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2
Agenda
Key Points to explain Grupo Santander Santander 1Q’14 Performance Appendix: – – – –
Funding and liquidity Group P&L Corporate Governance Performance by business area
3
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
7
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
23
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
9
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
10
… 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: