Banco Santander SA saw its shares rise 4.7% in premarket trading on Wednesday following reports that the Spanish lender is considering using the significant risk transfer market to hedge a portfolio of buy-now-pay-later (BNPL) loans.
According to people familiar with the matter, Santander has been in discussions about an SRT linked to roughly c500 million ($588 million) of loans originated by its digital arm, Openbank, to clients in Germany. The sources said the terms of any potential transaction are not final and could change as the sale process unfolds.
If completed, the transaction would represent the bank's first SRT associated with BNPL credit - a form of interest-free installment lending that lets borrowers split purchase costs over time. The proposed risk transfer would cover a position equivalent to almost 10% of the reference portfolio, the sources said.
SRTs are commonly used by banks in Europe and North America to move credit risk off their balance sheets, particularly in corporate lending. Issuance of these instruments is running at record levels as pension funds and hedge funds show strong appetite for the exposure. Lenders are increasingly deploying SRTs to manage risk concentrations in more volatile parts of their books, including commercial real estate loans and consumer credit.
Santander is among the most active issuers in the SRT market. The bank is also reported to be working on SRTs tied to about c5 billion of loans to Spanish small and mid-size enterprises, with those transactions expected to cover roughly 6% of the respective reference portfolio, according to the people familiar with the plans.
Market participants have shown heightened interest in SRTs as a tool to reallocate risk to institutional investors, and Santander's reported activity would extend that trend into BNPL products if the deal proceeds along the described terms. Observers noted that the final structure and coverage of the proposed SRTs could be adjusted during the sale process.
Key factual points summarized above reflect the scope of the discussions and the potential scale of the transactions as reported by the sources. No definitive agreement has been announced and details remain subject to change.