Banco Santander walked into its Q3 2026 release with the stock under pressure, down double digits over the past month and quarter, and trading near €10.51 at last close. Then came a set of results built around one clear story: profitability held firm while capital stayed solid, with underlying net income at €3,750m for the quarter and a Common Equity Tier 1 ratio of 12.7%.
The share price reaction now hinges on whether investors focus on that earnings strength or fixate on credit worries around a roughly 3% non performing loan ratio. The emotional trade and the fundamental picture are not perfectly aligned.
Love Banco Santander's earnings resilience but uneasy about that 3% non performing loan ratio? Filter for banks and lenders that pair firm profitability with cleaner credit trends in our list of solid balance sheet and fundamentals stocks (207 results)
Q3 2026 Earnings Summary
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Total Revenue (Q3 2026 vs. Q3 2025):€12,072m vs. €11,183m (up about 8%)
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Net Income, Excl. Extra Items (Q3 2026 vs. Q3 2025):€3,750m vs. €2,931m (up about 28%)
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Basic EPS (Q3 2026 vs. Q3 2025):€0.41 vs. €0.19 (up about 121%)
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Non Performing Loans (Q3 2026 vs. Q3 2025):€36,057m vs. €31,644m (higher non performing loan balance)
Santander says it's on track for over 20% RoTE by 2028. Ask Charlie what Santander needs to hit 20% returns .
Evaluating Santander's Efficiency‑Driven Bull Story
The bullish view depends on Banco Santander turning tech programs into a leaner cost base and structurally higher returns.
"Bullish analysts expect Banco Santander to use its global platform, AI programs and capital light businesses to compound profit while keeping its cost base under tight control through 2028."
Q3 results support that hypothesis. Underlying 9M26 profit reached €11.2b with underlying RoTE at 16%, and the efficiency ratio improved to 42.6%, the best in 17 years. Management attributes almost 2 percentage points of that efficiency gain to the ONE Transformation program, with group costs broadly stable even after bringing TSB and Webster on balance sheet.
Not everyone reads the same price the same way. → See the higher figure this Narrative lands on, and how it gets there .
Bear Case on Costly Tech Programs Faces Mixed Signals
Bearish investors worry that Banco Santander's group wide projects quietly inflate expenses and blunt margin gains.
"The heavy reliance on large scale, group wide technology programs like ONE Transformation and Gravity creates execution and decommissioning risk, where delays or duplication of platforms could erode the expected efficiency gains and weigh on net margins."
The Q3 efficiency ratio at 42.6% and broadly stable costs, even after adding TSB and Webster, show the feared cost blowout is not visible. That said, integrations still sit in early stages and Webster only contributed modestly to current profit, so the full test of this risk is still ahead.
Hunt For Quiet Fundamental Disconnects
Banco Santander shows how earnings strength and credit concerns can influence the same stock in different ways. The real opportunity is finding stocks that could be undervalued before the market corrects them.
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Company 1 - 35% below our estimate - turns a swelling turbine order book and expanding service contracts into steadier high margin maintenance income streams.
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Company 2 - 49% below our estimate - rides new offshore and geothermal tube contracts as recent cost cuts aim to support stronger cash generation.
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Company 3 - 36% below our estimate - knits together acquired design consultancies and new digital tools to capture multi year infrastructure and water program fees.
Those are three of them. See the full list of 191 companies trading below our fair value estimates →
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include SAN.MC .
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