Santander Consumer Bank AS. Investor Presentation 2017

Transcription

1 Santander Consumer Bank AS Investor Presentation

2 Disclaimer Important information Santander Consumer Bank AS ("SCB") cautions that this presentation contains forward-looking statements. 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 that we have indicated in our past and future filings and reports, 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. This document has been prepared by SCB for information purposes only and its contents are proprietary information and are strictly private and confidential. You agree that this document should not be reproduced (in whole or in part), delivered or distributed to others or replicated without the prior written consent of SCB and is intended to be read by market professionals (eligible counterparties and professional clients) and should not be disclosed to nor relied upon by retail clients and/or investors. Forward-looking statements speak only as of the date on which they are made and are based on the knowledge, information available and views taken on the date on which they are made; such knowledge, information and views may change at any time without notice. SCB does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Likewise, this document contains certain tables and other statistical analyses (the "Statistical Information") which may have not been audited. Numerous assumptions have been used in preparing the Statistical Information, which may or may not be reflected in this document or be suitable for the circumstances of any particular recipient. As such, no assurance can be given as to the Statistical Information's accuracy, appropriateness or completeness in any particular context, or as to whether the Statistical Information and/or the assumptions upon which they are based reflect present market conditions or future market performance. The Statistical Information should not be construed as either projections or predictions or as legal, tax, financial, investment or accounting advice. 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 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 SCB. 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, SCB gives no advice and makes no recommendation to buy, sell or otherwise deal in shares in SCB 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 This document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. 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. To the fullest extent permitted by law, SCB does not accept any liability whatsoever (including in negligence) for any direct or consequential loss arising from any use of or reliance on material contained in this document. In addition neither SCB nor any of their affiliates makes any representation or warranty as to the fairness, accuracy, completeness, adequacy or comprehensiveness of the information contained in this document and expressly waives any responsibility arising from any lack of accuracy, comprehensiveness and adequacy of the information contained in this document. This document has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently neither SCB nor any director, officer, employee or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the document distributed to you in electronic format and the hard copy version available to you on request from SCB. This presentation is provided on the basis of your acceptance of the terms of this disclaimer. 2

3 Santander Consumer Bank AS: Snapshot Pan-Nordic predominance in auto combined with growth in unsecured Nordics YTD Q Gross Outstanding Auto Loans¹: 108,5 Bn (77%) Gross Outstanding Unsecured Loans²: 32,7 Bn (23%) Profit Before Tax: 2,919 MM Auto Loans: Unsecured Loans: Profit Before Tax: Norway 43,9 Bn 11,0 Bn 1239 MM Finland Auto Loans: Unsecured Loans: Profit Before Tax: 22,2 Bn 2,6 Bn 489 MM Auto Loans: Unsecured Loans: Profit Before Tax: Denmark 22,8 Bn 5,5 Bn 643 MM 53 % Sweden Auto Loans: Unsecured Loans: Profit Before Tax: 19,6 Bn 13,6 Bn 546 MM 3 Source: Q Report All figures in Norwegian Kroner (NOK) 1) Gross Outstanding Auto Loans ( Auto Loans ): Total loans before individual and group-wise write-downs, Operational leasing and Stock Finance. 2) Gross Outstanding Unsecured Loans ( Unsecured Loans ): Direct Loans, Credit Cards and Sales Finance ( Durables )

4 Growing presence across the Nordics With a doubling of outstanding loans in the past 5 years NOK Millions Gross outstanding loans by geography % 17% % +8% 20% % 20% % 24% 24% Finland Denmark % Sweden Norway % 39% Q Source: SCB annual reports ( ) and Q report

5 SCB Nordic expansion based on auto history Accelerated after ownership by Santander and GE merger ELCON Finance A leading Norwegian company within equipment leasing, factoring and auto financing SCF acquires ELCON Company demerges Auto finance retained (Norway and Sweden) Bankia Bank acquired (credit cards) ELCON Finance becomes Santander Consumer Bank AS Launch consumer loans Norway Start up auto finance in Denmark and Finland GE Finland acquired (auto finance, consumer loans) Consumer loans in Sweden (2012) and Denmark (2013) Deposits launched in Norway and Sweden (2013) Deposits launched in Denmark SCF S.A. acquires GE Money Bank AB GE Money Bank AB is renamed Santander Consumer Bank AB (SCB AB) Merger between Santander Consumer Bank AS (SCB AS) and SCB AB, 1 st of July 2015, with SCB AS as the surviving entity 5

6 Providing consumer finance across the Nordics With auto financing representing the core of the business Customers Distribution Presence Auto Financing Private Customers SME s Corporates Dealers Online direct distribution Cross sale Direct Loans Private Customers Agents Online direct distribution Cross sale Sales Finance¹ Private Customers Dealers Online direct distribution Cross sale Credit Cards Private Customers Dealers Online direct distribution Cross sale Portfolio Management Deposits Private Customers Online direct distribution 6 1) Sales Finance includes E-commerce and Durables

7 The Core Nordic strengths Auto of Finance SCB s Auto market franchise Market share and main competitors Norwegian market 7 % 9% 26 % 11 % 20 % 27 % Market leading position provides economy of scale Finnish market 12 % 7 % 20 % 25 % 36 % Santander Consumer Bank VW Møller Bilfinans Sparebank 1 Gruppen DNB Finans Nordea Finans Others (incl captives) Santander Consumer Bank Nordea Finans Others (incl captives) OP Financial Group Danske Finance Danish market Swedish market 12 % 36% 14 % 18 % 20 % Market shares and position #1 #1 Market shares and position 14 % 34 % 18 % 24 % 10 % Santander Consumer Bank Nordea Finans Others (incl captives) Jyske Finans Nordania 53 % Santander Consumer Bank Volkswagen Finans Others (incl captives) Volvo Finans DNB Finans Market shares and position #1 #4 Market shares and position Partnerships with 19 brands & dealers 7 Source Norway: Internal calculations based on data from Finansieringsselskapenes Forening as per Q Source Finland: Internal calculations based on data from Finnish Transportation Safety Agency (Trafi) as per Q Source Denmark: Internal calculations based on data from Finans og Leasing as per year-end 2016 Source Sweden: Internal calculations based on data from Finansbolagens Förening as per year-end 2016

8 Product mix distribution Auto private persons is most significant share Gross Outstanding distribution by product Q Non Std. (Auto) 4 % Other¹ 3% Credit Card 5% Consumer Loan 19% Total Unsecured 23% Total Auto 77% Auto SME 10 % Auto PP 59 % 8 Source: Q Management reporting 1) Other products are Leisure finance

9 Part of the Santander Group A leading financial group worldwide Banco Santander Key Figures YTD Q Total assets (trill. ) 1.47 Santander Consumer Finance Key Figures YTD Q Loans (bill. ) 97 Profit After Tax (mill. ) 5,077 Profit After Tax (mill. ) 1,031 Headcount 200,949 POS partners >130 Customers (millions) 132 Customers (million) 20 Branches Globally (units) 13,704 European countries 15 9 Source: Banco Santander and SCF Institutional Presentation Q3 2017

10 SCB AS fully owned by Santander Consumer Finance S.A. Rating of A-/A3 equivalent to both parents Banco Santander S.A. Fitch /Moody s/s&p A- / A3 / A- Santander Consumer Finance S.A Fitch/Moody s/s&p A- / A3 / BBB+ SCB is Regulated by the Norwegian FSA Santander Consumer Bank AS Fitch/Moody s A- / A3 Santander Consumer Bank AS (Branch, Sweden) Santander Consumer Bank AS (Branch, Denmark) Santander Consumer Finance OY (Subsidiary, Finland) 10

11 Solid profitability Increased earnings from strong asset growth, lower funding costs and merger synergies NOK Millions Profit Before Tax % YTD Q YTD Q Source: SCB annual reports ( ) and Q report

12 Strong financial performance Evidencing well-managed growth Return On Assets 1 Net Interest Income Ratio 2 2,0 % 2,1 % 1,7 % 1,8 % 2,6 % 3,0 % 4,6 % 4,6 % 4,4 % 4,7 % 5,3 % 4,8 % Q Q Cost / Income Ratio 3 42% 42% 44% 49 % 40% 45% Q Source: SCB annual reports ( ) and Q report. 1) ROA = PBT (annualized) / ANEA 2) NII Ratio = Net Interest Income (annualized) / ANEA 3) Cost/Income Ratio = OPEX / Gross Margin

13 Group Balance Sheet summary Robust balance sheet driven by growth in net loans NOK MM Q Q Δ Q/Q % FY 2016 FY 2015 Δ 16/15 % Deposits with external institutions % % Loans to customers % % Other financial assets % % Other Assets % % Total Assets % % Debt to credit instituions % % Deposits from customers % % Debt established by issung securities % % Other liabilities % % Subordinated loan capital % % Total equity % % Total Liabilities & Equity % % YTD Q development Continuous growth momentum in net loans and deposits reflecting a high level of activity across the Nordics Issued total of NOK 9 Bn YTD Q3 in senior unsecured bonds to reduce intragroup funding Lower volume of bond purchases during Q3 Change in other assets and liabilities driven by reclassification Full-year 2016 development Overall Balance Sheet growth driven by growth in net loans Deposits with external institutions reduced due to lower reserves on securitization transactions Increase in deposits consistent with funding strategy Dividend payment of NOK 500 MM in December 2016 Bonds purchased as part of liquidity portfolio of NOK 14,2 Bn Issued bonds of NOK 18,3 Bn 13 Source: Q and 2016 Annual Report

14 Group Income Statement summary P&L showing steady growth with increasing PBT after legal merger NOK MM Q Q Δ Q/Q % FY 2016 FY 2015 Δ 16/15 % Interest income % % Interest expenses % % Net Interest Income % % Commissions and fees % % Other product related income and cost % % Gross Margin % % Salaries and personnel expenses % % Administrative expenses % % Depreciations and amortisation % % Net Margin % % Other Income and costs % Total losses on loans, guarantees etc % % Profit Before Tax % % Income tax % % Profit After Tax % % YTD Q development Full-year 2016 development Increase in net loans is higher than increase in net interest income as portfolio composition has shifted towards more Auto lending. Lower funding cost contributes to higher net interest income Significantly lower loan losses mainly driven by recoveries from bad debt sales Group PBT increase of 58% driven by: Strong net loans growth and reduced funding costs 2016 full year PBT contribution from the GE-portfolio compared to only half-year in 2015 LLR & write off alignment after the merger in 2015 Auto and unsecured contribute approximately 50% each to PBT 14 Source: Q and 2016 Annual Report

15 Self-funding is a strategic focus Three pillars approach provides funding flexibility Self-funding pillars 1 Funding composition² 26% Securitization 7 current outstanding transactions across Nordics Senior Unsecured NOK 7,70 billion outstanding in the Norwegian bond market Deposits In Norway deposits are guaranteed up to NOK 2 MM 38% 9% 27% Represents a low-cost and stable funding source SEK 4,45 billion outstanding in the Swedish bond market In EU countries the guarantee is up to EUR 100, Q Parent funding Securitization Deposits Unsecured Bonds EUR 2,25 billion outstanding from four Benchmark transactions issued under the SCB AS EMTN Programme NOK 48 billion in total deposits across Norway, Sweden and Denmark Self-funding ratio 50% 28% 22% 62% 70% 70% 73% Q Source: Q Report 1) Outstanding amounts/transactions as per Q ) Funding composition in NOK billions

16 Unsecured Senior Funding 2016 summary and Q developments NOK SEK EUR 2016 New Issuances Maturities 3,651 million 1,104 million 1,450 million - 1,000 million 500 million Repurchases 401 million 90 million - Net New funding 3,250 million 1,360 million 1,000 million Total outstanding¹ 5,851 million 4,860 million 1,750 million Preferred Format FRN FRN FXD Preferred Tenor 2 3 year 3 year 3 year Q New Issuances Maturities 2,650 million - 2,000 million 2,410 million 500 million - Repurchases 800 million - - new funding 1,850 million 2,000 million 500 million Total outstanding² 7,701 million 4,450 million 2,250 million Preferred Format FRN FRN FXD Preferred Tenor 3 5 year 3 4 year 3 year 16 Source: Q and 2016 Annual Report, Bloomberg 1) Outstanding amounts as per year-end ) Outstanding amounts as per Q3 2017

17 Unsecured Funding Maturity profile as per Q Total Maturity (EUR MM) EUR MM SEK MM NOK MM NOK SEK EUR Source: Q and 2016 Annual Report, Bloomberg FX: SEK/NOK 0,9755 EUR/NOK 9,4125 EUR/SEK 9,6490

18 Nordic Deposits Online distribution of high-yield deposit products Norway Deposit Balance: NOK 20,7 Bn Demand products with floating interest rate Nordic Deposit Consolidated Total Balance: NOK 48,3 Bn Retail customer base Highly competitive market with many small players Denmark Deposit Balance: NOK 13,1 Bn Demand and Notification product with % of Consolidated balance 43% Sweden Deposit Balance: NOK 14,5 Bn floating interest rate Termed Deposit with fixed interest rate 53 % Demand and Notification product with floating interest rate % of Consolidated balance 27% 30% % of Consolidated balance 18 Source: Q Report

19 Strict capital requirements in Norway Ensuring strong capitalization of the bank Expected requirement from Q Capital requirements in Norway CET1 Pillar 1 & 2 Total Pillar 1 2.2% Pillar 2 CET1- requirement 2% Tier2 1,5% Tier 1 CET1 Pillar 1 Countercyclica l buffer ~1.3% 1 Strict requirements in Norway with the inclusion of additional buffer requirements and a high countercyclical buffer requirement From Q4 2016, the countercyclical buffer requirement is calculated as a weighted average of the risk weighted assets in the countries where the bank operates ~13.5% ~11.3% Pillar 1 CET1- requirement ~14.8% ~11.3% Pillar 1 CET1- requirement Systemic risk buffer 3% Conservation buffer 2.5% ~11.3% As per Q3 2017, the CET1 ratio requirement for SCB is 13,2% and per Q4 2017, SCB expect a CET1 ratio requirement of about ~13.5% Minimum CET1 requirement 4.5% From July 2017, SCB have had to comply with a leverage ratio requirement of 5% 19 1) Pillar 1 CET1 requirement here incorporates the increase in countercyclical buffer from 1.5% to 2% in Norway in December Total countercyclical buffer requirement is set to 1.3% since the countercyclical buffer requirement is calculated as a weighted average of the risk weighted assets in the countries where the bank operates. The countercyclical buffer for SCB will vary with the share of risk weighted assets in each country and according to the buffer requirement determined by the respective country

20 Delivering on capital requirements Capital ratios above expected year-end requirements Capital ratios evolution SCB Group 13,7 % 13,9 % 14,1 % 13,1 % 10,9 % 9,7 % 10,3 % 10,8 % 19,1 % 18,7 % 17,8 % 18,4 % 17,4 % 16,8 % 15,3 % 15,1 % 14,6 % 11,4 % 11,5 % 11,2 % CET1 Tier 1 Tier 2 Leverage ratio Q High capital ratios attained through solid earnings and IRB CET1 ratio currently exceeds the requirement by 1%, while total capital has a surplus of close to 1,5% Capital ratios reduced somewhat from 2016 due to high loan growth offset by NOK 500MM Tier2 issuance in Q3 Adoption of IRB approach in Dec 2015 provided capital relief of about NOK 1.3 Bn, with 1/3 of the portfolio under IRB With a current leverage ratio of 11.20%, the bank is positioned well above the leverage ratio requirement of 5% IFRS9 is expected to negatively impact capital in 2018, which can be accommodated through a dividend adjustment 20.

21 Risk Management Clear governance and management structures Clear governance & key decision bodies General Assembly (Shareholder) Board of Directors Directors Audit Committee Remuneration Committee Independent entities Supervisory Board Committee of Representatives Control Committee Internal Audit SCB AS Financial Supervisory Authority Internal Audit Director Seeking synergies to be efficient Making sure to have the best team in Risk GREAT PEOPLE + OPPORTUNITY = RESULTS Risk Committee Administration Chief Executive Officer Senior Management Team (SMT) Credit Committee (1. Auto 2. Non- Auto) Asset & Liability Committee Capital Committee Internal Audit Grupo Santander Audit Securitization AML Basel II Credit Risk Legal Finance IT Independent Credit Risk Control Unit Nordic Internal Control Committee Sourcing Board External Audit Deloitte Compliance Committee AML Committee Branches lead by Local Management Teams Local Credit Committee 21

22 Sound underwriting processes Information is fed into PANDE 1 Key components in underwriting Credit information Credit reports from external agencies Internal payment history Pay-slips, tax declarations, etc. Credit info Minimum acceptance criteria including: Min. age Down payment requirements (LTV) AML/Fraud Credit policy Credit policy PANDE Vehicle information Scorecards Internally developed scorecards since 2010 Enables high degree of automatization Models integrated into management Scorecards Includes: Age Mileage Brand Vehicle info 22 1) Pan Nordic Decision Engine

23 Tight risk controls result in stable performance Risk ratio breakdown NPL Ratio Q Denmark 0,70 % 0,71 % 0,61 % 0,97 % 1,21 % 1,16 % NPL Ratio 3 Finland 1,38 % 1,04 % 0,89 % 0,72 % 0,71 % 0,74 % Norway 2,47 % 2,47 % 2,36 % 3,41 % 3,36 % 3,56 % 1,81% 1,66% 1,53% 2,10% 2,07% 2,01% Sweden 0,74 % 0,48 % 0,61 % 1,52 % 1,22 % 1,10 % Nordic 1,81 % 1,66 % 1,53 % 2,10 % 2,07 % 2,01 % NPL Ratio Q Auto¹ 1,30 % 1,20 % 1,09 % 1,01 % 1,08 % 1,08 % Unsecured² 6,24 % 5,32 % 4,77 % 4,95 % 4,88 % 5,02 % Nordic 1,81 % 1,66 % 1,53 % 2,10 % 2,07 % 2,01 % Coverage Ratio Q Auto¹ 69,2 % 75,5 % 89,4 % 95,4 % 90,4 % 86,2 % Unsecured² 138,6 % 136,4 % 148,1 % 111,8 % 113,1 % 107,4 % Nordic 97,7 % 98,6 % 126,9 % 106,8 % 113,5 % 98,7 % Q Coverage Ratio 4 126,9 % 106,8 % 113,5 % 97,7 % 98,6 % 98,7 % Q Source: Q report and management figures 1) Auto includes Stock Finance 2) Unsecured includes Direct Loans, Credit Cards and Sales Finance 3) NPL ratio = Non-performing loans / Gross outstanding loans 4) Coverage Ratio = Loan Loss Reserves (Write Downs) / NPL

24 Key takeaways Sustained market leader in auto Building out position in unsecured space Robust financial results Stable credit risk Anchored by a global banking franchise 24

25 October 2017 Santander & Santander Consumer Finance

26 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 forwardlooking 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. For further details on 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 (

27 Subjects Banco Santander Santander Consumer Finance

28 Santander, a leading financial group Key Figures Sep 17 Total assets (trill. ) 1.47 Attributable Profit 2016 (mill. ) 6,204 Attributable Profit 9M 17 (mill. ) 5,077 Eurozone largest banks by market capitalisation (1) (EUR bn.) Headcount 200,949 Customers (millions) 132 Shareholders (millions) 4.07 Branches (units) 13,704 SANTANDER BNP ING BBVA Intesa Cred.Agric. Unicredit Soc.Gen. Deutsche (1) Source: Bloomberg. Data as of 29/9/2017 NOTE: Customers ex-popular

29 Purpose and business model Our purpose Our aim to help people and businesses prosper to be the best retail and commercial bank that earns the lasting loyalty of our people, customers, shareholders and communities Our way of doing things Predictable, stable profit throughout the cycle Sustainable, high profitability enabling growth opportunities to be exploited Cash dividend per share growth

30 A differential business model Our geographic diversification and critical mass in 10 core markets generate predictable profit, meaning lower capital needs Serving 132 million customers drives profitable growth The subsidiary model, with a strong culture of working together, drives efficiency and service excellence

31 Well diversified between Europe and the Americas (*) Excluding Corporate Centre and Real Estate Activity Spain, and including Popular. (1) Popular included (2%)

32 With leading positions in its core markets Large market share leads to high(-er) profitability SPAIN BRAZIL UK PORTUGAL CHILE POLAND ARGENTINA MEXICO US SCF (1) Spain & Portugal includes Popular, UK: Mortgages (excluding Social Housing), consumer credit and commercial loans (ex-financial Institutions), SBNA in the states where the bank operates and SCF in new car loans, including PSA operation & not considering brand s financial captive (2) Only private banks for Portugal, Brazil and Argentina (3) Spain public perimeter. SCUSA s RoTE: 15%, SBNA s RoTE: 3%. SCF ex-scuk (4) Peers average (UK Statutory). Source: Companies reports, analyst s reports and Bloomberg

33 Profitable and sustainable business Our business model allows us to generate high pre-provision profit which provides us with a high capacity to absorb provisions Pre-provision profit Profitability drivers billion 3,03% 3,28% 3,26% 3,25% 3,06% 2,94% 3,04% 2,90% 2,83% billion Pre-provision profit / loans Cost of credit > 22 billion per year 2,44% 1,65% 1,36% 1,40% 1,69% 1,43% 1,02% 1,25% 1,18%

34 Predictable and growing profit over the economic cycle Source: Bloomberg; Note: GAAP criteria (1) The analysis takes the quarterly EPS to Dec 16, starting from the first available data since Jan 99

35 A strong brand that has great recognition in the Group s main markets and globally

36 June 2017: Banco Popular Operation Spain and Portugal Banco Santander acquired Banco Popular on 7 June 2017 Acquisition took place following an auction conducted by the Single Resolution Board and FROB in which Santander was selected as the successful bidder Santander paid a notional consideration of 1 and addressed a capital increase of + 7Bn. Strong strategic business

37 9M'17 Financial Highlights - Group incl. Popular 9M 17 / 9M 16 change Improving profitability and financials per share together with a higher capital ratio (1) 9M 17 including integration costs and other. 9M 16 including capital gains from the disposal of the stake in Visa Europe and restructuring costs

38 9M'17 Financial Highlights - Group excl. Popular 9M 17 / 9M 16 change More loyal and digital customers levered on enhanced customer experience, drive growth in NII, fee income, volumes and credit quality (1) % change in constant euros.

39 9M'17 P&L P&L breakdown Excellent quality and strong top-line growth (1) 9M 17 included integration costs and others. 9M 16 included capital gains from the disposal of the stake in Visa Europe and restructuring costs

40 Delivering on our commitments for 2017 (1) Note: 2016 EPS and DPS adjusted for the rights issue completed on July, 27th (1) % change in constant euros. (2) Total dividends charged to 2017's earnings are subject to the Board and AGM approval. The Board approved the first interim dividend for 0.06 that was paid on 4 August and to apply the Santander Dividendo Elección (scrip dividend) programme in the second interim dividend.

41 Improving our RoTE target for 2018 from >11% to >11.5% and reiterating all other targets Santander Targets for 2018

42 Subjects Banco Santander Santander Consumer Finance

43 Santander Consumer Finance, European leader in the consumer finance industry Key Figures Sep 17 Grupo Santander is the main and unique shareholder of SCF... and at the same time, SCF acts as a holding for its subsidiaries through a banking license Operations are mainly done through point-ofsales (dealers and retailers) Loans (bill. ) 97 Deposits (bill. ) 36 Underlying Attrib. Profit 2016 (mill. ) 1,238 Underlying Attrib. Profit 9M 17 (mill. ) 1,031 European countries 15 Market positions 1 Top 3 Customers (million) 20 PoS partnerts (thousand) >130 SCF: Management perimeter (i.e. including SCUK) Attributable profit without non-recurring (provisions or capital gains) (1) In its main geographies by market share in New Business car loans or durables

44 With recurrent profits through the cycle Underlying Attributable Profit Million All-time record profit result in 2016 In 9M17, underlying attributable profit of 1,031 million SCF: Management perimeter (i.e. including SCUK) Attributable profit without non-recurring (provisions or capital gains)

45 A differential and proven business model A High diversification and European leadership B Advanced car financing platform and strong foothold in consumer finance SCF s business model C D Efficiency leadership with proven integration capabilities Best-in-class risk and collections capabilities E Sound funding structure

46 A Well spread across Europe and well balanced between car and consumer loans Geographic diversification Outstanding: 97 bn (Sep 17) UK Italy France Poland 8% 7% 10% Spain Other 4% 7% % loans by country 13% 15% 35% Germany Nordic Countries Well spread across 15 European countries Important foothold in the largest economies 74% portfolio in AAA & AA countries Mortgages Cards Durables Product diversification Outstanding: 97 bn (Sep 17) Other 3% 4% Direct 7% 13% Car Stock Finance 5% 9% % loans by product 22% 36% Auto Consumer Other Auto -New Auto-Used Car financing represents the biggest share of the portfolio: 67% Consumer lending (durables financing, cash loans and credit cards): 20% SCF: Management perimeter (i.e. including SCUK)

47 B Advanced car financing platform and strong foothold in consumer finance Advanced car financing platform Presence in all European markets TOP positions in its geographies, including the 5 biggest European auto markets: Germany, France, UK, Italy and Spain, that accounts for 75% of Europe s car registrations > POS (captive and non-captive) The longest European captive agreements base: more than 100 agreements with 15 manufacturers Strong foothold in consumer finance TOP retail chain agreements throughout Europe >55,000 POS partners >4 MM consumer loans per year TOP 3 in core geographies Digital direct business platforms Consumer Finance: Durable financing, Personal loans and Credit Cards SCF: Management perimeter (i.e. including SCUK)

48 C One of the best efficiency ratios in the industry, with proven capabilities to make the most of integrations Efficiency ratio (1) 50,5 49,8 49,1 1H15 1H16 1H17 47,0 47,5 44,9 42,9 43,9 43,6 Integrations Germany Austria Finland Germany Norway Sweden Denmark /2016 Germany Benelux Spain France Germany Italy Spain Portugal Belgium Austria Netherlands Switzerland SCF: Management perimeter (i.e. including SCUK) Peers: Crédit Agricole Consumer Credit, BNP Personal Finance. Source: company websites. (1) Efficiency ratio: operating expenses plus depreciation and amortization over total income.

49 D Sound risk metrics Risk Premium (%) NPL Ratio (%) Coverage Ratio (%) SCF: Management perimeter (i.e. including SCUK). Risk Premium: Ratio (%) of average VMG (last 12 months variation in delinquency balance minus Net Write Offs for the period) to average portfolio (for a period of twelve months). (12-month VMG / 12-month Average Managed Loans) * 100.

50 E Funding diversification SCF s funding structure September 2017 Capacity to do issuances in all countries Diversification of deposits in many countries Improvement of access cost to markets Increase of long term financing versus short term SCF: Management perimeter (i.e. including SCUK)

51 All in all, SCF is a significant contributor to Santander s results, representing 13% of the Group s profit* in 9M17 SCF, 13% SCF excluding SCUK. Including SCUK, SCF represents 14% of SAN profit* (*) Percentage over SAN underlying attributable profit in 9M17, excluding Corporate Centre and Real Estate Activity Spain (1) Popular included (2%)

52 Contacts Anders Bruun-Olsen, Nordic CFO Mobile: Thomas Andrén-Johansen, Capital Markets Manager, Nordic Mobile: Priscilla Halverson, Capital Markets Director, Nordic Mobile: Morten Christopher Freberg Holme, Capital Markets Manager, Nordic Mobile: Anders Fuglsang, Capital Markets Manager, Nordic Mobile: Joachim Joveng Rogne, Capital Markets Analyst, Nordic Mobile: : For more information: Santander Consumer Bank AS: Santander Consumer Finance SA: Banco Santander: 52