Institutional Presentation

Transcription

1 Institutional Presentation 2018

2 Highlights Santander, a leading financial group 2018 Highlights Total assets (EUR trillion) 1.46 Gross customer loans (EUR billion excluding reverse repos) 874 Customer deposits + mutual funds (EUR billion excluding repos) 906 Branches 13, Attributable profit (EUR million) 6, Attributable profit (EUR million) 7,810 Market capitalisation (EUR billion; ) 65 People (headcount) 202,713 Customers (millions) 144 Shareholders (millions) 4.1 Communities 1 (million people helped in 2018) 2.3 (1) Provisional data

3 Index 1. Our purpose and business model 2. Aim and value creation 3. Corporate governance and internal control 4. Group structure and business units Highlights results and activity 6. Summary and mid-term targets

4 Our purpose and 1.business model

5 1. Our purpose and business model A model of sustainable, predictable growth OUR PURPOSE to help people and businesses prosper OUR AIM AS A BANK to be the best open financial services platform, by acting responsibly and earning the lasting loyalty of our people, customers, shareholders and communities OUR HOW Simple Personal Fair Our model and the results it generates show that Santander is on the right track 5

6 1. Our purpose and business model A model of sustainable, predictable growth 1 We have SCALE and the potential to grow organically 2 PREDICTABLE GROWTH: diversification by country and business, which contributes higher profits in a more stable manner 3 Focus on increasing CUSTOMER LOYALTY and OPERATIONAL EXCELLENCE 6

7 1. Our purpose and business model 144 million customers in markets with a total population of more than one billion Customers by country. Dec-18 * Potential for organic growth through increased loyalty and digitalisation Mexico 12% USA 4% Argentina 3% Others 1% Chile 2% Brazil 29% 144 Million customers Spain 12% UK 18% SCF 13% Poland 3% Portugal 3% Loyal customers (millions) Digital customers (millions) 15% 26% Dec-17 Dec-18 Dec-17 Dec-18 Our scale gives us efficiency, sources of growth and new business opportunities 7

8 1. Our purpose and business model We have a relevant position in our core markets Americas Europe United States 3 Mexico Brazil United Kingdom 1 Poland 2 Loans: 3% Deposits: 3% Loans: 13% Deposits: 13% Loans: 9% Deposits 4 : 11% Loans: 10% Deposits: 9% Loans: 12% Deposits: 12% Chile Loans: 19% Deposits: 18% Argentina Loans: 10% Deposits: 13% Portugal Loans: 18% Deposits: 16% Spain Loans: 18% Deposits 5 : 18% SCF Top 3 We maintain leadership position in our core markets Data: Market-share as at Dec-18 or latest available. (1) Loans include household (mortgages and consumer credit) plus corporate loans. Deposits include household deposits (with banks and NS&I) and corporate deposits, excluding cash holdings (2) Including Santander Consumer Finance business (SCF) (3) In all states where Santander Bank operates (4) Includes demand, savings and time deposits, LCA (agribusiness notes) and LCI (real estate credit notes) (5) Other Resident Sectors in Spain 8

9 1. Our purpose and business model Our model is based on a balanced geographic diversification Contribution to 2018 underlying attributable profit 1 Balanced distribution between mature markets, which provide *stability, and developing markets, which fuel growth in revenue Other Latam; 2% Other Argentina; 1% Europe; 1% Chile; 6% United Kingdom; 13% Americas Europe 48% 52% Brazil; 26% Spain; 17% Mexico; 8% United States; 5% Poland; 3% Portugal; 5% SCF; 13% (1) Excluding Corporate Centre and Real Estate Activity Spain 9

10 1. Our purpose and business model with a good a business mix by products and segments Loan portfolio by business Customer funds by business CIB, 11% Corporates, 16% Other individuals, 9% EUR 874 bn Home mortgages, 36% CIB, 10% Corporates, 12% SMEs, 10% EUR 906 bn Individuals demand deposits, 36% Individuals time deposits, 14% SMEs, 11% Consumer, 17% Consumer, 4% Individuals mutual funds, 14% Good mix of products for individuals, consumer finance, SMEs, companies and other products Note: Loans excluding reverse repos. Customer funds: deposits excluding repos + marketed mutual funds 10

11 1. Our purpose and business model which is key to our stable and predictable growth Profitability drivers Average quarterly EPS volatility Pre-provision profit, EUR bn EPS volatility calculated using quarterly data from Jan-99 to Q % 348% 125% 110% 89% 77% 57% 45% 43% 33% % Pre-provision profit / loans 3.03% 3.28% 3.26% 3.25% 3.06% 2.94% 3.04% 2.90% 2.83% 2.97% 2.89% -2x 3x -1x -1x 6x 3x 4x 3x 1x 10x 4x Cost of credit 1.02% 1.36% 1.40% 1.65% 2.44% 1.69% 1.43% 1.25% 1.18% 1.07% 1.00% Source: Bloomberg Net profit increase Note: GAAP criteria. Standard deviation of the quarterly EPS starting from the first available data since Jan-99 Our unique business model allows us to deliver better results with less volatility and sustainable growth 11

12 1. Our purpose and business model Customer loyalty and operational excellence The digital transformation of our core banks (Supertankers) is customer focused with two key priorities Priority 1 Priority 2 * Two key priorities for digital transformation of the core banks All our products & services through E2E digital channels Deliver all products & services in a fast and efficient way Best-in-class in operational excellence * to continue to deliver the best customer service More digital customers Increased customer engagement Stronger loyal relationships Top 3 bank in 7 core countries in customer satisfaction 1 (1) Internal benchmark of active customers' experience and satisfaction 12

13 1. Our purpose and business model Customer loyalty and operational excellence We are re-engineering our core banks (Supertankers) leveraging Group scale and innovation Transforming the FRONT All products and services to be available in digital channels (end-to-end) 15% cloud adoption 15-30% efficiencies over IT infrastructure cost Transforming the BACK Re-engineering, digitizing and automatizing all our processes 1,200 robots allow c.10% cost reduction of processes Evolving our IT architecture and systems Our Core banking system is a structural advantage Onboarding new technologies Rapid integration of new technologies in our day-to-day operations Becoming an agile and data-driven organisation Machine Learning -40% customer churn +20% conversion rate improvement Santander Agile Way 35% of projects in agile (450 teams) 13

14 1. Our purpose and business model Customer loyalty and operational excellence We have launched autonomous ventures (Speedboats) that serve our core banks with new solutions while competing in the open market Openbank 1 Santander One Pay FX Superdigital 1 * One of the largest fully digital bank by balance sheet with full suite of products & services +20% loyal customers (Dec-18 vs. Dec-17) +19% deposit growth (Dec-18 vs. Dec-17) First blockchain-based retail *payments solution Spain Brazil UK Poland Financial solution for the unbanked * >350 k active customers +28% in revenue (2018 vs. 2017) +35% in deposits (Dec-18 vs. Dec-17) (1) Openbank data in Spain and Superdigital data in Brazil 14

15 Aim and value 2.creation

16 2. Aim and value creation Santander is one of the most valued brands in the world 5 th best global bank brand (BrandZ ranking, 2018) 6 th best global financial brand (BGB 2018, Interbrand Ranking) People 202,713 employees Customers 144 million Our brand embeds the essence of the Group's culture and identity: our purpose: help people and businesses prosper our aim as a bank: to be the best open financial services platform, by acting responsibly and earning the lasting loyalty of our people, customers, shareholders and communities and behave in a way that is simple, personal and fair Communities 1 Shareholders million people helped in 2018 Simple Personal Fair million (1) Provisional data 16

17 2. Aim and value creation People People 2018 Global engagement survey 202,713 Employees Dec-18 55% 45% Women University graduates 82% Engaged employees One of the Top 3 leading banks to work for in 7 countries * Our people management strategy focuses on six key areas Talent management Knowledge and development *The SPF culture is based on our corporate behaviours I show respect I truly listen I talk straight I keep promises Culture Our goal is to be the best bank to work for Remuneration and benefits I actively encourage cooperation I bring passion I support people I embrace change Systems Employee experience A new corporate management evaluation model 60% what we do 40% how we do it 17

18 2. Aim and value creation 144 million customers Dec (+15%) million loyal customers (Dec-18 vs. Dec-17) 32.0 (+26%) million digital customers (Dec-18 vs. Dec-17) Customers * Operational Our value proposal aims to meet the needs of our different customer profiles Innovative, simple, personalised solutions * excellence to maximise the Bank s efficiency and customer service quality New collaborative spaces focused on customer experience and digital capacities A value proposal for individual customers: World Santander Plus As I Want it Account A new global division: Santander Wealth Management Global solutions: Chile, Brazil, Spain, Portugal and Argentina Smart and Santander Ágil branches Spain, UK, Mexico, Santander SMEs Santander Cash Nexus New autonomous ventures: Top 3 in customer satisfaction 1 in 7 core countries Superdigital (1) Internal benchmark of active customers' experience and satisfaction 18

19 2. Aim and value creation Shareholders 4.1 Million Dec-18 +5% Total dividend per share growth vs Among the best banks in Europe by profitability Share capital distribution (by investor, Dec-18) * In 2018, increase in shareholder remuneration Underlying RoTE in % 40% 1% 59% Institutional investors Board Retail shareholders Santander Investor Day: sharing the Bank's strategy and outlook with analysts and investors Largest bank in the Eurozone by stock market value Market capitalisation at end Dec-18 EUR 64,508 mn We strengthened capital Fully loaded CET1 2 Dec % (1) Total dividends charged to 2018 earnings are subject to the board and AGM approval (2) Data calculated using the IFRS 9 transitional arrangements 19

20 2. Aim and value creation 2.3 million people helped in >72 k scholarships granted in ~1.2 k agreements with universities and academic institutions in 21 countries 1 Communities Contributing to the economic and social progress of people and *businesses in a responsible and sustainable way We support and promote financial inclusion * any Community investment: invest more in supporting education than other private company in the world Firm supporter of higher education 96 Santander X Universities from 8 different countries Firm commitment to the environment In the DJSI socially responsible investment index (since 2000) and in the FTSE4Good (since 2002) Leading Global Bank in the financing of renewable energy projects 2 3 rd Bank in the world 1 st Bank in Europe (1) Provisional data (2) #1 position based on number of operations; #2 position based on volume; Source: Dealogic 20

21 2. Aim and value creation Our strategy since 2015 has demonstrated clear results People Customers Shareholders Communities Strategic priorities Be the best bank to work for and have a strong internal culture. Earn the lasting loyalty of our individual and corporate customers. Digital transformation and operational excellence. Capital strength, risk management and profitability. Support people in the local communities where the Bank operates / Santander Universities Results More motivated and engaged employees, sharing a common culture Increased loyal and digital customers, more satisfied We have provided sustainable growth and predictable profits for our shareholders Higher investment in the community and more people helped 21

22 2. Aim and value creation and we have successfully completed our 3 year plan ~10% Loyal customers (mn) 13.8 Digital customers (mn) 16.6 Fee income % 2 Cost of credit Cost-to-income EPS growth DPS (EUR) FL CET1 RoTE % 48% % 10.0% 47% 11.2% % 11.7% Note: 2015 metrics have been re-stated to reflect the capital increase. (1) % change (constant euros), 2018 figure relates to CAGR (2) 2018 figure relates to average (3) Total dividend charged to 2018 earnings is subject to the Board and 2019 AGM approval (4) Underlying RoTE 2015: 11.0%. Underlying RoTE % 22

23 Corporate governance and 3.internal control

24 3. Corporate governance and internal control Corporate governance * Composition of the Board Dec-18 Balanced Board composition Respect for shareholders rights 20% 60% Non-executive directors (independent) Executive directors 20% Non-executive directors (neither proprietary nor independent) Maximum transparency in terms of remuneration At the forefront of best practices and longterm vision * Percentage of women on the Board Clear and robust governance with welldefined accountability and prudent management of risks and opportunities 33% 36% 33% 19% 11%

25 3. Corporate governance and internal control Internal control Parent-subsidiary governance model Group Subsidiary B Board of Directors Group Executive Chairman Subsidiary A 1 Board of Directors 1 Presence of Grupo Santander in the subsidiaries' Board of Directors establishing guidelines for board dynamics and effectiveness Group CEO 2 CEO/Country head 2 Reporting of the CEO / country heads to the Group CEO and Group executive committee Control and Management Functions Control and Management Functions Compliance Internal Audit Risk 3 Compliance Internal Audit Risk 3 Interaction between the Group and the subsidiaries control, management and business functions Finance Finance Financial Control / Accounting Other Financial Control / Accounting Other The Group s appointment and suitability assessment procedure is a key element of governance 25

26 Group structure and 4.business units

27 4. Group structure and business units Group structure * Based on 9 markets and on the consumer finance business in Europe, supported by the Corporate Centre activities and other functions Units and businesses United States Brazil Mexico Chile Argentina Santander Corporate & Investment Banking Santander Wealth Management 2 Spain Portugal United Kingdom SCF 1 Poland SCF Uruguay Peru Colombia Asia-Pacific Representative offices Group functions and Corporate Centre activities Internal Audit Risk & Compliance Santander Digital Universities Communication, Corporate Marketing and Research Costs General Secretariat and Human Resources Technology and Operations Financial Accounting and Management Control Financial Division Strategy & Corporate Development (1) Santander Consumer Finance (SCF) with presence in Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the UK (2) In 2019 the insurance business will be included in Santander Wealth Management unit, which will increase the unit s contribution to the Group and its global synergies. 27

28 4. Group structure and business units Spain Santander España maintains its loyalty-centred strategy while making progress on its digital transformation 2018 Highlights Strategic priorities Branches 4,366 Employees 32,313 Complete Banco Popular s integration, maintaining quality service and customer relationship Keep on growing SMEs and Corporate segments Accelerate the Bank s digital transformation in order to improve the customer experience Loyal customers (millions) 2.7 Digital customers (millions) 4.8 Gross loans* 209,630 Customer funds* 315,351 Underlying attributable profit* 1,738 Contribution to Group s profit 17% (*) EUR million Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds 28

29 4. Group structure and business units Santander Consumer Finance SCF SCF is the consumer finance leader in Europe with best in class profitability and efficiency 2018 Highlights Strategic priorities Branches 438 Employees 14,865 Maintain high profitability and efficiency, while reorganising business in Germany under the same brand Remain the leader in new auto financing and boost growth in consumer finance Help our partners with their transformation plans New digital business model and signing agreements with the main retailers Customers (millions) 19.4 E-commerce open platform Mobile payments Awards 15 countries Gross loans* 97,707 Germany Spain Customer funds* 36,531 Italy Portugal Underlying attributable profit* 1,296 Poland France Contribution to Group s profit 13% Digital interaction Analytics & digital marketing Finland Norway Sweden Denmark Netherlands Austria Belgium Switzerland United Kingdom 1 (*) EUR million. Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds. (1) UK data included in SAN UK 29

30 4. Group structure and business units Poland Position in Poland reinforced by the integration of the retail and SME businesses of DBP 1. BZ WBK was renamed Santander Bank Polska 2018 Highlights Strategic priorities Branches 611 Employees 12,515 Become a more agile organisation in order to increase customer loyalty and retention Remain the leader in digital channels in Poland Strengthen Santander brand Enhance our position in Private Banking and Wealth Management Loyal customers (thousands) 1,802 Digital customers (thousands) 2,203 #1 in mobile banking Account as I Want It (Konto Jakie Chcę) Gross loans* 29,033 Customer funds* 35,554 Underlying attributable profit* 298 Contribution to Group s profit 3% Apple Pay, Google Pay, Garmin Pay, BLIK, HCE (*) EUR million Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds. (1) Deutsche Bank Polska 30

31 4. Group structure and business units Portugal In Portugal, with Banco Popular's integration, we consolidated our position as the country s 1 largest privately owned bank 2018 Highlights Strategic priorities Branches 572 Employees 6,705 Progress in our digital transformation and streamlining workflow Improve efficiency obtaining additional synergies from Banco Popular integration Gaining market share with low cost of credit Loyal customers (thousands) 752 Digital customers (thousands) 734 Gross loans* 36,568 Customer funds* 39,143 Underlying attributable profit* 480 Popular Portugal integration Contribution to Group s profit 5% (*) EUR million. Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds. (1) Domestic activity 31

32 4. Group structure and business units United Kingdom One of the leading banks in the United Kingdom, with an innovative value proposition for retail customers and small businesses 2018 Highlights Strategic priorities Branches 756 Employees 25,872 Become the UK s best open digital bank in order to deliver operational excellence Generate growth through increased loyalty across target business segments Achieve constant profitability through balance sheet strength and prudent risk management Loyal customers (millions) 4.4 Digital customers (millions) 5.5 Gross loans* 235,753 Customer funds* 206,630 Underlying attributable profit* 1,362 Digital mortgages Contribution to Group s profit 13% (*) EUR million Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds. 32

33 4. Group structure and business units Brazil Santander Brasil has a customer-centred model and a strategy focused on sustainable and profitable growth 2018 Highlights Strategic priorities Branches 3,438 Employees 46,914 Increase customer satisfaction and loyalty across all segments Profitable market share gains Continue efficiency and cost of credit improvement Innovative solutions (digital & disruptive bank) Loyal customers (millions) 5.2 SuperGet Digital customers (millions) 11.4 Gross loans* 75,282 Customer funds* 110,243 Underlying attributable profit* 2,605 Select Direct More innovations in the sales management app Greater convenience and agility Payrolls Santander Way Agribusiness Contribution to Group s profit 26% Meus Compromissos Enhanced financial management on mobile devices Employment benefits Fully digital investment platform SMEs (*) EUR million Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds. 33

34 4. Group structure and business units Mexico Santander Mexico, a leading financial group in the country, focused on commercial transformation and innovation 2018 Highlights Strategic priorities Branches 1,418 Employees 19,859 Continue the retail banking transformation: enhancing our attention model and expand new businesses Drive digitalisation, remote attention models and customer experience Focus on attracting payrolls, drawing on our strong position in SMEs and Corporates Promote SCIB business Loyal customers (thousands) 2,515 Digital customers (thousands) 2,879 Gross loans* 31,192 Customer funds* 38,630 Underlying attributable profit* 760 Select Me Women proposition Contribution to Group s profit 8% (*) EUR million Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds. 34

35 4. Group structure and business units Chile Chile s leading privately owned bank by assets and customers 2018 Highlights Strategic priorities Branches 381 Employees 12,008 Continue the commercial transformation via the new branch network model and digital banking Improve customer service quality and grow loyal and digital customer base Significant growth in loans and customer funds Increase profitability, improving efficiency and cost of credit Loyal customers (thousands) 668 Digital customers (thousands) 1,086 Gross loans* 39,019 Customer funds* 33,279 Underlying attributable profit* 614 Contribution to Group s profit 6% (*) EUR million Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds. 35

36 4. Group structure and business units Argentina Santander Río is the country's largest privately owned bank by banking business 2018 Highlights Strategic priorities Branches 468 Employees 9,324 Continue the transformation of the branch network, focused on improving customer experience Improve the value offer, prioritising Select, SMEs Advance and mid-income segments Action plans to generate savings and improve efficiency Openbank launch Loyal customers (thousands) 1,423 Digital customers (thousands) 2,094 Gross loans* 5,574 Customer funds* 10,191 Underlying attributable profit* 84 Contribution to Group s profit 1% (*) EUR million Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds. 36

37 4. Group structure and business units United States Santander US has built a strong presence in the Northeast of the US 2018 Highlights Strategic priorities Branches 660 Employees 17,309 Improve customer experience in order to drive volume growth Seize collaboration opportunities across our businesses in order to drive value Cost management and efficiency improvement Continue resolving legacy regulatory issues Loyal customers (thousands) 339 Digital customers (thousands) 894 Gross loans* 83,696 Customer funds* 64,239 Underlying attributable profit* 552 Contribution to Group s profit 5% (*) EUR million. Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds. Santander Bank customers 37

38 4. Group structure and business units Santander Corporate & Investment Banking SCIB SCIB is the global business division for corporate and institutional customers who require tailored service and value-added wholesale products suited to their complexity and sophistication 2018 Highlights Strategic priorities Underlying attributable profit* 1,705 Contribution to the Group's profit 17% Fully leverage our customer-centric model, to drive greater penetration of our franchise and faster growth in retail banking business (collaboration revenue) Strengthen the global value proposition, focusing on increasing our presence in the US, UK and Continental Europe Continue the implementation of the GIP 1, while embracing the digital transformation Maintain disciplined use of capital, while keeping strict cost control SCIB: a global relationship model designed to better serve customer needs 11% 33% Global Transaction Banking 30% Revenue (2018) Global Debt Financing Global Markets Enhance tailormade services Customer-centric strategy Global and local teams Capital & Other 26% Simplifying interactions with customers Nurturing long-term relationships (*) EUR million (1) Implementation of the Global Infrastructure Programme (GIP) following the regulatory agenda 38

39 4. Group structure and business units Santander Wealth Management Our aim: become the best Wealth Manager in Europe and the Americas 2018 Highlights Strategic priorities Private Banking customers c.174 k Private Banking Asset Management Assets under management 1 Contribution to profit 2 EUR 329 bn EUR 1,015 mn Build, scale and connect local models in one platform Become the best local provider in our footprint Develop the Private Wealth segment proposition Build competitive edge on our global capabilities Private banking digital transformation New IT model and digital investment platform Foster collaboration among countries private banking, SAM, SCIB and SMEs ESG 3 strategy In 2019 the insurance business will be included in Santander Wealth Management unit, which will increase the unit s contribution to the Group and its global synergies (1) Private Banking + SAM excluding AUM of Private Banking customers (2) Profit after tax + net fee income generated by this business (3) Environmental, Social and Governance 39

40 2018 Highlights 5.results and activity

41 Highlights results and activity Key achievements * Growth * Profitability * Strength Loans 1 EUR 874 bn (+4%) Underlying attributable profit 1 EUR 8,064 mn (+18%) FL CET % (+46 bps) Customer funds 1 EUR 906 bn (+4%) Underlying RoTE 12.1% (+26 bps) NPL ratio 3.73% (-35 bps) (1) YoY change in constant euros (2) 2018 data calculated using the IFRS 9 transitional arrangements Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds. 41

42 Highlights results and activity Key achievements Double digit profit growth with sustainable quarterly performance EUR mn 2018 % vs Euros Constant euros Net interest income 34, Fee income 11, Underlying attributable profit Constant EUR mn +12% Q4 18 vs Q4 17 Customer revenues 45, ROF and other 2, Gross income 48, ,844 1,803 1,986 1,978 2,084 2,016 Operating expenses -22, ,618 1,541 Net operating income 25, Net loan-loss provisions -8, Other provisions -1, PBT 14, Underlying attrib. profit 8, Net capital gains and provisions Attributable Profit 7, Q1'17 Q2 Q3 Q4 Q1'18 Q2 Q3 Q4 Attributable profit Constant EUR mn 1,618 1,541 1,329 1,424 1,986 1,678 2,084 2,062 Note: Contribution to the SRF (net of tax) recorded in Q2 17 (EUR -146 mn) and Q2 18 (EUR -187 mn). Contribution to the DGF in Spain (net of tax) in Q4 17 (EUR -155 mn) and Q4 18 (EUR -158 mn) (1) In 2018, costs associated to integrations (mainly restructuring costs), net of tax impacts, in Spain (EUR -280 mn), Corporate Centre (EUR -40 mn) and Portugal (EUR 20 mn) and badwill in Poland for the integration of Deutsche Bank Polska (EUR 45 mn). In 2017, integration costs (Popular: EUR -300 mn and Germany: EUR -85 mn), charges for equity stakes and intangible assets (EUR -130 mn), capital gains from the disposal of the stake in Allfunds Bank (EUR 297 mn), USA fiscal reform (EUR 73 mn), goodwill charges (EUR -603 mn) and in the US provisions for hurricanes and other in USA and other (EUR -149 mn). 42

43 Highlights results and activity Key achievements Revenues: for yet another year, growth driven by strong recurring customer revenues Net interest income 7,458 8,179 8,969 YoY growth due to greater volumes and management of spreads, with improvement in 9 of our 10 core markets Sustained QoQ evolution Q4 favoured by TDR reclassification in the US (c. EUR 180mn) Fee income 2,499 2,775 2,908 Higher fee income reflecting greater activity and customer loyalty QoQ improvement partially due to seasonality (Brazil) YoY increase in the majority of our main markets Other revenues Q1'17 Q2 Q3 Q4 Q1'18 Q2 Q3 Q4 Low Q4 18 affected by DGF contribution in Spain and high inflation adjustment in Argentina Note: Constant euros (1) Other income includes gains/losses on financial transactions, income from the equity accounted method, dividends and other operating results. Contribution to the SRF recorded in Q2'17 and Q2'18. Contribution to the DGF in Spain recorded in Q4 17 and Q4 18. (2) TDR (Troubled Debt Restructuring) 43

44 Highlights results and activity Key achievements Costs: best-in-class cost-to-income ratio while enhancing customer experience Cost evolution 2018 vs. 2017, % SCF Nominal 1 In real terms Group costs in real terms -0.5% in % in 2017 Group cost-to-income 47.0% in % in 2017 Top 3 in customer satisfaction 3 in 7 core markets Note: Constant euros (1) Spain and Portugal include Popular (2) Excluding inflation and perimeter (3) Internal benchmark of active customers' experience and satisfaction 44

45 Highlights results and activity Key achievements Continued credit quality enhancement: YoY improvement in all metrics Improved NPL and coverage ratios at Group level Lower cost of credit 2 at Group level Risk culture: risk pro (%) 65 Coverage ratio (%) Risk pro defines the way in which we understand and manage risks in our day-to-day activities NPL ratio Dec-17 Mar-18 Jun-18 Sep-18 Dec (1) IFRS 9 first application (2) Provisions to cover losses due to impairment of loans in the last 12 months / average customer loans and advances of the last 12 months 45

46 Highlights results and activity Key achievements Capital: we surpassed our goal of 11% in 2018 Fully loaded CET1 evolution % High organic capital generation in bps FL Total Capital ratio Dec % FL Leverage ratio Dec % Dec-17 Sep-18 1 Organic Perimeter 2 Other Dec-18 1 generation Our positive results over the 7 stress tests since 2008 demonstrate the strength and diversification of our model (1) Data calculated using the IFRS 9 transitional arrangements, otherwise the total impact would have been -27 bps (2) WiZink: +8 bps 46

47 Highlights results and activity Key achievements Positive performance of RoTE and RoRWA RoTE (%) RoRWA (%) Underlying Total

48 Highlights results and activity Key achievements Creating value for our shareholders TNAVps (EUR) % 4.19 Reaching double digit EPS growth in 2018 (vs. 2017) Cash DPS (EUR) % Statutory EPS (EUR) % (1) Total dividend charged to 2018 earnings is subject to the Board and 2019 AGM approval 48

49 Highlights results and activity Grupo Santander financial information * For additional information on the Group and the various countries, please click on the links to see the following reports and countries presentations SCF Earnings presentation Financial report Countries' presentations 49

50 Summary and mid-term 6.targets

51 6. Summary and mid-term targets plan completed: exceeding our targets while building the foundations for continued success Continue building on our strengths with a clear strategy to fulfil our aim and purpose Focus on customer loyalty and digital excellence to continue delivering profitable growth Accelerating in building a smartly connected Group to the benefit of all our stakeholders Mid-term targets RoTE 13-15% FL CET1 11%-12% 51

52 i. Important information In addition to the financial information prepared under International Financial Reporting Standards ( IFRS ), this presentation certain alternative performance measures ( APMs ) as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority on 5 October 2015 (ESMA/2015/1415en) as well as non- IFRS measures ( 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. 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 IFRS, please see Q Financial Report, published as Relevant Fact on 30 January 2019, Section 26 of the Documento de Registro de Acciones for Banco Santander, S.A. ( Santander ) filed with the Spanish Securities Exchange Commission (the CNMV ) on 28 June 2018 (the Share Registration Document ) and Item 3A of the Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission of the United States of America (the SEC ) on 28 March 2018 (the Form 20-F ). These documents are available on Santander s website ( Santander cautions 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 Form 20-F under Key Information-Risk Factors - and in the Share Registration Document under Risk Factors - 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 forwardlooking statements. 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. 52

53 i. Important information 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. 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 this presentation. No investment activity should be undertaken on the basis of the information contained in this 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. 53

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