26 October 2017 MEXICO. January September 2017

Transcription

1 26 October 2017 MEXICO January September 2017

2 Disclaimer Banco Santander, S.A. ("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 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 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. 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 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 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 4, 2017 (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 31, 2016, filed with the U.S. Securities and Exchange Commission on March 31, 2017 (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 ( Note: The Information contained in this presentation shall not be used or considered under any circumstances as a petition for sale or buy in the terms of the Ley del Mercado de Valores. (Mexican Securities Market Law regulation). 2

3 Content Macroeconomic environment and financial system Strategy and business Results Appendix

4 Macro-economic environment Moderate but stable growth, despite temporary rise in inflation and policy uncertainty Annual GDP Growth (%, real) Central Bank Monetary Policy (%, end of year) (e) 2018 (e) 2019 (e) (e) 2018 (e) 2019 (e) Inflation (%, annual change) Average Exchange Rate (MxP/USD) (e) 2018 (e) 2019 (e) (e) 2018 (e) 2019 (e) 4

5 Macro-economic environment 2014/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /07 Activity supported by resilient domestic market and recovery in manufacturing driven by exports GDP (% annual change, s.a.) Domestic Consumption (% annual change, 3m m.a.) Industrial activities Services I II III IV I II Exports (% annual change, 3m m.a.) Industrial Production (index, Jan 2014=100) Industrial Production Manufacturing Production Source: INEGI 5

6 2014/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /07 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Macro-economic environment Inflation expected to decrease in response to monetary policy, consumer confidence has rebounded and labor market remains strong Annual Inflation and Monetary Policy Rate (%) Private Sector Inflation Expectations (%) Consumer prices Producer Prices Policy Rate to 4 years 5 to 8 years Consumer Confidence (Index, Jan 2003=100) Job Creation and Unemployment Rate (%) Job Creation Unemployment rate Source: INEGI, BANXICO 6

7 Financial system: Loan and deposit evolution Sound system loan and deposit growth Total loans ( bn constant euros) YoY (%) 13.7% 12.9% 12.0% 10.3% 10.9% Loan growth remains at double digit Decelerating consumer loan growth Slower system loan growth reflects higher interest rates and lower economic growth expectations S'16 D'16 M'17 J'17 Aug'17 Total funding ( bn constant euros) Investments announced by major banking players reflects confidence in the sector YoY (%) 13.7% 13.3% 11.4% 10.9% 10.0% Softer deposit growth, but still expanding at low double digits S'16 D'16 M'17 J'17 Aug'17 Source: CNBV Banks as of August 2017 (last available) 7

8 Content Macroeconomic environment and financial system Strategy and business Results Appendix

9 Our Franchise Santander México: one of the leading financial groups in the country STRATEGIC PRIORITIES Boost payrolls & strengthen Santander Plus offering to drive attraction & loyalty KEY DATA 9M 17 Var. YoY* Gross loans 1 28, % Customers Funds 1 39, % Attributable profit % Consolidate our positioning in SMEs and recover leadership in mortgages RoTE Efficiency ratio Loans market share % 472 bps 39.4% -59 bps 13.3% -112 bps Operational & IT transformation through CRM & digital platforms Enhance customer service quality across the Bank Deposits market share % 40 bps Loyal customers 3 1, % Digital customers 3 1, % Branches 1, % Employees 18, % (1) Million euros; (2) As of August 2017 (last available); (3) Thousands. (*) Constant euros 9

10 Commercial strategy and business transformation Fostering innovation and executing on strategic program to drive customer attraction Co-branded Card Loyalty program Mortgages +747 K cards issued +290 K new customers Exclusively managed by Santander for the next 10 years Contributes to add new customers and successfully cross sell products to this new customer base Innovative comprehensive program focused on customer attraction, transactionality, loyalty and digitalization 2.5 million customers since its launch in May % increase in demand deposits in Santander Plus customers Launch of Select ME program to accompany the empowerment of women The only one in Mexico that offers a tailored interest rate based on the customer s profile Property appraisal s bonus of 100% of the amount paid by the customer Distribution Network Transformation Digitalization Global Corporate Banking Shift to a true onmichannel banking experience to attract and retain customers Smart Red corporate model (self service) Starting to deploy full function ATMs Upgrading online and mobile banking platforms to offer customers innovative and quality services that satisfy their dynamic demands. Launched: Super Cuenta Go for individuals Cuenta PyMe for SMEs CRM platform dedicated for SME customers Onboarding platform to enhance the customer journey for SMEs Continuing to position our corporate global banking franchise as a top three player Increased earnings contribution (PBT) from an average of 18% ( ) to 23% in 9M 17 10

11 Customers Continue to substantially improve the quality of our customer base Loyal individuals 1, % 1,834 Maintain strong focus on increasing loyalty, while attracting new customers through innovative products such as Santander Plus and Aeroméxico co-branded card Sep'16 Sep'17 Santander Plus key contributor in reducing attrition by 45% Loyal companies % 61 SMEs customer loyalty up 13% focus on increasing cross selling SMEs dedicated CRM platform and an online onboarding process enhancing the customer journey. Sep'16 Sep'17 Digital customers +53% 1,808 Digital customers have expanded consistently every quarter by: 1,179 Improving onboarding processes to new channels Adding new functionality to digital platform Mobile banking customers up 79% YoY Sep'16 Sep'17 11 Last available

12 Total loans performance High-margin segments performed well despite softer total loan growth Total gross loans ( bn constant euros) Sep 17 YoY (%) QoQ (%) Individual Loans Mortgage Consumer credit Credit Cards S'16 D'16 M'17 J'17 S'17 Commercial Loans SMEs (1) Middle Market Corporates Government Total Loans Source: Mexican GAAP criteria (excludes cross border loans) (1) SMEs commercial loan portfolio 12

13 Total funds performance Client-centric approach for individuals and SMEs drives deposit growth Total funding ( bn constant euros) Sep 17 YoY (%) QoQ (%) Demand Time Total deposits S'16 D'16 M'17 J'17 S'17 Mutual funds distributed Total Customer funds Source: Mexican GAAP criteria (excludes derivatives positions) 13

14 Content Macroeconomic environment and financial system Strategy and business Results Appendix

15 Net interest income Robust NII up 14% YoY from profitability focus and higher interest rates Net Interest Income ( MM constant euros 1 ) Yield on loans (%) Q16 4Q16 1Q17 2Q17 3Q17 3Q'16 4Q'16 1Q'17 2Q'17 3Q17 NIM 2 (%) Official interest rate (TIIE) 3 (%) Cost of deposits (%) Q16 4Q16 1Q17 2Q17 3Q17 (1) Average exchange rate as of September 2017 (9M 17) (2) Group criteria; (3) Quarter average. 15

16 Net fees Strong contribution from investment banking and cash management boost 10% YoY growth in net fees, supported by pick-up in credit cards Net fees ( MM constant euros 1 ) 9M 17 9M 16 YoY(%) QoQ(%) Q'16 4Q'16 1Q'17 2Q'17 3Q'17 Cash Management Insurance Credit Cards Mutual Funds Financial Advisory Capital Markets & Securities Total (1) Average exchange rate as of September 2017 (9M 17) 16

17 Gross income Strong performance in core earnings drives 14% YoY growth in gross operating income Gross income ( MM constant euros 1 ) M 17 9M 16 YoY(%) QoQ(%) Net Interest Income 1,970 1, Net Fees Subtotal 2,539 2, Q'16 4Q'16 1Q'17 2Q'17 3Q'17 Other Gross income 2,630 2, (1) Average exchange rate as of September 2017 (9M 17) (2) Other includes Gains (losses) on financial transactions and Other operating income 17

18 Operating expenses Sound efficiency despite step-up in strategy execution Operating expenses ( MM constant euros 1 ) M 17 9M 16 YoY(%) QoQ(%) General admin. expenses Depreciation and amortization Operating expenses 1, Q'16 4Q'16 1Q'17 2Q'17 3Q'17 Efficiency ratio (with amortizations) 39.4% 40.0% Number of branches 1,401 1,387 Number of employees 18,217 17,467 (1) Average exchange rate as of September 2017 (9M 17) 18

19 Net operating income after loan-loss provisions (LLPs) Healthy asset quality even with lower loan growth. LLPs increase YoY still reflecting sale of non-performing loan portfolios in 1H 17 LLPs and Cost of credit ( MM constant euros 1 ; %) Cost of credit Net LLPs 2.9% 2.9% 2.9% 3.0% 3.1% M 17 9M 16 YoY(%) QoQ(%) Net Operating Income 1,594 1, LLPs Net op. income after LLPs Q'16 4Q'16 1Q'17 2Q'17 3Q'17 NPL ratio 2.6% 3.0% NPL Coverage ratio 110.3% 101.9% (1) Average exchange rate as of September 2017 (9M 17) Cost of credit: Provisions to cover losses due to impairment of loans in the last 12 months / average customer loans and advances of the last 12 months 19

20 Attributable profit Strong attributable profit up 19% YoY, reflecting robust performance in NII and fee income Attributable profit ( MM constant euros 1 ) 9M 17 9M 16 YoY(%) QoQ(%) Profit before taxes Tax on profit Consolidated profit Underlying att. Profit Non-recurring 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 Attributable profit Effective tax rate 21.0% 22.2% (1) Average exchange rate as of September 2017 (9M 17) 20

21 Final remarks Market Environment & Financial System Moderate, but stable growth, spurred by resilient domestic consumption and strengthening of external demand. Inflation reached an inflection point following decisive monetary policy actions, and is expected to converge to the 2-4% Central Bank range in Labor market remains strong, manufacturing sector in recovery phase due to growing external demand. Recent concerns over continuity of NAFTA negotiations have put pressure on FX Strategy & Business Allocating MXN 15 Billion over next 3-Years to drive growth and innovation; become a customer centric bank and the leader in profitability in Mexico. Strengthen position in retail banking and consolidating leadership in key products and markets, while realizing the potential of our investment and corporate banking business. Upgrading technology and infrastructure, talent, quality, processes and branding. Maintain strong focus on profitability. Strong performance in high-margin loans despite lower total loan growth reflects sharp focus on profitability. Deposits up 16% YoY. Results Robust NII growth supported by profitability focus and higher rates, along with higher net fees drives 14% YoY increase in gross operating income. Healthy asset quality despite lower loan growth. Higher LLPs YoY still reflecting sale of non-performing loan portfolios in 1H 17. Strong attributable profit up 19% YoY, reflecting solid performance in NII and fee income 21

22 Content Macroeconomic environment and financial system Strategy and business Results Appendix

23 Balance sheet Constant EUR million (1) Variation 30-sep sep-16 Amount % Customer loans 29,072 28, Cash, central banks and credit institutions 8,925 11,580 (2,655) (22.9) Debt securities 14,026 13, o/w: available for sale 7,395 6, Other financial assets 5,902 7,013 (1,111) (15.8) Other assets 2,577 2, Total assets 60,502 62,450 (1,948) (3.1) Customer deposits 31,339 26,318 5, Central banks and credit institutions 9,841 9,947 (106) (1.1) Debt securities issued 4,931 5,296 (365) (6.9) Other financial liabilities 7,167 13,387 (6,220) (46.5) Other liabilities 1,815 1,967 (152) (7.7) Total liabilities 55,093 56,914 (1,821) (3.2) Total equity 5,409 5,536 (126) (2.3) Other managed and marketed customer funds 10,538 11,078 (540) (4.9) Mutual funds 10,538 11,078 (540) (4.9) Pension funds Managed portfolios (1) End of period exchange rate, as of 09/30/

24 Income statement Constant EUR million (1) Variation 9M17 9M16 Amount % Net interest income 1,970 1, Net fees Gains (losses) on financial transactions Other operating income (20) (23) 3 (11.2) Gross income 2,630 2, Operating expenses (1,037) (924) (113) 12.2 General administrative expenses (943) (845) (98) 11.6 Personnel (475) (438) (37) 8.5 Other general administrative expenses (468) (407) (61) 15.0 Depreciation and amortisation (94) (79) (15) 18.4 Net operating income 1,594 1, Net loan-loss provisions (718) (612) (107) 17.5 Other income (15) (22) 7 (31.7) Underlying profit before taxes Tax on profit (181) (167) (14) 8.3 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 of September 2017 (9M 17) 24

25 Quarterly income statement Constant EUR million (1) 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Net interest income Net fees Gains (losses) on financial transactions Other operating income (9) (5) (9) (19) (14) 5 (11) Gross income Operating expenses (305) (309) (310) (330) (329) (352) (356) General administrative expenses (277) (281) (286) (305) (299) (320) (323) Personnel (144) (155) (139) (159) (154) (159) (162) Other general administrative expenses (133) (126) (148) (146) (145) (162) (161) Depreciation and amortisation (28) (28) (24) (25) (30) (32) (32) Net operating income Net loan-loss provisions (210) (208) (194) (207) (240) (239) (239) Other income (6) (11) (5) (8) (4) (6) (4) Underlying profit before taxes Tax on profit (52) (51) (64) (76) (58) (62) (61) 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 of September 2017 (9M 17) 25

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