Morningstar DBRS Comments on Santander's Sale of Polish Subsidiary to Erste

On May 5, 2025, Erste Group Bank AG (Erste, rated A (high) with stable trend) announced that it would acquire a 49% stake in Santander Bank Polska Group S.A., and a 50% stake in its asset management company from Banco Santander S.A. (rated A (high) with Stable trend). Both transactions are expected to cost around EUR 7.0 billion for Erste. The transaction will be all-cash and represent a premium of 7.5% compared to Santander Polska's closing price from Friday May 2, 2025. Santander Polska's shares will trade ex-dividend on 12 May 2025. The proposed acquisition will allow Erste to have de facto control of Santander Bank Polska given that it would be the largest shareholder. On the other hand, Santander will own around 13% of Santander Polska and plans on gaining full ownership of Santander Consumer Bank Polska, to retain presence in Poland in the consumer banking business. The acquisition is expected to be finalised by the end of 2025, and subject to regulatory approvals. In addition, Santander and Erste have also announced a strategic cooperation in Corporate & Investment Banking (CIB) in search of synergies as well as providing Erste access to Santander's global payments platforms.

Morningstar DBRS views the deal as credit positive for Santander in the short term as the transaction is expected to generate net capital gains of around EUR 2.0 billion, which should boost the bank's capital position by around 100 bps and bring the pro-forma CET1 ratio to around 14% from 12.9% reported at end-March 2025. This will also allow Santander to also accelerate its planned share buybacks, as they intend on distributing 50% of the proceeds, equivalent to around EUR 3.2 billion, although still subject to regulatory approval. In Morningstar DBRS' view, this could provide the backbone for Santander to continue focusing on other areas, especially North America, echoing recent strategic decisions. The latter notably include the unveiling of open banking in the U.S. and Mexico, the development of the U.S. CIB business and the obtention of a banking licence to operate in Canada.

Morningstar DBRS also views the deal as credit positive for Erste in the medium term as the acquisitions will likely boost its market position and profitability. Erste directly operates in seven countries in Central and Eastern Europe (CEE). With Erste now entering Poland, they gain access to one of the fastest growing economies in Europe in recent years, with resilient and highly profitable banking system. Santander Bank Polska is the third largest bank in Poland by total assets. With the Polish market, Erste will further enhance its position in the CEE, with loan portfolio in the region increasing to around EUR 131 billion from EUR 94 billion based on YE 2024 financials. According to Erste, the planned acquisitions will boost its profitability, with earnings per share expected to increase by around 20%. Morningstar DBRS notes that Erste will finance the acquisitions from its own sources, including the cancellation of the planned EUR 700 million share buyback, and setting dividend payout ratio at maximum 10% of 2025 net income. As a result, Erste expects that the acquisition would lead to a temporary decline in CET ratio to around 13.5% at end-2025 from 15.3% at end-2024. However, Morningstar DBRS expects Erste's CET 1 ratio to rebound in 2026, and remain sound above 14.25%.