Banco Santander (SAN) Q3 2026 earnings review
Santander's profit rises 19%, but its capital buffer narrows
Santander's cost cuts and newly acquired banks lifted profit, while revenue at its older businesses slipped during the summer. Third-quarter profit excluding one-offs rose 19% from a year ago to €3.8 billion as shared software trimmed operating expenses. Adding TSB in the UK and Webster in the US boosted headline revenue, but by our math sales at businesses owned a year ago slowed to 3% growth and dipped from the second quarter.
| 9M sales from businesses owned a year ago | +5% in constant euros (headline +7%) |
|---|---|
| Q3 profit, excluding one-offs | €3.85B +19% from a year ago |
| Core capital ratio (CET1) | 12.7% 14.0% last quarter, after Webster deal |
| Full-year 2026 outlook | Unchanged profit above €14.1B ex acquisitions |
⚖️ Verdict: 🟢 Bullish
The story got better because closing the Webster purchase fixed Santander's weak US deposit base while back-office cost savings ran ahead of schedule. The US loan-to-deposit ratio dropped below 100%, and nine-month operating costs excluding acquisitions fell in constant euros. One caution: paying for Webster knocked the core capital ratio down to 12.7%, and regulatory charges plus tax shifts pushed consumer-lending profit at Openbank down 9%.
The question now is whether the third-quarter revenue dip at the existing businesses was a brief summer lull or the start of a broader margin squeeze. Either lower interest rates in Europe and Brazil will revive lending spreads, or falling yields will force the bank to rely entirely on cost cuts and mergers for growth. Fourth-quarter net interest income and the year-end capital ratio will settle it.
🐂 Bull Case
Shared Software Cuts Costs Across the Bank
Santander is moving its regional banks onto shared software and simpler product menus under a programme it calls ONE Transformation. The Spanish lender now serves 54% of its retail customers through its Gravity cloud software and global app. It wants that share above 80% by 2028 through "simplification & automation".
- Efficiency ratio (operating costs as a share of revenue): 42.6% in the first nine months, down 2.8 percentage points from a year ago
- Third-quarter operating costs excluding TSB and Webster: €6.34 billion in constant euros, down 3.1% from a year ago by our math
- Retail non-sales staff per million customers: 392, down 17% from 473 a year ago
This matters because the bank is adding customers while spending less to serve each one. Total customers rose by 17 million over the past year to 189 million, yet the annualised cost per active customer fell 5% to €249. Lower overhead lifted net operating income 10% in constant euros excluding acquisitions.
What to watch: fourth-quarter operating costs excluding TSB and Webster. Another drop from a year ago will confirm the bank met its full-year cost-reduction plan without slowing platform rollouts.
Webster Deal Reshapes the US Funding Base
Santander completed its purchase of Northeast US lender Webster Financial on 20 August. For years the group funded its large US car-loan book partly with expensive wholesale borrowing because it lacked enough local retail deposits. Management said the deal "accelerates our path to top-tier profitability and efficiency, supported by c.$800mn of cost synergies".
Combining Webster's branch network and $10 billion of health savings accounts with $11 billion of digital deposits at Openbank US pushed US deposits up 84% in constant euros to €158 billion. The US loan-to-deposit ratio fell below 100%, down from 113% two years ago, while Openbank's US deposits save about $150 million a year in funding costs.
What to watch: the US efficiency ratio in 2027, currently 44.7%. A steady drop toward the 40% target will show Whether Santander is capturing the promised $800 million in branch and headquarters savings.
Wealth and Payments Fees Lift Group Returns
The lender relies on its fee-charging businesses to keep revenue growing when interest rates stop rising. Across the group, net fee income rose 7% in constant euros over the first nine months to €10.35 billion. Wealth Management and Insurance led that gain as assets under management hit a record €588 billion, up 11% from a year ago.
In Payment Solutions, the bank's merchant-acquiring and cross-border payments unit, processed transactions on its Getnet Platforms tripled to 14 billion. Moving traffic onto a single software platform cut the cost per payment transaction by 39% to 1.5 euro cents, which more than doubled the unit's nine-month underlying profit to €105 million.
What to watch: gross written insurance premiums, up 20% to €10.0 billion in the first nine months. Continued double-digit growth will test management's claim that insurance is only 10% penetrated across its customer base.
🐻 Bear Case
Acquisitions Mask a Third-Quarter Dip in Underlying Sales
Santander folded UK mortgage lender TSB into its accounts in May and added US commercial bank Webster in August. Those two deals lifted headline third-quarter revenue 8.0% from a year ago in constant euros to €15.87 billion, and 1.3% from the second quarter.
- Third-quarter revenue excluding TSB and Webster: €15.20 billion in constant euros, up 3.4% from a year ago by our math, but down 1.5% from the second quarter
- Third-quarter net interest income (the spread between loan interest and deposit costs) excluding acquisitions: €11.22 billion, down 1.9% from the second quarter
- Third-quarter net fee income excluding acquisitions: €3.42 billion, down 1.3% from the second quarter
This matters because the businesses Santander owned a year ago shrank slightly between the second and third quarters. Lower inflation-linked bond income in Chile, a shift toward safer, lower-yielding loans in Brazil, and a quieter quarter for investment banking after a strong spring all weighed on the top line.
What to watch: fourth-quarter revenue excluding TSB and Webster. By our math, the bank needs about 5% growth from a year ago in the final quarter to keep its full-year mid-single-digit target intact.
Consumer Auto Provisions and Tax Shifts Cut Openbank Profit
In its presentation highlights, Santander said it is "comfortably on track to deliver our targets, with all global businesses contributing to mid-teens profit growth". That statement only holds if investors ignore regulatory charges and tax changes inside Openbank, the group's digital and consumer auto-lending division.
On the bank's own underlying profit table, Openbank's nine-month profit fell 9.3% in constant euros to €1.41 billion, and dropped 12.6% excluding Webster. The unit absorbed €194 million after tax in first-half provisions for UK car-finance commission complaints and about €200 million in higher US taxes after electric-vehicle tax credits ended.
In the third quarter, the bank also booked a €69 million charge in Openbank Europe after a European court ruling on "charging interest on costs associated with consumer credit", shifting that hit out of net interest income into other provisions. Return on tangible equity in Openbank fell 1.3 percentage points to 9.0%.
What to watch: the UK regulator's final redress rules for motor finance commissions. Any extra provision beyond the €245 million pre-tax charge booked in the first half would further delay Openbank's return to profit growth.
Webster Purchase Drops the Capital Buffer Below the Full-Year Target
Paying for acquisitions in cash and shares consumes regulatory capital. Closing the Webster purchase in August cut Santander's Common Equity Tier 1 (CET1) ratio — its core buffer of equity against risk-weighted loans — by 1.47 percentage points in the third quarter.
Even after adding 0.19 percentage points from third-quarter profits net of dividends and loan growth, the CET1 ratio dropped from 14.0% in June to 12.69% in September. Meanwhile, the Bank of Spain raised its countercyclical capital requirement on Spanish loans from 1 October, adding 0.11 percentage points to the group's minimum threshold.
What to watch: the year-end CET1 ratio against the 12.8%–13.0% target. By our math, Santander must generate 0.11 to 0.31 percentage points of net capital in the fourth quarter, matching its best quarterly pace this year.
👓 Other Themes
Defaults in Argentina Offset Credit Gains in Europe and Brazil
Nine-month loan-loss provisions rose 10% in constant euros to €10.06 billion, nudging the cost of risk (annualised provisions as a share of total loans) up 0.03 percentage points to 1.16%. High inflation and economic adjustment in Argentina drove that increase: Argentine provisions more than doubled to €809 million and the local cost of risk jumped 4.55 percentage points to 10.80%, reflecting "sector-wide trends, with early signs of stabilization". Outside Argentina, group cost of risk held steady at 1.09%.
💲 Other KPIs
Net interest margin — net interest income divided by average interest-earning assets — slipped 0.11 percentage points from the second quarter and 0.01 points from a year ago. Lower inflation-linked adjustments in Chile, a safer loan mix in Brazil, and quieter trading in corporate banking drove the third-quarter dip after the margin reached 2.71% in the spring.
The share of loans that are credit-impaired fell 0.03 percentage points from June and 0.01 points from a year ago. Excluding TSB and Webster, the ratio improved to 2.85%. Santander holds provisions covering 64% of its €39 billion in stage-three impaired loans, unchanged from June and down from 67% a year earlier due to a shift toward mortgage lending.
Tangible net asset value per share stood at €5.92 in September. Adding the €0.125 cash dividend paid in May and the €0.127 dividend payable in November brings total per-share value to €6.17, up 11% from €5.56 a year ago. The Spanish bank has also completed or launched €8.5 billion of its €10 billion share buyback plan for 2025–2026.
🔮 Guidance
Unchanged. Santander still plans for mid-single-digit revenue growth in constant euros from the businesses it owned before buying TSB and Webster. With nine-month growth on that basis at 5%, by our math the outlook calls for about 5% growth in the fourth quarter, up from 3.4% in the third quarter.
Unchanged. Management expects full-year operating expenses excluding acquisitions to fall in constant euros compared with 2025. Nine-month costs on this like-for-like basis are already down 2%, helped by a 3.1% drop in the third quarter as the bank shuts down older computer mainframes and trims back-office staff.
Unchanged. The full-year plan calls for underlying profit excluding TSB, Webster, and the sold Polish unit to beat the €14.1 billion earned in 2025. Having delivered €11.0 billion in the first nine months, by our math Santander needs at least €3.1 billion in the fourth quarter, well below its €3.8 billion third-quarter run rate.
Unchanged. The group still plans to finish 2026 at the top end of its 12%–13% operating range. After the Webster acquisition knocked the ratio down to 12.69% in September, by our math the bank must add 0.21 percentage points in the fourth quarter to reach the 12.9% middle of the range.
Unchanged. Santander targets at least 10% annual growth in tangible net asset value per share plus cash dividends. At 11% growth in September, the bank is ahead of this floor, even after absorbing the capital charge from closing the Webster deal.
❓ Key Questions
What caused underlying third-quarter revenue to shrink from Q2?
Excluding TSB and Webster, third-quarter revenue in constant euros fell 1.5% from the second quarter as both net interest income and fees dipped. How much of that drop came from temporary inflation-linked bond swings in Chile versus durable margin pressure in Brazil and Europe?
How will Santander rebuild 21 basis points of capital in Q4?
Closing the Webster deal pushed the CET1 capital ratio down to 12.69%, below the 12.8%–13.0% year-end target. Will the fourth-quarter rebuild come solely from retained profit, or does the plan rely on risk-transfer deals and asset sales?
When will Webster integration charges finish hitting statutory profit?
Santander excluded €666 million after tax of merger integration charges and asset write-downs from its underlying profit across the second and third quarters. How much more restructuring spend will the bank book in the fourth quarter and in 2027 to capture the $800 million in US cost savings?
Is the €69 million European consumer-credit ruling a one-off?
In the third quarter, the bank shifted a €69 million charge in Openbank Europe out of net interest income following a European court ruling on consumer-credit fee interest. Does this cover past loans only, or will the ruling permanently reduce ongoing interest yields in European consumer finance?