Banco Santander Q3 2026 Earnings Date & Estimates

Banco Santander (NYSE:SAN) is a Spain-based global banking group founded in 1857 and headquartered in Santander, Spain. The company provides financial services to individuals, businesses, institutions and governments through a network spanning Europe, North America and South America.

Its principal activities include retail and commercial banking, consumer finance, corporate and investment banking, payments, asset management and private banking. Santander offers products and services such as current and savings accounts, mortgages, personal and business loans, credit cards, insurance, investment products, cash-management services and financing for corporate clients.

The group operates through established banking businesses in markets including Spain, the United Kingdom, Portugal, Poland, Brazil, Mexico, Chile, Argentina and the United States. Santander is led by Executive Chair Ana Botín, who has held the chairmanship since 2014, and Chief Executive Officer Héctor Grisi, who assumed the role in 2023. Its ordinary shares trade in Spain, while its American depositary receipts trade on the New York Stock Exchange under the symbol SAN.

Banco Santander Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record profitability: Underlying nine-month profit reached €11.2 billion, up 14% year over year in constant euros, with revenue up 7%, fees up 7%, and underlying ROTE improving to 16%.
• Positive Sentiment: Transformation is improving efficiency and returns. ONE Transformation helped lower costs, lift the efficiency ratio to 42.6%—its best level in 17 years—and supports Santander’s goal of achieving ROTE above 20% by 2028.
• Positive Sentiment: Capital generation and shareholder returns remain strong. CET1 stood at 12.7% after absorbing Webster’s acquisition impact, while earnings per share rose 21% and total buybacks are expected to approach €9 billion.
• Negative Sentiment: Brazil remains a key risk and near-term drag. Santander is de-risking and shifting the loan mix, which is weighing on net interest income, while Brazilian cost of risk remains elevated; Argentina also continues to pressure group provisions.
• Neutral Sentiment: TSB and Webster provide longer-term synergy potential but add execution risk. Management reiterated its integration plans and expects significant cost and funding benefits, although remaining restructuring costs and the TSB migration will continue into 2027.

Presentation

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Good morning everyone, and thank you for joining Santander's third quarter results presentation. Today's presentation will follow the usual structure. First, Héctor will talk about our results with a special focus on the performance of our global businesses. José will then cover the financial results in more detail. Finally, Héctor will close with final remarks before we open the line for Q&A. Before we start, let me highlight two points.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

First, this is the first quarter in which both TSB and Webster are included in our results, with Webster consolidating from August 20th. Second, to provide a clearer view of the underlying trends, our underlying metrics exclude the impact of Poland, as well as integration costs related to TSB and Webster. With that, Héctor, over to you.

[Héctor Grisi, CEO at Banco Santander]

Thanks, Raul, and good morning, everyone. Q3 was another strong quarter for Santander, demonstrating once again the strength of our strategy and the resilience of our business model. Our underlying profit for the first nine months of 2026 hit a new record of EUR 11.2 billion, driven by strong customer activity, revenue growth, and our growing franchise of 189 million customers, which now includes TSB and Webster.

[Héctor Grisi, CEO at Banco Santander]

At the same time, ONE Transformation continues to drive excellent progress towards a simpler and more integrated model. This is translating in tangible results, efficiency improving by almost 2 percentage points, underlying RoTE increasing to 16%. Our balance sheet remains very solid, with robust credit quality and CET1 ratio of 12.7%. We have generated close to 90 basis points of capital this year, helping us to absorb the impacts from TSB and Webster while maintaining a solid capital position.

[Héctor Grisi, CEO at Banco Santander]

Overall, our disciplined capital allocation continues to drive strong results and shareholder value creation. Before I move on, as you may notice, the impact of TSB and Webster on year-on-year trends remains very limited, at around 1.3 percentage points across the main P&L lines. Our P&Ls remains very solid, with underlying profit growing 14% year-on-year in constant euros.

[Héctor Grisi, CEO at Banco Santander]

We continue to deliver strong revenue growth across our global businesses, with revenue up 7%, supported by NII up 8%, driven by a profitable volume growth and record fees up 7%, outpacing NII growth ex M&A, with strong customer activity across our businesses. This reflects the structural trends as customers do more with us and we capture the benefits of stronger connectivity across the group. At the same time, costs decline excluding TSB and Webster, demonstrating the positive effects of our transformation.

[Héctor Grisi, CEO at Banco Santander]

LLPs remain impacted by Argentina, reflecting sector-wide trends in the country. In the rest of the group, provisions grew broadly in line with organic portfolio growth. All in all, these results once again demonstrate the quality and resilience of our earnings. What we are seeing again this quarter clearly reflects the strategy we presented at Investor Day. Our unique business model combines the scale with customer focus and diversification across Europe and the Americas.

[Héctor Grisi, CEO at Banco Santander]

Together with ONE Transformation and our network businesses continues to drive operational leverage, higher profitability, and strong shareholder value creation. Now, let's talk about our customers. Three structural trends continue to strengthen the quality of our results. First, we continue to grow our customer base. Second, customers are doing more with us, supported by higher engagement, better products, and stronger connectivity across the group, driving fees per active customers up 2%.

[Héctor Grisi, CEO at Banco Santander]

Third, we continue to structurally reduce our cost to serve as ONE Transformation continues to scale across the group. Together, more active customers, deeper relationships, and lower cost to serve are making our profitability more sustainable over time. We continue to deliver on our transformation, driving structural efficiency and gains from levers we control. Simplification and automation have delivered almost 2 percentage points of efficiencies.

[Héctor Grisi, CEO at Banco Santander]

Our network businesses are generating strong positive jaws. Our global technology platforms are scaling across the group, and AI is now making a measurable contribution. As a result, our efficiency has improved significantly with further upside ahead. Our five global businesses continue to deliver strong results supported by customer activity, diversification, and scale. Retail and Openbank are delivering strong operational leverage through revenue growth and lower cost.

[Héctor Grisi, CEO at Banco Santander]

CIB, Wealth and Payments continue to leverage our global capabilities and connectivity to deliver double-digit revenue growth and further efficiency gains. Together, our global business model is driving higher profitability and continued progress towards our 2028 targets. Now, let me take you through each global business.

[Héctor Grisi, CEO at Banco Santander]

In retail, we continue to transform our model, combining cutting-edge technology with expertise and proximity for our teams to deliver the best customer experience. We continue to scale up our global platforms with new app now live in five countries and the customer interaction platform available in six following its rollout in Spain. Together, they are enabling a simpler, more personalized, and more consistent customer experience across the markets.

[Héctor Grisi, CEO at Banco Santander]

In commercial, our new model continues to generate strong results in Spain and the U.K., connecting high-growth companies with more value-added solutions, delivering 17 percentage points of operating jaws in each market with strong revenue growth and lower cost year-on-year. At the same time, Webster strengthens our commercial capabilities in the U.S., adding scale, deposits, and further cross-border opportunities across the U.S.-LatAm corridor, leveraging our global footprint.

[Héctor Grisi, CEO at Banco Santander]

Overall, retail fees grew 8%, cost per active customer declined 5%, and productivity continued to improve. Profit grew 12% year on year, supported by strong operational leverage and solid asset quality with cost of risk relatively stable ex-Argentina. Looking ahead, we expect profitable growth to continue as we scale our model, deepen customer relationships, and capture additional revenue and cost synergies from TSB and Webster.

[Héctor Grisi, CEO at Banco Santander]

With Openbank, we are building a more integrated, scalable, and efficient business with a broader customer proposition across our key markets. In mobility finance, we continue to strengthen our core auto lending business with 12 new agreements with OEMs, reinforcing our position as a strategic partner. At the same time, we are broadening our offering beyond traditional auto lending, expanding our leasing platform in Europe, and improving the digital customer experience.

[Héctor Grisi, CEO at Banco Santander]

In digital banking, our customer proposition continues to gain traction. This is reflected in embedded finance, where Openbank Pay continues to scale, including the recent expansion of our Amazon partnership to Poland. At the same time, our focus on funding optimization continues to support profitability, particularly in the U.S., where Digital Bank has already raised around EUR 11 billion of deposits since its launch.

[Héctor Grisi, CEO at Banco Santander]

This is translating into a strong underlying performance, with positive operational leverage driving 13% growth in profit before tax, excluding motor finance. As anticipated, profit continues to reflect the end of the electric vehicle tax incentives in the U.S. The tax rate is now expected to remain broadly stable. We expect profitability to improve as we continue to scale the business and deliver further efficiencies.

[Héctor Grisi, CEO at Banco Santander]

Santander US is already delivering strong results with clear improvements in profitability, efficiency, and funding. In just nine months, Santander US RoTE has improved by around two percentage points while profit is up 24% year on year, excluding Webster, supported by strong operating leverage and lower provisions. Openbank has been an important contributor to this progress, particularly through the improvement in our funding profile. With Webster now part of the group, our loan-to-deposit ratio is below 100%.

[Héctor Grisi, CEO at Banco Santander]

Webster further accelerates this progress, adding scale, a more balanced business mix, and significant cost synergies and puts on a clear path to around 18% RoTE by 2028. In CIB, we continue to build a world-class business for our corporate and institutional clients, leveraging the strength of our global network. Our business model combines in-depth industry expertise, advice, financing, and risk management capabilities, helping us to build deeper strategic relationships with our clients.

[Héctor Grisi, CEO at Banco Santander]

A good example is our role in the largest offshore wind project in the German Baltic Sea, where we supported our client as debt and M&A advisor, lender, and hedge counterparty. What continues to differentiate us is the connectivity of our franchise, bringing CIB capabilities to clients across the group in a much more integrated way. Our recent airport financing illustrates this very well, with our export finance capabilities supporting a commercial banking client.

[Héctor Grisi, CEO at Banco Santander]

At the same time, we continue to transform our operating model through global platforms and AI, improving productivity, customer service, and risk management. Strong client activity, efficiency, and capital discipline continue to drive profitable growth. As a result, profit rose 15% year-on-year while maintaining one of the best efficiency ratios in the sector and originating new business at an RoTE of around 22%.

[Héctor Grisi, CEO at Banco Santander]

In Wealth, we continue to deliver solid growth while enhancing our value proposition, leveraging our global scale and capabilities. In private banking, we are further strengthening our global advisory model and connectivity across countries and businesses. This is already translating into stronger client activity with cross-border referrals of more than 40% year-on-year. In insurance and asset management, we are increasingly operating as one integrated platform to deliver a more differentiated value proposition. Insurance is one of the biggest growth opportunities across the group.

[Héctor Grisi, CEO at Banco Santander]

Our integrated life and pensions model is already delivering tangible results in Spain, where life savings sales increased 43% year-on-year. In protection, our specialized sales model in Brazil is driving higher productivity and conversion rates while reducing churn through expert advice. This is supporting a 20% premium growth across our core insurance businesses. Together, these initiatives are making our business more scalable, more resilient, and increasingly fee-based.

[Héctor Grisi, CEO at Banco Santander]

Overall, profit rose almost 20%, driven by strong client inflows, fee growth, and continued efficiency gains. Finally, payments, our high-growth platform business. We continue to combine scale with innovation. In Getnet, we remain focused on reinforcing our value proposition through innovation, including a single entry platform that allows merchants to accept payments across Europe. Getnet platforms is already processing around 2 billion transactions per month, helping to reduce the cost per payment transaction by 39%.

[Héctor Grisi, CEO at Banco Santander]

In Ebury, we are accelerating international expansion, product development, and innovation. This is translating into strong financial performance, with revenue up 15%, EBITDA margin improving to 34%, and profit more than doubling year-on-year. Overall, the business keeps building strong momentum with significant upside as we continue to scale our global platforms. Our strong operational and financial performance continues to drive organic capital generation, high profitability, and double-digit value creation.

[Héctor Grisi, CEO at Banco Santander]

We have generated almost 1 percentage point of capital organically during the year, leaving our CET1 ratio of 12.7%, on track to achieve our global year-end target. Underlying RoTE improved to 16% and is close to 17% at a normalized average CET1 ratio of 13%. Underlying earnings per share grew 21%, reflecting strong profit generations and buybacks, while TNAV plus cash dividend per share increased 11%, even after the initial impact from Webster.

[Héctor Grisi, CEO at Banco Santander]

Including the program currently underway, total share buybacks will reach around EUR 9 billion, close to our commitment to distribute at least EUR 10 billion for 2025 and 2026. I will now hand over to José, who will walk you through the financials in much more detail.

[José García Cantera, CFO at Banco Santander]

Thank you, Héctor, and good morning, everyone. I will take you through the group's P&L and capital performance in more detail. Let me start with two brief comments. First, the group's P&L includes 40 days of Webster results following its acquisition in August and obviously a complete TSB quarter. I will only refer to the impact of TSB and Webster where material. Second, as usual, we present growth rates in both current and constant euros.

[José García Cantera, CFO at Banco Santander]

The difference this period was around 2 percentage points, mainly due to the appreciation of the Brazilian real and the Mexican peso. Turning to the results. As Héctor said, we are delivering record results once again, supported by good commercial activity and structural cost efficiencies, generating strong operational leverage. Revenue grew 7% while costs were stable, even with the consolidation of TSB and Webster.

[José García Cantera, CFO at Banco Santander]

Loan loss provisions were again this quarter affected by Argentina, reflecting sector-wide trends in the country. Excluding Argentina, provisions grew in line with the loan portfolio. The other results line includes motor finance provisions in Openbank Europe, booked in the first half, as well as restructuring costs related to the execution of our transformation.

[José García Cantera, CFO at Banco Santander]

As a result, profit grew 14% year-on-year in constant euros, putting us in a very strong position to exceed our guidance of more than EUR 14.1 billion profit in 2026, excluding M&A. Total revenue increased 7% year-on-year, supported by deeper client relationships, higher engagement, and 17 million new customers over the last 12 months. All five global businesses contributed to revenue growth. In retail, stronger customer engagement drove solid growth in both NII and fees. Openbank reported solid NII performance, particularly in Europe and South America.

[José García Cantera, CFO at Banco Santander]

CIB was up 14%, supported by strong client activity across business lines. Wealth and Payments delivered double-digit growth driven by fee-generating activity, client flows in Wealth, and higher volumes in Payments. Excluding M&A, revenue grew 5%, keeping us on track to deliver our mid single-digit growth target. Overall, these results demonstrate the strength and diversification of our revenue base. The group's net interest income increased 8% year-on-year, supported by the contribution from TSB and Webster in Retail and Openbank.

[José García Cantera, CFO at Banco Santander]

Excluding their impact, NII rose 5%. Retail delivered a positive performance across most countries, supported by higher volumes and active balance sheet management. Openbank also performed well, driven by volumes and disciplined margin management, particularly in Europe, together with the contribution from our broader presence in South America. CIB also contributed significantly, led by capital-efficient, high-return activities, particularly in global markets.

[José García Cantera, CFO at Banco Santander]

On a quarter-on-quarter basis, net interest income rose 2% on the back of strong trends in Retail Spain and the U.K., as well as the inclusion of Webster. In Spain, Retail continued to perform strongly with NII up 2% quarter-on-quarter, supported by improved loan pricing and active balance sheet management. The U.K. also delivered a strong quarter with NII up 6% quarter-on-quarter, excluding TSB, supported by higher yields and volumes.

[José García Cantera, CFO at Banco Santander]

However, the quarter was affected by the normalization of CIB after a strong quarter, the shift towards a lower-risk portfolio mix, and day count differences between loans and deposits in Brazil, and lower UF in Chile. Just these last two effects explain the drop at group level. Overall, NII is proving stronger than anticipated at Investor Day.

[José García Cantera, CFO at Banco Santander]

A solid activity and a more favorable rate environment in Europe more than offset higher rates in Brazil. Net fee income increased 7% year-on-year, supported by customer growth, higher activity, and a greater contribution from value-added products as ONE Transformation deepens customer relationships. This is visible across the group. In retail, fees rose 8% with strong performances across most of our footprint.

[José García Cantera, CFO at Banco Santander]

Openbank fees were broadly stable as solid growth in South America was offset by the U.S., where the comparison was affected by high servicing fees in 2025 related to portfolio sales. CIB delivered a particularly strong fee performance driven by global banking activity, especially in the U.S., where fees grew more than 30%. Wealth continued to deliver double-digit fee growth with strong contribution from private banking. Payments also performed strongly with fees up 6%, with Getnet total payment volumes increasing 9%.

[José García Cantera, CFO at Banco Santander]

ONE Transformation remains a key driver of our profitability improvement, enabling us to invest at scale in best-in-class global platforms. These platforms give us the capabilities and customer experience needed to compete with leading digital players, attract more customers, deepen relationships, and support growth.

[José García Cantera, CFO at Banco Santander]

At the same time, our global approach reduces duplication and structural costs across markets. This is reflected in our efficiency ratio, which now stands at 42.6%, the best level in 17 years, with both revenue and costs improving at the same time. In Retail and Openbank, which represent roughly 75% of our cost base, costs declined by 2% even after incorporating TSB and Webster, and while we continue to invest in our global platforms, revenues grew 6% with a strong positive operating jaws.

[José García Cantera, CFO at Banco Santander]

In our network businesses, CIB, Wealth, and Payments, costs grew well below revenue, reflecting targeted investments in capabilities that support capital-light growth and recurrence. As a result, net operating income was up 12%, increasing from already high levels last year. Looking ahead, we see further room for cost improvement despite inflationary pressures, without taking into account the synergies from TSB and Webster, all of them levers that are firmly within our control.

[José García Cantera, CFO at Banco Santander]

Our balance sheet's risk profile remains low, with sound credit quality across the group, supported by prudent risk management and resilient labor markets in most of our core geographies. As in previous quarters, metrics are impacted by Argentina, reflecting sector-wide trends in the country. However, cost of risk in Argentina improved again this quarter. Following the stabilization trend we anticipated earlier this year, slower new production begins to feed through.

[José García Cantera, CFO at Banco Santander]

Excluding Argentina, the group's underlying credit quality remains solid. Loan loss provisions grew in line with organic loan growth, while cost of risk was broadly stable at 109%, even after absorbing less favorable FX movements. Retail and Openbank represent over 90% of the group's loan loss provisions. In retail, cost of risk was stable year-on-year, excluding Argentina, supported by key markets such as Spain and Brazil.

[José García Cantera, CFO at Banco Santander]

In Openbank Europe, cost of risk reflected model updates and growth in Openbank Pay, while in the U.S. continued to perform well. In CIB, provisions were affected by a limited number of single names. Our NPL ratio remains low, as the negative impact from Argentina was broadly offset by the positive contributions from TSB and Webster. Overall, credit quality remains resilient. As long as labor markets do not deteriorate, we would not expect material impacts on credit quality.

[José García Cantera, CFO at Banco Santander]

Moving on to capital, we reported another good quarter of organic capital generation. Our CET1 ratio stood at 12.7% after absorbing the 147 basis point impact from Webster. Excluding this impact, the CET1 ratio increased around 15 basis points in the quarter, demonstrating our ability to generate capital while investing in profitable growth.

[José García Cantera, CFO at Banco Santander]

This quarter, we generated 59 basis points of capital from profit, which enabled us to build capital while growing new businesses at a RoTE of around 21%, compensating capital distribution charges for shareholder remuneration in line with our payout target and absorbing other impacts, including regulatory charges, in line with our expectations.

[José García Cantera, CFO at Banco Santander]

This solid organic capital generation keeps us on track to end the year at or above our 12.8% target at the upper end of our 12%-13% CET1 operating range after absorbing the remaining regulatory charges and integration impacts from TSB and Webster in the fourth quarter. Héctor, back to you.

[Héctor Grisi, CEO at Banco Santander]

Thanks, José. In conclusion, these strong results put us comfortably on track to deliver all our targets. Our business continues to show solid momentum, with ONE Transformation driving a strong operational leverage. This has translated into record underlying profit, a robust capital position, and double-digit shareholder value creation. Even excluding TSB and Webster, we are generating more underlying profit than last year, when Poland was still part of the group.

[Héctor Grisi, CEO at Banco Santander]

In summary, our results remain consistent and predictable. As we enter the final quarter, we remain focused on profitable growth, further efficiency gains, and continued value creation. We are building a simpler, more connected, and more profitable Santander able to create value across different economic cycles.

[Héctor Grisi, CEO at Banco Santander]

Finally, our financial North Star is clear: to deliver an RoTE above 20% by 2028. Disciplined capital allocation, ONE Transformation, and our global businesses are the engine of our progress. The results we are delivering today give us confidence in the path ahead. Now we are happy to take your questions.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Thanks, Héctor and José. With this, let's start the Q&A session. Operator, could we have the first question, please?

[Operator]

Thank you. If you wish to ask a question, please press star five on your telephone. Our first question comes from the line of Francisco Riquel from Alantra. Please go ahead, sir.

[Francisco Riquel, Analyst at Alantra]

Yes. Good morning. Thank you for the presentation and taking my questions. I want to focus on Brazil. You are positively geared to lower Selic rates, but the cost of deposits has gone up in this quarter. I also see NIM is under pressure. I understand you are also de-risking the loan book, but the cost of risk remains high and NPLs are still trending up. If you can update on NIM and cost of risk dynamics and what shall we expect for the remainder of the year.

[Francisco Riquel, Analyst at Alantra]

Looking more into the medium term, in Brazil, the election has changed the outlook for interest rates. I wonder how much of the uplift to the 20% RoTE target was based on this, on external tailwinds such as lower Selic rates, and how can you offset for that, if you could consider further restructuring. Also related to this, if you can update on the Gravity rollout in Brazil, which I understand is not on plan. Thank you.

[Héctor Grisi, CEO at Banco Santander]

Thank you, Francisco. Good morning, and thank you for your questions. I believe it's important when we talk about Brazil to put things into perspective. In what sense? First of all, to understand that now 80% of the group is basically based upon developed markets. The portfolio of the total group's 80% developed markets. Brazil is just 9% of the total portfolio of the bank.

[Héctor Grisi, CEO at Banco Santander]

It's important to understand, and that's the beauty of diversification, that even when some of the countries are not doing so well, we have a particular situation when in the U.K. and the U.S., things are going much better than expected. It's important to understand that situation. Also, it's important to say that when we went to the Investor Day, our base case that Lula was going to win.

[Héctor Grisi, CEO at Banco Santander]

It's important to understand that just 90 days ago, everybody thought that Lula will win, then things changed, and then things changed so abruptly that Mr. Bolsonaro was going to win. That basically created a rally on the market, and you saw the result when the result basically did not come out as everyone expected.

[Héctor Grisi, CEO at Banco Santander]

I do believe that, first of all, we believe it's a normal reaction. When you see rates going all the way to 300 basis points, some of that has come back already, 200 basis points. It's now at 200 basis points, and we'll see that situation will be normalizing over the next few months. But it is important to understand now the particular situation that we have. This quarter is down basically because of two factors.

[Héctor Grisi, CEO at Banco Santander]

First of all, you already talk about it, is our decision to de-risk portfolio, and also the decision that we took to change the mix of that portfolio. So those two things are affecting NII, but will change exactly what we're doing towards in the future, which would help us exactly managing the cost of risk. And you don't see the benefits of the cost of risk today, but you will see them in the future.

[Héctor Grisi, CEO at Banco Santander]

If you see some of the things that we're making, I talked about some of it last quarter, was, for example, commercial, 40% of the portfolio is now concentrated in dollars and mainly in trade finance. In CIB, we're talking about 30% of the portfolio is already dollar-denominated, and is also a lot of it in export and trade finance-directed.

[Héctor Grisi, CEO at Banco Santander]

So we see that the benefits will show later, but this is exactly what we're doing, and it's exactly the way it was designed. On the other side, all the upside that we have projected in Brazil for the future is due to ONE Transformation. So we're doing a huge amount of simplification in our bank. You see exactly how we are delivering already on the cost, because ONE Transformation is exactly all about this.

[Héctor Grisi, CEO at Banco Santander]

It's exactly simplifying the bank, automatizing, having less layers in the structure of management to have a much leaner bank, much more efficient, and this is exactly what we're going towards. So the plan does not change from what we had. It's exactly the same one. You're going to see the benefits and the great opportunity that we have today in Brazil.

[Héctor Grisi, CEO at Banco Santander]

I agree with you that rates are not going to come down as much as we thought in the plan, but nonetheless, we have controlled sensibility. Maybe José can explain to you a little bit more of what we're doing in terms of the sensibility. It is important to say that we don't have that much sensibility as we used to have in Brazil. It's important to acknowledge that.

[Héctor Grisi, CEO at Banco Santander]

On Gravity, I must tell you that things are as expected. We're going to be able to do the migration at the end of the year, beginning of the next one. It's exactly what we expected. Some of the suppliers have taken a little bit more time giving us equipment, given the huge demand that is on the market vis-à-vis computing, because all the data centers in the U.S., et cetera.

[Héctor Grisi, CEO at Banco Santander]

We're going to be delivering that, and we are working really hard to have it on time. That's exactly what's going on there. The outlook that we have is that we see that the model is changing, that we're concentrated on that, and we're going to deliver on what we have said. José, I don't know if you're going to complete anything in terms of the sensibility.

[José García Cantera, CFO at Banco Santander]

No, as Héctor said, we've decreased the sensitivity to rates to more or less half of what we had six months ago. We have now to a 100 basis points movement upwards, downwards around EUR 30 million-EUR 40 million sensitivity to rates. It's a lot less than we had six months ago.

[Héctor Grisi, CEO at Banco Santander]

Let me explain you a little bit more about the risk strategy and what should we expect in terms of cost of risk and the credit quality in Brazil. The risk strategy is already very visible. If you look at 90+ days past due loans in Brazil, we started from broadly at the same level as the system, around 3.3% in March 25. Our ratio has now stabilized at 4.1%, and the system has a rate reaching almost 5% in August.

[Héctor Grisi, CEO at Banco Santander]

It's starting to work. If you look at early delinquencies, that's 15-90 days, the leading indicator is already improving. We're starting at around 4.1% in March 25, and the early delinquency ratio has improved 3.9% in August, while the market subsequently deteriorated up to 4.7%. With it, Francisco, I believe that I answered your question.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Thanks very much, Héctor. Could we have the next question, please?

[Operator]

Our next question comes from the line of Ignacio Ulargui from BNP Paribas. Please go ahead.

[Ignacio Ulargui, Analyst at BNP Paribas]

Thanks. Good morning, everyone, and thanks very much for the presentation and for taking my questions. I have two questions. The first one is on costs. Just wanted to get a bit of a sense of how should we think about the cost performance over the coming quarters. You have delivered a very good quarter this time around, despite the perimeter change.

[Ignacio Ulargui, Analyst at BNP Paribas]

Just wanted to get a bit of sense if there is a scope for acceleration in the synergies and the cost savings from ONE Transformation, so we could offset some headwinds in revenues via costs. The second question is on capital. You flagged that, José, during the presentation, but just wanted to get a bit of a sense of the regulatory headwinds that are pending. From memory, there should be around 10 basis points still to come in regulatory headwinds, and how that will impact the 12.8% that you confirmed during the call. Thank you.

[Héctor Grisi, CEO at Banco Santander]

Thank you, Ignacio. This is what ONE Transformation is all about. We are delivering really structural savings. Remember that ONE Transformation is a process in which first we are deeply going into simplification. Then a lot of automation, but at the same time, we are doing quite a lot in, if you take a look at it is mainly retail, which we are really changing the way we work and the way we do things. As you can see, year-to-date cost fell around 2% year-on-year, excluding M&A. That basically put us on track to deliver the lower cost base in 2026. Q3 costs fell alone 4% in the quarter-on-quarter, excluding M&A.

[Héctor Grisi, CEO at Banco Santander]

In retail, as I was saying, year-to-date cost improved around 5% year-on-year, excluding M&A, reflecting the benefits of what I was talking about in terms of simplification and automation. The omnichannel model and enhanced digital capabilities is with 73% of the products digitally enabled are helping on the efficiency, and we see transactionality basically coming up quite a lot, and people are using much more the digital-based products that we have, and that is helping us quite a lot.

[Héctor Grisi, CEO at Banco Santander]

What I see is positive operating leverage will remain a key differentiator for the bank as a whole. We are growing revenue at around 5% with lower cost, improving the cost-to-income ratio. That is 2.8 percentage points to 42.6%, and this will continue to be the norm. The group will continue to that, and you will see the operating leverage basically working.

[Héctor Grisi, CEO at Banco Santander]

In terms of synergies and what you were saying about what cost is going to help, what revenue is not coming, we foresee that revenue is going to go up as well, but nonetheless, cost will help out and will give us exactly what we are looking for. In terms of the synergies, I believe that right now it is too early to tell. It is important to understand that we just took over about a month and a half Webster.

[Héctor Grisi, CEO at Banco Santander]

In that sense, we are still basically looking at ways to execute synergies as fast as we can. I think that the team is already working together. We are having a pretty good run of things, but I think it is too early to tell if we are going to be able to advance synergies.

[Héctor Grisi, CEO at Banco Santander]

On the U.K., I believe also that we are going to be able to deliver exactly the synergies that we told you. The thing is, there we have the Part VII. The Part VII I foresee that is going to finish over the first quarter of next year. As soon as we are basically done with the Part VII, I believe we could be able to do the migration and have all the platforms and Santander products basically offered to TSB customers towards the third quarter of 2027. That basically will enable us to get to the synergy numbers that we told you. I have a good outlook, but nonetheless, I do not want to be ahead of myself in any way. On capital, José please.

[José García Cantera, CFO at Banco Santander]

Morning, Ignacio. For the fourth quarter, we expect supervisory charges roughly around 5 basis points. Also, remember that in the fourth quarter, we have the operational risk charge that happens once a year that is around 8 basis points. However, also in the fourth quarter is the most active in terms of asset sales and mobilization, where we expect to see a pretty strong quarter despite market conditions. We have closed already several transactions. Some are about to close. We would expect to do better than 12.8% at year-end. We will report the number that will be above most likely the target we set for the year in terms of capital.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Thanks very much. Operator, could we have the next question, please?

[Operator]

Our next question from Andrea Filtri of Mediobanca. Please go ahead.

[Andrea Filtri, Analyst at Mediobanca]

Good morning. Thank you for taking my questions. Could you please update us on the buyback of Brazilian minorities and on the operational outlook you have for this unit going forward? When will we see, Héctor, the cost of risk benefit that you mentioned? Also tax rate was very low this quarter. Can you give us an indication for Q4 and 2027 in terms of tax rate in Brazil? Finally, if you can update us on your Danish compromise application. Thank you.

[Héctor Grisi, CEO at Banco Santander]

Thank you, Andrea. What's going on in terms of the buyback, what we see is that we will continue with it. This doesn't change anything that we have seen, and we're going to go ahead with the same conditions that we basically have expressed. There is no change on that. In terms of the operational outlook, what I see is exactly what I was telling you. I see basically ONE Transformation was helping us quite a lot. We believe that in terms of the cost of risk, I think we have quite a good outlook in the sense that three months cost of risk is stable. You see Q3 2026 is at 1.14%. That's -1 basis point quarter-on-quarter.

[Héctor Grisi, CEO at Banco Santander]

The LLP growth was +2.8% quarter-on-quarter, if you exclude M&A, and was driven mainly by out of seasonality, is partly offset by the improvements that we have seen in Argentina and the U.K. 12 months cost of risk was 1.16%. That's 1 basis point quarter-on-quarter. That's 3 basis points year-on-year, with Brazil cost of risk at around 4.25%.

[Héctor Grisi, CEO at Banco Santander]

So if you exclude Argentina, the cost of risk would be around 1.09%, and LLP growth around 6% broadly in line with organic loan growth that we have had. So it's important to understand that with the loan growth that we have had, cost of risk goes up, but it's going to be under control, and towards the end of the year, we expect the cost of risk at around 1.15% for 2026.

[Héctor Grisi, CEO at Banco Santander]

Slightly, given the cost of risk in Brazil and the longer interest rates that we see there, but we see it improving towards 1.1% in 2027 and 2028 as we see the benefit from TSB Webster, because that mix helped us quite a lot. Remember that I said 80% now of the loan portfolio in the bank is in developed countries. So if you see NPLs, the ratio improved to 2.9%. That's 3 basis points quarter-on-quarter and 1 basis point year-to-date. So coverage is around 64% flat quarter-on-quarter. So that's exactly what I see in that. On the tax rate, José, could you comment?

[José García Cantera, CFO at Banco Santander]

No. We expect to have a relatively low tax rate in Brazil for the coming quarters. This is also benefiting the group. We do not expect to see significant changes in the coming quarters.

[Héctor Grisi, CEO at Banco Santander]

Okay. In terms of the Danish Compromise, we are already under the FiCoD supervision, and that is a step, as you know, prior to the Danish Compromise approval, which we expect to obtain within the next two or three quarters. I had a conversation with ECB. They are taking a little bit longer with us because we have much more complex businesses with AJBs, everything that we have in Latin America, et cetera, but it is on track. It is important to acknowledge that it will not be an immediate capital release event.

[Héctor Grisi, CEO at Banco Santander]

The benefit is better capital treatment for the future insurance growth and the vehicle to add insurance assets over time, specifically to grow a life factory in-house, which we are doing because it is a great opportunity that we have. Just take a look at the growth in terms of fees on insurance, it is 20% year-on-year.

[Héctor Grisi, CEO at Banco Santander]

This is a big opportunity for us, and also to penetrate the customer base that we have, that if you see our natural quota in every single market versus the amount of insurance that we do, it is a lot less. That is a huge opportunity that we have. Thank you, Andrea.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Thanks, Héctor. Thanks, Andrea. Could we have the next question, please?

[Operator]

Our next question comes from the line of Ignacio Cerezo from UBS. Please go ahead.

[Ignacio Cerezo, Analyst at UBS]

Hi. Good morning. Thank you for taking my questions. The first one is, sorry, it is slightly open-ended. If you can give us a view on the deposit environment in Spain, U.K., U.S., and how that can have an impact in terms of customer spread and NII in the future, if you see basically that as a headwind for net interest income developments in those three countries.

[Ignacio Cerezo, Analyst at UBS]

The second one is on the CIB book, EUR 178 billion growing around 28% per annum, with big growth actually in Spain and the U.S. So if you can give us some color on breakdown of that book between different segments, industries, exposure to tech data centers. Again, that qualitative color, if you want, actually, that can educate our guys a little bit better. Thank you.

[Héctor Grisi, CEO at Banco Santander]

Thank you, Ignacio. In terms of what we see in the deposit cost and what should we expect for the deposit cost, we are seeing some migration towards higher yielding deposits, particularly, as you say, in Spain, U.K., and Brazil, but it remains very manageable.

[Héctor Grisi, CEO at Banco Santander]

Customer spreads are very, very resilient. In Spain, we had a one-off that it basically moves the number, but you are going to see that Spain numbers are going to come back down towards the end of the year. So nothing to worry about that. We do not foresee anything going on in the U.S. I think that on the other side, Webster is helping us out with the deposit mix that we have there. So we believe that it is going to help us in the margin there. Let me go much more specifically.

[Héctor Grisi, CEO at Banco Santander]

It is very important to tell you that we are managing deposit betas, and we are protecting them through stronger primacy. That is a change of the model. Also, it is exactly what ONE Transformation is all about, because we are concentrated on doing much more with our customers. The moment that you have primacy with a customer, all the transactional deposits come in.

[Héctor Grisi, CEO at Banco Santander]

So what is going on in deposit markets basically does not hurt you as much because the transactional deposit, people need to keep them in the current account for all that they need over the month. So that is helping us quite a lot, and you will see the numbers going up in Spain, in Brazil, basically in all the group. So we have also a tremendous discipline pricing, active balance sheet management, and we grow in stable transactional balances, as I explained.

[Héctor Grisi, CEO at Banco Santander]

Retail in Spain, to go a little bit more on detail and be very specific about what is going on, underlying beta remains very controlled. In the quarter, deposit beta is higher, as I said, as a one-off, that we are expecting retail to normalize towards 18%-19% in the fourth quarter. In terms of retail U.K., the structural hedge and the asset repricing offset quite a lot the mix pressure with cost of deposits remaining very stable.

[Héctor Grisi, CEO at Banco Santander]

In retail Brazil, we are shifting towards a more granular, lower cost deposit base. In the quarter, we saw higher deposit costs, which were seasonally impacted by a higher number of business days. So all in all, I think we are doing a pretty good job in deposits, and we are actually having a much better deposit base given the transformation that we are doing.

[Héctor Grisi, CEO at Banco Santander]

I can tell you that this is the most important thing that the teams in every single country and every single unit of the bank concentrate on. Deposits is exactly how to do well in bad times and good times, and we are concentrated on that. In terms of CIB growth, I must tell you that we are concentrated in exactly what we do best, which is project finance, energy.

[Héctor Grisi, CEO at Banco Santander]

In the sectors that are core for us is exactly what we are doing. In these particular markets, I think it is much better to use our capabilities in CIB that helps us basically grow in AI very fast, and also in the segments that we know quite well with the customers that we know well. You see margins basically opening up a little bit, and we are taking advantage of that.

[Héctor Grisi, CEO at Banco Santander]

In terms of the concentration that we have, I must tell you, in data centers, we have less of 1% of the total balance sheet of the bank in data centers. There is nothing to worry about. Data centers, it is important to understand, is project finance. That is something that the bank knows very well how to do. What we have seen that the biggest barrier of entry in data centers is access to energy and electricity.

[Héctor Grisi, CEO at Banco Santander]

Given that, we are being very cautious in the way that all the data centers projects that we come in, we have the energy behind them, and also with the best of takers, with the best risk available in the market. We understand your worries, but I must tell you that we are on top of that, and this is something that we know how to do very well. I don't know, José, if you want to complement anything.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Thanks very much, Héctor. Can we have the next question, please?

[Operator]

Our next question comes from the line of Miruna Chirea from Jefferies. Please go ahead.

[Miruna Chirea, Analyst at Jefferies]

Good morning. Thank you very much for taking my questions. Firstly, I was wondering if you could help us with the profit bridge to 2027. I guess this year you're going to be at EUR 15 billion or slightly above. You guided for more than EUR 20 billion in 2028. But what is it reasonable to expect in terms of profit in 2027, and how much of that would you think is underlying growth from 2026 versus the impact from M&A?

[Miruna Chirea, Analyst at Jefferies]

Then just to follow up on the customer margins in retail Spain, could you give us more color in terms of how much loan yields expanded in the quarter versus the increase in cost of deposit? You were mentioning before there was a one-off in the quarter on the cost of deposit. Could you clarify what that is, please? Thank you very much.

[Héctor Grisi, CEO at Banco Santander]

Thank you. In terms net net, as you have said, we expect to be well ahead of our previous guidance of at least EUR 14.1 billion net profit ex M&A for 2026. We are on track to be above EUR 15 billion of underlying net profit, including M&A for the whole year. What is important to say is that for the numbers that you can run for 2027, 2028, and onwards is exactly what you have in, is the track that we're going to get by 2028 to what we guided the market towards above 20% RoTE. Then you can make your numbers, and you're going to see that we're on the right track to get there. With that, José, you can take.

[José García Cantera, CFO at Banco Santander]

Yeah. Average volumes year-on-year in Spain, loans were up 5% and deposits was also up 5%. So average volumes in the quarter, third quarter this year compared with third quarter last year. Yield on assets was down 18 basis points. This is client averages, so 18 basis points down.

[José García Cantera, CFO at Banco Santander]

In deposits, we had an almost EUR 5 billion transaction with a public institution in Spain that distorts the net interest margin in the quarter quite substantially. We would expect the margins to normalize again in the fourth quarter. The outlook, obviously, for the margins as rates increase in Spain, and we maintain positive sensitivity to rates, is positive.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Thanks very much, José. Miruna, we can help you offline if you want to get into the modeling details as well. Can we get the next question please, operator?

[Operator]

Our next question comes from the line of Marta Sanchez Romero from JPMorgan. Please go ahead.

[Marta Sanchez Romero, Analyst at JPMorgan]

Thank you very much. My first question is on Brazil. It is at a run rate of EUR 2.1 billion this year. Consensus has EUR 2.8 billion in 2027 and EUR 3.3 billion in 2028, which is a remarkable improvement. Are you comfortable with that? My second question is on U.K. Looks like you are doing better at managing your pricing, so the customer spread expanded in the quarter, but I see that your loan growth is barely moving, and it is falling well behind the targets that you set out at the Capital Markets Day. No growth this quarter. I understand that the mortgage market is not doing much, but can you tell us what you are thinking about in terms of risk appetite, loan growth, and pricing? Thank you.

[Héctor Grisi, CEO at Banco Santander]

Thank you. In terms of the EUR 2.1 billion, I think it is one of the possible outcomes that we have designed for that. So, that could be it, as you have said. In terms of the U.K., I think that the U.K. has had a pretty good performance. Year-to-date profit in the U.K. grew around 22%, excluding M&A year-on-year. That is basically by 4% year-on-year core revenue growth, okay, is important.

[Héctor Grisi, CEO at Banco Santander]

The important thing is that you see the effects of ONE Transformation. This is probably the best franchise in terms of ONE Transformation is impacting, because you see an 11% year-on-year cost decline in the franchise. A very low cost of risk at just 12 basis points. So the business is both benefiting for a lengthened duration of the structural hedge, which we have been implementing, and resilient customer spreads. Okay?

[Héctor Grisi, CEO at Banco Santander]

We see loan repricing offsetting deposit mix shifts, and this is helping us out. We have, as you have seen, a very disciplined cost reduction and execution of ONE Transformation, and these structural drivers will remain tailwinds in the franchise going forward. Also, on the second thing, you have the integration of TSB, that basically further medium-term earnings growth, which helps us quite a lot.

[Héctor Grisi, CEO at Banco Santander]

As I basically already said on the Part VII, remains on track for completion on the Q1 of 2027, and the integration milestones are progressing as planned. I am very comfortable that we are going to get to the numbers that we told you in terms of what are we doing in there in terms of synergies.

[Héctor Grisi, CEO at Banco Santander]

Our 400 million cost synergy targets, as I said, is exactly the number that we are going to come out with, and combined with the benefits from ONE Transformation, we continue to see the RoTE improving to around 16% RoTE for 2028.

[José García Cantera, CFO at Banco Santander]

If I may give you some color on the outlook for NII, because we remain very constructive on NII in the U.K. Long yields year-on-year were higher by 3 basis points. Cost of deposits was lower by 3 basis points. So the underlying business, despite the not so favorable interest rate environment, has been managed very well.

[José García Cantera, CFO at Banco Santander]

On top of that, we have, as mentioned, as Héctor said, GBP 119 billion in the structural hedge, with an average duration of 2.6 years and a yield of 3.34%. Remember, the yield in the third quarter, this is the yield in the third quarter. If we look at the yield for the first nine months, it was 3.2% compared to 2.6% in the nine months of 2025. The combination of very good outlook in terms of volumes, pricing management, and structural hedge give us a quite constructive outlook also for the NII.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Thanks, Marta. Thanks very much. Could we have the next question, please?

[Operator]

This question comes from the line of Sofie Peterzens from Goldman Sachs. Please go ahead.

[Sofie Peterzens, Analyst at Goldman Sachs]

Hi. This is Sofie from Goldman. Thanks a lot for taking my question. My first question would be on banking taxes. I know you said that in Brazil, tax rate will remain low, but how should we think about the potential removal of the Spanish banking tax and reviews here and also U.K. banking tax? Is that something that we should be mindful of?

[Sofie Peterzens, Analyst at Goldman Sachs]

Then, just going back to deposits, I know you said Spain was a little bit a one-off, but if we look across your market, term deposits or time deposits increased quarter-on-quarter in all core countries, quarter-on-quarter. Maybe if you could just talk a little bit about your funding strategy for 2027. How do you see wider spreads impacting your funding costs, and how do you plan to fund, and are you going to push more for term deposits to move away from some of the wholesale funding? Thank you.

[Héctor Grisi, CEO at Banco Santander]

Thank you, Sofie. In terms of the banking tax, we don't have any information up to now. It's just what you have heard in the press in terms of what could happen in the U.K. What I would say is that, we already pay very high taxes in the U.K. We're talking about 45%, 46%, goes higher. I don't know. It's going to be complicated to deploy capital if you get that amount of taxes, but let's see what happens. Hopefully, it's not the case. On Spain, we don't have any information at all right now. As you know, it was modified a couple of years ago. Now it's a real tax. We don't have any information about that. It's very important.

[Héctor Grisi, CEO at Banco Santander]

I'm going to go and explain you exactly what the strategy that we have in terms of the deposit base and you can get an idea, and I'm going to talk a little bit about specifically what's going on in Spain. It's important to understand, first of all, that what we're doing in terms of ONE Transformation and what we're doing is very much concentrated, and I was saying on primacy on the accounts.

[Héctor Grisi, CEO at Banco Santander]

When you become number one bank to your customer, the customer basically has a payroll, has everything with you. They have three, four different products together with you. But most importantly, they have the transactional deposits.

[Héctor Grisi, CEO at Banco Santander]

When you have the payroll and you debit your accounts every single month with the payments from school for your children, water, electricity, all the bills basically are deducted to that account and you do the payments from there, it's very difficult not to leave money on the current account. That's transactional deposits.

[Héctor Grisi, CEO at Banco Santander]

That's why we are enhancing our digital offering and everything that we do to make sure that the customers stay with us and have all the transactionality. This is exactly where we change. If you look at every single country on Santander, all of them are increasing the amount of transactional deposits. Why is that? Because that's exactly what we are concentrated on, and our sales teams in retail, in every single part, are concentrated on the transactional deposit and customer growth.

[Héctor Grisi, CEO at Banco Santander]

If you see the numbers alone in Spain that you were asking about, we are talking about 445,000 customers in the past 12 months coming into Spain as new customers. That is enabling us to have a much better and broader deposit base. Also, we are very much into managing deposit betas to the detail. We are very much concentrated on that.

[Héctor Grisi, CEO at Banco Santander]

We check them. Let me give you a little bit more detail. We have a pricing meeting every Monday in every single Santander unit discussing exactly that. The cost of deposits, how do they price every single product that the retail is offering to the bank, and we reprice that, and we are very profit-oriented towards that, and also capital-oriented in the terms that RWA and the consumption RWA is very defined.

[Héctor Grisi, CEO at Banco Santander]

You see in everything that we do that we are very much concentrated and very granular about how we do things. You will see even people in Salvador da Bahia in Brazil talking about cost of deposits, RWA, so that is on the DNA of the sales teams right now. That is exactly how we are managing things, and we are so delicate about what we are doing. José, I believe, gave you a pretty good explanation of the particular situation that we have in Spain. I do not know, José, if you want to go further into detail into that.

[José García Cantera, CFO at Banco Santander]

Sofie, let me give you some details about betas. The only country where we had a slight increase in betas in the quarter was Spain, from 26.4% to 28%, including CIB. Excluding CIB, obviously betas are a lot less. The U.K. was flat, but everywhere else, betas were down. In Chile, in Argentina, in Mexico, in the U.S. So the overall outlook for the group is actually good.

[José García Cantera, CFO at Banco Santander]

In Spain, we remain geared positively to rates. This is important because when we talk about betas from 26% to 28%, we are talking relative to the base that is also used to reprice assets, and 70% of the assets are at variable rates. Clearly, even if betas go up a little bit, the assets will reprice a lot more than liabilities. Our sensitivity in Spain to 100 basis points interest rate change is EUR 350 million, basically.

[José García Cantera, CFO at Banco Santander]

It increases very quickly as we grow deposits. That is why when we look at NII in 2027, we see NII in Spain up mid-single digits or maybe a bit better than that. Again, despite that, betas might go up a little bit. Because again, repricing of assets clearly outweighs the pressure on deposits. As Héctor said, we are managing deposit cost very well in all countries, but especially in Spain.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Thanks very much, Héctor and José. Could we get the next question, please?

[Operator]

Our next question comes from the line of Antonio Reale from Bank of America. Please go ahead.

[Antonio Reale, Analyst at Bank of America]

America. I have a couple of follow-up questions, please. One on Brazil and one on the U.S., actually. Can you please remind us the time lag in repricing between assets and liabilities that you have in Brazil? Your funding reprices much faster than your asset side, from what I remember. If you could just remind us the time lag and what we should expect from your ALCO book in Brazil going forward, which I understand is how you've been lowering your rate sensitivity. That's my first question.

[Antonio Reale, Analyst at Bank of America]

The second one is, if you can remind us how Webster contributes to change your historically negative correlation to rates that you've had in the U.S. over the years, and maybe just remind us how some of the numbers that relate to the healthcare franchise that Webster has in the U.S., which I think is particularly sticky, and maybe the phasing of those funding synergies which also relate to excess liquidity. Thank you.

[José García Cantera, CFO at Banco Santander]

In the U.S., we are fully neutral. We are completely neutral to interest rate changes. The integration of Webster changed the interest rate sensitivity, and we have been managing the ALCO in the U.S. to have completely neutral interest rate sensitivity. In Brazil, we reprice, as you said, liabilities a lot faster than assets. Betas in Brazil are around 65% at the moment, which shows you the structure of the liabilities, which reprice with the CDI for the most part, and around 40% of the assets rotate every year.

[José García Cantera, CFO at Banco Santander]

With that, you can have quite a good idea how the structure of the balance sheet plays with interest rates. Again, the sensitivity we have today, taking all of that into account, which I think is the important number. Six months ago, we had EUR 60 million-EUR 70 million sensitivity to 100 basis points change. We are half of that today. For the last six months, we have been working very hard to neutralize interest rate sensitivity in Brazil as well.

[Héctor Grisi, CEO at Banco Santander]

Antonio, just to get by me now. In terms of the HSA, as you know, it is a pretty good business. We have overall AUMs of $25 billion. Out of those, $9 billion are deposits that we use in the bank, okay? Basically, it helps quite a lot the franchise. That is what I can tell you that will help us out to manage much better, and the idea is basically to grow that business as we see fit.

[José García Cantera, CFO at Banco Santander]

Funding synergies. Funding synergies in the U.S. Yes. As we consolidate liquidity management, we can say coming from two sources, obviously, the more efficient use of sources to finance assets, because we do not have limits between companies, and the second is that we have lower requirements as we, again, consolidate volumes. It is difficult to give a number, but this is something that could be in the region of 50 million, maybe more. This is going to come over time as we integrate funding and the commercial gap management.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Thanks. Thanks very much. Could we have the next question, please?

[Operator]

Our next question comes from the line of Britta Schmidt from Autonomous. Please go ahead.

[Britta Schmidt, Analyst at Autonomous]

Morning. Thank you for taking my questions. Just coming back to the deposit competition a little bit more broadly, do you have any views on whether AI-driven customer behavior might increase competition for marginal deposits in the longer term? How is the bank positioning itself against that? On loan growth, maybe you can give some qualitative comment on where you see the marginal loan growth dynamics across your major divisions such as Spain, U.K., U.S., and Brazil, and how that is expected to trend in 2026 versus 2027.

[Britta Schmidt, Analyst at Autonomous]

Where do you see perhaps improvements in growth? Where do you expect perhaps a little bit of a slowdown? Then just a final question, I don't know whether you can or cannot comment on that, but can you shed any color on the remaining stake in the Polish business, please, and your intentions with it? Thank you.

[Héctor Grisi, CEO at Banco Santander]

Okay. Thank you, Britta. Look, that's a pretty good question in terms of what we're looking at it in AI, and you're right. That's something that we need to take into account. At the moment, we don't see it as a menace, but I do see that in the medium to long term, it's going to be a situation. We're working around it to see how we're going to interact with agents, et cetera.

[Héctor Grisi, CEO at Banco Santander]

We're working towards that and really understanding what's the best way to manage all that, and if we're going to leave agents be able to do it. I do believe that at this time, we shouldn't allow agents to be able to interact with our apps, but let's see what the market takes us in the future. That's something that we are reviewing at this point.

[Héctor Grisi, CEO at Banco Santander]

In terms of loan growth, in terms of Spain, U.K., U.S., and Brazil, I think that we will continue to be very much overall focused on profitability. It is tremendously important. Our teams, I explained already how do we do that and how do we manage that. Whenever we see an opportunity that is above our cost of equity, that is exactly where we grow the portfolios. We do not have any specific. We see the portfolios, and we check the mix that we want to have, but we move that every single week the way we see the evolution of the different portfolios and the evolution of different markets and the products.

[Héctor Grisi, CEO at Banco Santander]

It is very important that we have that, but we have enough capital to redeploy and to have a really good growth to be able to deliver the numbers that we have promised you and that we will plan on delivering. In terms of the color on Poland, what I will tell you is that we are very happy with the position that we have. We have managed it. We have 9.7% of the Erste Bank Polska, and we plan basically to maintain the position for now.

[José García Cantera, CFO at Banco Santander]

If I may complement, excluding Webster and TSB, loans were up year-on-year for the group 6.4% and 6% in deposits. We have very strict capital location criteria. We invested the capital at a RoTE, the new capital at a RoTE above 21%, 22%, 23%, which is the minimum we need to draw the profitability up for the group going forward.

[José García Cantera, CFO at Banco Santander]

When you look at RWA, growth is obviously a lot less than that. It is like 1.4% or something like excluding TSB and Webster year-on-year. The difference is obviously asset sales, guarantees, securitizations. The whole equation around growth is profitability. We are finding very good pockets of profitability, and therefore, this is translated into growth.

[José García Cantera, CFO at Banco Santander]

When we look forward, we can see gross loan growth growing at the levels it is growing today for the group, which is mid-single digits, with some countries growing higher, like for instance, Mexico, and some countries growing a little bit less, like the U.K. But the overall loan growth for the group at around mid-single digits, invested at returns above 20% is what will drive the profitability of the group at that 20%, at least for 2028.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Thanks very much. Could we have the next question, please?

[Operator]

Next question from Carlos Peixoto from CaixaBank BPI. Please go ahead.

[Carlos Peixoto, Analyst at CaixaBank BPI]

Hi, good morning. Carlos from CaixaBank here. A question from my side as well. The first one would be on the NII outlook for Spain. In the previous guidance or in the previous quarter, sorry, you mentioned that the second half, you expect it to be aligned with the first half. Is that still the case? If so, what would be the drivers for the improvements in the first quarter?

[Carlos Peixoto, Analyst at CaixaBank BPI]

The second question will be a minor detail on the U.S., but basically, the drop in loan yield that we see in the U.S., is it all driven by Webster incorporation? Maybe you could give some color on how the underlying trends are evolving, excluding Webster. Thank you.

[Héctor Grisi, CEO at Banco Santander]

Thank you. I am going to give you the U.S., and then José will complement on what you are asking in terms of NII. Okay? Webster contributed around EUR 89 million of underlying profit in the quarter. Okay? We have been only consolidating it for only 40 days following the closing. Excluding Webster, profit after taxes grew 24% in the first nine months of 2026, and that is supported by really strong growth in CIB, NII, and wealth fees. Okay? It is important that the whole franchise is basically performing quite well.

[Héctor Grisi, CEO at Banco Santander]

Total expenses declined 3% year-on-year. That is delivering strong operational leverage. Provisions fell around 3% year-on-year as consumer credit performance remains resilient. That is basically what we have seen all along, that it is getting better and better and hopefully is the case. Very strong labor markets in the U.S. and very strong economy.

[Héctor Grisi, CEO at Banco Santander]

Q3 reflects normalization in CIB following a record Q2, and the typical seasonality of the auto provisions that I explained. RoTE, including Webster, reached 12.6%, and we are on track to reach the 18% post-integration of Webster. I must tell you that the franchise by itself, before Webster, was on track to deliver the 15% RoTE. Webster is basically putting on the table between 2%-3% to take the franchise by the end of 2028 to 18%.

[José García Cantera, CFO at Banco Santander]

Again, NII in Spain. I gave you the outlook for 2027, so for the fourth quarter. In the first nine months of the year, NII in Spain is up 8% year-on-year. We see no reason why we should see a significantly different figure in the fourth quarter. I already explained the one-off that we have in the third quarter that will reverse in the fourth quarter.

[José García Cantera, CFO at Banco Santander]

There is also some technicalities around global markets because the funding of global activities is in NII, where the revenues are in trading. That generates quarter-on-quarter some volatility, particularly in CIB. When you look at NII, CIB is affected by that. That, in the context of the overall NII in Spain, should not change the trends that we've seen in the first nine months of the year.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Thanks very much. Could we have the next question, please?

[Operator]

Our next question comes from the line of Alvaro Serrano from Morgan Stanley. Please go ahead.

[Alvaro Serrano, Analyst at Morgan Stanley]

Hi. I got a couple of, at this point, follow-up questions, but unfortunately one more on Brazil. I just want to get a sense of when this is going to bottom out, the profits there. Obviously it's a kind of franchise, given the emerging market nature, and the consumer-heavy sort of nature of the business, that if you don't grow loan book, it's going to be very difficult for profitability to recover.

[Alvaro Serrano, Analyst at Morgan Stanley]

Can you give us a sense of when that de-risking exercise is going to be over, and when we can see loan growth finally accelerate? Is it now from Q4? Is it 2027? Is it 2028? Maybe it's more about costs, so maybe some color and direction on that. My second question is on costs. Obviously very good performance in the U.K. and the U.S.

[Alvaro Serrano, Analyst at Morgan Stanley]

I just want to get a sense in the U.K., for example, TSB was about, call it GBP 800 million of cost base. Year on year, your costs are only up GBP 100 million or so, a bit less than that in pounds. Is the GBP 800 million the wrong cost base? Because you've said the synergies are ahead of us. Can you help us, handhold us in terms of what the right cost base is to start from there to deduct the synergies? Because it looks like you're doing a lot better both in TSB and Webster. Thank you.

[Héctor Grisi, CEO at Banco Santander]

Thank you, Alvaro. Brazil, as you have said, we don't believe that up until what happened on Monday, we were actually towards in the right track of finishing the de-risking and everything that we were doing. You see basically how the mix changes in Brazil when you have the mass market segments coming down in terms of loans and commercial and CIB, you see it going up, and you see a little bit of the change of the mix, and you see that we are playing in some. What I will tell you is that I think it's too early to tell you that if we're going to be able to go back to the market right away given the current circumstances.

[Héctor Grisi, CEO at Banco Santander]

What we are looking at and the discussions we're having with the team in Brazil is that we're going to be doing it day by day and looking at the market the moment it normalizes. The important thing is that to go back to the market when inflation is at levels of 4.22% expected, that's the last number of inflation that we had from Brazil.

[Héctor Grisi, CEO at Banco Santander]

Rates at 14%, and we must see what the central bank does if they increase or maintain the rate as it is, and then we will take it from there. I would love to tell you right now what's the right strategy at this point. We need to wait a little bit of what the situation comes out. Let's see if today continues to normalize and they feel less pressure in order to hike rates at this point.

[Héctor Grisi, CEO at Banco Santander]

I will tell you that we're ready in order to move and to start basically the motor again. But we need to wait a little bit. Nonetheless, the important delta of Brazil is ONE Transformation. So remember that because it's very important to see that all the efforts that we're doing in ONE Transformation, and also you were saying we did very well in cost.

[Héctor Grisi, CEO at Banco Santander]

Well, look at Brazil. Brazil is actually with the inflation that they have, et cetera, doing much better that you could expect. So in that sense, it's going to come from there, but it's important to acknowledge, and I agree with you, that economy like Brazilian, you need to basically come back into the market, and we will do so, but we will do it in the right way.

[Héctor Grisi, CEO at Banco Santander]

I think what I tell you also is that we are very much concentrated in the parts of the economy where we believe that they are not affected by these high real rates, and we are concentrated much on that and will continue to thrive on that. In terms of cost, as you have said, yes, we see opportunities in the U.K. mainly because of the synergies that we believe can be ignited after that.

[Héctor Grisi, CEO at Banco Santander]

The situation is that until you basically finish and get through Part VII, it is important that you are not going to be able to do anything. I believe that there is a lot of opportunities of what we have seen in the U.K. so far and also in the U.S. The most important integration part is IT, and in IT we have a lot of experience.

[Héctor Grisi, CEO at Banco Santander]

Our teams basically have done this in the past, and we have the outlook that we can do that looks promising. That is what I could tell you. Looks well, and we are going to be able to deliver and for sure the numbers that we told you.

[José García Cantera, CFO at Banco Santander]

Alvaro, let me give you some details on the restructuring and non-recurring items. In the first nine months of the year, we had in the second quarter, 250 million related to TSB. In the second quarter, we have 416 million related to both TSB and Webster. It is a bit more in the U.S. than in the U.K., so it is around 40% U.K., 60% U.S.

[José García Cantera, CFO at Banco Santander]

Those are the charges that have already been taken in the P&L related to the integration of both TSB and Webster. Alvaro, you can see in the U.K. IMS, the exact TSB cost contribution on a nine-month basis. That hopefully helps you to get to the right cost base for your models. Happy to take you through that offline if you would like.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Operator, could we have the next question, please?

[Operator]

Next question comes from the line of Hugo Cruz from KBW. Please go ahead, sir.

[Hugo Cruz, Analyst at KBW]

Hi. Thank you for the time. I just have one final question on, if you could talk a bit about the NII trends in Mexico. Q3 was a little bit weaker than expected. Rate cycle is probably going to turn. If you could give a bit of guidance for Q4, what do you expect on loans and deposits and anything around the replicating portfolio? Thank you.

[Héctor Grisi, CEO at Banco Santander]

Thank you. As you have seen, Mexico basically continues to deliver very strong profitability levels. We have an underlying RoTE of 21.2% in the country. Year to date, NII grew 4%, driven by, first of all, volume growth and the active balance sheet management that we have, that is offsetting the pressure from lower rates. Remember that the rates came in Mexico quite fast.

[Héctor Grisi, CEO at Banco Santander]

Q3 NII was down 2% quarter on quarter. That is mainly driven by the lower NII from CIB markets and lower volatility. Also, you take a look at our portfolio, in unsecured loans to individuals who are lowering the portfolio, given that the outlook that we have is that we want to be a little prudent on that portfolio.

[Héctor Grisi, CEO at Banco Santander]

You will see that we are increasing the portfolio a little bit more in commercial, in SMEs, and in CIB, because that is the way we believe that the market should be going. Cost of risk has been going up a little bit, and we want to be cautious in the way we manage those portfolios. Okay? It is important to look at it also what we are doing in terms of the change on the model.

[Héctor Grisi, CEO at Banco Santander]

Mexico fee growth year to date is 11%. Okay? That is exactly what we are doing in terms of concentrated on customers primacy, the global businesses, and the network effects. Costs are down, even with inflation that we have in Mexico, 0.9% year on year. The asset quality, take a look at it, is broadly stable. Cost of risk is at 2.73%.

[Héctor Grisi, CEO at Banco Santander]

That is below a normalized level of 3%, and NPLs improved by seven basis points to 2.9% quarter on quarter. All in all, I believe that the franchise is performing really well, and we see that is going to continue to do well.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Thank you, Héctor. Could we take the next question, please?

[Operator]

Our next question comes from the line of Borja Ramirez from Citi. Please go ahead.

[Borja Ramirez, Analyst at Citi]

Hello. Good morning. Thank you very much for taking my questions. I have two, please. They both are related to deposits. Firstly, in Mexico, just a follow-up. I can see the cost of deposits declined quarter-over-quarter, and there were some indications from competitors that actually the pressures from fintechs may be easing.

[Borja Ramirez, Analyst at Citi]

I would like to ask if you are seeing that as well, and also if you could provide a bit of color on the outlook for cost of deposits. My second question would be on Spain. It is very helpful regarding the guidance for NII for next year, so thank you for that. I would like to ask, how should we think about the deposit volumes in Spain, and maybe also in terms of the mix between the current accounts and term deposits? Thank you.

[Héctor Grisi, CEO at Banco Santander]

Thank you, Borja. In Mexico, look, it has become a very competitive market with all the neobanks, as you say, basically fighting for the cost of deposits. What we are seeing is basically the top banks of the system getting a little bit more of the deposit base, and what is hitting real hard is the medium-sized banks, where the neobanks are making much more pain for these banks.

[Héctor Grisi, CEO at Banco Santander]

What I see is that our strategy is concentrated, as I have discussed in terms of primacy and transactionality, and that is something that is showing pretty good results. You saw it in the cost of deposits, and we will continue like that. Nonetheless, there is going to be a lot of competition, and we need to concentrate on basically upgrading our IT, upgrading our app to be much more competitive and to get much more customers towards primacy. In terms of Spain, I don't know, José, if you-

[José García Cantera, CFO at Banco Santander]

In Spain, Borja, let me give you the average balances third quarter this year, which I think it shows that we are all talking a lot about competition for deposits in Spain, the newcomers, the fintechs, et cetera. Let me give you the average volumes that we have had so far this year. In the fourth quarter of 2025, EUR 280 billion, EUR 280 billion in the first quarter of 2026, EUR 282 billion, EUR 289 billion in the third quarter. If we exclude the one-off, it is around EUR 284 billion, EUR 285 billion.

[José García Cantera, CFO at Banco Santander]

So despite all this competition, we are actually increasing the deposit base in Spain at very healthy rates. Year on year, as I said, average volume is up 5%. What to expect next year? As interest rates go up, obviously, the behavior might change, as you say. We might see some movements from current accounts to demand deposits.

[José García Cantera, CFO at Banco Santander]

However, that is not going to happen, we believe, in size, because the increase in interest rates is not that significant to change customer behavior. So yes, there will be some movements from current to demand. We are not seeing it yet. Not at all. If it happens, we think it is going to be relatively small. So for next year, what do we expect?

[José García Cantera, CFO at Banco Santander]

Low to mid-single-digit growth in deposits in Spain. That is our outlook today. Having said that, we also had a low growth estimate for deposits in 2026, and we are doing a lot better, because basically we are capturing a lot of the primacy, as Héctor said, with customers in Spain. So we are not being aggressive at all in deposit pricing, but the way we are competing is through adding value to customers, so generating growth around new customers.

[Raul Sinha, Global Head of Investor Relations at Banco Santander]

Thanks very much. This brings us to the end of our conference call. Thanks very much, Héctor and José, for your answers. The Investor Relations team is available at your disposal if you have got further follow-up questions. We look forward to speaking to you next quarter. Thank you.

Participants

Executives

• Raul Sinha, Global Head of Investor Relations
• Héctor Grisi, CEO
• José García Cantera, CFO

Analysts

• Francisco Riquel, Analyst at Alantra
• Ignacio Ulargui, Analyst at BNP Paribas
• Andrea Filtri, Analyst at Mediobanca
• Ignacio Cerezo, Analyst at UBS
• Miruna Chirea, Analyst at Jefferies
• Marta Sanchez Romero, Analyst at JPMorgan
• Sofie Peterzens, Analyst at Goldman Sachs
• Antonio Reale, Analyst at Bank of America
• Britta Schmidt, Analyst at Autonomous
• Carlos Peixoto, Analyst at CaixaBank BPI
• Alvaro Serrano, Analyst at Morgan Stanley
• Hugo Cruz, Analyst at KBW
• Borja Ramirez, Analyst at Citi