31 January 2018 SPAIN. January - December 2017

Transcription

1 31 January 2018 SPAIN January - December 2017

2 Disclaimer Banco Santander, S.A. ("Santander") cautions 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 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 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. 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 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. 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 Note: All figures excluding Popular

4 Macroeconomic environment The expansionary cycle in the Spanish economy is expected to continue in the coming years, with interest rates rises not anticipated before 2019 Annual GDP Growth (%, real) Interest rate (official rate, %) (e) 2018 (e) 2019 (e) (e) 2019 (e) Inflation (annual change, %) Unemployment rate (%) (e) 2019 (e) (e) 2019 (e) Source: Santander Research Department 4

5 Macroeconomic environment backed by the adjustments and the structural reforms undertaken Annual GDP Growth (%, real) Contribution to GDP growth (% YoY) Spain Eurozone (e) (e) 2018 (e) Net external demand Domestic demand GDP y-o-y data Investment (exc. Construction) (% GDP) Housing: sales and permits (thousands of units) New building permits Sales Q Q'17 30 Source: Santander Research Department 5

6 Total banking system volumes Loans to Households & Non Financial entities are decreasing at a slower pace than 2016 In savings, the flow from deposits to mutual funds continues Loans to customers Savings EUR billion YTD EUR billion Mutual Funds YTD +10.7% 1,455 1,410 1, % 1,537 1,517 1, % 1,232 1,196 1, % % Dec'15 Dec'16 Nov'17 Dec'15 Dec'16 Nov'17 Households & non-financial entities in Spain Non-monetary financial institutions EMU Public sector in Spain Other non-resident sectors in Spain 6 Source: ECB and Bank of Spain. Other Monetary Financial Institutions.

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

8 Our Franchise The financial group includes retail networks, global businesses and specialised entities 2017 STRATEGIC PRIORITIES KEY DATA 2017 Var. YoY Predictable, sustainable and profitable growth Gross loans 1 148,585 Customer funds 1 251,196 Attributable profit 1 1,180-2% +12% +46% Bank of choice for SMEs and corporates ROTE % +122 bp Efficiency ratio 57.2% -154 bp Loans market share bp Improve efficiency and customer experience Deposits market share bp Loyal customers % Best bank to work for Digital customers Branches 2,843 Employees 22, % -2% -0% (1) Million euros; (2) Underlying ROTE; (3) Other non-resident sector in Spain as of Nov 2017 (lastest available) excluding Popular. Including Popular: Market share Loans 18.3% and Deposits 18.9%. (4) Millions. 8

9 Commercial strategy and business transformation Our strategy based on customer loyalty, SME & Corporate focus, employee engagement and sustainable profitability is showing solid results and market share growths SMEs and Corporates Global Corporate Banking Digital transformation Be the bank of choice for SMEs and Corporates Development of international trading corridors SMEs investment growth +9% Stock investment market share growth +38pbs GCB at the top in all relevant country league tables (IPOs, syndicated loans, debt capital market, etc.) while building on collaboration revenues with the retail network and growing in fees (+20%) Omni-channel strategy to deliver the best seamless experience across channels Best-in-class remote banking advisor Santander l Personal Digital customers +15% 1l2l3 Strategy Credit Cards Digital eco-system renewal Commitment with our loyalty strategy with the launch of the1l2l3 Smart and Cuenta Zero Customer loyalty +42% YoY Transactionality a top priority to build deep long-lasting relations with our customers Record sales in credit cards with >1.4million Growing credit turnover +50% Improved website and Apps for both retail and SMEs to boost customer experience Leaders in mobile payments (~60% market share) Santander Spain named as Bank of the Year in Spain (2) 9 (1) SME and Corporate stock investment market share rising from 11.40% in Oct 16 to 11.78% in oct 17; (2) Santander Spain named as Bank of the year in Spain by The Banker

10 Customers Customer centric approach: loyalty and digital transformation are key levers to improve results and satisfaction. Loyal individuals (k) 1, % 1,559 Our commercial strategy is improving customer loyalty and increasing our transactionality (mobile payments, cards usage ) leading to increases in commercial activity (+3,5 pp in new mortgage production 1 ) Dec 16 Dec`17 Loyal companies (k) +6% Corporate strategy: being the Bank of choice for SMEs and Corporates Growing in high value-added products: capturing the potential of our international footprint (+16% in International business production) and growing in collaboration revenues 24% Dec 16 Dec 17 Digital customers (k) 2, % 3,158 Focused on digital transformation, from internal processes to a customer omni-channel experience, leveraging in our digital philosophy Digilosofía Leaders in mobile payments(>60% market share) and best-in-class remote banking advisor Dec 16 Dec (1) New production mortgage market share rising from 8.0% in Nov 16 to 11.5% in Nov 17

11 Total loans Growth in new lending activity is not reflected in gross loans stock due to drop in Institutions and GCB Total gross loans ( Bn 1 ) % var. / Dec 17 Dec 16 Sep Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 Institutions Individual customers of which: - Housing mortgages Companies Corporate Gross loans (w/o repos) Repos Provisions (4) Net loans (1) Excluding repos

12 Total customer funds Focus on growing through demand deposits and mutual funds Total customer funds ( Bn) % var. / Dec 17 Dec 16 Sep 17 Repos & other Pension funds Mutual funds Demand + Time deposit Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 Demand deposits Time deposits Deposits w/o Repos Mutual funds Customer funds Pension funds Repos Total customer funds

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

14 Net interest income. Yield and costs YoY NII evolution affected by mortgage repricing in a competitive and low interest rates environment QoQ impacted by higher average volumes in customer deposits. Lower contribution from ALCO and GCB Net Interest Income ( MM) Yield on loans (%) Q'16 1Q'17 2Q 3Q 4Q Cost of deposits (%) NIM 1 (%) Official interest rate 2 (%) Q'16 1Q'17 2Q 3Q 4Q 14 (1) Net interest income annualised / Total assets average period (2) Quarter average.

15 Net fee income Positive evolution of fee income YoY (+16%), backed by a strong rise in fees related to means of payment, mutual funds and GCB activity In the quarter, 10% increase mainly due to transactional services Net fee income ( MM) % var YoY QoQ Fees from services Mutual and pension funds Insurance Other Total fee income 2,067 1, Q'16 1Q'17 2Q 3Q 4Q 15

16 Gross income Good performance in fee income offset the lower NII Positive impact QoQ from dividends received in GCB activity and negative effect for the DGF charge ( 153 MM) Gross income ( MM) 1,324 1,539 1,351 1,435 1,368 EUR million % var YoY QoQ Net interest income 2,909 3, Net fees 2,067 1, Subtotal 4,976 4, Other Total 5,694 5, Q'16 1Q'17 2Q 3Q 4Q (1).- Other includes Gains (losses) on financial transactions and Other Operating income 16

17 Operating expenses Lower costs YoY reflected the efficiency plan announced in 2016 QoQ increased due to costs related to Openbank, Elavon integration and IT depreciations Operating expenses ( MM) EUR million % var YoY QoQ General expenses 3,080 3, Personnel 1,597 1, Other 1,482 1, Amortisations Total 3,259 3, Q'16 1Q'17 2Q 3Q 4Q 1 Efficiency ratio (%) Branches 2,843 2,911 Employees 22,916 23, (1) Calculation of efficiency ratio includes amortisations

18 Net operating income after loan-loss provisions (LLPs) Sharp fall in LLPs and further improvement in NPLs and cost of credit YoY EUR million LLPs and Cost of credit ( MM; %) % var Cost of credit YoY QoQ Net operating income 2,434 2, Loan-loss provisions Loan-Loss provisions Net operat. income after provisions 1,921 1, Q'16 1Q'17 2Q 3Q 4Q Coverage ratio (%) NPL ratio (%) (1) 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 Attributable profit Profit backed by fee income (more than offsetting pressure on NII), cost control and LLPs EUR million % var YoY QoQ Attributable profit ( MM) Underlying PBT 1,714 1, Tax on profit Consolidated profit 1,197 1, Minority interests Underlying att. profit 1,180 1, Non-recurring 1 (216) 4Q'16 1Q'17 2Q 3Q 4Q Attributable profit 1, Effective tax rate (%) 30.2% 28.5% (1).- In 2Q 16 capital gains from the disposal of the stake in VISA Europe, and restructuring costs 19

20 Final remarks Economic environment and financial system The expansionary cycle in the Spanish economy is expected to continue in the coming years. GDP growth is backed by the adjustments and the structural reforms undertaken. Santander: Strategy and activity Become the best retail and commercial bank in Spain by improving our value proposition and transforming the way we do business. Continue growing our 1l2l3 strategy to improve customer loyalty and to gain market share. Developed the new Digital philosophy to enhance digital capabilities and boost efficiency and profitability. New lending increased in main retail products and segments, especially in mortgages. Demand deposits and mutual funds continued to grow. Santander: Results Positive evolution in net fees YoY offset the pressure on margins (NII + Net Fees: +2.4%) and lower results in Gains (losses) on financial transactions. Cost to income improvement underscoring the positive trend in costs. Decrease in provisions backed by credit quality improvement. 20

21 Content Macroeconomic environment and financial system Strategy and business Results Appendix Note: the following slides provide data on the Spain unit, which includes the retail network of Santander, Global Corporate Banking, and the ALCO portfolio in Spain. Not included: Santander Consumer Finance unit in Spain nor Spain's Real Estate activity, as described in Santander Group's quarterly Financial Report (see Description of Segments in Information by principal segments chapter). All figures excluding Popular

22 Balance sheet EUR million Change Dec 17 Dec 16 Amount % Customer loans 153, , Cash, central banks and credit institutions 89,585 54,207 35, Debt securities 61,836 58,084 3, o/w: available for sale 42,780 38,727 4, Other financial assets 35,391 37,741 (2,350) (6.2) Other assets 10,354 9, Total assets 350, ,354 38, Customer deposits 193, ,779 16, Central banks and credit institutions 79,146 52,071 27, Other financial liabilities 41,168 46,951 (5,784) (12.3) Other liabilities 7,883 4,186 3, Total liabilities 338, ,850 37, Total equity 12,249 11, Other managed and marketed customer funds 77,221 66,649 10, Mutual funds 58,438 49,357 9, Pension funds 10,563 10, Managed portfolios 8,221 6,932 1,

23 Income Statement EUR million Change Amount % Net interest income 2,909 3,077 (169) (5.5) Net fees 2,067 1, Gains (losses) on financial transactions (167) (28.0) Other operating income Gross income 5,694 5, Operating expenses (3,259) (3,297) 37 (1.1) General administrative expenses (3,080) (3,156) 77 (2.4) Personnel (1,597) (1,632) 35 (2.1) Other general administrative expenses (1,482) (1,524) 42 (2.7) Depreciation and amortisation (180) (140) (39) 28.1 Net operating income 2,434 2, Net loan-loss provisions (513) (585) 72 (12.3) Other income (207) (267) 60 (22.6) Underlying profit before taxes 1,714 1, Tax on profit (518) (416) (102) 24.4 Underlying profit from continuing operations 1,197 1, Net profit from discontinued operations Underlying consolidated profit 1,197 1, Minority interests (4) (18.2) Underlying attributable profit to the Group 1,180 1, Net capital gains and provisions * (216) 216 (100.0) Attributable profit to the Group 1, *Including capital gains from the sale of VISA Europe and restructuring costs

24 Quarterly Income Statement EUR million 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 Net interest income Net fees Gains (losses) on financial transactions (42) Other operating income (30) (0) Gross income 1,543 1,343 1,398 1,324 1,539 1,351 1,435 1,368 Operating expenses (837) (834) (824) (802) (798) (806) (815) (841) General administrative expenses (801) (799) (791) (766) (752) (765) (771) (792) Personnel (415) (410) (401) (408) (399) (399) (401) (398) Other general administrative expenses (386) (389) (390) (358) (352) (365) (370) (394) Depreciation and amortisation (36) (35) (33) (36) (46) (41) (44) (49) Net operating income Net loan-loss provisions (231) (129) (140) (85) (163) (137) (104) (110) Other income (37) (82) (51) (97) (64) (64) (55) (23) Underlying profit before taxes Tax on profit (126) (85) (108) (97) (146) (98) (145) (128) 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* (216) Attributable profit to the Group 307 (8) *Including capital gains from the sale of VISA Europe and restructuring costs 24

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