Santander plans to pay half its profits to investors over the next three years as the Spanish bank tries to boost a share price that has trailed European rivals.
The lender announced a new three-year strategy on Tuesday, just two months into the tenure of chief executive Hector Grisi. Santander aims to achieve a return on tangible equity of 15-17 per cent and raise its global customer base to 200mn, up from 160mn.
“Today we set out our plans to enter a new phase of profitable growth, building a digital bank with branches, powered by the Santander network,” said executive chair Ana Botín.
European banks that are reaping the rewards of higher interest rates have raised their shareholder returns in a bid to jolt share prices, which have fallen behind US rivals since the global financial crisis.
Santander’s shares are up 14 per cent over the past three years, compared to a 55 per cent rise for the Euro Stoxx Banks index. The Spanish lender’s share performance has been dogged by foreign exchange moves, in particular a deterioration of the real in Brazil, where the bank has a large business.
Last year, Santander achieved a 13.4 per cent return on tangible equity, and plans to return €3.8bn to shareholders — half through dividends and half through buybacks — which is equivalent to 40 per cent of profits.
Santander has been boosted by rising interest rates over the past year as it benefits from the lower levels it pays out to customers on savings products compared with the higher fees it generates on mortgages and other lending.
The bank has been steadily building up its capital buffers in recent years, achieving a 12 per cent core equity tier 1 ratio, a closely watched measure of balance sheet strength.
Since it no longer needs to put as much aside to increase that buffer, it has received regulatory approval to increase its shareholder returns.
Santander plans to return €921mn through a buyback programme and raise its cash dividend, which will be 18 per cent higher for 2022 at €11.78 per share.
Central to the bank’s strategy is improving efficiency and rolling out new products globally as opposed to focused on individual markets.
While it plans to add a further 40mn customers over the next three years, it also intends to increase the number of products and services it sells to them.
“We are focused on executing our plan, providing the best customer experience, and becoming the most profitable bank in each of our geographies,” said Grisi, who previously ran Santander’s Mexican and North American businesses.
The bank plans to improve its efficiency ratio, a measure of its ability to generate revenue from its spending, from 45.8 per cent to 42 per cent by 2025.