In Davos last month, Ana Botín, the executive chair of Banco Santander, was keen to make a virtue of the size of the Spanish lender.
She brushed off reports that the lender could quit the UK, and reminded President Trump via video link that Santander boasted more customers than the two biggest US banks combined.
“Congratulations, I know very much about your bank and you’ve done a fantastic job,” Trump applauded.
Others are less impressed. Since Botín inherited the top job from her father in 2014, the group’s shares have fallen by nearly a third.
As other global banks such as HSBC and Citigroup retrench from far-flung markets, there are questions about whether Santander’s sprawling footprint — one that encompasses 10 “core markets”, more than 170mn customers, nearly 210,000 staff and total assets of €1.8tn — still makes sense.
“Santander has a balance sheet that’s as big as some of the larger US banks, but it trades at a much lower multiple and is less profitable,” says Hugo Cruz, European banks analyst at KBW.
“There are questions around whether [Santander] is actually adding value or not. There’s a conglomerate discount.”
Executives at the Spanish lender are not oblivious to these concerns.
The bank is exploring a number of strategic options for its UK business, one of which is potentially exiting the British retail market where it has had a presence since 2004, the Financial Times reported last month.
In the two decades that Santander has operated in the UK, the unit has largely produced steady — but underwhelming — returns for its parent group. The bank argues that the reliability of returns at its UK business allows it to pursue growth in more volatile markets, such as Latin America.
Santander said its model was “proven to generate consistent growth” and that the value of its network was “evident in constant improvement in efficiency which is among the lowest of our peers, and we continue to invest for future growth”.
On Wednesday, it is expected to report net profits of €12.2bn for 2024, up from €11.1bn a year earlier. It trades at a multiple of about 0.96 times tangible book value.
However, the weaker UK returns relative to some of Santander’s other markets, coupled with Britain’s ringfencing regime and Brexit, has caused frustrations within the wider group, according to people familiar with the matter.
John Cronin, a financial industry analyst and founder of SeaPoint Insights, says: “The point is [Santander] generates a better risk-adjusted return on capital in other markets, so it is incumbent on the board to reassess its commitment to the UK market at intervals.”
Last week, it was announced that Santander’s UK chair William Vereker had resigned following disagreements with the group’s leadership, highlighting some unease within the operation.
“What Santander has is a very strong culture,” says one banker familiar with the group. “They are very strong managers — Spanish managers that have been trained in the Botín way.”
While Botín has said publicly that the UK business was “not for sale” and would remain a “core market” for Santander, people at the highest level of the bank have said privately that an exit was still on the cards.
Santander last year rejected a “low ball” offer for its UK retail business from Barclays, said a person familiar with the matter. Barclays declined to comment. Analysts have estimated that Santander could generate between €11bn and €15bn from a sale of the unit.
Barclays executives also previously debated pursuing an asset swap with Santander, people familiar with the matter said.
It would have proposed that the Spanish bank transfer its mortgage-focused UK high-street business to Barclays in exchange for the British lender’s US cards business, giving both greater scale in markets where they are undersized. The idea never got off the ground because of regulatory and competition hurdles.
If Botín is cooling on Santander’s UK arm — a business she ran directly before ascending to the chair — she has warmed to the US.
Botín has embarked on a major expansion of the Spanish lender’s corporate and investment bank.
In 2021 Santander acquired Amherst Pierpont Securities, a designated primary dealer of US Treasuries, for $600mn, and the bank has pledged a further $250mn to build out the investment bank.
It has also recruited heavily from Credit Suisse following the scandal-hit Swiss lender’s takeover by UBS.
“There’s been a lot of revenue growth in the corporate and investment bank,” says KBW’s Cruz. “They hired all these people and you can see fees growing strongly.”
During the first nine months of 2024, Santander’s investment bank produced €6.3bn in revenue, or almost 14 per cent of the lender’s top line during the period. Five years ago, the investment bank was contributing about a tenth of the bank’s total revenue.
Internally, the bank’s leaders talk about the benefits from the investment in the US since 2021 only starting to be felt in 2025.
Several bankers who have joined Santander in the past two years say the long lag is because of a bare bones infrastructure that lacked even basic back-office support to onboard blue-chip clients like major hedge funds or access to industry data sources like Dealogic. “There was literally nothing,” said one Santander investment banker.
Some bankers joined with guarantees of about $4mn in pay for the first year of employment, with an understanding that something similar could be paid for the second year.
Hires have ranged across mergers and acquisitions, leveraged finance and equity capital markets, a broad push which has aroused curiosity about the size of its ambitions.
“History shows that it’s difficult for European banks to compete in investment banking in the US,” says a senior executive at a rival European lender.
However, Davide Serra, founder of Algebris Investments, which owns more than €1bn of equity and debt in Santander, says the “one great advantage” for Santander’s US investment bank is “the corridor with Latin America”.
Santander has a strong presence in several countries across the region. Its businesses in Brazil, Mexico and Chile are expected to produce €4.6bn in combined net profit for 2024, according to the analyst consensus.
“I’m not sure you would design a bank like this today from scratch,” says Cronin. “But the geographic diversification does confer revenue insulation and there is a neat and sensible counterbalance between developed and emerging market exposures which seems to work well.”
Santander has targeted a return on tangible equity — a key measure of bank profitability — of about 16 per cent for 2024, significantly higher than most of its European peers.
“In the past two years, total shareholder return has outperformed peers and we are confident our model still has significant upside,” the bank told the FT.
Serra said that Santander’s high return on equity, coupled with the relatively low volatility of its earnings, made the Spanish lender a compelling investment case and suggests that its mix of multimarket retail franchises is “not out of fashion”.
“The shares, like most other high quality European banks, are very highly undervalued,” Serra adds. “It’s one of my largest positions. What’s not to like about getting paid 10 per cent per year and growing?”
But others question whether the bank is stretching itself too thin.
“Santander needs to think about what it wants to do,” says a senior European banker. “Is it retail? If so, in which countries? Is it corporate banking? Their corporate and investment bank is not bad, but it’s not brilliant. There needs to be a massive rethink.”
Additional reporting by Stephen Morris