Banco Santander (BME:SAN) Profit Margins Improve, Reinforcing Value Narrative vs. Market Growth Concerns

Banco Santander (BME:SAN) reported net profit margins of 25.3%, an improvement over last year’s 22.9%. Annual earnings grew 19.8% but trailed the five-year average of 36.7% per year. Shares currently trade at €8.75, which is below the estimated fair value of €11.5, and SAN’s Price-To-Earnings ratio of 10.1x aligns with peer averages. The headline numbers are supported by high-quality earnings and forecasts for further revenue and profit growth. However, a flagged risk around dividend sustainability and a slower forecasted earnings pace compared to the Spanish market may weigh on sentiment.

See our full analysis for Banco Santander.

The next section puts these results head-to-head with the market’s most widely followed narratives, showing where the numbers and expectations line up and where they might diverge.

See what the community is saying about Banco SantanderBME:SAN Earnings & Revenue History as at Oct 2025

Margins Projected to Narrow from 25% to 21%

Analysts expect net profit margins to slip from the current 25.1% to 20.7% in three years, even as revenue is forecast to grow 5.7% annually, outpacing the Spanish market’s 4.2% average. According to the analysts' consensus view, while Santander’s digital banking push and global efficiency programs are expected to drive recurring revenue and fees,

Cost reduction via technology and scale remains critical. However, ongoing spending on transformation and parallel legacy systems could delay the structural margin uplift many bulls are hoping for. Diversified international operations buffer profitability. Still, analysts acknowledge that rising compliance costs, legal cases, and strong fintech competition may cap margin gains faster than bullish investors anticipate.

Consensus expects digital expansion and market diversity to keep fueling growth but stresses that margin headwinds and cost transformation risks must be overcome for strong returns. 📊 Read the full Banco Santander Consensus Narrative.

P/E Ratio Gap vs Banks but Near Peers

Santander’s Price-To-Earnings ratio sits at 10.1x, closely tracking peer banks, but just above the 9.9x European banking sector average and well below the expected 12.0x multiple needed to reach analysts’ 2028 price target. Analysts' consensus narrative views the modest P/E gap as a double-edged sword:

The discount to peers is reinforced by market caution on future profit growth. While revenue is set to rise, earnings growth at 3.8% yearly trails both past trends and the Spanish market average. This valuation anchoring reflects consensus that the current share price (€8.75) is close to analyst target (€9.14), offering little implied upside unless Santander’s growth outpaces muted expectations or the sector rerates higher.

Story Continues

Revenue Growth Outruns Local Market

Analyst forecasts see revenues rising at 5.7% per year, a significant premium to the Spanish market average of just 4.2%. However, projected earnings increases are more muted at 3.8% annually, which lags the market’s 5.1% pace. Analysts' consensus narrative points to this above-market revenue growth as a core reason for stability, but flags ongoing risks:

The bank’s global reach, especially its focus on high-growth markets such as Brazil and Mexico, underpins robust top-line expansion and fee income resilience, a key positive in the consensus narrative. Nevertheless, potential headwinds from loan quality in emerging markets, legal expenses, and macroeconomic swings could still temper net income and challenge the view that revenue outperformance will reliably translate into shareholder returns over time.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Banco Santander on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Banco Santander research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

See What Else Is Out There

Santander’s margin outlook is clouded by rising costs and slow earnings growth. These factors raise concerns about its ability to sustain consistent performance over time.

If a steadier growth story is what you’re after, discover companies delivering reliable gains and resilience with stable growth stocks screener (2108 results) opportunities.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include SAN.MC.

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