United Kingdom. January - September October, 2015

Transcription

1 United Kingdom January - September October, 205

2 Disclaimer 2 Santander UK Group Holdings plc ( Santander UK Group Holdings ) is a subsidiary of Banco Santander, S.A. ( Santander ). Santander UK Group Holdings and Santander both caution that this presentation may contain forward-looking statements. Such forward-looking statements are found in various places throughout this presentation. Words such as believes, anticipates, expects, intends, aims and plans and other similar expressions are intended to identify forward-looking statements, but they are not the exclusive means of identifying such statements. Forward-looking statements include, without limitation, statements concerning our future business development and economic performance. Forward-looking statements involve known and unknown risks and uncertainties, they are based on management s current expectations, estimates and projections and both Santander UK Group Holdings and Santander caution that these statements are not guarantees of future performance. We also caution readers that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. We have identified certain of these factors on pages 32 to 340 of the Santander UK Group Holdings Annual Report for 204. Investors and others should carefully consider the foregoing factors and other uncertainties and events. Undue reliance should not be placed on forward-looking statements when making decisions with respect to Santander UK, Santander and/or their securities. The information in this presentation, including any forward-looking statements, speak only as of the date on which they are made, and we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise. Statements as to historical performance, historical share price or financial accretion are not intended to mean that future performance, future share price or future earnings for any period will necessarily match or exceed those of any prior quarter. Nothing in this presentation should be construed as a profit forecast. No representation or warranty of any kind is made with respect to the accuracy, reliability or completeness of any information, opinion or forward-looking statement, any assumptions underlying them, the description of future operations or the amount of any future income or loss contained in this presentation or in any other written or oral information made or to be made available to any interested party or its advisers by Santander UK Group Holdings or Santander s advisers, officers, employees or agents. It does not purport to be comprehensive and has not been independently verified. Any prospective investor should conduct their own due diligence on the accuracy of the information contained in this presentation. This presentation does not constitute an offer to sell, or a solicitation of an offer to subscribe for, any securities, it does not constitute advice or a recommendation to buy, sell or otherwise deal in any securities of Santander UK Group Holdings or Santander or any other securities and should not be relied on for the purposes of an investment decision. This presentation has not been filed, reviewed or approved by any regulator, governmental regulatory body or securities exchange in any jurisdiction or territory. To the fullest extent permitted by law, neither Santander UK Group Holdings nor Santander accept any liability whatsoever for any direct or consequential loss arising from any use of or reliance on this presentation. By attending / reading the presentation you agree to be bound by these provisions. Note: The results information contained in this presentation has been prepared according to Spanish accounting criteria, regulation and Banco Santander group policy in a manner applicable to all subsidiaries of the Banco Santander Group. As a result it may differ from that disclosed locally by Santander UK. The results information in this presentation includes all of the Banco Santander group operations in the UK even if they are in Santander UK consolidated Group. Source: Santander UK Group Holdings Q3 205 results Quarterly Management Statement for the nine months ended 30 September 205 or Santander UK Group Holdings Management ( MI ), unless otherwise stated. Santander has a standard listing of its ordinary shares on the London Stock Exchange and Santander UK continues to have its preference shares listed on the London Stock Exchange. Further information in relation to Santander UK can be found at: Neither the content of Santander UK s website nor any website accessible by hyperlinks on Santander UK s website is incorporated in, or forms part of, this presentation. Santander UK Group Holdings plc. Registered Office: 2 Triton Square, Regent's Place, London, NW 3AN, United Kingdom. Registered Number Registered in England. Telephone Calls may be recorded or monitored. Santander UK Group Holdings plc. and its subsidiaries operate primarily in the UK, are regulated by the UK Prudential Regulation Authority ( PRA ) and the Financial Conduct Authority ( FCA ) and are part of the Banco Santander, S.A. group (the Banco Santander group ). Santander UK plc s Financial Services Register number is Santander UK plc. is also licensed by the Financial Supervision Commission of the Isle of Man for its branch in the Isle of Man. Deposits held with the Isle of Man branch are covered by the Isle of Man Depositors Compensation Scheme as set out in the Isle of Man Depositors Compensation Scheme Regulations 200.In the Isle of Man, Santander UK plc s principal place of business is at 9/2 Prospect Hill, Douglas, Isle of Man, IM ET. Santander and the flame logo are registered trademarks. Banco Santander S.A. London Branch is regulated by the Financial Conduct Authority.

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

4 Macro-economic environment 4 Relatively strong growth of UK economy. Falling oil prices have led to lower inflation Annual GDP growth (%, real) Interest rates (%, year end) (e) 206 (e) (e) 206 (e) Annual CPI inflation rate (%, annual average) 3 GBP/Euro exchange rates (year end) (e) 206 (e) (e) 206 (e) Source: Office for National Statistics and Bank of England. Estimates by Santander UK Economics (September 205) GDP growth was revised down from 2.8% y/y to 2.6% y/y in 205 Q2 (30th September Quarterly National Accounts). GDP growth was also marked down from 3.0% to 2.9% for 204 as a whole. 2 Bank of England Bank rate 3 Consumer Price Index

5 Macro-economic environment 5 Unemployment expected to fall further. Signs of strengthening housing market Unemployment rate (ILO, year end) Property transactions (sa, 000s) ,068,222,256, (e) 206 (e) (e) 206 (e) Average weekly earnings (annual, % inc. bonuses) House prices (%, year end) (0.3) (e) 206 (e) (e) 206 (e) Source: Her Majesty s Revenue & Customs, Office for National Statistics and Halifax (Lloyds Banking Group). Estimates by Santander UK Economics (September 205) International Labour Organisation definition

6 Financial system: loan and deposit growth 6 Loan growth remains modest. Steady deposit growth GBPbn. YoY (%) Total loans,799,797,805,807, Total loans growth of.6% at end 204, has increased in 205 Mortgage growth of 2.2% projected in 205 Corporate sterling loan growth still negative in mid-205 Q3'4 Q4'4 Q'5 Q2'5 Q3'5 YoY (%) Total deposits 2,564,59,65,637, Q3'4 Q4'4 Q'5 Q2'5 Q3'5 Steady deposit growth has continued, reflecting continued balance sheet adjustments Some indication that the personal savings ratio is moderating compared to a year ago Corporate deposit growth still strong. Investment intentions remain positive Total loans stock and annual % change include household borrowing and PNFC sterling borrowing from banks 2 Total deposits include household deposits (with banks and NS&I) and PNFC deposits, excluding cash holdings Source: Bank of England. Bankstats (Monetary and Financial Statistics) end September 205 (August data) Annual growth is calculated using growth of net lending on existing stock

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

8 Our franchise 8 Santander UK is a well established UK market player Santander UK s branches Business and Results Sep'5 Var. YoY Loans 98. bn. 4% Deposits 59.7 bn. 6% Total customer funds 65.8 bn. 5% Attributable profit,087 mn. 4% Network and Customers Clients - active customers 2 4 mn. n.a. Branches (7%) ATMs 2,337 % Other Key Metrics Loan-to-Deposit ratio (LDR) 4 25% 3 p.p. Return on Risk Weighted Assets (RoRWA).72% 4 b.p.s. Return on Tangible Equity (RoTE) 5 2.0% 8 b.p.s. CET ratio 6.7% -5 b.p.s. Customer Balances based on local view 2 Active customers hold at least one active product. For current accounts, savings accounts or credit cards an active product must be open and have a balance of more than 50 or at least one transaction in the last month 3 Local criteria includes branches and universities and excludes agencies 4 Calculated as Customer Loans and Credits divided by Customer Deposits on the face of the balance sheet. LDR was impacted by the commencement of the PSA cooperation in February RoTE of 2.0% is adjusted for the FSCS and UK Bank levy phasing. Statutory RoTE was 2.8% 6 CET capital ratio was impacted by the commencement of the PSA cooperation in February 205.

9 Commercial focus / strategy () 9 Current accounts ( bn.) Loyal and satisfied retail customers Dec'3 Dec'4 Sep'5 I2I3 World customers (mn.) Sustained balance growth from loyal customers; improving the quality of liabilities I2I3 World transforming our profile and improving customer satisfaction Dec'3 Dec'4 Sep'5 Total Corporate loans ( bn.) Bank of Choice for UK companies Corporate lending grew 2% year-on-year, despite a subdued market utilising enhanced capability Dec'3 Dec'4 Sep'5

10 Commercial focus / strategy (2) 0 CET 2.6%.9%.7% Strong capital position Consistent profitability and a strong balance sheet Dec'3 Dec'4 Sep'5 Loan-to-Deposit Ratio (LDR) 2 23% 24% 25% Underlying funding position broadly stable Dec'3 Dec'4 Sep'5 CRD IV end point Common Equity Tier Capital is calculated in accordance with the PRA CRD IV implementation rules (Policy Statement PS7/3) 2 FL CET capital ratio and the LDR were impacted by the completion of the PSA cooperation. Excluding the impact of the PSA cooperation, the FL CET capital ratio was 2.0% and LDR 23%.

11 Loans performance Mortgage growth in-line with market. Strong corporate loan growth GBPbn. Total loans 4.0% Sep'5 YoY QoQ % 98. Individuals % % Mortgages % % Consumer credit % % Companies % 2% SMEs 3.3 8% 2% Corporates 7. 6% 2% Large corporates 5.8 5% % Non core 7.7 (%) (2%) Q3'4 Q4'4 Q'5 Q2'5 Q3'5 Total 98. 4% % Customer Balances based on local view. 2 Mortgages refers to residential retail mortgages only and excludes social housing and commercial mortgage assets cooperation. 3 Consumer credit impacted by the completion of the PSA

12 Total customer funds performance 2 GBPbn. Further growth in loyal retail balances. Managing down rate sensitive deposits Total deposits 5.8% Sep'5 YoY QoQ % 59.7 Demand % 5% Savings % % Time (4%) (3%) Total % 2% Funds distributed (2%) (5%) Q3'4 Q4'4 Q'5 Q2'5 Q3'5 Total Customer Funds % % Customer Balances based on local view 2 Third-party off-balance sheet assets originated by Santander Asset Management in the United Kingdom

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

14 Net interest income and spreads 4 NII YOY growth driven by increased lending. Banking NIM under pressure from lower asset margins GBPmn. Net Interest Income Loans spread (%) 3.7% (0.4%) %.33%.33%.32%.29% Total Loans Spread 864 Q3'4 Q4'4 Q'5 Q2'5 Q3'5 Q3'4 Q4'4 Q'5 Q2'5 Q3'5 Deposits spread (%) 0.89% 0.92% 0.92% 0.90% 0.90% Banking NIM (%).82%.85%.87%.85%.80% Total Deposits Spread Q3'4 Q4'4 Q'5 Q2'5 Q3'5 Banking NIM is calculated as annualised statutory net interest income divided by average customer loans

15 Net fees 5 Regulatory and competitive pressures impacting fee income GBPmn. Net Fees (5.2%) (6.9%) Q3'4 Q4'4 Q'5 Q2'5 Q3'5 9M'5 9M'4 YoY QoQ Banking (%) 8% Credit Cards 5 52 (2%) (4%) Investments (5%) (8%) Mortgages 5 5 4% 3% GCB % (20%) Other % (4%) Total % (7%) Global Corporate Banking ( GCB ) was previously referred to as Corporate & Institutional Banking ( CIB )

16 Gross income 6 Gross income rising, driven by net interest income momentum GBPmn. Gross Income 2.3% (2.0%) 9M'5 9M'4 YoY QoQ Net Interest Income 2,682 2,526 6% (0%),24,36,52,73,50 Net Fees % (7%) Subtotal 3,30 3,39 5% (2%) Gains/Losses on Financial Transactions Other Operating Income (2%) (3%) % n.m Q3'4 Q4'4 Q'5 Q2'5 Q3'5 Gross income 3,475 3,328 4% (2%)

17 Operating expenses 7 Operational efficiency well managed, absorbing on-going investment GBPmn. Operating Expenses 9M'5 9M'4 YoY QoQ 3.4% (0.6%) General and admin. expenses,648,554 6% (0%) Depreciation and amortisation (6%) (%) 585 Q3'4 Q4'4 Q'5 Q2'5 Q3'5 Operating expenses,824,743 5% (%) Efficiency ratio (including depreciation) 52.5% 52.4% 0. p.p. (0.7) p.p. Number of branches (7%) (2%) Number of employees 26,54 25,384 3% (%) Local criteria, includes branches and universities but excludes agencies

18 Net operating income after loan-loss provisions ( LLPs ) 8 Loan portfolios performing well in a favourable credit environment GBPmn. LLPs and Cost of Credit Cost of credit Net LLPs 0.9% 0.4% 0.% 0.08% 0.04% (6) Q3'4 Q4'4 Q'5 Q2'5 Q3'5 9M'5 9M'4 YoY QoQ Net operating income,650,586 4% (3%) LLPs (63) (240) (74%) (47%) Net op. income after LLPs,587,346 8% (0%) NPL Coverage Ratio 40% 43% (3) p.p. (0) p.p. NPL Ratio.5%.80% (29) b.p.s (0) b.p.s Cost of credit based on 2 month loan-loss provisions divided by average customer loans.

19 Attributable profit 9 Strategic transformation with improvement in profitability GBPmn. Attributable Profit 6.7% 9M'5 9M'4 YoY QoQ (2.8%) Profit before taxes,46,98 8% (%) Tax on profit (309) (248) 25% (7%) Attributable profit, % (3%) Q3'4 Q4'4 Q'5 Q2'5 Q3'5 2 Effective tax rate 22% 2% p.p. p.p. Attributable profit is post non-controlling interests of 20m 2 Reduction from Q2 5 is largely due to lower net fee income and an additional 43m conduct remediation provision relating to wealth and investment products

20 Conclusions 20 Strong performance in 9M 5 and with a supportive outlook Market Environment and Financial System Strategy and Business The UK economy continues to be supportive of our business. Full year 205 GDP growth forecast of +2.5% UK housing market remains strong, with higher volumes and house prices than a year ago, but with evidence of a slow down. We maintain a conservative risk discipline, with a 65% LTV on new mortgages Market loan growth driven by residential mortgages and unsecured personal lending; corporate loan stock to be broadly steady for 205 I2I3 World, with 4.6 million customers, is transforming the quality of our customer base while reducing funding costs Retail customer satisfaction improved further and we continue to be the first choice for customers switching their current account provider The new corporate platform is delivering business growth. Corporate loans increased 2% over the year, despite a subdued market Results Profit after tax () rose 4% to,087mn vs 9M 4. Banking NIM of.84% for 9M 5. Operational efficiency well managed. We continue to invest in business growth and further enhancements to our digital channel Balance sheet strength: FL CET ratio of.7%; Leverage ratio of 4.% Attributable profit is post non-controlling interests of 20m

21 Agenda 2 Macro-economic environment and financial system Strategy and business Results Appendix

22 Balance sheet GBPbn. Variance Amount % 22 Loans and credits* Trading portfolio (w/o loans) Available-for-sale financial assets Due from credit institutions*. 3.0 (2.0) (5.0) Intangible assets and property and equipment Other assets (0.7) (34.) Total assets/liabilities & shareholders' equity Customer deposits* Marketable debt securities* (.5) (2.8) Subordinated debt (.7) (36.4) Insurance liabilities Due to credit institutions* (.5) (7.5) Other liabilities Shareholders' equity** Off-balance-sheet funds (0.8) (0.9) Mutual funds (0.8) (0.9) Pension funds Managed portfolios (0.0) (9.6) Customer funds under management Commercial loans included above Commercial deposits included above * Includes all stock of concept classified in the balance sheet ** Capital + reserves + retained profit + valuation adjustments

23 Income statement GBPmn. 23 Variance 9M'5 9M'4 Amount % Net interest income 2,682 2, Net Fees Gains (losses) on financial transactions (20) (2) Other operating income * Gross income 3,475 3, Operating Expenses (,824) (,743) (82) 5 General administrative expenses (,648) (,554) (94) 6 Personnel (876) (933) 57 (6) Other general administrative expenses (772) (62) (5) 24 Depreciation and amortisation (77) (89) 2 (6) Net Operating Income,650, Net loan-loss provisions (63) (240) 77 (74) Other income (7) (48) (24) 6 Profit before taxes,46, Tax on profit (309) (248) (6) 25 Consolidated profit, Minority interests (20) 0 (20) - Attributable profit to the Group, * Including dividends, income from equity-accounted method and other operating income/expenses

24 Quarterly statements of income GBPmn. 24 Q3'4 Q4'4 Q'5 Q2'5 Q3'5 Net interest income Net Fees Gains (losses) on financial transactions Other operating income * Gross income,24,36,52,73,50 Operating Expenses (585) (609) (62) (608) (605) General administrative expenses (532) (537) (556) (547) (545) Personnel (326) (322) (294) (302) (280) Other general administrative expenses (206) (25) (262) (245) (265) Depreciation and amortisation (53) (72) (56) (6) (60) Net Operating Income Net loan-loss provisions (70) (27) (56) (2) 6 Other income (58) (08) (4) (36) (94) Profit before taxes Tax on profit (89) (87) (87) (5) (07) Consolidated profit Minority interests - - (6) (7) (7) Attributable profit to the Group * Including dividends, income from equity-accounted method and other operating income/expenses

25 25