31 January 2017 POLAND. January December 2017

Transcription

1 31 January 2017 POLAND January December 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 Macroeconomic environment GDP growth above 4%, inflation near to target Annual GDP Growth (real. %) Central Bank monetary policy (%) (e) 2018 (e) 2019 (e) (e) 2019 (e) Inflation (annual change. %) Average exchange rate (EUR/PLN) (e) 2019 (e) (e) 2019 (e) 4 Source: GUS, NBP, BZ WBK

5 Macroeconomic environment Strong consumption, record low unemployment, upcoming 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) 5 Source: GUS. NBP. BZ WBK

6 Macroeconomic environment Stable growth in loans, deceleration of deposits YoY (%) Total loans (EURbn) % 5.1% 4.8% 5.0% 3.8% Total market loans are rising by about 4% y/y FX-corrected growth is at c6% y/y, more or less unchanged versus previous months. Consumer loans are growing at a solid 7-7.5% y/y while PLNdenominated mortgage loan growth rate is slightly above 10% y/y. In corporate sector, investment loans rose by about (from above 16% y/y to 12% y/y) and current loans accelerated from 4.4% y/y in June to 8.4% y/y. Dec'16 Mar'17 Jun'17 Sep'17 Dec'17 YoY (%) Total customer deposits (EURbn) % 7.3% 4.5% 5.0% 4.1% Deposit growth decelerated in y/y terms, partially due to outflow of deposits to alternative investments, e.g. the stock market or real estate market, and due to slow credit action. Demand deposits still grow really fast, by c12% y/y, while term deposits fall by more than c7% y/y. Dec'16 Mar'17 Jun'17 Sep'17 Dec'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 12M 17 Var. YoY* Gross loans 1 22, % Customer funds 1 27, % Attributable profit % Underlying Consolidated profit % Remain the leader in digital channels in Poland Underlying RoTE 11.6% 0 bps Efficiency ratio 42.6% -143 bps Loans market share % -5 bps Gain market share in volumes Deposits market share % -9 bps Loyal customers 3 1, % Digital customers 3 2, % Remain the leader in profitability Branches % Employees** 11, % (1) Million euros; (2) As of September 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 enhancement Accounts and cards Good sales results of the new current account offer Account as I Want It (Konto Jakie Chcę) ths. accounts opened from launch (21st Aug) till end of 2017 Account as I Want It as #1 in Personal Accounts with mobile applications ranking by TotalMoney.pl. BZWBK #2 in the number of active credit cards (803 ths. after 3Q) Investments New Arka investment funds e-platform launched 27th, November Almost 3 times higher net sales Arka investment funds volume YoY (PLN 2.2 bn vs. 0.8 bn) Loans and deposits Excellent 4Q in cash loans 22% sales growth YoY Whole 2017 sales higher by 6% vs Active management of margins on deposit portfolio, including savings account interest rates optimisation Retail transformation New Distribution Strategy for Retail roll-out started, new sales network management structure implemented (incl. optimization of Macroregions from 8 to 5) Branch network optimization: 82 branches closed in 2017 (network coverage 576 branches) Multichannel sales 2.09 m digital customers (+6% YoY) +14% (4Q2016/4Q2017) credit products sales growth Personal account acquisition via internet within video-verification process available #1 mobile application in Bankier.pl ranking 9

10 Commercial strategy and business transformation Our goal is bulding the best SME bank in Poland by services, processes and relations enhancement Multichannel POS Loans Sales of loans in Contact Center initiated End-to-end digital credit process in ebanking (buy-by-click) Profil zaufany for SMEs implemented Video verification in online account opening Implementation of biometric for SME2 customers (COKF) Implementation of POS terminal sales tool (ID-Instant Decision). It allows to generate and make a deal during one call to MCK or visit in Branch Biznes Ekspres EBI - Biznes Ekspres loan with co-financing from the European Investment Bank offering customers a lower credit margin. Corporate Banking development Key initiatives 5th and 6th edition of Program Rozwoju Exportu concluded customer events focused on selected sectors, including publication of two sector report Launch of International Business Corridors leveraging on international footprint of the Group to facilitate business opportunities between UK, Germany and Spain. Further corridors in progress Digital Transformation As first Bank in Poland introduction of Voice biometry and phone identification for corporate clients 50% of post-sale processes are digital Launch of B2B/Host to host for corporate clients Launch of Credit Workflow Awards Eurobiuld CEE Awards Financing Provide of the Year CIJ Awards Poland 2017, for Best Bank Bank Zachodni WBK, for the third time in a row received award from BGK for its outstanding sales results in the sale of the de minimis guarantee (award shared with SME). 10

11 Customers Good growth in loyal customer numbers in all segments Loyal individuals (k) +2% 1,261 1,288 Further increase in loyal customer numbers Strategy to increase income from loyal customers New CRM tools to increase loyal individual base New account released in September, loyalty programmes Dec'16 Loyal companies (k) Dec'17 +12% 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 Dec'16 Digital customers (k) Dec'17 +6% 1,979 2,089 Digital channels as the personalisation tool for new Account as I Want it Steady increase in product sales and transactionality via internet and mobile channels Dynamically growing number of customers using mobile application Dec'16 Dec'17 11

12 Total loans performance +5% YoY loan growth, across main segments, maintaining focus on profitability, impact by FX mortgages (-19% YoY) and property portfolio PLN mortgages up 16% YoY, SME loans up 11% YoY, very strong performance in GCB up 17% YoY. Total gross loans ( bn constant euros) Dec'17 YoY (%) QoQ (%) Individuals % 0% Mortgage 8.3 3% 0% Cash loans 1.8 6% 0% Other personal 0.6 0% -1% Companies % 0% SME % 1% Corporate 4.4 7% 4% Property % 0% GCB % 0% D'16 M'17 J'17 S'17 D'17 Total Gross Loans % 0% 12

13 Total funds performance Deposit base stable YoY, focus on profitability and active management of the deposit base. Safe LtD ratio at 92%. Strong growth in mutual funds assets. Total deposits ( bn constant euros) Dec' 17 YoY (%) QoQ (%) Customer deposits w/o repos % 0% Demand % 7% Time % -12% Customer deposits w/o repos % 2% Mutual Funds % 2% Customer deposits w/o repos + Mutual funds % 1% D'16 M'17 J'17 S'17 D'17 13

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

15 Net interest income 12M 17 interest income higher by 9% YoY (+3% QoQ) due to active management of NIM Net Interest Income ( MM constant euros 1 ) Yield on loans (%) Q16 1Q17 2Q17 3Q17 4Q17 Cost of deposits (%) 4Q'16 1Q'17 2Q'17 3Q'17 4Q' NIM (%) Official interest rate 3 (%) Q16 1Q17 2Q17 3Q17 4Q17 (1) Average exchange rate as of 12M17, (2) Local criteria, (3) Quarter average. 15

16 Net fees Net fee up 8% YoY and 1% QoQ. Negative regulatory impact YoY in insurance in 1Q. Strong YoY dynamics related to capital market fees, cards and loan fees Net fees ( MM constant euros 1 ) M 17 12M 16 YoY (%) QoQ (%) Cards % 10% Customer % 1% Loan + Insurance % 4% Capital market fees % -9% Other % 11% Total % 1% 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 (1) Average exchange rate as of 12M 17 16

17 Gross income Gross operating income up 5% YoY in 12M 17. Strong performance in core lines NII +9% YoY and Fees +8% YoY Total income growth impacted by ALM income in 12M 16 Gross income ( MM constant euros 1 ) 12M 17 12M 16 YoY (%) QoQ (%) Net Interest Income % 3% Net Fees % 1% Subtotal % 2% Gain/losses on financial transactions % -2% Other 3 (3) (2) 36% - Gross Income % 5% 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 (1) Average exchange rate as of 12M 17 (2) Gains (losses) on financial transactions and Other operating income. 17

18 Operating expenses Cost base under tight control +2% YoY. QoQ administration cost increase related to strategic costs initiatives in consulting (acquisition project) & marketing (Bank as I want strategy). Operating expenses ( MM constant euros 1 ) 12M 17 12M 16 YoY (%) QoQ (%) General and administrative expenses (548) (534) 3% 7% Depreciation and amortisation (58) (59) -3% -4% Operating expenses (605) (594) 2% 6% 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Efficiency ratio (with amortizations) 42.6% 44.1% Number of branches Number of employees (1) Average exchange rate as of 12M 17 18

19 Net operating income after loan-loss provisions (LLPs) Strong improvement in credit quality: NPL ratio down 85 bps YoY and lower cost of credit LLPs and Cost of credit ( MM constant euros 1 ; %) Cost of credit 0.70% 0.66% 0.65% 0.61% 0.62% 12M 17 12M 16 YoY (%) QoQ (%) Net LLPs Net Operating Income % 4% LLPs (137) (149) -8% 10% Net operating income after LLPs % 3% NPL ratio 4.57% 5.42% NPL Coverage ratio 68% 61% 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 (1) Average exchange rate as of 12M17 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 +12% YoY mainly due to strong core income, strong control in costs and lower cost of credit. Higher tax charge due to regulatory costs (BFG). Underlying attributable profit (adjusted by VISA in 2016) +8% YoY. Attributable profit ( MM constant euros 1 ) 12M 17 12M 16 YoY (%) QoQ (%) Underlying profit before taxes % 10% Tax on profit (148) (124) 20% 26% Underlying consolidated profit % 5% Underlying att. profit % 6% Non - Recurring % - 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Attributable profit to the Group % 6% Effective tax rate 25.5% 23.8% (1) Average exchange rate as of 12M 17 20

21 Final remarks Market Environment & Financial System GDP growth accelerated to around 4.5% in 2017 and it may remain close to 4% in Private consumption remains the main growth driver, but a rebound in investment is also expected in the coming quarters. CPI inflation at 2.0% y/y in December In the months to come, CPI is expected to oscillate in % y/y with changing breakdown (core inflation up to 2% at the year-end). Main interest rates remained flat at 1.5% and this level is expected until 4Q18. Loans increased by c4% y/y in December 2017 (excluding fx effect 6%), slightly slower than in the preceding months (FX effect). Gradual acceleration of loan growth is expected in the coming quarters. Strategy & Business 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 new offer, more activity and related income. Strategy focused on end to end digital transformation. Net Interest Income +9% YoY, active management of NIM in low interest rate environment. Strong growth in fee income +8% YoY. Results Operating expenses under tight control +2% YoY impacted by costs related to optimisation and one-off projects. Strong improvement in credit quality: NPL ratio down 85 bps YoY and lower cost of credit Solid result at PBT level +12% YoY mainly due to core income, controlled administrative costs and lower cost of credit Underlying attributable profit (adjusted by VISA in 2016) +8% YoY.. 21

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

23 Balance sheet Constant EUR million* Variation 31-Dec Dec-16 Amount % Customer loans 22,220 21,095 1, Cash, central banks and credit institutions 1,661 2,134 (473) (22.2) Debt securities 6,786 6, o/w: available for sale 5,959 6,097 (138) (2.3) Other financial assets (76) (13.3) Other assets 1, Total assets 32,171 31, Customer deposits 24,255 24, Central banks and credit institutions Debt securities issued Other financial liabilities (17) (3.1) Other liabilities (284) (29.3) Total liabilities 27,235 26, Total equity 4,936 4, Other managed and marketed customer funds 4,007 3, Mutual funds 3,900 3, Pension funds Managed portfolios (*) End of period exchange rate, as of 31/12/

24 Income statement Constant EUR million* Variation Amount % Net interest income Net fees Gains (losses) on financial transactions (34) (39.7) Other operating income (3) (2) (1) 36.4 Gross income 1,419 1, Operating expenses (605) (594) (12) 1.9 General administrative expenses (548) (534) (13) 2.5 Personnel (319) (310) (9) 2.9 Other general administrative expenses (229) (224) (5) 2.0 Depreciation and amortisation (58) (59) 2 (3.2) Net operating income Net loan-loss provisions (137) (149) 11 (7.5) Other income (96) (85) (12) 13.9 Underlying profit before taxes Tax on profit (148) (124) (24) 19.8 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 (9) (2.8) (*) Average exchange rate as of 12M 17 24

25 Income statement Constant EUR million* 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 Net interest income Net fees Gains (losses) on financial transactions Other operating income (6) 18 (5) (8) (13) 10 (5) 5 Gross income Operating expenses (149) (150) (152) (143) (148) (149) (149) (159) General administrative expenses (135) (135) (137) (128) (134) (135) (135) (144) Personnel (76) (77) (79) (78) (78) (80) (80) (81) Other general administrative expenses (58) (58) (58) (50) (56) (55) (55) (63) Depreciation and amortisation (14) (15) (15) (15) (14) (14) (15) (14) Net operating income Net loan-loss provisions (34) (35) (44) (36) (27) (33) (36) (40) Other income (23) (30) (6) (26) (24) (26) (28) (18) Underlying profit before taxes Tax on profit (23) (29) (33) (39) (39) (32) (34) (43) 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 12M 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