25 April Spain

Transcription

1 1 25 April 2013

2 Important information Banco Santander, S.A. ("Santander") cautions that this presentation contains forward-looking statements. 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, macroeconomic, 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 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. Forward-looking statements speak only as of the date on which they are made and are based on the knowledge, information available and views taken on the date on which they are made; such knowledge, information and views may change at any time. Santander does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 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. In making this presentation available, Santander gives no advice and makes no recommendation to buy, sell or otherwise deal in shares in Santander or in any other securities or investments whatsoever. Neither this presentation nor any of the information contained therein constitutes an offer to sell or the solicitation of an offer to buy any securities. 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 Note: Statements as to historical performance or financial accretion are not intended to mean that future performance, share price or future earnings (including earnings per share) for any period will necessarily match or exceed those of any prior year. Nothing in this presentation should be construed as a profit forecast. The businesses included in each of our geographic segments and the accounting principles under which their results are presented here may differ from the included businesses and local applicable accounting principles of our public subsidiaries in such geographies. Accordingly, the results of operations and trends shown for our geographic segments my differ materially from those of such subsidiaries. 2

3 3 Agenda Macroeconomic indicators and financial system Strategy and business Results Appendix

4 : Macroeconomic indicators 4 In 2013, recession expected to ease throughout the year GDP (annual growth %) Interest rates (3 months euribor %) * (e) 2014(e) (e) 2014(e) (*) End of period rates Quarterly var. Q4 12: -0.8% Q1 13p: -0.5% Q2 13e: -0.2% Q3 13e: 0.0% Q4 13e: +0.3% 1.8 Average inflation (%) (e) 2014(e) Source: INE; Thomson Reuters; estimates from Santander Research Dept.

5 is transforming its economy amid recession scenario, which intensifies the negative impacts in the short term 5 ADJUSTING the imbalances generated over the large expansion cycle and making the STRUCTURAL REFORMS to secure future growth Current account deficit 1 Public Sector Private sector 2 Households / companies indebtedness Housing (real estate) Labour market / pensions NEW Roadmap Sep12 Consolidate previous reforms Boost new initiatives 4 Budget deficit 3 Financial Sector Impact on growth in the short term Public accounts adjustment + Eurozone downturn Strong external sector Measures taken in the right direction No direct impact in the short term potential recovered in the medium term Resolution / boost from government

6 1 External Sector adjustment External balance in 2013 Adjustment completed due to strong goods exports and tourism, turns into the main driver for future growth Balanza corriente : % del PIB current account balances (% GDP) prev % Outlook 10% Source: Bank of and Santander Research Dep., April 2013 Fuente: Banco de España y Servicio de Estudios, abril 2013 backed by improved competitiveness Unit labour costs (index: Q1'08=100) España Alemania Germany Irlanda Ireland Francia France Italia Italy Outlook Q4 12:-5.8% Source: European Commission +0.7% +1.5% Current account surplus in H2'12 Goods exports: +20% in January 2013: +10% year-on-year Total exports / GDP: 32.3% in 2012 (vs 26.7% in 2008) Well diversified exports 1 and higher exports diversification España: Exportaciones UE (ene 2008=100, media móvil 3 meses) Exports destination (January 2008=100, 3m moving No avg.) UE No EU EU Source: Fuente: Mº Ministry de Economía of Economy y Competitividad. and Competitiveness, Abril 2013 April (1) Capital goods (20%); food and beverage (15%); automobiles (14%); chemical products (14%); non-chemical products (11%); packed consumer goods (8%); energy products (7%). Source: Customs 2012.

7 2.1 Private Sector adjustment: indebtedness 7 Faster deleveraging of non-financial companies and households, underpinned by their financial surplus (2012: 6.9 p.p. / GDP) Total financial liabilities of households and non-financial companies. (% GDP) Faster reduction of NPLs in 2012 Households: indebtedness in line with other economies Total Lending -2.7 p.p. / GDP Non-financial entities Non-financial entities: greater adjustment (mainly real estate) Lending p.p. / GDP* Households e Eurozone UK (17 countries) Nordic countries USA Note: 2012, estimate under Eurostat criteria based on Bank of data (April 2013); consolidated data from companies (except the UK). Source: Eurostat and Flow of Funds (consolidated)-usa data (revised April 2013) In real terms, households financing is around that of June 2006 and companies financing around that of December 2005 Source: Bank of (Dec12 / Dec11) (*) Impact from the transfer of loans from deposit-taking-institutions to SAREB ("bad bank"). It would account for close to 5 p.p. of GDP at December 2012

8 2.2 Private Sector adjustment: housing Offer below minimum levels... : Housing starts (thousand units) Source: INE (new construction licences) Minimum 40 years Finished houses: 2011: : 120 (thousands) and demand > finished housing... : New housing sold (thousand units) Structural demand Source: INE (purchase-sale Property Registry) will produce adjustment in stocks in stimulated by lower prices : new housing stock (units) Outlook p Source: Ministry of Development and Santander, July Change in housing prices from peak (price index per m 2 in real terms) Base 100: Q3'07 peak T99 4T00 4T01 4T02 4T03 4T04 4T05 4T06 4T07 4T08 4T09 4T10 4T11 4T12 Source: INE and Bank of Drop from "peak" similar to the US and Ireland Faster in 2012: -10% nominal -13% real Q4'99 Q4'00 Q4'01 Q4'02 Q4'03 Q4'04 Q4'05 Q4'06 Q4'07 Q4'08 Q4'09 Q4'10 Q4'11 Q4'12 Q1 13: 65

9 3 Public Sector adjustment Reduction of the public sector's structural deficit amid a sharp recession, which complicates the achievement of the global target 9 Fiscal deficit by component The implemented measures are consistent with further reductions of the structural deficit (1) Estimated savings : EUR 121 bill. (approx. 11% of 2012 GDP) % GDP Total balance Primary structural balance Cyclical balance p e Source: European Commission (AMECO), April 2013 Note: 2011 and 2012 data excluding the impact from support to the banking sector according to excessive deficit protocol (EDP) Debt Interest GDP stabilisation will accelerate the total deficit reduction (positive cyclical balance) coupled with a sentiment favouring an adjustment pace consistent with the phase of the cycle (26 April 2013: new fiscal consolidation program under EDP) (1) Urgent measures Dec 11 + General State Budget Apr 12 + Economic and Financial Plan for Regional governments May 12 + Q3 12 measures.

10 4 Structural reforms to secure future growth 10 Targets Provide more flexibility to the economy Improve sustainability in the medium-term Boost growth, the country undergoing the most reforms among developed ones (according to 2013 OCDE ranking) Optimum level OCDE average Main milestones Jan-Jun 2012: sustainability rules for the public sector, labour reform,... Sep 2012: National Reforms Plan ( 12-13) 26 April 2013: NEW package of structural reforms Italy Eurozone USA Source: OCDE Going for growth 2013

11 4.1 Structural reforms: measures taken in H1'12 and first results 1 st phase of Public Sector reform 11 Targets Ensure sustainability and effective control of public finances Measures Law of zero structural deficit Conditional liquidity for regional governments Long-term limits, annual expenditure ceilings Capacity to sanction and direct control in case of breach Fiscal and financial conditionality Up to EUR 18 bill. in 2012 and 23 bill. in 2013 Regional governments: public deficit evolution (% GDP) Impacts b 2012a Between 2012 and 2011, all regional govts. (17) reduced their deficit At December 2012, only two regional govts. surpassed 3% (max.: 3.45%) Source: Ministry of Finance and Public Administations, February 2013

12 4.1 Structural reforms: measures taken in H1'12 and first results Labour legislation reform 12 Targets More flexibility to increase the average employment in the cycle Basic aspects Lower redundancy costs Greater internal flexibility negotiation Maximum: 33 days salary per year of service, up to 24 months (vs. 45 days and 42 months, previously). If for economic reasons: 20 days and 12 months. Negotiation due to company's situation (vs. sector) Seek internal adjustments (salary, working hours, mobility ) instead of external adjustments (layoffs) Working contracts: average annual growth Initial impacts Permanent contracts Temporary contracts -9.1% Before reform ( ) +10.5% -3.5% -2.6% Last 6 months In companies < 50 workers: +122,000 permanent contracts in 2012 Self-employed: +80,000 jobs in 2012, positive for the first time since the onset of the crisis Salary restraint in new collective agreements (Jan-Mar13:+0.6%) 3 months average data Source: National Public Employment Service (SEPE)

13 4.2 Structural reforms: National Reforms Plan (Sep. 12) Roadmap 2013 accomplishments in the National Reforms Plan 13 Promote employment Ensure sustainable public budget Enhance the corporate scenario Boost competitiveness in key sectors Employment and youth entrepreneurship strategy Contracts linked to education + youth employment + training, etc. Benefits + fixed contribution to Social Security, Flat rate Create Independent Fiscal Authority Total control of budgetary process (all administrations) + greater transparency Greater sustainability of pensions system: adjustment to legal / real retirement age Rationalisation and sustainability of local governments (savings of 0.7% /GDP in ) Real estate disposals and optimisation of premises Market Unit Law (impact of 0.15% of annual GDP for 10 years) Single regulator -C.N.M.C.*- (agreement with EU) Science and Technoly strategy ( ) + National Plan for Scientific Research, Development and Technological Innovation ( ) Digital Agenda for (applying EU regulations) Electricity Sector: 2013 scheme for the system's financial balance + increased competitiveness in the islands and extra-peninsular systems Hydrocarbon Sector: scheme to increase distribution competitiveness Promote integration of agro-industrial cooperatives + Improve food chain functioning (*) CNMC = National Commission for Markets and Competition

14 4.3 Structural reforms: financial sector (I) , the year for provisioning and recapitalisation 2013, normalisation starts Real estate provisioning (RDLs*) Conditioned** financial assistance from the EU up to EUR 100 bn. Creation of SAREB*** ( bad bank ) 55% private capital and 45% public funds Assets transferred from Groups 1 and 2 banks (EUR 51 bn.) to be sold in 15 years Concentration and reduction of installed capacity Adapting to the new scenario Recovery of spreads In an improved liquidity scenario Lower needs for provisions After real estate effort in 2012 Recapitalisation MoU** roadmap (see appendix) Capital injection of EUR 39 bn. of public funds to Groups 1 and 2, below theoretical needs Mandatory restructuring plans MOVING FORWARD TO PROFITS NORMALISATION IN THE SECTOR (*) February's Royal Decree Law 2/2012, May's Royal Decree Law 18/2012 and August's Royal Decree Law 24/2012. (**) 20 July 2012, Memorandum of Understanding (MoU) (***) Company to manage assets from the banking restructuring

15 4.3 Financial sector reform (II) 15 Continued concentration of financial entities (from 50 in 2009 to 16 in ) and adjustment of installed capacity, enabled further efficiency improvement Total deposit-taking-institutions Thousands of branches , Entities reduction +7, , Source: Bank of, April 2013 Branches: announced closures of around 3,500 branches for (towards 1992 numbers) 75% 70% 65% 60% 55% 50% 45% 40% Efficiency ratio of deposit-taking-institutions Workforce: (Jun.12: 236,500; -34,000 since 2008) in June 2012 the historical minimum (2002: 238,199) have been surpassed Source: Bank of, April 2013 (1) Only national independent banks and former saving banks. Credit cooperatives and foreign banks are not included. Data for the beginning of 2013 assumes the successful conclusion of two ongoing concentration processes, which would absorb two former savings banks (CEISS and Caja 3)

16 4.3 Financial sector reform (III) 16 In 2013 improved deposits spread after competition for deposits the last year. The recovery of spreads on loans started in 2012 continues 6,0 5,5 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 Loans: spreads 1 of interest rates on new operations % Hogares.Vivienda Households; Housing Sociedades Companies < <1m EUR 1 mill. Sociedades Companies < >1m EUR 1 mill. 0,0 Jan-07 ene-07 Jan-08 ene-08 Jan-09 ene-09 Jan-10 ene-10jan-11 ene-11jan-12 ene-12 Jan-13 ene-13 Source: Bank of, April 2013 The higher risk and liquidity premiums, capital needs, etc, are transferred to the price 5,5 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 % Deposits: interest rates on new term deposits 1,0 ene-07 Jan-07 ene-08 Jan-08 ene-09 Jan-09 Jan-10 ene-10 ene-11 Jan-11 ene-12 Jan-12 Jan-13 ene-13 Source: Bank of, April 2013 Hogares Households Empresas Companies Due to better liquidity situation: LTROs + EU financial aid + SAREB + markets opening (1) Loan spreads: households - euribor 12 months; companies - euribor 3 months.

17 4.3 Financial sector reform (IV) Lower provisions envisaged in 2013 after the strong effort in provisions for real estate in Total deposit-taking-institutions: Impairment losses on financial assets (including loan-loss provisions) EUR million 81,392 15,377 19,622 16,834 22,724 4,667 8, NLP ratio increased, but far from OW adverse scenario NPL ratio implicit in probability of default (OW adverse scenario) is 3.5 times the current NPL ratio (EC report) Despite unemployment (26%), only 7-9% of customers with mortgage loans are unemployed (IMF report) In % loans: In 2014, over 10% of the portfolio provisioned during the crisis

18 18 Banking System: main figures (business volumes) Note: Analysis of Other Monetary Financial Institutions (OIFM) according to ECB methodology. OIFM = Credit entities (banks, savings banks and cooperatives + other credit institutions + Money Market Investment Funds)

19 Total banking system volumes. Loans 19 Fast reduction in the resident private sector's lending, particularly in the real estate sector (developers and housing). Impact from transfers to SAREB* EUR billion Loans to customers 1,985 1,971 2, ,832 1,789 1,772 1,955 1,937 1,944 1, , , , ,697 1,678 1,673 1,654 1,620 1,528 1,484 * * Dic'08 Dic'09 Dic'10 Dic'11 Feb'12 Mar'12 Jun'12 Sep'12 Dic'12 Feb'13 Households & non-financial entities Public sector Non-monetary financial institutions EMU Other non-resident Source: ECB and Bank of. Other Monetary Financial Institutions (*) In Dec 12 and Feb 13, reduction in loans to households and non-financial entities due to transfers to SAREB (approx. EUR 54 and 20 billion, respectively)

20 Total banking system volumes. Savings 20 Recovery of households and companies deposits* vs. drop in financial operations (repos, securitisations, etc.). Recovery of mutual funds in 2013 EUR billion Savings Savings*: 1,925 1,952 2,031 1,981 1,960 1,958 1,860 1,788 1,779 1,792 Total deposits* Non-resident sector Public Sector 1,750 1,783 1,887 1,849 1,825 1, , ,661 1,652 1, Non-monetary financial institutions Retail commercial paper Households & non-financial entities Dic'08 Dic'09 Dic'10 Dic'11 Feb'12 Mar'12 Jun'12 Sep'12 Dic'12 Feb'13 Mutual funds: (*) Including retail commercial papaer Source: ECB and the Bank of. Other Monetary Financial Institutions

21 Total system's volumes. Liquidity basic dynamics 21 In 2012 and 2013 generation of liquidity due to deleveraging accelerated. Moreover, markets opening and financial support reduced recourse to the ECB Households and non-financial entities in (EUR billion) Net recourse to the ECB (EUR billion) % commercial gap in 4 years Loans* +68 Deposits + retail commercial paper +372 Liquidity increase -44 Loans* Jan-Feb Deposits + retail commercial paper +41 Liquidity increase Monthly average of daily data Reduction since Aug 12: -EUR 129 bill. (-33%) Jan-10 Ene-10 Dec-10 Dic-10 Dic-11 Dec-11 Dec-12 Dic-12 January 2013: improved market conditions / risk premium facilitate banks' issuances (approx. EUR 13 bill. overall) Source: Bank of, April 2013 (OIFM) Source: Bank of, April 2013 (*) In Dec 12 and Feb 13, reduction in loans to households and non-financial entities due to transfers to SAREB (approx. EUR 54 and 20 billion, respectively)

22 In short 22 In a scenario of economic slowdown in Europe due to the sovereign debt crisis, 's economy faces a double challenge: complete the adjustments generated by the expansion and make structural reforms that grant future growth. Adjustments well advanced in the external sector, with a balanced current account since the second half of 2012; in the private sector with financial surplus in companies and households; and stock reduction in 2012 benefiting from lower prices in housing. Within the public sector adjustment, the measures taken in 2012 enabled a significant reduction of the structural deficit, particularly in regional governments, getting closer to meeting the new deficit targets negotiated with the EU. Boost from structural reforms by the new government in large areas: public sector, labourpensions, financial and corporate-competitiveness. In 2012, the banking system went through a cleaning-up and recapitalisation process, obtaining conditional financial assistance from the EU. In 2013 the banking sector will benefit from lower provisions after the effort in 2012, coupled with the reduction in installed capacity and the beginning in the recovery of spreads. The system's liquidity continues to improve: deleveraging, recovery of deposits and greater access to wholesale markets reduced the liquidity provided by the ECB by almost a third All these trends, including the regulatory changes underway, will contribute to reinforce the banking sector, which in turn, will improve its financing of the real economy.

23 23 Agenda Macroeconomic indicators and financial system Strategy and business Resultados Appendix

24 Santander in today 24 The largest financial group by combined market share of business and profit. Includes retail networks 1, global businesses 2 and specialised entities 3 Grupo Santander in EUR million Mar 13 Mkt. share* Net loans 176, % Deposits 207, % ** Total savings 240, % ** Attributable profit 207 Branches 4, % ATMs 5,749 Customers (million) 13.1 (*) Latest available. Data obtained from Bank of s Statistical Bulletin (chapters 4, 8 and 19) referred to total Deposit-Taking Institutions (banks, savings banks, credit cooperatives) and confidential reports M-21, UME-1 and UME-2 (**) Estimated market share including retail commercial paper. (1) Santander Branch Network, Banesto and Banif. Currently undergoing a merger. Excluding Santander Consumer Finance and discontinued real estate business. (2) Wholesale banking (SGBM), asset management (SAM), insurance (SI), cards (SC) (3) Openbank (direct banking)

25 Strategy and business in Merger (Santander + Banesto + Banif) Main management focus for the year: integration Approved by governance bodies: pending regulator's authorisation for the legal merger Actions to secure synergies Management of deleveraging Deposits 1 : the capturing pace is maintained Exploiting the security / attractiveness of Santander brand Improved spreads on new term deposits Activity Loans: selective growth at higher interest rates Launching of Plan 10,000: increase loans mainly to companies and SMEs. Spreads: higher in new loans, although impact from mortgage repricing after the sharp fall in euribor rates Improved liquidity enabled the EUR 31 bn. of LTROs to be repaid High capacity of internal generation due to deleveraging + deposit capturing Loan-to-deposit ratio below 100% (85% March 2013) (1) Including retail commercial paper issued since Q4'2011 to complement traditional deposits.

26 5 Integration: Santander + Banesto + Banif merger Merger plan "on target" Dec 12 9 Jan Mar Mar 13 End of Apr 13 May 13 Board approved transaction Board approved merger project Banesto Santander AGM AGM Approvals Regulatory and administrative approval Legal merger Delivery of Santander shares Rebranding and operational integration Streamlining branches/workforce Dec 13 3 years Actions taken during integration process (Q1 13) New structure (retail network and central services) Agreement with trade unions Branches streamlining plan: overlappings identified Customers: operations free of charge between entities + Welcome Pack (May 13)

27 5 Integration: Santander + Banesto + Banif merger Restructuring effort concentrated in 2013 and beginning of 2014, which enables anticipation of the announced synergies 27 Closure of branches (nº) Branches streamlining EUR mill. (before tax) Restructuring costs Accumulated cost synergies Dec 12 announcement May 13 EUR 206 mill. (Year 1) May 14 EUR 326 mill. (Year 2) May 15 EUR 420 mill. (Year 3) May 16 EUR mill. (before tax) Update as of April

28 Activity: savings 28 Sharp deposits 1 increase due to strong capturing of retail demand and time deposits... EUR billion Savings Savings Other savings Deposits + retail commercial paper +9.1% % Mar 12 Jun 12 Sep 12 Dec 13 Mar 13 EUR billion % var. Mar 13 / Mar 13 Dec 12 Mar 12 Dec 12 Mar 12 Demand dep Time dep Ret. comm. paper Repos Deposits Mutual funds Pension funds Total savings (1) Including retail commercial paper

29 Customer deposits. By product and funding cost 29 EUR million... means gain in market share and higher cost of deposits (stock). In 2013, lower cost for new deposits but still not reflecting on stock Deposits TOTAL Retail commercial paper Term deposits and other Term deposits cost (new deposits) Base 100: Q Demand deposits Mar'12 Dec'12 Mar' Increased deposit market share in 12 months: +230 b.p. Term deposits + retail commercial paper increased their share in the last 12 months: From 44% (March 2012) to 50% (March 2013) Q1'12 Q2'12 Q3'12 Q4'12 Q1'13

30 Activity: Loans to customers 30 Lending evolution reflect the deleveraging trends of the private sector. Greater stability in companies Loans to customers EUR billion -3.8% EUR billion By segment % var. Mar 13 / Mar 13 Dec 12 Mar 12 Dec 12 Mar 12 Public sector & institutions* Individual customers of which: Housing mortgages Companies* Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Gross loans Provisions Net loans (*) Plan to pay suppliers of regional and local governments included in the Companies line

31 Customer loans. By segment and return Impact from low interest rates in mortgage repricing. Improved yield on new loans, still not reflecting on stock 31 EUR million TOTAL Household mortgages Other loans to individuals Companies + suppliers financ.. Gross loans Companies: yield (new loans) Companies Euribor 1year Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Other Public sector Mar'12 Dec'12 Mar'13 Lower demand for loans from individuals Stable loans to companies. Actions: In 2012: EUR 5,200 mill. via Crédito Activación and Crédito Exportador In 2013: Plan 10,000 launched in April Mortgages: yield (new loans) Mortgages Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 86 Euribor 1year 34

32 Loans to customers. NPL ratio and entries Higher NPL ratio, mainly due to companies and lower denominator. Stable NPL entries from individuals and companies 1 in recent quarters 32 NPL ratio NPL Entradas entriesnpl+90d 2 >90 days % Base 100: 1S' Mar'12 Jun'12 Sep'12 Dec'12 Mar'13 Rest of portfolio Total Household mortgages Non-real estate companies Mortgages to individual customers Greater stability in household mortgages and other individual customers Impact on NPL ratio from the lower denominator Other loans to individuals Consumer loans Cards H1'08 H2 H1'09 H2 H1'10 H2 H1'11 H2 H1'12 H2 Q1'13 (1) Companies without real estate purpose (2) Gross entries according to schedule (before recoveries)

33 Liquidity managment. Basic trends 33 High liquidity generation improves the loan-to-deposit ratio Continuous strong liquidity improvement enabled Santander to repay EUR 31 bn. of LTROs to the ECB Improved commercial gap continues (spreads between net loans and deposits) due to deleveraging and deposit capturing. Improved commercial gap Var. Mar'13/Dec'12 in EUR bn. -2 Net loans +9 Deposits 2 Gap improvement: -EUR 11bn. The reduction in the commercial gap in Q1'13 covers 45% of the medium- long-term debt maturities in and reduces the need for wholesale issues Overall, the Group in maintains an important issuance capacity: In Q1 13, M/L term issues for EUR 4.7 bn. Net loan-to-deposit ratio 1 107% 90% 85% Dec'11 Dec'12 Mar'13 Moreover, strong securitisation activity in SCF Europe which will continue reducing its recourse to the parent bank (1) Including Banesto (2) Including retail commercial paper

34 34 Agenda Macroeconomic indicators and financial system Strategy and business Results Appendix

35 Results: Net interest income 35 Impact of lower interest rates on mortgage repricing, higher cost of funds and lower contribution of ALCO portfolio in 2013 Lending spreads (%) EUR million Net interest income ,297 1,347 1,337 1,187 1,078 Q1 12 Q2 Q3 Q4 Q1 13 Deposits spreads (%) Q1 12 Q2 Q3 Q4 Q Q1 12 Q2 Q3 Q4 Q1 13

36 Results: Gross income 36 In the quarter, greater stability of fee income and higher trading gains from wholesale clients EUR million Gross income EUR million Q1 13 Q1 12 % var. Total Other* Fee income 2,043 1,961 1, ,758 1, Net interest income 1,078 1, Net fees Net interest income 1,297 1,347 1,337 1,187 1,078 Subtotal 1,579 1, Trading gains (*) Q1 12 Q2 Q3 Q4 Q1 13 Trading: gains Other: Other Total 1,815 2,

37 Results: Operating expenses 37 Flat expenses 1. Still no impact from integration processes Operating expenses EUR million Q1 13 Q1 12 % var. EUR million General expenses Personnel Other Amortisations Total Q1 12 Q2 Q3 Q4 Q1 13 Efficiency ratio (%) - with amortisations w/o amortisations (1) In Q4'12, positive one-off from the release of funds allocated to variable remuneration and not paid.

38 Results: Net operating income 38 Net operating income stabilising in the quarter Net operating income EUR million EUR million 1,074 1, Q1 13 Q1 12 % var. Gross income 1,815 2, Expenses Q1 12 Q2 Q3 Q4 Q1 13 Net operat. income 853 1,

39 Results: Loan-loss provisions 39 Sharp decline of loan-loss provisions in the quarter. High capacity of net operating income to absorb provisions Loan-loss provisions* EUR million Q1 13 Q1 12 % var. EUR million Net operating income 853 1, Loan-loss provisions Net operat. income after provisions Q1 12 Q2 Q3 Q4 Q % 1.7x 1.7x (*) Including country-risk Net op. income / total loans Net op. income / total provisions Net op. income / specific provisions

40 Results: Attributable profit 40 In short, strong profit recovery over the fourth quarter, although still affected by the environment and the Group's policy to strengthen liquidity EUR million Attributable profit EUR million Q1 13 Q1 12 % var. Profit before taxes Tax on profit Minority interests Attributable profit Q1 12 Q2 Q3 Q4 Q1 13 ROA (%) ROE (%)

41 41 Agenda Macroeconomic indicators and financial system Strategy and business Results Appendix Spanish banking system: MoU roadmap Santander : results and balance sheet Santander NPL and coverage ratios Santander : market shares

42 42 's banking sector

43 4.3 Financial Sector Reform: Roadmap - MoU In H the recapitalisation of the Spanish banking will be completed 43 Jul-Aug 12 Financial support MoU RDL24/2012 Resolutionrestructuring framework Bail-in pref. /subord. Bad bank DGF-FROB Minimum capital September 2012 October 2012 November 2012 December 2012 June 2013 Nov'12: Bad bank underway Bottom-up for Group 1 banks exercise 1/1/13: Request for minimum Recapitalisation Plans capital (9% BdE) (Groups 2 and 3) Restructuring / Resolution Plans (Group 1) Restructuring / Resolution Plans (Group 2) Group 1: state banks Group 2: needing State aid Group 3: with capital needs but without State aid Segregation and transfer of impaired assets to an AMC (Groups 1 and 2) Injection of State support (Groups 1 and 2) (Group 2: Feb 13) End of private sector recapitalisation process (Group 3)

44 44 Santander Results and balance sheet (*) Including retail networks of Santander, Banesto and Banif, Global Banking & Markets, Asset Management, Insurance and ALCO. Excluding SCF and the discontinued real estate activity in

45 Year-to-date Income Statement 45 Eur million Variation Q1 13 Q1 12 Amount % Net interest income 1,078 1,297 (219) (16.9) Net fees (9) (1.8) Gains (losses) on financial transactions Other operating income* (3) (8.1) Gross income 1,815 2,043 (228) (11.2) Operating expenses (962) (969) 7 (0.7) General administrative expenses (869) (877) 8 (0.9) Personnel (554) (559) 5 (0.9) Other general administrative expenses (315) (318) 3 (0.9) Depreciation and amortisation (93) (92) (1) 0.8 Net operating income 853 1,074 (221) (20.6) Net loan-loss provisions (516) (724) 208 (28.7) Other income (36) (55) 19 (35.1) Profit before taxes Tax on profit (93) (91) (2) 2.2 Profit from continuing operations Net profit from discontinued operations Consolidated profit Minority interests 1 2 (1) (48.5) Attributable profit to the Group * Including dividends, equity accounted income and other operating income/expenses

46 Quarterly Income Statement 46 Eur million Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Net interest income 1,297 1,347 1,337 1,187 1,078 Net fees Gains (losses) on financial transactions 203 (75) Other operating income* Gross income 2,043 1,961 1,919 1,758 1,815 Operating expenses (969) (954) (963) (937) (962) General administrative expenses (877) (863) (869) (848) (869) Personnel (559) (555) (559) (534) (554) Other general administrative expenses (318) (308) (309) (314) (315) Depreciation and amortisation (92) (91) (94) (88) (93) Net operating income 1,074 1, Net loan-loss provisions (724) (670) (466) (613) (516) Other income (55) (46) 7 (34) (36) Profit before taxes Tax on profit (91) (90) (153) (60) (93) Profit from continuing operations Net profit from discontinued operations Consolidated profit Minority interests (1) 1 Attributable profit to the Group * Including dividends, equity accounted income and other operating income/expenses

47 Balance Sheet 47 Eur million Variation Amount % Loans and credits* 176, ,368 (6,906) (3.8) Trading portfolio (w/o loans) 73,971 70,072 3, Available-for-sale financial assets 33,300 43,328 (10,028) (23.1) Due from credit institutions* 37,817 19,404 18, Intangible assets and property and equipment 4,185 4, Other assets 5,330 10,387 (5,057) (48.7) Total assets/liabilities & shareholders' equity 331, , Customer deposits* 197, ,903 21, Marketable debt securities* 10,153 8,347 1, Subordinated debt Insurance liabilities Due to credit institutions* 21,435 25,381 (3,946) (15.5) Other liabilities 89, ,486 (17,357) (16.3) Shareholders' equity** 12,170 14,010 (1,840) (13.1) Off-balance-sheet funds 37,065 40,486 (3,421) (8.5) Mutual funds 23,417 27,123 (3,706) (13.7) Pension funds 9,403 8, Managed portfolios 4,245 4,385 (140) (3.2) Customer funds under management 244, ,743 19, Including total on-balance sheet balances for this item ** Not including the year's profit

48 48 Santander NPL and Coverage ratios (*) Including retail networks of Santander, Banesto and Banif, Global Banking & Markets, Asset Management, Insurance and ALCO. Excluding SCF and the discontinued real estate activity in

49 NPL and Coverage ratios 49 NPL ratio Coverage ratio % % Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13

50 50 Santander Market shares

51 Activity: Customer market shares in * Feb'13 Var. 12m 51 LOANS Public sector Other resident sectors Commercial loans Mortgages No Other residente loans SAVINGS Public sector Other resident sectors Demand No Time residente Mutual Funds Note. Data obtained from Bank of s Statistical Bulletin (chapters 4, 8 and 19) referred to total Deposit-Taking Institutions (banks, savings banks and credit cooperatives) and confidential reports M-21, UME-1 and UME-2 (*) Time deposits including retail commercial paper

52 52