On February 28, Banco Santander will celebrate its Investor Day in January, which will present its plans for the next three years, with Héctor Grisi as the new CEO of the entity from the 1st of. In this meeting with investors and analysts, the bank will focus on reinforcing the discourse of improving growth and profitability, but also on taking steps forward with regard to its dividend policy.
Botín already left the door open at the beginning of February to improve it and increase the ‘pay out’, which is now at 40% (with 20% in share repurchases and another 20% in cash payment). And, everything indicates that the entity could announce that it would raise it up to 60%. Nuria Álvarez, an analyst at Renta 4, hopes so as it could also serve to increase the attractiveness of the price. Credit Suisse experts also believe that the entity could reach 60%, in which the distribution is 30% in cash payment and another 30% in share repurchase. In total, the bank could distribute cumulatively “20,000 million euros, which represents 34% of the capitalization,” say the experts of the Swiss bank.
To make such a stand, the analysts point out that, “an optimization of the capital estimate could pave the way for a greater generation of organic capital, allowing the expansion of current distribution objectives”. Experts believe the bank will insist on profitable growth, which will be fueled by increased connectivity and integration to improve efficiency. And, on the other hand, it will optimize growth in all markets and products by improving the request for capital.
From the entity they explain that the presentation will affect the transformation of the entity, “giving importance to digital businesses”, recalls Marisa Mazo, financial analyst at GVC Gaesco, as well as the importance of global businesses, such as PagoNxt or Wealth management. Regarding financial objectives, the market believes that Banco Santander will reiterate its double-digit revenue growth goals, driven by the restrictive policies of central banks, with interest rate rises.
In addition, the bank is expected to confirm its objective of achieving an efficiency ratio below 45% and a cost of risk that is less than 1.2%, which the entity had already set itself, but which it had not managed to achieve. The bank is also expected to reiterate its 15% RoTE target, which it already advanced during the presentation of the 2022 results, which if met could lead the bank’s profit to exceed 10,000 million euros.
Regarding whether they will be very ambitious, Álvarez believes that the achievement should be possible because he remembers that it is a three-year strategic plan and “you cannot be very aggressive since there are exogenous variables that cannot be controlled”, where the ECB and the Euribor are sources of volatility. “And where the real effects (of this rate hike) are not transferred to the small economy, which may end up raising the cost of risk and, with it, provisions.”
Objectives by divisions
However, analysts, who remember that the bank usually gives objectives by divisions, believe that distinctions will have to be made between regions. On the one hand, Brazil, Portugal and Mexico will present greater profitability, where the return on equity and the return on RWA will remain significantly above the average levels of all its divisions.
On the other hand, the United States and Spain offer lower profitability, especially in the first country, something that Mazo shares. In these divisions, growth could be more limited, while in Poland a divestment could be considered, experts say. The United Kingdom also raises doubts, because the mortgage market is very saturated, with less or practically no growth in mortgages.
Analysts also point out that compliance with the strategic plan will be conditioned by the cost of liabilities if finally the big banks end up coming in when remunerating deposits. Market volatility, weak currencies or other regulatory hurdles could also put limits on excess capital, while higher provisions could impede profit growth.