Fitch Ratings has affirmed Banco Santander, S.A.'s (Santander) Long-Term Issuer Default Rating (IDR) at 'A' with a Stable Outlook and its Viability Rating (VR) at 'a'.
A full list of rating actions is below.
Key Rating Drivers
Balanced Geographic Diversification: Santander's ratings benefit from its stable, balanced and geographically diversified universal banking operations with strong franchises in several key markets and a leading European consumer finance business. Its business profile and effective risk management support resilient profitability, offsetting lower capital ratios and weaker asset quality compared with higher-rated European peers'. Santander's funding benefits from its growing deposit base, while maintaining access to diverse wholesale funding sources.
Good Environment in Some Markets: Santander's improved operating environment assessment, which is now in line with that of Spanish domestic peers despite the group's material exposure to emerging markets, benefits from growth opportunities not only in Spain but in other key mature markets. In particular, Santander has large and growing foreign operations in Portugal, the US and UK, which balance risks. Its multiple point-of-entry (MPE) resolution strategy requires subsidiaries to manage capital and funding independently. This limits the potential for foreign operations to become a contingent liability for the parent.
Strong Business Profile: Santander is a global universal bank with strong shares in key markets and product segments. Its diversified business model is also supported by its growing corporate and investment banking (CIB) and payments businesses and a leading consumer finance business. Wealth management and insurance are less developed than at other European peers but adequately complement its product offering and are growing. Its global franchise covers both developed and more volatile markets, which allows the bank to generate sound and stable earnings through different interest rate and economic cycles.
Conservative Risk Profile: Centralised and robust risk controls underpin Santander's conservative risk profile. The bank has tightened its underwriting standards in more vulnerable asset classes and geographies, underpinning its resilient asset quality. Interest-rate and foreign-exchange risks are well-managed, and traded market risk is contained and below higher-rated peers'.
Resilient Asset Quality: Santander's loan portfolio performance is stabilising following post-pandemic normalisation. Fitch expects its impaired loans ratio to remain at about 3% in 2026-2027. The bank operates in higher-risk emerging markets that result in higher problematic exposures than at peers, but proactive risk management, tightened underwriting and strong coverage ratios put Santander in a good position to navigate ongoing economic uncertainties.
Profitability to Remain Strong: Santander's profitability is a rating strength. Its operating profit was 3.4% of risk-weighted assets (RWAs) in 9M25, due to a successful transformation plan. This has resulted in fee income growth in its wealth, CIB and payments businesses, strict cost discipline and muted loan impairment charges (LICs). We expect these trends to consolidate in 2026-2027, which together with moderate loan growth, should keep operating profit remaining comfortably above 3% of RWAs.
Improving Capitalisation: Santander's common equity Tier 1 (CET1) ratio of 13.1% at end-September 2025 slightly exceeds its 13% guidance for 2025 and is at the upper end of its 12%-13% operating range. We expect the CET1 ratio to remain slightly above 13% in 2026-2027, assuming the bank continues to use excess capital for growth and share buybacks. Sustained internal capital generation and strict capital management have supported larger capital distributions while improving the CET1 ratio.
Diversified Funding, Strong Retail Franchise: Santander's gross loans/deposit ratio has been declining (end-September 2025: 105%, excluding the recently sold Polish business) as the group implements its strategy to expand the deposit franchise, mainly through its digital bank, Openbank, but remains above domestic and international peers'. Its global retail deposit franchise has proved resilient throughout the cycle, which enhances the stability of the group's funding and liquidity and reduces concentration risks. Wholesale funding is diversified by product and currency across various geographies and has access to a wide investor base.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Negative rating pressure would emerge if we no longer expected Santander to structurally operate with a CET1 ratio of about 13%, or if diversifications benefit from a balanced geographical footprint weakened because of a higher weighting towards more volatile markets. Operating profit/RWAs falling below 3% on a sustained basis, signaling diminishing earnings resilience, would also be negative for the ratings.
An unexpected severe setback in the economic prospects in the group's core countries sharply eroding its business and financial prospects would also be negative for Santander's ratings.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
An upgrade of Santander's ratings would require further improvements in its operating environment. In addition, an upgrade would also require a CET1 ratio materially above 13% on a sustained basis, while preserving operating profit at well above 3% of RWAs, without significantly altering the group's risk profile, and achieving stronger asset-quality metrics.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Santander's long-term senior preferred (SP) debt and deposit ratings, and its Derivative Counterparty Rating (DCR), are one notch above its Long-Term IDR to reflect the protection that accrues from buffers of senior non-preferred (SNP) and more junior debt at the Spanish resolution group. We estimate that this buffer was almost 18% of resolution group RWAs at end-September 2025. Fitch expects the buffer to remain above 10% of RWAs on a sustained basis. For the same reasons, Santander's SNP notes are rated at the same level as its Long-Term IDR.
The short-term SP debt and deposit ratings of 'F1' are the lower of two options mapping to 'A+' long-term deposit and SP ratings on Fitch's rating scale, respectively, reflecting Santander's 'a' funding and liquidity profile.
The rating of subordinated Tier 2 debt is two notches below the bank's VR, which is in line with Fitch's baseline notching for loss severity.
Legacy preferred shares are rated five notches below the bank's VR. This corresponds to two notches for loss severity and three notches for non-performance risk, given the presence of a profit test in the notes' terms and conditions.
Santander's Government Support Rating (GSR) of 'no support' reflects our view that, although external extraordinary sovereign support is possible, it cannot be relied on. This is because senior creditors can no longer expect to receive full extraordinary support from the sovereign in the event that the bank becomes non-viable.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Santander's DCR, senior debt and deposit ratings are primarily sensitive to changes in Santander's IDRs, from which they are notched. We would downgrade the DCR, long-term SP and SNP debt and deposit ratings by one notch if the size of the combined buffer of junior and SNP debt for the resolution group fell below 10% of RWAs on a sustained basis with the group partly meeting its Minimum Requirement for Own Funds and Eligible Liabilities with SP debt.
Santander's subordinated debt and legacy preferred shares' ratings are primarily sensitive to a change in Santander's VR, from which they are notched. The ratings are also sensitive to a change in the notes' notching, which could arise if Fitch changes its assessment of their non-performance risk relative to the risk captured in the VR or their expected loss severity.
An upgrade of the GSR would be contingent on a positive change in the sovereign's propensity to support the bank. In Fitch's view, this is highly unlikely, although not impossible.
VR ADJUSTMENTS
The operating environment score of 'a' is below the 'aa' category implied score due to the following adjustment reason: sovereign rating (negative).
The capitalisation and leverage score of 'a-' is above the 'bbb' category implied score due to the following adjustment reason: internal capital generation and growth (positive).
The funding and liquidity score of 'a' is above the 'bbb' category implied score due to the following adjustment reasons: non-deposit funding (positive) and deposit structure (positive).
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores
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