26 th April 2017 MEXICO. January March 2017

Transcription

1 26 th April 2017 MEXICO January March 2017

2 Disclaimer 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 onthe 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). 2

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

4 Macro-economic environment Monetary policy and economic uncertainty are expected to continue affecting the Mexican economy 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 Moderate economic growth in Mexico supported by resilient consumption despite higher consumer inflation Economic Activity Global Indicator (%) 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 01/17 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% -12.0% Industrial Activity (%, annual change) 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 01/17 Monthly variation Annual variation Total Mining Construction Manufacturing Domestic Consumption (%, annual change) 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 01/17 Consumer Confidence Index (Base Jan. 2003=100) Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 Total Domestic Imported 5 Source: INEGI, BANXICO

6 Macro-economic environment Volatility in financial and other variables stabilizes in 1Q17 supported by policy decisions Financial Variables Exports (USDmm) % 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000-1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q MXN/USD TIIE 28d Total Exports Manufacturing Exports Automotive Exports Oil Exports Imports (USDmm) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000-1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q Total Imports Non-Oil Imports Oil Imports Source: INEGI, BANXICO 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - Grupo Modelo Acquisition FDI (USDmm) AT&T Investment

7 Financial system: Loan and deposit evolution Deceleration in system loan growth, deposits maintain momentum Total loans ( bn constant euros) Loan growth remains at double digit YoY (%) 13.9% 15.2% 13.7% 12.9% 11.7% Consumer loan growth remains stable Pace has decelerated as a result of increase in interest rates and lower economic growth expectations M'16 J'16 S'16 D'16 Feb'17 Total funding ( bn constant euros) Investment announced by major banking players reflects confidence in the sector YoY (%) 12.3% 15.0% 13.7% 13.3% 14.9% System deposits with a YoY pick-up both in demand and time deposits M'16 J'16 S'16 D'16 Feb'17 Source: CNBV Banks as of Feb 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 Improve commercial tools, CRM and digital platforms KEY DATA 1Q 17 Var. YoY* Gross loans 1 29, % Customers Funds 1 40, % Attributable profit % Boost payrolls, while further enhancing customer service quality RoTE Efficiency ratio Loans market share % 581 bps 38.8% -189 bps 13.5% -75 bps Strengthen Santander Plus offer to increase loyalty Deposits market share % -16 bps Loyal customers 3 1, % Digital customers 3 1, % Consolidate our positioning in mortgages and recover leadership in SMEs Branches 1, % Employees 17, % (1) Million euros; (2) As of Feb2017 (last available); (3) Thousands. (*) Constant euros 9

10 Commercial strategy and business transformation Improved customer experience from innovative products and services, along with process improvements Cards Loyalty program Mortgages +500 K cards issued +166 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 1.5 million customers in its first year +44% increase in demand deposits in Santander Plus customers The only one in Mexico that offers a tailored interest rate based on the customer s profile 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

11 Customers Making headway in customer loyalty and digitalization Loyal individuals 1, % 1,609 Maintain strong focus on increasing loyalty, while attracting new customers through innovative products such as Santander Plus and Aeroméxico co-branded card Mar'16 Mar'17 Santander Plus key contributor in reducing attrition by 28% since May 16 Loyal companies % 54 SMEs customer loyalty up 12% focus on increasing cross selling Launched of SMEs dedicated CRM platform and an online onboarding process to enhance the customer journey. Mar'16 Digital customers +61% 951 Mar'16 Mar'17 1,528 Mar'17 Digital customers have expanded consistently every quarter by: Improving onboarding processes to new channels Adding new functionality to digital platform Launched upgraded mobile banking app 11

12 Total loans performance Santander México reports 8% YoY loan growth, sharp focus on profitability Total gross loans ( bn constant euros) Mar 17 YoY (%) QoQ (%) Individual Loans Mortgage Consumer credit Credit Cards M'16 J'16 S'16 D'16 M'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 Deposit base expands 15% YoY supported by strategic initiatives aimed at individuals and SMEs Total funding ( bn constant euros) Mar 17 YoY (%) QoQ (%) Demand Time Total deposits M'16 J'16 S'16 D'16 M'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 Commercial strategy and higher rates drive 14% YoY growth in NII Net Interest Income ( MM constant euros 1 ) Yield on loans (%) Q16 2Q16 3Q16 4Q16 1Q17 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 NIM 2 (%) Official interest rate (TIIE) 3 (%) Cost of deposits (%) Q16 2Q16 3Q16 4Q16 1Q17 (1) Average exchange rate as of 3M 17 (2) Net interest income annualised / Total assets average period (3) Quarter average. 15

16 Net fees Net Fees up 13% YoY with strong contribution from investment banking Net fees ( MM constant euros 1 ) 1Q 17 1Q 16 YoY(%) QoQ(%) Q'16 2Q'16 3Q'16 4Q'16 1Q'17 Cash Management Insurance Credit Cards Mutual Funds Financial Advisory Capital Markets & Securities Total (1) Average exchange rate as of 3M 17 16

17 Gross income Gross operating income up 13% YoY underpinned by strong NII and net fees Gross income ( MM constant euros 1 ) Q 17 1Q 16 YoY(%) QoQ(%) Net Interest Income Net Fees Subtotal Q'16 2Q'16 3Q'16 4Q'16 1Q'17 Other Gross income (1) Average exchange rate as of 3M 17 (2) Other includes Gains (losses) on financial transactions and Other operating income 17

18 Operating expenses Higher costs due to new commercial projects and ongoing investments Operating expenses ( MM constant euros 1 ) Q 17 1Q 16 YoY(%) QoQ(%) General admin. expenses Depreciation and amortization Operating expenses Q'16 2Q'16 3Q'16 4Q'16 1Q'17 Efficiency ratio (with amortizations) 38.8% 40.7% Number of branches 1,389 1,386 Number of employees 17,580 17,869 (1) Average exchange rate as of 3M 17 18

19 Net operating income after loan-loss provisions (LLPs) Sound asset quality with NPLs down 29 bps YoY and stable cost of credit LLPs and Cost of credit ( MM constant euros 1 ; %) Cost of credit Net LLPs 3.0% 3.0% 2.9% 2.9% 2.9% Q 17 1Q 16 YoY(%) QoQ(%) Net Operating Income LLPs Net op. income after LLPs Q'16 2Q'16 3Q'16 4Q'16 1Q'17 NPL ratio 2.8% 3.1% NPL Coverage ratio 104.8% 97.5% (1) Average exchange rate as of 3M 17 19

20 Attributable profit Strong profit growth of 24% YoY driven by NII and fee income Attributable profit ( MM constant euros 1 ) 1Q 17 1Q 16 YoY(%) QoQ(%) Profit before taxes Tax on profit Consolidated profit Underlying att. Profit Non-recurring 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 Attributable profit Effective tax rate 21.1% 22.8% (1) Average exchange rate as of 3M 17 20

21 Final remarks Market Environment & Financial System Despite short term macroeconomic uncertainty due to the new U.S. administration s policies regarding trade and migration, the most recent indicators show a normalization in the economic trend. Nevertheless potential negative shocks may affect market volatility and flows of funds. Banco de México adopted several measures to address FX volatility and inflationary pressures increasing interest rates 75 bps since the beginning of the year, which translated into FX appreciation. The recent favorable developments in the external sector, together with a strengthening of the public finance position tend to diminish the possibility of any sovereign rating review in 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. Increased focus on profitability. Total loans up 8% YoY while focusing on profitable growth; deposits up 15% YoY. Results Solid NII performance supported by commercial strategy and higher rates, together with higher net fees drives 13% YoY increase in gross operating income in 1Q17. Sound asset quality with NPLs down 29 bps YoY and stable cost of credit. Strong attributable profit up 24% YoY, driven by NII and fee income. 21

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

23 Balance sheet Constant EUR million* Variation 31-Mar Mar-16 Amount % Customer loans 29,316 28,090 1, Cash, central banks and credit institutions 14,760 10,651 4, Debt securities 16,200 16,583 (384) (2.3) o/w: available for sale 6,978 5,507 1, Other financial assets 6,575 6, Other assets 2,958 2, Total assets 69,809 64,235 5, Customer deposits 33,971 27,612 6, Central banks and credit institutions 13,283 11,270 2, Debt securities issued 5,429 5, Other financial liabilities 9,785 12,337 (2,552) (20.7) Other liabilities 1,842 1, Total liabilities 64,311 58,216 6, Total equity 5,498 6,019 (522) (8.7) Other managed and marketed customer funds 10,905 11,380 (475) (4.2) Mutual funds 10,905 11,380 (475) (4.2) Pension funds Managed portfolios (*) End of period exchange rate, as of 03/31/

24 Income statement Constant EUR million* Variation 1Q17 1Q16 Amount % (*) Average exchange rate as of 3M 17 Net interest income Net fees Gains (losses) on financial transactions Other operating income (13) (9) (5) 53.7 Gross income Operating expenses (319) (297) (23) 7.7 General administrative expenses (291) (270) (21) 7.8 Personnel (150) (140) (9) 6.7 Other general administrative expenses (141) (129) (12) 9.0 Depreciation and amortisation (29) (27) (2) 6.3 Net operating income Net loan-loss provisions (233) (204) (29) 14.4 Other income (4) (6) 2 (27.1) Underlying profit before taxes Tax on profit (56) (51) (6) 10.9 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 Attributable profit to the Group

25 Quarterly income statement Constant EUR million* 1Q16 2Q16 3Q16 4Q16 1Q17 Net interest income Net fees Gains (losses) on financial transactions Other operating income (9) (5) (8) (19) (13) Gross income Operating expenses (297) (300) (301) (321) (319) General administrative expenses (270) (273) (278) (296) (291) Personnel (140) (150) (135) (154) (150) Other general administrative expenses (129) (123) (143) (142) (141) Depreciation and amortisation (27) (27) (23) (24) (29) Net operating income Net loan-loss provisions (204) (202) (188) (201) (233) Other income (6) (11) (5) (7) (4) Underlying profit before taxes Tax on profit (51) (49) (62) (74) (56) 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 (*) Average exchange rate as of 3M 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