• Profit: EUR 3.4 billion, up 19% from Q1 '24.
• Return on Tangible Equity (RoTE) post-AT1: 15.8%, up almost 2 points year-on-year.
• CET1 Ratio: 12.9%, at the top end of the 12% to 13% operating range.
• Revenue Growth: Up 5% in constant euros.
• Net Interest Income (NII): Increased 4% excluding Argentina.
• Net Operating Income Growth: 7% year-on-year.
• Efficiency Ratio: Improved by around 1 point.
• Total Revenue Increase: 5%, driven by customer activity and global business contributions.
• Net Fee Income: Grew close to double digits.
• Cost of Risk: Improved to 1.14%.
• Loan Loss Provisions: Increased 7% year-on-year.
• TNAV plus Dividend per Share Growth: 14.5% year-on-year.
• EPS: Rose to above EUR 0.21.
• Payments Revenue Growth: Double-digit growth in both PagoNxt and Cards.
• Consumer Deposit Increase: 12% year-on-year.
• Global Markets Revenue Growth: Up 23% year-on-year.
• Wealth Profit Growth: Double digits with efficiency ratio improved by close to 1.5 points.
• Payments Profit Growth: 30% year-on-year.
• PagoNxt EBITDA Margin: Improved to around 29%.

• Warning! GuruFocus has detected 4 Warning Sign with SAN.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Banco Santander SA (NYSE:SAN) reported a record profit of EUR 3.4 billion for Q1 2025, a 19% increase from Q1 2024.
• The company achieved a strong CET1 capital ratio of 12.9%, at the top end of its 12% to 13% operating range.
• Revenue grew by 5% in constant euros, supported by a 4% increase in net interest income (NII) and record fees.
• The bank's transformation efforts have improved efficiency, with a 1-point improvement in the efficiency ratio.
• Banco Santander SA (NYSE:SAN) plans to distribute up to EUR 10 billion to shareholders through share buybacks for 2025/2026, subject to regulatory approvals.

Negative Points

• The bank faces currency depreciation challenges across its footprint, impacting TNAV plus dividend per share growth.
• Argentina's economic situation is causing distortions in the P&L, affecting net interest income and other income.
• Loan loss provisions increased by 7% year-on-year, with some deterioration noted in Brazil due to higher rates and inflation.
• The Spanish banking tax is being accrued quarterly through taxes, impacting profit calculations.
• The bank is experiencing regulatory and supervisory headwinds, with an expected 60 basis points impact for the year.

Q & A Highlights

Q: How should we think about net interest income (NII) going forward, given changes in rate expectations across your core markets? A: Hector Grisi Checa, CEO: Excluding Argentina, we expect NII to be slightly up in constant euros and slightly down year-on-year in current euros. We are assuming end rates at around 1.5% by the end of '25. Our ALCO portfolio has grown, and we have positive sensitivity to higher rates in Europe. In Brazil, we are well-positioned for lower rates, with an outlook improving for '25.

Q: Can you discuss any M&A and asset disposal opportunities, particularly regarding Santander's Polska? A: Hector Grisi Checa, CEO: We acknowledge speculation about a potential transaction involving Santander's Polska. We are in discussions with Erste for a potential sale of a 49% stake, but there is no certainty of an agreement. Completion would be subject to closing conditions and regulatory approvals.

Q: How should we think about group cost evolution throughout the year? A: Hector Grisi Checa, CEO: We reiterate our guidance for lower costs in current euros for '25 versus '24, despite inflation and FX pressures. Costs were 2% higher year-on-year in Q1 in constant euros but declined 1% in current euros. Our transformation is generating operational leverage, allowing us to maintain or reduce costs while increasing revenue.

Q: Can you provide an update on the performance of DCB Europe? A: Hector Grisi Checa, CEO: NII continues to perform well and is on track to benefit from lower rates. Fee income was impacted by regulatory changes in Germany, which has now been rebased. Impairments were higher due to a mix of items, but we are not concerned about credit quality. New origination is meeting return hurdles, and returns will improve with lower rates.

Q: What are your strategic growth priorities, and how do you plan to redeploy capital, especially if the sale of the Polish stake goes ahead? A: Hector Grisi Checa, CEO: The US is a significant growth market for us, and we will continue to deploy capital there as long as it's profitable. Our focus is on organic growth, which has been above 20%, and on share buybacks. We aim to continue growing our businesses and executing our transformation to deliver strong returns to shareholders.

Q: Can you provide an update on the UK motor finance business and the structural hedge in the UK? A: Jose Cantera, CFO: The structural hedge is almost EUR110 billion at a yield of 2.47%. We expect NII to go up in the UK by low single digits, in line with volume growth. The impact of the ring-fencing regime being discontinued is negligible, but a simpler operating framework would help banks contribute more to growth.

Q: What is your outlook for NII in Spain, and how do you see the cost of risk evolving? A: Jose Cantera, CFO: We have reduced interest rate sensitivity in Spain, and even if rates go down to 1.5% by year-end, we expect NII to remain strong. We don't see any risk to our guidance of a 1.15% cost of risk for the year, with different behaviors across countries.

Q: How do you view the competitive landscape in Mexico with Nubank gaining a banking license? A: Hector Grisi Checa, CEO: We welcome Nubank becoming a fully licensed bank as it levels the playing field. The competition is tough, but we have the tools to compete effectively. Our digital bank in Mexico is performing well, with strong client acquisition and deposit growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.