Mexico. First Quarter April 29, 2014

Transcription

1 1 Mexico First Quarter 2014 April 29, 2014

2 Disclaimer 2 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 on the 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).

3 Agenda 3 Macro-economic environment and financial system Strategy and business Results Appendix

4 Macro-economic environment The Mexican economy posted a weak performance in 1Q14, but fundamentals remain solid 4 Annual GDP Growth (%, real) Interest Rates (%, end year) (e) 2015 (e) (e) 2014 (e) 2015 (e) Annual CPI Inflation Rate (%, annual average) Euro Exchange Rates (MxP/Eur annual average) (e) 2015 (e) (e) 2015 (e) Source: INEGI, BANXICO, Santander

5 Macro-economic environment 5 While both external and domestic factors dampened growth in 1Q14, a rebound is expected in the second half of 2014 Economic Activity (Jan12=100) ANTAD Retail Sales (%YoY) Jan-12 mar-12 may-12 jul-12 sep-12 nov-12 Industrial Production jan-13 mar-13 may-13 jul-13 sep-13 Monthly GDP nov-13 jan-14 6% 4% 2% 0% -2% -4% -6% -8% -10% Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Consumer Confidence (SA. 2008=100) Job Creation (thousands of jobs) , Month (LA) 12m Accumulated (RA) -600 Source: INEGI, ANTAD, STPS, Santander

6 Financial system: loan and deposit growth Constant EUR Bn Mexico s financial system loan and deposit growth tempered by the economic deceleration 6 YoY (%) Total loans M'13 J'13 S'13 D'13 F'14 Loan growth deceleration over LTM reflecting economic slow down Market recovery expected in 2014, approx. 15% YoY loan growth Positive performance anticipated in individual and corporate loans Total deposits Healthy deposit growth YoY (%) Expansion mainly driven by demand deposits M'13 J'13 S'13 D'13 F'14 Source: CNBV Banks as of February 28th, 2014.

7 Agenda 7 Macro-economic environment and financial system Strategy and business Results Appendix

8 Our franchise 8 Santander Mexico: one of the leading financial groups in the country Santander Mexico branches EUR Mar 14 Var. YoY Business and Results Loans 22.7 bn. 16.2% Deposits 22.3 bn. 10.2% Profit before tax 226 mn % Attributable profit 138 mn % Network and Customers Clients % Branches 1, % ATMs 5, % Market Share 1 Loans 13.1% 38.3 bps Deposits 12.8% -0.8 bps (1) Market share as of February 28th, 2014, source CNBV Banks

9 Commercial focus / strategy 9 Client centric model drives retail banking loan growth Total loans Retail Banking loans 19.6 Retail and total loans Mar'13 Dic'13 Mar'14 Loans up 16.2% YoY, above market growth rate SMEs loans 1 Leading player servicing high potential SMEs Wide product offering through specialized network Mar'13 Dic'13 Mar'14 Strong focus on mid and high income mortgage mkt 4.0 Mortgage loans nd largest player expanding above market rates through organic and inorganic growth Mar'13 Dic'13 Mar'14 (1) EUR Bn.

10 Commercial focus / strategy 10 Focus on core products futher supported by middle market Middle market loans Mar'13 Dic'13 Mar' % YoY driven by introduction of investment banking products and focus on agribusiness, trade financing and transactionality Demand deposits 1 Strong deposit base provides room for growth New branches, SMEs and Select client deposits driving above growth market rates Mar'13 Dic'13 Mar'14 Number of branches Branch expansion 1,193 1,258 1, new branches opened since 4Q12 and 97 expected to be opened by 1Q15 Mar'13 Dic'13 Mar'14 Source: Santander data (1) EUR Bn

11 Loan performance 11 Double digit loan growth with strong performance across most segments Constant EUR billion Total loans 16.2% 3.7% M'13 J'13 S'13 D'13 M'14 Mar 14 YoY (%) QoQ (%) Individuals Mortgages Consumer Credit cards Companies SMEs Middle market Corporates Government Total Source: Mexican GAAP criteria (excludes cross border loans)

12 Total customer funds 12 Constant EUR billion Expansion in demand deposits drives higher deposit base Total deposits 10.2% -0.9% M'13 J'13 S'13 D'13 M'14 Mar 14 YoY (%) QoQ (%) Demand Time Total customer deposits Mutual funds distributed Total customer funds Source: Mexican GAAP criteria (excludes derivatives positions)

13 Agenda 13 Macro-economic environment and financial system Strategy and business Results Appendix

14 Net interest income and spreads 14 YoY margin expansion mainly driven by loan growth Constant EUR million Net Interest Income Loan spreads, % Commercial Banking Total Loans 1Q13 2Q13 3Q13 4Q13 1Q14 Deposit spreads, % 1Q13 2Q13 3Q13 4Q13 1Q14 TIIE (%) Total Deposits Commercial Banking 1Q13 2Q13 3Q13 4Q13 1Q14 1 TIIE accumulated average 2 TIIE Quarter average

15 Net fees 15 Constant EUR million Stable net fees YoY despite strong capital markets in 1Q13 Net Fees Q13 2Q13 3Q13 4Q13 1Q14 Main Items 1Q14 1Q13 YoY(%) QoQ(%) Credit cards Insurance Mutual funds Payments & collections Investment banking Financial Advisory Others Total

16 Gross income 16 Positive performance in gross income notwithstanding unusually high trading gains in 1Q13 resulting from market volatility Constant EUR million Gross income Q14 1Q13 YoY(%) QoQ(%) Net Interest Income Net Fees Subtotal Other Gross income Q13 2Q13 3Q13 4Q13 1Q14 (1) Other includes Gains (losses) on financial transactions and Other operating income

17 Operating expenses 17 Operating expenses reflect stringent cost controls despite branch expansion Constant EUR million Operating expenses General and admin. expenses 1Q14 1Q13 YoY(%) QoQ(%) Depreciation and amortization Operating expenses Q13 2Q13 3Q13 4Q13 1Q14 Efficiency ratio (with amortizations) pp 2.4pp Number of branches 1,279 1, % 1.7% Number of employees 14,293 13, % 0.9%

18 Net operating income after loan-loss provisions (LLPs) 18 Cost of risk levels starting to normalize following regulatory changes in methodology in 2013 Constant EUR million Cost of credit LLPs and Cost of credit 2.5% 2.7% 3.3% 3.5% 3.6% Net Operating Income 1Q14 1Q13 YoY(%) QoQ(%) LLPs Net op. income after LLPs Net loan-loss provisions 131 NPL ratio 3.62% 1.92% 1.7pp -0.0pp 1Q13 2Q13 3Q13 4Q13 1Q14 NPL Coverage ratio 99% 157% 58.5pp 1.1pp

19 Attributable profit 19 Strong loan growth and branch expansion not yet fully reflected in profitability Constant EUR million Attributable profit Profit 1Q14 1Q13 YoY(%) QoQ(%) 222 Profit before taxes Tax on profit Net income Attributable profit Effective tax rate 21.4% 11.4% 1Q13 2Q13 3Q13 4Q13 1Q14

20 Conclusions 20 Market Environment & Financial System The Mexican economy continued to post a lower than expected growth rate in 1Q14 due to domestic and external factors Growth is expected to pick up in 2H14, following confirmation of US economic growth and public spending in Mexico starts to show positive effects Financial system growth below expectations reflecting weak economic conditions during the quarter Strategy & Business Enhancing the value of the franchise leveraging client centric model to drive retail banking, prioritizing core segments including high potential SMEs, mortgages and further supported by focus on middle market Branch expansion program on track Results Commercial activity and deposits above market rates, despite ongoing economic slowdown Positive net fee performance affected by strong capital market activity in 1Q13 Growth in expenses below business growth reflect tight cost control despite branch expansion Improved risk ratios following regulatory change in local methodology to calculate reserves

21 Agenda 21 Macro-economic environment and financial system Strategy and business Results Appendix

22 Balance sheet 22 EUR million. Constant currency* Variation Amount % Loans and credits* 22,381 20,436 1, Trading portfolio (w/o loans) 11,293 12,870 (1,577) (12.3) Available-for-sale financial assets 3,475 2,095 1, Due from credit institutions* 8,347 11,349 (3,001) (26.4) Intangible assets and property and equipment Other assets 5,637 4,505 1, Total assets/liabilities & shareholders' equity 51,529 51,605 (77) (0.1) Customer deposits* 25,592 22,837 2, Marketable debt securities* 2,496 3,197 (702) (21.9) Subordinated debt Insurance liabilities Due to credit institutions* 5,922 7,098 (1,175) (16.6) Other liabilities 12,808 14,555 (1,747) (12.0) Shareholders' equity** 3,765 3,918 (153) (3.9) Off-balance-sheet funds 11,016 9,920 1, Mutual funds 11,016 9,920 1, Pension funds Managed portfolios Customer funds under management 40,049 35,955 4, * As of * Includes all stock of concept classified in the balance sheet ** Not including profit of the year

23 Income Statement EUR million. Constant currency* Variation 1Q 14 1Q 13 Amount % 23 Net interest income Net fees (2) (1.2) Gains (losses) on financial transactions (23) (45.9) Other operating income** (12) (7) (5) 66.2 Gross income Operating expenses (307) (275) (31) 11.4 General administrative expenses (273) (247) (26) 10.6 Personnel (142) (135) (7) 5.1 Other general administrative expenses (131) (112) (19) 17.3 Depreciation and amortisation (33) (28) (5) 18.7 Net operating income (28) (6.4) Net loan-loss provisions (179) (131) (48) 36.6 Other income (2) 24 (25) Profit before taxes (101) (30.8) Tax on profit (48) (37) (11) 30.0 Profit from continuing operations (112) (38.6) Net profit from discontinued operations Consolidated profit (112) (38.6) Minority interests (28) (41.0) Attributable profit to the Group (84) (37.9) * As of exchange rate 1Q'14 ** Including dividends, income from equity-accounted method and other operating income/expenses

24 Quarterly statements of income 24 EUR million. Constant currency* 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 Net interest income Net fees Gains (losses) on financial transactions (1) 27 Other operating income** (7) 5 (9) (10) (12) Gross income Operating expenses (275) (273) (289) (307) (307) General administrative expenses (247) (243) (261) (280) (273) Personnel (135) (135) (146) (138) (142) Other general administrative expenses (112) (108) (115) (143) (131) Depreciation and amortisation (28) (30) (28) (26) (33) Net operating income Net loan-loss provisions (131) (165) (240) (212) (179) Other income 24 (2) (3) (3) (2) Profit before taxes Tax on profit (37) (38) (21) 22 (48) Profit from continuing operations Net profit from discontinued operations Consolidated profit Minority interests Attributable profit to the Group * As of exchange rate 1Q'14 ** Including dividends, income from equity-accounted method and other operating income/expenses

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