Key Points to explain Grupo Santander

1 2 Agenda  Key Points to explain Grupo Santander  Santander 1Q’14 Performance  Appendix: – – – – Funding and liquidity Group P&L Corporate Go...
Author: Garry Flowers
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Agenda

 Key Points to explain Grupo Santander  Santander 1Q’14 Performance  Appendix: – – – –

Funding and liquidity Group P&L Corporate Governance Performance by business area

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Grupo Santander. Main figures

March 2014 Total balance sheet (bill. €)

1,169

Net customer loans (bill. €)

695

Customer deposits + mutual funds (bill. €)

732

2013 Attributable Profit (EUR million)

4,370

1Q’14 Attributable Profit (EUR million)

1,303

Market capitalisation (billion €) Shareholders (million) Headcount (# employees) Branches (units)

Customers (million)

85 3.30 185,165 13,735

107

Key Points to explain Grupo Santander

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Key Points to explain Grupo Santander

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1. Commercial bank

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Santander is a commercial bank. Retail banking accounts for 87% of the Group's revenues

1Q'14 Gross income (by business area)

Customers by country (December 2013)

Retail Banking

84%

13%

Global Wholesale Banking

Rest USA, 2% 2% Chile, 3% Argentina, 2%

Spain, 15%

Mexico, 10% Germany, 6%

107 million customers

3% Private Banking , Asset Management and Insurance

Poland, 6% Portugal, 2%

Brazil, 28% UK, 24%

Of the remaining 13% (GBM), 90% represents customers’ revenues.

1. Commercial bank

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Our main business is DEPOSIT CAPTURING AND LENDING to individuals, SMEs and corporate customers %, March 2014

Net loans / Total balance sheet vs. Santander international peers*

59

58

58

56

54

54

53

Euro area banks

38

Grupo SAN

C1

C2

C3

C4

C5

C6

C7

37

C8

36

C9

33

C10

31

C11

30

C12

29

C13

27

C14

Santander has the largest branch network among international banks Source: Bloomberg (*) “Peer Group”: BBVA, BNP Paribas, Bradesco, Citigroup, Deutsche, HSBC, Intesa Sanpaolo, Itaú, JPMorgan Chase, Lloyds, Nordea, Scotiabank, Sociéte Générale, UBS, UniCredit

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C15

Key Points to explain Grupo Santander

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2. Diversification Santander's presence in the world is CONCENTRATED IN 10 CORE COUNTRIES

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BALANCED DIVERSIFICATION between mature and emerging markets … 1Q14

Critical mass in our core markets

Attributable profit by country Portugal, Spain, 2% 14% Germany, 5% Other Europe, 6% UK, 20%

Poland, 6% Brazil, 20% 56% 44%

Mexico, 7%

Chile, 7% Other LatAm, USA, 9% 4%

Loan portfolio by country Other LatAm Chile 4% 2% Mexico 3%

Spain 23%

Brazil 10%

USA 9%

UK 34%

Note: branches data doesn´t include the SCF business (1) Lending (2) Non-earmarked lending (3) Including total loans of mortgages, UPLs and SMEs (4) Branches in Northeast US (5) Including SCF business (6) Installments (new loans) 3Q2013 according with Bankenfachverband Percentage over operating areas ordinary attributable profit, excluding Spain's run-off real estate

Portugal 3% Poland 2% Germany 4% Run-off real estate 1% Other Europe 5%

2. Diversification

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… allows a strong operating income…

…providing a high capacity to absorb provisions …

Group net operating income (Pre-provision profit)

Profitability drivers

EUR bn.

22

23

23

23

18 9

2005

11

2006

2.1%

2.3%

2.6%

2.9%

3.2%

3.1%

3.1%

3.1%

2.9% PPP/ loans

20

14 2.4%

2007

2008

2009

2010

2011

2012

2009-2013 Pre- provision profit: Provisions:

EUR 111 bn. EUR 65 bn.

2013

0.4%

0.5%

0.6%

2005

2006

2007

1.0%

1.3% 1.3%

1.6%

2008

2009

2011

2010

1.5% Cost of credit 2012

Pre-provision profit, always well above the cost of credit: > 1.5 p.p. in average

2013

2. Diversification

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… which contributes to recurring profit generation

We have overcome various crisis, both local and international in the last 25 years, generating profits every year

As a result, Santander profits are more stable than those of European banks Profit. Santander vs. ECB Top 12 supervised entities

During the crisis: –

Santander is 1 of the 3 banks among international G-SIFIs1 without a single quarter of profit losses…



…supported by a large pre-provision profit generation (Top 5 worldwide)

Our capacity to generate profits is acknowledge by rating agencies, being Santander the only bank worldwide with a higher rating than its sovereign debt

(1) Excludes Chinese banks

EUR mill.

Entities: BBVA, BNP Paribas, Deutsche, BPCE, Crédit Agricole, ING Group, Intesa Sanpaolo, Nordea, Rabobank, Société Générale , UniCredit

Key Points to explain Grupo Santander

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3. Model of subsidiaries

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International expansion through a decentralised model of subsidiaries … … legally independent and … Local Banks for all purposes and they are subject to double supervision and internal control: local and global

Subject to local supervision & regulation

Listed subsidiaries

National deposit guarantee fund

… autonomous in capital and liquidity Centralised model

“Contagion” from the crisis International branches depending on Parent bank for capital and liquidity

Santander's model

“Firewalls” International subsidiaries self-sufficient in terms of capital and liquidity

This model generates incentives for good local management. And facilitates management / resolution of crises

Key Points to explain Grupo Santander

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4. Efficiency

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This makes Santander Europe’s most efficient international bank and one of the world’s leading banks Data March 2014

Efficiency ratio1 vs Peers (%) C1

61.3

62.8

Grupo SAN C2

47.9

C3 C4 C5 C6 C7 C8 C9 C10

Grupo Santander

Average peers

European peers average

C11 C12 C13

47.2 47.9 49.5 49.6 50.8 51.7 52.5 55.5 61.6 62.9 62.9 63.7 64.7 67.6

C14 (1) Expenses / Revenues

C15

(*) “Peer Group”: BBVA, BNP Paribas, Bradesco, Citigroup, Deutsche, HSBC, Intesa Sanpaolo, Itaú, JPMorgan Chase, Lloyds, Nordea, Scotiabank, Sociéte Générale, UBS, UniCredit

76.2 81.1

4. Efficiency

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Ongoing plans to improve profitability 2014-16 efficiency and productivity plan: cost savings EUR 1,500 mn. EUR million 2014-2016 savings by origin

1,100

2014-2016 accumulated savings

1,500 1,500

1,500 1,500 1,250

750

400

Merger Efficiency synergies plan

Expected savings

2014

2015

2016

Key Points to explain Grupo Santander

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5. Medium to low risk profile

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Balance Sheet reflects our business model and risk management EUR billion

Balance sheet (March 2014)

1,169 Cash and credit institutions

173

Derivatives AFS portfolio Trading portfolio

67 76 57

Other*

1,169 Credit institutions

126

Derivatives Other

66 46

Credit risk: our core business (60% of Balance sheet)

101 620

Deposits

Net loans to customers

Retail Balance Sheet

Market risk: low complexity and customer-driven activity

695

Assets

M/LT funding + securitisations

193

ST funding Shareholders’ equity & fixed liabilities

19 99

Operational risk: limited exposure with strong control culture

Liabilities

(*) Other assets: Goodwill EUR 26 bn., tangible and intangible assets EUR 19 bn., other capital instruments at fair value EUR 1 bn., accruals and other accounts EUR 55 bn.

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STRONG BALANCE SHEET MANAGEMENT:

5.1

CREDIT RISK

5.2

MARKET AND STRUCTURAL RISK

5.3

LIQUIDITY

5.4

CAPITAL

5.1 Medium to low risk profile. CREDIT RISK

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Grupo Santander lending portfolio: retail, granular, secured and well diversified by country, product and economic sector Assets EUR billion

Loan portfolio by country EUR billion

1,169

UK

234

Spain

157

Brazil

69

USA

59

SCF

57

Chile

28

Other LatAm Chile 4% 2% Mexico 3%

Spain 23%

Brazil 10%

USA 9%

Portugal 3% Poland 2%

Net loans to customers

695

Portugal

24

Mexico

22

Poland

17

Argentina TOTAL GROUP Mar-14

4 695

UK 34%

Germany 4% Run-off real estate 1% Other Europe 5%

5.1 Medium to low risk profile. CREDIT RISK Grupo Santander lending portfolio: retail, granular, secured and well diversified by country, product and economic sector

Customer loans by product

Home mortgages



Consumer lending



Stable risk-return and high management capability



Granular Diversified by costumer, geography and industry

Mortgages

SMEs

Corporates



− −



Real estate





GBM

− −

High quality and low average LTV (50-55%)

Financing local corporates focused on working capital Not significant concentrations in single-names / sectors Non relevant weight in the Group balance sheet Appropriate coverage levels in all geographies Deleverage process continues in Spain Deep customer relationships in our core markets NPL ratios remain in low levels

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5.1 Medium to low risk profile. CREDIT RISK

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The Group's model and diversification have eased the crisis impact. A period of credit quality stabilisation / improvement has started Managing different environments Group NPL and coverage ratios (%) Spain

74

Coverage ratio 70

67

65

66

7.49 5.75

J'13

(1)

NPL ratio

M'13

5.15

J'13

(1)

5.40

S'13

5.61

D'13

5.52

M'14

(1) Including reclassification of substandard transactions in Spain

7.61

6.40

4.12

M'13

4.75

UK

S'13

D'13

M'14

2.03

2.01

1.98

1.98

M'13

J'13

S'13

D'13

Brazil

6.90

M'13

6.49

J'13

6.12

S'13

1.88 M'14

USA

5.64

5.74

D'13

M'14

3.01

2.96

3.04

3.09

M'13

J'13

S'13

D'13

2.88 M'14

5.1 Medium to low risk profile. CREDIT RISK

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The balance sheet of SPAIN run-off real estate1 unit has been sharply reduced over the last years

Total Balance Sheet assets (EUR bn.)

Total exposure coverage (including performing loans)

52% 53% 47%

41.0

D'08

33.8

D'09

22% 30.6

D'10

24.9

D'11

12.3

10.8

10.3

3%

D'12

D'13

M'14

D'08

% over total assets:

• Group: • Spain:

D'11

D'12

D'13

M'14

Of which: