26 th April 2017 SANTANDER US. January March 2017

Transcription

1 26 th April 2017 SANTANDER US January March 2017

2 Disclaimer Banco Santander, S.A. and its affiliates ("Santander") caution 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 our future business development 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 creditworthiness of our customers, obligors and counterparties. These 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 Santander. The information in this presentation is not intended to constitute research as that term is defined by applicable regulations. Nothing in this presentation constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. Recipients of this presentation should obtain advice based on their own individual circumstances from their own tax, financial, legal and other advisors before making an investment decision, and only make such decisions on the basis of the investor's own objectives, experience and resources. 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 None of this presentation, or its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior written permission of Santander. Note: Nothing in this presentation should be construed as a profit forecast. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding performance. Information, opinions and estimates contained in this presentation reflect judgments at the original date of publication of this presentation by Santander and are subject to change without notice. Santander has no obligation to update, modify or amend this presentation or to otherwise notify a recipient hereof in the event that any information, opinion or estimate set forth herein changes or subsequently becomes inaccurate. This presentation is provided for informational purposes only. Note: The information included in this presentation for Santander Holdings USA, Inc. ( SHUSA ) has been prepared according to Spanish accounting criteria and regulation in a manner applicable to all subsidiaries of the Santander Group and, as a result, it may differ from the information disclosed locally by SHUSA or Santander Bank. Any use of local (US GAAP) accounting will be noted where it occurs. IRS Circular 230 Disclosure: Santander and its employees are not in the business of providing, and do not provide, tax or legal advice to any taxpayer outside Santander. Any statements in this communication as to tax matters were not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. 2

3 Perimeter Data shown throughout this presentation refers to Santander Holdings USA, Inc. which includes Santander Bank NA (SBNA), Santander Consumer USA Holdings Inc. (SC), NY Branch and Santander Investment Securities, Banco Santander International (BSI Miami), and Puerto Rico (Santander Bancorp and Santander Financial Services) unless stated otherwise. 3

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

5 Macro-economic environment Declining GDP growth with projected rate increases in 2017 and 2018 GDP Growth (%, real) Interest Rate 1 (%, period average) (e) 2018 (e) 2019 (e) (e) 2018 (e) 2019 (e) CPI Inflation Rate (%, period average) USD: EUR Exchange Rate (period average) (e) 2018 (e) 2019 (e) (e) 2018 (e) 2019 (e) Source: FRB, Knoema.com (EIU Forecasts), LongForecast.com and estimates by Santander Research La Semana 4/21/ month LIBOR rate from Moody s ECCA 5

6 Macro-economic environment Unemployment projected to remain steady as home sales level off Debt to GDP 1 Unemployment Rate (%) 81.0% 80.0% 79.3% 78.4% 77.6% 67.7% 69.0% 71.2% 71.9% 71.1% Household Debt to GDP Nonfinancial Bus. Debt to GDP Q'17 Existing Home Sales (Mn) Value of Used Vehicles AVERAGE, Q' Source: BLS. National Association of Realtors, FRB. 1. Household & Business debt data has been restated for previous periods by FRB data current as of Q4 2016; 2. Annual averages and monthly seasonally adjusted annual rates updated through February 2017; 3. Manheim Index, March

7 Financial System: Loan and Deposit Growth Steady growth for Loans; Deposits continue to trend upward USD billion Total loans 1 YoY (%) 8,841 8,941 9,123 9,235 9, % 6.9% 6.7% 6.8% 5.3% Loan growth remained strong in 2016, driven by growth in commercial lending Loan slowed significantly in Q D'15 M'16 J'16 S'16 D'16 Total deposits 12,190 12,429 12,528 12,799 12,895 Deposit growth of 5-6% across the industry continues in 2016 YoY (%) 3.6% 3.9% 5.0% 6.7% 5.8% Loans to deposit ratio for the industry decreased slightly to 72.2% as of Q vs % in Q D'15 M'16 J'16 S'16 D'16 Source: FDIC Statistics on Depository Institutions; data available one quarter in arrears. 1. Gross Loans 7

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

9 Our Franchise Santander has well established banking franchises in the Northeast and Puerto Rico, a nationwide auto finance business, a broker-dealer in New York and a private banking business in Miami STRATEGIC PRIORITIES Key Metrics 1Q'17 Var. YoY Santander US Business & Results Meet regulators expectations Loans 1 Deposits Bn (5.8%) 66.7Bn (1.1%) Attributable Profit 101 Mn 12.4% Improve customer experience and loyalty Santander Bank - Network & Customers 2 Clients 2.1 Mn 2.1% Branches Maintain leadership in auto finance ATMs Santander Bank - Market Share 3 Loans 2, % 37% Improve profitability Deposits Santander Consumer USA - Market Share 4 SC Market Share (Retail Auto Lending) 2.7% 17% 4.3% (#7 in the US) 1. Calculated using local US GAAP criteria. 2. Customer data is Feb 17 vs. Feb 16 for Clients, Mar 17 vs. Mar 16 for Branches and ATMs; var. YoY excluding SBB. 3. Market share as of 6/30/2016 from FDIC. Data available once a year (Considering all states where Santander Bank operates). 4. Source: J.D. Power Market Share Report for Q1 17 (includes Santander Consumer USA and Chrysler Capital combined). 9

10 Santander US: Strategy/Priorities SHUSA Execute multi-year transformation program to strengthen risk, capital and liquidity management Invest in technology to further improve internal controls, risk management and capital planning systems Complete consolidation of US operations Meet regulatory expectations and build a compliant, successful business in the US Santander Bank Build more and deeper customer relationships through a simplified product offering Grow Core Deposits across Consumer and Commercial segments Enhance digital capabilities by enabling convenient interfaces and improving transaction processes Improve operating efficiency and manage costs Grow the Global Corporate Banking business with US-based clients Santander Consumer USA Leverage efficient, scalable platform to originate and service profitable assets Emphasis on compliance and responsible consumer practices Focus on optimizing the profitability of retained assets Continued expansion in prime segment through Chrysler Capital Improve funding costs 10

11 1. 4Q 16 net checking growth impacted by planned exit of legacy accounts 2. Excludes Time, Brokered CDs, Government and Holding Company deposits. Santander Bank: Retail & Commercial Focus Customer base 1 Net Checking Customers Growth (in thousands) (2.9) Aggressive marketing efforts in 1Q 17 contributed to a strong rebound in customer growth Online digital customers (000 s) Solid YoY growth driven by roll-out of enhancements and digital capabilities 1Q16 1Q17 Core deposit growth 2 Total Core Deposits ($ in billions) ~6% growth year-over-year driven primarily by increased customer acquisition and marketing initiatives C& I lending growth Total C&I Loans ($ in billions) ~19% year-over-year decline in C&I driven by reduction of GCB balances 11

12 SC: Optimizing Portfolio Profitability and Realizing Full Value of the Chrysler Relationship Optimize Portfolio Profitability Total Serviced Portfolio for Managed Assets ($ in billions) Serviced for others down year-over-year, while slight uptick in owned vs. prior quarter Owned and serviced Serviced for others Originate loans and leases through Chrysler relationship Chrysler Volume ($ in billions) Increase in volume quarter over quarter, consistent with seasonal trends Expense Ratio (%) 3 Expenses & Expense Ratio $53.2 $53.3 $52.7 $52.0 $ % 2.2% 2.3% 2.2% 2.0% $0.3 $0.3 $0.3 $0.3 $0.3 Q Q Q Q Q Average Managed Assets Operating Expenses Expense Ratio Operating expenses stable, ratio increasing due to a reduction in serviced for others balances 1. Owned and Serviced portfolio excludes Personal Lending 2. Includes Chrysler Capital originated retail loans and leases. 3. US GAAP Expenses. 12

13 Total Loans Performance YoY decline driven primarily by Commercial Loans at SBNA USD Billion Total Loans 1 Mar'17 YoY (%) QoQ (%) Consumer 42.1 (0.4) (1.6) Mortgages (2.5) SC (Auto Lending) 26.5 (1.7) (0.1) Other Consumer (6.2) Commercial 40.1 (11.6) (4.3) CRE & Multifamily 17.1 (7.8) (2.1) C&I & Other Commercial 23.0 (14.1) (5.9) Private Banking (1.9) M'16 J'16 S'16 D'16 M'17 Total Loans (5.8) (2.9) End of period balances. Calculated using local US GAAP accounting criteria. 2. Other includes personal lending, credit cards and HELOC

14 Total Customer Deposits Performance Core deposits continue strong growth YoY, reducing reliance on wholesale deposits; government deposits are declining due to planned exit from certain customer segments USD Billion Total Deposits M'16 J'16 S'16 D'16 M'17 Mar'17 YoY (%) QoQ (%) Core Deposits Time Deposits 4.7 (8.0) (2.5) Gov t Deposits 3.5 (26.7) (14.1) Other Deposits (3.0) (6.6) Customer Deposits Wholesale Deposits 2.7 (40.5) (32.5) Total Deposits (1.1) (0.9) Note: SC has no deposits. NY branch deposits not included. 1. End of period balances. Calculated using local US GAAP accounting criteria. 2. Core Deposits are comprised of Non-Interest DDAs, Int-bearing DDAs, MMAs & Savings. 3. Includes customer repo and Eurodollar deposits 14

15 SC Diversified Funding Base SC continues to demonstrate consistent access to funding with less reliance on external sources USD Billion Total Committed Funds Mar '17 YoY (%) QoQ (%) Santander Funding Third Party Funding 10.7 (0.1) 0.4 Amortizing Notes Public Securitizations Total Committed Funding % 7.2% M'16 J'16 S'16 D'16 M' Includes ~$4BN from SHUSA ($3BN backup line plus $950MM tem lending), and $3BN BSNY lines to SC. 2. Privately issued amortizing notes only.

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

17 Net Interest income YoY decline of NII driven by mix change at SC, while lower borrowings and higher rates at SBNA drive the increase vs. prior quarter USD million Loan yields (%) Net Interest Income SC ,706 1,652 1,625 1,561 1,586 SBNA NIM (%) Total San US NIM (%) SBNA NIM (%) SC Federal Funds Rate (%) Deposit cost (%) SBNA Average Quarterly Rate. Note: NIM = Net interest income annualised / Total assets average period

18 Net Fees Fee Income down by 6% YoY driven by lower Servicing Portfolio volume USD million Net Fees 1Q'17 1Q'16 YoY(%) QoQ(%) Account Fees (2.3) Debit and CC Fees (1.5) (5.0) Invest. & Insurance (6.0) 0.6 Cont. Risk and Commit Other Fees (12.9) (16.9) SC Servicing Fees (19.7) (1.6) Others (10.8) 15.6 Total Fees by Category (6.8) Insurance includes gross earned fees

19 Gross Income YoY decline in gross income driven by impact of lower NII and fees, as well as reduction in Other Income which included one time gains in 1Q 16 USD million Gross Income 2,168 2,133 2,085 2,001 1Q'17 1Q'16 YoY(%) QoQ(%) Net Interest Income 1,586 1,706 (7.0) 1.6 Net Fees (6.8) 5.2 1,945 Subtotal 1,877 2,018 (7.0) 2.1 Other (17.4) 15.5 Gross Income 2,001 2,168 (7.7) Other includes Gains (losses) on financial transactions, Other operating income and Leasing income

20 Operating Expenses YoY expenses unfavorable driven by investment in compliance and operations; QoQ decrease driven by lower consulting and depreciation expense at SBNA USD million Operating Expenses General and admin. expenses Depreciation and amortization 1Q'17 1Q'16 YoY(%) QoQ(%) (4.1) (4.6) 8.7 Operating expenses (4.1) 4.4 SBNA Operating Expenses (0.3) 8.7 SC Operating Expenses (13.1) (9.7) Efficiency ratio (with amortizations) 44.6% 39.5% SBNA 79.8% 77.1% SC 18.9% 14.7% Number of branches Number of employees 17,679 18,229 20

21 Net Operating Income after Loan Loss Provisions (LLPs) YoY decline in provisions driven by asset mix at SC, and Oil & Gas provisions at SBNA in 1Q 16 USD million LLPs and Cost of Credit Net loan-loss provisions Q'17 1Q'16 YoY(%) QoQ(%) Net Operating Income 1,109 1,312 (15.4) 9.5 LLPs (863) (949) Net op. income after LLPs (32.1) Cost of credit 1 (%) SAN Bank SC NPL Ratio 1Q17 1Q16 SAN Bank 1.06% 1.47% SC 4.78% 3.28% Coverage ratio SAN Bank 115% 95% SC 267% 375% Cost of credit = 12 month loan loss provisions / average lending

22 Underlying and Attributable Profit Attributable profit increased YoY. Compared to the fourth quarter, recovery in revenues and profits due to the normalization of the main P&L lines USD million Underlying Profit 1Q'17 1Q'16 YoY(%) QoQ(%) Profit before taxes (27.1) Tax on profit (65) (114) 42.6 N/A Consolidated Profit (17.1) Minority interest (45) (87) (47.6) 7.2 Underlying Profit N/A Non-recurring 0 0 N/A (100.0) 12 Attributable profit (24) 101 Attributable profit N/A Effective tax rate 30.9% 39.2% Non-recurring Items: In 4Q 16, -$36mill. restatement Santander Consumer USA 22

23 Conclusions Market Environment & Financial System Declining GDP Growth with rate increases projected in 2017 and 2018 Unemployment steady as home sales level off Loan growth remained strong in 2016 driven by Commercial Lending, but weakness across the market in Q Deposit growth of 5-6% across the industry in 2016 Strategy & Business Aggressive marketing efforts in Q1 contributed to a rebound in customer growth Core Deposit growth of 6% year-over-year driven primarily by increased customer acquisition and marketing initiatives YoY decline in C&I Loans driven by reduction of Commercial balances as the balance sheet is optimized Serviced for others down year-over-year, while slight uptick in owned vs. prior quarter SC continues to demonstrate consistent access to funding Results YoY decline of NII driven by mix change at SC, while lower borrowings and higher rates at SBNA drive the increase vs. prior quarter Fee Income down by 6% YoY driven by lower Servicing Portfolio volume YoY expenses unfavorable driven by increase in insurance and severance expense at SC; QoQ decrease driven by lower consulting and depreciation expense at SBNA YoY decline in provisions driven by asset mix at SC, and the reduction of Oil & Gas reserves at SBNA Attributable profit increased QoQ due to non-recurring items booked at SBNA in December 23

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

25 Balance Sheet (IFRS) Santander US USD $ Million Variation 31-Mar Mar-16 Amount % Customer loans 87,497 92,031 (4,535) (4.9) Cash, central banks and credit institutions 21,871 23,664 (1,793) (7.6) Debt securities 20,376 21,754 (1,378) (6.3) o/w: available for sale 17,858 19,790 (1,932) (9.8) Other financial assets 3,251 3,532 (281) (7.9) Other assets 14,186 13, Total assets 147, ,686 (7,504) (4.9) Customer deposits 67,461 67,771 (309) (0.5) Central banks and credit institutions 23,777 36,476 (12,699) (34.8) Debt securities issued 30,193 25,517 4, Other financial liabilities 3,242 2, Other liabilities 4,803 4,879 (76) (1.6) Total liabilities 129, ,618 (8,142) (5.9) Total equity 17,705 17, Other managed and marketed customer funds 19,696 20,827 (1,131) (5.4) Mutual funds 9,607 7,756 1, Pension funds Managed portfolios 10,089 13,071 (2,982) (22.8) 25

26 Balance Sheet (IFRS) Santander Bank USD $ Million Variation 31-Mar Mar-16 Amount % Customer loans 52,236 56,460 (4,224) (7.5) Cash, central banks and credit institutions 3,905 7,265 (3,360) (46.3) Debt securities 18,138 20,580 (2,442) (11.9) o/w: available for sale 15,954 18,951 (2,998) (15.8) Other financial assets 1,018 1,583 (565) (35.7) Other assets 2,854 3,996 (1,142) (28.6) Total assets 78,150 89,884 (11,734) (13.1) Customer deposits 57,207 57,581 (373) (0.6) Central banks and credit institutions 8,703 18,868 (10,165) (53.9) Debt securities issued 798 1,638 (840) (51.3) Other financial liabilities (123) (32.6) Other liabilities 854 1,098 (244) (22.2) Total liabilities 67,818 79,563 (11,745) (14.8) Total equity 10,332 10, Other managed and marketed customer funds (1) (3.0) Mutual funds (1) (3.0) Pension funds Managed portfolios 26

27 Balance Sheet (IFRS) Santander Consumer USA USD $ Million Variation 31-Mar Mar-16 Amount % Customer loans 25,971 27,130 (1,159) (4.3) Cash, central banks and credit institutions 3,426 2, Debt securities o/w: available for sale Other financial assets Other assets 9,983 8,596 1, Total assets 39,476 38, Customer deposits 1 (1) (100.0) Central banks and credit institutions 7,759 11,115 (3,357) (30.2) Debt securities issued 23,686 20,430 3, Other financial liabilities Other liabilities 2,067 1, Total liabilities 33,778 33, Total equity 5,698 4, Other managed and marketed customer funds Mutual funds Pension funds Managed portfolios 27

28 Quarterly Income Statement (IFRS) Santander US US $ Million Net interest income 1,706 1,652 1,625 1,561 1,586 Net fees Gains (losses) on financial transactions (18) (6) Other operating income Gross income 2,168 2,133 2,085 1,945 2,001 Operating expenses (856) (874) (875) (932) (891) General administrative expenses (775) (787) (788) (839) (806) Personnel (458) (452) (454) (446) (474) Other general administrative expenses (317) (335) (334) (393) (333) Depreciation and amortisation (82) (87) (87) (93) (85) Net operating income 1,312 1,259 1,210 1,013 1,109 Net loan-loss provisions (949) (797) (867) (935) (863) Other income (72) (16) (3) (8) (34) Underlying profit before taxes Tax on profit (114) (161) (102) (15) (65) 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 (36) Attributable profit to the Group (24)

29 Quarterly Income Statement (IFRS) Santander Bank US $ Million Net interest income Net fees Gains (losses) on financial transactions (11) (2) Other operating income Gross income Operating expenses (468) (483) (475) (514) (469) General administrative expenses (406) (417) (411) (449) (407) Personnel (254) (247) (235) (224) (234) Other general administrative expenses (152) (170) (175) (225) (173) Depreciation and amortisation (62) (66) (65) (64) (62) Net operating income Net loan-loss provisions (79) (13) (7) (33) (32) Other income (35) (9) Underlying profit before taxes Tax on profit (8) (11) (32) (30) (14) Underlying profit from continuing operations (24) 64 Net profit from discontinued operations Underlying consolidated profit (24) 64 Minority interests Underlying attributable profit to the Group (24) 64 Net capital gains and provisions Attributable profit to the Group (24) 64 29

30 Quarterly Income Statement (IFRS) Santander Consumer USA US $ Million Net interest income 1,161 1,111 1,088 1,035 1,009 Net fees Gains (losses) on financial transactions 1 (7) (20) (16) (10) Other operating income Gross income 1,408 1,369 1,322 1,242 1,236 Operating expenses (207) (205) (217) (213) (234) General administrative expenses (200) (198) (211) (207) (227) Personnel (123) (123) (129) (126) (133) Other general administrative expenses (77) (75) (83) (81) (94) Depreciation and amortisation (7) (7) (6) (6) (6) Net operating income 1,201 1,163 1,105 1,029 1,002 Net loan-loss provisions (843) (758) (835) (873) (805) Other income (27) 2 (0) (11) (17) Underlying profit before taxes Tax on profit (125) (149) (72) (48) (63) 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 (36) Attributable profit to the Group

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