Webster's deal has been finalized, Santander(SAN.US) announces a three-year strategy: net profit target exceeds 20 billion euros by 2028, RoTE aiming for 20%

After completing a milestone acquisition of U.S. Webster Financial Corporation (WBS.US), Spanish banking giant Santander (SAN.US) officially announced its strategic roadmap for 2026-2028 at an investor day event held in London on February 25. Reports indicate that the bank has committed to increasing its annual net profit to over 20 billion euros (approximately $23.6 billion) by 2028, and plans to raise its core profitability indicator—tangible return on equity (RoTE)—from 16.3% in 2025 to above 20%.

This Spanish bank issued a statement on Wednesday stating that starting from 2027, it will adjust its dividend structure to increase the proportion of cash dividends to 35% of profits, while correspondingly reducing the share of stock buybacks in profit distribution. Previously, the bank’s cash dividends and stock buybacks were roughly equal, and its commitment to returning half of profits to investors remains unchanged.

Notably, the bank posted impressive net profit performance last year, reaching a record 14.1 billion euros. Before announcing the financial targets on Wednesday, analysts’ average forecast for 2028 net profit was 18.6 billion euros.

Additionally, the bank set the following goals on Wednesday:

1. Distribute excess capital if the CET1 ratio at the end of the plan exceeds 13%;

2. Double the per-share cash dividend by 2028;

3. Achieve “mid-single-digit” annual revenue growth;

4. Reduce costs each year;

5. Increase efficiency ratio to around 36% by 2028.

The bank also announced that it will pay a new cash dividend of €0.125 per share, bringing the total dividend for 2025 to €0.24 per share. Currently, Santander’s price-to-book ratio (a metric often used by analysts for valuation) is about 1.5. Many investors believe that when this ratio exceeds 1, stock buybacks become less attractive to investors.

Santander CEO Ana Botín stated in the announcement that the plan “sets a new standard for profit growth, aiming to serve over 210 million customers across Europe and the Americas.”

This latest target comes less than a month after Santander agreed to acquire Webster Financial Corporation for $12 billion, which will be the largest acquisition of a U.S. lending institution by a European bank.

It is also the third deal under Botín’s leadership within less than a year: in April last year, she sold a majority stake in Santander Poland to Erste Group Bank AG for €7 billion, and later acquired UK lender TSB from Banco Sabadell SA.

In recent years, driven by rising interest rates, Santander’s profitability has significantly improved. Its stock price has long lagged behind its peers but more than doubled by 2025, making it the most highly valued lending institution on the European continent.

Several major European competitors of Santander have also recently updated their strategies and dividend plans. Italy’s largest bank by assets, Intesa Sanpaolo SpA, announced earlier this month that it plans to return approximately €50 billion to investors by 2029; its competitor, UniCredit SpA, also pledged to pay a similar amount cumulatively by 2030.