Banco Santander is poised for significant changes following its 2024 financial performance and the executive compensation review. The Spanish banking giant has reported record profits coupled with controversial decisions around its remuneration policy, which may reshape how shareholders perceive management incentives.
Chairwoman Ana Botín is making headlines as the highest-paid banker in Spain, with total compensation rising to €13.7 million for 2024, representing a 13% increase from the previous year’s €12.24 million. This increase aligns with Santander’s record net profit of €12.57 billion, bolstered by favorable market conditions and strategic operational decisions. Investors and analysts are closely observing whether these financial results will sustain long-term shareholder value.
Rather than a mere increase, the changes also encompass broader structural adjustments to the bank's remuneration policy. Reflecting on the feedback from shareholders post the last Annual General Meeting, where support for the compensation policy dropped to 74%, Santander is making amendments to appease investors. Conversations held with its 16 largest shareholders, representing 24% of the company’s capital, are noted to have influenced the modifications. This proactive engagement aims to recalibrate the weight of variable vs fixed compensation packages.
The bank proposes enhancing the components tied to long-term performance by increasing payouts made and based on share performance from 50% to 60%. Elsewhere, the portion of bonuses linked directly to long-term goals will rise from 36% to 40%, paired with the shareholder performance variable, which is increasing from 40% to 50%. These changes hope to align executive rewards more closely with the interests of shareholders.
Despite the mouthwatering packages for senior management, there remains pressure for transparency concerning the cap on fixed salaries, which the bank promises to clarify through benchmarking against competitors such as BBVA and HSBC, among others. The sheer increase of compensation within the bank is substantial, particularly with Botín herself commanding nearly €6 million as part of her variable pay contingent on immediate and deferred bonuses.
Botín's executive pay includes €5.923 million as variable compensation per the bank’s disclosed report, divided equally between cash and share-based payments. She also earns additional compensation through benefits such as insurance and retirement plans, which amount to roughly €1.062 million. The total compensation packages of Botín as well as CEO Héctor Grisi, who collected €8.308 million (up 22% from 2023), tie directly to the favorable stock performance of Santander, whose shares rose by 23% throughout the year.
The bank has taken steps to address its dividend policy, announcing its intent to propose €0.11 per share to shareholders to be paid on April 4, amounting to total dividends derived from 2024 profits reaching the highest levels seen over the past decade. This announcement marks not only good news for shareholders but also raises speculation about how sustainable these dividends will be moving forward. With analysts predicting slight declines overall profit to €12.523 billion for 2025, the consensus appears optimistic, with possible dividends remaining attractive due to stock buyback strategies.
Santander's management maintains confidence in its ability to sustain profit levels beneficial to dividends, reiterates its payout target of 50%. The question of sustainability has been pervasive, especially as the European Central Bank contemplates potential changes to decreasing interest rates, which typically pressure margins and overall profitability for banks.
Market analysts cautiously project Santander maintaining comparable profits, albeit slightly reduced. Nuria Álvarez, analyst at Renta 4, suggested there would be growth of around 5% net income for 2025, reinforcing the belief dividends could rise alongside continuing stock performance.
Through this period of prosperity, Santander faces the responsibility of aligning its executive compensation with broader shareholder interests—not just focusing on profit, but also on long-term sustainability and ethical governance practices. The shift to more performance-linked pay aims to address shareholder concerns, and the future will show how effectively these changes can balance executive rewards with stakeholder expectations.