Santander US 3Q 2012 Results. October 2012

Transcription

1 Santander US 3Q 2012 Results October 2012

2 Disclaimer Banco Santander, S.A. and its affiliates ("Santander") caution that this presentation contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of These forward-looking statements are found in various places throughout this presentation and include, without limitation, statements concerning our future business development and economic performance. While these forward-looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: (1) general market, macro-economic, governmental and regulatory trends; (2) movements in local and international securities markets, currency exchange rates, and interest rates; (3) competitive pressures; (4) technological developments; and (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties. The risk factors and other key factors that we have indicated in our past and future filings and reports, including those with the Securities and Exchange Commission of the United States of America (the SEC ), could adversely affect our business and financial performance. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forwardlooking statements. 2 The information contained in this presentation is subject to, and must be read in conjunction with, all other publicly available information, including, where relevant any fuller disclosure document published by Santander. Any person at any time acquiring securities must do so only on the basis of such person's own judgment as to the merits or the suitability of the securities for its purpose and only on such information as is contained in such public information having taken all such professional or other advice as it considers necessary or appropriate in the circumstances and not in reliance on the information contained in the presentation. The information in this presentation is not intended to constitute research as that term is defined by applicable regulations. Nothing in this presentation constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. Recipients of this presentation should obtain advice based on their own individual circumstances from their own tax, financial, legal and other advisors before making an investment decision, and only make such decisions on the basis of the investor's own objectives, experience and resources. In making this presentation available, Santander gives no advice and make no recommendation to buy, sell or otherwise deal in shares in Santander or in any other securities or investments whatsoever. No offering of Securities shall be made in the United States except pursuant to registration under the U.S. Securities Act of 1933, as amended, or an exemption therefrom. Nothing contained in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotion in the U.K. Financial Services and Markets Act None of the presentation, or its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior written permission of Santander. Note: Nothing in this presentation should be construed as a profit forecast. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding performance. Information, opinions and estimates contained in this presentation reflect a judgment at its original date of publication by Santander and are subject to change without notice. Santander has no obligation to update, modify or amend this presentation or to otherwise notify a recipient thereof in the event that any information, opinion or estimate set forth herein, changes or subsequently becomes inaccurate. This presentation is provided for informational purposes only. Note: The Old Perimeter Sovereign contains results information from Santander Holdings USA, Inc. ( SHUSA ), which include results for Sovereign Bank and other SHUSA subsidiaries, except for Santander Consumer USA, Inc. Note: The results information contained in this presentation for SHUSA have been prepared according to Spanish accounting criteria and regulation in a manner applicable to all subsidiaries of the Santander Group and as a result it may differ from the one disclosed locally by SHUSA or Sovereign Bank. IRS Circular 230 Disclosure: Santander and its respective employees are not in the business of providing, and do not provide, tax or legal advice to any taxpayer outside Santander. Any statements in this Communication to tax matters were not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor

3 Disclaimer perimeter restatement to Santander US 3 OLD PERIMETER Sovereign Santander Consumer USA + = accounted under equity method NEW PERIMETER Santander US new perimeter in place since 1Q2012 Note: In December 2011, the ownership of Santander Consumer USA decreased from 91.5% to 65% and, therefore, the accounted income under equity method has decreased accordingly as showed in this presentation

4 Agenda 4 Market Environment 3Q2012 Strategy and Business Results

5 1. Estimates from Servicio de Estudios Santander 2. Listed rates are average for the quarter Note: Northeast includes the states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont. Source: BEA, BLS, Federal Reserve Market Environment 5 Continued but still modest economic growth GDP Growth (%, real) Unemployment Rate 2 (%) % 9.6% 9.0% 8.1% 7.8% Q Job Creation (# thousands) Q11 2Q11 4Q11 1Q12 3Q12

6 Market Environment 6 The real estate market is showing signs it may be past the bottom Average Sales Price of Existing Homes ($ 000) Rental Vacancy Rate (%) $276 $282 $277 $ % 10.2% 9.5% 8.6% $217 $220 $214 $ % 7.7% 7.4% 6.7% U.S. National average U.S. Northeast average U.S. National average U.S. Northeast average Existing Home Sales (Mn) Housing Starts (Th) U.S. (ex Northeast) 2011 Northeast U.S U.S. Note: Northeast includes the states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont. Source: National Association of Realtors; US Census Bureau; US Dept. of Commerce

7 Market Environment Yield compression continues and rates likely to stay low for a considerable time after the economic recovery strengthens 7 Constant Maturity Yields (%) 1 Spread between 10-year & 2-year Treasuries (bps) Q12 3Q yr Treasury 30-yr Mortgage 2-yr Treasury Annual CPI Inflation Rate (%, average) Spread between 10-year and 2-year Treasuries calculated as average spread for the quarter, whereas constant maturity treasury yields are end of period. Source: Federal Reserve Bank, BLS

8 Market Environment 8 Households and businesses continue to deleverage Household Debt/GDP 1 (%) Non-financial Business Debt/GDP 2 (%) 96.0% 80.1% 90.6% 77.5% 78.1% 77.0% 85.8% 83.1% Q Q Household debt to GDP ratio calculated as Consumer Debt/GDP 2. Nonfinancial Business Debt excludes financial business debt, calculated as Nonfinancial Business Debt/GDP Source: Bureau of Economic Analysis, Federal Reserve, Z.1 Flow of Funds

9 Banking System Loan Balances 9 C&I growth driving overall loan volume up Total Loans 1 US$ in billions, % year-over-year growth rate Commercial & Industrial Loans US$ in billions, % year-over-year growth rate 7,316 7,340 7,474 7,411 7,513 1,237 1,283 1,347 1,374 1, % -0.7% 1.3% 2.2% 2.7% 6.2% 10.1% 13.7% 14.3% 15.1% 2Q11 4Q11 1Q12 2Q11 4Q11 1Q12 Real Estate Loans 2 US$ in billions, % year-over-year growth rate Consumer Loans US$ in billions, % year-over-year growth rate 4,125 4,119 4,136 4,086 4,087 1,288 1,285 1,308 1,266 1, % -4.3% -3.1% -1.8% -0.9% -4.0% -3.3% -0.7% -0.6% -0.5% 2Q11 4Q11 1Q12 2Q11 4Q11 1Q12 1.Gross loans 2.Real estate loans includes residential mortgages, nonfarm nonresidential, construction and development, home equity lines, multifamily residential real estate, farmland, real estate loans in foreign offices. Source: FDIC Statistics on Depository Institutions

10 Banking System Deposit Balances 10 Deposit growth still strong, but decelerating Total Deposits 1 US$ in billions, % year-over-year growth rate Core Deposits 2 US$ in billions, % year-over-year growth rate Time Deposits US$ in billions, % year-over-year growth rate 8,226 8,505 8,758 8,826 8, % 9.9% 11.2% 10.4% 8.4% 6,341 6,657 6,936 7,034 7, % 17.9% 17.7% 16.0% 12.1% 1,884 1,848 1,822 1,791 1, % -11.7% -7.9% -7.0% -4.2% 2Q11 4Q11 1Q12 2Q11 4Q11 1Q12 2Q11 4Q11 1Q12 1. Held in domestic offices 2. Demand, NOW, money market and savings accounts Source: FDIC Statistics on Depository Institutions, numbers reported are end of period

11 Agenda 11 Market Environment 3Q2012 Strategy and Business Results

12 Santander US overview 12 Santander US has built a strong presence in the U.S. Northeast Footprint Features Deposits 1 : Loans 1 : Branches: ATMs: Employees (FTEs): $49,099 Mn $52,736 Mn 722 2,195 9,432 Main Market Shares State Branches (#) Branch Market Share 2 (%) Rank 2 Massachusetts % 3 Pennsylvania % 7 New Jersey % 7 New York % 19 Rhode Island % 3 1. Average period balances, calculated using local US GAAP accounting criteria 2. FDIC Market Share of branches; data as of June 2012 (published on annual basis) Source: FDIC

13 IT Transformation Implemented the Santander IT Core platform, which will pave the way for new functionalities, developments, and better time to market 13 Step 1 Step 2 Step 3 IT Transformation Accounting system migration completed (~1Q2012) Front end of channels enhanced (~1Q2012) IT Core platform replaced (2Q2012) Full stabilization of IT Core platform (3Q2012) Multiple Systems Two Banks System Product Mortgage Home Equity Team Member Customer One Bank Credit Card Cash Mgmt Mortgage Home Equity CD Multi-channel Upgrade Upgraded Online Banking site performance and functionalities Replaced and migrated Debit Card platform to allow more volume Technical migration will allow ATM upgrade CD Insurance

14 Retail Banking 14 Santander US is building its Retail Franchise Key Initiatives Sales Model Retail Distribution Retail Business Network Sales Process Transformation Multi Channel Upgrade Online Banking Consumer Segmentation Mass Affluent SME Banking Expansion Credit Card Launch New Investments Program Implementing Santander best practices in our Sales Model Creating the necessary changes in behavior to improve sales productivity and overall results through Consistent Sales and Service process Weekly and daily sales agenda Leadership and coaching model By the end of 2012, STARR will be fully implemented in all branches

15 15 Business Deposit Balances Customer deposits continue to grow, but at a slower pace and with a focus on core deposits and pricing Historical Deposit Balances 1 US$ in millions, % year-over-year growth rate US$ in millions Detailed Deposit Balances 1 47,462 47,661 48,978 49,394 49,099 3Q12 Var. (%) 15.0% 12.7% 10.2% Non-Interest Bearing DDAs 8,300 7, % Interest Bearing DDAs 26,048 25, % 3.9% 3.4% Time Deposits 8,953 8, % Wholesale Deposits 3,569 2, % Other 2 2,228 3, % Total Deposits $49,099 $47, % 4Q11 1Q12 3Q12 Annual Growth Rate Total Deposits 1. Average period balances, calculated using local US GAAP accounting criteria 2. Includes government, customer repo and Eurodollar deposits Note: DDAs corresponds to Demand Deposit Accounts

16 Business Loan Balances 1 16 Above market growth, mostly driven by C&I Historical Loan Balances US$ in millions, % year-over-year growth rate 51,328 51,703 52,517 52,736 50, % 3.4% 3.3% 4.1% 1.4% 4Q11 1Q12 3Q12 Annual Growth Rate Total Loans US$ in millions Commercial Real Estate Detailed Loan Balances 3Q12 Var. (%) 10,265 10, % C&I and other 14,232 11, % Multi-family 7,228 6, % Total Commercial 31,725 28, % Home Equity & Other Consumer 9,452 10, % Residential Mortgage 11,559 11, % Total Loans $52,736 $50, % Run-off portfolio 1,456 2, % Total Loans excluding run-off $51,280 $48, % 1. Average period balances, calculated using local US GAAP accounting criteria

17 Agenda 17 Market Environment 3Q2012 Strategy and Business Results

18 Results Net Interest Income 18 Net interest income continues to be impacted by low interest rates Net Interest Income Loan Spread (%) US$ in millions % Q11 1Q12 3Q12 Deposit Spread (%) Q11 1Q12 3Q12 4Q11 1Q12 3Q12

19 Results Net Fees Fee income dips slightly, reflecting impact of regulation and low volume environment 19 Quarterly Net Fees Year-To-Date Net Fees US$ in millions US$ in millions M12 9M11 Var. (%) 4Q11 Account Fees Debit & Credit Card Fees Investment & Insurance 1Q12 3Q12 Contingent Risk & Commitment Fees Other Account Fees % Debit & Credit Card Fees % Investment & Insurance % Contingent Risk & Commitment Fees % Other % Net Fees $368 $ % 1. Insurance includes gross earned fees

20 20 Results Gross Income Gross income impacted by the reduction in Santander Consumer USA ownership (Dec 2011) as reported in Other Operating Income US$ in millions Quarterly Gross Income US$ in millions Year-To-Date Gross Income M12 9M11 Var. (%) Net Interest Income 1,647 1, % Net Fees % Subtotal 2,015 2, % Financial Gains/(Losses) % 4Q11 1Q12 Net Interest Income Net Fees 3Q12 Financial Gains/ (Losses) Other Operating Income /(Expense) 1 Other Operating Income/(Expense) % Gross Income $2,540 $2, % 1. Including dividends, income from equity-accounted method and other operating income/(expenses)

21 Results Total Expenses Increase in expenses due to investment in personnel and higher depreciation expenses related to IT transformation 21 US$ in millions Quarterly Total Expenses US$ in millions Year-To-Date Total Expenses M12 9M11 Var. (%) G&A expenses % Personnel % General % Depreciation % Total Expenses $1,118 $1, % 4Q11 1Q12 3Q12 Personnel General Depreciation

22 Results Net Operating Income Decrease in operating income mostly due to the reduction in Santander Consumer USA ownership and higher expenses 22 US$ in millions Quarterly Net Operating Income Year-To-Date Net Operating Income US$ in millions M12 9M11 Var. (%) Gross Income 2,540 2, % Total Expenses 1,118 1, % Net Operating Income $1,423 $1, % 4Q11 1Q12 3Q12

23 Results Provisions and Loan Quality Improvement in asset quality results in lower NPLs, higher coverage ratio and stable provisions 23 Non-performing Loans & Coverage Ratio (%) Provisions 1,2 US$ in millions 93% 96% 107% 113% 110% % 2.9% 2.5% 2.3% 2.3% Q11 1Q12 3Q12 Allowance for Loan Losses to Non-performing Loans Non-performing Loans to Total Loans 4Q11 1Q12 3Q12 Provision for Credit Losses 1. Provision includes provisions for loans and other credit exposures 2. Includes one-off costs resulting from Trust PIERS litigation

24 24 Results Net Income Overall reduction in Net Income consistent with the reduction in Santander Consumer USA ownership and one-time litigation costs 1 Historical Net Income Detailed Net Income US$ in millions US$ in millions Income/(Loss) Before Taxes Income Tax (Expense)/Benefit 9M12 9M11 Var. (%) 923 1, % % Net Income/(Loss) $747 $1, % 4Q11 1Q12 3Q12 Pre-tax Income / (Loss) Net Income / (Loss) 1. Includes one-off costs resulting from Trust PIERS litigation

25 Results Ratios 25 High efficiency and profitability ratios Cost to Income (%) Fees / Costs (%) ROE (%) 46.9% 46.4% 37.1% 37.5% 25.4% 14.9% 3Q12 3Q12 3Q12

26 26 Conclusion The economy continues to recover at a modest pace Employment has improved but is stabilizing Market Environment Housing market is showing signs the bottom may be past Yield compression continues and rates likely to stay low C&I growth driving overall loan volume up Deposit growth still strong, but decelerating Strategy & Business Successfully completed Phase I of the Turnaround Continue to develop the platforms to achieve a full-fledged bank Charter change has been instrumental in growth of Commercial Banking franchise in the US Overall results impacted by Santander Consumer USA transaction and Trust PIERS litigation Results Efforts are resulting in stronger income generation capabilities Rates pressure partially offset by growth of loan and deposit volume; relatively stable fee income despite impact of regulation Asset quality improvement continues to result in lower NPL, higher coverage ratios and stable provisions

27 27 Appendix Trended Results Balance Sheet

28 Trended Results 28 US$ million Variation Jan-Sep 12 Jan-Sep 11 Amount % Net interest income 1,647 1,803 (155) (8.6) Net fees (43) (10.4) Gains (losses) on financial transactions Other operating income* (208) (42.1) Gross income 2,540 2,853 (312) (10.9) Operating expenses (1,118) (1,002) (115) 11.5 General administrative expenses (980) (885) (95) 10.8 Personnel (540) (500) (40) 8.0 Other general administrative expenses (440) (385) (55) 14.4 Depreciation and amortisation (138) (118) (20) 17.0 Net operating income 1,423 1,850 (427) (23.1) Net loan-loss provisions (259) (457) 198 (43.3) Other income (241) (101) (139) Profit before taxes 923 1,291 (368) (28.5) Tax on profit (176) (222) 46 (20.9) Profit from continuing operations 747 1,069 (322) (30.1) Net profit from discontinued operations Consolidated profit 747 1,069 (322) (30.1) Minority interests Attributable profit to the Group 747 1,069 (322) (30.1) * Including dividends, income from equity-accounted method and other operating income/expenses

29 Trended Results 29 US$ million Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Net interest income Net fees Gains (losses) on financial transactions Other operating income* Gross income Operating expenses (328) (332) (342) (383) (362) (378) (378) General administrative expenses (295) (290) (300) (343) (323) (332) (326) Personnel (164) (166) (170) (164) (180) (178) (182) Other general administrative expenses (131) (124) (130) (179) (143) (154) (144) Depreciation and amortisation (33) (42) (42) (41) (39) (46) (52) Net operating income Net loan-loss provisions (134) (213) (111) (158) (93) (101) (65) Other income (36) (32) (33) 16 (25) (35) (180) Profit before taxes Tax on profit (78) (51) (93) (93) (75) (76) (24) Profit from continuing operations Net profit from discontinued operations Consolidated profit Minority interests Attributable profit to the Group * Including dividends, income from equity-accounted method and other operating income/expenses

30 30 Balance Sheet US$ million Variation Amount % Loans and credits* 54,106 51,225 2, Trading portfolio (w/o loans) Available-for-sale financial assets 18,065 14,095 3, Due from credit institutions* 796 1,090 (294) (27.0) Intangible assets and property and equipme (80) (10.4) Other assets 8,255 6,495 1, Total assets/liabilities & shareholders' equ 82,315 74,035 8, Customer deposits* 49,721 47,451 2, Marketable debt securities* 1,083 2,183 (1,100) (50.4) Subordinated debt 3,238 3, Insurance liabilities Due to credit institutions* 18,030 11,932 6, Other liabilities 3,410 3,510 (100) (2.8) Shareholders' equity** 6,833 5, Off-balance-sheet funds 0 4 (4) (99.9) Mutual funds Pension funds Managed portfolios 0 4 (4) (99.9) Savings-insurance policies Customer funds under management 54,042 52,735 1, * Includes all stock of concept classified in the balance sheet ** Not including profit of the year

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