RBC Capital has moved Banco Santander SA to an Outperform rating from Sector Perform and boosted its price objective to EUR12.25 from EUR8.50. The analyst action accompanies a fresh projection that Santander will deliver stronger returns as cost-saving initiatives and recent deals take hold.
The bank’s shares are trading at $12.75, with a price-to-earnings ratio of 11.12 and a price/earnings-to-growth ratio of 0.46. RBC’s note observes these valuation metrics alongside an InvestingPro Fair Value analysis that suggests the stock remains undervalued.
RBC’s upgrade arrives ahead of Santander’s Investor Day, scheduled for February 25. The firm’s analyst, Benjamin Toms, highlighted uncertainty in consensus estimates following a string of developments that have clouded near-term comparability, including recent results, merger and acquisition activity, and a restatement.
On fundamentals, RBC now models a return on tangible equity of 19.5% for fiscal year 2028 for the bank, modestly above the roughly 18% consensus estimate. Santander itself has set guidance targeting a return above 20%. For context, the bank’s return on common equity for the last twelve months through Q4 2025 stood at 14%.
Santander’s shares have shown substantial appreciation over the past year, delivering a 116% gain. RBC expects the next leg of performance to be driven primarily by cost reductions, and the firm anticipates the bank could trade at a multiple premium to peers as those savings materialize.
RBC also expressed a constructive view of Santander’s recently announced TSB and Webster transactions. The firm said those deals should give the bank additional scale in markets where it currently reports sub-optimal returns, potentially improving overall profitability as integration progresses.
Separately, Banco Santander reported record profits for the fourth quarter of 2025, with earnings up 12% year-over-year to EUR 14.1 billion. Management’s earnings call emphasized strategic priorities around digital banking and efficiency improvements as central elements of the bank’s path to higher returns.
Despite the solid quarterly performance, the company’s stock experienced a premarket decline. Analyst commentary referenced in the note underscores that strategic initiatives - including digital transformation and cost discipline - will be important to maintaining the bank’s competitive position and supporting future results.
Investors preparing for the February 25 Investor Day will likely weigh RBC’s revised projections, the company’s guidance toward returns above 20%, the anticipated impact of cost-saving programs, and the potential benefits from the TSB and Webster transactions. The firm points to these items as key drivers of its upgraded view.
Note: The analysis above reflects RBC Capital’s published upgrade, the bank’s reported Q4 2025 results, and the details provided regarding recent transactions and guidance.