Santander: New strategy focused on profitability and growth. José Luis de Mora Global Head of Financial Planning and Corporate of Development

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1 Santander: New strategy focused on profitability and growth José Luis de Mora Global Head of Financial Planning and Corporate of Development Rome, 17th June 2015

2 2 I. A new banking framework deserves a new strategy II. Santander: Our new strategy III. The future: A solid starting point poised for growth IV. Outlook

A New Banking Environment 3 Bifurcated macro US,UK: growth and rising rates but at low levels Europe: less growth, QE and low rates Emerging markets: diverse, slower growth and higher risk premiums

3 A New Banking Environment 3 Bifurcated macro US,UK: growth and rising rates but at low levels Europe: less growth, QE and low rates Emerging markets: diverse, slower growth and higher risk premiums Demographic changes Ageing population: focus on wealth management Growth of affluent New middle class in emerging markets New social and reputational environment Demand of cultural transformation of banks Increased regulatory pressures More capital, liquidity, compliance Higher intervention and demands Industrial renaissance in mature markets Unit labour cost adjustment SMEs/ corporates banking opportunity Trade finance importance Technology disruption Technology critical to rebuild strategy Category killers threatening traditional model Digital" generations The banking environment is changing at an accelerated pace, creating challenges but also opportunities for institutions that are ready to adapt

half 115 RWAs 8,050 7,950 = TCE 510 1,005 double 1,110 Even with the same profit level of 2007, profitability would

4 The economics of the sector have changed, the ROTE has fallen far below its precrisis levels: Banking s ROTE will be structurally lower 4 European banks vs 2007 Assumption: If 2014 net profit = 2007 Net profit half 115 RWAs 8,050 7,950 = TCE 510 1,005 double 1,110 Even with the same profit level of 2007, profitability would be half CTE 1% 6% -7% 9%-11% higher ROTE 20% 7%-9% less than half 11% Source: Banking analyst reports of 34 European banks

5 P/TBV 2015 In a low interest rate and high capital requirement environment, small differences in ROTE and growth have a large impact on the P/BV valuation 5 ROtE 2015 Source: Bloomberg

6 How is the banking industry trying to restore their ROTEs? 6 1. Capital reallocation 2. Increase revenues: Manage margins / market share gains / improve operating leverage 3. Cost reduction / improve efficiency 4. Risk management 5. Consolidation

7 7 I. A new banking framework deserves a new strategy II. Santander: Our new strategy III. The future: A solid starting point poised for growth IV. Outlook

Santander has absorbed structural impacts as well as cyclical impacts and it is adapting its business model to the new market and regulatory environments 8

8 Santander has absorbed structural impacts as well as cyclical impacts and it is adapting its business model to the new market and regulatory environments 8 >20% 12-14% 10-11% Pre-crisis ROTE Structural impacts Cyclical impacts 2014 Adapting to the new environment: A New Strategy 2017 Target 2017 ROTE Target ROTE

9 . and we have designed a new strategy adapted to these new and more demanding times 9 A strong internal culture The Santander Way: Simple, Personal, Fair Earn the loyalty of our retail and corporate customers, gain market share: improve our franchise 4. CULTURAL Transformation People Customers To be the best retail and commercial bank that earns the lasting loyalty of our Communities Shareholders Operational excellence Reinforced capital and risk management 1. Commercial SUCCESS and 2. Operational EXCELLENCE 3. Improving ROTE and growth Supporting the community of the future: Santander Universities Enhanced profitability

retail customers and 3 m of SMEs and corporates customers An engaged customer is Retail SMEs Corporates more profitable

to 17M retail loyal customers (+40%) Retail and consumer loan growth above peers + From 0.8M to 1.

10 1. Commercial SUCCESS Gaining market share and earning the loyalty of our customers is our top priority and the core of our strategy People 10 Customers Communities Shareholders Our opportunity to earn the loyalty of our customers : 92 m of retail customers and 3 m of SMEs and corporates customers An engaged customer is Retail SMEs Corporates more profitable that a non engaged customer Impact and 2017 goals The result is more customers, more engaged and more revenues: From 12M to 17M retail loyal customers (+40%) Retail and consumer loan growth above peers + From 0.8M to 1.1M SMEs and corporate loyal customers (+37%) and SME + corporate lending growth* above peers = Our operating income would grow by 2-3bn (*) Including GBM

2. Operational EXCELLENCE Operational excellence: delivering the best service at a competitive cost People 11 Customers Communities Shareholders Customer satisfaction index C/I ranking

3% 2H11 2H12 2H13 2H14 C1 SAN C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 C13 C14 C15 C16 C17 44 47 47 49 52 55 56 59 59 59 62 68 70 71 71 73 # 2 15 pp difference vs peers average 84 92 Goal:

11 2. Operational EXCELLENCE Operational excellence: delivering the best service at a competitive cost People 11 Customers Communities Shareholders Customer satisfaction index C/I ranking vs. Peers** (% Mar 15) Santander Peer Group 86.4% 85.9% 84.3% 85.3% 2H11 2H12 2H13 2H14 C1 SAN C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 C13 C14 C15 C16 C # 2 15 pp difference vs peers average Goal: Top 3 in all Geographies(*) Goal: C/I below 45% (*) Top 3 in net satisfaction; US to the average (**) Peer Group : BBVA, BNP Paribas, Citigroup, Deutsche, HSBC, Intesa Sanpaolo, Itaú, JPMorgan Chase, Lloyds, Société Générale, UBS, UniCredit, Bank of America, Wells Fargo, Barclays, Standard Chartered and ING

3. Improving ROTE and growth An efficient and disciplined capital

improving RoRWA After capital increase, we are amongst the best in

way: We will focus on organic growth opportunities, supporting our

6% Target We will be stricter in our capital allocation allocating

2.4% Target We will be stricter in our acquisitions criteria Peers

12 3. Improving ROTE and growth An efficient and disciplined capital allocation People 12 Customers Communities Shareholders Focus on improving RoRWA After capital increase, we are amongst the best in capital adequacy and we will assign this capital in a more efficient way: We will focus on organic growth opportunities, supporting our customers (developed markets) Peers (developed markets) 0.9% 1.6% Target We will be stricter in our capital allocation allocating capital to businesses with higher potential returns (Latam + Poland) 2.4% Target We will be stricter in our acquisitions criteria Peers (emerging markets) 2.4% This will allow us to deliver a ROTE of 12-14% by % 1% 2% 3%

3. Improving ROTE and growth with a wide risk management framework and a

Customers Communities Shareholders Excellence in risk management Strong

0% Assuming fulfilment of the AT1 & T2 buckets through the transitional period

5% 10-11% A new dividend policy mostly in cash: - cash pay out ratio between

13 3. Improving ROTE and growth with a wide risk management framework and a strong capital position allow us deliver value to our shareholders People 13 Customers Communities Shareholders Excellence in risk management Strong capital standards 10-11% 1.5% 2.0% Assuming fulfilment of the AT1 & T2 buckets through the transitional period % 10-11% A new dividend policy mostly in cash: - cash pay out ratio between 30-40% of a growing recurrent profit Higher EPS growth than peers 500m investment in Risk Data Aggregation program across the Firm 2017 Goal: NPL ratio <5% Group CET1 target AT1 T2 Group total ratio expected

Our targets are focused on delivering higher growth than our peers and improving

geographies 17 Million Retail Loyal Customers 1 Million SMEs and Corporates Loyal

in customer service* 25 million digital customers 4. CULTURAL People Customers 1.

Operational EXCELLENCE Transformation 12-14% ROTE 700 M support through Universities

000 scholarships in 2015-2017 Top 10 in Dow Jones Sustainability index Communities

14 Our targets are focused on delivering higher growth than our peers and improving profitability to our shareholders 14 Top 3 bank to work in the majority of our core geographies 17 Million Retail Loyal Customers 1 Million SMEs and Corporates Loyal Customers Customer loans growth above peers*** All geographies in top 3 among peers in customer service* 25 million digital customers 4. CULTURAL People Customers 1. Commercial SUCCESS and 2. Operational EXCELLENCE Transformation 12-14% ROTE 700 M support through Universities in the next 4 years** scholarships in Top 10 in Dow Jones Sustainability index Communities Shareholders FL CET1 of 10%-11% NPL ratio of <5% C/I <45% Higher EPS growth than peers*** 3. Improving ROTE and growth (*) US above peers average (**) 4 years: (***) Peer Group: BBVA, BNP Paribas, Citigroup, Deutsche, HSBC, Intesa Sanpaolo, Itaú, JPMorgan Chase, Lloyds, Société Générale, UBS, UniCredit, Bank of America, Wells Fargo, Barclays, Standard Chartered and ING

15 15 I. A new banking framework deserves a new strategy II. Santander: Our new strategy III. The future: A solid starting point poised for growth IV. Outlook

16 A superior starting point: we are well positioned to deliver profitability and growth above peers A strong and low risk business model US Latam Europe Loans UK 2. Business portfolio geared for growth 3. Entering into a growth cycle

17 1. A STRONG AND LOW RISK BUSINESS MODEL A business model based on a well diversified retail and commercial bank with recurrent earnings generation, low risk and attractive growth profile 17 Diversified and attractive portfolio/market presence Santander s model Strong retail and commercial banking franchises Autonomous subsidiaries model with fully-integrated IT systems and support functions Strong balance sheet and amongst the best in capital position with prudent risk management Focus on operational excellence and efficiency A top global brand

1. A STRONG AND LOW RISK BUSINESS MODEL with a unique and a well balanced emerging-mature markets and strong retail and commercial local positions in all of our

markets, given the improved outlook Revenue by geography.

HK CEE Latam Asia+MENA Developed markets: Growing Temporary Slowdown (Return to Growth) Stable Growth Ranking Loan market Share GDP growth 2015 Spain #3 14% 3.

18 1. A STRONG AND LOW RISK BUSINESS MODEL with a unique and a well balanced emerging-mature markets and strong retail and commercial local positions in all of our core markets 18 Diversified portfolio with focus on Europe and the Americas Santander will benefit from significant organic growth opportunities in all its core markets, given the improved outlook Revenue by geography. % SAN Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Peer 12 Peer 13 Peer 14 Peer 15 Peer 16 Peer 17 26% 13% 15% 3% 43% Europe UK US HK CEE Latam Asia+MENA Developed markets: Growing Temporary Slowdown (Return to Growth) Stable Growth Ranking Loan market Share GDP growth 2015 Spain #3 14% 3.0% Portugal #3 11% 1.5% UK #5 9% 2.6% US #21 3% 1 2.6% Germany #1 2 14% 2 1.8% Brazil #3 8% -1.5% Argentina #2 9% -1.5% Poland #3 10% 3 3.6% Mexico #3 14% 3.2% Chile #1 19% 3.0% 1 Considering all states where Santander Bank operates plus Puerto Rico 2 Consumer loans 3 Including SC

19 1. A STRONG AND LOW RISK BUSINESS MODEL This diversification has allowed us a more stable profit than the top banks 19 Evolution of Profit before tax. (Base 2006=100) Banks: BBVA, BNP Paribas, Citigroup, Deutsche, HSBC, Intesa Sanpaolo, Standard Chartered, JPMorgan Chase, Lloyds, RBS, Credit Agricole, Société Générale, UBS, UniCredit, Bank of America, Barclays and ING

20 2. BUSINESS PORTFOLIO GEARED FOR GROWTH We have higher potential growth than peers, reflected in efficient market share gains in most of our markets 20 Strong position Loan market share % Market share growth y-o-y Loans growth (1) y-o-y Efficiency ratio% Peers efficiency ratio% #1 Chile 19% +0 pb +9% 42% 48% #3 Mexico 14% +46 pb +19% 42% 56% #3 Spain 14% +70 pb +1% 48% 49% #3 Portugal 11% +66 pb -4% 51% 59% (2) #3 Poland 10% +1 pb +8% 44% 47% #5 UK 9% +60 pb (3) +5% 53% 71% #2 Argentina 9% +38 pb +26% 57% 57% #3 Brazil 8% +10 pb +17% 39% 43% #21 US Data as of 31 st March 2015 (4) 3% - +4% Average 2015 GDP growth in Santander core markets close to 3% 36% (5) 65% (1) Gross Loans excluding repos (2) Including SC (3) SMEs (4) Considering all states where Santander Bank operates plus Puerto Rico (5) Efficiency ratio: Santander Consumer US = 14%; Santander Bank= 71% and Puerto Rico= 52%

21 2 BUSINESS PORTFOLIO GEARED FOR GROWTH and a greater capacity for loan origination, we are in a unique position to deliver higher yielding assets / credit growth in a low interest rate world 21 Global leader in consumer finance Our mature markets benefit from the interest rate cycle generating credit helped by cost of funding Leading bank in high loan demand markets We have presence in emerging market with low bancarisation and low leverage that will sustain credit demand in the long term Unique value proposition for expanding SME markets There is rapidly growing demand for SME loans in peripheral countries Banks with strong asset generation capacities are winners in the current environment: Santander has all ingredients to generate credit growth and profitable yielding assets

(EUR bn) P&L cycle 8.1 8.9 8.9 8.2 5.3 2.3 4.

22 3. ENTERING INTO A GROWTH CYCLE and we are entering a growth cycle 22 Attributable profit (EUR bn) P&L cycle e

3. ENTERING INTO A GROWTH CYCLE with a cyclical recovery of revenues and volumes in all our markets, this trend is specially relevant in mature markets which are growing again 23 Commercial revenues

23 3. ENTERING INTO A GROWTH CYCLE with a cyclical recovery of revenues and volumes in all our markets, this trend is specially relevant in mature markets which are growing again 23 Commercial revenues - Grupo Mar 15 gross loans* Mar 15 deposits** Constant EUR million NII +8 p.p. 7,450 7,703 7,691 7,966 8,038 UK Spain Y-o-Y % var Y-o-Y % var Fees Income +4 p.p. 2,436 2,472 2,476 Commercial Revenues +7 p.p. 10,175 10,167 9,886 2,578 2,524 10,544 10,563 Brazil USA SCF Chile Mexico Portugal Poland Argentina Q'14 2Q 3Q 4Q 1Q'15 TOTAL Group (*) Gross loans excluding repos (**) Deposits (excluding repos) + managed and marketed mutual funds

24 24 I. A new banking framework deserves a new strategy II. Santander: Our new strategy III. The future: A solid starting point poised for growth IV. Outlook

We are seeing growth positive trends in all markets over next three years 25 2008-2014: Balance sheet cycle completed Deleveraging (USD / EUR / GBP Capital accumulation

growth improvement Progressive normalisation of provisions Certain stabilisation / pickup of credit demand Low rates continue to put pressure on profitability Control cost

25 We are seeing growth positive trends in all markets over next three years : Balance sheet cycle completed Deleveraging (USD / EUR / GBP Capital accumulation Improvement of Liquidity Restructuring cost Higher provisions / clean-up portfolio Absorption of regulatory impacts (capital / liquidity / other costs) : ROE and growth improvement Progressive normalisation of provisions Certain stabilisation / pickup of credit demand Low rates continue to put pressure on profitability Control cost Capital optimization 2017+: Normalisation Full normalisation of provisions Progressive normalisation of interest rates? Recovery of solvent demand, volume growth Regulatory stability

Our financial targets in the medium-term 26 2014 2017 targets Growth Loans +5%

NPL ratio 5.19% < 5% Capital CET1 fully-loaded 9.

Fargo, JPMorgan Chase, Citi, Bank of America, HSBC, BNP Paribas, UniCredit,

26 Our financial targets in the medium-term targets Growth Loans +5% Above peers* Operating excellence Efficiency ratio 47% < 45% Risk management NPL ratio 5.19% < 5% Capital CET1 fully-loaded 9.7% 10-11% Profitability RoTE 11% 12-14% EPS growth +24% Above peers* (*) Wells Fargo, JPMorgan Chase, Citi, Bank of America, HSBC, BNP Paribas, UniCredit, Deutsche Bank, Banca Intesa, BBVA, ING, Société Genérale, Lloyds Bank, Barclays, Standard Chartered, UBS and Itaú

27 27 Save the date Investor Day London 23 rd 24 th September 2015

Santander Group Strategy. Ana Botin, Group Executive Chairman Boadilla del Monte, 3 rd February 2015

Santander Group Strategy. Ana Botin, Group Executive Chairman Boadilla del Monte, 3 rd February 2015 Santander Group Strategy Ana Botin, Group Executive Chairman Boadilla del Monte, 3 rd February 2015 Important information Banco Santander, S.A. ("Santander") cautions that this presentation contains forward-looking