26 October 2017 POLAND. January September 2017

Transcription

1 26 October 2017 POLAND January September 2017

2 Disclaimer Banco Santander, S.A. ("Santander") and Banco Bank Zachodni WBK, S.A. ( BZ WBK ) caution 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 Santander 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 Santander 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 or BZ WBK. 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 and BZ WBK give no advice and make no recommendation to buy, sell or otherwise deal in shares in Santander or BZ WBK 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 ( 2

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

4 Macro-economic environment GDP growth near 4%, inflation gradually rising Annual GDP Growth (real. %) Central Bank monetary policy (%) (e) 2018 (e) 2019 (e) (e) 2018 (e) 2019 (e) Inflation (annual change. %) Average exchange rate (EUR/PLN) (e) 2018 (e) 2019 (e) (e) 2018 (e) 2019 (e) Source: GUS. NBP. BZ WBK 4

5 Macro-economic environment Strong consumption, record low unemployment, awaited investment recovery Private consumption (YoY growth. %) Current account balance (% GDP) (e) 2018 (e) 2019 (e) (e) 2018 (e) 2019 (e) Investment (YoY growth. %) Unemployment (year-end. %) (e) 2018 (e) 2019 (e) (e) 2018 (e) 2019 (e) Source: GUS. NBP. BZ WBK 5

6 Financial system: Loan and deposit growth Slow revival in loans, deceleration of deposits Total loans (Constant euros bn) 1 YoY (%) % 5.3% 5.1% 4.8% 5.0% Total market loans are rising by about 5% y/y this year. Consumer loans are growing at a solid 7-7.5% y/y while PLN-denominated mortgage loan growth rate is slightly above 10% y/y. A revival of corporate loans continued with PLNdenominated loans reaching 9% y/y. Sep'16 Dec'16 Mar'17 Jun'17 Sep'17 Total customer deposits (Constant euros bn) 1 YoY (%) % 9.1% 7.3% Deposit growth decelerated versus end of 2016 due to outflow of deposits to alternative investments, e.g. the stock market or real estate market. Demand deposits still grow really fast, by c13% y/y, while term deposits fall by c5% y/y. 4.5% 5.0% Sep'16 Dec'16 Mar'17 Jun'17 Sep'17 Source: NBP. BZ WBK 6

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

8 Our Franchise Bank Zachodni is the 3 rd bank in Poland STRATEGIC PRIORITIES Top 3 in quality of service. Increasing the number of loyal customers KEY DATA 9M 17 Var. YoY* Gross loans 1 22, % Customer funds 1 26, % Attributable profit % Underlying Consolidated profit % Remain the leader in digital channels in Poland RoTE 11.4% -41 bps Efficiency ratio 42.8% -188 bps Loans market share % -6 bps Gain market share in volumes Deposits market share % -14 bps Loyal customers 3 1, % Digital customers 3 2, % Remain the leader in profitability Branches % Employees** 11, % (1) Million euros; (2) As of June 2017 (last available); (3) Thousands. (*) Constant euros. ** 2016 does not include Call Centre employees. 8

9 Commercial strategy and business transformation Improved customer experience due to innovative products. services and processes enchancement Accounts and cards New innovative current account offer Account as I Want It (Konto Jakie Chcę) with Tailored debit card (Karta Dopasowana) launched. It is flexible account with package of products and services in which customer decide what to use and what to pay for 115 ths. accounts opened till end of Sep 2017 Account as I Want It begins the new way of the future products construction and changes our communication with the market in line with the new brand promise Bank as You Want It! Autumn marketing campaign supporting the new CA offer in line with the new brand promise launched. Loans and credit cards Product and process changes in the mortgage loans in line with the new law concerning mortgages and intermediaries Investments PLN 1bn of net sales of Arka IF via internet after 3Q % of total net sales PLN 13bn assets in retail Brokerage House - the highest since 3 years Brokerage House participation in the greatest private IPO Play Communications over 16% share in offer Insurance Launch of new product - property and movables insurance Locum Comfort Launch of Insurance Loyal Program preferences for insurance continuation and customers with more than 1 insurance product credit card and World MasterCard actively advertised to customers within As I Want It as shopping refunds and foreign travel functionalities Price promotions supporting consumer loans sales in all channels and active promotional campaigns to increase credit cards sales 9

10 Commercial strategy and business transformation Improved customer experience due to innovative products, services and processes enchancement Retail transformation Continuation of huge retail banking transformation process new distribution strategy accepted, start of implementation in 4Q2017. Pilot of first branch accessible to customers 7 days a week with cash self-service ( Galeria Północna shopping center in Warsaw). Multichannel sales Steady growth of sales in remote channels in 3Q2017 the share reached 59% in quantity and 35% in value (In Q1 56% and 32% respectively). Reached 1m customers in mobile banking making over 2m transactions monthly Tickets to cultural events - additional service available in BZWBK24 mobile Features of new Account as I Want It can be turned on by customers in BZWBK24 internet and BZWBK24 mobile 10

11 Customers In all segments loyal customer numbers increase Loyal individuals 1,218 +3% 1,254 Constant increase in loyal customer numbers Strategy to increase income from loyal customers New CRM tools to increase loyal individual base Sep'16 Sep'17 New loyalty programmes Loyal companies +11% 87 Sep'16 Digital customers 96 Sep'17 Enhance value proposition and non-risk based revenue. Service excellence & continuous quality improvement New products and loyalty options for business: Export development programme, debit cards, EIB guarantees, Voice biometry for SME 1,960 +4% 2,030 Sep'16 Sep'17 Digital channels as the personalization tool for new Account I Want Steady increase in product sales and transactionality via internet and mobile channels Dynamically growing number of customers using mobile application 11

12 Total loans performance +5% YoY and +2% QoQ due to growth across main segments, maintaining focus on profitability. SME loans up 8% YoY and 2% QoQ. PLN mortgages up 17% YoY. Strong performance in GCB up 15% YoY. Total gross loans ( bn constant euros) Sep'17 YoY (%) QoQ (%) Individuals % 1% Mortgage 8.1 6% 1% Cash loans 1.8 5% 3% Other personal 0.6 2% 2% Companies % 3% SME 3.4 8% 2% Corporate 4.0 3% 3% Property % -5% GCB % 5% S'16 D'16 M'17 J'17 s'17 Total Gross Loans % 2% 12

13 Total funds performance Deposit base increased 5% YoY driven by demand deposits up 10% YoY focus on profitability and active management of the deposit base. Safe L/D ratio at 93%. Very good performance in investment funds sales Total deposits ( bn constant euros) Sep' 17 YoY (%) QoQ (%) Customer deposits /w/o REPOS % 2% Demand % 2% Time 8.0-3% 1% Customer deposists % -1% Mutual Funds % 5% Customer deposits /w/o REPOs) + Mutual funds % 2% S'16 D'16 M'17 J'17 S'17 13

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

15 Net interest income 9M 17 interest income higher by 10% YoY (+3% QoQ) due to active management of NIM Net Interest Income ( MM constant euros 1 ) Yield on loans (%) Q16 4Q16 1Q17 2Q17 3Q17 Cost of deposits (%) 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 NIM (%) Official interest rate 3 (%) Q16 4Q16 1Q17 2Q17 3Q17 (1) Average exchange rate as of 9M17, (2) Local criteria, (3) Quarter average. 15

16 Net fees Net fee up 7% YoY and 3% QoQ. Negative regulatory impact YoY in insurance in 1Q. Strong YoY dynamics related to cards, loan fees and capital markets fees. Net fees ( MM constant euors 1 ) M 17 9M 16 YoY (%) QoQ (%) Cards % -3% Customer % 5% Loan + Insurance % 0% Capital market fees % 8% Other % -8% Total % 3% 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 (1) Average exchange rate as of 9M 17 16

17 Gross income Gross operating income up 3% YoY in 9M 17 impacted by ALM income in 9M 16. Strong performance in core lines NII +10% YoY and Fees +7% YoY Gross income ( MM constant euros 1 ) 9M 17 9M 16 YoY (%) QoQ (%) Net Interest Income % 3% Net Fees % 3% Subtotal % 3% Gain/losses on financial transactions % 37% Other 3 (8) Gross Income % 0% 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 (1) Average exchange rate as of 9M 17 (2) Gains (losses) on financial transactions and Other operating income. 17

18 Operating expenses Cost base under tight control down -1% YoY. Strategic costs initiative impacting depreciation Operating expenses ( MM constant euros 1 ) 9M 17 9M 16 YoY (%) QoQ (%) General and administrative expenses (402) (406) -1% 0% Depreciation and amortisation (43) (44) -2% 4% Operating expenses (446) (450) -1% 0% 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 Efficiency ratio (with amortizations) 42.8% 44.7% Number of branches Number of employees (1) Average exchange rate as of 9M 17 18

19 Net operating income after loan-loss provisions (LLPs) Healthy credit quality: NPL ratio down 101 bps YoY and lower cost of credit LLPs and Cost of credit ( MM constant euros 1 ; %) Cost of credit 0.76% 0.70% 0.66% 0.65% 0.61% 9M 17 9M 16 YoY (%) QoQ (%) 44 Net Operating Income % -1% LLPs (97) (112) -14% 9% Net LLPs Net operating income after LLPs % -3% NPL ratio 4.70% 5.71% NPL Coverage ratio 68% 69% 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 (1) Average exchange rate as of 9M17 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 Solid result at Underlying PBT level +9% YoY mainly due to strong core income, controlled administrative costs and lower cost of credit. Higher tax charge due to regulatory costs (BFG) Attributable profit ( MM constant euros 1 ) 9M 17 9M 16 YoY (%) QoQ (%) Underlying profit before taxes % -5% Tax on profit (105) (84) 25% 5% Underlying consolidated profit % -7% Underlying att. profit % -8% Non - Recurring 30 Attributable profit to the Group % -8% 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 Effective tax rate 25% 22% (1) Average exchange rate as of 9M 17 20

21 Final remarks Market Environment & Financial System Strategy & Business GDP growth accelerated to around 4.0% in 1H17 and in the second year-half it may be even above the 4% mark. Private consumption remains the main growth driver, but a rebound in investment is also expected in the coming quarters. CPI inflation rose to 2.2% y/y in September. Inflation may drop temporarily below 2% in December due to high base effect, but it is expected to rise gradually in 2018 towards the 2.5% target. Main interest rates remained flat at 1.5% and this level is expected until 4Q18. Loans increased by 4.9% y/y in August 2017, slightly faster than in December 2016 (4.7% y/y). Gradual acceleration of loan growth is expected in the coming quarters. Business strategy continues to be focused on gathering new customers through the development of our multi-channel approach and increasing loans and related fee income from the Consumer, SME, Leasing, Factoring, Business & Corporate and GCB segments. Increasing level of loyal and digital customers through more activity and related income. Strategy focused on end to end digital transformation. Active management of Net Interest Income +10% YoY in low interest rate environment. Strong growth in fee income +7% YoY and +3% QoQ. Results General & admin expenses -1% YoY as a result of strict cost control and optimisation. Improving credit quality with room for further improvement going forward. Solid result at PBT level +9% YoY mainly due to core income, controlled administrative costs and lower cost of credit. 21

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

23 Balance sheet Constant EUR million* (*) End of period exchange rate. as of 09/30/2017 Variation 30-Sep Sep-16 Amount % Customer loans 21,486 20,296 1, Cash, central banks and credit institutions 1,845 1, Debt securities 5,954 5, o/w: available for sale 5,536 5, Other financial assets Other assets (25) (2.7) Total assets 30,778 29,088 1, Customer deposits 23,166 22,077 1, Central banks and credit institutions Debt securities issued Other financial liabilities (16) (2.8) Other liabilities (153) (17.6) Total liabilities 26,102 24,764 1, Total equity 4,676 4, Other managed and marketed customer funds 3,794 3, Mutual funds 3,699 3, Pension funds Managed portfolios (11) (10.1) 23

24 Income statement Constant EUR million* Variation 9M17 9M16 Amount % Net interest income Net fees Gains (losses) on financial transactions (32) (45.4) Other operating income (8) 6 (14) Gross income 1,042 1, Operating expenses (446) (450) 4 (0.9) General administrative expenses (402) (406) 3 (0.8) Personnel (237) (232) (5) 2.4 Other general administrative expenses (166) (174) 9 (4.9) Depreciation and amortisation (43) (44) 1 (1.8) Net operating income Net loan-loss provisions (97) (112) 15 (13.7) Other income (78) (58) (19) 33.3 Underlying profit before taxes Tax on profit (105) (84) (21) 24.9 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 30 (30) (100.0) Attributable profit to the Group (24) (10.0) (*) Average exchange rate as of 9M 17 24

25 Income statement Constant EUR million* 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Net interest income Net fees Gains (losses) on financial transactions Other operating income (6) 18 (5) (8) (13) 10 (5) Gross income Operating expenses (148) (150) (152) (143) (148) (149) (149) General administrative expenses (134) (135) (136) (127) (134) (134) (134) Personnel (76) (77) (78) (78) (78) (79) (80) Other general administrative expenses (58) (58) (58) (50) (56) (55) (55) Depreciation and amortisation (14) (14) (15) (15) (14) (14) (15) Net operating income Net loan-loss provisions (34) (35) (44) (36) (27) (33) (36) Other income (23) (30) (6) (26) (24) (26) (28) Underlying profit before taxes Tax on profit (23) (29) (32) (39) (39) (32) (34) 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 30 (0) 0 Attributable profit to the Group (*) Average exchange rate as of 9M 17 25

26 Thank you Our purpose is to help people and businesses prosper. Our culture is based on the belief that everything we do should be