Santander hikes 2028 profit forecast to above 20 billion euros after deals

By Jesús Aguado

MADRID, Feb 25 (Reuters) – Santander aims to hike its profit by over 40% in the next three years to above 20 billion euros, helped by growth in its U.S. and UK markets, a rise in customer numbers and cost savings from its IT transformation, it said on Wednesday.

Santander, which reported a record net profit of 14.1 billion euros for 2025, also lifted its profitability ratio target by almost four percentage points to above 20% to reflect expected synergies from recent acquisitions of U.S. bank Webster and Britain’s TSB.

Over the 2026-2028 period, the bank targets annual mid-single-digit percentage revenue growth, a double-digit growth in earnings per share, and annual cost declines, which are partly the result of creating a common IT platform and the deployment of a unified global operating business model.

“The architecture is built and the engines are running. Now it is about executing with precision,” Santander’s CEO Hector Grisi told investors in London.

Its cost-to-income ratio was seen improving to around 36% at the end of 2028 from a reported 41.2% in 2025.

By 2028, more than 1 billion euros in cost savings and revenue would come from initiatives in artificial intelligence, contributing around one percentage point to the group’s cost-to-income improvement, with two percentage points from TSB and Webster synergies, and other savings from its digital drive.

This would help reduce its total cost base to less than 27 billion euros by 2028 from 28.5 billion euros on a pro forma basis.

HIGHER FOOTPRINT IN DEVELOPED MARKETS

For decades, the bank’s geographical diversification – spanning 10 core markets – has insulated it from economic downturns in individual regions but left it vulnerable to currency depreciations, particularly in Latin America.

Shares in Santander, the euro zone’s biggest lender by market value, closed up 4.8%. Shares had risen more than 80% in the past 12 months, almost twice as much as the European banking index.

Barclays said Santander’s efficiency and profit targets exceeded market expectations and that investors would focus on the bank’s ability to deliver structurally higher returns, with lower reliance on Brazil.

The Webster and TSB deals will raise the developed markets’ share of Santander’s gross operating profit to nearly two-thirds, with the bank aiming for a profitability ratio of around 16% in the UK and 18% in the U.S. by 2028.

Santander aims to serve more than 210 million customers across Europe and the Americas, up from 180 million clients. It sees its net interest income expanding on constant euros by a low-to mid-single-digit percentage over the period, supported by volumes and lower funding costs.

GROWTH PRIORITY

European banks announced several acquisitions last year as they look to deploy cash piling up from soaring profits, though some, such as Deutsche Bank and Barclays, have prioritised increasing share buybacks.

The bank sets a 50% shareholder payout ratio, evenly split between cash and shares, but from 2027 onwards, the cash proportion would rise to 35% in keeping with its goal of reaching a core tier-1 capital ratio of around 13% by 2028, compared with 13.5% at the end of 2025.

Santander aims for higher end-2028 ROTE targets in almost all of its five units, targeting more than 21% for its retail business, more than 20% for corporate and investment banking. For its wealth unit, it forecasts a target of over 60%, a similar level to its current profitability ratio.

($1 = 0.8472 euros)

(Reporting by Jesús Aguado; additional reporting by Emma Pinedo; Editing by David Latona, Tomasz Janowski, Rod Nickel)