Santander says $12 billion U.S. bank deal will cost less than 7 times earnings. The market isn't buying it.

By Steve Goldstein

Ana Botin says Santander's acquisition of Webster Financial isn't expensive.

Santander shares fell on Wednesday, as Spanish investors reacted to the banking giant's $12 billion acquisition.

Santander shares (ES:SAN) (SAN) slipped 4% in Madrid.

Ana Botin, Santander's executive chairman, told analysts on a call that the price-to-earnings ratio of the acquisition of Webster Financial will amount to just 6.8 once $800 million of synergies are included. It's paying $75 a share for Webster (WBS), a 14% premium to the pre-announcement price.

The deal will make the Madrid-headquartered firm the tenth largest retail and commercial bank in the U.S. by assets, and the fifth largest by deposits in the Northeast.

It's the third deal announced by Santander in the last 12 months, having sold part of its Polish business and acquired the U.K. bank TSB.

"While the decision to allocate more capital to the U.S. is unlikely to be taken easily by the market, we think that the guided impacts of the deal and the valuation are not overly aggressive," said analysts at Jefferies led by Miruna Chirea.

Deutsche Bank analyst Alfredo Alonso however noted the challenges of the deal.

He said it "presents execution risks that would require careful management and demonstrated delivery to fully convince investors that the returns would be higher than simply having received excess capital through further share buybacks over inorganic growth. Hence, while we deem the deal sensible enough, we also consider that it could potentially lead to a temporary negative impact on the stock."

Citi analysts led by Borja Ramirez Segura also noted that cost synergies represent 58% of Webster's cost base, "which may be met with initial skepticism."

Santander also reported better-than-expected fourth-quarter earnings and a 5 billion euro stock buyback.

-Steve Goldstein

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02-04-26 0539ET