Britta Schmidt

Britta Schmidt raised concerns about Webster's commercial real estate portfolio, noting its size and potentially elevated NPL levels compared to peers, seeking comfort on its quality. She also questioned if the projected restructuring costs seemed low, inquired about the intent to merge Webster into Santander's business, and sought clarification on the 2026 profit increase being in current euros.

Answer

Ana Botín, Executive Chair, and José García Cantera, CFO of Santander, confirmed that the 2026 profit increase is in current euros, comparing to the EUR 14.1 billion reported in 2025. Ms. Botín assured that due diligence found Webster's commercial real estate books to be clean with a strong, diversified portfolio. She stated that restructuring costs are estimated at circa 1x synergies (EUR 800 million) and will largely be offset by the accounting gain from the Poland sale in 2026. Ms. Botín confirmed that Webster will be merged into Santander Bank, N.A., with all capital implications already considered in the 140 basis points impact.

Britta Schmidt asked for comfort regarding Webster's commercial real estate portfolio, noting its size and potentially elevated NPL levels. She also questioned if the restructuring costs seemed low, inquired about structural merger plans for Webster into Santander US and any associated capital implications, and sought clarification on whether the 2026 profit increase was in constant or current euros.

Answer

Ana Botín (Executive Chair) expressed comfort with Webster's commercial real estate book, citing the US team's understanding and the portfolio's diversification. She confirmed restructuring costs of approximately €800 million (1x cost synergies), which are expected to be largely offset by the accounting gain from the Poland sale in 2026. Botín stated that Webster would be merged into Santander US, with all capital implications considered in the provided returns. She clarified that the 2026 profit increase, ex-M&A, would be in current euros, comparing to the €14.1 billion reported in 2025. José Antonio García Cantera (CFO) added that the 140 basis points capital impact includes DTAs and a slight increase in risk-weighted assets.

Britta Schmidt from Autonomous Research asked about the commercial real estate (CRE) portfolio at Webster, its NPL levels, and sought comfort regarding its risk profile. She also questioned if the restructuring costs seemed low and requested details on due diligence findings. Additionally, she inquired about the structural intention to merge Webster into Santander's business, potential capital implications, and sought clarification on the 2026 profit increase guidance (ex-M&A) being in current euros.

Answer

Ana Botín (Executive Chair, Banco Santander) confirmed that the 2026 profit increase (ex-M&A) is in current euros, comparing to the EUR 14.1 billion reported in 2025. She stated that the CRE book was thoroughly reviewed during due diligence and is considered 'absolutely clean' with a strong, diversified portfolio. Regarding restructuring costs, she clarified they are estimated at 1x cost synergies (approx. EUR 800 million) and will largely be offset by the accounting gain from the Poland sale in 2026. She confirmed that Webster will be merged into Santander Bank, N.A., and all capital implications are considered in the provided returns and the 140 basis points capital impact.

Britta Schmidt raised concerns about Webster's commercial real estate portfolio, given its size and elevated NPL levels, questioned the seemingly low restructuring costs, and asked about the intention to merge Webster into Santander US, the dependency of synergies on such a merger, and potential capital implications. She also sought clarification on whether the 2026 profit increase (ex M&A) is in current or constant euros.

Answer

Executive Chair Ana Botín confirmed that the 2026 profit increase (ex M&A) is in current euros, comparing to the €14.1 billion reported in 2025. She expressed comfort with Webster's commercial real estate portfolio after due diligence, noting their strong customer knowledge. She stated that restructuring costs are estimated at circa $800 million (one-time cost synergies) and would largely be offset by the accounting gain from selling Poland in 2026. She confirmed the intent to merge Webster into Santander US, with synergies dependent on this integration, and reiterated that all capital implications are considered in the provided returns. CEO Héctor Grisi elaborated on the strategic fit and growth opportunities.

Britta Schmidt asked about weak loan volumes in Spain and what level of customer spread would be needed to stimulate growth. She also questioned what macroeconomic conditions would be required for the Brazil provision to be released back into the P&L.

Answer

CEO Héctor Grisi Checa stated the bank is being highly disciplined on mortgage pricing in Spain due to intense competition, and will increase volumes when spreads become more rational. CFO José García Cantera clarified the Brazil provision increase stems from corporates, not individuals, and that lower interest rates and continued strong employment would be key variables for improvement and potential release.

Britta Schmidt inquired about Brazil's new 'product payable' initiative and its competitive impact, and also requested updates on the U.K. motor finance case provisions and trends in the U.K. mortgage market.

Answer

Executive Hector Blas Grisi Checa stated there are no plans to modify the provision for the U.K. motor finance case. CFO José Antonio García Cantera noted a constructive outlook for the U.K. mortgage market, with rising loan yields and falling deposit costs improving margins. Regarding the new payroll lending rules in Brazil, he believes it's a positive move for activity but is awaiting further details for a full assessment.

Britta Schmidt of Autonomous Research pointed out the discrepancy between optimistic commentary on NII in key regions and the unchanged official group targets for 2024. She also asked to explain the delta between the guided double-digit customer revenue growth and mid-single-digit total revenue growth.

Answer

CFO José García Cantera explained the delta in revenue guidance is due to non-customer-related items, such as the significant monetary adjustment for hyperinflation in Argentina, which was EUR 600 million in Q1 alone. CEO Héctor Grisi expressed optimism about underlying trends but reiterated the official 2024 guidance, including the 16% RoTE target, which the bank is confident in achieving.

Britta Schmidt from Autonomous Research questioned the adequacy of the 12% CET1 target ratio compared to peers, asked how the plan's cost growth compares to inflation, and sought clarification on the profit trajectory, suggesting a potential 'hockey stick' shape towards 2028.

Answer

CEO Onur Genç defended the 12% CET1 target, highlighting that BBVA's capital buffer over its regulatory requirement is wider than the peer average. Global Head of Finance Luisa Gómez Bravo noted cost growth is projected to be well below inflation. Genç refuted the 'hockey stick' profit growth theory, attributing steady improvement to stabilizing interest rates in core markets, not just a late-cycle recovery in hyperinflationary economies.

Britta Schmidt of Autonomous Research asked about Mexico, questioning the Net Interest Margin outlook given the short-term nature of loan growth and the size of recent severance payments. She also requested updates on the recognition of the 2024 Spanish bank tax and the status of the Sabadell transaction.

Answer

CEO Onur Genç confirmed all lending, regardless of duration, must meet profitability hurdles. He disclosed a severance program in Mexico affected 5% of staff and accounted for about 3 percentage points of the quarter's cost growth. CFO Maria Gomez Bravo stated they are in a 'wait and see' mode on the 2024 Spanish tax. Onur Genç added that the Sabadell deal is in its final stages with the competition authority (CNMC), with a decision expected in the coming days.

Britta Schmidt from Autonomous Research asked about the profitability of the short-term loan growth in Mexico and inquired about severance payments made there. She also sought clarification on the recognition of the 2024 Spanish bank tax and requested an update on the Sabadell deal.

Answer

CEO Onur Genç confirmed all loan growth, short or long-term, must meet strict profitability hurdles. He revealed a severance program in Mexico affecting 5% of staff (around 2,500 people), with the related one-off costs accounting for about 3% of the 11.7% YoY cost growth in the region. CFO Maria Gomez Bravo stated they are in a 'wait and see' mode on the 2024 Spanish tax legislation. Onur Genç added that the Sabadell deal is in the final stages of review by the Spanish competition authority (CNMC).

Britta Schmidt of Autonomous Research questioned if the guided deceleration in Mexican loan growth was cautious, and asked for the expected capital generation in basis points for 2025.

Answer

Executive Onur Genç clarified that the Mexico guidance is based on a pessimistic 1% GDP growth scenario and that the country's underleveraged economy supports strong growth, hinting at a potential guidance upgrade. On capital generation, he explained that the priority is deploying capital to profitable growth, which consumed 156 bps in 2024. He emphasized that tangible book value growth is the key metric, not a specific bps generation target.

Britta Schmidt from Autonomous Research requested a breakdown of the deposit cost guidance between Spain and Portugal, more specifics on the cautious cost of risk outlook, and updates on the timing for the pending share buyback and future distribution announcements.

Answer

Gonzalo Gortázar Rotaeche (executive) reiterated that the cost of risk caution is due to general global turmoil, not specific internal data, and the bank is very comfortable with its guidance. Javier Pano Riera (executive) explained that in Portugal, the weight of interest-bearing deposits is higher, but the cost evolution is similar to Spain. He stated that decisions on additional distributions are not necessarily year-end events and can be announced when a sufficient capital buffer exists. He also confirmed the company retains discretion on the timing of the next buyback execution.

Britta Schmidt of Autonomous Research asked for the underlying cost of risk excluding overlays, the drivers for the 'other provisions' line running ahead of guidance, and whether more action is needed to reduce interest rate risk sensitivity (IRRBB) in light of new Basel proposals.

Answer

CEO Gonzalo Gortázar expressed an upbeat view on cost of risk, seeing more upside than downside. He noted that the driver of 'other provisions'—mortgage setup claims—is now trending down. CFO Javier Pano confirmed the prior guidance for this line remains valid and explained that IRRBB sensitivity is being managed organically through fixed-rate mortgage origination and active hedging, ensuring compliance with future parameters.

Britta Schmidt of Autonomous Research asked for the underlying cost of risk excluding overlays and the new default definition impact. She also inquired about the drivers for the higher run-rate of 'other provisions' and whether the bank needs to decrease its IRRBB sensitivity due to new Basel proposals.

Answer

CEO Gonzalo Gortázar conveyed a positive message on cost of risk, stating that developments are better than expected and the bank sees more potential upside than downside. He noted that the increase in 'other provisions' from mortgage claims is now trending down. CFO Javier Pano confirmed the guidance for 'other provisions' remains valid and stated the bank will manage its IRRBB sensitivity through organic evolution (fixed-rate mortgages) and hedging activities to stay within required parameters.

Britta Schmidt requested an outlook for NII in Portugal given deposit competition, a breakdown of front-book lending yields and deposit costs, and a timeline for when pressure on banking fees would ease and return to growth.

Answer

CFO Javier Pano explained that NII from the Portuguese BPI unit will likely be negative year-on-year due to higher deposit costs there, though the competitive situation has calmed. He noted front-book deposit costs are around 3%. On banking fees, he stated they are 'getting closer to the bottom' on pressure from account fee waivers, which should help the overall fee line stabilize.

Asked about the CET1 target for buybacks, the ROTE guidance relative to 2023's performance, the underlying assumptions for the cost of risk guidance, and a breakdown of rate sensitivity by geography.

Answer

The CET1 target will be brought down towards 12.00% with the buyback, with no specific buffer retained for headwinds. The ROTE guidance of 'over 15%' is consistent with the 15.6% achieved in 2023. The cost of risk guidance of ~30 bps assumes some use of existing overlays. Rate sensitivity is slightly higher in Portugal than in Spain.