Santander still confident Webster deal will close this year

• Key insight: The CEO of Spanish banking giant Banco Santander downplayed concerns that politics could get in the way of its pending acquisition of U.S.-based Webster Financial.
  
• What's at stake: The $12.3 billion deal is the largest bank M&A transaction announced so far this year. It marks the first time in years that a European bank has sought to acquire a stateside bank. 
  
• Forward look: Santander still needs approval from the Federal Reserve Board.

Banco Santander's pending acquisition of Webster Financial was approved Tuesday by the European Central Bank, leaving one more regulator to sign off: the Federal Reserve Board.

The largest bank M&A deal announced so far in 2026 is still expected to close before year-end, Santander executives said Wednesday during the Spanish bank's second-quarter earnings call.

There's been some concern that Santander's $12.3 billion transaction could get derailed amid President Trump's threats to disrupt trade with Spain. Two weeks ago during a NATO summit, Trump ordered Treasury Secretary Scott Bessent to immediately halt trade with Spain, citing the country's refusal to commit 5% of its gross domestic product to defense spending by 2035.

It was the second time this year that Trump has called for a trade shutdown with Spain. In March, he threatened to cease trading after Spain refused to allow the U.S. military to use its bases to launch attacks against Iran. Trading between the two NATO allies, however, has remained normal.

During Wednesday's call, one analyst sought an update on the deal's expected closing timeline, given the risk of delays "or even in extreme cases" the cancellation of the deal "because of political interference."

Santander CEO Héctor Grisi said the bank has "a very constructive engagement with all the supervisors and the approvals needed to close the transaction," and noted that the Office of the Comptroller of the Currency also recently approved the acquisition.

"The process is proceeding fully in line with our expectation" to close during the second half of the year, Grisi said.

The Santander-Webster tie-up is a crucial part of Santander's strategy to expand in the United States. The Madrid-based bank has had a stateside presence since 2006, when it acquired a 20% stake in Sovereign Bank in Philadelphia. It acquired the rest of Sovereign in 2009 and, four years later, renamed it Santander Bank, which at the time operated in nine Northeastern states.

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Santander Group Executive Chair Ana Botín has characterized the addition of Stamford, Connecticut-based Webster, a Northeast regional bank with roughly $86 billion in assets, as "a final step change" for U.S. growth after years of trying to gain scale and profitability.

The deal will help Santander diversify its U.S. loan portfolio. The bank's loan book, which has historically been dominated by consumer finance loans, will gain more commercial-and-industrial and commercial real estate loans.

Meanwhile, its deposit base will benefit from a stable source of low-cost deposits from a variety of sources, including a consumer bank, a commercial bank and a health savings accounts business, executives have said.

Webster has about 195 branches in Connecticut, New York, Massachusetts and Rhode Island.

The OCC approved the merger of Webster Bank into Santander Bank on June 12. Webster shareholders voted in favor of the acquisition in May, according to a securities filing.

In addition to the Fed's approval, the deal needs the sign-off of the U.S. Department of Justice, which is responsible for analyzing the anticipated competitive effects and determining whether the transaction violates antitrust laws.

The two banks have already laid out the management structure for the combined organization, which will be led by Christiana Riley, the CEO of Santander U.S. since February 2025.

John Ciulla, Webster's chairman and CEO, will be the CEO of Santander Bank, the two banks have determined. Luis Massiani, Webster's president and chief operating officer, will become chief operating officer of Santander Bank and Santander Holdings USA.

Mixed quarterly results for Webster

On Wednesday, Santander reported solid overall results for the second quarter, with underlying profit hitting a new record of €3.8 billion, executives said on the earnings call. The banking giant added four million new customers this spring when it finalized its acquisition of TSB Banking Group in the United Kingdom. In the U.S., loans grew 6%, and deposits grew 1%, it said.

The day before, Webster reported mixed results for the quarter. Net income was $256.8 million, down about 0.8% year over year. Earnings per share totaled $1.56, missing the consensus estimate by seven cents, according to S&P Capital IQ. Excluding costs associated with the Santander acquisition, earnings per share were $1.60 for the quarter, the bank said.

Similar to other regional banks, Webster's net interest margin came in lower than expected at 3.26%, though loans and leases rose nearly 8% year over year, and deposits were up 6%.

Second-quarter revenue was $740 million. Net interest income was $632.7 million, up about 1.8% year over year. Fee income was $107.2 million, up 13.3% from the year-ago quarter.

Expenses rose to about $385 million, an increase of 11.4% compared with the same quarter last year. The uptick was primarily driven by higher compensation and benefit costs as well as $8.7 million of acquisition-related expenses incurred during the quarter, the bank said.

In a research note, David Chiaverini, an analyst with Jefferies, said that expenses, which were higher than expected, were partly offset by a lower provision and better-than-expected fee income.