Banco Santander (SAN) Investor Update summary

Strategic rationale and transaction overview

• Sale of 49% in Santander Bank Polska to Erste Group for €6.8 billion in cash, valuing the business at 2.2x spot tangible book value and a 7.5% premium to the adjusted closing price.

• Erste Group will also acquire 50% of Santander Bank Polska Asset Management for about €200 million.

• Santander will retain a 13% stake in Santander Bank Polska as a financial investment, valued at €1.9 billion, with no conditions or lock-up period.

• Transaction simplifies the group’s footprint, increases capital for organic growth, share buybacks, and bolt-on M&A, and establishes strategic cooperation with Erste in corporate banking and payments.

• Transaction expected to close by end of 2025, subject to regulatory approvals.

Capital allocation and buyback plans

• Proceeds will be used in line with the capital hierarchy, prioritizing organic growth, buybacks, and selective M&A, with bolt-on acquisitions required to exceed 20% ROI.

• Accelerated €10 billion buyback program, with €3.2 billion extraordinary buyback expected in Q1 2026, and potential to exceed €10 billion total buybacks.

• Pro-forma CET1 ratio expected to be 14% at year-end, temporarily above the 12%-13% target range.

• Transaction releases approximately €6.4 billion in CET1 capital, with a net capital gain of about €2 billion and TNAV increase of €4 billion.

• No change to capital guidance; regulatory headwinds expected to ease in 2026.

Financial impact and growth outlook

• Deal is guided to be earnings positive by 2027/2028, with EPS accretion expected from organic growth, buybacks, and bolt-on M&A.

• Return on tangible equity (RoTE) targeted at 15%-17%, with 16.5% expected this year.

• Transaction crystallizes value at a significant premium to current trading levels and historic highs.

• Consumer finance business retained for scale and strategic value, especially in large markets like Poland.

• No material risk retained on Swiss franc mortgages; €200 million cap on guarantees provided.