Banco Santander Mexico, S.A.

Good evening, everyone, and thank you for joining Santander's 2025 results presentation. We are delighted to be joined by our executive chair, Anna Wotin, our CEO, Hector Gracie, and our CFO, Jose Garcia Cantera. We are going to have a short presentation with Anna leading the way. Anna, it's my pleasure to hand to you.

Thank you, Raul, and good evening, everyone. Welcome to our 2025 results presentation. So, alongside our strong results today, we're announcing the acquisition of Webster Financial Corporation, an important strategic step for the group. So, for that reason, today's presentation will follow a slightly different structure. First, Hector will kick off with an overview of our results. Then I will explain the transaction in detail, including the strategic and financial rationale and implications. And I will then wrap up with some closing remarks and now outlook for 2028. Hector, over to you.

Thanks, Anna, and welcome to our full year results presentation. This was another record year for Santander, with a customer base growing by 8 million new customers to 108 million. Our quarterly profit hit a new record, and with 14.1 billion in 2025, we have reported our best-ever annual results, driven by solid underlying growth across all our businesses. We achieved this by focusing on one transformation, making excellent progress towards a common operating model and simplifying our products. This has enabled us to improve our efficiency to almost 41% and to increase our ROTE post-81 to 16.3%. We have further strengthened our balance sheet ending the year at all-time high C81 ratio of 13.5%, reflecting our ability to generate capital organically. And finally, we once again delivered strong shareholder value creation with thin upload dividend per share growing by 14%. Our profits are up 12% year-over-year, and ex-Argentina up 15% year-on-year. We delivered strong growth in our top line, with revenue up 4% in constant euros, supported by customer activity across all our businesses. Fee income is up 9% in constant euros, supported by significant growth in customers and the network benefits we're capturing through our global businesses. We were well below revenue, down 1% in absolute terms, showcasing the positive effects of our transformation, and we delivered record net operating income of almost $37 billion. Our prudent approach to risk is also evident in our cost of risk, which ended the year at 1.15%, in line with our guidance for 2025. The combination of our global businesses with geographical diversification continues to drive profitable and resilient growth. CIB, wealth and payments delivered strong revenue growth underpinned by solid fee increases driven by network effects and enhanced capabilities. At the same time, while higher interest rates benefit our retail franchises in Europe, other parts of the group perform better with lower rates. Our consumer business is a great example of this, with NII up 5% year-on-year. In addition, our strong customer focus and product track record in active balance sheet management is playing the resilient group NII performance, which, excluding Argentina, grew 3% year-on-year. At the same time, we are beginning to see the benefits of our global platforms. Our global and diversified model allows us to both improve customer experience and efficiency, and the ability to allocate capital in a dynamic way across global businesses and geographies, something very few can replicate. Combined with our capital discipline and focus on profitability, this is driving higher ROTE with the group and most of our global businesses above the targets we set for 2025. This is despite adverse macro on a net basis compared to our base scenario. Our consistent execution has driven positive operating leverage. The key driver of this was one transformation driven by simplification and automation, which resulted in 265 basis points of efficiencies, followed by our global businesses, which contributed 108 basis points, and our global tech capabilities with another 87 basis points. And there is still much more to come. We see further upside as we roll out common operating model and tech platforms across retail and consumer, while we also capture network effects across our global businesses, particularly on wealth and insurance, CIB and payments. And very importantly, all this is something that is entirely under our control. In retail, one transformation improved our operating leverage by combining the deployment of our global platforms with a strong local execution and network benefits. We grew active customers by around 2% while reducing our cost to serve by around 4%, closing 25% with a 39% cost-to-income ratio and almost 80% post-81 ROTE, exceeding the objectives we set for the year. This performance reflects progress on the transformation of both the operating and the business models in parallel and the beginning of tech platform deployment. First, we are rolling out common business models across the countries through our global businesses. We are moving towards common operating models by simplifying products and customer journeys. And third, we are making good progress on automation through our global platforms with Gravity and OneApp now deployed across green markets. As a result, retail profit grew 9% year-on-year with cost declining in real terms. In consumer, we made progress in the transformation by the scaling of OpenBank as our global consumer platform. We are seeing a strong growth in our digital bank across key markets, including the U.S., Mexico, and Germany, attracting strong customer and deposit inflows and supporting our deposit gathering strategy to lower funding costs. At the same time, we continue to expand and consolidate partnerships offering global best-in-class embedded finance solutions with leading platforms and OEMs. CINIA continues to scale through new strategic partnerships, including Amazon and Apple, reaching more than 2 million customers and expanding installment and co-branded solutions across Europe. Finally, a major milestone in our transformation was the integration of Santander Consumer Finance and Open Banking Europe into a single legal entity under the Open Bank brand, simplifying our structure and enabling a more consistent and seamless experience for our customers and partners. As a result, consumers delivered strong financial performance in 2025, with profit growing 8% year-on-year, supported by solid NII growth and improved cost of risk. Across wealth, CIB, and payments, we are driving double-digit fee growth, through the network effects and global platforms. In CIB, we are focused on our markets where we have invested to build a world-class franchise to better serve corporate and institutional clients across all the footprint. These investments resulted in another record year in revenue with high single-digit fee growth while maintaining our low risk profile. We are building the best wealth and insurance manager across Europe and the Americas. supported by our leading global private banking platform and the best-in-class products. Wealth profit was up 27% in 2025 on the back of strong commercial activity and double-digit fee growth. Looking ahead, insurance is one of the biggest upside for Fees in the Group. In payments, we hold a unique position as we operate on both sides of the value chain. We're capturing scale and seizing a growing opportunity through our global platforms, principally as an enabler to group platforms, but increasingly also in the open markets. In 25, payments volume was on 9% and Pagonex EBDA margin close above 34%. Looking ahead, CIB, wealth and payments, will remain a key growth engine and key drivers of fee growth for the group. Our strong operational and financial performance is driving higher profitability and double-digit value creation. POS81 Rote reached 16.3%, up nearly one percentage point year-on-year, reflecting our disciplined approach to capital allocation. Pre-81, we are above our original target of 17% ROTE set at the last investor day. Earnings per share rose 17%, supported by solid profit generation and lower share count following the buybacks. As a result, TINA plus cash dividend per share grew by 14%. we maintain our upgraded target to distribute at least 10 billion euros to our shareholders through share buybacks for 2025 and 2026, subject to the regulatory approvals. The Board approved a new buyback program of up to 5 billion, including 3.8 billion generated from the sale of Poland and 1.8 billion against the second half 2025 results. As the ECB has already granted the corresponding approval, the program will begin tomorrow. Moving on to capital, over the past few years, we focused on improving capital productivity and accelerating organic capital generation. Our fully loaded CET1 ratio increased 70 basis points in 2025 to 13.5%, well above our 12-13 target supported by record organic capital generation after investing in profitable growth, remunerating our shareholders, and absorbing regulatory impacts. At the beginning of January, we completed the disposal of Santander Polska, a 2.2 price to tangible book, generating around 95 basis points of capital. This excess capital has been deployed with discipline in line with our capital hierarchy. First, we used half of it to accelerate the delivery of our share buybacks within our target of at least $10 billion for 2025-2026. we deployed some of our excess capital into the acquisition of TSV, which will improve our UK ROTE to 16% by 2028. Given our improving profitability and strong momentum, our excess capital is likely to build further in 2026, which brings us to the Bolton acquisition of Wester. Anna, over to you.

Thank you very much, Hector. And before I turn to Webster, I would like to spend a couple of minutes on where Santander US is today. In a nutshell, Santander US has made huge progress, and you can see that in the numbers, into building a sustainable and more profitable model every year in an organic path. So let me just give you the highlights, but let me start by saying that over the last three years, actually 23 to 25, profits have grown by over 30%, and that the 1.7 PAT in the U.S. gets us to the 15% adjusted ROTA that we guided in Invest Today. Very importantly, it has been one of the top countries in value creation for Santander shareholders over the last five years. actually a top three geography. So in consumer, OpenBank has continued to scale very, very fast, reaching around $5 billion in deposits, over 200,000 customers, and reducing our deposit funding cost. In commercial, we are top 10 multifamily lender, underscoring our very strong position in this U.S. asset class. And our strategic investment in CIB, you're seeing that again in the results with a business that is – delivering a return on tangible equity of 18% driven by revenue growth but very substantial growth in fees and very disciplined capital allocation. We also remain the market leader in wealth for LATAM high net worth offshore. We'll continue to leverage the group's global network to build further scale in this business. So the acquisition of Webster It's going to accelerate this transformation that, as you have seen in the numbers, is ongoing and doing well. But the goal now is to be best in class in terms of both profitability and efficiency relative to the major U.S. banks. This is a key focus. I would say the key focus in all our core markets, be one of the most profitable banks. And let me give you the highlights. We're going to pay $12.2 billion for Webster. That is a PE of 6.8 times, including the synergies that we have identified and feel very comfortable with in our due diligence. We expect to deliver close to 800 million pre-tax cost synergies. That's circa 19% of the combined cost base. As a result, Santander U.S. ROTI would increase to 18% and will deliver 7% to 8% EPS accretion in 2028. Santander Group CET1 ratio is expected to be at 12.8% at closing, close to the 13% target this year, and we will keep and we maintain and reiterate our commitment to do at least 10 billion share buybacks while remaining close to the top end of our 12% to 13% operating target for CET1. Very importantly, this transaction is fully aligned with our capital hierarchy, and it is expected to deliver circa 15% return on invested capital. That is almost six percentage points above returns today from share buybacks. So moving to some of the key details of the transaction, Webster is a bolt-on for Santander. As we've said, this is the kind of M&A we'll do in our co-markets. The asset base represents just 4% of group loans. The headline price translates into 10 times 28 consensus PE or 2 times Q425 tangible book value. As a reminder, we sold Poland at 2.2 times price to tangible, and we have reinvested the proceeds to improve our deposit franchises in both the UK and the US. We will pay 65% of the price in cash using our excess capital optionality, and the remaining 35% we will pay for instant under shares. We expect to complete the transaction before year-end 26 with a joint integration team led by John Siula, who is the current chairman and CEO of Webster and will become the CEO of Santander Bank N.A. with Christiana Riley, remaining country head of Santander U.S. The strategic rationale and the financial rationales are both very compelling. The transaction scales our U.S. Northeast franchise to the 10th largest retail and commercial bank in the United States by assets, and importantly, the 5th largest by deposits in our Northeast footprint. This is going to bring benefits from economies of scale and a better competitive positioning. Second, and importantly, our businesses are highly complementary. Webster has a lower cost of deposits, loan-to-deposit ratio of 81%. Combining this with our nationwide and top consumer franchise, with what Webster brings, a very strong commercial franchise in its footprint and funding advantage, this will be a key driver for continuous growth opportunities and synergies, both on cost and revenues. In the due diligence, we've identified approximately 800 million of cost synergies. This is supported and will be supported and led by a management team with a proven integration track record and, of course, complemented by Santander's own experienced tech people and teams. Together with One Transformation, our current organic growth plans in the U.S., and Transformation and Open Bank, Webster enhances significantly our U.S. ROTE to 18% by 2028. This is best in class amongst other U.S. regional banks and actually among the top 25 banks, one of the best. It's a highly accretive acquisition for our shareholders. We'll deliver 7% to 8% EPS accretion and a return on investment capital of close to 15%, while allowing us to deliver on our at least $10 billion buyback commitment. As Hector has mentioned, and as part of that commitment, we will begin our $5 billion share buyback project. So Webster is a compelling combination with Santander. It's a great opportunity for Santander to strengthen and become much better in our U.S. deposit and lending franchises. Webster operates across consumer, commercial, healthcare, financial services, with a strong presence in affluent markets and middle market lending. It has a leading health service account franchise, which is and provides a stable low-cost funding base. While not as large as other peers, Webster has shown a strong track record of growth, profitable growth, and M&A integration. Its latest results show a best-in-class financial performance with close to 17% ROT, a 46% efficiency ratio, and a 0.4 cost of risk. On a combined basis, This will raise our deposit share to 8%. That is top five position in the Northeast, an economic area that is as large as the U.K. economy. We will be a top 10 national retail and commercial bank by assets in the U.S. And, again, our U.S. deposit franchise, together with Webster, becomes more stable and diversified. Importantly, the combined banks will have a significantly improved loan-to-deposit ratio around 100%. So a bit more detail for those of you that don't know Webster. You can see here a detail of both loans and deposits breakdown. Webster has a much greater focus on CNI, which we don't. This results in a much more balanced loan mix and overall portfolio. It brings a lower risk profile, reducing our cost of risk around 1.3%. which compares with 1.6% for SunUS standalone. Importantly, the deposit base, the funding mix, brings sticky low-cost deposits without cost of deposits, combined cost of deposits falling from 2.7 to 2.4. And finally, again, I said this already, the combined franchise will help close the commercial funding gap to close to 100% loan-to-deposit ratio. So I want to stress that a key part of this transaction for us is the team. We value very highly the team that John Siula leads together with Luis. They have done a great job over the last few years, not just in integration, but in making their bank one of the most efficient and most profitable among regional banks. They have a proven track record in M&A, and John, current chairman and CEO of Webster, will become CEO of Santander Bank N.A., including Webster, reporting to the SUSE board. Luis Massiani, currently president and COO of Webster, will become the head of integration. Lead of integration, he will report directly both to John Sciulla as CEO of the banks, or the new bank, and Christiana Riley as president and CEO of Santander U.S. and our SUSE holding. Christiana Riley, again, remains country head and CEO, President and CEO of Santander U.S. And they have, all of them will have incentives aligned with the financial performance of the combination and the creation of long-term shareholder value. A combination that, as I've mentioned, will have both revenue and efficiency benefits, combining investment efforts synergizing operational overlaps, and bringing Webster onto our open bank front-end platform for consumers, whilst we will take Santander Bank Commercial Bank onto the Webster platform. Through the integration, we have identified close to $800 million in cost synergies, fully phased in by the end of 2018. Headquarters efficiencies and branch optimization will reduce $480 million in cost. Technology and operations will reduce $280 million in cost, and other initiatives $35 million in cost. In addition to these synergies, one transformation will reduce over the same time period around $200 million in cost, landing at a combined cost base of around $3.5 billion. We have identified also 100 million from balance sheet optimization with additional upside potential. And very importantly, we have not included joint revenue opportunities, which clearly will be there. Restruction costs are expected to be our one-time cost synergies, along with the TSB integration costs will be largely booked in 2026 against the gain on sale from Poland. Overall, this evolution will translate into positive jobs that will push the combined efficiency ratio below 40% by 2028. The transaction accelerates our three-year organic plan, as I've mentioned at the beginning. It was a very ambitious plan. Now, with Webster, we aim and our target is to lift U.S. ROT from around 10% today to 18% on a post-81 basis by 28. This level of profitability will allow us to grow our business organically by investing in our customers, our technology, and our people. Reiterate again that on a standard loan basis, SunUS is already on track to improve returns in a very significant way. Driven first by the full integration of auto and consumer banking, this is expected to deliver cost and funding benefits. and result in a three percentage point improvement. Second, growth in capital-like business, including CIB, which would add another two percentage point uplift to returns. Based on consensus forecast and our identified synergies, the combined SunUS franchise will be top three in cost efficiency among the top 25 U.S. banks and in the top five by profitability by 28, based on current analyst forecast. I want to reiterate, as I said at the beginning, that being one of the most profitable banks in our core geographies is a key target for Santander, and the Webster acquisition gets us there. Webster provides this final step change that we needed in the U.S. by lifting the returns by the three percentage points or higher. Again, the combined U.S. business expected to deliver ROT of 18% by 28, which is close to or at best-in-class among U.S. banks. During 2026, organic capital generation, net of distributions, regulatory headwinds, and other factors is expected to be circa 70 basis points. At the time of expected closing for this deal, our CET ratio is expected to be close to 13% in the range of 12.8% to 13%, again, very close to the upper end of our operating range. The acquisition of Webster is expected to have an impact of around 140 basis points on Santander Group CET-1 ratio. And in 27, we expect to be back above 13% CET1, creating further capital optionality for additional shareholder remuneration subject to our capital hierarchy. Importantly, as this is a Bolton acquisition, we're able to reiterate our capital return commitments to remunerate shareholders with a 50% ordinary payout and at least 10 billion share buybacks for 25 and 26 earnings. In summary, we're using excess capital in line with our capital hierarchy for a bolt-on acquisition that represents only 4% of group assets, which delivers a cash-on-cash close to 15% ROIC, with Webster offering a perfect fit for Santander US and a combination that will be very competitive in its footprint, Second, together with the improvements that are already in plan from one transformation, will make San U.S. more efficient, more profitable, reaching 18% ROTE in 28, and very importantly, improving the hard currency mix in terms of loans to 80% of total for the group. Eighty percent of all the loans for Santander Group will be in hard currency. that brings a strong management team with an excellent track record on successful integration and a culture and values similar to Santander. We have a culture, like Webster, of being a community bank close to our customers in every geography in which we operate. So let me just add to this that this transaction together with TSP will accelerate our journey to be the most profitable bank in all our core markets. U.S. is among the most attractive banking markets globally with very attractive risk returns, a growth economy, and, you know, favorable regulatory environment. As is the case of the U.K., the U.S. has very strong connectivity with the rest of our global franchises, and there will be additional network benefits across our global businesses and geographies, and as I just said, increases the share of hard currency earnings, which is overall a good thing for us and for value creation for our shareholders. So looking forward, what is the outlook? Well, this transaction, together with the very significant progress you've seen in our strategy, in our numbers, you've seen the 25 results, we're headlining some of our key targets. Obviously, we'll give you more detail at Investor Day. Following the acquisition of Webster, the integration of TSB, Santander will be at scale in all its core markets with near two of best-in-class profitabilities. And as a result of this, and based on the current macro outlook, we expect to achieve ROTE in excess of 20% in 28. As we have indicated in previous results, 26 is a transition year. I would say also an excellent year from a BAU but also capital reallocation point of view. Because we are selling Poland in Q1, 26, we just closed that. We expect to close TSB in Q2 of 26. We expect to close Webster Inc. of 26 and continue running our legacy and new platforms in parallel for a few months as we migrate our global platforms in both the UK and the US. Excluding these corporate transactions in 26, so... Ex-M&A in 26, this is what we're expecting. First, revenue to grow mid-single digit in constant euros, double digit including M&A in 26, with fee growth higher and surpassing net interest income growth. Cost to be lower in absolute terms in constant euros. Cost of risk broadly stable. Attributable profit to increase, so a higher profit in 26 over 25. Again, this is X M&A. And a CE21 to be close to 13, somewhere between 12.8 and 13% by the end of 26. Looking ahead further into 27, our guidance right now is revenue to grow double digits, net profit to grow mid-teens, and CE21 to be over 13%. So exciting times ahead for Santander. We have a lot more detail for you at our investor day and obviously more detailed targets. We will detail how we will execute on the strategy, and I hope to see you all there.