It has been a fantastic five years for Banco Santander (LSE:BNC) shareholders. The Spanish bank stock is up 216% over this time, turning every £10,000 invested back then into £31,600.
On top of that, there has been a steady flow of rising dividends since they resumed in 2021 (payouts were paused during the pandemic). Including those, the five-year total return rises to almost £34,000! Lovely.
Solid operational results
Santander’s net interest income — the profit made from core lending and borrowing activities — has been supercharged by higher interest rates in the UK, US, Europe, and parts of Latin America. In 2024, the bank posted a net profit of €12.57bn, up 14% year on year.
The momentum continued in Q1 2025, with profit up 19% to €3.4bn (or 10%, excluding a one-off gain). Strong net interest income in Spain and Mexico offset weaker margins in Brazil and the UK.
Return on tangible equity — a key profitability metric — rose to a healthy 15.8%, while capital buffers remained strong with a CET1 ratio of 12.9%. The bank also continued share buybacks, and it remains on track to buy back at least €10bn worth of its own shares in 2025 and 2026.
Finally, the company added 9m new customers in the quarter, bringing the total worldwide to a whopping 175m.
UK expansion
That number will likely increase further, because in July, Santander announced the £2.65bn acquisition of TSB from Sabadell. Once completed, the two banks will serve nearly 28m retail and business customers nationwide.
Earnings per share are projected to increase immediately, before adding around 4% by 2028. And the lender expects to generate at least £400m in annual pre-tax cost synergies.
The acquisition further strengthens Santander’s position in one of its core markets, expanding its customer base and lending capacity across the UK.
This acquisition will see Santander become the third-largest bank in the UK by personal current account balances, and number four in the mortgage market.
Latin America opportunity
One thing I like is Santander’s positioning in Latin America, where millions of previously unbanked people are joining the financial system through digital accounts.
Yet while demand for credit cards, personal loans, and small business financing has exploded, credit penetration is still relatively low versus developed markets. So there’s a long runway for growth ahead, which Santander is well-placed to benefit from.
Nevertheless, it’s still the case that Latin America remains a volatile region. Currency swings, economic instability, and high inflation can weigh on reported earnings.
There’s also mounting competition from nimble digital banks like Nubank (Nu Holdings), Mercado Pago (MercadoLibre), and Revolut. So Santander will have to work hard to stay competitive.
Should I buy Santander stock?
Despite its strong share price run, Santander looks reasonably valued to me. The stock trades at just 8.2 times forward earnings.
That said, the dividend yield sits around 3.4%, which is lower than FTSE 100 banks like Lloyds (4.9%) and HSBC (5.5%).
I already have HSBC shares in my portfolio for income, as well as fintechs Nu and MercadoLibre for growth in Latin America. I’m not going to add Santander to the mix too.
However, the stock is reasonably priced, so investors might want to consider Santander for their own portfolios.
