*
Lifts ROTE target to between 15-17% in 2023-2025 period
*
Raises pay-out in three-year strategy to 50% from 40%
*
Bank aims to add 40 million new customers by 2025
*
Sees NII growing a CAGR between 6% and 7% between
2022-2025
*
Sees efficiency ratio of 42%, cost of risk of 100 to 110
bps
*
Shares rise 5%
(Adds quotes from Chairman, CEO, details on countries)
By Jesús Aguado
MADRID, Feb 28 (Reuters) - Spain's Santander said it plans to return half its profits to shareholders as it
announced ambitious profitability targets for the next three
years, betting on customer growth and higher interest rates in
Europe to boost revenue.
Santander has relied in the past on Latin America to
cope with tough conditions for lenders in Europe since the
financial crisis but banks across Europe are beginning to
benefit from higher borrowing costs despite economic
uncertainty.
"We do have tailwinds for the first time in eight years,
we are running a business in Europe where we are not charging
deposits and (not) giving loans close to zero," Santander
Chairperson Ana Botin told investors at the bank's 2023-2025
strategy update in London.
Its shares rose almost 5% by 1250 GMT on news of the planned
payouts and after the bank also said it aimed to achieve a
return on tangible equity (ROTE) of 15-17% between 2023 and
2025, compared with 13.4% in 2022.
"While the payout target increased to 50% (from current
40%), in line with consensus but below our expectations, we flag
the bank's significantly higher revenue growth ambitions and
profitability targets which could offer absolute shareholder
distribution amounts well above expectations," Credit Suisse
analysts said in a note.
The remuneration would be in the form of cash payouts and
share buybacks.
Chief Financial Officer Jose Garcia Cantera also said he
expects a compound annual growth of 6% to 7% in the group's net
interest income between the end of 2022 and 2025.
SPANISH OPPORTUNITIES
The euro zone's second-biggest lender in terms of market
value expects to raise its global customer base by 40 million to
around 200 million, helping it to grow revenue by around 7-8%
per year on average in constant euros in the period, helped by
collaboration among global businesses and its network.
Santander's European region is targeting a 15% ROTE in 2025
compared with 9.28% by the end of 2022, the biggest increase in
percentage points among the bank's three core regions.
This would bring Europe, the lender's main contributor to
the group's profits, in line with the ROTE target seen for North
America.
"Spain is where we see the most opportunities to improve
profitability and efficiency," Santander CEO Hector Grisi said,
adding the bank was also redefining its branch model and
targeting active customers growth of around 10% in the period.
In the United States, its second-biggest market, it said it is focused on more profitable segments, such as its consumer unit, after recently exiting mortgage activities. South America, which accounts for 31% of the bank's profits, targets a ROTE of 19%, still the highest among Santander's markets, from 18.77%, with the cost of risk to rise to around 320 and 340 basis points from 332 bps. Santander expects its cost of risk, which measures the cost of managing potential losses for the bank, to hover around 100 and 110 basis points in 2025 from an expected 120 bps this year. The lender said it also aimed to maintain its core tier-1 fully loaded capital ratio, the strictest measure of solvency, above 12% throughout the three years. ($1 = 0.9448 euros) <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ BREAKINGVIEWS-Santander’s new plan is a make-or-breakup moment ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Jesús Aguado; additional reporting by Emma Pinedo; editing by Inti Landauro and Emelia Sithole-Matarise)
Messaging: Reuters Messaging: jesus.aguado.reuters.com@reuters.net))