Earnings call transcript: Santander Q3 2025 profit hits record, stock dips

Santander reported a record quarterly profit of €3.5 billion for Q3 2025, marking its best-ever nine-month period, with revenue up 4% in euros. The bank’s earnings per share (EPS) slightly missed forecasts, coming in at $0.2566 compared to the expected $0.2609, while revenue exceeded expectations at $17.81 billion against a forecast of $17.75 billion. Despite the strong financial performance, the stock saw a premarket decline of 2.22%, trading at $10.12.

Key Takeaways

• Record quarterly profit of €3.5 billion for Q3 2025.
• EPS slightly missed forecasts, while revenue exceeded expectations.
• Stock price declined by 2.22% in premarket trading.
• Return on Invested Capital increased to 16.1%.
• Continued focus on digital transformation and platform integration.

Company Performance

Santander demonstrated robust performance in Q3 2025 with a record profit and a significant increase in revenue. The bank’s strategic initiatives, including digital transformation and cost management, contributed to this success. Compared to previous quarters, Santander maintained its competitive edge in diverse markets, despite challenging interest rate environments.

Financial Highlights

• Revenue: $17.81 billion, up from the forecast of $17.75 billion.
• Earnings per share: $0.2566, slightly below the forecast of $0.2609.
• Net Interest Income increased by 2%.
• Fees grew by 8%, and expenses decreased by 1% in euros.
• Return on Invested Capital rose to 16.1%.
• CET1 capital ratio reached an all-time high of 13.1%.

Earnings vs. Forecast

Santander’s EPS of $0.2566 fell short of the forecasted $0.2609, resulting in a negative surprise of 1.65%. However, the revenue of $17.81 billion surpassed expectations by 0.34%. The slight miss in EPS was offset by the revenue beat, reflecting the bank’s strong operational performance.

Market Reaction

Despite the positive revenue surprise, Santander’s stock declined by 2.22% in premarket trading, reflecting investor concerns over the EPS miss. The stock’s current price of $10.12 is within its 52-week range, suggesting that broader market trends and sector performance may also be influencing investor sentiment.

Outlook & Guidance

Santander remains optimistic about its future, targeting a Return on Invested Capital of around 16.5% in 2025. The bank plans to distribute at least €10 billion in share buybacks over 2025-2026 and anticipates stable to slightly growing Net Interest Income in 2026. Continued digital transformation and platform integration are key strategic focuses.

Executive Commentary

"We are building a stronger and more connected Santander to strike the full potential of our unique combination of customer focus, scale, and diversification," said Héctor Grisi, Group CEO. He emphasized the sustainability and resilience of Santander’s results, stating, "Our results are sustainable and less volatile than peers, even in a more challenging environment."

Risks and Challenges

• Navigating challenging interest rate environments in key markets.
• Potential regulatory and tax considerations impacting operations.
• Maintaining competitive advantage amid digital transformation.
• Managing credit quality in diverse markets such as the US, Brazil, and Mexico.
• Economic uncertainties in regions like Europe and Latin America.

Q&A

During the earnings call, analysts inquired about Santander’s capital allocation strategy and the outlook for Net Interest Income across different markets. The management provided insights into the expansion of Openbank and addressed concerns over credit quality in the US, Brazil, and Mexico.

Full transcript - Banco Santander SA ADR (SAN) Q3 2025:

Raul, Moderator/Operator, Santander: Good morning and welcome to the third quarter 2025 results presentation. For the call today, we will be joined by Héctor Grisi, our Group CEO, and José García Cantera, our CFO. Héctor, over to you.

Héctor Grisi, Group CEO, Santander: Thanks, Raul. Good morning everyone, and thank you for joining the Santander results presentation. We will follow the usual structure. First, I will go over our results with a special focus on the performance of our global businesses. Then, José, our CFO, will provide a detailed view of the financials, and I will wrap up with some final remarks before we open for Q&A. Before we begin, a quick note that all figures in the presentation continue to include Poland until the disposal is completed. Q3 was another record quarter, reflecting the strength of our strategy and the resilience of our business model in a more demanding environment.

Our quarterly profit hit a new record at €3.5 billion, making the first nine months of 2025 the best nine-month period ever, driven by strong revenue growth across the global businesses and our solid customer base, which increased by 7 million year on year to 178 million as we enhanced customer experience by leveraging our global platforms. We achieved this while we continued to invest for the future through one transformation, making excellent progress towards a simpler and more integrated model. This has enabled further efficiency gains and a 70 basis points increase to our ROIC to 16.1%. Our balance sheet also remains solid with a strong capital ratio, which ended the quarter with an all-time high of 13.1% and a robust credit quality. All of this drove strong shareholder value creation with TNF plus cash dividend per share growing 15% despite some currency headwinds.

We are approaching the end of our 2023-2025 strategic plan, well on track to meet our targets thanks to our profitability and our disciplined capital allocation, which is further improving profitability. Remember that earlier this year, we raised our ROIC target to around 16.5% post ’81, equivalent to above 17% pre ’81 from our original investor day target range of 15% to 17%. At the same time, we’re already operating with a CET1 ratio above 13%, clearly exceeding our original post-Basel III target of above 12%, with 88% of RWAs generating returns above our cost of equity. Finally, after our latest inorganic transactions, we decided to accelerate the execution of our €10 billion share buybacks and upgrade our target. We announced that we expect to distribute at least €10 billion to our shareholders through share buybacks for 2025-2026, subject to regulatory approvals. Let’s go now into our income statement.

Our P&L remained very solid, with profit growing double digits year on year, once again reflecting the strength and diversification of our model. We delivered strong top-line growth with revenue up 4% in euros, supported by NII, which increased 2%, but especially by a new record quarter in fees, up 8%, supported by significant customer growth and the network benefits that we are capturing through our global businesses. At the same time, expenses grew below revenue, down 1% in euros, in line with our target, showing the positive effects from our transformation. This performance translated into solid growth in net operating income, again demonstrating the sustainability of our results. Our prudent approach to risk is also evident in our robust credit quality trends, with a cost of risk that is consistently improving year on year.

Overall, as we have shown over time, our results are sustainable and less volatile than peers, even in a more challenging environment. We are ahead of our plan executing our transformation, boosting our operational leverage and structurally improving both revenue and cost. Simplification, automation, and active spread management have already delivered 259 basis points of efficiencies. Our global businesses added 101 basis points, and our in-house and global tech capabilities another 88 basis points, exceeding the level expected by the end of 2025. There is still more to come. We see further upside, which is focused on rolling out common platforms across retail and consumer, while also capturing additional efficiencies from wealth, CIB, and payments by leveraging our global network. All this is something that is entirely under our control. All our global businesses delivered strong profit growth while we improved the group’s profitability.

Customer activity and diversification continue to drive revenue growth. In a less favorable interest rate environment, our CIB, wealth, and payments businesses, which are more fee-driven, are seeing increased revenue with fees up 7%, 19%, and 16% respectively. At the same time, some of our franchises and emerging markets perform better with lower rates. Our consumer business is a great example, with NII up 6% year on year. In addition, our customer focus and solid track record in active balance sheet management explain the resilient NII performance in retail, which, excluding Argentina, grew 1% year on year. At the same time, we’re extracting the potential from our scale. Scale gives us efficiency and also the flexibility to allocate capital quickly, something very few others can replicate.

Combined with our strict capital discipline and focus on profitability, this is driving higher ROIC, with most of our businesses already above the targets we set for 2025. It is this unique combination of customer focus, scale, and diversification that enables us to deliver strong and recurring results, putting us in an excellent position to navigate the challenges ahead. In retail, we are transforming the way we operate to become a digital bank with branches, combining cutting-edge technology with the expertise and proximity of our teams. We continue to digitalize and enhance customer journeys, driving double-digit growth in digital sales. A key milestone was the launch of the new app in Brazil that introduces conversational capabilities, and we are now preparing its rollout across more countries.

In cost, we’re making the most of AI to speed up simplification and automation, which is reducing manual activities and allowing teams to focus more on customer interactions and value-added activities. As a result, the dedication of teams to non-commercial activities has dropped by 17% during the last 12 months. We are progressing in the rollout of our global platform, Gravity. Our backend technology is fully implemented in Spain and Chile, and we expect to deploy it in Mexico in Q4. Retail profit grew high single digit year on year, driven by sound revenue performances across most countries. Cost declined in real terms, and credit quality remains solid. In a more demanding environment, net interest income grew year on year, excluding Argentina, reflecting our focus on profitability and disciplined margin management. Fees rose 5%, supported by higher customer activity, our ongoing digitalization, and improved customer journeys.

We will keep scaling our transformation to boost efficiency and contribute to the group’s growth. By improving customer experience and simplifying operations, we expect to continue growing our customer base while reducing cost in euros. In consumer, we continue to advance in our priority to become the preferred choice for our partners and customers by delivering the best solutions and strengthening our cost-competitive advantage across our footprint. Deploying global platforms is key to scale our business and to reduce cost to serve. We recently announced the integration of Santander Consumer Finance and Openbank in Europe, a natural step that simplifies our business, reduces cost, and improves our product offering. We keep enhancing our value proposition, and Openbank is again a great example. In Germany, it now offers a new AI-driven investment broker. In the U.S.

and Mexico, Openbank has attracted €6.2 billion in deposits as part of our broader deposit-gathering strategy. We continue to expand and consolidate partnerships, offering global best-in-class solutions with top OEMs. Cineo continued to grow, reaching record volumes during Amazon Prime Days and introducing installment payments for Amazon customers in Spain. Profit grew 6% year on year in a challenging context of weaker carrier registrations in Europe, driven by NII growth and solid cost-of-risk performance, especially in the U.S. We continue to prioritize profitability over volumes, lower funding costs, and accelerating transformation while actively managing capital to maximize returns. We expect consumer to be one of the drivers of the group’s profit, supported by NII growth as the business benefits from lower rates and progresses in our strategy to lower funding costs.

Solid fee-income performance as insurance penetration improves and further cost efficiencies as we accelerate our transformation. In corporate and investment banking (CIB), we are building a world-class business to better serve our corporate and institutional clients across our footprint while maintaining our low-risk profile. Number one, we continue to deepen our client relationships and strengthen our position in our core markets, leveraging our centers of expertise and expanded coverage. This is translating into market share gains in the U.S. as we achieve greater relevance in the investment banking space. Number two, our enhanced capabilities are enabling us for significant opportunities across CIB, improving our cross-business value proposition and driving solid growth in our institutional franchise in global markets where revenue rose 27% year on year.

Even in a more challenging environment, CIB keeps on delivering solid results with profit up 10% year on year, supported by solid fee growth across business lines and exceptional performance of global markets early in the year. All of this while we maintain one of the best efficiency ratios in the sector and a ROIC of around 20%, reflecting our strict focus on profitability and capital discipline. We will build on the capabilities developed in recent years to drive revenue growth in CIB across the group, driven by stronger connectivity across countries, products, and businesses. In wealth, we are building the best wealth and insurance manager in Europe and the Americas. Number one, in private banking, we remain focused on expanding our fee businesses and consolidating our global position through value-added solutions.

We continue developing our new global family office service, which, after just three months of activity, is providing advisory services to our first clients in Spain who represent a total wealth of more than €500 million. Number two, in asset management, we keep reinforcing distribution and investment capabilities in alternatives and streamlining our liquid product platform. Number three, in insurance, we are focused on two new verticals: lifetime pensions with new products for senior customers in Brazil and annuities from private banking and affiliate clients in Spain, and P&C, where we expanded our value offering to SMEs with new protection business products in collaboration with GetNet. Number four, collaboration with other businesses is a major growth driver for wealth. Collaboration revenues have been a strong growth lever, with PB and CIB working hand in hand from tailored capital market structures for ultra-high net worth individuals to new joint opportunities.

In summary, all of this is supporting strong growth and high profitability levels. Profit rose 21% off the back of strong commercial activity and double-digit fee growth across the three businesses. Efficiency improved 1.3 percentage points year on year, and ROIC is close to 70%, confirming wealth position as one of the most efficient and profitable businesses in the group. Finally, payments, where we hold a unique position on both sides of the value chain. In merchant acquiring, we’re expanding our global platform with a single API to serve all our customers across our footprint, and it’s now live across our five countries in Latin America, reinforcing GetNet’s positioning in the region. PagoNext Payments is leveraging the best proprietary technology to deliver account-to-account processing, FX, fraud detection, and other value-added services. Volume processed by our payments hub was more than five times higher than last year.

In cards, where we are amongst the largest issuers globally with 107 million active cards, we continue to expand the business and deliver best-in-class products. As part of our debit-to-credit strategy to promote the benefits of using credit cards, this quarter, we launched PaySmarter in five other countries. We also kept strengthening the integration between cards and merchant solutions, expanding our bundle proposition with GetNet in Brazil, which now joins Spain, Chile, Portugal, and Argentina. Payments delivered a strong quarter, resulting in double-digit revenue increase year on year, both in cards and PagoNext, with controlled costs driving profit growth of more than 60% and improving PagoNext’s EBITDA margin to 32%, already above our 25% investor-day target, with GetNet being one of the best among peers. Our strong operational and financial performance is driving higher profitability and double-digit value creation for the 10th consecutive quarter.

Post 1981 ROIC, we reached 16.1%, up nearly one percentage point year on year, reflecting our disciplined capital allocation strategy. Earnings per share rose 16%, supported by solid profit generation and fewer shares following buybacks. As a result, TNF plus cash dividend per share increased 15%. We maintain our graded target to distribute at least €10 billion to our own shareholders through share buybacks for 2025 and 2026, subject to regulatory approvals. Since 2021, and including the program that is underway, we will have repurchased more than 50% of our outstanding shares, providing a return on investment of approximately 20% to our shareholders. I will leave you now with José, who will go into our financial performance in more detail.

José García Cantera, CFO, Santander: Thank you, Héctor, and good morning, everyone. I will go into more detail on the group’s P&L and capital performance. Let me first remind you that, as we always do, we are presenting growth rates in both current and constant euros. The difference was around 5 percentage points as of September, mainly due to the depreciation of the Brazilian real and the Mexican peso towards the end of last year. As the CEO explained, we are yet again reporting record results this quarter for the sixth consecutive quarter. Revenue grew 4%, with a good cost performance in line with our objectives for 2025. Cost of risk improved in the quarter, supported by robust labor markets and our prudent risk management.

There are several positives and negatives in the other results line, but the concepts that explain most of the significant drop in this line year on year are the write-downs in PagoNext in the second quarter of last year and the temporary levy on revenue earned in Spain, which this year has been recorded under the tax line. For the last two years, we have reported a continuous upward trend in profit, which grew 3% this quarter in constant euros on the back of a resilient NII performance, cost under control, and lower loan loss provisions. Total revenue increased 4% to €46 billion, on track to meet our 2025 target, even with less favorable interest rates than initially anticipated. This growth was underpinned by customer activity and more than 7 million new customers. All global businesses contributed to revenue growth.

Payments accelerated, with revenue up 19%, as both PagoNext and cards delivered double-digit growth in NII and fees, driven by higher activity. Wealth also maintained the positive trends from the first half, with revenue rising 13%, supported by record assets under management and a strong commercial momentum. CIB grew 6% year on year, driven especially by global markets and our growth initiatives in the U.S. Consumer also had a strong performance, supported by strong net interest income growth across most of our footprint. In retail, revenue rose even in a less favorable interest rate context, thanks to our active margin management and our increased focus on fees. The group’s net interest income increased 3% year on year, excluding Argentina.

Although the majority of group’s NII comes from retail and consumer, this quarter, most of our businesses contributed to the overall growth year on year, which was supported by active asset and liability pricing management. This is most evident in consumer, both in Europe and the U.S., with improving loan yields and a funding structure with a larger share of customer deposits. Also in retail, especially in the U.K., Chile, and Mexico. Strong activity in cards, particularly in Brazil, higher volumes and lower funding costs related to market activities and CIB, and our efforts to adapt the sensitivity of our balance sheets to protect NII on the new cycle of interest rates. A good example of this is retail, where net interest income increased across most countries in a less favorable context of interest rates. In the quarter, net interest income was impacted by the Argentine peso.

Excluding Argentina, NII was flat, and net interest margin declined only four basis points for similar reasons I just mentioned. This performance is in line with our guidance of NII going slightly up in 2025 in constant euros, excluding Argentina, and slightly down in current euros. We believe net interest income is approaching its trough as we move into a more balanced environment, with rates in Brazil expected to ease and lower rates in Europe likely to support consumer volumes and funding costs. Net fee income achieved yet another record period, as the number of active customers continues to increase and our transformation promotes connectivity across the group, deploys high-value added products and services, and delivers the best customer experience. Fees grew high single digits, above our target for the year and well above inflation and costs.

This was supported by positive active activity trends, customer growth, and a product mix that is shifting towards more value-added products and services. This shift is evident across all global businesses. Retail fees rose 5%, increasing across most of our footprint. CIB increased 7%, up from record levels last year, boosted by an excellent first quarter and year-on-year growth across all business lines, particularly in global banking in the U.S. Wealth maintained a strong momentum across business lines, backed by record assets under management. Double-digit growth in payments, both in PagoNext and cards, supported by higher activity levels. As discussed in previous quarters, this year consumer is affected by new insurance regulation in Germany. Nevertheless, we saw a recovery this quarter, supported by our strategic focus on insurance, with rising penetration expected to translate into higher fee generation as activity accelerates.

As we advance our transformation, enhancing customer experience and connectivity, and continue to attract more customers, we expect a strong and sustainable fee performance. One transformation is key to understanding why we are improving profitability in most of our markets, leveraging the connectivity that our global businesses provide. The improvements are already very evident. Our costs dropped 1% year on year in current euros, which translates into better efficiency levels, already amongst the best in the industry. In retail and consumer, which are leading our transformation, costs are evolving very positively, down 1% in real terms, even with pressure on salaries in some countries and the upfront cost of rolling our global platforms. In corporate and investment banking, wealth and payments, where we are investing, costs grew. However, they showed positive operating jobs with a double-digit fee increase, as I have just explained.

This excellent performance resulted in a 5% rise in net operating income from already high levels last year, and our efficiency ratio improved to 41.3%, the best we have reported in more than 15 years. Going forward, we expect sustainable improvements in operational leverage as we further implement the structural changes to our model, especially in retail and consumer, which represent 70% of our cost space. The risk profile of our balance sheet remains low, with robust credit quality across our footprint, on the back of low unemployment and easing monetary policies in most countries. Loan loss provisions increased 5% year on year, reflecting the decision to reduce NPLs and also some deterioration in Brazil in the context of higher interest rates. Credit quality continued to improve year on year, as reflected both in the NPL ratio and cost of risk. The NPL ratio was fairly stable at 2.92%.

Remember that much of our NPL portfolio has collateral, guarantees, and provisions that account for more than 80% of its total exposure. Cost of risk improved year on year and quarter on quarter to 1.13%, despite the management actions I just explained. In retail, cost of risk improved year on year across all our main countries and was steady in the quarter. In consumer, cost of risk also improved, both year on year and quarter on quarter, as the excellent trends in the U.S. continued in the third quarter, even with the usual seasonality. U.S. auto has demonstrated to be a highly profitable and resilient business through multiple macroeconomic cycles. It continues to perform better than expected, even after some normalization of the delinquency rate, in line with our expectations, with over 90-day delinquency at historically low levels, backed by strong labor markets and resilient used car values.

Finally, our lending exposure to private markets is less than 1% of group’s lending exposure. We anticipate a stable cost of risk going forward, supported by stable labor markets. Moving on to capital, as you know, we have been working on improving our capital productivity and accelerating our capital generation for some time. Our CET1 capital ratio increased again to 13.1% and is now above the top end of our 12% to 13% operating range.

This quarter, we generated 56 basis points of capital from attributable profit, which enabled us to accumulate capital after allocating some capital to profitable organic risk-weighted asset growth, mostly offset by asset rotation initiatives, compensating capital distribution charges for shareholder remuneration and AT1s, and absorbing other charges, including some regulatory headwinds, which, as we discussed last quarter, this year will be lower than initially expected, as some of them have been postponed to 2026, and some of the technical notes published by the EBA were more favorable than anticipated. We continue to deploy capital to the most profitable opportunities and leverage our global asset desk’s mobilization capabilities to maximize capital productivity. Our disciplined capital allocation delivered a new book ROIC of 2.8% in the quarter, equivalent to a return on tangible equity of 22%, well above that of our backbook. Hector, back to you.

Héctor Grisi, Group CEO, Santander: Thanks, José. In conclusion, these are great results. Good business dynamics and our business model supported solid revenue growth, with fees rising high single digits while we reduced costs in euros. Cost of risk improved and remains in line with our target of around 1.15% at the end of the year. We grew the CET1 ratio again to 13.1%, exceeding the upper end of our operating range on the back of our strong capital generation, while we profitably grow our business organically and continue to reward our shareholders. Our ROIC improved and is on track to reach our target of around 16.5% in 2025, and TNF plus cash dividend per share keeps growing double digits. In summary, very solid results, even in a less favorable environment than we initially anticipated, which makes us confident that we will achieve all our 2025 targets.

We expect to maintain the good trends supported by our focus on profitable growth as we deepen our transformation in a context of resilient labor markets. We are building a stronger and more connected Santander to strike the full potential of our unique combination of customer focus, scale, and diversification. This is exactly what makes us confident that we will keep on growing and creating long-term value across different economic cycles. The best is yet to come. Now, we will be happy to take your questions. Thank you.

José García Cantera, CFO, Santander: Thank you, Héctor. Thank you, José. Could we go to the first question, please?

Raul, Moderator/Operator, Santander: Thank you. If you wish to ask a question, please press 5 on your telephone. We already have the first question from the line of Ignacio Ulargui from BNP Paribas Exane. Please go ahead.

Thanks very much for the presentation and for taking my questions. I have two questions. Looking to your ROIC target for the year of 16.5%, there has to be an acceleration into the fourth quarter to get to that level. What would be the main drivers for that? Don’t you feel revenue NII has probably troughed this quarter? We should see a more decisive increase in the quarters to come. What would be fees? What drives that performance? Linked to that, how should we think into 2026 on those lines? I have the second question as a bit of a clarification. Looking to the credit quality in Brazil, there has been a small improvement in the quarter. Provisions have gone down. How should we think about cost of risk?

Has there been any kind of release of provisions that you took into Q4 for the extraordinary top-up that you did, or is it just an underlying improvement of credit quality and provisioning? Thank you.

Héctor Grisi, Group CEO, Santander: Thank you, Ignacio. First of all, let me discuss a little bit about the ROIC of the 16.5% plus AT1 target. First of all, as you have seen, in the first nine months, we have delivered a record profit with a ROIC of 16.1%. If you see just the Q3, the underlying ROIC is well above the 16.5%. It is very important that you see that. We expect a really strong performance in Q4, basically driven by a number of factors. You can see, first of all, we also have seasonality, higher fees, and an increased momentum from the execution of One Transformation, and we’re reiterating the guidance of around $62 billion in revenue for 2025. We see lower costs and the cost of risk around the 1.15% that we have discussed. Another result of around $3 billion.

I do believe that our strategy, the business model, the diversification, the disciplined approach to capital allocation will deliver a compounding effect that will continue yielding the positive results we’re aiming for. I see that we’re going to get to around that circa 16.5%. The important thing also to take into account is the disciplined capital allocation that is driving a 15% growth in value creation and higher shareholder remuneration, and with the CET1 that you have seen, that is strong at levels of around 13.1%. It is very important for that. The outlook for 2026, as you have seen over the last two years, we have shown consistent execution of the strategy, and we have delivered ROIC every year from below the 15% that we were back in 2022. As you know, and we have discussed, we will provide further details for the next three-year plan.

Our investor day is going to be in February 2026. Wait us for that. It is important to understand that if you see every single unit of the bank basically showing improvement, every single business unit, global business is also improving. As we already heard, we’re only scratching the surface of the potential with One Transformation. As we have discussed previously, and I said back in the investor day in the beginning of 2023, our aim was to become the best bank in every single geography. Up to today, we are best in class in five of our geographies, but we still have five geographies to close the gap with the number one in that market. That basically gives you the view that we will continue improving.

As you know, 2026 is also a transition year with the impact from Poland reducing net profit by $700 million and the TSB contribution that is likely to be more material once we make progress on the integration. Our current cost base is elevated, given the migration towards global platforms, which is resulting in some duplication of cost. Nonetheless, I do see that we have a very promising 2026. In terms of, sorry, José, go ahead.

No, cost of risk in Brazil.

Yeah, I also want to talk about cost of risk in Brazil. In the quarter, loan loss provisions fell 9% quarter on quarter. 12-month cost of risk remained stable at around $471. Over the last two years, we have de-risked the balance sheet, as we have been explaining to you every single quarter, with a rapid contraction of unsecured and less profitable lines, such as personal and payroll loans. Remember that I explained to you that we were changing the mix, and that’s basically helping us out. However, we have rates that are the highest in the developed world, 10%, 10 points of real rates, which is also a challenging environment for companies, especially agribusiness, corporates. It’s a difficult environment. Hopefully, rates, and we basically believe, will be coming down a little bit during the first quarter.

I do believe that credit quality, volume growth, and earnings will be supported by an improving macro, which we have seen. Even with these rates, remember that Brazil is going to grow around 2% a year. As I said, hopefully, by the end of 2027, we see rates falling down to 10.5%. José can basically give you more details.

José García Cantera, CFO, Santander: Just to add, if you look at cost of risk on a quarterly basis, in 2024, cost of risk was 4.5% every quarter. In the first two quarters of this year, we had a cost of risk of 4.9%. It’s back to 4.5% in the third quarter. There is nothing extraordinary, no reversal of provisions or anything. It is a more normalized asset quality level, the one that we’ve seen in the third quarter. We would expect to finish the year within the range that we guided you for, which is somewhere between 4.7% to 4.8% or around 4.8% cost of risk.

Raul, Moderator/Operator, Santander: Thanks very much. Could we have the next question, please?

Next question from Cecilia Romero Reyes from Barclays. Please go ahead.

Thank you very much for taking my questions. The first one is on capital. You have guided for around 20 basis points of regulatory headwinds, if I’m not mistaken, for the rest of the year, which now obviously looks like it will come in Q4. Is that still the case? Considering Q4 is typically a more intensive risk-weighted asset quarter and that there could be an additional hit from UK motor provisions, how comfortable are you with the 13% CET1 target? My second one is on corporate actions. For the Santander Bank Polska sale and the TSB acquisition, is everything still on track to be closed by year end and early 2026, respectively? Is there any change to capital impacts or any of the financial impacts previously announced? Thank you.

Héctor Grisi, Group CEO, Santander: Thank you, Cecilia. In terms of, I’m going to basically answer you number two. In terms of Santander Bank Polska, I review every single week the advance on that one, and I believe that we’re right on track to close on Q1. In terms of capital, I will ask José basically to give you his overview of what you have asked.

José García Cantera, CFO, Santander: The outlook for regulatory and supervisory charges is now better, as I said during the presentation, because some charges that we expected this year have been postponed and probably will be lower than we had anticipated. They have been postponed to 2026. Also, some of the technical notes, capital model adjustments, et cetera, came in better than expected. For the year as a whole, I would say that regulatory and supervisory charges will be in the region of 20 to 25 basis points. We have had 16 in the first nine months of the year. In terms of targets, we believe that we will generate capital in the fourth quarter from the 13.1% that we reported in September. The view that we have today on capital is that the ratio will increase in the fourth quarter further.

In terms of the capital charges, et cetera, related to the acquisitions, nothing’s changed. We think Poland will generate around 90 basis points of capital. We don’t know exactly because it depends on the deductions, but it will be around 90 basis points. The acquisition of TSB is around 50, 52 basis points capital charge. Remember that we announced once we close Poland, a share buyback in the amount of €3.2 billion, which is around 50 basis points. Those are the capital charges from the transactions, and they haven’t changed in the last couple of months. We don’t expect them to change materially from the numbers I gave you.

Raul, Moderator/Operator, Santander: Thanks very much, José. We have the next question, please.

Next question from Francisco Riquel Correa from Alantra Equities. Please go ahead.

Yes, thank you. Thank you for the presentation. My first question is on NII in Spain, which is 1% up quarter on quarter. You were guiding for a decline. You already improved the full-year guidance from minus 6, minus 7 to minus 4, minus 5. I wonder if you can update again on this guidance because I think I feel trends are better than expected. Please comment also on the margin dynamics. I see the customer spread is down, but NIM is stable. What should we expect for NII loan growth in Spain in Q4 and in 2026? My second question is, I wonder if you can update on the rollout of the Gravity platform. You have recently completed in large markets like Spain and Chile. What type of efficiency and productivity gains are you capturing already and what should we expect on a full-year basis? Thank you.

Héctor Grisi, Group CEO, Santander: Thank you, Francisco. Yes, as you have said, NII in Spain is much better. I think that the Spanish team has done a great job in terms of managing betas. As José explained in his presentation, we have done a pretty good job in that sense. That’s why you see NII basically up 1%. We expect to continue fourth quarter up long single digits from flat that we have expected. We expect to basically have that. For 2026, I will basically tell you that we have good dynamics, but nevertheless, we expect it is important that you wait for the beautiful picture that you have in front of you in terms of the investor day. We will give you a pretty good idea of what we expect. In terms of the rollout with Gravity, I’m glad you asked the question. I think that it’s very important.

As a matter of fact, we just migrated Mexico this weekend. That’s another large market that is being migrated. To tell you exactly how it works, once we migrate a country to Gravity, we start shutting down the mainframes. Let me give you an example. Remember that Spain was migrated in April. We used to have five mainframes in Spain. Two already have been shut down. We’re still waiting to shut down another three more that will be closed over the next 18 months. Once we shut down those, that decreases costs quite a lot because every time we do that, we save a lot of money by all the charges that we get from the suppliers in terms of that. To give you exact new numbers, we can contact you later because I don’t have the exact new numbers that we will get from that.

I do believe by the end of 2026, all the big countries will be migrated and we will start the migration with the smaller countries. What I can tell you is the results are pretty good. The NPS with the customers has gotten better. The response, I don’t know in what market it is and if you’re a customer of ours, but hopefully you are, you’re going to see that the speed has become a lot better. It’s a lot easier because we don’t go back and forward to the mainframe every single time you consult your balance on your current account or anything like that. It’s pretty much faster. I think that the results are there. Spain is getting less cost out of what we have done. Chile, the response has been really, really good.

Mexico, migration was a success and we expect to be closing, I mean, decreasing the amount of capacity. We’re using the mainframe right away and we’ll see it over it. You see the results on 2026. That’s when exactly happens because we’ll be shutting down the mainframes on those markets. Okay.

José García Cantera, CFO, Santander: If I may add some details on NII, you ask about the difference between customer margins and NII. I think we are, as Héctor said, we are doing a great job in managing cost of deposits, a lot better than we anticipated. We are growing volumes at a lower cost. That’s one component relative to the initial guidance we gave at the beginning of the year. The other one is obviously all the hedging decisions that we’ve taken. Right now, we have around €50 billion of Spanish government bonds at an average yield of 3.4% and a duration of five years. That’s expected to add quite a lot to the NII in the fourth quarter and next year. On a sequential basis, I think, as I said, we are close to the trough.

It’s possible that we see a slight decrease quarter on quarter, maybe one or two quarters more, but you know from very, very close to basically flattish, but basically probably slightly down quarter on quarter. If you look at the year as a whole, you’re right. We guided for minus 6%, then minus 4%, and it’s going to be flat or slightly down year on year. The outlook for 2026, beyond these one, two quarters where it might be marginally down, is quite positive.

Raul, Moderator/Operator, Santander: Thank you very much. Could we have the next question, please?

Next question from Sophie Petersons from Goldman Sachs. Please go ahead.

Thank you for taking my question. Here is Sophie from Goldman Sachs. My first question would be around the kind of litigation provisions still to come. You took a provision in the corporate center in the fourth quarter. How much, or is there any additional details that you could give around this provision? How much should we expect still to come from UK Motor and also AXA provisions? Do you have any other litigation provisions that we should expect in any other countries over the next quarter or year? That would be my first question. My second question would be if you could maybe talk a little bit more about the net interest income outlook in Brazil. I know interest rates are expected to come down, but in the short-term, short to medium term, what do you expect in terms of volume growth?

Could you remind us of your rate sensitivity in Brazil? How long does it take for level rates to help the Brazilian net interest income? Thank you.

Héctor Grisi, Group CEO, Santander: Thank you, Sophie. Okay. First of all, on this situation of the litigation provisions to come, first of all, on the UK-AXA situation, we do not expect the net impact of the judgment to be material for the group. In October 2022, the court granted Santander a permission to appeal, and the case will now proceed to the Court of Appeal. Given this is an ongoing matter, we are not able to comment any further. I’m sorry about that. In terms of the UK Motor Finance, in 2024, as you know, we took almost £300 million provision for the UK FCA Motor Finance Review. We have noted that the FCA has recently published a consultation into a proposed redress scheme, and Santander UK is reviewing the consultation in detail, basically to understand the potential implications.

We also note that the FCA proposed approach is first in an important respect from the Supreme Court’s ruling, and the legal basis for the redress scheme’s relevant period is not clear, and it remains at the consultation stage. There is therefore a certainty regarding the final scope, methodology, and the timing of the redress scheme that may ultimately be implemented. At this point, I think it’s very complicated, and the important thing that I can tell you is that it’s not expected to be material for the group and no more than a few points of CET1. We will provide you further updates on the Q4 results, and we’ll reiterate that we’re on track for the results and the guidance that we have given you for 2025 on all the targets.

In terms of NII outlook for Brazil, what I can tell you is interesting to say basically that we need to put Brazil in context. It’s very important to understand that the loan book in Brazil is only 9% of the total group loans. Diversification is working. The impact of higher rates and inflation in Brazil has been positively offset by the stronger performance in Europe and in other businesses. Brazil is also, it’s important to say, is growing by 2% in 2025. Labor markets have been resilient, despite the challenging rate environment. As I said before, interest rates are the highest, in terms of real rates, which is an important point to take. What we have done is that we are changing the mix and we are going to a higher quality business, which means lower margins, but more stable asset quality, which is very important.

I feel comfortable and confident that as monetary policy eases, the business will do even better than we did in the last easing cycle. You have to remember, as you know very well, that we have negative sensitivity to high rates in Brazil. We expect once the rates start coming down, that will help us out and will give better margins for us. If we’re even that, I don’t know, José, if you’d like to complement.

José García Cantera, CFO, Santander: Yeah, just some details on that. Interest rate sensitivity today to 100 basis points, moving the curve is $75 million upwards and downwards. You know that this is lower than it has been in the last few years. We’ve been decreasing the overall sensitivity, but more importantly, we’ve been moving the sensitivity towards, we’ve made the sensitivity more sort of homogeneous along the curve. We no longer depend as much on short-term rates, but we have a spread sensitivity from zero to three, four years, which we think is the right position to be in front of the lower rates we expect next year. We would expect NII to be stable in 2025 with basically stable revenue and with fees up. This is based basically on loans that are also going to be stable in 2025.

Again, no further, I would say, the sensitivity we have when we look at 2025, sorry, 2026 and 2027 should contribute positively to NII evolution in Brazil in the next couple of years.

Raul, Moderator/Operator, Santander: Thanks very much. Could we have the next question, please?

Next question from Álvaro Serrano Saenz de Tejada from Morgan Stanley. Please go ahead.

Hi, thanks for taking my questions. I kind of have a follow-up on cost and another one on U.S. asset quality. On cost, cost income continues to improve sequentially quarter on quarter. My follow-up is, apologies, Héctor, I heard you say that Mexico Gravity was implemented this weekend, but I missed if you can give us the pipeline of the next few countries over the next few quarters. As we think about next year’s cost and medium term, I noted in the past you’ve said you can achieve flat costs in retail in particular. Is this possible in places like Brazil and Mexico? In Mexico, your cost income is not as good as peers. Just wondering if there’s an advantage there that we’re not taking into account. The second on cost, on cost of risk in the U.S.

José, I noted your comments saying that stable asset quality performance in the U.S., but if we look at ABS data at an aggregate level, there is a deterioration. It looks like in subprime auto, which you have some exposure to. Can you maybe talk us through why you think you’re not seeing that deterioration? Is it because you haven’t been growing that much in the segment the last two, three years? You’re not exposed to undocumented where there has been some trouble. Maybe some more color on that stable asset quality performance in the U.S. that you’ve noted. Thank you.

Héctor Grisi, Group CEO, Santander: Thank you, Álvaro. First of all, let me give you a general view on cost on the group, and then we’ll get into the details of Gravity and then flat cost in Mexico, Brazil, which by the way are pretty good questions. I’ll address the U.S., which thank you very much. I knew you were coming with that one, so I was prepared. Cost remained very well controlled in the first nine months of 2025, as you have seen. Minus 1% in current. I must tell you that we will reiterate the guidance to deliver lower costs in current euros in 2025 versus 2024. We see that we’re done in absolute terms and the cost growth remains below the revenue growth, which is very important in this group. Remember, always positive, Jos. Underpinning the confidence in delivering the positive operating leverage that we are creating through one transformation.

Remember, one transformation is all about increasing revenues and decreasing costs. That basically creates the operating leverage that we’re working for. Short-term costs are higher as we continue to invest in the global platforms. As I explained to you, Mexico, even though we had the migration this weekend, the mainframe is still basically consuming MIPS because we want to keep this in parallel until we stabilize Gravity. Once Gravity is stabilized, we start basically decreasing the amount of MIPS that we consume on the mainframe. By the way, then we start decreasing the cost that we have. We have the same in many different platforms, Álvaro. That’s why I say that 2026 is the most difficult year because that’s where we are doing this transformation in which the global platforms are coming in, Gravity, PLART, Payments Hub, et cetera, and we’re still in parallel running those.

Just getting into Mexico, Mexico is the worst one by far because Mexico is the one that we needed to upgrade the most and is the one that has most dual platforms working on. They have in dual PLART for credit cards and they have Pampa working at the same time while we’re doing the migration. We have Gravity and the mainframe at the same time because we’re doing the migration. We have in Payments Hub and Transfer working at the same time because we’re going to decommission Transfer towards the end of the year. You’ll see that Mexico will start basically getting more in the level of our peers. By the way, our only peers that you are talking about are Banorte and BBVA because the rest are further ahead from us in cost. We’re much better.

I would say that we are a little better on average, but we need to get, I couldn’t agree more, we need to get to our peers. That’s exactly what we’re working on. The same thing, I will tell you, is Brazil. Brazil is going to be the same. For example, Brazil just got the new version 24 of the global app that is coming in. It’s the first country to do so. We already have 1 million customers migrated, but we need to migrate 60 million customers at the end. This takes time, but nevertheless, we are also at the same time, because we’re doing the simplification and the automation, we’ve been able to maintain cost. You were asking precisely about what’s going on in retail and commercial, which is a really good question.

How are we basically decreasing cost in retail and commercial at the same time we’re doing this deployment? It’s because in retail and commercial, we are doing interesting things in terms of basically concentrating on simplification. You take a look at the number of products that we had three years ago, it was over 10,000 products. Just to give you an example, 300 different credit cards in Brazil. We’re down to 17 different credit cards in Brazil. Mortgages in Mexico, we had 17 different types of mortgages in Mexico. We’re down to three. The amount of things are going, the important thing is basically changing the legacy on the back of the bank. That’s where the big job is being taken on in terms of simplifying all the legacy that we have, and that’s a huge amount of cost.

Sorry to extend myself, but it’s very important that you understand what one transformation is all about. It’s not just about the platforms. It’s a lot about simplification and automation of processes, which really change exactly what we’re doing. I’m confident that 2026, even though it’s a tough year in terms of everything that I’m explaining to you, we will be able to maintain costs flat or down in the group because that’s exactly where we are concentrated. It’s very important that you get that. I don’t know if that basically answers all of your questions. If not, please let me know and I will gladly give you all the details on that.

The thing is, the amount of money that you save once you’re decommissioning, and that’s the most important part, the discipline on decommissioning, you really start to see the savings coming on and you have seen it because there was no other way that we could be giving you this number in cost if we were not really doing those commissions and being very disciplined about it. In terms of cost of risk in the U.S., first of all, it’s important what I was telling you. We continue to be and to have a high exposure to prime and near prime. If I’m correct, 38% of our book is prime and near prime. As you say correctly, the amount of origination has come down significantly. We were at the peak about two years ago at around $35 billion in origination.

We’re down to $22, $23 billion, and at the end of the year, it’s going to be $24 billion in origination. The origination that we do in supply and de-supply is very well managed and is not the same that the other player basically was doing. As you say, we never get into with undocumented customers. It’s a completely different model than the one we had. What you see is what José explained in his presentation, that we see that even 30 days and 60 days delinquency is normalizing. 90 days is still below what we expected. We expect less provisions, even in the fourth quarter, from the U.S. auto business because of that. I don’t want to give you an exact figure because you never know what happens towards the end, but we see nonetheless that the labor market is still strong.

Manhattan is up 2% year on year, even though it has decreased a little bit in the past three, four months, but nothing to concern us. The customers, what’s happening after 90 days is that they want to keep their autos because they know that it’s going to be much more expensive to go out into the market. That’s why 90-day delinquencies, people are basically coming back to us and renegotiating because they want to keep their autos. I don’t know if that basically answers your question, José. I don’t know if I left anything out.

José García Cantera, CFO, Santander: Yes, again, in terms of cost of risk, the second half tends to be worse than the first half. When you compare quarter on quarter, ’26 against, sorry, ’25 against ’24, the numbers are coming in better every single quarter than we had last year. In the third quarter, last year cost of risk was 1.85%. It is 1.69% in the third quarter of this year in the U.S. Remember, at the beginning of the year, we guided for cost of risk slightly above 2%. Today, we see cost of risk in the U.S. below 2% in 2025, actually better than we expected. Again, knowing that there is some seasonality in the second half, the numbers should be better.

Just to give you a bit more detail on what Héctor just said, when we look at loans past due over 60 days, and if we look at the last 10 years, this number for non-prime has moved between 4% to 8%, and we are within that range at the moment. It has been going up recently, but it’s within the range that we’ve seen in the last 10 years. When we look at prime, for instance, over 60 days, it’s below 3%. This figure has been moving a bit higher, a bit lower than 2% for the last 10 years, so very much normalized. It’s true that in the last couple of quarters, we’re seeing some increase in this ratio, but this has not translated into losses because the recovery rates remain very robust.

When we look at actual losses, net loss in prime, it’s basically below 3%, which is much better probably than we saw, for instance, during the period of 2010 to 2020 or 2019. If we look at non-prime, losses are below 7%, which is the best we’ve seen, excluding the post-COVID period. These are the best numbers that we’ve seen in many, many years. Net-net, actually very normal behavior is what we see in the U.S.

Raul, Moderator/Operator, Santander: Thanks very much. We have the next question, please.

Next question from Carlos Joaquim Peixoto from Banco BPI. Please go ahead.

Yes, hello. Good morning. First question would actually be regarding First Brands in the U.S. There were these press reports over previously this month regarding some engagement with Jefferies and the possibility of Santander being involved in the refinancing of First Brands. I was just trying to understand here whether there is any relevant exposure or do you see this as a risk for the group? The second question would actually be focused on the corporate tax rates. How do you see what should we expect in terms of the overall corporate tax rates in the full year or in the fourth quarter, if you prefer, for the group as a whole, but focusing as well on Brazil? We have this quarter low tax rates given the interest payments on capital.

Should we see a similar effect in the fourth quarter or should we see it reverting back to the previous levels now in the fourth quarter? Thank you very much.

Héctor Grisi, Group CEO, Santander: Thank you, Carlos. I must tell you that in terms of first brands, as you know, we don’t discuss customers. What I can tell you is that whatever we have is not material for the group at all.

José García Cantera, CFO, Santander: Tax rate. Yeah, the tax rate for the group in the first nine months of the year was 26.6%, which basically in Spain it was 37.5%, excluding Spain 24.1%. This is a little bit better, not significantly better than we anticipated. There are two reasons for this. In the U.S., tax rate is 10%. Remember that we said that when the EV. The

Raul, Moderator/Operator, Santander: aid program finalizes and the tax rate would normalize gradually, and we thought that it would normalize faster than it is normalizing. Actually, the tax rate is lower in the U.S. than we thought. Slightly lower in Brazil, nothing significant. For year-end, we would expect the tax rate to be around the same level it is today, 27%.

Héctor Grisi, Group CEO, Santander: Thanks very much, José. We have the next question, please.

José García Cantera, CFO, Santander: Next question from Rita Smith from Autonomous. Please go ahead.

Raul, Moderator/Operator, Santander: Thank you for taking my questions. A couple of follow-ups on credit, please. In Mexico, I think there’s some comments on model updates and higher SME provisions. Can you help us disentangle these two? What was the impact of the model updates, and what are you seeing in terms of the SME pressure, and do you expect that to continue or get worse? In Brazil, there were also some selected issues in the corporate world. Can you maybe comment whether you’ve got any exposure here and whether you still feel happy with the provision that you built in the last quarter? Lastly, Argentina came in quite high as well. Is this only lending, or are there also impacts in potentially the bond portfolio?

Maybe you can share with us a little bit as to what you expect for Argentina in the coming quarters with regards to results, hyperinflation, and also FX developments. Thank you.

Thank you, Rita. I will address the questions from Brazil and Argentina. Then José will tell you a little bit, I mean, what’s going on. Let me tell you that in Mexico, the portfolios are performing really well. We have had some model updates, but nothing that hits capital in there. SMEs basically actually were growing in the segment because we have really good ROAs. I can tell you that we’re going to beef up that, but José will give you better details. In terms of Brazil corporates, I can tell you we have taken a deeper look at the portfolio because, you know, with 10% real rates, corporates suffer in that environment. We have reviewed the portfolio in detail. We have actually understood and located exactly where the problems are, and we’re working on them. I don’t see any significant situations on the portfolio up to this point.

All of them are under control, and they were really taken care of. On the corporate side, we don’t have anything material that would be a material impact for the group, at least in the next few months. I don’t foresee it because even the situation, as I said, Brazil is growing 2%. In that sense, the economy is still growing. Argentina is an interesting story. I actually was in Argentina as I was in Brazil a couple of months ago. What I can tell you is the situation is complicated. In one sense, it’s complicated because, as you know, inflation is at around the levels between 25% to 30%, and that’s where the year is going to end. Rates, because the government has really, I would say, basically there is no pesos to lend in Argentina.

The government is squeezing pesos out to really decrease inflation in a strong way. That basically has taken rates to real rates to levels that are tremendously high. What you see in Argentina happening is that the cost of risk is growing tremendously high. We’ve been very cautious in Argentina because of that. Cost of risk in Argentina went almost to the level of 7%. That’s why, with real rates at these levels, it’s really impossible to make money with 60 points of real rates. What we’ve been doing is being very cautious. Basically, the only lending that we’re doing in Argentina is to exporters in dollars. That’s the majority thing, and energy, and energy companies. We are basically deep involved in situations in Vaca Muerta, where there are a lot of opportunities and the portfolio is basically going very well.

I must tell you, to lend in pesos in Argentina in this market today is hard because of the real rates. Hopefully, let’s see what the government does with this victory that they just had. They had a pretty good rally. The peso appreciated a little bit. Hopefully, let’s see that they ease a little bit on the economy, the real rates start to come down, and we see a much better next few months. Today, we are being very cautious in the way we manage credit in Argentina.

Héctor Grisi, Group CEO, Santander: Mexico, yes, we’ve updated the models, the provisioning models and some capital models. The consequence is that without really seeing any significant deterioration in real asset quality, there’s been a movement from stage two to stage three. It’s around 10% of the stage two loans moved into stage three, but it’s the consequence of the model, not that the actual deterioration was taking place. In any case, cost of risk in the third quarter is still below 3%. In the third quarter alone, if we look at the last 12 months, cost of risk at 2.6%, below 3%. Remember at the beginning of the year that we said cost of risk in Mexico would not go above 3%. It’s actually quite well below 3% because the overall performance is pretty good. In this quarter in particular, again, is this technical change from stage two to stage three. Thanks very much.

Could we have the next question, please?

José García Cantera, CFO, Santander: Next question from Pablo de la Torre Cuevas from RBC. Please go ahead.

I just wanted to get your thoughts on the deposit outlook for the UK into the next year. One of your peers talked about muted deposit growth in 2026, and another has spoken of elevated competition in term deposits. They’re just interested in your thoughts there as deposit growth has been a big driver of top-line growth over the last couple of years for UK banks. If we translate that into UK NIM directionally and excluding TSB, would you expect underlying UK NIM to grow as much in 2026 as it has been in 2025, driven by that structural hedge repricing? Thank you.

Héctor Grisi, Group CEO, Santander: Structural hedge right now is €106 billion, 2.7% yield, and two and a half years of duration. This should have positive contribution to NII next year. Second comment, we expect rates to go down from 4% to 3.5% by year-end next year. It could go down even, there could be even three cuts, but we believe that we give today more probability to two cuts. Volumes should be up next year. Overall, we would expect NII to actually increase in the UK in 2026, excluding TSB, of course. We are talking low to mid-single digits increase in NII. Thanks. Thanks very much, José. Ben, hopefully that answered your question, but we can take it offline if you’ve got any further details on deposits outstanding. Could we have the next question, please?

José García Cantera, CFO, Santander: Next question from Borja Ramirez from Citi. Please go ahead.

Hello, good morning. Thank you very much for taking my questions. I have two. Firstly, on capital, I believe it may have been mentioned that in Q4, it’s generally more intensive in terms of the SRTs. I would like to ask if you could provide any details on the capital benefit that we may see in Q4 linked to SRTs. My second question would be on other provisions. If I understood well, it was mentioned that other provisions would be around $3 billion for 2025. Given that you have booked $2.5 billion in the nine months, this seems to imply half a billion for Q4. I would like to ask if my numbers are correct, of course, what are the assumptions on provisions? Thank you.

Héctor Grisi, Group CEO, Santander: Thank you, Jorge. The first one, yes, the fourth quarter is the most active in risk-weighted asset mobilization initiatives. As a consequence, we would expect net risk-weighted asset growth to be close to zero in the fourth quarter. It was slightly positive in the third quarter. We have gross risk-weighted assets up $11 billion and asset mobilization initiatives between $7 to $8 billion in the third quarter. The fourth quarter, the net gain from SRTs, which by the way is not the only way we are mobilizing capital. In the third quarter, we mobilize as much by asset sales as securitizations. We also had some hedges. We are using different tools to optimize the capital and increase the capital productivity. Putting all this together against risk-weighted asset growth in the fourth quarter, it should be very, very close to zero.

Your second question, when you speak about other provisions, I presume that you’re talking about other results, so the line below provisions. Yes, this line should be substantially lower than last year because of the one-offs that we had last year and because the banking tax in Spain last year was accounted for in other results and now is in the tax line. We would expect this line to be a bit higher than $3 billion in the year. $3 to $3.2 billion is the reasonable number in the absence of any substantial one-offs that at this point we do not envision. In the absence of substantial one-offs, the answer is yes. The reason is excluding these one-offs. What is in this line is the labor cost in Brazil, operational risk.

It tends to be a bit higher in the fourth quarter, but not to deviate a lot from, let’s say, $3.2 billion for the year, again excluding one-offs. Thanks, Borja. Could we have the next question, please?

José García Cantera, CFO, Santander: Next question from Andrea Filtri from Mediobanca. Please go ahead.

Thank you for taking my question. The first is a bit of a back of the envelope. Your 16.5% ROTIC target discounts around $13.6 billion profits in 2025, which would only imply $3.3 billion left for Q4 2025, which would be a deceleration quarter on quarter. Your ROTIC guidance implies a marked acceleration in Q4. Which of the two is right? My second question is more conceptual on insurance and the Danish compromise. You have made statements prior on the intention to gain Danish compromise-like benefits at Banco Santander. Could you elaborate a little bit how you intend to do that and what sort of benefit you could get? Thank you.

Raul, Moderator/Operator, Santander: Okay, Andrea. First of all, and I know you’re very bright, probably brighter than me, but you need to redo your numbers because for me, actually, the numbers should be going up. That would be my comment on that one. In terms of insurance and what we’re doing with Danish compromise, the only thing I could say is we have formally applied with the ECB for enhanced supervision, and that’s the only thing that I could discuss at this point. Let’s see what the ECB decides, and if they give us enhanced supervision, that will give us basically the trend to see the following path or the following step. Thank you.

Héctor Grisi, Group CEO, Santander: Yeah, Andrea. The post 81, 16.5 would be slightly higher than the numbers, but I’m very happy to give you a call after and take you through the details. Could we have the next question, please, operator?

José García Cantera, CFO, Santander: Next question from Ignacio Cerezo Olmos from UBS. Please go ahead.

Hi, good morning. Thank you for taking my questions. First one is if you can give some color on any excess capital above the 13% by the end of the year, if that is going to be used for incremental capital return or there’s going to be some uses of that capital, thinking of potentially restructuring costs, for example. The second one is on the payout mix between cash and buybacks, considering higher share prices and lower profitability of buying back a stock. If you think it makes sense conceptually to be moving towards the cash dividend component, basically of the payout mix in the future. Thank you.

Raul, Moderator/Operator, Santander: As you know, we have a very strict capital hierarchy. First of all, as we have said, we’re going to prioritize organic profitable growth. Second, we’re going to follow it by ordinary distribution. Then we do any bolt-on acquisition that must be complementary and to generate attractive financial returns, and those need to surpass those of any organic investments or buybacks. I believe that at this point we feel very comfortable with the capital levels that we have, and the capital allocation framework has been a fundamental pillar of the strategy, as you have seen. We will continue the disciplined and strict capital approach that we have had to capital. In that sense, I will ask José basically to give you more details on the buybacks.

Héctor Grisi, Group CEO, Santander: This is a very interesting intellectual and financial discussion because you have all types of technical papers written on this matter. The way we see this, and obviously this is for the board to decide, and it will decide in the Board of Directors that will take place in December about the dividend policy for next year. The way we see that, or I see that, is that when you are looking at improving profitability going forward, and when you are looking at a cost of capital that is at worst stable, probably improving, and then you add growth, high single-digit growth, buying back shares is still a very good value proposition. Obviously, the new business is being written at a return on tangible equity, as I said, of 22%.

That is the first and most important use of our capital, but there is not an infinite amount of capital that we can put to work at 22%. Once we have covered that bucket, buying back shares, again, when you’re looking at improving profitability, a stable lower cost of capital, and growth in profits is still a very good value proposition for shareholders. More details to come next year, I’m not sure. I hope you’ll understand. We’ve got two more questions left. Could we go to the next question, please, operator?

José García Cantera, CFO, Santander: Next question from Fernando Gildes Antibanes from Intesa Sanpaolo. Please go ahead.

Hi, thank you for taking my question. Can you hear me okay?

Héctor Grisi, Group CEO, Santander: Go ahead.

Okay, yes. Okay, first question, follow-up in Spain regarding the repricing on rates. Are we done in the repricing, and what is the bank risk appetite going forward regarding the actual pricing trends, especially in the loan needs? The second question is on CIB Europe. I see the NII up 13% year on year, 5% quarter on quarter. What is driving these upgrades, and can you comment what you expect going forward? Thank you.

Raul, Moderator/Operator, Santander: Look, in terms of Spain, what I tell you, I mean, it’s a very competitive market, as you know. We have rates in even with a Spanish bond at 3.30%, we have mortgages down and we have seen 1.90%, 1.75%. I think that the market is being irrational in that point. Hopefully there is some rationality in the months to come and we see rates at much better levels. We have been very disciplined and very focused on profitability and we will continue to do so even if we lose a little bit of market share. You have seen that we have lost a little bit of market share because of that discipline. We don’t believe that mortgages today at 1.75% make sense to do in the bank, so we won’t do them.

Exactly when the price and when there is a lot of competition on the high-risk name in a corporate side, etc., we’re going to maintain our level of risk reward that we believe is the right one. We will continue and we will put in a lot of discipline in that sense. In terms of what we see in terms of DCB, give me one second. In global DCB, first of all, it is important to say that we’re improving the rotate from 24 to 10.4 post 81s in 2025. It’s important. Part of the improvement is explained by the lower conduct, basically, of the charges that we had, remember, on the Swiss francs, mainly in Poland. The underlying attributable profit is growing at 6%. That basically is positive. NII is growing 6% year on year. That’s well above credit, which is up 2%.

It’s benefiting from the focus on profitability, as we have said. The yields on loans have improved 25 basis points and the cost of deposits has come down by 39 basis points. As you know, in this business, we are sensitive to higher rates, negative sensitivity to higher rates. When rates start to come down, we have much better margins. It’s important to say that we have improving credit quality. The cost of risk is down for 201. That’s less than basis points versus Q3 2024. The 12 months cost of risk is at 2.06%, down three basis points quarter on quarter. We have excellent LEPs performance, as we have said. Our strategy is to expand the deposit governing capabilities through Openbank. As you know, it has been a success. We are doing that in Germany. As we have announced, we are merging Openbank and DCB Europe.

That basically will enable us to have much more control, better management, and the deposits close to the origination of the assets. That basically would be a help to have much better margins, much better operation, and also much better cost.

Héctor Grisi, Group CEO, Santander: Thanks very much. Could we have the last question, please?

José García Cantera, CFO, Santander: Last question from Miruna Kirea from Jefferies. Please go ahead.

Hello, thank you very much for taking my question. I just had a quick one, please, on Openbank. I was wondering how your progress in Openbank is going in Mexico and in the U.S. If you could give us maybe an update in terms of the balance of deposits that you’ve raised in those markets since you launched. Secondly, to this point that you are making now on merging Openbank and Santander Consumer Finance in Europe, could you give us just a bit more color on what kind of synergies could you see there by merging the two lines of business and the overall rationale for this? Thank you very much.

Raul, Moderator/Operator, Santander: Thank you, Mina. Okay, so Openbank Mexico and the U.S., this is basically, I’m giving it to you from the back of my mind. If I’m correct, it’s $6.5 billion in deposits on the two combined, if I remember correctly. We’re talking about 160,000 customers in the U.S. In Mexico, I don’t recall. I’ll give you the exact number. Sorry, I don’t have it in front of me. We’re trying to find it out for you. In the meantime, let me discuss a little bit of what’s the rationale behind the merger that we’re doing with Openbank and DCB. As you know, we’ve been operating in parallel. It’s one unit and we have one boss basically managing both of those businesses. At this point, we had two of everything because there were two separate institutions.

That basically will help us a lot in terms of cost because now we’re going to have just one for both of them. Cost, systems, etc. A lot of that is going to be a lot of synergies in that sense. The most important synergy is the amount of deposits that we have in the bank that will be basically used to eliminate or try to eliminate as much the negative sensitivity that we have when rates basically go up. When you have a sustainable deposit base, that will basically help you out to match it to the assets and you have much better planning if you have that. Openbank, as you know, is the largest deposit base of any digital bank in Europe.

We believe there’s a huge opportunity to continue like that and also will help us to upgrade our operations in Germany, which we have a really good deposit base there and we would like to increase it and continue basically growing the business as we see fit. All in all, I think that’s going to be a pretty good combination. Yes, in the U.S., it’s $5.8 billion in deposits and we’re talking about 162,000 new customers in Openbank. Thank you, Mina.

Héctor Grisi, Group CEO, Santander: Thank you, Miruna. I think that we are out of questions. Thank you, everybody, for your time this morning. This concludes our analyst presentation, and we look forward to speaking to you soon. Have a good day.

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