“And corporate credit in Spain is now cheaper than in Germany, according to data from the ECB survey” (3.69% vs 3.70%), emphasized the president of Spain’s largest bank, Ana Botín, who saw a rise of more than 8% in the stock market yesterday after announcing profits of €12.574 billion (up 14%) with a revenue increase of 10%. (https://t.co/TUaTQ8qTGE )
The board intends to increase shareholder returns and also announces a share buyback of up to €10 billion (in the last year, it has repurchased more than 15% of its capital) “and without setting a maximum price for the acquisition of shares.” The president noted that any excess capital beyond the 13% range (CET 1 ratio) will be returned as additional remuneration to shareholders. She pointed out the great capacity for organic capital generation, resulting from balance sheet rotation and an efficiency level that has decreased to 41.8%, which is 66 basis points better than the previous year.
She reiterated that its franchise in the United Kingdom, which accounts for 9% of the group’s business, is not for sale and complained that there is no European framework that favors cross-border mergers. “Europe is not a single financial market (…) so it is logical that in a market that grows little – the European one – there are operations within each country, and that investment banks constantly come to offer you to buy this or sell that.”
The president and CEO of Santander, Hector Grisi, expressed confidence in continuing to grow profitably across all segments: With 87% of assets above the cost of capital – which for Santander is 11.1% – the entity achieves a ROTE of 16%.
They complained about excessive European regulations – “every additional billion in capital means €16 billion less in credit to SMEs and €40 billion less in mortgages” – and called for adapting “green” requirements for entities, stating that a mortgage in Mexico or Brazil cannot have the same “green” requirements as in the Netherlands and Spain.
Regarding the housing market issues in Spain, Ana Botín was clear: Spain has a pent-up demand for 600,000 homes, and fewer than 100,000 are being built each year. There is a need to incentivize professional investors. For example, here REITs – known as SOCIMIs in Spain – account for 15% of the market. In Germany, they make up 50% of the rental market.”
Beyond national issues, she pointed out that “In Europe, we need to improve productivity, and for that, as Letta and Draghi indicate, we must support private investment. Because without investment, there is no growth, and without growth, there is no well-being.”
Morgan Stanley comments:
SANTANDER, OVERWEIGHT, FROM €5.9 TO €6.5 Santander: 4Q24: A Pivotal Moment: Over the last three years, banks have generated income through liabilities, but Álvaro Serrano (analyst) believes that in the next three years, the source of income will be assets. And as one of the largest consumer franchises globally, Álvaro believes that Santander will be able to generate earnings growth above its competitors. Additionally, following the positive surprise in yesterday’s capital figure (CET1 12.8%, +30bps versus consensus), management has committed to distributing all capital that exceeds 13%, which according to Álvaro reflects that the capital building process of the last 15 years is coming to an end and will allow the bank to increase the total payout from 50% in 2024 to 57% in 2025 and to 64% in 2026 (total yield of 10-11%). Therefore, in light of expectations for higher profits and more buybacks, Álvaro raises his EPS estimate for 2025-27 by 7-10%. At a P/E of 6.2x, he reiterates OW.
