RBC Capital Markets upgraded Banco Santander to 'outperform' from 'sector perform,' raising its price target to €12.25 from €8.50 ahead of the bank's Feb. 25 Investor Day. The London-based analysts, led by Benjamin Toms, now model fiscal 2028 return on tangible equity including AT1 at 19.5%, above the current consensus of approximately 18% and nearing Santander's own guidance of more than 20%.

The upgrade implies roughly 14% upside from the stock's current price of €10.76 on the Madrid Stock Exchange, where it trades under the ticker SAN. RBC's revised price target of €12.25 is derived from a sum-of-parts model based on fiscal 2028 estimates discounted back two years to 2026 at a cost of equity of 11.2%. The bank's implied cost of equity, at approximately 11%, sits 110 basis points below its historical average since 2013.

Central to the upgrade thesis is what RBC calls a 'self-help' cost-cutting phase, modeling the group's cost-to-income ratio falling approximately 4 percentage points to around 38.2% by fiscal 2028. The analysts forecast underlying three-year constant currency revenue growth at a compound annual rate of approximately 9%, against cost growth of approximately 3%. RBC models approximately €33 billion in total distributions over the next three years, including €15.6 billion in dividends and €17.3 billion in buybacks, equivalent to 21% of the brokerage's current market capitalization of €157.9 billion.