Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 412

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 412
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 market valuation of banks improved significantly throughout the year, although significant differences in the ratio of market capitalization to book value remained. While European banks increased their market capitalization to an average of 0.8

times their book value, US banks were at levels of 1.6 times their book value at year end.

The process of easing monetary policies is expected to have an impact on net interest income which is expected to be offset by an increase in credit volumes in an environment where a significant increase in non-performing loans is not expected.

Banks maintained high solvency levels, as observed in the stress tests conducted by supervisors and multilateral organizations, and they absorbed the impact of the gradual liquidity withdrawal being carried out by the major central banks.

The sector's outlook for 2025 is positive, with returns expected to be slightly lower than those recorded in 2024 but well above those observed in the last decade. In the short term, the main risks facing the sector are essentially exogenous, mainly those related to geopolitical risks.

The potential volatility in market valuations could be amplified by the positions of non-bank financial institutions. The volatility observed in the banking sector in August, although short lived, can be seen as a wake-up call.

The medium-term challenges for banks remain unchanged. The digital transition continues to force entities to make significant investments in order to offer the best customer experience to be able to face the competition from new competitors, while improving efficiency through automatization and simplification of processes, and maintaining safeguards against cyberattacks.

Additionally, the banking sector must continue to address potential risks related to sustainability.

Regulatory and competitive environment

In 2024, the regulatory agenda was similar to that of 2023, with prudential, sustainability, digitalization and retail banking issues taking the spotlight. In Europe, European Parliament elections held in June 2024 and the composition of the new European Commission slowed down the approval of ongoing proposals and the presentation of new ones. Competitiveness was consolidated as a fundamental pillar of action, both for the new European Commission - which agreed to introduce a competitiveness test in new legislative proposals - and for the UK, which introduced it as a regulatory objective.

The main regulatory topics in 2024 were:

1. Prudential and resolution: the European Banking Authority (EBA) began work on the secondary regulation needed to allow the Basel III reform in Europe (the new CRR3) to enter into force on 1 January 2025. However, the implementation of the Fundamental Review of