Santander aims to shed about €40 billion of credit risk in 2026

(Bloomberg) -- Banco Santander SA, one of Europe's most active sellers of bank risks and assets, expects offerings next year to match the pace set in 2025.

Spain's largest lender is likely to offload around €40 billion ($47 billion) to €45 billion of risk-weighted assets through significant risk transfers and other capital-relief tools in 2026, said Sergio Gamez, global head of capital, profitability management and asset desk, referring to preliminary estimates. The figures are broadly in line with expectations for this year, he said.

"The SRT market is benefiting from regulatory and political support, which in turn is reassuring investors," Gamez said in an interview. "The SRT market is here not only to stay, but also to keep growing."

SRTs are expected to get a boost as policymakers look for ways to revive Europe's €1.2 trillion securitization market and increase financing for housing, energy and defense. Before breaking for the summer, the European Commission issued proposals including lower capital charges on certain types of loan portfolios tied to SRTs targeting insurance companies.

SRTs allow banks to insure loans against default by selling credit-linked notes to pension, sovereign wealth and hedge funds. That means banks are able to bolster their solvency ratios, or free up capital to pursue growth. Typically, a lender obtains default protection for between 5% and 15% of the loans' value. Santander is one of the world's largest issuers of SRTs.

Santander has been a consistent user of SRTs to boost its regulatory capital buffers and fuel growth. It announced a plan earlier this year to return over €10 billion to investors through share buybacks over several years.

Santander is discussing at least eight SRT deals with investors, including two potential transactions tied to portfolios of Portuguese and Spanish residential mortgages, according to people with knowledge of the matter. The transactions out of its Fortaleza and Aracataca programs are structured as unfunded credit protection, a format typically used by insurance companies, said the people.

The lender is also considering at least two deals out of loan portfolios from its Latin American units, said the people. At least two more possible SRT deals are tied to auto loan portfolios out of Norway and the UK, said the people.

The potential deals are in different stages of the sale process and terms are subject to discussions with investors, the people said. A representative for Santander declined to comment on deals being discussed with investors.

"This year we're doing more SRTs out of our LatAm operations because we are seeing an increase of investor appetite," said Gamez, without discussing the details of any transaction. "The SRT market continues at a strong pace, so the investor demand keep growing."

The global SRT market is expected to expand 11% annually on average in the next two years, according to a Bloomberg Intelligence survey earlier this year. Banco BPM SpA, Macquarie Capital, Deutsche Pfandbriefbank AG and UBS Group AG are among the lenders discussing or finalizing deals.

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