The bank will offer Santander México’s minority shareholders the opportunity to sell their shares at a premium, increasing the bank’s exposure to a core market with strong long-term fundamentals. Acquiring the full 8.3% outstanding stake would require total consideration of c.€550 million1

Santander will report today at its annual general meeting that the business has remained strong in the first quarter of 2021, with revenues in line with the fourth quarter of 2020. As a result, the bank now expects to achieve an underlying return on tangible equity (RoTE) of c.10% by the end of 2021.

The bank will also report today that the board’s intention is to restore a shareholder remuneration policy of 40-50% of the group’s underlying profit. For that reason, the bank is accruing throughout the year the proportional amount of capital required to execute this policy once supervisors allow.

Finally, Santander has also appointed Andreas Dombret to the bank’s international advisory board.

Madrid, 26 March 2021 - PRESS RELEASE
Banco Santander announced today that it intends to make a cash offer to repurchase the outstanding shares of Santander México that it does not already own, which represent c.8.3% of its Mexican subsidiary’s share capital. The expected price for those shareholders who accept the offer would be 24 Mexican pesos for every share of Santander México (and its equivalent for every American Depositary Share), which represents a 24.3% premium on the closing market price on 25 March 2021 and a 23.6% premium over the last 30 trading days’ volume weighted average price. Acquiring the full 8.3% outstanding stake would require total consideration of c.€550 million1.

The offer is attractive for shareholders of both Santander México and Banco Santander. Santander México shareholders will receive a price broadly in line with consensus target price for the next 12 months, as well as allowing them to divest a low-liquidity stock with. The transaction is also beneficial for shareholders of Banco Santander, as it increases the group’s growth profile, as well as its capacity to generate capital. It is also consistent with the bank’s strategy to deploy capital in high growth markets. Mexico is a core market for the group with attractive long-term fundamentals.

The transaction is expected to have a return on invested capital (ROIC) of c.14% and improve Banco Santander’s earnings per share (EPS) by 0.8% in 2023. It will increase the group’s capacity for organic capital generation and be neutral in terms of tangible net asset value (TNAV) per share. The acquisition of the outstanding shares would reduce the group’s CET1 ratio by c.8 basis points2. As of 31 December 2020, the group’s CET1 capital ratio was 12.34%, above its target range of 11-12%.

The transaction is expected to be completed in the second or third quarter of 2021. Commencement of the offer and the offer itself will be subject to customary conditions, including regulatory authorizations, as well as the approval of the delisting of the Santander México shares from the Mexican Stock Exchange. The delisting will require the affirmative vote of at least 95% of the capital stock of Santander México in an extraordinary shareholders’ meeting. Banco Santander currently owns 91.7% of Santander México.

Q1 performance and 2021 group dividend

In addition, at Banco Santander’s annual general meeting, which is to be held today at 12.00 pm CET, the bank will report that in the first quarter of 2021 the business has remained strong, with revenues in line with the fourth quarter of 2020. In Europe, the bank is delivering savings that improve the efficiency ratio at group level. The cost of risk continues to trend downwards as anticipated in the bank’s annual results presentation last month. As a result, the bank now expects to achieve an underlying return on tangible equity (RoTE) of c.10% by the end of 2021.

The bank will also report today that the board’s intention is to restore a shareholder remuneration policy of 40-50% of the group’s underlying profit. For that reason, the bank is accruing throughout the year the proportional amount of capital required to execute this policy once supervisors allow.

International advisory board

The group board has also decided to appoint Andreas Dombret as a member of the bank’s international advisory board. Mr Dombret brings significant expertise in financial services, central banking and bank regulation, further strengthening the caliber and quality of the advisory board. He served as a board member of Deutsche Bundesbank from 2010 to 2018 and as a supervisory board member of the European Central Bank from 2014 to 2018. Previously, he was vice chairman of Bank of America in Europe and held senior positions with Rothschild, JPMorgan and Deutsche Bank.

1 Estimated valuation based on total shares owned by minority shareholders of 561.4 million valued at 24 Mexican pesos per share, with an exchange rate of 24.66 Mexican pesos per euro.

2 All the impacts indicated in this paragraph assume 100% acceptance of the offer.