Spanish lender accelerates digital transformation and shareholder returns while consolidating UK footprint with TSB deal
Banco Santander reported a record first-half profit of €6.83 billion for 2025, up 13% year-on-year, underscoring the Spanish lender’s growing resilience and operational efficiency despite geopolitical uncertainties and a shifting interest rate landscape.
The group’s earnings per share jumped 19%, marking its fifth consecutive quarter of record profitability. Return on tangible equity (RoTE) hit 16% post-AT1, reflecting strong organic capital generation and rigorous cost discipline.
The bank saw its net fee income reach a record €6.68 billion, up 3% in euros and 9% in constant currency, compensating for a modest decline in net interest income due to a less favourable rate environment.
Operating expenses fell 0.4%, aided by the continued rollout of digital platforms like Santander Gravity. With legacy technology increasingly replaced by shared global systems, efficiency improved to 41.5%—its best level in over fifteen years.
Santander added eight million customers over the past twelve months, raising its total to 176 million.
The growth was buoyed by strong digital channel expansion and sustained deposit inflows, particularly in its Wealth and Payments segments. In the payments business, attributable profit surged 47%, while cost-per-transaction in PagoNxt dropped by 21%, evidencing the bank’s success in capturing scale.
The bank’s strategic recalibration includes the sale of a 49% stake in Santander Poland at 2.2x tangible book value, and the acquisition of UK-based TSB at 1.45x TBV.
Santander expects the TSB deal to generate a return on invested capital above 20% and contribute a 4% increase in earnings per share by 2028. These transactions reflect the group’s pivot toward capital-accretive moves aligned with its strict capital hierarchy. CET1 ratio reached 13%, well within the bank’s target operating range, and ahead of schedule.
Shareholder remuneration remains a priority, with Santander announcing a new €1.7 billion buyback programme, equivalent to 25% of first-half profits. This comes on top of €3.1 billion in buybacks already executed from 2024 earnings, bringing total remuneration to €6.3 billion.
By business lines, Retail & Commercial Banking generated €3.7 billion in profit (+14%), with RoTE at 17.2%, driven by digital sales growth and a lean cost base. CIB reported €1.53 billion in profit (+15%), fuelled by global markets expansion and fee generation. Wealth Management & Insurance profit rose 24%, aided by an 11% jump in assets under management. The Digital Consumer Bank faced a marginal decline in profit due to reduced fiscal incentives, but posted gains in net interest income and deposits.
Loan growth remained subdued at 1%, with the bank prioritizing profitability over volume, while customer funds rose 6%, supported by mutual fund inflows. Credit quality improved across segments, with cost of risk at 1.14% and the NPL ratio at 2.91%, both at multi-year lows.
Santander reiterated its commitment to deliver at least €10 billion in buybacks across 2025 and 2026, backed by earnings and excess capital. The bank is on track to meet its full-year targets, including €62 billion in revenue, RoTE of 16.5%, and continued cost reductions.
Santander’s performance underscores the importance of diversification, digitization, and disciplined capital management in a volatile global banking environment. The strategic sale of Polish operations and the expansion in the UK not only streamline the group’s footprint but also drive shareholder value through targeted redeployment. Efficiency gains from digital infrastructure, particularly core banking transformation, are translating into real cost savings and margin improvement.
While net interest income remains pressured, the uptick in fee income and strong gains in payments and wealth segments showcase the bank’s shift toward more stable and scalable revenue sources. The robust CET1 buffer, combined with aggressive share buybacks, offers flexibility amid potential macro shocks.
The bank’s evolving mix between global platforms and regional strongholds positions it well for mid-term profitability, especially as it eyes steady growth in advanced markets and a rebound in consumer and retail demand.