27 July 2016 MEXICO. First half 2016

Transcription

1 27 July 2016 MEXICO First half 2016

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 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). 2

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

4 Macro-economic environment A difficult global backdrop has translated into tighter local conditions Annual GDP Growth (%, real) Central Bank monetary policy (%, end of year) * * 4.75* * (e) 2017 (e) (e) 2017 (e) Inflation (%, annual change) Average exchange rate (MxP/USD) (e) 2017 (e) (e) 2017 (e) Source: INEGI, BANXICO, Santander * Revised from previous quarter 4

5 Macro-economic environment FX volatility has started to affect the price of tradable goods, thus both fiscal and monetary policy have tightened, while private consumption is the main source of growth Inflation (YoY growth, %) 2016/ / / / / / / / / / / / / / / / /01 Tradable Goods Core General 4.50% 4.00% 3.50% 3.00% 2.50% Jan-15 Feb-15 Banxico s Interest Rate (%) Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 GDP (YoY growth, %) / / / / / / / / / / / / / / / / /01 GDP Industry Services Source: INEGI, SHCP, BANXICO 5

6 Financial system: Loan and deposit growth System loans remain resilient, pick up in deposit growth rate Total loans ( bn currency-neutral) YoY (%) 13.0% 16.6% 14.8% 13.9% 12.8% Consumer loans remain strong J'15 S'15 D'15 M'16 May'16 Total deposits ( bn currency-neutral) YoY (%) % 15.9% 13.4% 12.3% 13.5% System deposits pick up driven mainly by demand deposits J'15 S'15 D'15 M'16 May 16 Source: CNBV Banks as of May 2016 (last available) 6

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

8 Our Franchise Santander México: one of the leading financial groups in the country Business and Results currency-neutral 1H 16 Var. YoY Gross Loans ( bn) % Deposits ( bn) % Consolidated profit ( MM) % Attributable profit ( MM) % Network and Customers Total customers (MM) 1H % Branches (#) 1, % ATMs (#) 6, % Market Share 1 May 16 Loans 13.8% Deposits 13.7% Source: CNBV Banks (1) Market share as of May 2016 (last available) 8

9 Strategy Focus on innovation and operational transformation Goals Be the market leader in profitability and growth Strategic priorities STRENGTHEN POSITION IN RETAIL Retain existing customers Become their primary bank Acquire new highpotential customers CONSOLIDATE KEY MARKETS SMEs and mid-market Corporate banking Mortgages Enablers OPERATING MODEL Technology and infrastructure Talent, quality and processes Marketing and branding 9

10 Customers: KPIs follow up Retail Payroll (k) 2,931 Jun'15 +11% 3,240 Jun'16 Launch of Santander Plus in May 16 focused on client attraction, transactionality, loyalty and digitalization Leverage unique position in corporate sector, particularly with middle-market and SMEs which drive the bulk of employment Maximize recent regulatory changes that enable payroll portability SMEs Loan Portfolio (2) (MXN MM) +10% 58,057 63,934 Further develop new SME II segment (from 50 to 200 million pesos of annual sales) Jun'15 Jun'16 Credit Card Accounts (k) 2, % 2,674 Attract new clients and increase engagement efforts +165,000 (1) Aeromexico co-branded card clients; 25% new customers (launched Feb 16) Jun'15 Jun'16 Digital Customers (k) % 1,045 Improve on-boarding processes to new channels Implement new multichannel on-boarding strategy Add new functionality to digital platform Launched upgraded mobile banking app Jun'15 Jun'16 10 (1) As to date (2) SMEs commercial loan portfolio

11 Total loans performance Total loans up 14.7% YoY mainly due to retail and middle market portfolio growth Total gross loans ( bn currency-neutral) Jun 16 YoY (%) QoQ (%) 14.7% 5.2% J'15 S 15 D'15 M'16 J'16 Total Individual Mortgage Consumer credit Credit Cards Total Corporates SMEs (1) Middle Market Corporates Government Total Loans Source: Mexican GAAP criteria (excludes cross border loans) (1) SMEs commercial loan portfolio 11

12 Total customer funds performance Continued demand deposit growth supports 12.8% YoY increase in deposit base Total deposits ( bn currency-neutral) 12.8% 4.8% Jun 16 YoY (%) QoQ (%) Demand Time Total deposits J'15 S 15 D'15 M'16 J'16 Mutual funds distributed Total Customer funds Source: Mexican GAAP criteria (excludes derivatives positions) 12

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

14 (1) Average exchange rate 1H 16 (2) TIIE quarter average Net interest income and spreads NII up 15.0% YoY reflecting loan portfolio growth, investment in securities and focus on capital returns; remained stable QoQ Net Interest Income ( MM currency-neutral 1 ) Loan spreads (%) Retail Banking Total Loans 2Q15 3Q15 4Q15 1Q16 2Q16 Deposit spreads (%) Retail Banking 2Q'15 3Q'15 4Q'15 1Q'16 2Q' TIIE (%) Total Deposits 2Q15 3Q15 4Q15 1Q16 2Q16 14

15 Net fees Net fees rose 6.4% YoY with contributions from most segments Net fees ( MM currency-neutral 1 ) Q'15 3Q'15 4Q'15 1Q'16 2Q'16 1H 16 1H 15 YoY(%) QoQ(%) Insurance Cash Management Credit Cards Mutual Funds Financial Advisory Capital Markets & Securities Total (1) Average exchange rate 1H 16

16 Gross income Gross operating income up 12.7% YoY supported by strong performance in core revenues Gross income ( MM currency-neutral 1 ) H 16 1H 15 YoY(%) QoQ(%) Net Interest Income 1,173 1, Net Fees Subtotal 1,536 1, Q'15 3Q'15 4Q'15 1Q'16 2Q'16 Other Gross income 1,578 1, (1) Average exchange rate 1H 16 (2) Other includes Gains (losses) on financial transactions and Other operating income

17 Operating expenses Efficiency ratio improves 185 bps YoY; higher expenses support commercial initiatives Operating expenses ( MM currency-neutral 1 ) H 16 1H 15 YoY(%) QoQ(%) General admin. expenses Depreciation and amortization Operating expenses Q'15 3Q'15 4Q'15 1Q'16 2Q'16 Efficiency ratio (with amortizations) 40.5% 42.4% Number of branches 1,389 1,356 Number of employees 17,074 16, (1) Average exchange rate 1H 16

18 Net operating income after loan-loss provisions (LLPs) Strong focus on asset quality reflected in YoY improvement in NPL ratio and stable cost of risk LLPs and Cost of credit ( MM currency-neutral 1 ; %) Cost of credit Net LLPs 2.9% 2.9% 2.9% 3.0% 3.0% H 16 1H 15 YoY(%) QoQ(%) Net Operating Income LLPs Net op. income after LLPs Q'15 3Q'15 4Q'15 1Q'16 2Q'16 NPL ratio 3.0% 3.8% NPL Coverage ratio 102.3% 87.5% 18 (1) Average exchange rate 1H 16

19 Attributable profit Attributable profit up 10.2% YoY Attributable profit ( MM currency-neutral 1 ) H 16 1H 15 YoY(%) QoQ(%) Profit before taxes Tax on profit Net income Q'15 3Q'15 4Q'15 1Q'16 2Q'16 Attributable profit Effective tax rate 22.0% 22.6% 19 (1) Average exchange rate 1H 16

20 Conclusions Market Environment & Financial System Economic growth remained relatively stable during 1H16, supported by private spending FX volatility and acceleration in tradable good prices caused the authorities to raise interest rates by another 50bp and to further reduce public spending by 32 Bn pesos in 2016, a total of 1% of GDP Main risks: i) continued weakness of oil production and ii) a deterioration of the current account deficit Strategy & Business Implementing strategic initiatives across the company over the past two years to further consolidate our market leadership position and drive profitability Strengthening our position in retail banking and consolidating leadership position in key products and markets, while realizing the potential of our investment and corporate banking business (launches of Santander Plus and Aeromexico cobranded credit card) Three-year strategic plan focuses on upgrading technology and infrastructure, talent, quality, processes and branding Increased focus on profitability of RWA Total loans up 14.7% mainly due to retail portfolio and middle market portfolio growth Results Solid core revenues performance drives 12.7% YoY increase in gross operating income Strong focus on asset quality reflected in YoY improvement in NPL ratio and stable cost of risk Improved efficiency despite higher costs to support commercial initiatives 20

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

22 Balance sheet EUR million. Currency-neutral* Variation 30-jun jun-15 Amount % Customer loans ** 28,215 24,309 3, Financial assets held for trading (w/o loans) 15,128 13,077 2, Available-for-sale financial assets 6,739 3,387 3, Central banks and credit institutions ** 8,102 4,535 3, Tangible and intangible assets (27) (6.9) Other assets 6,080 6,397 (317) (5.0) Total assets/liabilities & shareholders' equity 64,628 52,097 12, Customer deposits ** 27,497 24,426 3, Debt securities issued ** 5,410 5, Liabilities under insurance contracts Central banks and credit institutions ** 10,159 7,200 2, Other liabilities 17,345 11,325 6, Stockholders' equity *** 4,218 4, Off-balance-sheet funds 11,359 10, Mutual funds 11,359 10, Pension funds Managed portfolios Customer funds under management 44,266 40,110 4, * End of period exchange rate 30-jun-16 ** Includes all stock of concept classified in the balance sheet *** Capital + reserves + retained profit + valuation adjustments 22

23 Income statement EUR million. Currency-neutral* Variation 1H16 1H15 Amount % Net interest income 1,173 1, Net fees Gains (losses) on financial transactions (6) (10.1) Other operating income** (15) (24) 9 (38.5) Gross income 1,578 1, Operating expenses (639) (593) (46) 7.8 General administrative expenses (581) (541) (40) 7.3 Personnel (311) (286) (26) 9.1 Other general administrative expenses (270) (256) (14) 5.4 Depreciation and amortisation (58) (52) (6) 12.4 Net operating income Net loan-loss provisions (435) (364) (71) 19.5 Other income (18) 5 (22) Profit before taxes Tax on profit (107) (101) (6) 5.9 Profit from continuing operations Net profit from discontinued operations Consolidated profit Minority interests Attributable profit to the Group * Average exchange rate 1H16 ** Including dividends, income from equity-accounted method and other operating income/expenses 23

24 Quarterly income statements EUR million. Currency-neutral* 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Net interest income Net fees Gains (losses) on financial transactions Other operating income** (12) (12) (23) (16) (9) (5) Gross income Operating expenses (296) (297) (297) (304) (318) (322) General administrative expenses (271) (270) (273) (281) (289) (293) Personnel (140) (146) (147) (144) (150) (161) Other general administrative expenses (131) (125) (126) (137) (138) (132) Depreciation and amortisation (25) (26) (24) (23) (29) (29) Net operating income Net loan-loss provisions (176) (188) (205) (195) (218) (217) Other income 6 (2) 1 (9) (6) (12) Profit before taxes Tax on profit (50) (52) (44) (61) (54) (53) Profit from continuing operations Net profit from discontinued operations Consolidated profit Minority interests Attributable profit to the Group * Average exchange rate 1H16 ** Including dividends, income from equity-accounted method and other operating income/expenses 24

25 Thank you Nuestra Our purpose misión to es help contribuir people al and progreso de las businesses personas prosper. y de las empresas. Nuestra Our culture cultura is based basa on the en la belief creencia that de que everything todo lo we que do hacemos should debe ser