Santander Totta's Q1 Profit Slips 9.8% to €242 Million as Net Interest Margin Compresses — Lending Book Climbs to €56.2 Billion and the Bank Originates One in Five New Portuguese Mortgages

Santander Totta opened its 2026 reporting cycle on Wednesday morning with a print that captures the squeeze every Portuguese retail bank is now navigating: net interest income is rolling over as Euribor settles, but loan demand keeps growing fast enough to defend the franchise. Net profit landed at €242.4 million for the first quarter, down 9.8% on the €268.8 million booked a year earlier, with pre-tax results down 10.5% to €329.5 million.

The net interest margin — the line item that has carried Iberian bank earnings since 2023 — fell 3.5% to €341.8 million as deposit pricing finally bites and the variable-rate mortgage book reprices lower. Commission income rose 6.0% to €128.9 million, but not enough to offset the rates effect: total banking product slipped 1.1% to €479.5 million. Operating costs climbed 4.5% to €136.2 million on digital-transformation spend and an early-retirement charge, lifting the cost-to-income ratio to 28.4% from 26.9% a year ago. The bank still posted a return on tangible equity of 31.4% and remains, on its own measure, the most profitable lender in the Portuguese system.

Volume Tells a Different Story

The earnings slowdown is rates-driven, not demand-driven. The gross credit portfolio reached €56.2 billion at end-March, up 10.8% year-on-year. The mortgage book grew 9.1% to €25.8 billion, with Santander Totta originating roughly one in every five new residential housing loans signed in Portugal during the quarter. More than 40% of those new mortgages went to clients under 35, and around half were issued under the public-guarantee scheme that the government extended into 2026 to support first-time buyers facing the same valuations covered in our piece on record bank valuations of €2,151 per square metre.

Customer deposits ended the quarter at €40.1 billion (+5.8%) and off-balance-sheet resources at €9.7 billion (+9.5%), with active customers approaching two million and 1.1 million using the mobile app at least monthly. The CET1 phase-in capital ratio rose 1.1 points year-on-year to 15.6%, far above the ECB's 10.27% Pillar 2 requirement for 2026, and the MREL ratio of 33.5% cleared the 26.11% regulatory threshold by a comfortable margin.

Reading Q1 Against the Sector

The print lands two days after Galp opened earnings season, one day after BCP reported a Polish-driven 68% jump in net profit, and on the same morning that Banco de Portugal's quarterly Bank Lending Survey caught domestic banks tightening SME credit criteria over Q1. Santander Totta's NPE ratio of 1.4% (down 0.1 point) with 89.4% coverage suggests the asset-quality cycle is still benign on the household side, even as the survey flagged rising risk perception in business lending — a divergence we covered in yesterday's analysis of the BLS results.

What This Means for Expats

• Mortgage market still very open: Santander Totta is writing one in five new home loans, with a clear preference for under-35s and public-guarantee files. If you fit either profile, the bank is competing aggressively on this segment.
• Spreads should keep narrowing: The compressing net interest margin is the same trend you should expect at renewal — the gap between Euribor and your spread will keep tightening as banks defend their books.
• Deposit rates may finally move: The 3.5% NIM compression and 6% fee growth pattern is what banks do when they need to retain deposits. Expect more visible savings-account promotions through Q2.
• Capital is comfortable: 15.6% CET1 means lending capacity is not a constraint. If your file fits the bank's appetite, supply is the easiest part of the equation right now.
• Compare across the field: Galp, BCP and now Santander Totta have all reported. Our 2026 mortgage guide for foreign residents walks through the FINE form and BdP stress-test premium that determine where each lender lands on your specific file.

The next sector tells will come from Caixa Geral de Depósitos and Novobanco in May, with the Banco de Portugal Financial Stability Report due in late spring. Both will sharpen the picture on whether the Q1 NIM compression is a one-quarter reset or the start of a slower year for Portuguese bank earnings.