• Profit: EUR12.6 billion, a record high.
• Revenue Growth: 10% in constant euros.
• Return on Tangible Equity (RoTE): 16.3%.
• Capital Ratio: CET1 at 12.8%.
• Net Operating Income: EUR36 billion.
• Cost of Risk: 1.15%.
• Fee Income Growth: 11% in constant euros.
• Customer Growth: 8 million new customers.
• Shareholder Value Creation: TNAV and dividend per share up 14%.
• Retail and Consumer Revenue Growth: Double-digit growth.
• Corporate and Investment Banking (CIB) Revenue Growth: 14%.
• Wealth Revenue Growth: 15%.
• Payments Volume Growth: 11%.
• Operating Leverage: Cost growth of 1% vs. revenue growth of 9%.
• Cost to Income Ratio: Improved to 41.8%.
• Share Buybacks: EUR1.6 billion announced for 2024 earnings.

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

Release Date: February 05, 2025

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

Positive Points

• Banco Santander SA (NYSE:SAN) achieved a record profit of EUR 12.6 billion in 2024, marking the third consecutive year of record results.
• The company grew its customer base by 8 million, demonstrating strong customer acquisition across all global businesses.
• The bank's balance sheet remains robust with a strong capital ratio at an all-time high of 12.8%, reflecting its ability to generate capital organically.
• Banco Santander SA (NYSE:SAN) delivered strong shareholder value creation with tangible net asset value (TNAV) and dividend per share growing by 14%.
• The bank's cost of risk ended at 1.15%, better than initial guidance, showcasing prudent risk management.

Negative Points

• Currency devaluation in some markets posed challenges, although offset by profitability and the appreciation of the US dollar.
• Higher interest rates in Europe could impact parts of the business, such as consumer and certain developing market geographies.
• The bank anticipates a more challenging and volatile macroeconomic environment in 2025.
• The cost of risk in Brazil may perform marginally weaker than in 2024 due to changes in the portfolio.
• Regulatory charges are expected to be similar to 2024, indicating ongoing regulatory pressures.

Q & A Highlights

Q: Can you provide more details on the trade-off between organic and inorganic growth, especially in the context of M&A in the European banking sector? A: Ana Botin, Executive Chairwoman, explained that Banco Santander prioritizes profitable organic growth and investments across its businesses, followed by ordinary dividends and share buybacks. Inorganic growth must complement strategic aims and generate attractive financial returns that surpass those of organic investments or share buybacks. Any incremental capital exceeding targets will be returned as additional remuneration to shareholders.

Q: What are the expectations for the UK market, particularly for the retail bank, in a competitive environment? A: Ana Botin stated that the UK market remains core to Santander, with a resilient outlook for its 88% retail business. The bank expects UK NII to have bottomed out in the second half of 2024 and to be slightly up in 2025. The focus is on leveraging global platforms to improve customer experience and reduce costs, with a RoTE target of around 11%.

Q: How does Banco Santander plan to manage its capital allocation, and what is the threshold for surplus capital distribution? A: Ana Botin clarified that the bank aims to operate at a 13% CET1 ratio by the end of 2025, with flexibility to distribute excess capital following a hierarchy of organic growth, distributions, and disciplined inorganic investments. The target range remains above 12%, and any excess capital will be returned to shareholders.

Q: Can you elaborate on the impact of regulatory changes on Banco Santander's capital, particularly regarding DTAs in Brazil? A: Jose Cantera, CFO, mentioned that the deduction of Brazilian monetizable DTAs from capital was already taken in Q4 2024. If the ECB's interpretation is maintained, there will be no further impact on capital. The bank is contesting this decision as it believes it creates an uneven playing field.

Q: What are the expectations for Banco Santander's performance in Brazil, considering the current economic environment? A: Ana Botin noted that Brazil's retail business contributes about 38% of Brazil's net profit, which is 7% of the overall group profit. The bank expects Brazil's RoTE to be stable in 2025, driven by higher customer revenues, especially fee income, and contained costs. The bank has been prudent in growth and improved the quality of its balance sheet.

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