Transcription
Banco Santander has had a big year. Give us a sense of how big a year it's been.
It's been a great year. Our numbers will be totally on track to deliver all the numbers in our three year plan. And again in '25, we are going to reach our profitability, 16 and a half percent. And for shareholders, you know, great value creation, increasing dividend per share, our share price is up 100%, but there's still a lot of inherent value in our stock. Our multiples are still very attractive compared to US banks. For example, we are trading at a bit under ten times price earnings and we deserve a premium to Europe and even to the US banks because our profitability is getting better and we have growth.
What were the main drivers of the success you've had this year? So I say it's an overnight success, ten years in the making. So since I took over, I inherited a group of banks. It was a big bank, but many different geographies, different business models, very disconnected. And the whole vision is to bring them all together under a single open financial services platform. And that's what we have been working on. So this year, every single one of our five businesses is growing. We have simplified the organization. We sold Poland, we bought in the UK. So UK business now is at scale and this is really the opportunity at Santander. We have profitable growth for many years. Organically.
Santander succeeded in selling half of its Polish unit this year, while other European banks, including UniCredit and BBVA, had a tough time getting deals done. As you say, you sold Poland, you bought in the UK. There were other banks in Europe that tried to do transactions this year that didn't go so well. How come you got it done? Well, you know, the sale of Poland was the largest cross-border M&A in Europe in a decade. And in today's world, governments defend their countries. And, you know, regulation is what it is. Friendly deals are the way to go. And so I believe that's a secret.
As you say, Banco Santander, as you inherited it, is pretty far flung. I mean, you've got obviously Spain, you've got Europe, you've got UK, you've got us, Mexico, Brazil. How much is that helping back us under that diversification? So in today's economy, either you are large or you have global scale or you're very specialized and we have the scale. We're one of the largest banks in the world by number of customers, 180 million. That's more than the number one and number two bank in many states. Together we have added 60 million customers in the last ten years. And so that's scale to benefit from that scale. To have the operating leverage, you need to work across the company. You cannot just work separately by business or by geographies.
One of your goals has been efficiency, increasing the efficiency of bank. How much success have you had, How much further can you take it? We're only just scratching the surface of our potential as a group. We have Gravity Alco operating system, we have our payments core system, which is allowing us to reduce cost per transaction in the last two years by a third. What is now coming is what do you as a customer are going to see, which is the open bank. The front end this year will have flat to down cost and growing topline and this should continue into the next few years. And again, organically, you know, we end markets with 1.2, 1.3 billion people where we are at scale in each one of them. And building our own platforms is something that very few banks, very few companies have in the world today.
One of Santander's strongest verticals is its auto lending business, working with dealerships at 14,000 points of sale as well as through its digital platform Open Bank. The last two years, delinquencies were very low during COVID have normalized. So there have been going up. But our final loss rate is actually stable over the last 12 months and consumers are actually getting up to date on their loans even though they get a bit behind. So the loss rates are stable and we're not seeing anything right now that tells us that US consumer on average at least is is having any issues. It's very solid.
We see interest rates coming down in Europe now. What does that do to your bank and the banks generally? So the way the terminal rate and we can have a debate about what that is in Europe or in the US, given the size of and level of government debt, given demographics, defense spending, decarbonization, you know, we don't see that drag being below 2% in Europe, probably below three in the United States, something like that. And that is a very good level for banks because it is high enough for us to have a margin, but not that high that the credit gets bad. Rates are at a level that I think will allow growth to remain around 3% globally right now. But that's not fast enough. But at least we're growing.
Regulation may be one thing. Holding down growth in Europe. In the last six years, the EU has added 13,000 new banking rules while the U.S. came up with only 3500. Give us your sense of regulation of banks in Europe versus the United States. Well, I think regulation like life is all about balance, right? And so we do believe in smart regulation, but we've gone way too far on certain items like capital. You know, soundness of banks doesn't just depend on capital, as we've seen. You know, if you look at the capital ratios of some of the banks have had problems or pretty high. And so we think, again, Santander, look at our CDs, it's one of the best in the world, including the best banks in United States. Why? Because it's about a strong balance sheet, liquidity, you know, scale, business model, etc.. So, you know, we have gone as far as I think we need to go in capital and now we need to be supporting growth.
Mario Draghi came out with the famous report on what's been done with that report. So we ambition is very high. Even if you don't get to that, you're going to do pretty big things. And so this is the thing in Europe. What is our ambition for growth? Mario Draghi gave us a diagnosis. How much have we executed? Not more than 10% in one year. So we have to have a much greater ambition on delivering on those recommendations. I've said it publicly, you know, if taxes, every euro we make in Europe, $0.58 go to the government, every dollar we make in another state, 42. That's not a small number, but it's, you know, significantly lower. So excess regulation, excess taxation actually is a tax on the economy, on growth, at some point people don't invest. And so this is the balance we need to find. And Europe is getting further apart from the United States, not coming closer.
We also have regulation of banks at both the European level and member state level. To what extent do member states hold things back? Well, under one thing you didn't mention, so there's the regulation and then that's the level two and three. Here in the States is a lot of talk about the agencies. Clearly there's work to do in United States. In Europe, there's even much more work to do. Right. And I showed at a conference on regulation only financial services regulation without the rest of the interpretation of the rules, which is 2000 tomorrow, 97,000 lines, which is 100 donkey holders, you know, I showed it there. And so so that is a second level. And then the third is what you say, which is the national rules and regulations.
How do you decide how to allocate your capital for growth and to what extent is it affected by things like the relative difference in regulatory levels? Well, of course, that matters a lot, right? If other things equal, every dollar I put in Europe, you know, 58 of the profit goes to the state and 42 United States. Well, you know, Europe is going to have to give me higher growth, Ohio profitability or both for us to go there. So, so yes, it matters. It matters a lot.
There's innovation and creativity in Europe, entrepreneurship in Europe. Do the capital markets support it? We have been pushing for a long time for Capital Markets Union. We now have the savings union, which is not exactly the same, but it's going to be helpful. The reality is that most of semi commercial lending comes from banks and that is why it's so existential and urgent that we increase the ambition for change because we will only be more competitive if there's more investment. This is coming from small or medium sized companies and a lot of that lending comes from the banks and that's why capacity to lend has to expand. And that is what, you know, again, regulation, smart regulation would be very helpful.
Is there any prospect of a unified banking regulatory system in Europe? Well, you know how many years it'll take to build the United States? 200. Europe. We've been going at this for 50 or 60 years. So it will happen. I'm not sure I will see it.