31 October Poland. 9M'18 Earnings Presentation

Transcription

1 31 October 2018 Poland 9M'18 Earnings Presentation

2 Disclaimer Banco Santander. S.A. ("Santander") and Banco Bank Zachodni WBK. S.A. ( BZ WBK ) caution that this presentation contains statements that constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of Forward-looking statements may be identified by words such as expect. project. anticipate. should. intend. probability. risk. VaR. RORAC. RoRWA. TNAV. target. goal. objective. estimate. future and similar expressions. 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 and our shareholder remuneration policy. 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. industry. 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. Numerous factors. including those reflected in the Santander Annual Report on Form 20-F filed with the Securities and Exchange Commission of the United States of America (the SEC ) under Key Information-Risk Factors - and in the Santander Documento de Registro de Acciones filed with the Spanish Securities Market Commission (the CNMV ) under Factores de Riesgo - could affect the future results of Santander and could result in other results deviating materially from those anticipated in the forward-looking statements. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements speak only as of the date of this presentation and are based on the knowledge. information available and views taken on such date; 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 or BZ WBK. 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. No investment activity should be undertaken on the basis of the information contained in this presentation. In making this presentation available. Santander and BZ WBK give no advice and make no recommendation to buy. sell or otherwise deal in shares in Santander or BZ WBK 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 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 may differ materially from those of such subsidiaries. In addition to the financial information prepared under International Financial Reporting Standards ( IFRS ). this presentation includes certain alternative performance measures as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority on 5 October 2015 (ESMA/2015/1415es) as well as Non-IFRS measures. The APMs and Non-IFRS Measures are performance measures that have been calculated using the financial information from the Santander Group but that are not defined or detailed in the applicable financial information framework and therefore have neither been audited nor are capable of being completely audited. These APMs and Non-IFRS Measures are been used to allow for a better understanding of the financial performance of the Santander Group but should be considered only as additional information and in no case as a replacement of the financial information prepared under IFRS. Moreover. the way the Santander Group defines and calculates these APMs and Non-IFRS Measures may differ to the way these are calculated by other companies that use similar measures. and therefore they may not be comparable. Please refer to the quarterly financial Report for further details of the APMs and Non-IFRS Measures used. including its definition or a reconciliation between any applicable management indicators and the financial data presented in the consolidated financial statements prepared under IFR. see Section 26 of the Documento de Registro de Acciones for Banco Santander filed with the CNMV on July (available on the Web page of the CNMV - and at Banco Santander - and Item 3A of the Annual Report on Form 20-F for the year ended December filed with the U.S. Securities and Exchange Commission on March (the Form 20-F ). For a discussion of the accounting principles used in translation of foreign currency-denominated assets and liabilities to euros. see note 2(a) to our consolidated financial statements on Form 20-F and to our consolidated financial statements available on the CNMV s website ( and on Banco Santander s website ( 2

3 Index 1. Macroeconomic environment and financial system 2. Strategy and business 3. Results 4. Appendix 3

4 Macroeconomic environment and financial system 01

5 Macroeconomic environment GDP growth slowing gradually with CPI lifting towards the Central Bank's target Annual GDP Growth (real, %) Central Bank Monetary Policy (year end, %) (e) 2019 (e) 2020 (e) (e) 2019 (e) 2020 (e) Annual inflation rate (average, %) Average exchange rate (EUR / PLN) (e) 2019 (e) 2020 (e) (e) 2019 (e) 2020 (e) Source: Polish Central Bank and Santander Bank Polska 5

6 Macroeconomic environment Strong consumption with record low unemployment and investment recovery Private Consumption Growth (real, %) Current Account Balance (year end, % GDP) (e) 2019 (e) 2020 (e) (e) 2019 (e) 2020 (e) Annual Investment Growth (real, %) Unemployment (year-end, %) (e) 2019 (e) 2020 (e) (e) 2019 (e) 2020 (e) Source: Polish Central Bank and Santander Bank Polska 6

7 Financial system: Loan and customer deposits evolution Slow revival in loans and deposits Total loans (Constant EUR bn 1 ) Total market loans rose 6% YoY in September Slight acceleration vs. Dec-17 was mostly due to FX effect (FX-adjusted loan growth stable near 6% YoY since mid-2017). YoY (%) 5.0% 3.8% 4.8% 5.5% 5.8% Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 Total customer deposits (Constant EUR bn 1 ) Consumer loans are gathering pace, with almost 10% YoY growth in September. PLN-denominated mortgage loan growth rate is slightly above 10% YoY. In the corporate sector, loan growth stabilised at 6% YoY (after FX adjustment). YoY (%) % 6.9% 5.0% 4.1% 5.1% Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 Deposit growth slowly picking up, partly due to FX effect, but also to higher growth in households savings. In September, households deposits rose 7% YoY the fastest pace in year. While demand deposits are still posting double-digit growth rates, time deposits are falling or stagnating in annual terms. Cost of new deposits in the household segment rose since May (1) End period exchange rate as of Sep-18, Source: National Bank of Poland, Santander Bank Polska 7

8 Strategy and business 02

9 Our Franchise Santander Bank Polska S.A. is the 3 rd largest bank in Poland 1 STRATEGIC PRIORITIES KEY DATA 9M 18 YoY Var. 5 Gross loans 2 24, % Top 3 in quality of service. Increasing the number of loyal customers Remain the leader in digital channels in Poland Gain market share in volumes Deposits 2 26, % Attributable profit % RoTE 11.1% -36 bps Efficiency ratio 43.0% +19 bps Loans market share % 33bps Deposits market share % 43bps Loyal customers 4 1, % Digital customers 4 2, % Remain the leader in profitability Branches % Employees 11, % (1) By total assets (2) EUR Mn (3) As of June-18 (last available). Local criteria (4) Thousands (5) Constant euros 9

10 Customers Good growth in loyal customers across all segments Loyal individuals (k) 1, % 1,639 Further increase in loyal customers Strategy to increase income from loyal customers Sep-17 Sep-18 Loyal companies (k) 96 +8% 104 Enhance value proposition and non-risk based revenue Service excellence and continuous quality improvement Sep-17 Sep-18 Digital customers (k) 2,175 +7% 2,030 Digital channels as the personalisation tool for the new As I Want it Account Steady increase in product sales and transactionality via internet and mobile channels Sep-17 Sep-18 Dynamic growth in the number of customers using mobile application 10

11 Commercial strategy and business transformation Enhanced customer experience backed by innovative products, services and processes Good key products performance Bank praised for personal account offer Reached 900k opened As I Want It Account (Konto Jakie Chcę) Maintained double-digit growth in new sales of personal loans (+17% Q3 18 vs. Q3 17) and increase mortgage sales dynamic (+43% Q3 18 vs. Q3 17) #1 for As I Want It Account for young people ranking by financial portal money.pl Loan volume growth Sep-18 vs. Sep-17: +9% Cash Loans +8% Mortgage Loans (PLN Mortgage +16%) Strong deposit growth (+13% Sep- 8 vs. Sep-17) Innovations msignature - mobile app authorisation tool cheap and secure alternative to SMS codes Multichannel 2.18 mn digital customers (+8% Q3 18 vs. Q3 17) 1.24 mn active mobile users (+23% Q3 18 vs. Q3 17) 10.7 mn transactions in mobile banking (+75% Q3 18 vs. Q3 17) Continued the rapid development of mobile payments YoY doubled number of cards in digital wallets (HCE, Google Pay, Garmin Pay and Apple Pay) Next mobile payment method FitBit available since October Retail transformation Roll-out of the new distribution model 4 branches in new format and 3 acquisition points in shopping mall opened in Q bank branches transformed into partnership units in Q

12 Commercial strategy and business transformation SME business growth Good performance in 9M 18 Initiatives improving customer satisfaction 11% Total loan volume growth 9M 18 vs. 9M 17 17% Deposit volume growth 9M 18 vs. 9M 17 Działalność.pl Website for customers planning to launch business activity knowledge based, required forms and calculators facilitating the process 12% 23% NII growth vs. 9M 17 Fee income growth vs. 9M 17 New promotion of POS 18 months without terminal lease fee: 12 months within Cashless Poland program + 6 additional months within Santander s offer 11% SME new lending growth 9M 18 vs. 9M 17 12

13 Total loans performance Loan growth YoY supported by all strategic segments. PLN-mortgages grew 16% YoY Total loans (Constant EUR bn 1 ) Sep-18 YoY (%) QoQ (%) Individuals Mortgages Personal loans Other personal Companies SMEs Business and Corporate Banking Property Corporate and Investment Banking Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Total Gross Loans (1) End period exchange rate as at Sep-18 13

14 Total funding performance Solid growth of customer funds. Strong rise in deposits YoY due to liquidity building ahead of Core of Deutsche Bank Polska acquisition Total customer funds 1 (Constant EUR bn 2 ) Sep-18 YoY (%) QoQ (%) Demand deposits % 3.3% Savings deposits % -0.2% Term deposits % 3.1% Customer deposits % 2.6% Mutual Funds % -1.1% Customer deposits + Mutual funds % 2.1% Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 (1) End period exchange rate as at Sep

15 Results 03

16 Net interest income NII up 6% YoY. NIM impacted by higher cost of deposits due to tougher competition and promotional offer for liquidity building ahead of Core of Deutsche Bank Polska acquisition Net interest income (Constant EUR mn 1 ) Yield on loans (%) Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 NIM 2 (%) 3.33% 3.40% 3.42% 3.16% 2.99% Official interest rate 3 (%) 1.5% 1.5% 1.5% 1.5% 1.5% Cost of deposits (%) Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 (1) Average exchange rate as at 9M 18 (2) Local criteria (3) Quarter average 16

17 Fee income Fee income growth YoY. Capital market fees impacted by external factors. Good performance in loans, cards and FX fees Net fee income (Constant EUR mn 1 ) 9M 18 9M 17 YoY(%) QoQ(%) Cards Customer Loans + Insurance Capital market fees Other Total Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 (1) Average exchange rate as at 9M 18 17

18 Gross income Strong growth in core revenue YoY. Gross income increased YoY despite lower gains on financial transactions Gross income (Constant EUR mn 1 ) 9M 18 9M 17 YoY(%) QoQ(%) Net Interest Income Net Fees Subtotal Gain/loses on financial transactions Other (4) (8) Gross Income (2) Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 (1) Average exchange rate as at 9M 18 (2) In Q3 18 Q0Q dynamics affected by seasonal collection of dividends in Q2 18

19 Operating expenses Controlled operating expenses YoY, despite higher costs for strategic projects, investments and salary pressures on labour market Operating expenses (Constant EUR mn 1 ) 9M'2018 9M'2017 YoY (%) QoQ (%) General and administrative expenses (428) (404) 6-3 Depreciation and amortisation (44) (43) 1 1 Operating expenses (472) (447) 5-3 Efficiency ratio 43.0% 42.8% Branches (#) Employees (#) 11,283 11,691 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 (1) Average exchange rate as at 9M 18 19

20 Net operating income after loan-loss provisions (LLP) NPL ratio improved 47 bps, cost of risk in 2017 supported by sale of NPLs. Credit quality in line with expectations Cost of credit Net LLP LLP and cost of credit (Constant EUR mn 1, %) Net Operating Income LLP (120) (97) Net operating income after LLP NPL ratio 4.23% 4.70% Coverage ratio 72% 68% 9M 18 9M 17 YoY(%) QoQ(%) Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 (1) Average exchange rate as at 9M 18 20

21 Attributable profit YoY profit growth driven by customer revenue. QoQ evolution affected by the seasonal collection of dividends in Q2 Attributable profit (Constant EUR mn 1 ) 9M 18 9M 17 YoY(%) QoQ(%) PBT Tax on profit (97) (106) Consolidated profit Attributable profit Effective tax rate 22% 25% Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 (1) Average exchange rate as at 9M 18 21

22 Concluding remarks Final remarks Market Environment & Financial System Strong GDP growth in Poland in 2018, above European average. GDP is forecasted to decelerate slightly, to below 4% in 2019, with still strong private consumption and reviving investments. Labour shortage still a major bottleneck for growth. CPI inflation climbing towards the NBP target (2.5%) due to strong tendencies in energy and rising core inflation. Official interest rates unchanged at 1.5% until very late Total loan growth after FX adjustment stabilised near 6% YoY. Gradual acceleration of loan growth is expected in the coming quarters. Strategy & Business Business strategy continues to be focused on gathering new customers through the development of our multi-channel approach and increasing loans and related fee income from the Consumer, SME, Leasing, Factoring, Business & Corporate and CIB segments. Growing loyal and digital customers through new products, more activity and related income. Strategy focused on end-to-end digital transformation. Realisation of strategic projects: DB acquisition, rebranding, agile implementation and mortgage bank. Net Interest Income: +6% YoY, quarterly dynamics impacted by liquidity building ahead of Core of Deutsche Bank Polska acquisition. Results Strong growth in Gross income: +5% YoY. General & administrative expenses under tight control, however impacted by strategic projects realisation. Continued improvement in credit quality: NPL ratio down 47 bps YoY and steady cost of credit. Attributable profit of EUR 236 mn in 9M 18 (+8% YoY) achieved despite a challenging business environment and investments in the future. 22

23 Appendix 04

24 Appendix Balance sheet Constant EUR million¹ Variation 30-Sep Sep-17 Amount % Loans and advances to customers 23,639 21,621 2, Cash, central banks and credit institutions 2,128 1, Debt securities 9,718 5,991 3, o/w: designated at fair value through equity 7,370 5,571 1, Other financial assets (114) (19.8) Other assets 1, Total assets 37,031 30,971 6, Customer deposits 28,026 23,311 4, Central banks and credit institutions 1, Debt securities issued 1, Other financial liabilities (82) (15.2) Other liabilities Total liabilities 32,384 26,265 6, Total equity 4,648 4,705 (57) (1.2) Other managed and marketed customer funds 3,898 3, Mutual funds 3,799 3, Pension funds Managed portfolios (1) End period exchange rate as at Sep

25 Appendix Income statement Constant EUR million¹ Variation 9M'18 9M'17 Amount % Net interest income Net fees Gains (losses) on financial transactions (4) (11.5) Other operating income (4) (8) 4 (46.8) Gross income 1,098 1, Operating expenses (472) (447) (25) 5.5 General administrative expenses (428) (404) (24) 5.9 Personnel (248) (238) (10) 4.2 Other general administrative expenses (180) (166) (14) 8.3 Depreciation and amortisation (44) (43) (1) 1.4 Net operating income Net loan-loss provisions (120) (97) (23) 23.2 Other income (74) (78) 4 (5.4) Underlying profit before taxes Tax on profit (97) (106) 9 (8.0) Underlying profit from continuing operations Net profit from discontinued operations Underlying consolidated profit Minority interests Underlying attributable profit to the Group Net capital gains and provisions Attributable profit to the Group (1) Average exchange rate as at 9M 18 25

26 Appendix Income statement Constant EUR million¹ Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Net interest income Net fees Gains (losses) on financial transactions Other operating income (13) 10 (5) 5 (30) 27 (2) Gross income Operating expenses (148) (149) (150) (159) (151) (162) (158) General administrative expenses (134) (135) (135) (145) (136) (148) (144) Personnel (78) (80) (80) (82) (81) (83) (84) Other general administrative expenses (56) (55) (55) (63) (56) (65) (60) Depreciation and amortisation (14) (14) (15) (14) (15) (15) (15) Net operating income Net loan-loss provisions (27) (33) (37) (40) (45) (41) (34) Other income (24) (26) (28) (18) (13) (34) (27) Underlying profit before taxes Tax on profit (39) (32) (34) (43) (30) (29) (38) Underlying profit from continuing operations Net profit from discontinued operations Underlying consolidated profit Minority interests Underlying attributable profit to the Group Net capital gains and provisions Attributable profit to the Group (1) Average exchange rate as at 9M 18 26

27 Thank you. Our purpose is to help people and business prosper. Our culture is based on believing that everything we do should be: