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Banco Santander (NYSE:SAN) reported what executives described as its strongest first half ever, with record quarterly profit in the second quarter and record underlying profit for the first half of 2026, supported by revenue growth across its global businesses, lower costs and continued customer expansion.
Chief Executive Officer Héctor Grisi said Santander's quarterly profit reached EUR 3.8 billion, while first-half underlying profit rose 14% year-over-year in constant euros. He said the performance was driven by "strong revenue growth across global businesses" and a customer base that reached 182 million, up more than 12 million from a year earlier. That figure includes 4 million customers from TSB, which Santander consolidated after closing the acquisition on April 30.
Grisi said the bank's "One Transformation" program continued to support operating leverage, with efficiency improving by three percentage points and underlying return on tangible equity rising to 15.6%. He added that underlying RoTE adjusted for excess capital was close to 17%.
Revenue rises as costs decline
Chief Financial Officer José García Cantera said total revenue increased 6% year-over-year, in line with Santander's 2026 target. Net interest income rose 6%, supported by resilient margins and profitable volume growth, while net fee income increased 7% as fees rose across businesses and countries.
García Cantera said fee growth continued to outpace net interest income, reinforcing what he called the quality and diversification of Santander's revenue base. He highlighted strong performances in Corporate and Investment Banking, retail banking, Openbank, Wealth and Payments.
The bank's efficiency ratio improved to 42.8%, as revenue rose and costs declined 1% year-over-year, or 5% in real terms. In Retail and Openbank, which García Cantera said represent about 75% of the group's cost base, costs fell 3% even after incorporating TSB, while revenue increased 4%.
Grisi said the bank is using simplification, automation, global technology platforms and artificial intelligence to improve productivity. He said Santander's customer interaction platform is live in five markets and ready to roll out in Spain, where it is intended to personalize customer interactions and improve conversion.
Global businesses deliver profit growth
Santander reported broad profit growth across its five global businesses. In retail banking, underlying profit rose 12% year-over-year, supported by higher fees, lower cost per active customer and stronger operational leverage. Grisi said the bank's commercial banking model in Spain produced 17% revenue growth and a 3% cost decline, and is now being rolled out in Brazil, Mexico, the U.K., Chile and Portugal.
In Openbank, profit before tax increased 15% excluding motor finance. Management said the business benefited from higher revenue, lower costs and controlled credit quality, though profit was affected by the end of electric vehicle tax incentives in the U.S. Santander also recorded a EUR 245 million gross impact related to motor finance in Openbank Europe, most of which was booked in the first quarter.
Corporate and Investment Banking profit rose 17% year-over-year. Grisi said Santander is shifting from building capabilities to scaling the franchise, using its global network to deepen client relationships. García Cantera said CIB revenue rose 16%, helped by client flows and a notable acceleration in global banking fees.
Wealth profit increased 19%, supported by growth in private banking, insurance and asset management. Santander said customer assets and liabilities in private banking grew 15%, while cross-border client referrals increased by more than 20% year-over-year. In Payments, revenue rose 17%, EBITDA margin improved to 33% and profit increased four-fold year-over-year.
TSB integration begins; Webster expected in second half
Management emphasized that TSB contributed only two months of results in the quarter, limiting its year-over-year impact. Grisi called the acquisition strategic because it adds scale in the U.K., strengthens Santander's funding mix through deposits and adds a low-risk mortgage portfolio.
Santander expects TSB to help deliver a return on tangible equity of around 16% in Santander UK by 2028, supported by at least EUR 400 million of synergies. In response to an analyst question, Grisi said the bank has already included EUR 250 million of non-recurring restructuring items related to TSB and expects another EUR 250 million in coming quarters.
On the planned Webster transaction, Grisi said Santander had received European Central Bank approval to continue with the deal, after also receiving approval from the Office of the Comptroller of the Currency. He said the process remains in line with expectations for closing in the second half of the year.
Credit quality affected by Argentina, but capital remains strong
García Cantera said Santander's balance sheet risk profile remained low, but loan loss provisions were affected by portfolio deterioration in Argentina, reflecting sector-wide trends. Excluding Argentina, provisions were broadly stable year-over-year and cost of risk improved by two basis points.
Grisi said Santander expects cost of risk to remain around 1.15% in 2026, with some improvement in Argentina in the second half. He said the acquisition of TSB and Webster should improve cost of risk toward a 1% to 1.1% range over 2027 and 2028.
In Brazil, executives said higher interest rates are normalizing more slowly than previously expected, putting pressure on some corporate and small-business portfolios. Grisi said he does not expect Brazil's cost of risk to worsen beyond the 4.2% level anticipated for the full year, citing changes in portfolio mix and a greater focus on more profitable and lower-risk segments.
Santander's common equity tier 1 ratio stood at 14% after absorbing a 55-basis-point impact from TSB. Excluding that impact, García Cantera said CET1 increased by 20 basis points in the quarter. He said Santander remains on track to end the year in line with its 12.8% target after absorbing Webster and additional regulatory impacts.
Guidance maintained as management says performance is ahead of plan
García Cantera said first-half performance keeps Santander "firmly on track" to deliver guidance of more than EUR 14.1 billion of profit in 2026, excluding mergers and acquisitions. Grisi said the bank is running slightly ahead of plan and remains confident in delivering sustainable growth and shareholder value creation.
The bank also said it had received ECB approval for a new buyback program of up to EUR 1.8 billion against 2026 results. Grisi said total buybacks, including the program currently underway, would reach around EUR 9 billion, close to Santander's commitment to distribute at least EUR 10 billion for 2025 and 2026.
Looking ahead, Grisi reiterated Santander's longer-term goal of delivering return on equity above 20% by 2028, citing disciplined capital allocation, One Transformation and the scaling of global businesses as the main drivers.
About Banco Santander (NYSE:SAN)
Banco Santander, SA (NYSE: SAN) is a Spanish multinational banking group headquartered in Santander, Spain. Founded in 1857, the bank has grown from a regional institution into one of Europe's largest banking groups, operating a diversified financial services platform that serves retail, small and medium-sized enterprises, and large corporate clients. Santander is publicly listed in Spain and maintains American Depositary Receipts on the New York Stock Exchange under the ticker SAN.
The group's core activities include retail and commercial banking-offering deposit accounts, payment services, mortgages, personal and auto loans, and small business financing-alongside corporate and investment banking services for larger institutional clients.
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