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Banco Santander Central Hispano (NYSE:SAN)
Q4 2020 Earnings Call
Feb 03, 2021, 4:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Sergio Martinez

Good morning, everyone. Thanks for joining today's Banco Santander 2020 full-year earnings presentation. As every Q4 with full-year presentation, we have today our executive chairman, Ana Botín, who will address with the CEO the performance of 2020 and the different regions and some of the country's review. Then the Executive chairman will make a disclosure on the progress on the transformation and the next step that we will kick off from 2021, to conclude with medium-term outlook and key takeaways before jumping into the Q&A session.

So with no further delays, Ana, please.

Ana Botin -- Executive Chairman

So thank you, Sergio, and good morning, everybody. And I want to start by saying that I hope you and your close ones are safe and well. It's been a difficult year for everybody. And all of us have lost colleagues and friends.

And so our thoughts are with everybody that has had that terrible experience. Without further ado again welcome to our 2020 presentation. We will cover the results for the year. We will give you our views for the medium term and cover some of the strategic priorities that we will be focusing on for the next few years.

[Audio gap] Sorry, cost of credit at 1.28% and slightly better than the improved guidance that we gave last quarter. And finally, we have continued to generate very strong growth in organic capital, reached 12.34% at the end of the year which is above our target range. We, in November 2020, paid a dividend of new shares equivalent to 0.10 per share, and the board of directors intention is to go back to the 40% to 50% as soon as we can. We are also proposing to our shareholders in end of March a 2.75 per share in cash against 2020 results.

Jose Antonio will review that in more detail the full-year results, but just to point out again that we delivered 5 billion underlying profit. That's after a 50% increase in provisions due to COVID, with very good cost control, as you can see, and net operating income in constant euros, as I mentioned which is up year on year. Again, these underlying results and provisions represent a prudent approach to the COVID-related potential losses which we have been guiding through the year. At the base of these strong underlying numbers is again our geographical and business diversification.

It has shown its worth in previous crisis. Again, in this one, we have delivered robust performance in the Americas. I want to point out that North America has been our best performing region. The best ordinary profit performance in 2020, with growth in loyal customers based on increased collaboration between Mexico and the U.S.

Importantly, in the U.S., we delivered $1.2 billion net profit. That's a statutory attributable profit and a growth in the underlying profit for the year. Europe, we are very much focused on transforming the business, what we call One Europe is a new operating model. We are very confident this will lead us to results that would be increasingly positive.

We are basing our growth on -- in revenues and increase in productivity. And importantly, we have generated 1 billion net cost savings excluding perimeter in the last two years. And South America remains the growth engine for the group. We have delivered 19% RoTE, but very importantly, operating income increased 5% on a year-on-year basis in Brazil.

And loyal customers and customer loans grew at 9% and 15%. And finally, we're also increasingly diversified by businesses. You can see here, CIB, very strong numbers, wealth management also and our Digital consumer bank which is the pro forma merger of Santander Consumer Europe and Openbank which is already 16% of the total revenues. I mentioned at the beginning that COVID has been a challenge for all of us at the personal level.

We are very clear that our priority throughout and continues to be our people. This is the best way that we can take care of our customers. We have supported 6 million of our customers with moratoria, lending 1 billion per day to SMEs and corporates. We have also supported our communities in a very important way with 100 million across the group in aid in different aspects.

And this is something which we are very keen because we know that that is at the base of our success for the future. We're also, during 2020, very focused on further embedding ESG across the bank. It's something which is at the base again of our aim, and I define it as being a more responsible bank. We have continued supporting our customers in a transition to green, this is something which we are absolutely very focused on.

32.6 billion in green financing, as you can see since 2019, and going green ourselves. So in 2020, we were net zero in our own operations, and this is something we will continue going forward. We are promoting financial inclusion, especially in the Americas. We supported about 500 million credit to micro entrepreneurs and also supporting society through scholarships and our support for universities.

Very importantly, we have continued to invest in our talent and also diversity. We are aiming to continue in this line. We're now close to 24% of women in leadership positions. A very diverse board in terms of nationalities, backgrounds with 40% women on the group Board.

And again, based -- at the base of all of our strategy is an increasingly strong culture which we have defined as being simple, personal and fair. So after this introduction, I will pass over to Jose Antonio to give you a summary of both the group and the businesses in 2020. Jose Antonio?

Jose Antonio -- Vice Chairman and Chief Executive Officer

[Audio gap] So excluding them, total income remained stable as the decrease in activity and lower interest rates were offset by higher volumes, the lower cost of deposits and good performance in global businesses. We accelerate our cost reduction and we expect to keep on track in this year. As a result, net operating income in a very difficult year grew 2% year on year in constant euros. Higher loan-loss provisions due to the COVID crisis, with the cost of credit in line with our guidance during the year.

All in all, underlying attributable profit reached the 5 billion, as I already mentioned. We had a very positive fourth quarter. We improved our business activity and customer revenue reached its highest figure in the last eight quarters. Finally, we recorded in the year 13.9 billion, negative net capital gains and provisions.

Following the 12.6 billion impairment we announced in June, the bank has recorded charges of 1.1 billion in the fourth quarter. These charges in the fourth quarter were mainly restructuring costs in Spain, but also in other countries in Europe due to the transformation process we are implementing to increase productivity and efficiency. In Europe, we expect total restructuring costs in 2020 and 2021 of around 1.5 billion, and we expect savings of 1 billion in 2021 and 2022. Going through the P&L along the main lines of the P&L, Q4 customer revenue continued to consolidate its upward trend while trending toward the pre-COVID levels.

4% growth in NII versus Q3 with the highest NII in the last two years, mainly driven by Spain, U.K. and South America. Fee income grew 3% primarily backed by South America. Costs were up 4% in the quarter, partly affected by seasonality labor agreements in Argentina and Brazil were -- are the main drivers and higher technology expenses, particularly in Mexico.

As a result, net operating income decreased 3% quarter on quarter, but was 3% higher than in Q4 2019. Taking a more detailed look at the customer revenue, NII increased from higher lending and deposit volumes, with more than offset the interest rate impact and negative regulatory impact in Brazil -- particularly in Brazil and Poland. Net fee income was affected by the COVID crisis. In this environment, our strategy remains focused on increasing customer loyalty and growth in higher value-added services and products.

Very positive quarter for CIB and wealth management and Insurance. Together, they represent 50% of the fee income of the bank. In costs, you see the trends, the figures speak by themselves. In Europe, 6% decrease.

In North America, down -- 2% down, mainly in the U.S. 5% down. In South America, costs increased 1% excluding Argentina due to the high inflation. We expect to continue to reduce in costs and improving our efficiency ratio in 2021.

Going to the cost of credit. The cost of credit stood in line with our expectations, Ana already mentioned the 1.28% increase in the year due to expected higher -- expected macro scenario. The increase largely reflects the IFRS 9 forward-looking view based on potential macroeconomic scenarios and collective and individual assessment to COVID expected credit losses in this scenario. However, the underlying trends in credit quality remained solid in 2020.

NPL decreased 11 basis points. Coverage increased 8 percentage points. Loan-loss reserves increased 4 billion to more than 24 billion. By stage, we increased stage 1, 22 billion due to the increase in the loan book; stage 2, 21 billion; and stage 3 remaining virtually flat that speaks -- this classification speaks about the quality trends, the underlying quality trends in the loan book.

When it comes to moratoria at some point, we got a -- we were very proactive in the moratoria, some of them were offered by the bank to the customers, some were -- other were mandatory by the different governments. At some point, we have even 112 billion in moratoria. So the majority of this has expired and used, just 3% of the expired moratoria are classified as stage 3. 78% of the active moratoria remain secured, and 83% is concentrated in Europe, mainly in Portugal and in Spain.

In Portugal, government-mandated extension of our moratoria until September. In Spain, longer initial terms than other countries, almost 95% of the one you have in the screen expired in the coming months. Although yesterday, the Spanish government took some actions to extend some moratoria for specific sector and vulnerable people. When it comes to capital, the capital ratio reached 12.3% after increasing 36% in the quarter and 69 basis points in the year.

The 104 basis points of organic generation, partly offset by the impact of restructuring costs, corporate transactions and market performance. It also includes 9 basis point related to an accrual of 2020 dividend payments based on the limit established by the ECB that allows a maximum payment of 2.75 per share. The fully loaded core equity Tier 1 ratio was 11.89%. Tangible net asset value was 3.79 virtually stable since September, although we took some restructuring cost charges as you had seen in the P&L.

Going to the regions and making some comments about the three regions and the main countries. With the creation of One Europe, we are accelerating our business transformation. To achieve with two main goals: achieve superior growth under a more -- and having a more efficient operating model. Regarding commercial activity, loans grew 4%, boosted by SME and large corporates in Spain, mortgages in U.K.

and CIB. Portugal rose in the loan book, 8%. Deposits increased 6% and mutual finance 5%. This growth is remarkable in Europe.

Moving to results, underlying attributable profit amounted to 2.7 billion in 2020, 45% less than in 2019, affected by higher loan-loss provisions in all markets. So other points I want to mention is the cost decreases, well ahead of our schedule, as we -- I commented before. The total income, net interest income remained flat but improved in the later part of the year. Partly driven by the recovery in commercial activity and consumer lending, and improvement in the cost of funding.

Before going to more detail into Santander Spain and U.K., I would like to highlight Santander consumer finance's positive performance in the year, clearly outperforming the market, showing high resilience in results and a recovery in the second half of the year. In Q4, profit increased 14% compared with an already strong Q3. This is a business that clearly reflects the benefits of the diversification. Ana will describe later our product in Digital consumer bank in more detail.

In Spain, we have been very active in supporting our customers being very active with ICO funding where we granted 31 billion. Since the state of alarm was declared, we have granted 100 billion to self-employed people on corporates. We made further progress in enhancing customer experience. We are escalating Net Promoter Score in relation with our competitors.

The volumes grew, loans grew 5% and customer funds 4%. In the net -- in the income statement, the profit for the year was 517 million, 60% lower year on year. By line, the income fell basically due to the lower fee income in relation with the lockdowns we have had, and also the reduced income from real estates and smaller ALCO portfolios. Conversely, net interest income grew 1% driven by the positive performance in volumes, margin management and the positive contribution for TLTROs.

We had another positive year in costs, dropping 10%. Lastly, loan-loss provisions doubled driven by the expected potential losses in our macro scenario arising from the pandemia and several collective assessments in the most vulnerable sectors. That said, our portfolio's credit quality remained solid. NPL decreased 71 basis points.

Arrears remain at lower levels than pre-COVID, provided the different support programs in place. The arrears are 1.8 billion in December versus 3.7 billion in February. Coverage increased 6 percentage points. Loan-loss reserves increased by 1 billion.

And the different stages: stage 1, grew 16 billion; stage 2, 3 billion; and Stage 3, a little bit less than 1 billion. Going to the U.K. Our transformation program is gaining traction and beginning to show results. Volumes increased year on year.

Loans, plus 3%. Customer funds, plus 8%. 2020 profit, it cannot be other way, was heavily affected by COVID-19 and regulatory changes, particularly in relation with overdrafts. We've got some one-off set by better NII, plus 2%; and lower cost, minus 6%.

Profit fell year on year, but increased 18% quarter on quarter, continuing the recovery that began in Q3, thanks to the NII -- that increased NII due to increase in the NIM by 11 basis points in the quarter, due to lower funding costs and high front book margin. Costs improved 3%, minus 6% year on year. Loan-loss provisions have started to normalize in the year. Cost of risk is relatively low, 28 basis points.

Coverage increased by 11 percentage points. In constant euros, stage 2 increased by 6 billion and Stage 3 plus 600 million. For 2021, we expect good operating performance based on lower funding costs and new business bases, improved productivity through our transformation program. In North America, it's the region that has delivered the best ordinary profit performance across the group in 2020, grew the volumes, loans plus 4% and customer funds plus 19%.

Profit just -- decreased just 3% despite the pandemic-related provisions driven by net operating income. Efficiency improved significantly. By country, Santander U.S. focus on preserving the strength of its balance sheet and its sustained improvement in profitability.

Volume, loans grew 6% and deposits grew 20%. Profit increased 4% year on year, with resilient NII, cost reduction minus 5% and lower minority interest in SCUSA. NPL ratio fell 16 basis points. We reinforced coverage plus 50 percentage points to 210.

In constant euros, stage 2 increased 3 billion and stage 3 remained flat. In Mexico, the loan book remained flat, got a spike at the middle of the year and normalized afterward. Customer funds grew 14%, particularly strong growth in demand deposits from individuals that grew 24%. Regarding results, positive trends in revenue and net operating income, cost by 5% due to IT investments.

NPL ratio increased 62 basis points and the coverage decreased 7 percentage points to 121%. In constant euros, stage 2 increase by 2 billion. Stage 3 remained basically flat, grew 200 million. South America, volumes gradually recovered during the second half of the year.

Loans grew 15% year on year and customer funds 18%. Deposits, particularly strong growth in deposits plus 30% in the region. The reason was the main driver of -- as Ana said, of the top line with higher revenues in all countries. Net operating income rose 5% as a result of the positive revenue and improving cost to income.

Full-year 2020 underlying attributable profit fell just 4% due to COVID-related provisions. NPL ratio, 47 basis points, and coverage increased 9 percentage points. By country, Brazil recorded an excellent year, I will explain later. In Chile, we ranked No.

1 in NPS with a record growth in current accounts, plus 42% full-year 2020. Net operating income increased 4%, boosted by higher NII and cost control. Argentina, Uruguay, Peru and Colombia achieved higher profits due to positive performance in revenue and efficiency improvement. Going to Brazil, Brazil economy performed better, significantly better than expected.

Santander has once again recorded an excellent year, both in terms of results and volumes, while we remain focused on capturing growth opportunities. Commercial activity in the second half of the year sit at pre-COVID-19 levels, boosting revenue growth in the year and achieving double-digit increases in volumes. Loans grew 19% and customer funds 16%. Full-year 2020 net operating income increased 3% driven by Brazilian revenue and efficiency improvement, higher volumes offset the significant margin pressures and lower inter rates.

Higher provisions with net credit quality indicators at very controlled levels. NPL ratio fell 73 basis points, coverage increased by 13 percentage points. Underlying attributable profit decreased 5%, but return on tangible equity remained high at 19%. For 2021, we remain optimistic about Brazil, focused on increasing our customer base, maximizing revenues across our business.

And second, maintaining high profitability levels and volumes growth with a good asset quality and continue to gain market share in the most important segments in the country. Taking a look to the global business, corporate and investment banking had an excellent year. We continue to support our customers, increasing our market share. Income grew 15%.

Profit was 23% higher driven by 15% growth in the income, I mentioned, and 3% cost reduction. We grew double-digit in our core business, particularly in global markets and global debt financing. In Q4, profit declined as the improvement performance -- the improved performance in NII and fee was broadly offset by lower trading gains due to CBA and lower volatility than in the third quarter and higher provisions related with COVID-19 on specific names. wealth management and insurance business performed well in the year.

The assets under management amounted to 370 billion, in line with December 2019 in constant euros. In the quarter, growth was 4%. Total income -- total fee income generated accounted for 31% of the group's total. Underlying attributable was up 2%, thanks to 3% growth in revenues.

In private banking, positive sales and business growth, fees grew 9%. And Santander Asset Management and strong volume rebound from the lows in May on further progresses in our ESG strategy. Lastly, Insurance, underlying profit rose 18%, the main growth drivers continue to be noncredit-related business. And now I hand over to Ana to continue with the presentation.

Ana Botin -- Executive Chairman

So thank you so much, Jose Antonio. Allow me now to say, first of all again that I am really proud of the progress we have made since 2014. I am excited about the opportunities ahead. And I would like to start by saying again that our aim and values remain the same, as we've said through several years.

They provide very strong foundation for the Santander of tomorrow, while allowing us to deliver today. Our aim to be the best open financial services platform by acting responsibly and earning the lasting loyalty of all of stakeholders. Just few minutes to show you how we have delivered results following the strategy for a number of years. Again, our teams and our approach to capital management disciple have been key.

If you look back to the last six years, '14 to '19. Of course, 2020 was an outlier. We have doubled profits, improved -- sorry, hadn't put the -- if we look back to our performance over the last six years, 2020 was a clear outlier. I just want to remind ourselves that we have doubled profits, improved our underlying return on tangible equity by more than 400 basis points, 11.8% in 2019, 12.34% today.

Very importantly, and I think these numbers show the transformation of our model. Our capital base has grown by 29 billion. That's a 70% increase, with only a 13% increase in RWAs. Again, testament to a radical change in the model which will continue into the future, and that's what gives us confidence again for the next few years.

If we look ahead, we will continue, following the strategy which has served us well, allocating resources efficiently, focusing on the profitable growth which makes us very different from many of our peers and of course shareholder value creation. We will continue to grow our RoRWA organically. Again, most of this growth will continue from our businesses in the Americas. In terms of segments, we'll continue to invest and expand on our fee-based and capital-light businesses, corporate and investment banking, wealth management and payments through PagoNxt, and of course, the Digital consumer bank which is, as I will explain again in a few minutes, the pro forma merger of Santander Consumer and Openbank.

This should lead us to growth in earnings per share and tangible NAV per share which in turn will underpin cash dividend growth, bringing us to the path of the 40% to 50% cash payout as soon as regulators allow us. To capture organic profitable growth, we will continue to invest in the higher return and capital-light geographies and businesses. We have made progress again in 2020 in accretive capital rebalancing, first by reweighting our capital to these more profitable geographies, mainly the Americas; to higher return on capital-light businesses, CIB, wealth management, insurance and payments. We have been setting minimum profitability thresholds in all segments.

Also and very, very important, we have a lot of focus on faster asset rotation and we have aligned top management remuneration with these profitability goals. As a result, in 2020, this is an important number in what has been again a difficult year, about 40% of our capital has delivered double-digit underlying return on tangible equity. So as we look to the Santander of tomorrow, we have three priorities for this profitable growth. There is no doubt that our industry is going to continue to be challenging even in a post-COVID world, low interest rates, increasing competition.

But we have very clear three strategic priorities to build on our foundations including the One Santander, a new operating model; second, PagoNxt; and third, the Digital consumer bank. Again, think of this of further leveraging our scale and using technology to strengthen customers' loyalty but also to access new fee-based revenue pools. I will go now through each one of these. So what do we mean when we say One Santander? What we are really saying is that we are aiming to create a much better bank for our customers to drive growth, to drive profitable growth.

We have made huge progress in the last few years. I just shared with you the numbers of these five, six years which show that. But we want to accelerate this transformation. We created the regions.

Now with One Santander, we are redefining again our operating model. We want to make sure that we can leverage 147 million customers and also based on clear principles. The first one is simplify. It's the keyword here.

Simplify our mass market value proposition, redefine how we interact with our customers and further leverage the capacity we have across Europe and then across the group to build together and create a common model to share processes and do this across markets. This is not just in the One Europe, we are doing that across the Americas. And this is what will allow us to reach top NPS -- top three NPS in nine countries, over 50% of total sales will be digital and to further reduce our efficiency ratio -- improve our efficiency ratio to about 40%. We will follow very clear milestones as we execute along these three priorities.

If I turn first to the One Europe, the One Europe goal is to go to 10% to 12% underlying return on tangible equity and an efficiency ratio of 45%. We will work across all regions, but especially in Europe to leverage the payment platform, the PagoNxt global solutions that I have referred to. In North America, continued focus on collaboration between the two countries. We are seeing 30% increase in revenues in 2020 in areas like commercial banking and CIB, and targeting 11% to 13% return on tangible equity and 40% efficiency in the medium term.

South America, we're expanding Getnet and Superdigital to other countries. We did announce yesterday afternoon in Brazil, the listing of Getnet Brazil. I will comment on that later. And our aim is to deliver an underlying return on tangible equity of 19% to 21% compared to the 18% for the region this year, and 35% efficiency.

So allow me to turn to the second priority which is PagoNxt. PagoNxt is a global payments company, where we're bringing together different assets across the group. Initially, it's going to focus very much on two segments: first is the merchant acquiring; and second, the SMEs, but will also be looking to the consumer segment. Payments is not a new strategy.

It's not a new priority. Payments has always been at the core of our loyalty strategy, and this is what allows us to earn the loyalty of our customers. Santander has the scale to become one of the top global payment platforms in the world. Merchant acquiring is a global revenue pool of 80 billion.

It's a fast-growing market. Especially on the e-commerce, globally growing at 11%. International trade again a global revenue pool of 350 billion, also growing globally. We already have significant scale in these businesses.

So we have a very strong starting point. In merchant acquiring, for example, we have more than 1 million active merchants and business customers and 60 million active credit and debit. In trade, we will leverage our more than 4 million SME customers. This is probably one of the biggest in the banking world.

And over 200,000 SMEs that are trading internationally. Think of PagoNxt as the backbone, the technology backbone that will allow our banks, the One Santander, to leverage our scale. To really have 147 million customers in one place with common products, this is what PagoNxt is aiming for, and to build those products that are essential to our customers, most important to our customers. It will allow us to grow faster, but very importantly, to deliver a better customer experience.

The aim is that this will be a single autonomous company and will probably be one of the largest private fintech companies in the world. Again, we announced yesterday the listing during 2021 of Getnet Brazil. So you can have much better visibility about all these revenues that are high-growth revenues inside our business. So I already mentioned focus on merchant and trade solutions.

I just want to point out here that this is not starting from scratch. And these are just two examples where we are building our own software, our own solutions. And this is Brazil and Spain, where, as you can see here, market share growing from 12% to 15% in Brazil. In Spain, from 12% to 17%, growing at 40%, where we also bought back our acquiring stake from Elavon.

So again, we believe we can build better solutions ourselves. We have the scale, and we have proven it works. We are now going to bring all of this together and we will bring together Getnet Brazil with our Getnet global platform, with Wirecard, with SEMs, in a single company for acquiring. Our vision on the trade side is to deliver fast and efficient trade finance, supply chain and FX payments.

Again, this is not starting from scratch. We've made significant investments in progress. We already have 300,000 customers onboarded into what is a global platform. And Ebury is at the heart of this trade strategy.

Ebury has generated more than GBP 100 million in net revenues, 270,000 transactions. Even in a challenging environment, they have grown the number of transactions per customer and growing about 3% on the year. Another of the key assets for trade is the Payments Hub. Again, this is an internal development.

It went live and became the main SEPA provider for Ebury last quarter. In December 2020, our Payments Hub processed over 30 million in incoming payments. We've reached agreements to become the main payments engine for all our corporate bank in London, Paris, Milan, Frankfurt, Hong Kong, New York. It is already servicing third parties outside Santander.

And finally, Mercury is the platform that has allowed us to finance 6.6 million, of which 60% of the trades were done digitally. Again, more than 7,000 customers have already been onboarded. And just interesting fact is that, in 2020, many of these imports were related to medical supplies. So the third priority, the way Santander is going to become an open financial services platform, how are we're going to grow.

And every time, and I'm sure I'll get a question from you in terms of are we going to do M&A? Well, we do not need to do banking M&A. We aim to grow in new markets through our Digital consumer bank. This is the pro forma merger of Santander Consumer in Europe and Openbank. Openbank is the first European bank running fully on the cloud, approved end-to-end by the ECB.

We are very confident that this is a strategy that will deliver great results. The reason for that is that Openbank includes already very successful strategy in terms of cross-selling. But as you can see here, we are going to merge that with a very significant consumer operation. So Santander Consumer brings 55,000 merchants POS.

Openbank, 1.2 million customers. Six million new consumers per year in 15 markets in the case of Santander Consumer. And also, the Santander Auto, where we're servicing 75,000 dealers and with a very high-quality and growth franchise. We are aiming that the digital consumer bank will run on a digital banking API model, a SaaS model, and this is crucial as it will allow us to fully leverage the data for both sides of the business and generate growth, but also fundamentally change the way we operate our consumer business.

This would lead and this is the ambition to grow revenues and double PAT in the medium term, reaching 15% underlying return on tangible. This is something which will take a few years, but it's really a new paradigm. We will be using common apps, single streamlined operating model, simplified license. We have already started on this as we launched Openbank in Germany, Holland, and Portugal and a very different way of running the business.

It will enable new auto consumer lending, but also new products to the consumer customers. I want to point out that Jose Antonio gave some fact, Santander consumer finance in 2020, and this goes back to the diversification, delivered 3% revenue growth in a very challenging year. 12 and a half underlying return on tangible in 2020. As I said, our ambition is now bigger.

We aim to -- for 39% efficiency and 15% underlying returns. We have painted this as a flywheel because I think this is the best way to picture how the combination of these two businesses is going to really power growth. It's a virtuous circle. And if you start what we have built over the years, our significant customer base at the top through 23,000 merchants, they offer consumer financing at checkout to customers.

Merchants go from large to small across industries. Many started as an off-line, but now are adding online capabilities. And of course, we have a very fast growth in online-only businesses. This generates about 4.5 million contracts.

We actually already have 700,000 digital customers, and we're now expanding to other sectors such as telecom and education. These new digital customers are a target for other lending products, insurance, we believe there is significant growth opportunity for both our lending and our digital banking services. And of course, this gives us significant data at the point of the first transaction which gives us very valuable insights into these customers' current and future financial needs. Then these new customers are candidates for other banking products through Openbank, these are one-click sign-ups even for a loan, one click.

New current account customers of course generate new deposits. This loyalty strategy provide in turn low funding for lending. I mentioned already that our digital bank averages 4.5 products per customer. But let me say also that in 2020, we grew by more than 100% of new customers year on year.

Again, the API services in turn attract new merchants, in turn add new customers again the flywheel spins, creating data depth and insights, and of course revenue growth. So just to end, I wanted to reiterate that based on the latest IMF OECD outlook, our goals are a cost-to-income ratio below 47% for 2021, cost of credit trending downwards from 1.28%, 9% to 10% underlying return on tangible. For the medium term, mid-single digit revenue growth in constant euros, best-in-class NPS. Again, this is the goal for the new operational model.

And we want to reiterate the following goals that we communicated in 2019 of 13% to 15% underlying return on tangible equity, 11% to 12% CET1 and the Board's intention to restore the payout of 40% to 50% on underlying. So in summary, we have delivered in 2020 again strong underlying results that show the resiliency of our model. Diversification again has proved that it has value. It has delivered robust performance in the Americas, solid growth in our global businesses, providing balance against a more challenging environment in Europe.

Robust credit quality deteriorating by just 28 basis points, thanks to active risk management. We have continued to build organic capital, reaching the 12.34% above our target. We have a strong capital position. We are comfortable with these current capital levels and buffers and especially, we are well placed to continue allocating capital to the internal significant opportunities for profitable growth to create value.

And we have a clear strategy going forward for 2021 that I just reviewed which gives us a high degree of confidence that we will deliver on our medium-term goals. So thank you again very much, and we are now available for questions.

Sergio Martinez

Yes, indeed. Thank you, Ana, Jose Antonio. Please now we have time for Q&A. So go ahead.

We can go ahead with the Q&A session.

Questions & Answers:


Operator

[Operator instructions] The first question comes from Jernej Omahen from Goldman Sachs. Please go ahead.

Jernej Omahen -- Goldman Sachs -- Analyst

Yes. First of all, good morning from my side. I'm just going to ask two questions, please. The first one is on the return on tangible equity target and how that could translate into tangible book value per share growth.

I guess we've seen Santander record, considering the circumstances, high levels of underlying profitability. But the tangible book value per share went backwards this year for reasons that we're all familiar with. I mean what gives you the confidence that if you meet the targets that you've set yourself for this year, that they will translate into tangible book value per share growth as well? And then the second question I have is on the EBA stress tests. They've announced the underlying assumptions for these tests, and some of them seem to be very, very severe, just forecasting a perpetual recession, pretty much.

And I was wondering to what extent, if at all, do you expect the results of the test to drive the supervisory decisions around capital return, dividends, buybacks, etc. Thank you very much.

Ana Botin -- Executive Chairman

So thank you so much. So this year, tangible NAV, as you've seen, and you said it, has been very affected by exchange rates. We're working very hard on continuing and accelerating the change in the model which we have really done a lot of that in the last five, six years. At the end, it's about reallocating capital to profitable growth, first.

Second, ensuring diversification. U.S. has been -- has given us a very good return in dollars, and we need to ensure a proper balance between higher volatility currencies and the more let's say stable currencies, like the dollar and the euro. I say this -- maybe the pound also.

So that is really the main way we're planning to improve the tangible NAV, continuous capital reallocation to the higher growth and profitability, ensuring the balance and diversification through the cycle. If we look at the 13% to 15% medium-term target, I can say, first, it's based on revenue growth. So we are saying mid-single digit revenue growth at the basis of that. If we look at the shorter term in terms of '21, we're looking to volume growth based on volumes, especially in the Americas.

We are looking at positive asset repricing. We are looking at delivering half of the 1 billion, so 500 million additional reduction in cost in Europe and the cost of credit that trends downward. So again, really doing everything we've done this year, but just doing it a bit more and a bit better for '21. And for the medium term, focusing on these three priorities -- this year, we have already seen -- I think Jose Antonio mentioned that, it's not just the corporate and investmentbank and wealth management which are now close to 40%.

Again, these are higher let's say higher return on capital businesses, but acquiring Payments through PagoNxt should also help us a lot on this change in the model. On the EBA stress test, yes, there are some issues there that maybe Jose Antonio wants to comment. However, we feel there are capital buffers and our diversification, the fact that our pre-provision profit this year which is around 24 billion, we could double provisions of 2020 and still not eat into capital. The buffers we have, even after that of 17 billion, 18 billion, all of that gives us confidence that whatever happens with the stress test which is -- I don't know if you want to give some details on -- there are some issues in the stress test that mean that we might be penalized, but I don't know how you want to.

Jose Antonio -- Vice Chairman and Chief Executive Officer

Well, as you know, Jernej, in the stress test, we've been performing very well. We are a top performer there. Our capital depletion was lower than our conservation buffer. So -- and well, we have P2G on top of this, yes.

So we do expect to continue to perform well there, although the synergies are more severe, and there are two issues that we've been raising over time that particularly affect emerging market exposure. Like our case, that is the static balance sheet that is probably, as you know, the -- in emerging markets, loan books, particularly very sure run. And in one year, you do the -- you renew the whole balance sheet and -- but it is what it is. And the second one that is news and how new is the provisions on the emerging markets are not allowed to depreciate with the depreciation of the currency that -- well, technically speaking, is not very natural, but it is what it is.

Having said that, we continue to expect, given our diversification and the resilience of our business model and the stronger -- we have the stronger pre-provision profit in the industry, we continue to perform well on our capital depletion among the lowest in the industry.

Ana Botin -- Executive Chairman

Yeah. If I may add just another -- for context, we have had, in 10 years, probably two of the biggest global crisis that have happened in decades. And just to understand the stability in our model, if we look at our performance in underlying profit in 2020, about 5 billion, that's more than double what we had at the low point in 2008 and in 2013 -- in the 2008 crisis. Again, it shows that we've made a lot of progress.

And of course, this was 70% more capital than we had then. So again, the stability in our earnings, diversification and how we perform under stress I think is evident from what we have done in two global crises so far.

Sergio Martinez

Thanks, Jernej. Next question, please.

Operator

Thank you. The next question comes from Ignacio Ulargui from Exane BNP Paribas. Please go ahead.

Ignacio Ulargu -- Exane BNP Paribas -- Analyst

Hi. Good morning, everyone. Thanks for taking the question. I just have two questions.

One is on the fee strategy. I just wanted to get a bit of your thoughts on how do you see these sort of like new business additions on payment, wealth management or Investment Banking tools to be happen to make a bit more dynamic performance on fees. So I mean I do see a very clear tailwind from the bit of the unwinding of the one, two, three strategy in terms of funding costs, and that is being very visible in NII in the U.K. also in Spain.

So I mean just wanted to get a bit of your thoughts on how do you see fees into the next couple of years. And I mean what is the relevance of the Payments business on that process? And also, second question is on the Brazilian business and -- has been a very good performance, much better than what we expected at the beginning of the year in this pandemic. I mean which levers do you plan to take to continue improving the contribution of the country to the group? Thanks.

Ana Botin -- Executive Chairman

So the growth in fees would continue to come from CIB, wealth management of course also retail is incredibly important, Insurance. So the One Europe strategy, but also in the Americas, retail fees are also a big driver. It is clear that there's still uncertainty over the next few months. So we could have in the first half, not a great performance in fees.

That's yet something which will depend a lot on the health situation. But what we have seen is that once -- and we see that in the second half of the year, that once things open up a bit, the performance is much better. On the payments, you will see again with the listing GetNet Brazil, just a flavor of what we can do in this space. The key thing here is that we already have performed incredibly well in acquiring in Brazil or Spain within a couple of years of having our own let's say payment factory.

Once we extend this to other countries -- you asked about the timing, that's always difficult. But I would say, a few years. We've said medium term, you should see a very significant increase coming from these areas. Do you want to answer on Brazil? mean Brazil, I think it's -- every time Brazil -- or we have a crisis, there's always uncertainty as to the performance, but it actually has done a very good job.

And again, remember that Brazil has historically low rates. So we now have a bit steeper interest rate curve which is also positive. And we are looking to growth in volumes and positive asset repricing for -- I think I said that already, for 2021. And cost of risk trending downward in general in all our geographies, ones more than others, and it would be variations there.

But I think that's really the picture for Brazil. And of course, the lower rates mean that that helps customers' repayments and good performance I think as they exit moratoriums. Is that roughly...

Jose Antonio -- Vice Chairman and Chief Executive Officer

Yeah. That's basically it. We rely on volumes, we expect to be growing double-digit in Brazil as we did in 2020. So this is probably the main lever.

Margin is more stable than the ones we had in 2020. In 2020, remember that we have the regulatory impact of the -- what they call their personal check, that is kind of overdraft that affected significantly the NIM and NII. And well at the end, the driver is market share gains and our capacity to keep growing the number of customers. You see the number of customers in the country have been booming in the last three, four, five years, yes.

So -- and we are still there, Ana already mentioning GetNet. GetNet is an example. We can go to auto finance where our market share is 25%. You can go to agro business, where we went from 2% market share to 9% market share, and we keep counting.

In Corporate, well, our cost of risk went down. In CIB, we are a market leader. So well the franchise has very good momentum and we expect to continue these trends, yes.

Sergio Martinez

Thanks, Ignacio. Next question, please.

Operator

Thank you. The next question comes from Ignacio Cerezo from UBS. Please go ahead.

Ignacio Cerezo -- UBS -- Analyst

Hi, good morning. Thank you for the presentation. Two questions from me. The first one, if you can clarify or give us some colors around regulatory headwinds on capital in '21 and '22? And the second question is on the U.S.

business. Obviously, the cost of risk performance has been very positive in the year. Again, much lower than what could be anticipated probably at the beginning of the year. There's a new stimulus plan coming, with probably the possibility of cash and checks actually being handed again to customers.

Do we have to still expect an increase of provisions in SCUSA, in particular or do you think the level of provisions in 2020 is sustainable for the future?

Ana Botin -- Executive Chairman

So let me answer the U.S. and then I'd like -- pass over to you, Jose Antonio. So in terms of the U.S., we have -- we've been reviewing this in line with the peers that have presented results. We're very much aligned with our peers, regional and even the large banks.

If we compare likes-for-likes in terms of portfolios, we believe we're being prudent provisioning. So I would expect that to continue into 2021. The stimulus is going to be obviously very important for this. And so there's really nothing there which should be out of line with the rest of our peers.

Again, if you compare portfolios of the same type of segments. I mean some of the larger banks have more C&I than we do, and that's why you've seen some reversals. That is not the case for us. And in terms of the consumer lender again we're in the range of our peers.

But it has performed very well. We believe that will continue to be the case into 2021. In terms of -- do you want to answer the other question?

Jose Antonio -- Vice Chairman and Chief Executive Officer

Yeah. In terms of capital, regulatory headwinds in 2020, we were -- the impact of the different regulatory changes were around slightly above 40 basis points. In 2021, we -- you mentioned 2021 and 2022. Well in 2021 that I have more visibility, we still continue to see some impacts coming in from basically all the TRIM review of the models, low default portfolios, all these issues that probably will come.

Difficult to say always when you face this, but we expect to be lower the impact than the one we had in 2020 that I remember was slightly above 40 basis points. And in 2022, well probably the trend is downwards. Clearly, we expect when the TRIM goes and all the review of the models and all these things, we will capture significant risk-weighted asset reduction in some models that we are building.

Sergio Martinez

Thanks, Ignacio. Next question, please.

Operator

Thank you. The next question comes from Francisco Riquel from Alantra. Please go ahead.

Francisco Riquel -- Head of Equity Research -- Analyst

Yes. Thank you for taking my questions. First one, I wonder if you can comment a bit more on the GetNet listing in Brazil. If you plan to offload more assets from PagoNxt into this unit? And what are your ambitions with this listing? If you plan to eventually monetize this asset or not? And second question is a follow-up on the U.S.

business. You mentioned operationally. I wonder if you can update strategically your views about the U.S. retail business.

I have also seen that you have front-loaded some restructuring expenses. If you can also comment on the cost-cutting plans here.

Ana Botin -- Executive Chairman

So at the moment, we have just announced the listing of GetNet Brazil. This is not selling of shares. It's just a listing of GetNet Brazil. We are, as I explained on PagoNxt, we'll be giving more information during the course of 2021.

The goal is that PagoNxt include three types of businesses, but really mainly two. One is acquiring business where we will be bringing together GetNet Brazil with GetNet global platform and eventually Wirecard which we closed just a few days ago. And since -- so that would be a global merchant acquirer eventually. But GetNet, it's about a listing.

In terms of the trade, it's also going to be part of PagoNxt. So there we have Ebury, Mercury Payments Hub and probably other products related to trade. So we have all of that in a global platform. We believe that is a very interesting business.

It's a high-growth business in payments-related activities. In some cases, we're already giving service to third parties like in the Payments Hub. So that is really the goal with the -- with PagoNxt and GetNet.

Jose Antonio -- Vice Chairman and Chief Executive Officer

Well, the second question about the U.S. strategy...

Sergio Martinez

Yeah. The U.S...

Jose Antonio -- Vice Chairman and Chief Executive Officer

And I may take the cost-cutting in the U.S. We're going to continue to naturally to improve efficiency in the U.S. Well we have two angles there. There, probably there is more efficiency gains to make in the bank while SCUSA is growing, and probably the cost will go up.

Overall, in the U.S., I will say the cost going forward will be quite flattish, yes, in the whole U.S., but not specific restructuring costs in the way we are doing in Europe. Now this is not in our vision for -- in our plans for 2021.

Ana Botin -- Executive Chairman

Yeah. In terms of the strategic view of the U.S., first is that the U.S. market is the best risk return market probably in the world, aside from being large and a source of talent and innovation, institutional stability. They're strong and increasing connections to -- not just to LatAm, but to Europe.

And what's very important is that both Santander Consumer and SBNA are working increasingly together. A lot of the origination in Santander Consumer is financed by SBNA. So we look at the U.S. as a country, not as pieces of a different business.

This is not different by the way what -- to what we do in Brazil or Europe. And again, this year, it has -- we have had some positive one-offs. But even in constant currency, we have had an increase in profits from the U.S. And the adjusted returns, once we adjust for excess capital which will not be there forever, actually, at or even a bit above the cost of equity, depending on how you see that of 8.5%.

So there are no plans to sell the business. And we are working, as in One Europe, with increasing connectivity, not just in terms of working with customers across different Santander countries. Again, I think I mentioned in corporate and investmentbank and commercial, we are seeing 30% increases year on year, but also in building together. And so this is incredibly important.

It was not an option a few years ago. Today, you can leverage the same way you can build for Poland, U.K. and Spain. You can build for Mexico, U.S.

and eventually, why not Brazil or Europe? So this is really the very different approach to the management of the business which is what we're calling the One Santander new operating model. So again, we are very focused on growing in a profitable way and building on the foundations of the last few years.

Sergio Martinez

Thanks, Paco. The next question, please.

Operator

Thank you. The next question comes from Carlos Cobo from Societe General. Please go ahead.

Carlos Cobo -- Societe Generale

Hello. Thank you very much for the presentation and extra detail on your vision for the future. Going a little bit back to the numbers of the quarter. Could you touch on the regulatory impact for 2021 again? Sorry to insist that.

You said below the 40 basis points in 2020. The last guidance that I had was an impact of 10 to 15 basis points in 2021. Are you still comfortable with that or there is some room for slightly higher impact? Just to fine-tune the model. And then two quick questions, more strategic.

If Payments is a global business, and that's how you present it, why listing the Brazilian subsidiary? Just for me to understand why starting that, why not being more global in the listing? And the second question would be on COVID losses. Could you try to help us to gain a little bit more confidence on what's the vision or the outlook for 2022? What's the scenario of defaults that you've covered for 2022? Because without the regulatory forbearance and the support from the states rolling over the great period from capital amortization and all the restructuring of credits, we don't really have any visibility. It doesn't feel like 2021 is the year to see the big increase in NPLs. So what's the scenario that you have for 2022 where we should assume further progress in the cost of risk reduction? What's the percentage of total, say, Stage two loans you expect to default? And how much of that has been covered already? Thank you very much.

Ana Botin -- Executive Chairman

So I will take the strategic ones, and then I will -- you can answer the capital and the COVID. But in terms of the GetNet listing in Brazil, this is a first step. The reason for that is exactly that, what you said, was the goal is to create a global platform which would be let's say parallel to the banks'. So think about the One Santander, the bank is owning customer relationships.

Think about PagoNxt as a global platform for acquiring which provides the backbone -- let's say, product factory for payments. This is really how we think about it. And so this is just a first step to create that global acquiring platform which would allow us to add value to not just do payments. Our vision is that payments will happen, we will not actually do payments.

But they will be the cornerstone of value-added services. So again, it's not about a processing business, it's about a value-added services business to our customers built of course on the -- eventually on the processing, but it's more than that. And to do that, we actually need to have it all together outside our listed banks, but also outside our non-listed banks, and I hope that answers the question. We are -- we will be giving more information and adding to this during 2021 and a lot more a year from now.

Again, these are assets we have been building individually for the last five years. We have shown they work, and now we want to make sure we take it to the next level. We have been, rightly so, challenged by investors and analysts, you guys, why do you not work better across countries? Well we have done that in CIB, in wealth management. We are now going to do that for mass market and SMEs.

So think of PagoNxt and our Payments businesses as providing a global platform where we can truly leverage the 147 million customers that we have in retail, that we have in SMEs, 4 million of them, that we have in merchants. And again, we'll provide further clarity, but this is really the vision. So I think the second question was again on the regulatory headwinds, I believe, for 2021 and COVID losses.

Jose Antonio -- Vice Chairman and Chief Executive Officer

Yeah. The first one, 2021, well I already elaborate on the regulatory capital impacting 2021, that we expect to be lower than the one in 2020. The main impact comes from the TRIM from the models. And well we expect like two stages there.

The first stage is to go up and to have an impact in 2021 and the second stage that once we get more models approved -- remember that we still have significant amount of our portfolio under standard model or some other models, we -- our risk weighting is higher than our competitors. And at some point, we will converge with this in the medium term. So in the short run, the numbers I gave you is lower impact than in 2020. In the medium term, we expect some positives from this side.

Probably to split this, IR can talk to you in the small numbers and in more detail on this. On the COVID losses, if I understood you well, you are asking about 2022. OK. So we guide you in 2021 to -- this is an area, naturally, this is an area of uncertainty, and everything is based on model we'll still have the health crisis going on.

What do we expect with a -- as Ana mentioned before, we are working with kind of IMF SME, yes. So with this scenario, we expect this year, the cost of risk to go down from the 1.28% we've had, and start the convergence toward the 1%. In 2022, I don't have any reason to think if we were right in anticipating our scenarios in the IFRS 9, forward-looking, we build 4 billion of capital provisions that until now we -- are in our balance sheet, that we expect this to cover the majority, if not all, the losses that arise from this. Can we be wrong in the scenario? Maybe.

You may be more negative or more positive. But we are relatively comfortable with this. And we -- even in the quarter, we keep reviewing our scenarios, our portfolios and building provisions accordingly with a conservative and prudent approach. And I do think from the 1.28%, I will bet on reducing in '21 and reducing again in 2022.

So this will be my initial expectation.

Sergio Martinez

Thank you, Carlos. Next question, please.

Operator

Thank you. The next question comes from Alvaro Serrano from Morgan Stanley. Please go ahead.

Alvaro Serrano -- Morgan Stanley -- Analyst

Hello. Good morning. I've got a couple of questions I guess on capital allocation. The first one, hopefully, the capital build journey is now over.

When I think about going forward, it sounds like, clearly, the emphasis of growth is still Americas, but it sounds like it will be a bit more balanced than previously. If I think about the bottlenecks, the digital and the consumer bank initiatives obviously, GetNet was a tremendous success because basically, you returned back to your natural market share. With the acquisitions like Wirecard in Germany and the push to become a global payments platform, how should we think about you achieving sort of growth outside your natural footprint? What gives you that confidence? And second, on Openbank and consumer bank, you're aiming to double profits, I think it is -- which is quite -- I mean it feels ambitious. Maybe you can talk us through which regions do you expect to grow most.

And again, it -- some of it is outside your natural sort of footprint, like Germany, although you've got the consumer bank there, clearly. But what are the growth sources were -- in the regions there? And the second question also is more sector level is around -- obviously, the sector -- the inability to distribute is accumulating capital, not just for you, but across Europe. And I would love to hear your thoughts on -- do you think this is going to have long-lasting effects in terms of competition? Do you think it can trigger sort of M&A and even cross-border M&A? And in that sort of sense, I've heard you loud and clear several times that you don't need to do M&A. But what would it take for Santander to be open to cross-border M&A or M&A in general? What would you be looking for? Thank you.

Ana Botin -- Executive Chairman

So you have head me say -- and I will repeat loud and clear, we're not interested in cross-border M&A in Europe. We need further significant changes on the regulatory side for that to begin to be something we might look at. We are -- and as you've seen in the last months, we are much more active on the digital and payment side. We believe that we already have enough customers, enough scale.

There's a lot of talk about scale. You need scale. We have achieved 47% cost income. We're guiding to even lower than that in the next few years.

Because we do have scale, we are the No. 1 bank, and I say No. 1 bank across Europe and the Americas in terms of number of customers. This is the scale that matters.

Second, our revenues -- with stable revenues in a year like 2020, I think that is remarkable. And so that is the scale we are aiming for. We have guided to single -- sorry, mid-single digit revenue growth for the medium term, even in 2021. And again, there's lots of uncertainty in the first few months, and that could affect our revenues in the first few months, especially on fees.

But we feel confident that after what we've done in 2020, that we have the scale to drive revenues and we have the scale to drive with PagoNxt, with the Digital consumer bank to drive profitable growth. So again, not planning to -- at M&A -- cross-border M&A, but rather looking at additional digital opportunities. In terms of doubling the profit on the Digital consumer bank, that is going to be driven a lot by revenues i.e., 18 million active customers in Santander Consumer; Europe, 6 million new consumer customers every year. I encourage you to look at the flywheel.

And again, any questions, please, very happy if you come back to us. But this is very important because we have the data, we have the customers. And now we have a go-to model which I don't think any of our peers have which is the Openbank. So think of Openbank as giving us the know-how to offer new banking products to customers that we don't need to invest to acquire because we're already acquiring them by the way profitably, on the consumer side.

This is crucially important. This is a virtuous circle that I described in the flywheel, and that's what gives us confidence that we can do that. Now, it's going to take a few years. So it's not going to be in '21 or '22.

But three, four years down the road, what you're going to see is a change in the paradigm in terms of how we run our consumer business and how that consumer business that is there, it's real, it's over 1 billion in profits, I believe, this year in 2020. Lots of customers and the Openbank tech stack which is modern, runs fully on the cloud. And it's not just about the customer experience, it's also about how we run the business and all the support functions. We can expand to Holland, we can expand to Germany with very limited cost increases, actually, in all these support functions in a way that is very prudent and under control.

So that's the reason we are again not putting a date on this, but you should be seeing in the next few years. And finally, on PagoNxt and the acquisitions. So it should all come together in -- again, it will take a few years because there's several assets across Europe and the Americas. And the goal there again is to increase growth.

And the way we're looking to do that is by value-added services in payments by delivering, for example, for SMEs, a much better cross-border experience for SMEs that trade -- SMEs that trade at a higher growth. SMEs, we have 200,000 of those. We are already testing, for example, with Ebury. We have a great partnership with Ebury.

We're able to offer services we are not offering before and vice versa. We are helping Ebury, for example, to run the business in the way we run it in some areas which is very important these days. So we think that it's a win-win combination, and that's where we will be looking to integrate so we can grow faster.

Sergio Martinez

Thank you. Next question, please.

Operator

Thank you. The next question comes from Daragh Quinn from KBW. Please go ahead.

Daragh Quinn -- KBW -- Analyst

Hi, good morning. Thanks for taking my question. It's Daragh from KBW. One question just on the capital targets and dividends, you generated capital this year and headed back toward your targets.

Presumably even if we forecast your cash dividend, you would still be looking to generate capital organically. Could you just say maybe how that would change or not, your outlook for the level of capital you think you should be holding in the future? And then on the dividend, you could just confirm that there won't be -- that you're not planning any script dividends in the future? Because obviously, that has been one of the headwinds in the past to NAV per share growth. And on the business side of things, maybe just if you could give a quick comment on the margin in two geographies, 1 in the U.K. which has seen quite a strong improvement in margin and NII over the last couple of quarters, as you've changed the pricing policy on the one, two, three account.

If you could just comment on where things go from here and the outlook for 2021 in the U.K. And on the U.S. excluding the consumer business, it looks like it's just been very ongoing weak margin NII performance from the banking business. Maybe if you could just provide a little bit of color of what's going on there and what your outlook is.

Thank you.

Ana Botin -- Executive Chairman

So on capital, our targets are to be between 11% and 12%. There is -- we believe going forward, we're going to have more capital flexibility, as you've sort of hinted at. We are planning to go back to the 40% to 50% on an underlying profit distribution on an underlying basis as soon as we're allowed to do that. And the most important thing is that even in a difficult year, we have made further progress in what we call the transformation on -- of the model.

It happens at an operating level which is what's driving the financial transformation. The operational goal, the One Santander new operating model is actually building, for example, a common mobile app across Europe, just build once and use across different countries. On a financial level, it means that we grow our earnings while growing capital. But we grow less our balance sheet and lending in proportion to that growth.

And again, that's what's going to allow us to generate more organic capital and better profitability. We are not -- the scrip is -- I know we've gone back in 2020 to a scrip. And again, we need to keep a balance between institution and investors and also retail, and the scrip was the only way we could give some dividend, even though it wasn't shares, to our retail. The board and management intention, as we have said many times for the last 6 years, is to go to 100% cash.

This is what we are intending for 2021. And we will get news on what is the recommendation from the ECB for European banks in Q4. We'll be accruing a cash dividend this year. Hopefully, we can return that to shareholders in -- sometime in Q4 or Q1 of next year.

In terms of the business and how that's performing, I'll let Jose Antonio answer that. But I would say that both -- the more challenging region this year has been without doubt, Europe. But U.K. and Spain which have been the hardest hit from an economic point of view, and therefore, we have our customers, and therefore, we have also reflected that.

But the last couple of quarters have been quite encouraging. There is a lot of uncertainty. But remember, we've seen lockdowns in Spain being very, very I'd say, probably at the level of the more difficult ones right now. So we know what happens in a lockdown.

We know what happens to activity, to the top line. And both the U.K. and Spain have shown on a quarter-on-quarter basis, 5% to 6% increase in net interest income and doing much better also on fees. So -- and the transformation of the U.K.

is not just about revenues. And by the way, U.K. has done really well in terms of mortgage growth, growing 4.5 billion pounds in mortgages and actually more or less the same on business loans. So again, volumes have done well, margins are improving, and very importantly, very, very strong performance in costs.

Again, not just the U.K., Spain year on year is reducing cost by 10%. I want to stress that our focus in both the U.K. and Spain is going to be growth in revenues, but of course, better -- through better experience for our customers. But the new operating model which obviously is going to be also reducing our costs.

We think of it as productivity. And I said, I believe that we will be -- our aim is to reduce 500 million of the 1 billion additional cost we announced in 2021. So in the U.S. SBNA, as I said, is part of the U.S.

business with consumer, and net interest income in 2021 at -- has gone up by 4%. Total SBNA has gone up by 2%, Santander Consumer by 8%. So in spite of the lower rates, doing well in net interest income. If you want to think about the retail side separate from the consumer side, even though increasingly they're working together, I would also say that for the last few years, we've been more concentrated on regulatory remediation controls, setting up the structural basis for growth.

So you should start seeing a different behavior of our business in the next couple of years. Again, we are very proud that in a year like this, the U.S. has been, I can say, our best-performing country, at least in terms of the bottom line and growth and profits. Do you want to add anything on the business -- U.K., I think I covered that.

Jose Antonio -- Vice Chairman and Chief Executive Officer

No. It's done. Yeah.

Ana Botin -- Executive Chairman

OK. So thank you.

Sergio Martinez

And last question, please.

Operator

Thank you. The next question comes from Fernando Gil de Santivañes from Barclays. Please go ahead.

Fernando Gil de Santivanes -- Barclays -- Analyst

Hi. Hello. Good morning. Thank you for taking my question and thank you for the presentation.

A quick question on Spain NII and the trends. I mean how much are you accruing on TLTRO? And how much do you think this will affect going forward in 2021 and 2022? Thank you very much.

Ana Botin -- Executive Chairman

That is the question for Jose Antonio.

Jose Antonio -- Vice Chairman and Chief Executive Officer

So I don't have the numbers in front of me.

Ana Botin -- Executive Chairman

So Jose Antonio is going to take -- give it to our CFO. Thank you, Jose.

Jose Antonio -- Vice Chairman and Chief Executive Officer

Thank you.

Ana Botin -- Executive Chairman

And we have some others in the room so maybe...

Jose Antonio -- Vice Chairman and Chief Executive Officer

Yes. We currently have a total of around 75 billion in TLTRO. And obviously, we believe that we can apply the new conditions described recently, and that will mean an increase in '21 relative to '20 of around 300 million, of which 250 million will come in Spain, more or less.

Sergio Martinez

I think we are -- no more questions. We need to leave it here already.

Ana Botin -- Executive Chairman

Sure.

Sergio Martinez

So thanks very much, everyone. Thanks, Ana, Jose Antonio. And obviously, the IR team is at your disposal.

Ana Botin -- Executive Chairman

Yes. Sorry, it was a bit longer presentation. We usually get feedback, more time for questions. We try to answer all the questions you've asked.

That last one really was quite something. I'm very happy to have Jose with us here. Thank you so much, everybody, and we're very proud of our results. Again, any further questions, our -- Sergio, Jose are at your disposal, and stay healthy and safe.

Thank you.

Jose Antonio -- Vice Chairman and Chief Executive Officer

Thank you. Bye.

Duration: 92 minutes

Call participants:

Sergio Martinez

Ana Botin -- Executive Chairman

Jose Antonio -- Vice Chairman and Chief Executive Officer

Ana Botn -- Executive Chairman

Jernej Omahen -- Goldman Sachs -- Analyst

Ignacio Ulargu -- Exane BNP Paribas -- Analyst

Ignacio Cerezo -- UBS -- Analyst

Francisco Riquel -- Head of Equity Research -- Analyst

Carlos Cobo -- Societe Generale

Alvaro Serrano -- Morgan Stanley -- Analyst

Daragh Quinn -- KBW -- Analyst

Fernando Gil de Santivanes -- Barclays -- Analyst

More SAN analysis

All earnings call transcripts

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