Morgan Stanley | Our analyst Álvaro Serrano reiterates Santander as his Top Pick, raising his target price from €8.30 to €9.50, while analysing what could lead to a ROTE of 20%. With capital stabilised and excess capital redistributed, Serrano believes that Santander’s global platform and the normalisation of profits in Brazil will drive the next phase of growth. He revises his profit estimates upwards by 7-8% for 2026/27, remaining 9% above consensus. The expert believes that February’s CMD could point to a ROTE >18%, which he sees as achievable, and estimates that it could approach 20% if the lack of profitability in the US retail business is addressed. It raises its total payout estimate to 70%, implying a total distribution of more than €40 billion between dividends and buybacks for the rest of CY25 and until 2028, with an annual return of 9-10%. With the stock trading at 8.3x PE 2026 compared to 9.5x for the sector, it continues to consider the valuation attractive.
Santander’s ROTE could approach 20% if lack of profitability in US retail business addressed
