Carlos Peixoto

Carlos Peixoto asked for updates on the expected impacts of the Polish sale and TSB acquisition on CET1 evolution by year-end 2026. He also questioned the rationale behind issuing new shares for Webster while simultaneously conducting share buybacks, rather than pursuing an all-cash deal and canceling previously announced buybacks.

Answer

Ana Botín, Executive Chair, and José García Cantera, CFO of Santander, clarified that for 2026 (excluding M&A), they expect mid-single-digit revenue growth, lower costs, and higher profits in euros compared to 2025. For 2027, with the full benefit of TSB and Webster, they anticipate double-digit revenue growth and mid-teens profit growth. Ms. Botín explained that 35% of the Webster consideration will be paid in new shares, while a EUR 5 billion share buyback program is commencing, with further buybacks planned. She noted that on a net basis, the buybacks will be compensated by the share issuance, emphasizing the strategic goal of achieving scale and best-in-class profitability in the U.S. and U.K.

Carlos Peixoto asked for an update on the CET1 evolution bridge, including the expected impacts from the Polish sale and TSB acquisition until year-end 2026. He also questioned the rationale behind issuing new shares for Webster while simultaneously carrying out share buybacks, and why the deal wasn't entirely in cash using previously announced buybacks.

Answer

Ana Botín (Executive Chair) outlined the 2026 outlook, noting mid-single-digit revenue growth (double-digit with M&A) and higher profits ex-M&A, with double-digit revenue growth and mid-teens profit growth expected in 2027. She emphasized the strategic importance of TSB and Webster in achieving scale and best-in-class profitability in core markets. Botín confirmed that new shares would be issued for 35% of the consideration, while the €5 billion share buyback program would commence, with further buybacks planned. José Antonio García Cantera (CFO) provided the exchange ratio for the share issuance (2.0548 Santander shares per Webster share) and clarified the 2026 profit guidance excludes M&A impacts.

Carlos Peixoto from CaixaBank requested an update on the expected CET1 impacts from the Polish sale and TSB acquisition to provide a clearer bridge until year-end 2026. He also asked if new shares would be issued for the Webster acquisition, and if so, the rationale behind issuing new shares while simultaneously conducting share buybacks, rather than funding the deal entirely with cash from previously announced buybacks.

Answer

Ana Botín (Executive Chair, Banco Santander) explained that ex-M&A, 2026 is expected to see mid-single-digit revenue growth, lower costs, and higher profits. With M&A (including TSB and Webster), double-digit revenue growth is anticipated for 2026, and for 2027, double-digit revenue growth and mid-teens profit growth are expected, reflecting the full benefits of TSB and Webster. She confirmed that new shares will be issued for 35% of the Webster consideration, while a EUR 5 billion share buyback program is commencing, with further buybacks planned. José Antonio García Cantera (CFO, Banco Santander) specified the exchange ratio for the share issuance (2.0548 Santander shares per Webster share) and clarified that the 2026 profit increase guidance is for reported figures, excluding Poland and without TSB/Webster contributions.

Carlos Peixoto asked for updates on the expected CET1 evolution impacts from the Polish sale and TSB acquisition by year-end 2026, and questioned the rationale behind issuing new shares for Webster while simultaneously conducting share buybacks, suggesting an all-cash deal with canceled buybacks as an alternative.

Answer

Executive Chair Ana Botín outlined that ex-M&A, 2026 would see mid-single-digit revenue growth and increased profit, with double-digit revenue growth including M&A. She emphasized that 2027 would be a clean year with full benefits from TSB and Poland, leading to double-digit revenue growth and mid-teens profit growth. She explained that new shares would be issued for 35% of the consideration, while a €5 billion share buyback program would commence, with further buybacks planned, stating that the net effect aligns with capital hierarchy. CFO José García Cantera provided the exchange ratio for the share issuance and clarified the 2026 profit guidance.

Carlos Peixoto asked about the loan loss provisions at the Corporate Center, questioning if they are recurring and which geographies they relate to. He also inquired about the NII evolution outlook for Brazil given the portfolio's de-risking.

Answer

CFO José García Cantera clarified that the Corporate Center provisions were a specific action to accelerate charge-offs and lower the NPL ratio, and should not be considered recurring. For Brazil NII, he explained the balance sheet has been repositioned for a lower rate environment, particularly on the liability side, and projected that at 12% interest rates, the RoE in Brazil could reach or exceed 20%.

Carlos Peixoto asked about the net interest income (NII) outlook for Spain for the remainder of the year and whether macroeconomic uncertainties could trigger additional provisions for the auto finance business.

Answer

CFO José Antonio García Cantera stated that the NII outlook in Spain has improved due to active management of the ALCO portfolio, which has reduced interest rate sensitivity. On credit risk, he emphasized that unemployment is the key variable, not GDP. As long as labor markets remain strong, he does not foresee major provisioning model changes and reiterated the group's cost of risk target.

Carlos Peixoto of CaixaBank BPI questioned the NII outlook for the U.S. business throughout the year and asked if the very low cost of risk seen in the U.K. during Q1 is sustainable.

Answer

CEO Héctor Grisi projected a flattish NII outlook for the U.S., contingent on volume performance. Regarding the U.K., both Grisi and CFO José García Cantera affirmed the stability of credit quality, suggesting the low cost of risk levels seen in recent quarters could be extrapolated for the rest of the year due to strong labor markets.

Carlos Peixoto of CaixaBank inquired about the specific quantification of one-off VAT and DTA impacts in the quarter, and sought clarity on the €36 billion capital distribution plan, asking if all of it would be distributed and how the Sabadell deal might alter this figure.

Answer

CEO Onur Genç explained the net positive one-off impact was €150 million, resulting from a €250 million gain from a tax audit (VAT and tax rate) partially offset by a €100 million loss on USD hedges. Global Head of Finance Luisa Gómez Bravo noted a €150 million DTA activation. Genç affirmed the €36 billion is available for distribution and that the strategic plan is presented on a standalone basis, separate from the Sabadell transaction.

Carlos Peixoto from CaixaBank questioned the conservatism in BBVA's guidance for Spain, asking why the bank maintains a low single-digit fee growth forecast after a 7% start and a 45 bps cost of risk guidance after a 30 bps Q1. He also asked for clarification on the cost of risk guidance for Turkey.

Answer

CFO Maria Gomez Bravo explained the fee guidance for Spain reflects caution around market volatility's potential impact on asset management fees. She clarified they have improved the cost of risk guidance for Spain to around 35 basis points. CEO Onur Genç confirmed they are sticking to their 180 basis points cost of risk guidance for Turkey, noting the Q1 figure of 189 bps was close to the target but that macro volatility remains a key factor.

Carlos Peixoto from CaixaBank BPI questioned the conservative guidance for Spain, asking why fee income guidance remained at low single-digits despite 7% Q1 growth, and why the cost of risk guidance wasn't lowered more aggressively. He also sought clarification on whether the cost of risk guidance for Turkey was being maintained.

Answer

CFO Maria Gomez Bravo explained the fee guidance for Spain is maintained due to potential market volatility impacting asset management fees, which constitute 40% of the total. She noted the cost of risk guidance for Spain was improved to around 35 bps due to the strong start. CEO Onur Genç confirmed that the cost of risk guidance for Turkey remains at 180 basis points, though he reiterated that it is highly dependent on evolving macro parameters.

Carlos Peixoto from CaixaBank BPI asked for the expected capital release from SRTs in 2025, a breakdown of Q4 capital impacts, and the estimated impact of the Spanish bank tax, including from the Sabadell deal.

Answer

Executive Maria Gomez Bravo indicated that BBVA expects to generate more capital from SRTs in 2025 than the 15 basis points generated in 2024. Executive Onur Genç noted the hyperinflation impact was 11 bps in Q4. Regarding the Sabadell transaction, Genç stated that the potential increase in the bank tax does not alter the strategic or financial rationale of the offer.