Banco Santander - Q4 2025 & Acquisition

Transcript

Rahul Sinha (Head of Investor Relations)

Good evening, everyone, and thank you for joining Santander's 2025 Results Presentation. We're 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.

Ana Botín (Executive Chair)

Thank you, Rahul, and good evening, everyone. Welcome to our 2025 results presentation. Alongside our strong results today, we're announcing the acquisition of Webster Financial Corporation, an important strategic step for the group. 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.

Héctor Grisi (CEO)

Thanks, Ana, and welcome to our full year results presentation. This was another record year for Santander, with our customer base growing by 8 million new customers to 180 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 all-time high CET1 ratio of 13.5%, reflecting our ability to generate capital organically.

Finally, we once again delivered strong shareholder value creation, with the annual dividend per share growing by 14%. Our profits are up 12% year-over-year, and ex-Argentina, up 15% year-over-year. We delivered strong growth in our top line, with revenue up 4% in constant EUR, supported by customer activity across all our businesses. Fee income is up 9% in constant EUR, 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 perform 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 explain 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 global 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 25. 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're 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. Third, we are making good progress on automation through our global platforms with Gravity and One App now deployed across key 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 expand and consolidate partnerships, offering global best-in-class embedded finance solutions with leading platforms and OEMs.

Zinia 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 Openbank in 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're 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 one percentage point year-on-year, reflecting our disciplined approach to capital allocation. Pre-AT1, we are above our initial 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've 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 UK 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.

Ana Botín (Executive Chair)

Thank you very much, Héctor. And before I turn to Webster, I would like to spend a couple of minutes on where Santander US is today. In a nutshell, Santander US has made huge progress, and you can see that in the numbers, into building a sustainable and more profitable model every year in an organic path. So let me just give you the highlights, but let me start by saying that over the last three years, actually 2023-2025, profits have grown by over 30%, and that the EUR 1.7 PAT in the US gets us to the 15% adjusted ROTE that we guided in 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 top 10 multifamily lender, underscoring our very strong position in this US asset class. And our strategic investment in CIB, you're seeing 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 gonna 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 US 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 gonna pay $12.2 billion for Webster. That is a PE 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 $800 million pre-tax cost synergies. That's circa 19% of the combined cost base. As a result, Santander US ROTE would increase to 18% and will deliver 7%-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%-13% target, 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 points, 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 28 consensus PE 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 remain, 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's the current Chairman and CEO of Webster and will become the CEO of Santander Bank, N.A., with Christiana Riley remaining country head of Santander US. The strategic rationale and the financial rationales are both very compelling.

The transaction scales our US Northeast franchise to the tenth largest retail and commercial bank in the United States by assets, and importantly, the fifth largest by deposits in our Northeast footprint. This is gonna 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, you know, 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 $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 US and transformation and Openbank, Webster enhances significantly our US ROTE to 18% by 2028. This is best in class amongst other US regional banks and actually among the top 25 banks, one of the best. It's a highly accretive acquisition for our shareholders, will deliver 7%-8% EPS accretion and a return on invested capital of close to 15%, while allowing us to deliver on our at least €10 billion buyback commitment. As Héctor has mentioned, and as part of that commitment, we will begin our €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, healthcare, financial services, with a strong presence in affluent markets and middle market lending. It has a leading Health Savings Accounts franchise, which is, and 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% ROT, a 46% efficiency ratio, and a 0.4, 0.4 cost of risk. On a combined basis, this will raise our deposit share to 8%. That is 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 to around 1.3, which compares with 1.6% for Santander U.S. standalone. Importantly, the deposit base, the funding mix, brings sticky, low-cost deposits with our cost of deposits

combined cost of deposits from 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, 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, N.A., including Webster, reporting to the SHUSA board.

Luis Massiani, currently president and COO of Webster, will become the head of integration, lead of integration. He will report directly both to John Ciulla as CEO of the banks or the new bank, and Christiana Riley as president and CEO of Santander US and our US holding. Christiana Riley, again, remains country head and CEO, president and CEO of Santander US. And they have-- all of them 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 bank onto the Webster platform.

Through the integration, we have identified close to $800 million in cost synergies, fully phased in by the end of 2028. Headquarters efficiencies and branch optimization will reduce $480 million in cost. Technology and operations will reduce $280 million in cost, and other initiatives, $35 million in cost. In addition to these synergies, One Transformation will reduce over the same time period, around $200 million dollar in cost, landing at a combined cost base of around $3.5 billion. We have identified also $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 around one-time cost 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 3-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 the 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 standalone basis, Santander US 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 three percentage point improvement. Second, growth in capital-light business, including CIB, which would add another two percentage point uplift to returns. Based on consensus forecast and our identified synergies, the combined Santander US 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 forecast. 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 3 percentage points or higher. Again, the combined U.S. business expected to deliver ROTE of 18% by 2028, which is close to or, 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 12.8-13. 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's CET1 ratio.

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 €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 US 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 US 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. 80% 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.

U.S. is among the most attractive banking markets globally, with very attractive risk returns, a growth economy and, you know, 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, increases the share of hard currency earnings, which is a good, 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 the very significant progress you've seen in our strategy, in our numbers, you've seen the 25 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 two of best-in-class profitability. And as a result of this, and based on the current macro outlook, we expect to achieve a 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 of 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 EUR, double digit, including M&A in 2026, with fee growth surpass, higher and surpassing net interest income growth. Cost to be lower in absolute terms in constant EUR. Cost of risk, broadly stable. Attributable profit to increase, so a higher profit in 2026 over 2025. Again, this is ex M&A. And 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, you know, execute on this strategy, and I hope to see you all there at Investor Day on the twenty-fifth of February.

Rahul Sinha (Head of Investor Relations)

Thanks very much, Ana. 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. Alternatively, if you'd like to ask management a question, you can email me directly at [email protected], and I will ask on your behalf. We have five questions lined up already from analysts. Can we go to the first question, please? I think it's from Alvaro Serrano.

Alvaro Serrano (Managing Director)

Hi, good afternoon. 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, on 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 how 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, why do you think it's the right region, and, and how do you get paid for execution risk? Thank you.

Ana Botín (Executive Chair)

Yes. Thank you, 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. And 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, I think, of what we said on TSB.

We have done extensive due diligence, and the way we split this on the $800 million is headquarters and overheads, $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. They're 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 $300 million of the total. That's a big number, $280 million. We are very comfortable with that number. We are going to go. On the commercial side, we're basically going to shut down our systems and go onto theirs. Simple. It's going to go into 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 launch national, but we're going to get a much better front end on the, for the Webster customers. On 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're buying Webster, but the operational model in terms of the bank is theirs. And so think about. If you want to think about high number, first, the combined is not such a high number. It's 19%. Again, very similar to what we said in the UK.

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 will 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 is 0 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 15% ROIC, we are being very consistent with our capital hierarchy. And again, the spread between share buybacks when we did TSB and today, it's exactly the same. So think that at EUR 11, the share buybacks is 9%, ROIC is 15. That's 6 points. That's exactly the difference between 14 and 20 we had when we announced TSB. Finally, you say mixed results in the U.S. Well, I respectfully disagree. We're very focused on shareholder value creation. I have said it, I think, during the presentation.

I want to reiterate, over the last five years, the U.S. has been top 3 in terms of the geographies of Santander and value creation. And again, the U.S. results have gone up by 30%, 30%, over the last 3 years. We've taken accounting ROTE from five-ten, but very importantly, on an adjusted basis, as we said at Investor Day, it's a 15%. So, I believe that is the explanation.

Rahul Sinha (Head of Investor Relations)

Thank you, Anna. Could we go to the next question, please? It's from Sophie from Goldman Sachs.

Sophie Ramsay (Equity Research Analyst)

Yes. Hi, this is Sophie from Goldman Sachs. Thanks a lot for taking my question. 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, like, after the impact that you guide for. Could you just give us the 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? Thank you.

Ana Botín (Executive Chair)

Okay. Apologies if I understood correctly, but I would say that obviously, what Webster does is it converts Santander US 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 gonna 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 the last three years.

We have turned Santander US into a sustainable, profitable business, but it was more of a monoliner focused on consumer. What we did is expand the digital bank, greatly reduced the cost of funding. We got $8 billion in about 15 months, which reduced our cost of funding, allowed us to fund profitably consumer loans, but it was a monoliner, okay? 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, at the way we get to 18%, and that is the key number. Webster acquisition takes Santander US 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. 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, okay? This will make us, again, a top bank in profitability. Importantly, you know, this is a bolt-on acquisition

If you measure it in terms of 4% of our loans, but it greatly increases the hard currency proportion. It's a strategic transaction in the U.S., but at a group level, it is a bolt-on acquisition, whether you look at it in terms of market value, 7%, or loans. Again, the ultimate goal is profitability, and we get to that by having the in-market scale and the diversified model that Webster brings to our retail commercial bank. In terms of 140 basis points

José García Cantera (CFO)

Hi, Sophie. It's José. The price we've paid in euros is EUR 10.3 billion. 65% of that is cash, which is the capital impact. In basis points, that is 110 basis points. Remember that in our case today, one basis point is around 61-62 million EUR. The difference between 110 and 140 is twofold. On the one hand, the impact of the DTAs, 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.

Rahul Sinha (Head of Investor Relations)

Thanks very much. Could we move to the next question, please? I think it comes from Borja Ramirez at Citi.

Operator (participant)

The next question comes from Borja Ramirez from Citi. Now your line is open.

Borja Ramirez (Director)

Yes, hello, good afternoon, and thank you very much for taking my questions. I would like to ask, so it seems there are 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,

Rahul Sinha (Head of Investor Relations)

Sorry, Borja, I don't think we got the

Borja Ramirez (Director)

Sorry, I

Rahul Sinha (Head of Investor Relations)

the second part of your question. Yes. Do you mind repeating the second question, please?

Borja Ramirez (Director)

Yes, sorry. Sorry, my bad. I would like to ask, given the fact that the business is now more diversified and better, you know, better funding for now 100% loan-to-deposit ratio, could that allow for better growth going forward for the combined business?

Ana Botín (Executive Chair)

Yeah, 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. That is 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 in commercial funding.

So overall, that improves our loan-to-deposit and will 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 US, this is, you know, this is the mix that you would see in any of the regional banks. So again, should allow us to grow faster overall, as well as reducing the cost, overall cost of funding.

Rahul Sinha (Head of Investor Relations)

Maybe we can go to the next question that comes from Carlos. Carlos at CaixaBank.

Operator (participant)

The next question comes from Carlos Peixoto from CaixaBank. Now your line is open.

Carlos Peixoto (Equity Research Analyst)

Hello. Good evening. Just a quick question from my side, actually, on the deal integration. So, or actually two questions. But basically, in 527, you make a bit of a bridge in C1 evolution. I was wondering if you could describe as well updates on the expected impacts from the Polish sale and in PSP, so that we could have a bit of an additional color on the world bridge and deal year-end 2026. And then on the second question, your are you issuing new shares?

And I'm sorry if I missed this, but are you issuing new shares for Webster or are those shares coming from the share buyback being carried out? In case you're 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 cancel the share buybacks that were previously announced? Thank you very much.

Ana Botín (Executive Chair)

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. You know, ex 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, but because we need to you know, again, we need to bring in a lot of costs and then include the synergy, 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 up, profits up mid-teens in constant euros.

So again, 27 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're exiting a country at 2.2 times book. Again, that, at the time, that was 66 points better than buybacks. We're doing two bolt-on acquisitions, which for the group, are bolt-ons, but strategically takes both the U.K. and the U.S. to be at scale in retail commercial banking, and very important, 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. Again, we could get organically there. As we said in the U.S., you know, we had a good plan. You can see it on the slide, you know, significant uplift over the next couple of years.

But getting to 18% profitability with a US bank is really, you know, a major achievement, as in the case of TSB, to 16%. So again, two add-on acquisitions, which basically give us the scale we needed on the retail commercial side. 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 that we 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, you know, the EUR 5 billion will be compensated by an issuance of 3.5 billion shares that will have to go to shareholders. On our side, there will be an AGM, shareholders meeting to approve that.

José García Cantera (CFO)

Just to give a detail that is probably important for as you build your models, the exchange ratio is 2.0548 Santander shares per Webster share, mm? That's the number of shares that will be issued. And probably just to clarify the up profit in 2026, ex-Poland and ex-TSB, that is exactly what we mean. In 2025-6, sorry, we will not have Poland, and without the contribution of TSB, we expect profits to be higher than the reported figure in 2025.

Ana Botín (Executive Chair)

Excellent.

José García Cantera (CFO)

Just the reported figure in 2025. That's what we mean by up without Poland, without TSB.

Ana Botín (Executive Chair)

without Webster, and of course

José García Cantera (CFO)

Of course.

Ana Botín (Executive Chair)

Yeah. So that is. Yes, just to clarify, again, 2026 ex M&A, i.e., excluding Poland, because it's no longer in the numbers, excluding TSB and excluding Webster, these would be the numbers. Obviously, we will have some months of both TSB and Webster, and that's why I said, including M&A, we'd have double-digit revenue growth already in '2026. We're not giving you any more numbers because we want to make sure they're clear when we do that, and we'll do that at Investor Day. But profits will be up ex M&A. So ex-TSB and Poland and Ren- and Webster, profits will be up in '2026.

Rahul Sinha (Head of Investor Relations)

Thanks very much, Ana, and José. Next question comes from Britta at Autonomous.

Operator (participant)

The next question comes from Britta Schmidt from Autonomous Research. Now your line is open.

Britta Schmidt (Senior Analyst)

Yeah, good evening. Thank you for taking my questions. 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.

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? 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. Thank you.

Ana Botín (Executive Chair)

Yeah. The 14.1 is euros, right? So, if you look at 2026, so we're talking about revenues and cost in constant, 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, we don't have exactly the number of months yet. You know, 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, yeah, that's all considered in the returns that we have provided. The 18 and.

You know, as José explained, we have considered the group capital implications, and that's 140 basis points. There's nothing more that we have seen, and we have been very we've done quite a rigorous 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. And restructuring cost, the question was that it sounded it's $1 billion, right?

José García Cantera (CFO)

One, One X.

Ana Botín (Executive Chair)

Circa one X. One X.

José García Cantera (CFO)

One X.

Ana Botín (Executive Chair)

Sorry, One X, so 800. Yeah.

José García Cantera (CFO)

800.

Ana Botín (Executive Chair)

EUR 800 million. And we will, actually, both the restructuring cost of TSB and Webster, subject to auditors, but we believe we will offset most of those in 2026 with the accounting gain from selling Poland, which is quite substantial. So again, that is considered in the numbers and the returns that we are providing, both in TSB and now in Webster. You want to say-

José García Cantera (CFO)

No, and obviously, and we haven't clarified this, but now that you mention it, it's important, the profit up in 2026 excludes the capital gain from Poland, obviously. Mm-hmm.

Ana Botín (Executive Chair)

With Santander, yes. So part of the uplift in ROTE to 18% before Webster was coming, and you have that in the slide. If you can put up the slide with the synergies. So first, as I said, Santander U.S. profit has gone up by 30% in two years, or three years, in the last three years. You can see that the way we get from 10% accounting ROTE, measured as U.S. banks, to 18%, you can see here on the slide that we're just showing on the screen, there's a standalone improvement from merging already. And yes, they would all be merged into the bank. We have a process ongoing for that already. That is a big improvement on ourselves as we merge the banks. Then there's the cost synergies of Webster with the bank.

So again, that is what takes us from 48 to 40. On the right-hand side of the slide is for the whole of Santander U.S., that includes CIB. On the left, it's excluding CIB, so you can have clarity of what the retail commercial bank of Santander, including the auto business, plus Webster, and then the synergies on that slide. So we go from 4.4 to 3.5- again, some of it, as you can see on the left, is Santander U.S. organic plan. You can see that obviously our cost base was still high pro forma, and the combination is what takes you down then to the 3.5. Is that helpful?

Rahul Sinha (Head of Investor Relations)

Britta, we'll 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.

Operator (participant)

The next question comes from Ignacio Ulargui from BNP Paribas. Now your line is open.

Ignacio Ulargui (Equity Research Analyst)

Thanks. Thanks very much for the presentation and for taking my questions. I have two questions. The first one is on capital generation. If I just look to the plan, to the slide 27 of the presentation, I mean, could you just explain a bit what is the reason behind the stronger build-up of capital that you have in 2026 before completing the transaction, the 70 basis points? I think it's a bit higher than to what I will have in mind. Is there more SRTs or it's just the fact that the profitability is improving? And the second question I have is on the revenue potential funding synergies of Webster. Just to be clear on that, there is no funding synergies incorporated into the 70% EPS accretion? Thank you.

Ana Botín (Executive Chair)

So the answer is there's no funding synergies on the EPS accretion. That's upside. There's no revenue synergies. 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 as before in the sense that we will be able to grow our auto consumer faster because we have, you know, we have a cheaper funding. So I think that is really interesting, and as you know, we're very competitive there.

So there is upside, not just because of cross-selling of our CIB comm you know, capital markets products to commercial customers, but also we'll be able to grow faster than we had in our own organic plan. That's not in the numbers. The cap gen that we are putting in for 2026, it's exactly the same as what we did this year. So, again, José or maybe then Héctor can comment on how we have done it. You know, we are generating a lot of cash, and this is something we can do again. We, we've done it already. We know how to do it. We have very granular tools. But José, can you

José García Cantera (CFO)

No, the cap gen is the same as in 2025, as Ana just said. What are the assumptions in these numbers? Regulatory and supervisory headwinds of between 20-25 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, you know, come up with these 70 basis points, which again is the same number as in 2025.

Rahul Sinha (Head of Investor Relations)

Thanks very much. The next question comes from Hugo Cruz at KBW.

Operator (participant)

The next question comes from Hugo Cruz from KBW. Now your line is open.

Hugo Cruz (Director)

Hello. Hi, thank you for the time. I have 3 questions. So first, I mean, I think some investors will be kind of, right or wrong, upset because they thought you're not going to do any big acquisition. 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, you know, the timing of the synergies, I understand from the slide that to all the EUR 800 million will be captured by 2028. Seems pretty quick, but then, perhaps it's because of US. But also I was wondering, are there any more synergies to come after 2028? That's it. Thank you.

Ana Botín (Executive Chair)

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. 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 $2 billion down the road, I think those are rough numbers, to get us to 18% between the synergies and the PNL of REN. This gets the Santander US, now I'm talking about the whole, including CIB, to 18% profitability at scale, global scale and local scale, in the U.S. and the U.K. At the group level, we are guiding to ROTE above 20%. We'll give you more details at Investor Day. That is a huge turning point for Santander, both in the U.S. and the U.K., but also at the group. So I don't know if that's clear enough or if you have any doubts, please ask me again. I will repeat it. We are at scale in our major markets, our core geographies. We have always been very clear the U.S. is a core geography. I've said that for 10 years.

We today can say that we have a full service Santander Retail Commercial Bank in a footprint, which is an economy as large as the UK, with a top team that has proven integration capacity. By the way, the timings, we're very confident because we're gonna be very pragmatic. It's a great question, and maybe, Héctor, you can help me here, but one of the things we are gonna do in the UK and U.S., we're gonna slow down One Transformation. Why? Because it's hard to do two things at the same time. So we're gonna be delivering the numbers we're telling you, but yes, there will be, for sure, additional benefits in the U.S. and UK beyond 2028.

And hopefully, if we can deliver, I know Héctor is gonna say that three years, or 2027, 2028, is already a short time period, but if we can accelerate the integration, especially in the U.S., where things work faster for many reasons, we will then, you know, continue with the One Transformation. So we'll focus One Transformation more on countries like Brazil, Mexico, Spain, Chile. Gravity, for example, you know, we're gonna, you know, roll out that 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. Do you wanna talk on the timings on One Transformation in the U.S. a bit more?

Héctor Grisi (CEO)

Yes, I mean, just to give you a little brief idea of what are we doing. So it's very important to understand that the business have grown significantly. 2023, we made $1 billion PAT; 2024, $1.5 billion; 2025, $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. Revenue grew 9% in the US year-on-year. Auto, the consumer business made, I mean, $5.7 billion in revenue, okay? CIB, $1.9 billion in revenue. That's basically 33% up year-on-year. Private banking, around 700. And SBNA, basically, I mean, the, the retail bank, basically did, in retail and commercial, is $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, right? So this is exactly what we needed in terms, and it's gonna help us not just in the synergies we're talking about, which are huge, but also what we're doing in terms of what the funding, which is not taken into account in these numbers, as Ana explained you. And there is a lot of synergies in terms of cross-selling and things that we can do within the two business, within CIB and the commercial business. Remember that Webster is 80% commercial, 20% retail, so is actually exactly what we needed in order to combine our business and to take it to the next level.

So it's gonna help us quite a lot in that sense because it is exactly what we needed to take the business up, to be able to grow it to 19%. So the return is great, as you have seen, and basically gives us an opportunity to become a much more competitive bank with a deposit base that we don't have today. So that combination is gonna help us a lot. This doesn't take into account that also makes us into a $200 billion total assets, which basically allows us to do some.

I mean, you know that we're very disciplined on the subprime business that we do, but that's helped us in the funding, and we put basically integrated in the whole operation of the bank. So these are things that we're, we'll be working over the next two years, but there are huge opportunities that is gonna give us, I mean, to take the returns that we are telling you, and probably a little bit more if we're really good at executing.

Ana Botín (Executive Chair)

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 I like to say we're the best owner. You know, 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 were the best because of what Hector just explained. We have a very complementary business. Revenue synergies, again, not in the numbers, funding synergies, not in the numbers, but very important, cost synergies. And so it does transform and is, you know, significant strategically for Santander US, whilst a bolt-on, low risk for the group. What's the other one?

Héctor Grisi (CEO)

Uh

Ana Botín (Executive Chair)

Yeah, beyond 28. I think we said that, no?

Héctor Grisi (CEO)

Yeah, we, I mean

Ana Botín (Executive Chair)

Beyond 28, One Transformation, because we're gonna really try to not get in the way of the integrations. We have a very complete, concrete plan on the integration, by the way. We know what are we gonna do. We know the systems. I think I said it. We're gonna go onto their system on the commercial side 100%. We're gonna go onto their back end, you know, also on the consumer, but our Openbank front, which is clearly better, and that, again, is gonna bring all the consumer customers, both Openbank, SBNA, and Webster consumers, onto a single, modern, cloud-based platform. And that can happen pretty fast.

Rahul Sinha (Head of Investor Relations)

Thank you, Ana. We've got two more questions left. The next one comes from Francisco Riquel at Alantra.

Operator (participant)

Ladies and gentlemen, I would like to remind you that if you would like to ask a question, please press star five on your telephone. The next question comes from Francisco Riquel from Alantra. Now your line is open.

Francisco Riquel Correa (Head of Equity Research)

Thank you. 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 Northeast 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? Thank you.

Ana Botín (Executive Chair)

So the answer is yes. I have said it, it's on the slide. We're at scale in all our core markets. When we think about the retail commercial bank 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%, and we are very confident we can get to that 10% with the new combination. So again, we are top five in footprint, and 8% is a very, very attractive market share. Clearly enough, I want to repeat it again, we're at scale in all our core markets. We're not going to stop the Openbank rollout national. That continues.

Now, what we are going to do is we will slow down the rollout of other products because we're going to focus on the integration. So we will delay by about a year the national digital bank. Remember that, again, we were focusing on shareholder value creation in the short term. So the goal of Openbank national was to access cheaper funding than wholesale. That we have achieved. That's what's behind part of the increase to EUR 1.7 billion, where we have reduced the funding costs.

So there will be a delay, so we, you know, we have rolled out, I think, high yield savings and CDs. The rest of the products will have to wait, and 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 scale of our system.

So there is no change in the strategy with Openbank, we just we'll delay that by about a year. The goal is, I know it's very ambitious, and don't write this one down, but the goal will be that by, say, April, May of 2027, we will be able to have and roll out the full product suite again for all the consumers. Héctor is telling me a bit more, maybe one month more, Héctor, but not more. But yes, is that sufficient, Álvaro? Who was this? Álvaro?

Rahul Sinha (Head of Investor Relations)

Paco.

Ana Botín (Executive Chair)

Paco. Pardon, Paco.

Rahul Sinha (Head of Investor Relations)

Paco, Paco.

Ana Botín (Executive Chair)

Pardon, Paco. But again, we can go into more detail. But we want to make sure we deliver the 18%, you know, in the US in three years, and for that, we have to be we have to choose our, you know, where we want to prioritize. And again, delaying one year, we think, is worth it for us to have a common system, common platform for both Webster, Santander, SBNA, and Openbank in the United States.

Rahul Sinha (Head of Investor Relations)

Thank you, Ana. The next question comes from Andrea Filtri.

Operator (participant)

The next question comes from Andrea Filtri from Mediobanca. Now your line is open.

Andrea Filtri (Equity Research Analyst)

Thank you for taking my question. I've got two. Your business plan is in a few weeks, but this move feels like an introduction to it. You fixed 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 the over 20% of 2028. I think the U.K. improvement is worth more than 1 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%? Thank you.

Ana Botín (Executive Chair)

So thank you, Andrea, for that question. And the answer to the first is yes, absolutely. So we have built the capital. We had two pending core geographies where we're not at scale locally, and the businesses were not as, you know, at the level that we could get to that profitability at a, you know, in a reasonable time period. So yes, you can expect that you will compound. We think of ourselves as a compounder. Dividends, compounding, you know, tangible book and dividend growth through the cycle, and we think this is incredibly important step. It's a turning point. We do obviously, you know, obviously focusing on organic growth, as I've said, we are at scale in all our core markets. The 8% market share in our footprint is huge. What's really important, we're buying a really good bank.

So yes, we're paying 2x tangible, but because we are the best owner, we can deliver for shareholders a 15% return on investment capital, that's cash on cash, which I think is incredibly attractive against the 9%, tangible, sorry, share buyback. So yes, we you should think of us now as growth, and you should think of ourself as a compounder, and we, you know, we should be very close to 13 by the end of 2026, and above 13 by the end of 2027, and I take you back to our capital hierarchy, organic growth. Again, distributions, no more bolt-ons, I can tell you that. And, you know, and TNAV, and dividend per share accretion, as we discussed. In terms of how we get from the 16 to 20, well, U.S., as I

Rahul Sinha (Head of Investor Relations)

Above 20.

Ana Botín (Executive Chair)

Above 20, yes. I think he said 20, but it's above 20. Thank you, Rahul. Yeah, we should be above 20, and as you know, we always deliver, so the 20 is, like, set in stone, and then obviously, hopefully more upside. So 16 in the U.K., 18% in the U.S., Brazil should improve substantially, Spain should continue to improve. There's a lot of businesses where it's still subscale, where we don't need to buy organic. Insurance is one of them. Commercial bank globally is another one. That's why this bank in the U.S. is so important, because they have a very strong commercial franchise with strong network effects, which was the reason that Poland strategically did not make sense for us and made a lot more sense for Erste. So this makes a huge amount of sense for us.

Nobody has asked, you know, why Webster? But we have been looking at opportunities and the relationship with Webster, we've known them for a number of years. Something that is hugely important, and I mentioned it in my presentation, the culture. They have the Santander culture in commercial banking. That's huge, and I think that is something which will help on the 18% for the US. But again, the 20 we'll give more in Investor Day.

But I would say Brazil, Spain still has upside, consumer bank has upside. You've seen that the improvement was not as good this year in consumer, if you had time to see the presentation. But the delta, as we've said, was like EUR 500 million, and this should continue to go up. One of the reasons that this year was not so great was quite a number of one-offs, which we don't expect in the future: Motor Finance and Swiss francs and some things. Did I miss anything? No.

José García Cantera (CFO)

I want to say Investor Day.

Ana Botín (Executive Chair)

Investor Day, Andrea. We'll give more detail on that. Is that satisfactory?

Andrea Filtri (Equity Research Analyst)

Thank you. Thank you, Ana.

Rahul Sinha (Head of Investor Relations)

The last question, we've got one more question from Ignacio Cerezo at UBS.

Operator (participant)

The last question comes from Ignacio Cerezo from UBS. Now your line is open.

Ignacio Cerezo (Equity Research Analyst)

Good evening, and thank you for taking my questions. Just clarifications, really. The first one is if you can give us some detail on how you calculate a 15% return on capital invested. The second one, if you can 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 will you respond to that? Thank you.

Ana Botín (Executive Chair)

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, you know, the confidence we have that there will be revenue synergies. So do you want to expl This is a cash on cash, basically, ROIC?

José García Cantera (CFO)

Yeah. I'm going to ask Rahul to give the details, but again, this is a three-year return on the capital invested today.

Ana Botín (Executive Chair)

Exactly. It's a cash-on-cash calculation.

José García Cantera (CFO)

Exactly. Exactly.

Ana Botín (Executive Chair)

Is that

José García Cantera (CFO)

Yes.

Ana Botín (Executive Chair)

That simple?

José García Cantera (CFO)

Yep. Rahul, you go.

Rahul Sinha (Head of Investor Relations)

So Ignacio, we can take you through the details if you like. But as you know, the transaction has $12.2 billion consideration, and that will give you a number that gets you to a capital employed. If you take into account, you know, the capital impact, you take the 140 basis points to work out the capital impact, plus the share issuance, that gives you the capital employed. And in terms of the returns, we've been quite clear.

If you take consensus estimates, Visible Alpha, for 2028, for Webster, you will get the net profit number. You can add on to that the cost synergies, and that should get you relatively close. There is a point about the marks, but we can take you through the detailed part of the calculation, but that should get you pretty close to the circa 15% number. And obviously, feel free to give us a call. The investor relations team will be

José García Cantera (CFO)

Which is the same way we calculated the TSB return on capital invested, and this is the usual way the industry calculates this number. So yeah, this is standard.

Rahul Sinha (Head of Investor Relations)

On the distribution question, Ignacio, we will give you more details at Investor Day. But safe to say, Ana has reiterated the 50% payout, and she has reiterated that we will apply 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, you know, some sense of what we assume in terms of our greater than 20% return on tangible equity. 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 through with us directly through our email addresses, [email protected], or through the usual phone lines which are on our website. 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.

Ana Botín (Executive Chair)

Thank you very much.