The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Neil Unmack

LONDON, Feb 25 (Reuters Breakingviews) - Ana Botín is sitting comfortably at the top table of banking. Her $191 billion Banco Santander SAN.MC now trades at a meaty premium to its tangible book value, and is by far the largest euro zone lender, judged by market capitalisation. It's down to savvy M&A, rigorous efficiency, and a cleaner business mix.

Santander once struggled to keep up with the top tier. In early 2025 it was even trading below tangible book value, a level implying that investors thought it could not deliver an economic return. That’s despite a relatively broad international business mix and exposure to fast-growing markets like Mexico and Brazil.

Those strengths, historically, came with some caveats. Santander’s operations in the UK and the United States lacked scale and lagged on profitability. Its capital ratio, while a respectable near-13% in 2024, rarely seemed to be at a level that would justify vast handouts to shareholders. And exposure to lending in riskier locations prone to currency fluctuations introduced volatility into its earnings.

Last year’s results, and a new business plan on Wednesday, highlight how Botín has moved the dial. Recent deals in both the UK and United States, such as the $12 billion acquisition of Webster Financial WBS.N, have bulked up and supercharged profitability in those "hard-currency" markets. After the sale of a Polish unit, so-called soft-currency assets, with more volatile foreign-exchange movements, account for just 20% of operating profit. That's down from a quarter three years ago.

Santander is also cranking out higher returns. The group is now pledging a more than 20% return on tangible equity by 2028, helped by a progressive reduction in costs. That includes savings from M&A, but also substantial benefits from artificial intelligence. It expects to bring expenses to 36% of revenue, from over 45% in 2025. The new target level is closer to financial technology groups, the bank reckons, rather than traditional lenders. Success on this point would prove that multinational banks can indeed use their scale to boost efficiency beyond the level of more focused local rivals — a point that investors long doubted.

There’s always room for improvement. Wealth management, a business prized by shareholders for its returns and stability, still made up less than 10% of revenue in 2025. Bulking up here is challenging given rich wealth valuations. And after a slew of deals, investors are unlikely to reward more splurges from Santander.

The bank is now worth a healthy 1.7 times forward tangible book value, which is in line with top-tier lenders like UniCredit CRDI.MI and only modestly below arch-rival BBVA BBVA.MC. It far surpasses laggards like BNP Paribas BNPP.PA, Barclays BARC.L and Deutsche Bank DBKGn.DE. If Botín shows that she can hit her 20% return target, that would justify a multiple closer to 2 times. That means there may be even more upside for shareholders.

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CONTEXT NEWS

Banco Santander on February 25 released new targets, pledging to boost its return on tangible equity to over 20% by 2028.

The bank led by Ana Botín plans to boost net income to more than 20 billion euros by 2028, up from 13.1 billion in 2025. Last year it generated a return on tangible equity of just over 16%.

Santander stock rose 4%, as of 1526 GMT on February 25, to 11.08 euros a share.

(Editing by Liam Proud; Production by Streisand Neto)

((For previous columns by the author, Reuters customers can click on UNMACK/neil.unmack@thomsonreuters.com))