Sovereign Bancorp, Inc. Third Quarter 2009 Results. Boston, October 28, 2009

Transcription

1 Sovereign Bancorp, Inc. Third Quarter 2009 Results Boston, October 28, 2009

2 Disclaimer 2 Banco Santander, S.A. ("Santander") and Sovereign Bancorp, Inc. ( Sovereign ) 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 forward-looking statements. 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 Sovereign. 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, both Santander and Sovereign give no advice and make no recommendation to buy, sell or otherwise deal in shares in Santander or Sovereign 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 Note: Statements as to historical performance, historical share price or financial accretion are not intended to mean that future performance, historical 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. Note: The results information contained in this presentation has 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 Sovereign.

3 Agenda 3 Market Environment 3Q09: Strategy and Business 3Q09: Results

4 Market Environment Economy expected to remain weak but has shown recent signs of leveling out and expected to improve in 2010 GDP (% Real Annual Growth) Spread between 10-year and 2-year Treasury (bps) * 2010* Source: U.S. Department of Commerce Annual CPI Inflation Rate ( %, annual average) Q09 Source: Federal Reserve Bank USD Exchange Rate vs Euro (Average) * 2010* Source: Bureau of Labor Statistics * Estimates from Servicio de Estudios Santander YTD 2009 Source: Federal Reserve Bank

5 Market Environment Unemployment continues to rise and expected to increase further in 2009 and Unemployment Rate (Q4 average, %) Debt Payments as % of Disposable Income * 2010* Source: Bureau of Labor Statistics * Estimates from Servicio de Estudios Santander Consumer Credit (% change, annual rate) Q209 Source: Federal Reserve Bank Source: Thomson Dat ast ream, Oct ober 2009 Personal Savings as % of Disposable Income Personal saving rate 6.0 Financial Gap Source: Thomson Dat ast ream, Oct ober 2009.

6 Market Environment Housing Market Sales activity is showing signs of stabilization due low market interest rates and first time home buyer tax credits made available by US Government. Average sales prices decline due to distressed sales; however, the Northeast is holding up better than the national average 6 Average Sales Price of Existing Homes Existing Home Sales Volume (seasonally adjusted) $292,200 Northeast Average: -6.9% year over year $276,300 U.S. National Average: 6.3% year over year 4,930,000 5,240,000 $242,200 U.S. National Average: -10.1% year over year $222,800 Northeast Average: 8.1% year over year 860, ,000 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Source: National Association of Realtors Northeast includes the states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont

7 Market Environment Summary 7 Overall economic conditions indicate the economic conditions continued to stabilize in July and August Eleven of the twelve Federal Reserve Districts noted that economic conditions have improved with the remaining District indicating the pace of decline was moderating Consumer spending remains soft with the exception of retail auto sales which benefited from the Government s cash for clunkers program which boosted sales and traffic volume in auto dealerships Most regions reported some improvement in residential real estate markets driven by continued low interest rates, declining house prices and tax credits for first-time home buyers Overall lending activity was stable or weak; credit conditions remained stringent or tightened further Demand for commercial real estate suggest that demand for space remains weak and that nonresidential construction related activity continues to decline Deposits in large and sound financial institutions have stabilized and grown in the first half of 2009 Employment continues to decline across a range of industries; concerns abound that U.S. recovery will be a jobless one as unemployment continues to increase and stands at 9.8% at the end of September US unemployment rate at 26 year high with job losses for 21 consecutive months, however Fed chief believes that US recession has ended

8 Banking System: Loan Balances Loan growth slows in current economic environment 8 US$ in billions %, year-over-year growth rate Total Loans 7,847 7,852 7,833 7,804 7,700 7,617 7,540 1,388 Commercial & Industrial 1,503 1,482 1,490 1,494 1,439 1,435 1,365 7,385 7, % 7.4% 9.1% 9.0% 6.3% 2.8% -1.3% -3.9% -5.6% 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 Real Estate 1, % 18.5% 18.5% 12.3% 14.7% 8.3% 3.8% -3.2% -8.4% 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 Consumer 4,805 4,794 4,782 4,750 4,701 4,705 4,700 4,651 4, % 5.3% 6.1% 5.9% 3.8% 1.0% -1.6% -2.2% -2.9% Excluding Credit Cards: -5.3% 981 1, % 6.1% 1,058 1,048 1,069 1,083 1, % 10.8% 9.0% 6.8% 2.9% 1,046 1, % -3.0% 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 Source: FDIC Statistics on Depository Institutions 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09

9 Banking System: Deposit Balances 9 Increased deposit growth shows Flight to Safety in recent quarters US$ in billions %, year-over-year growth rate Total Deposits1 Core Deposits2 Time Deposits Demand Deposits: 18.5% Money Market: 7.6% Savings: 11.7% 2,773 2,824 2,751 7,496 7,538 7,555 7,222 7,069 7, % 6,740 6, % 7.2% 6.6% 5.6% 5.0% 4.1% 4.3% 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 4,912 4,786 4,672 4,445 4,456 4,449 4,314 4, % 8.3% 7.7% 5.2% 5.4% 6.1% 3.6% 3.3% 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 2, % 2,599 2, % 6.2% 2, % 9.0% 8.7% 4.8% 2, % 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 Source: FDIC Statistics on Depository Institutions 1 Held in domestic offices 2 Demand, NOW, money market and savings accounts

10 Agenda 10 Market Environment 3Q09: Strategy and Business 3Q09: Results

11 Sovereign Overview A strong but historically underperforming franchise in the Northeastern US (US$ in millions) Sept 09 Deposits: $46,221 Loans: $50,815 Branches: 723 ATM s: 2,357 Employees: 8, MSA New York Philadelphia Boston Providence Hartford # of branches Market Share % 1 1 FDIC Market Share of deposits; data as of June % 5.4% 8.3% 9.2% 4.1% Market Share Rank

12 Strategy Stabilize financial condition liquidity and capital 2. Improve Risk Management and Collections 3. Improve margins and efficiency 4. Reorganize to align to Santander business model with commercial focus

13 1. Stabilize Financial Condition Liquidity and Capital 13 Tier 1 Risk-Based Capital2 8.91% 8.96% 9.17% Total Available Liquidity ($BN) % 6.59% 6% Well- Capitalized % Minimum Requirement 3Q 08 4Q 08 1Q 09 2Q09 3Q Q 08 4Q 08 1Q 09 2Q09 3Q09 Total Risk-Based Capital % 10.20% 12.43% 12.40% 12.54% 10% Well- Capitalized 8% Minimum Requirement 1 Including cash on hand, committed lines ($21.8bn) and uncommitted lines ($3.5bn) from the Federal Home Loan Bank and Federal Reserve 2 Capital ratios for Sovereign Bank 3Q 08 4Q 08 1Q 09 2Q09 3Q09

14 2. Improve Risk Management and Collections 14 Santander Risk Organization in Place Involvement of Senior Management (Exec. RM Comm.) enhanced Independence of Risk Organization established Collegial Decision Making (Committees) instituted Governance and Solvency Risk groups built Market Risk function restructured Credit Approval Committee structure launched September 21, 2009 Portfolio Management & Workout Other Initiatives Santander process for monitoring credits initiated in July 2009 New Collections head started July 1, 2009 Collections group organization defined Workout groups reorganized second quarter 2009 Assigned resources/enhanced processes Established Credit Committees Review of loans greater than $1 million to apply specific reserves Credit management information system enhancement project completed June 30, 2009 Initial Segmentation and credit quality reporting defined Market Risk limits in Santander s standard reporting Middle Market and business banking risk functions transferred to Commercial Credit Small business underwriting to Standardized Risk

15 3. Improve Margin and Efficiency Optimize mix and cost of funding to improve margin. Improve efficiency through reduced costs driven by implementation of best practices and optimization of operations 15 Net interest margin trend Efficiency ratio trend 2.98% 2.66% 1.96% 2.01% 2.25% 87.6% 14.3% 74.2% 73.3% 3Q 08 4Q 08 1Q 09 2Q09 3Q09 3M 09 6M 09 9M 09

16 4. Reorganize to Align to Santander Business Model 16 Support Business Assets Deposits HR, Finance, other support Operations and IT Risk Retail / Small & Medium Enterprise Banking Middle Market Corporate Banking Specialized Businesses $21.8 bn $13.4 bn $18.6 bn $37.5 bn $5.0 bn $0.3 bn

17 4. with Commercial Focus 17 Retail & SME Banking Increase consumer and small and medium enterprise (SME) banking customer base through: more aggressive commercial culture in the network (targets and incentives) integration of SME banking with the retail network Increase customer profitability through: broader product range offerings and cross-sell adequate pricing strategy Middle Market Corporate Banking Simplify organization and business model and increase penetration of core Middle Market segment Increase focus on Relationship Management Improve pricing for risk and enhance margins Increase penetration of deposit and treasury products Specialized Businesses Manage for value selective specialized businesses and portfolios Emphasis on efficiency of operations and capital Manage down non-core portfolios

18 Business Deposit Balances1 Continued focus on profitable relationships. Run off of higher cost time deposits and promotional money market experienced which helped reduce overall deposit costs by 28 basis points during the quarter US$ in millions %, year-over-year growth rate $43, % -13.9% $48, % -3.0% $50, % 3.2% $49,266 $46, % 4.2% 7.2% 3Q08 4Q08 1Q09 2Q09 3Q09 Total Deposits Retail & Commercial Deposit Growth 1 End of period balances 9.1% Demand deposits NOW Money market Savings Time deposits Total retail and commercial deposits Wholesale deposits Government deposits Customer repo and Eurodollar Total Deposits $6,658 5,194 12,292 3,547 11,585 $39,276 3,123 2,054 1,768 $46, $6,578 4,959 10,013 3,822 10,613 $35,985 3,131 2,081 1,926 $43,123 Y/Y Var. % 1.2% 4.7% 22.8% -7.2% 9.2% 9.1% -0.3% -1.3% -8.2% 7.2% 18 3Q09/ 2Q09 Var. % -10.2% -3.1% 3.1% -1.5% -12.7% -5.5% -32.2% 35.8% 11.9% -6.2%

19 Business Loan Balances1 19 Decline in loan portfolio due to run-off of non-core loan portfolios as well as reduced demand for commercial loans due to economic conditions US$ in millions %, year-over-year growth rate $57,072 $55,869 $54,945 $52,873 $50, Y/Y Var. % 3Q09/ 2Q09 Var. % Commercial Real Estate $12,787 $13, % -1.4% -0.1% -3.3% -7.0% -8.2% -11.0% C&I and other Multifamily Total Commercial Home Equity Residential Mortgage 11,937 4,471 $29,195 7,136 10,328 14,349 4,888 $32,518 6,732 11, % -8.5% -10.2% 6.0% -10.3% -5.7% -1.5% -3.2% 4.9% -8.1% 3Q08 4Q08 1Q09 2Q09 3Q09 Auto Other consumer 3, , % -9.3% -11.3% -1.8% Balances Growth Rate Total Consumer $21,620 $24, % -4.8% Total Loans $50,815 $57, % -3.9% 1 End of period balances

20 Agenda 20 Market Environment 3Q09: Strategy and Business 3Q09: Results* * Results in this section are prepared in accordance with U.S. generally accepted accounting principles (GAAP) but exclude the earnings and balance sheet impact of the contribution of Santander Consumer USA.

21 Results: Net Income 21 Third quarter 2009 results include a deferred tax valuation reversal as a result of higher projected future taxable income due to contribution of SCUSA US$ in millions Pretax income 4 5 3Q08 4Q08 1Q09 2Q09 3Q09 Income/(Loss) Before Taxes Income Tax Benefit Net income/(loss) Dividend on Preferred Stock Net income/(loss) available to parent 9M09 $(1,232) 1,384 $152 $11 $141 9M08 $(963) 209 $(754) $11 $(765) Var. % 09 / % 563.1% % 0.0% % Var. % 3Q09/2Q % % % 0.0% % 4Q08 include a $1.3 billion valuation allowance on deferred tax assets. Results in the third quarter of 2009 include the reversal of this deferred tax valuation of $1.3 billion 1 Results include a $602 million loss on the sale of Sovereign s CDO portfolio and a $575 million impairment charge on FNMA/FHLMC preferred stock. 2 The fourth quarter of 2008 include a $308 million impairment charge on certain nonagency mortgage securities and a $95 million equity method investment impairment charge. 3 The first quarter of 2009 include $233 million of merger related and restructuring charges, a $36.9 million impairment charge on FNMA/FHLMC preferred stock and a $42.8 million impairment on certain non-agency mortgage securities. 4 The second quarter of 2009 include $70.5 million of merger and restructuring related charges, a $35.3 million FDIC assessment and $24.0 million impairment charge on certain non-agency mortgage securities. 5 Results in the third quarter of 2009 include an increase to multifamily recourse reserves of $70 million and restructuring charges of $46 million. Results in this section are prepared in accordance with U.S. generally accepted accounting principles (GAAP)

22 Results: US GAAP and Spanish Results Reconciliation 22 The difference resulting from the reconciliation between US GAAP and Spanish accounting consist of several one-time charges and other adjustments. The majority of these charges were accrued for in the opening balance sheet at the acquisition date US$ in millions $152 -$39 3Q09 US GAAP 3QH09 (1Q only 2 months) Spanish Accounting Main differences (in US$ millions) One-time adjustments : Multi-family loans recourse reserves 141 Restructuring and merger related charges 327 Impairment FNMA/FHLMC preferred 37 Impairment on non-agency securities 97 Reverse valuation allowance release (1.298) Extraordinary credit provisions 313 Total one-time adjustments $(383) Recurrent adjustments: One month out of global consolidation 47 Purchase price adjustment 200 Fiscal adjustments (26) Other adjustments (29) Total recurrent adjustments $192

23 Results: Net Interest Income 23 Net interest income increased 5.3% from the second quarter of 2009 as a result of lower deposit costs and higher investment yields US$ in millions $486 $419 $309 $326 $343 9M09 9M08 Var. % 09 / 08 Var. % 3Q09 / 2Q09 Interest income $2,211 $3,038 (27.2)% (3.2)% Interest expense 1,234 1, % (9.9)% Net Interest Income $977 $1,464 (33.2)% 5.3% 3Q08 4Q08 1Q09 2Q09 3Q09 Results in this section are prepared in accordance with U.S. generally accepted accounting principles (GAAP)

24 Results: Spreads1 The decline in deposit spreads from one year ago is due to reductions in market interest rates and growth in higher cost time deposit and money market accounts. In recent quarters, Sovereign has focused on repricing these accounts to improve profitability 24 Deposit Spread, % Loan Spread, % Q08 4Q08 1Q09 2Q09 3Q09 3Q08 4Q08 1Q09 2Q09 3Q09 1 Spreads calculated using local criteria but have been restated to conform with Parent methodology Results in this section are prepared in accordance with U.S. generally accepted accounting principles (GAAP)

25 Results: Net Fees Results in the third quarter of 2009 and year to date have included charges to increase multifamily recourse liabilities of $67 million and $140 million, respectively. Commercial fees have declined due to current economic conditions which has resulted in reduced loan demand US$ in millions $163 $111 $91 $176 $100 3Q08 4Q08 1Q09 2Q09 3Q09 Consumer banking fees Commercial banking fees Capital markets revenue Fee Income Mortgage banking revenues Multifamily revenues Bank owned life insurance and other Other Fees Total Fees 9M09 $ (3) $ (137) 58 $(20) $366 9M08 $ $ $108 $526 Var. % 09 / % (12.9)% (112.9)% (7.7)% 136.0% (1,470)% (20.8)% (118.7)% (30.4)% 25 Var. % 3Q09 / 2Q09 9.8% (3.3)% (191)% (1.8)% (58.3)% 294.1% (10.8)% (185)% (43.1)% Results in this section are prepared in accordance with U.S. generally accepted accounting principles (GAAP)

26 Results: Gain / (Loss) on Financial Transactions 26 Results have been impacted by impairment charges on certain non-agency mortgage securities US$ in millions -$78 -$23 -$10 Security gain/(loss) 9M09 $(111) 9M08 $(1,143) Var. % 09 / 08 (90.3)% Var. % 3Q09 / 2Q09 (57.4)% -$313 -$1, Q08 4Q08 1Q09 2Q09 3Q The third quarter of 2008 include a $602 million loss on the sale of Sovereign s CDO portfolio and a $575 million impairment charge on FNMA/FHLMC preferred stock. 2 The fourth quarter of 2008 include a $308 million impairment charge on non-agency mortgage securities. 3 The first quarter of 2009 include a $36.9 million impairment charge on FNMA/FHLMC preferred stock and a $42.8 million impairment on non-agency mortgage securities. 4 The third and second quarter of 2009 include impairment charges on non-agency mortgage securities of $30.6 million and $23.4 million. Third quarter results also include a gain of $20.3 million on the sale of our entire FNMA/FHLMC preferred stock portfolio. Results in this section are prepared in accordance with U.S. generally accepted accounting principles (GAAP)

27 Results: Total Expenses Declining trend in expenses continues as third quarter results included lower deposit insurance and restructuring charges. Included in the second quarter of 2009 is a special FDIC assessment fee of $35.3 million US$ in millions $428 $548 $635 $470 $406 Personnel Other adm. 9M09 $ M08 $ Var. % 09 / 08 (14.4)% (5.7)% 27 Var. % 3Q09 / 2Q09 (6.4)% 4.9% G&A expenses $985 $1,097 (10.2)% (0.7)% Deposit insurance premium % (51.8)% 3Q08 4Q08 1Q09 2Q09 3Q09 Intangible amortization Equity method investments (31.1)% (39.0)% (6.5)% (105.1)% Adm. expenses Core deposit intangible Deposit insurance premium Equity method investments Restructuring and merger costs Total expenses 350 $1,511 4 $1,240 n/a 22.0% (34.4)% (13.5)% Restructuring and merger related Results in this section are prepared in accordance with U.S. generally accepted accounting principles (GAAP)

28 Results: Net Operating Income 28 Net operating income negatively impacted by non-recurring restructuring and merger related charges and impairment charges on the securities portfolio US$ in millions -$938 -$331 -$ $9 $26 Net interest income Total Fees Security gains/ (losses) Total expenses Net operating income 9M09 $ (111) 1,511 $(279) 9M08 $1, (1,143) 1,239 $(392) Var. % 09 / 08 (33.2)% (30.4)% (90.3)% 22.0% (28.7)% Var. % 3Q09 / 2Q09 5.3% (43.1)% (57.4)% (13.5)% 234.4% 1 The third quarter of 2008 includes a $602 million loss on the sale of Sovereign s CDO portfolio and a $575 million other-than-temporary impairment charge on FNMA/FHLMC preferred stock Q08 4Q08 1Q09 2Q09 3Q09 2 The fourth quarter of 2008 includes a $308 million other-thantemporary impairment charge on certain non-agency mortgage securities. 3 Merger related and restructuring charges were $233 million, excluding these charges net operating income was $(80) million. In addition, the company recorded a $36.9 million other-than-temporary impairment charge on FNMA/FHLMC preferred stock and a $42.8 million impairment on certain non-agency mortgage securities. Results in this section are prepared in accordance with U.S. generally accepted accounting principles (GAAP)

29 Results: Provisions and Loan Quality Non performing loans to total loans increased from 3.89% to 4.69% driven primarily by residential and commercial real estate loan portfolios US$ in millions 29 Provision & Allowance Non-performing Loans & Coverage Ratio $304 $340 $ % 3.18% 3.30% $237 $ % 128% 92% 3.01% 3.89% 80% 4.69% 70% 1.79% 2.10% 1.12% 1.64% 3Q08 4Q08 1Q09 2Q09 3Q09 3Q08 4Q08 1Q09 2Q09 3Q09 Provision for credit losses Allowance for credit losses to total loans Allowance for credit losses to non-performing loans Non-performing loans to total loans Results in this section are prepared in accordance with U.S. generally accepted accounting principles (GAAP)

30 Results: Ratios1 30 Cost ratios are being negatively impacted by lower levels of revenue Cost to Income2, % Fees / Costs3, % ROE % 3.1% 73.3% 55.1% 47.9% -13.3% 37.1% Sep-08 Sep-09 Sep-08 Sep-09 Sep-08 Sep-09 1 Ratios calculated using local criteria 2 Cost to Income defined as G&A expense dividend by revenues before gain/(loss) on securities 3 Fees / Costs defined as fee income before gain/(loss) on securities divided by G&A expense Results in this section are prepared in accordance with U.S. generally accepted accounting principles (GAAP)

31 31 Appendix Results 3Q09 Trended Results Balance Sheet Santander acquired Sovereign on January 30, 2009; therefore, only 8 months of Sovereign s results are included in the Group s 3Q09 results.

32 Income Statement Spanish Criteria US$ million 32 9M 09 Net interest income 1,101 Net fees 385 Gains/(losses) on financial transactions 65 Other operating income * (112) Gross income 1,439 Operating expenses (904) General administrative expenses (789) Personnel (476) Other general and administrative expenses (313) Depreciation and amortization (114) Net operating income 535 Net loan loss provisions (580) Other income (26) Profit before taxes (71) Tax on profit 32 Profit from continuing operations (39) New profit on discontinued operations Consolidated profit (39) Minority interests Attributable profit to the Group (39) * Including dividends, income from equity-accounted method and other operating income/expenses Santander acquired Sovereign on January 30, 2009; therefore, only 2 months of Sovereign s results included in the Group s 1Q09 results.

33 Income Statement Spanish Criteria 33 US$ million Q109 Q209 Q309 Net interest income Net fees Gains/(losses) on financial transactions (13) Other operating income * (8) (70) (34) Gross income Operating expenses (249) (332) (323) General administrative expenses (220) (289) (280) Personnel (136) (174) (166) Other general and administrative expenses (84) (115) (115) Depreciation and amortization (29) (43) (42) Net operating income Net loan loss provisions (122) (238) (221) Other income (1) (0) (24) Profit before taxes (38) (26) (7) Tax on profit Profit from continuing operations (25) (10) (4) New profit on discontinued operations Consolidated profit (25) (10) (4) Minority interests Attributable profit to the Group (25) (10) (4) * Including dividends, income from equity-accounted method and other operating income/expenses Santander acquired Sovereign on January 30, 2009; therefore, only 2 months of Sovereign s results included in the Group s 1Q09 results.

34 Balance Sheet Spanish Criteria 34 US$ million Loans and credits* 50,385 Trading portfolio (w/o loans) 298 Available-for-sale financial assets 13,325 Due from credit institutions* 1,124 Intangible assets and property and equipment 584 Other assets 4,261 Total assets/liabilities & shareholders' equity 69,976 Customer deposits* 46,321 Marketable debt securities* 14,263 Subordinated debt 3,465 Insurance liabilities Due to credit institutions* 756 Other liabilities 2,030 Shareholders' equity 3,142 Off-balance-sheet funds 654 Mutual funds Pension funds Managed portfolios 654 Savings-insurance policies Customer funds under management 64,702 * Includes all stock of concept classified in the balance sheet Santander acquired Sovereign on January 30, 2009; therefore, only 2 months of Sovereign s results included in the Group s 1Q09 results.

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