Portugal Q Portugal. Lisbon, July 27th 2011

Transcription

1 Q Lisbon, July 27th 2011

2 Disclaimer 2 Banco Santander, S.A. ("Santander") cautions that this presentation contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 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. 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, obligors and 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 forwardlooking 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 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. 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, or an exemption therefore. 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 regulation in a manner applicable to all subsidiaries of the Santander Group and as a result it may differ from the one disclosed locally by Banco Santander Totta.

3 3 INDEX Macroeconomic outlook and financial system Business growth Q Results Annexes

4 Macroeconomic Outlook 4 Adjustment process to weigh more on domestic demand, both in 2011 and 2012 GDP (YoY, at 2006 Prices) Fiscal Deficit (% GDP) (e) 2011 (f) 2012(f) CPI Inflation (%) (e) 2011 (f) 2012 (f) Unemployment (%) (f) 2012 (f) (e) 2011 (f) 2012 (f)

5 Macroeconomic Outlook 5 Political stability ensured The outcome of the General Elections of June 5 was a clear majority supporting the new Government, a coalition of center-of-right PSD and CDS-PP (134 MPs in 230) Adding the Socialist MPs (which negotiated the adjustment program), 85% of MPs are in support of the adjustment program

6 Macroeconomic Outlook 6 Activity continued to contract The recession is likely to have deepened in 2Q11, especially at the level of domestic demand Private consumption was more negative, as pointed out by the drop in both retail sales and auto sales Unemployment has remained elevated and households, in view of increased uncertainty regarding the need of additional measures, may have focused more on savings The drop in public expenditure may have more limited, given the electoral period Investment is to have contracted further, not only due to the political instability, but also to the tougher conditions in financial markets Net exports are expected to have continued contributing to GDP growth, but not enough to offset the drop in domestic demand Exports to Germany and France have increased above 20% in the period January-April

7 Adjustment under the EFSF The programme has specific and well-designed measures aiming to address the three main weaknesses of the economy GDP: Observed and Potential PIB PIB potencial Structural reforms aiming to increase the potential growth rate Fiscal Deficit & Public Debt (% GDP) Measures to correct the fiscal expenditure path and ensure fiscal accounts sustainability Credit/Deposits Ratio (%) Public Debt Fiscal Deficit Ensure the resilience of the financial sector, as well as the deleveraging of the economy Target 2014

8 Adjustment under the EFSF The adjustment program is demanding, with around 0 measures to be implemented before year end 8 Main Measures in the Memoramndum of Understanding to be implemented until year end General Government Structural Reforms Financial Sector July Reduction in Social Security Tax Tariff revision by state-owned companies (especially transportation) Special Personal Income Tax (50% of Christmas Bonus) Reform of severence pay Elimination of regulated electricity tariffs Elimination of golden-shares Sale of BPN Deleveraging program Recapitalization program 3rd Quarter Comprehensive survey of arrears by Govt Analysis of the 20 largets Parcerias Público Privadas Publish a medium term fiscal strategy document New Budgetary Framework Law Changes in VAT tables Liberalization of gas market Liberalization of postal services Privatization of CP (railroad) Regulamentation of Services Directive Urban Lease Law Evaluation of the plans on deleveraging and recapitalization New ratio for non-performing loans Analysis of corporate and household indebtedness levels 4th Quarter Reform of Laws on Local and Regional Finances Privatization of EDP and REN Reform of Central Govt. plan Cost/benefit analysis of all public entities Mobility of Civil Servants Revision of healthcare prices Revision of Competition Law Revision of Code of Public Procurement Evaluate supports to cogeneration and renewables Revision of the unemployment benefit Regime for restructuring banks as a going concern Laws on personal and corporate insolvency Revision of the Deposit Guarantee Fund

9 Adjustment under the EFSF 9 Banks are required to lower the loan to deposit ratio to 120% by 2014, from 158% in 4Q Loan to Deposit Ratio

10 Adjustment under the EFSF Banks are required to increase their core capital ratios to 9% in 2011 and % in 2012 Core Tier 1 Capital Ratios (1Q2011) % 9% As at Mar/11

11 Conclusions 11 Fast implementation of the adjustment program in the coming months Fiscal policy remains committed to the strict compliance with the new fiscal target of 5.9% of GDP for 2011 Additional measures for this year already announced: (i) new tax on Christmas bonus; (ii) further cuts in current expenditure; and (iii) anticipation of changes in VAT Design of the 2012 Budget guidelines, but the majority supporting the Government implies decision and implementation will be swift Activity is likely to remain subdued The adjustment at both private and public level will result in further contraction of activity, at the domestic level However, this is already taken into account in the macroeconomic scenario underlying the program, which forecasts GDP to contract 2.2% in 2011 The banking sector will close its deleveraging and recapitalization plans with the Bank of Credit growth is expected to moderate further, with tighter conditions cramping supply, while demand will also remain very subdued Deposit growth will remain a key focus for the sector, under its deleveraging process

12 Annex 12 The July 21st Eurozone Summit Agreement While specifically aiming at the Greek Situation, and Ireland will also benefit An extension of maturities of the loans, from an average of 7.5 years to a maximum of 30 years A reduction in the applicable interest rate by some 2pp The current rate is the funding cost of EFSF + 200bps + 50bps fee The new rate will be the funding cost of EFSF plus a fee (unspecified) Unlike Greece, there will be no restructuring of debt neither a private sector involvement The reduction in the interest rate will improve the sustainability of the debt dynamics, as the same primary surplus of the Government will now contribute more significantly to a reduction of the debt-to-gdp ratio, improving the solvency prospects

13 bn Financial System: Resources from households Overall resources falling, despite the increase in on-balance deposits Mutual funds and financial insurance reflect also the MtM of the portfolios Deposits Mutual Funds 13 Resources (Deps+MF+Bonds+Insurance) Mar- Jun- Set- Mar Retail Bonds Mar- Jun- Set- Mar Insurance Set Mar Jun Set- Mar Mar Mar- Jun- Mar- 11 Jun Set- Mar-11 Volume YoY, %

14 Financial System: Credit Total credit maintains its QoQ drop, especially at the level of corporates, while mortgages are decelerating faster 14 bn Credit (*) Mar- Jun Set Mar Mortgages (*) Mar- 4.0 Jun- 3.7 Set- Consumer Credit (*) Mar Jun Set Mar Mar Corporates (*) Mar Jun- Public Sector Mar Jun Set- Mar Set Mar- 11 Volume YoY, % * Adjusted for securitization

15 15 INDEX Macroeconomic outlook and financial system Business growth Q Results Annexes

16 Our Franchise 16 Santander Totta is the 3rd private bank in by total assets Santander Totta branches Α Α Α Α Α Α Α Α Α Α Α Α Α Α Α Α Balcões Α Α Million Eur Jun11 Mkt share (*) Loans 31, % Deposits 22, % Total Resources 31,757.3% Pension Funds 1, % Net income %(E) Branches %(APB) Employees 6,8 - (*) As at Mar/11 (activity in )

17 Business: loans performance 17 Deleveraging process in due course Million Euro Total Loans (*) Jun/11 Volume (M n Eur) % Var.2011/20-11,6% 34,523 34,949 34,393 34,389 35,400 35,447 (a) 32,182 31,847 31,289 Individuals 18, % from which Mortgage 16, % Consumer credit 1, % Corporates 11, % from which Small business 3, % Corporates 4, % Large corporates 2, % Guarantees and Other 1, % Jun/09 Sep/09 Dec/09 Mar/ Jun/ Sep/ Dec/ Mar/11 Jun/11 Total 31, % (*) Includes: gross credit, securitizations and guarantees. (a) Due to a change from Loans to Financial markets

18 Business: customer funds performance 18 Deposits increase substantially Million Euro Total Deposits 15,708 14,727 14,946 16,609 18,360 19, ,1% Jun/11 Volume 21,727 21,929 22,228 (M n Eur) % Var.2011/20 Customer deposits 22, % Sight Deposits 4, % Time and Saving Deposits 17, % Securities (retail) % Mutual funds and Pension Funds 4, % Insurance and Other % Jun/09 Sep/09 Dec/09 Mar/ Jun/ Sep/ Dec/ Mar/11 Jun/11 Total Client Resources 26, % * Excludes wholesale debt

19 Business: market share dynamics 19 Mar11 chg., pp Market share share, % 11/ Loans to individuals 12.2% -0.1 pp Mortgage credit (production) 9.3% -4.7 pp Mortgage credit (stock) 12.7% -0.1 pp Consumer credit 8.8% -0.0 pp Loans to corporates 5.5% -0.4 pp Credit cards 9.1% +0.0 pp Total Loans 9.2% -0.3 pp Deposits 9.7% +1.1 pp Deposits + Invest. Funds.1% +0.6 pp Insurance (stock).9% +0.0 pp Net income (E) 22.6% -4.4 pp Source: Bank of - Monetary Statistics activity in

20 20 INDEX Macroeconomic outlook and financial system Business growth Q Results Annexes

21 Results: spreads 21 Increase in cost of deposits while loan spreads increases slightly Loans spreads Retail banking Balance Sheet Resources spreads Retail banking 1,39 1,37 1,48 1,61 1,70 1,72 1,73 1,76 1,82 1,82 1,88 1,96 2,06 1,94 1,90 1,57 0,74 0,45 0,40 0,22 0,09 0, 0,21 0,23 0,12-0,31 Q208 Q408 Q209 Q409 Q2 Q4 Q211 Q208 Q408 Q209 Q409 Q2 Q4 Q211

22 Results: net interest income vs commissions 22 Net interest income decreases due to higher cost of funding. Commissions evolution reflects lower credit volumes. Million Euro Net interest inc. (*) + Net commissions -15,4% Volume (Mn Eur) Jun/11 Jun/ % Var.2011/20 Net interest income % Net commissions % Total % Q1 Q2 Q3 Q4 Q111 Q211 Net interest income Net commissions * Without dividends

23 Results: commissions 23 Commissions down 2.8% - GBM with better performance Million Euro Net commissions Volume (Mn Eur) Jun/11 Jun/ % Var.2011/ ,9% Credit % Credit cards % Mutual funds / Asset management % Insurance % Other % Commercial banking % GBM % Other (15.3) (18.7) -18.6% Q1 Q2 Q3 Q4 Q111 Q211 Total %

24 Results: administrative expenses and depreciation 24 Operating expenses flat regarding 1st. semester 20 Million Euro Total operating expenses -1,3% Volume (Mn Eur) Jun/11 Jun/ % Var.2011/ Administrative expenses % Personnel expenses % Other expenses % Depreciation % Total % Branches Q1 Q2 Q3 Q4 Q111 Q Administrative expenses Depreciation Jun/09 Sep/09 Dec/09 Mar/ Jun/ Sep/ Dec/ Mar/11 Jun/11

25 Results: net operating income 25 Net operating income down 30.9% Million Euro Net operating income quarterly performance cumulative performance ,6% % Q1 Q2 Q3 Q4 Q111 Q211 Jun/ Jun/11

26 Results: Loan Loss Provisions and Risk Premium 26 Risk Premium remains at moderate levels Loan Loss Provisions and Risk Premium 0.77% 0.54% 0.66% 0.56% 0.47% 0.52% 0.60% 0.62% 0.63% Q209 Q309 Q409 Q1 Q2 Q3 Q4 Q111 Q211 Net loan loss provisions Risk Premium

27 Results: net income 27 Net income decreases 49.5% due to NII fall and higher provisions Million Euro Million Euro Net income quarterly growth Net income -66,9% (million euros) Jun/11 Jun/ % Var.2011/ Income before taxes & MI % Taxes (35.6) (51.7) -31.1% 40.8 Minority Interest (0.2) (0.3) -33.4% Net income % Q1 Q2 Q3 Q4 Q111 Q211

28 Results: asset quality levels 28 NPL s ratio is 3.3% but 64% of the portfolio and 60% of NPL have real estate guarantee NPL ratio and NPL coverage (*) 2.90% 3.25% 3.03% 2.13% 2.04% 2.27% 2.32% 2.40% 2.43% 65.3% 68.4% 64.6% 63.9% 64.8% 69.0% 60.0% 61.9% 61.5% Jun/09 Sep/09 Dec/09 Mar/ Jun/ Sep/ Dec/ Mar/11 Jun/11 NPL coverage NPL ratio (a) Due to a change from Loans to Financial markets

29 Results: asset quality levels 29 ST performance compares favourably with its peers NPL ratio NPL coverage 5.0% 121.5% 116.1% 1.6% 3.0% 2.1% 3.3% 96.6% 94.9% 69.7% ST Bank 1 Bank 2 Bank 3 Bank 4 ST Bank 1 Bank 2 Bank 3 Bank 4 As of Mar/11. Local criteria

30 Results: ratios 30 Despite the adverse economic environment we maintain resilient efficiency and profitability Efficiency (%) ROE (%) +9,1 pp -11,2 pp 41.0% 42.2% 42.8% 40.1% 40.8% 43.6% 45.4% 46.4% 49.9% 25.7% 25.6% 25.4% 22.6% 22.0% 21.4% 20.3% 14.9%.7% Jun/09 Sep/09 Dec/09 Mar/ Jun/ Sep/ Dec/ Mar/11 Jun/11 Jun/09 Sep/09 Dec/09 Mar/ Jun/ Sep/ Dec/ Mar/11 Jun/11

31 Results: ratios ST remains best in class among Portuguese banks 31 Efficiency (%) ROE (%) 59.4% 67.3% 59.0% 57.0% 9.9% 8.3% 44.0% 5.6% 5.5% 2.8% ST Bank 1 Bank 2 Bank 3 Bank 4 ST Bank 1 Bank 2 Bank 3 Bank 4 As of Mar/11. Local criteria

32 32 Conclusions According to the rescue package with the EFSF and IMF, Portuguese banks have to deleverage their balance sheets, reaching a loan to deposit ratio of 120% at the end of Simultaneously they will have to increase capital ratios to ensure a core capital of 9% at the end of 20 and % at the end of 2011 In this scenario Santander Totta complies the new targets on capital ratios Results were driven by the decrease in NII and higher provisions. Operating costs remained flat Net interest income down 14.4% due to the increase in the cost of funding Despite the adverse economic environment, ST maintains levels of credit quality better than the average of the sector and resilient solvency, efficiency and profitability Net income decreased 49.5%

33 33 INDEX Macroeconomic outlook and financial system Business growth Q Results Annexes

34 Income statement as of Jun11 34 EUR million Variation H1 11 H1 Amount % Net interest income (54) (14,4) Net fees (5) (2,8) Gains (losses) on financial transactions 8 54 (46) (85,4) Other operating income* (12) (45,8) Gross income (117) (18,2) Operating expenses (262) (261) (0) 0,2 General administrative expenses (228) (226) (2) 1,0 Personnel (158) (156) (2) 1,0 Other general administrative expenses (71) (70) (1) 1,0 Depreciation and amortisation (34) (36) 2 (5,3) Net operating income (117) (30,9) Net loan-loss provisions (73) (59) (14) 23,2 Other income (23) (9) (14) 156,4 Profit before taxes (145) (46,5) Tax on profit (36) (52) 16 (31,1) Profit from continuing operations (129) (49,5) Net profit from discontinued operations Consolidated profit (129) (49,5) Minority interests 0 0 (0) (33,6) Attributable profit to the Group (129) (49,5) * Including dividends, income from equity-accounted method and other operating income/expenses

35 Quarterly income statement 35 EUR million Q1 Q2 Q3 Q4 Q1 11 Q2 11 Net interest income Net fees Gains (losses) on financial transactions Other operating income* Gross income Operating expenses (129) (133) (139) (140) (131) (131) General administrative expenses (111) (115) (121) (120) (114) (114) Personnel (77) (79) (83) (82) (79) (79) Other general administrative expenses (34) (36) (38) (38) (35) (35) Depreciation and amortisation (17) (18) (18) (20) (17) (17) Net operating income Net loan-loss provisions (16) (43) (44) (6) (32) (40) Other income (8) (1) 37 (8) (9) (14) Profit before taxes Tax on profit (31) (20) (23) (29) (19) (17) Profit from continuing operations Net profit from discontinued operations Consolidated profit Minority interests (0) Attributable profit to the Group * Including dividends, income from equity-accounted method and other operating income/expenses

36 Balance sheet as of Jun11 36 EUR million Variation Amount % Loans and credits* (4.050) (12,2) Trading portfolio (w/o loans) (474) (27,3) Available-for-sale financial assets (2.569) (38,2) Due from credit institutions* (3.086) (59,3) Intangible assets and property and equipment (13) (2,8) Other assets ,2 Total assets/liabilities & shareholders' equity (8.027) (15,4) Customer deposits* ,1 Marketable debt securities* (4.807) (47,3) Subordinated debt (245) (96,3) Insurance liabilities (2.383) (96,7) Due to credit institutions* (4.741) (26,4) Other liabilities (53) (7,7) Shareholders' equity** ,3 Off-balance-sheet funds (3.112) (42,8) Mutual funds (769) (21,8) Pension funds ,4 Managed portfolios ,1 Savings-insurance policies (2.377) (0,0) Customer funds under management (4.295) (11,9) * Includes all stock of concept classified in the balance sheet ** Not including profit of the year

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