Banco Santander Announces New SGD 6NC5 Senior Non-Preferred Bonds at an IPG of 3.10%

·       Banco Santander SA, Spain's largest bank with operations globally, is planning to issue new SGD 6NC5 senior non-preferred notes at an initial price guidance (IPG) of ~3.10%. The notes come with a one-time call option on 30 July 2031, and will mature on 30 July 2032. Issue ratings are expected to be A-/A/Baa1 (S&P/Fitch/Moody's) – 1 to 3 notches below Santander's own issuer-level ratings of A+/A+/A1. Net proceeds are earmarked for the Group's general funding purposes.

·       During the first half of the year (1H2026), which ended on 30 June 2026, the Group generated €22.7 billion in net interest income (NII), up from €21.2 billion in 1H2025 (+7.1% YoY). Santander did not release half-yearly net interest margin (NIM) data, but 2Q26 NIM held steady at 2.71% (2Q25: 2.71%), while net fee income rose 8.0% YoY, from €6.3 billion to €6.9 billion. Total income climbed from €29.0 billion to €30.8 billion, representing 6.4% YoY growth.

·       The Group's Retail & Commercial Banking segment remains the Group's main revenue and profit driver, contributing €10.2 billion (57.8%) of total operating income supported by strong commercial momentum, higher fee income, and continued efficiency gains from cost discipline. The second-largest profit contributor was Corporate & Investment Banking (CIB), which delivered €1.7 billion in underlying profit, up 17% YoY, driven by strong revenue growth across Global Banking and Global Markets.

·       Operating expenses were broadly flat at €12.5 billion, up just 1.1% from €12.4 billion in H1 2025, as the Group continues to focus on structurally improving efficiency via its ONE Transformation programme. Within this, administrative expenses (the bulk of the cost base) rose a modest 0.9% YoY to €10.9 billion as staff costs increased 2.9% to €6.9 billion on inflation and wage growth, though this was largely offset by a 2.4% decline in other general administrative expenses to €3.9 billion. Depreciation and amortization rose 2.5% to €1.67 billion, in line with continued technology investment.

·       With total income up 6.4% against operating expenses up just 1.1%, the Group generated strong positive operating leverage, driving its indicative statutory efficiency ratio down to 40.7% - an improvement of roughly 2.1 percentage points year-on-year (1H2025: 42.8%).

·       The Group's non-performing loan (NPL) ratio stood at 2.93% in end-June 2026, compared with 2.90% a year earlier, with the NPL coverage ratio at 64%. Cost of risk came in at 1.15%, a touch above the initial 2026 guidance range of 100-110bps, largely due to portfolio deterioration in Argentina reflecting sector-wide trends, alongside some single-name provisions in CIB Europe and Brazil. Overall asset quality remains solid and broadly stable, though the Argentina-driven cost of risk overshoot is worth monitoring.

·       The phased-in CET1 ratio stood at 14.0% as of 30 June 2026, up from 13.0% a year earlier, driven mainly by a 95bp uplift from the completed Santander Bank Polska disposal and strong organic capital generation, partly offset by a 55bp drag from the TSB acquisition - a UK retail bank Santander completed acquiring on 30 April 2026. While 14.0% sits above the Group's 12.8-13% target range, management expects this to normalise toward the target range by year-end once it absorbs the capital impact of the pending Webster Financial Corporation acquisition in the US. Total capital ratio stood at 18.8%.

·       We feel that Banco Santander is a solid issuer which is likely able to continue delivering solid profits while maintaining a robust capital position. At the IPG-based yield-to-worst of 3.10%, expected ratings of A-/A/Baa1 (S&P/Fitch/Moody's) place it solidly in the A-/BBB+ investment-grade band. We compared this new issue with other senior non-preferred bank papers in the SGD space (see Table 1).

·       The ~60-70bp pickup the new 3.10% IPG offers over the SANTAN 3.60% 23Oct2030 (YTW: 2.39%) and SANTAN 2.35% 13Nov2031 (YTW: 2.50%) levels on the existing curve is therefore mostly a function of the longer tenor and typical new-issue concession.

·       Looking further afield at other bank senior papers with broadly comparable ratings and tenor, the new Santander SNP issue also screens attractively. The BNP 3.31% 23May2032 Corp (SGD) yield 2.64%, ACAFP 2.75% 15Jan2032 Corp (SGD) yield 2.65%, and STANLN 4.50% 14Jun2033 Corp (SGD) yield 2.71% (this is senior unsecured and not senior non-preferred) at a similar-to-slightly-longer tenor. Against this basket, the new Santander note's 3.10% IPG offers a roughly 40-45bp pickup versus all three (though the final guidance may come in below IPG), despite Santander's issue ratings (A-/A/Baa1) sitting broadly in line with or above some of these peers. 

Table 1: Peer Comparison

Issuer	Issue	Credit Rating (S&P / Fitch / Moody’s)	Ask Price (SGD)	Years to Reset / Maturity	Yield to Worst (%)
Banco Santander, S.A.	SANTAN 3.10% 30Jul2032 Corp (SGD)	A- / A / Baa1*	100.00	5.00 / 6.00	3.10 **
Banco Santander, S.A.	SANTAN 3.600% 23Oct2030 Corp (SGD)	A- / A / Baa1	103.77	3.25 / 4.25	2.39
Banco Santander, S.A.	SANTAN 2.350% 13Nov2031 Corp (SGD)	A- / A / Baa1	99.17	4.31 / 5.31	2.50
BNP Paribas SA	BNP 3.310% 23May2032 Corp (SGD)	- / - / A+	103.17	4.83 / 5.84	2.64
Credit Agricole SA	ACAFP 2.750% 15Jan2032 Corp (SGD)	A- / A+ / A3	100.10	4.48 / 5.48	2.65
Standard Chartered PLC	STANLN 4.500% 14Jun2033 Corp (SGD)	BBB+ / A / A3	109.70	5.90 / 6.90	2.71
Data as of 23 July 2026 *Expected credit rating **Yield is based on IPG

Disclosure: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold NIL positions in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.