Francisco Riquel

Francisco Riquel asked if the Webster acquisition, which brings Santander to 8% market share in the Northeast region (less nationwide), provides sufficient scale to compete with large US banks in the long term. He also questioned why the Webster acquisition was considered a better alternative than rolling out Openbank nationwide, a strategy previously defended for the US.

Answer

Ana Botín (Executive Chair) affirmed that 8% market share in the Northeast, with a target to reach 10% with the combination, provides sufficient scale to be competitive, reiterating that Santander is now at scale in all its core markets. She clarified that the Openbank national rollout will continue but will be delayed by approximately one year to prioritize the integration and establish a common platform for Webster, SBNA, and Openbank consumers. Héctor Grisi Checa (CEO) emphasized Webster's strong commercial franchise as a crucial complement to Santander's existing businesses.

Francisco Riquel from Alantra questioned if the 8% market share in the Northeast region (and less nationwide) achieved with Webster would be sufficient scale to compete with large U.S. banks long-term, given Santander's past 10% market share target. He also asked why the Webster acquisition was considered a better alternative than rolling out Openbank nationwide, a strategy previously defended for the U.S.

Answer

Ana Botín (Executive Chair, Banco Santander) affirmed that 8% market share in the Northeast, an economy the size of the UK, is 'very attractive' and sufficient for scale in their core U.S. market, with confidence to reach 10% with the new combination. She clarified that the Openbank national rollout will continue but will be delayed by about a year to prioritize the integration of Webster and create a common, modern cloud-based platform for all consumer customers (Openbank National, SBNA, and Webster consumers). The initial goal of Openbank (accessing cheaper funding) has already been achieved.

Francisco Riquel Correa questioned if the 8% market share in the Northeast, achieved with Webster, is sufficient to compete with large US banks, given Santander's historical 10% market share target, and asked why the Webster acquisition was preferred over a nationwide rollout of Openbank, a strategy previously defended.

Answer

Executive Chair Ana Botín affirmed that the 8% market share in the Northeast is sufficient for scale, with confidence to reach 10% with the new combination, making Santander competitive in that footprint. She clarified that the nationwide Openbank rollout will continue, but the launch of other products will be delayed by about a year to prioritize integration and create a common, modern platform for all consumer customers (Openbank, SBNA, and Webster) across the US.

Francisco Riquel Correa questioned if the 8% market share in the Northeast region, which is less than the 10% target nationwide, would provide sufficient scale for Webster to be competitive with large U.S. banks long-term. He also asked why the Webster acquisition was considered a better alternative than rolling out Openbank nationwide, a strategy previously defended.

Answer

Ana Botín, Executive Chair of Santander, affirmed that the 8% market share in the Northeast, an economy the size of the U.K., is attractive and sufficient for scale, with confidence to reach 10%. She clarified that the Openbank national rollout will continue, but other product rollouts will be delayed by about a year to prioritize integration. Ms. Botín explained that Openbank's primary goal of accessing cheaper funding than wholesale has been achieved, and the delay will allow for a common, modern, cloud-based platform for all consumers (Openbank, SBNA, and Webster) by April/May 2027.

Francisco Riquel asked about the disappointing Q2 Net Interest Income (NII) in the UK, its future guidance post-TSB acquisition, and the rationale behind the top-up provisions in Brazil, seeking an outlook on NPLs and cost of risk.

Answer

CEO Héctor Grisi Checa described the UK as a work in progress with a focus on profitability, expecting NII to be slightly up in 2025. CFO José García Cantera added that Q2 UK NII was impacted by mortgage repayment seasonality but client margins improved. Regarding Brazil, the CEO explained the provisions were a conservative measure to strengthen the balance sheet in a challenging environment, not due to a change in expected losses, while shifting the lending mix towards secured loans.

Francisco Riquel asked about the sustainability of the U.S. business's strong Q1 performance, questioning the drivers behind its falling cost of funding, rising loan yields, and decreasing cost of risk amid worsening economic forecasts.

Answer

Executive Hector Blas Grisi Checa attributed the strong performance partly to seasonality, noting the first half of the year is typically stronger in the U.S. He confirmed the 15% ROTE target for the region and pointed to EUR 3.5 billion in new deposits and strong fee growth from the CIB build-out. CFO José Antonio García Cantera clarified that the rise in loan yields was due to a mix shift away from lower-yield loans in commercial and CIB.

Francisco Riquel of Alantra Equities asked for an update on Banco Santander's Net Interest Income (NII) guidance for Spain in 2024 and 2025, the NII performance in the Corporate Centre, and details on capital, including Basel IV impacts and the CET1 target.

Answer

CEO Héctor Grisi confirmed positive NII trends in Spain driven by strong client growth. CFO José García Cantera elaborated, forecasting low single-digit NII growth in Spain for 2024, an improvement from previous expectations. Regarding capital, Cantera stated the day-one impact of Basel III would be low (0-20 bps) with a fully loaded impact of 30-50 bps, reiterating the bank's commitment to maintaining a CET1 ratio above 12% post-implementation.

Francisco Riquel of Alantra questioned the source of organic excess capital generation in the new plan, seeking clarity on the profitability of the €13 billion earmarked for growth and the return threshold for potential M&A investments.

Answer

CEO Onur Genç clarified the plan anticipates negative regulatory impacts but still projects about 40 bps of organic capital generation annually. He stated M&A returns are benchmarked against share buybacks and are focused on domestic deals with high synergies. Global Head of Finance Luisa Gómez Bravo added that the plan's net attributable profit CAGR is around 9%.

Francisco Riquel of Alantra asked about the profitability of new lending in Spain, given the accelerated market share gains and growth in lower-margin segments like CIB. He also inquired about the drivers behind flat year-over-year costs in Spain and the updated guidance for the year.

Answer

CEO Onur Genç asserted that all new lending is profitable, governed by a strict, loan-by-loan return on capital framework, which is why the bank is not growing in less profitable areas like mortgages. Regarding costs in Spain, he explained that the flat performance included a small one-off VAT-related benefit; excluding this, cost growth was around 2%, which is in line with the bank's existing guidance.

Francisco Riquel from Alantra questioned the profitability of new lending in Spain, given the accelerated market share gains and growth in lower-margin segments like CIB. He also asked for an explanation of the flat year-on-year costs in Spain and an update on the cost guidance for the year.

Answer

CEO Onur Genç asserted that all new lending is profitable, managed through a strict, loan-by-loan return on capital framework, which is why growth in areas like mortgages is subdued. He explained that the flat costs in Spain were influenced by a small one-off VAT-related item of about €16 million. Excluding this, the underlying cost growth was around 2%, in line with previous guidance.

Francisco Riquel of Alantra asked about slowing demand deposit growth and the rising loan-to-deposit ratio in Mexico, and inquired about Spain's NII hedging strategy and the potential for a future "cliff effect."

Answer

Executive Maria Gomez Bravo stated that in Mexico, the deposit mix improved, and BBVA's competitive advantage in transactionality keeps deposit costs low. Executive Onur Genç added that the 104% loan-to-deposit ratio is manageable due to a large base of sticky, small-ticket deposits. Regarding Spain, Genç confirmed that on top of the ALCO portfolio, an average of EUR 15 billion in short-term mortgage hedges for 2025 protects the NII outlook.

Francisco Riquel of Alantra asked about the profitability of new business, noting the NII contribution from new volumes, and inquired about the potential IPO of BFA and CaixaBank's participation.

Answer

Javier Pano Riera (executive) explained that the front book yield for new production was just under 4%, in line with plans, though mortgage margins remain tight without considering cross-selling benefits. Gonzalo Gortázar Rotaeche (executive) confirmed that BPI intends to participate in the BFA IPO process initiated by the Angolan government, planning to sell a stake of around 15%, contingent on market conditions and attractive pricing.

Francisco Riquel from Alantra asked about the drivers for the increase in indexed deposits to 45%, the potential for higher time deposit demand to alter beta assumptions, and the rationale for reducing overlay provisions.

Answer

CEO Gonzalo Gortázar attributed the rise in indexed deposits to higher overall client liquidity, especially from corporates. CFO Javier Pano added that this trend does not derail their cost of deposit views. Regarding provisions, he explained the overlay reduction was driven by the technical runoff of the Bankia PPA and the absorption of the new definition of default impact, not by sector-specific concerns.

Francisco Riquel from Alantra Equities asked about the increase in indexed deposits to 45% of remunerated deposits and whether higher demand for time deposits could challenge deposit beta assumptions. He also inquired about the allocation of the EUR 273 million in released overlay provisions.

Answer

CEO Gonzalo Gortázar attributed the rise in indexed deposits to higher overall liquidity and cash balances among corporate clients. CFO Javier Pano clarified that the increase in time deposits does not change their views on deposit costs, as these products still carry a margin. He explained the overlay release was mainly due to the runoff of the Bankia PPA and absorbing minor impacts from the new definition of default, not due to concerns in any specific sector.

Francisco Riquel inquired about the key drivers behind the upgraded 2024 Net Interest Income (NII) guidance, NII sensitivity to lower rates, and the outlook for 2025. He also asked for an update on the timing of capital distributions and the bank's appetite for share buybacks at the current share price.

Answer

CEO Gonzalo Gortázar confirmed that the rising share price does not deter their buyback strategy and that capital distribution announcements for the current plan will not wait for the November Investor Day. CFO Javier Pano explained the NII guidance upgrade is due to better loan volumes, slower deposit cost migration, and higher rate assumptions. For 2025, he sees potential upside to the current market consensus for NII.