. He also inquired if the bank would consider internalizing its insurance business.

Answer

CEO Héctor Grisi reiterated confidence in the 16% RoTE target for 2024 and the 15-17% range for 2025. He stated that while the insurance business has huge upside, long-term JV agreements, particularly in Latin America and Europe, prevent internalization. CFO José García Cantera later added that costs are expected to grow around 2-2.5% in 2024, with a long-term ambition to keep them flat or down.

Asked for Brazil's interest rate sensitivity, the structural tax rates for Brazil and the U.S., whether organic capital buildup should accelerate, and the risks and opportunities of the digital euro.

Answer

Brazil's interest rate sensitivity is €150 million for a 100 bps drop. The group's structural tax rate is around 30%. Organic capital buildup is expected to accelerate with higher profitability and asset rotation. On the digital euro, they don't expect a release before 2026 and are monitoring developments, seeing it as a long negotiation process.

Andrea Filtri of Mediobanca asked about the target level for the ALCO portfolio, the timeline for using overlay provisions, the ability to minimize the bank levy, the guided tax rate, and management's wish list for regulatory simplification.

Answer

Javier Pano Riera (executive) explained that the bank is now more keen on using fixed-income securities for hedging due to attractive sovereign spreads, aiming to maintain its NII sensitivity target. He stated the base case is for overlay provisions to be used this year, but it depends on the environment. He also confirmed the effective tax rate of around 34% this quarter could be a reasonable run rate. Gonzalo Gortázar Rotaeche (executive) provided a detailed wish list for regulatory simplification, including slowing the pace of new rules and rationalizing sustainability disclosures.

Andrea Filtri from Mediobanca asked for CaixaBank's view on the ECB's work to standardize overlay provisions and whether the ECB is increasing scrutiny on areas like leveraged loans.

Answer

CEO Gonzalo Gortázar responded that while the ECB's mission is to continually assess risks, CaixaBank is very well-positioned with a top-tier NPL coverage ratio and a low NPL ratio among peers. He also highlighted that the bank has a very small leveraged lending book, making it not particularly exposed to increased scrutiny in that specific area.

Andrea Filtri from Mediobanca asked about CaixaBank's expectations for the ECB's work on standardizing overlay provisions and whether the ECB's focus on areas like leveraged loans indicates a broader push to tighten regulations.

Answer

CEO Gonzalo Gortázar acknowledged that identifying and managing risk is the ECB's mission but stated CaixaBank is very well-prepared for any scrutiny, citing its top-tier NPL coverage ratio and low NPL ratio among Spanish peers. He added that the bank has a very small book in leveraged lending, so it is not particularly impacted by discussions in that area, reflecting its prudent approach to risk.

Andrea Filtri asked about any requirement for the Spanish government to divest its stake, whether share buybacks are less appealing with the stock price above tangible book value, and if the ECB has a hostile view towards higher dividend payouts.

Answer

CFO Javier Pano noted the government's divestment deadline can be easily postponed. He argued that with a 16% ROTE, the bank's valuation is still attractive for buybacks based on its earnings multiple, making tangible book value a less relevant metric. He added that he has seen no negative indications from the ECB regarding higher payouts or special dividends.

Asked for clarification on whether deposit costs are expected to fall with rate cuts in 2024, and questioned the strategy of using capital for buybacks instead of retaining it for potentially more accretive M&A or future growth.

Answer

The average cost of deposits is not expected to fall in 2024 versus Q4 2023. On capital strategy, organic growth is the top priority, but there is no M&A focus currently. With ample capital generation and the stock trading below tangible book value (pro-forma for dividend), buybacks are considered a highly valuable way to return capital to shareholders.

Andrea Filtri from Mediobanca requested detailed assumptions behind the 2025 guidance, including interest rates and ALCO contribution for Spain NII, key metrics for Turkey, and Argentina's net profit contribution.

Answer

Executive Maria Gomez Bravo provided key assumptions: for Spain, terminal rates at 2% by June; for Turkey, year-end inflation around 26.5% and interest rates at 31%. Executive Onur Genç added that Argentina's 2025 profit contribution is expected to be marginal, similar to the EUR 182 million in 2024. He also detailed Turkey's EUR 3.4 billion CPI linker portfolio, which hedges its net monetary position.