Mexico. First Half July 30, 2015

Transcription

1 1 Mexico First Half 2015 July 30, 2015

2 Disclaimer 2 IMPORTANT INFORMATION Banco Santander, S.A. ( Santander ) Warns that this presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of These forward-looking statements are found in various places throughout this presentation and include, without limitation, statements concerning the development of our business, 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, debtors or 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. 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. 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. 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, of an exemption there from. 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 regulations in a manner applicable to all subsidiaries of the Santander group ad, as a result, it may differ from the ones discloses locally by Santander Mexico. 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).

3 Agenda 3 Macro-economic environment and financial system Strategy and business Results Appendix

4 Macro-economic environment 4 Steady economic growth supported by solid macrofundamentals Annual GDP Growth (%, real) Interest Rates (%, end year) (e) 2016 (e) (e) 2016 (e) Annual CPI Inflation Rate (%, end of period) Euro Exchange Rates (MxP/Eur annual average) (e) 2016 (e) (e) 2016 (e) Source: INEGI, BANXICO, Santander

5 Macro-economic environment A slight acceleration in domestic consumption and US economic recovery will be the growth drivers Retail Sales (% YoY, SA) 2015/ / / / / / / / / / / / / / / / / / / /01 Auto Exports (%YoY) 2015/ / / / / / / /01r/ 2013/ / / / / / / / / / / / / % 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% 2012/ /05 Industrial Production (%YoY, SA) 2012/ / / / / /05 Industrial Production Construction 2013/07 Domestic Auto Industry (%YoY. 3m MA) Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Total Production Jul / /11 Oct /01 Jan / / / / /11 Mining Manufacturing Apr-14 Jul-14 Oct-14 Domestic Sales Jan / /03 Apr /05 Source: INEGI, SHCP, Banxico

6 Financial system: loan and deposit growth Constant EUR Bn Total loans continue recovery trend in 2Q15; performance expected to continue in 2H15 6 YoY (%) Total loans J'14 S'14 D'14 M'15 May'15 Third consecutive quarter of pick-up in total system loan growth Higher growth rates across all segments, credit cards remain weak Positive trend in lending activity expected to continue in 2H15 Total deposits Healthy YoY deposit growth YoY (%) Expansion mainly driven by demand deposits J'14 S'14 D'14 M'15 May'15 Source: CNBV Banks as of May 31, 2015

7 Agenda 7 Macro-economic environment and financial system Strategy and business Results Appendix

8 Our franchise 8 Santander México: one of the leading financial groups in the country Santander México branches EUR 1H 15 Var. YoY Business and Results Loans 28.4 bn. 13.1% Deposits 27.5 bn. 13.4% Profit before tax 576 mn. 8.9% Attributable profit 342 mn. 4.6% Network and Customers Clients % Branches 1, % ATMs 5, % Market Share 1 Loans 14.1% 4.9 bps Deposits 13.5% 9.1 bps (1) Market share as of May 31, 2015, source CNBV Banks

9 Commercial focus / strategy 9 Focus on consumer loans and improvement in payroll processes Total loans Retail Banking loans Retail and total loans Jun'14 Mar'15 Jun'15 Total loans up 13% YoY, above market growth. Strong organic growth and Scotiabank portfolio drive good performance Leading player servicing the high-potential SME segment 2.7 SMEs loans % YoY SMEs loan growth. Specialized network. Expanding reach to larger SMEs Jun'14 Mar'15 Jun'15 Strong focus on mid and high income mortgage mkt Mortgage loans % YoY mortgage loan growth. Leading mortgage originator Jun'14 Mar'15 Jun'15 (1) EUR Bn.

10 Commercial focus / strategy 10 Middle market loans 1 Consolidating Middle market position % YoY reflecting focus on trade financing, transactionality and investment banking products Jun'14 Mar'15 Jun'15 Gaining market share in demand deposits 14.8 Demand deposits Growing in transactional multichannel activity. Demand deposits up 20% YoY Jun'14 Mar'15 Jun'15 Number of branches Branch expansion completed 1,293 1,350 1,356 Finalized 200 branch opening program Jun'14 Mar'15 Jun'15 Source: Santander data (1) EUR Bn

11 Loan performance 11 Constant EUR billion Total loans up 13.1% YoY with strong growth in core segments Total loans 13.1% 5.0% J'14 S'14 D'14 M'15 J'15 Jun 15 YoY (%) QoQ (%) Individuals Mortgages Consumer Credit cards Companies SMEs Middle market Corporates Government Total Source: Mexican GAAP criteria (excludes cross border loans)

12 Total customer funds 12 Deposit base up 13.4%; healthy mix supports to lower cost of funding Constant EUR billion Total deposits 13.4% 5.0% J'14 S'14 D'14 M'15 J'15 Jun 15 YoY (%) QoQ (%) Demand Time Total customer deposits Mutual funds distributed Total customer funds Source: Mexican GAAP criteria (excludes derivatives positions)

13 Agenda 13 Macro-economic environment and financial system Strategy and business Results Appendix

14 Net interest income and spreads Constant EUR million Achieving consistent growth in net interest income despite historically low interest rates Loan spreads, % 14 Net Interest Income 13.9% Retail Banking % Total Loans 2Q14 3Q14 4Q14 1Q15 2Q15 Deposit spreads, % 2Q14 3Q14 4Q14 1Q15 2Q15 TIIE (%) Retail Banking Total Deposits 2Q14 3Q14 4Q14 1Q15 2Q15 1 TIIE Quarter average

15 Net fees 15 Net fees up 10.4% sequentially Constant EUR million Net Fees 6.1% 10.4% Q14 3Q14 4Q14 1Q15 2Q15 1H 15 1H 14 YoY(%) QoQ(%) Credit cards Insurance Mutual funds Payments & collections Capital Mkts & Securities Financial advisory Others Total

16 Gross income 16 Gross operating income driven by strong performance in core earnings Constant EUR million Gross income 6.4% 4.9% H 15 1H 14 YoY(%) QoQ(%) Net Interest Income 1,244 1, Net Fees Subtotal 1,653 1, Other Gross income 1,702 1, Q14 3Q14 4Q14 1Q15 2Q15 (1) Other includes Gains (losses) on financial transactions and Other operating income

17 Operating expenses 17 Constant EUR million Sequentially stable expenses reflect effective cost management Operating expenses 5.7% 0.0% General and admin. expenses Depreciation and amortization Operating expenses 1H 15 1H 14 YoY(%) QoQ(%) Q14 3Q14 4Q14 1Q15 2Q15 Efficiency ratio (with amortizations) pp -1.0pp Number of branches 1,356 1, % 0.4% Number of employees 16,768 14, % 2.0%

18 Net operating income after loan-loss provisions (LLPs) 18 LLPs increases as anticipated while cost of credit remains stable QoQ Constant EUR million Cost of credit LLPs and Cost of credit 3.6% 3.3% 3.0% 2.9% 2.9% Net Operating Income 1H 15 1H 14 YoY(%) QoQ(%) 1, LLPs Net op. income after LLPs Net loan-loss provisions 2Q14 3Q14 4Q14 1Q15 2Q15 NPL Coverage ratio 87.5% 96.6% -9.1 pp -0.9 pp NPL ratio 3.81% 3.52% 0.3pp 0.1 pp

19 Attributable profit 19 Attributable profit up 4.9% QoQ; YoY comparisons reflect higher effective tax rate Constant EUR million Attributable profit -1.9% 1H 15 1H 14 YoY(%) QoQ(%) % 175 Profit before taxes Tax on profit Net income Attributable profit Effective tax rate 23.1% 21.0% 2Q14 3Q14 4Q14 1Q15 2Q15

20 Conclusions 20 Market Environment & Financial System Economic activity shows slight signs of improvement in the domestic sector, while a weaker than anticipated 1Q in US affected the external sector. We anticipate both domestic and external demand to gain momentum during the year, as shown by the auto industry Financial variables affected by the global context. Uncertainty about the monetary normalization in the US will continue to drive FX rate volatility Strategy & Business Acquisition of loan portfolio from Scotiabank Mexico effective April Successful cross selling strategy implemented with new customers coming from the acquired portfolio Focus on consumer loans and improvement in payroll processes Continue with multichannel activity (ATMs, Mobile Banking and Internet) Completed expansion plan 200 branches opened since 4Q12 Results Commercial activity slightly above market growth rates with core segments growing significantly above the system Gross income up 7.4% YoY reflects solid core earnings performance, mainly in NII and fees Maintain tight cost controls to fully leverage the benefit of our strategic initiatives

21 Agenda 21 Macro-economic environment and financial system Strategy and business Results Appendix

22 Balance sheet EUR million. Constant currency* Variation Amount % Loans and credits* 28,609 24,767 3, Trading portfolio (w/o loans) 15,391 11,721 3, Available-for-sale financial assets 3,986 3, Due from credit institutions* 7,086 7, Intangible assets and property and equipment Other assets 5,781 5, Total assets/liabilities & shareholders' equity 61,312 53,469 7, Customer deposits* 28,747 25,057 3, Marketable debt securities* 4,720 3, Subordinated debt 1, Insurance liabilities Due to credit institutions* 8,444 7, Other liabilities 13,329 10,909 2, Stockholders' equity** 4,891 4, Off-balance-sheet funds 12,557 11, Mutual funds 12,557 11, Pension funds Managed portfolios Customer funds under management 47,205 41,738 5, * As of * Includes all stock of concept classified in the balance sheet ** Capital + reserves + retained profit + valuation adjustments

23 Income Statement EUR million. Constant currency* Variation 1H 15 1H 14 Amount % 23 Net interest income 1,244 1, Net fees Gains (losses) on financial transactions (17) (17.5) Other operating income** (28) (21) (8) 38.2 Gross income 1,702 1, Operating expenses (697) (659) (38) 5.7 General administrative expenses (615) (590) (25) 4.2 Personnel (347) (308) (39) 12.5 Other general administrative expenses (268) (282) 14 (4.8) Depreciation and amortisation (81) (68) (13) 18.8 Net operating income 1, Net loan-loss provisions (435) (393) (41) 10.5 Other income 6 (4) 9 Profit before taxes Tax on profit (133) (111) (22) 19.4 Profit from continuing operations Net profit from discontinued operations Consolidated profit Minority interests Attributable profit to the Group * As of exchange rate 1H'15 ** Including dividends, income from equity-accounted method and other operating income/expenses

24 Quarterly statements of income 24 EUR million. Constant currency* 1Q 14 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15 Net interest income Net fees Gains (losses) on financial transactions Other operating income** (13) (7) (15) (11) (15) (14) Gross income Operating expenses (329) (329) (329) (331) (348) (348) General administrative expenses (294) (297) (294) (296) (308) (307) Personnel (152) (156) (161) (166) (170) (177) Other general administrative expenses (141) (141) (134) (130) (138) (130) Depreciation and amortisation (36) (33) (34) (35) (40) (41) Net operating income Net loan-loss provisions (192) (202) (217) (181) (210) (225) Other income (2) (2) 6 (1) 8 (2) Profit before taxes Tax on profit (52) (59) (52) (53) (65) (68) Profit from continuing operations Net profit from discontinued operations Consolidated profit Minority interests Attributable profit to the Group * As of exchange rate 1H'15 ** Including dividends, income from equity-accounted method and other operating income/expenses

25 25