Santander Institutional Presentation 9M 17

Transcription

1 Santander Institutional Presentation 9M 17

2 Santander, a leading financial group 9M 17 Total balance sheet ( trill.) 1.47 Gross loans ( bill.; w/o repos) 857 Customer deposits + mutual funds ( bill.; w/o repos) 892 Branches 13, Attributable profit ( mill.) 6,204 9M 17 Attributable profit ( mill.) 5,077 Market capitalisation ( bill.; ) 95 People (employees) 200,949 Customers (mill.)* 132 Shareholders (mill.) 4.1 Communities (million people helped, 2016)* (*) Excluding Banco Popular

3 Agenda Our purpose and business model Aim and value creation Structure and businesses 9M'17 Highlights Results and Activity 3

4 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 4

5 A differential business model Serving 132 million customers with critical mass in 10 core markets drives profitable growth Our geographic diversification generates predictable profit, meaning lower capital needs The subsidiary model, with a strong culture of working together, drives efficiency and service excellence 5

6 132 million 02customers in markets with a total population of one billion people Customers by country, Sep 17 Others 1% USA 4% Spain 10% Argentina 3% Chile 3% Strategic priorities are to increase customer loyalty and digitalisation of financial services in view of consumers demands and expectations Loyal customers (million) Digital customers (million) Mexico 11% 132 million customers SCF 15% Poland 3% Portugal 3% +12% % 24.2 Brazil 28% UK 19% Sep 16 Sep 17 Sep 16 Sep 17 Note: All figures excluding Banco Popular 6

7 Banco Santander aims to satisfy the needs of all types of customers Individuals with different income levels; companies of any size and sector; private corporations and public institutions Simple, tailor-made solutions to strengthen the lasting LOYALTY of our customers Solutions to support the INTERNATIONALISATION and growth of companies World Innovative product: current accounts, cards, Santander Trade Network A network of services suppliers certified by Santander to help internationalise businesses >68,000 exporters and importers Santander Select The differentiated value proposal for high income customers Global Treasury Solutions A service that helps multinational companies manage their treasuries remotely >60 multinational companies Santander Private Banking Santander SMEs A specialised service model for higher income customers A global solution to support the development of SMEs Best Bank in the world for SMEs Santander Cash Nexus Santander Flame Platform for multinationals with a complete suite of solutions that allows us to deliver local transactional services through a single global point of entry ~175 multinational companies An online platform to execute and manage foreign exchange transactions and risk 7

8 We are transforming our commercial model via digital channels, while strengthening the personal service New DIGITAL products / services Santander NEO CRM SmartRed / WorkCafé With simple access to the range of banking services and personalised advice This commercial intelligence tool offers a 360º view of customer behaviour and preferences An initiative to transform the customer experience at branches Biometrics 8

9 The evolution of our technology platform boosts the digital transformation, facilitating the development of new business capacities Santander starts from a sound, robust technological position, recognised as one of the best among banks with a global reach Internet Branches Mobile FRONT END Customers Points of sales (POS) ATMs Markets Contact Centres BACK END Data Processing Centre Agile methodology Santander Group has based its digital transformation on the following measures Improving the customer experience in the channels Focus on mobile banking, digitalisation of processes and new design of customer journey Improved data quality and use Big Data & Analytics, Cognitive, Artificial Intelligence Next-generation technology platform New ways of working Applications targeting employees Mexico Spain Brazil United Kingdom Lastly, Santander is positioning itself in the Fintech (Financial Technology) ecosystem as an innovative bank and a benchmark in the sector USD 200 million fund for disruptive innovation in FinTech 9

10 Santander is a strong brand that has great recognition in the Group s main markets and globally The brand is home to the Group s Culture and Identity Expresses a unique international positioning: real prosperity every day Reflects our positioning based on our purpose: helping people and businesses prosper Customer focused, based on the belief that everything we do should be Simple, Personal and Fair One of the most valued brands in the world 5 th best global Retail Banking brand 2 nd most valuable bank brand in Europe (The Banker, Brand Finance) Best Bank in the world for SMEs Best Bank in Latin America (Euromoney Magazine) BEST GLOBAL BRANDS 2017 TOP 10 BANKING BRANDS Brand Finance. Banking 500,

11 Critical mass in 10 core markets High market shares in retail and commercial banking USA Brazil Argentina Portugal UK Mkt. share 1,4 : 3% Branches: 694 Mkt. share 1 : 9% Branches: 3,422 Mkt. share 1 : 11% Branches: 482 Mkt. share 1 : 15% Branches: 587 Mkt. share 2 : 10% Branches: 820 Mexico SCF Chile Poland Spain Mkt. share 1 : 13% Branches: 1,401 Nº countries 5 : 15 Branches: 549 Mkt. share 1 : 19% Branches: 406 Mkt. share 1,3 : 10% Branches: 592 Mkt. share 1, 6 : 19% Branches: 2,857 (1) Lending (2) UK mortgages (excluding Social Housing),Consumer credit and commercial lending (excluding Financial Institutions) (3) Including Santander Consumer Finance business (SCF) (4) In the states where the Group operates. (5) Including SCF UK (6) Including Banco Popular. Excluding it: 13%. Data: Sep 17 or latest available. Branches do not include Santander Consumer Finance business 11

12 Our geographic diversification Underlying attributable profit 9M 17* Americas Europe Chile, 6% Argentina, 4% UK, 16% 48% 52% Brazil, 26% 1 Spain, 15% Mexico, 7% SCF, 13% USA, 5% Portugal, 5% Poland, 3% (*) Excluding Corporate Centre and Real Estate Activity Spain (1) Popular included (2%) 12

13 ... is fuelling more 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 billion 3.03% 3.28% 3.26% 3.25% 3.06% 2.94% 3.04% 2.90% 2.83% 2.96% Pre-provision profit / loans > 22 billion per year 1.02% 1.36% 1.40% 1.65% Cost of credit 2.44% 1.69% 1.43% 1.25% 1.18% 1.12% 9M billion M'17 * (*) Including Banco Popular 13

14 and generates predictable and growing profit over the economic cycle Santander has the lowest volatility in earnings among peers Average volatility of quarterly reported EPS (%), H Group attributable profit ( bn) Best with growing profits Statutory profit growth, CAGR (%), 1998 vs M' <0 < Source: Bloomberg; Note: GAAP criteria (1) The analysis takes the quarterly EPS to Jun 17, starting from the first available data since Jan 99 (2) Including Banco Popular 14

15 This model requires lower capital needs Capital Our risk culture Strong capital position, appropriate for its business model, geographic diversification, balance sheet structure, risk profile and regulatory requirements Called risk pro, which defines the way in which we understand and manage risks on a daily basis Increase cash dividends per share +9% cash DPS 2017(e) over 2016 Top tier profitability allows us to c.1/3 c.1/3 Fund business growth +10% 1 customer revenues 9M 17 over 9M 16 Simplicity Customer focus Responsibility Resilience Accumulate capital CET1 target: +40 bps per quarter Challenge 10.80% Capital (fully-loaded CET1) in Sep (1) Constant euros, NII + fees. Including Popular

16 The subsidiary 02 model Santander businesses are organised through a decentralised model... with subsidiaries legally independent and autonomous in capital and liquidity The governing bodies of each subsidiary shall see to it that their company is managed rigorously and prudently Management is carried out by local management teams who provide great knowledge and experience in relation to local customers and markets They are subject to the regulation and supervision of their respective local authorities, without prejudice to the global supervision of the Group by the European Central Bank Customer funds are secured by the national deposit guarantee funds This model is a strong incentive for local managers and enables local resolvability Firewall Cortafuegos 16

17 with a strong culture of working together, drives efficiency and service excellence Collaboration means opportunities because of our scale in 10 markets Santander is one of the most efficient international banks Our ability to collaborate across countries gives us an unfair advantage, and leads to a better outcome for customers and value creation for shareholders We aim to keep on improving the efficiency ratio through greater efficiency in technology and operation processes and in the corporate centres, as well as from greater digitalisation of the commercial distribution model Santander Wallet Global solution for >2 million customers The satisfaction and experience of our customers continue to be one of our priorities Launched: Upcoming: 17

18 ... and a 02 value-adding Corporate Centre Maximises subsidiaries competitiveness. The Group generates a higher result than the sum of each of the local banks acting in isolation Making the Group s governance more robust, through policies, models and control frameworks which allow the Group to implement corporate criteria and ensure effective supervision over the Group Making the Group s units more efficient by unlocking cost management synergies, economies of scale and achieving a common brand Sharing the best commercial practices, focusing on global connectivity, launching global commercial initiatives and fostering digitalisation 18

19 Agenda Our purpose and business model Aim and value creation Structure and businesses 9M'17 Highlights Results and Activity 19

20 Aim and value creation People 189,254 employees Customers 132 million Our aim is to be the best retail and commercial bank that earns the lasting loyalty of our people, customers, shareholders and communities. Communities 1.7million people helped in 2016 Shareholders 4.1 million Note: All figures excluding Banco Popular 20

21 People 189,254 Sep'17 79% of employees in 2016 perceive Banco Santander as Simple, Personal and Fair 78% employee engagement rate in 2016 The strategy for managing people focuses on six major challenges Corporate behaviours are the basis for becoming a bank that is more Simple, Personal and Fair Talent management Culture Show respect Truly listen Talk straight Keep promises Expertise and development 6 challenges Technology Actively collaborate Bring passion Support people Embrace change Remuneration and benefits Employee experience Certified excellence in employee conditions 1 the first global recognition network Note: All figures excluding Banco Popular (1) Top Employers Institute recognizes the excellent working conditions at Santander Spain, Bank Zachodni WBK in Poland, Santander UK and at the Santander Consumer Finance units in Germany, the Netherlands and Belgium 21

22 Customers 132 Million Sep (+12%) million loyal customers 24.2 (+20%) million digital customers Our value proposal aims to meet the needs of our different customer profiles Operational excellence to increase customer satisfaction by offering the best service at the lowest price possible Simple, tailor-made solutions to: strengthen the lasting loyalty of our customers and support the internationalisation and growth of companies Number of countries where Santander is Top 3 in customer satisfaction World Santander SMEs Santander Select Santander Private Banking Santander Trade Network Global Treasury Solutions Santander Cash Nexus Santander Flame 6 New digital apps 3 Strengthening personal service c. 70% of our PBT Santander NEO CRM SmartRed 1H'15 1H'17 (1) Corporate benchmark of customer satisfaction Note: All figures excluding Banco Popular 22

23 Shareholders 4.1 million Sep'17 +5% Expected dividend per share growth in Delivering shareholders value. Increased remuneration and payment of the four usual dividends maintained We offer our shareholders an attractive sustainable return to maintain their lasting confidence. Strong commitment Among the best in Europe by profitability Share capital distribution (By Investor, 30-September-17) Group Strategy Update: sharing the bank's strategy and outlook with analysts and investors Underlying RoTE 9M % Tangible book value per share Institutional 60.3% Individuals 38.5% Board 1.2% We strengthened our capital New York, October 2017 Chairman, CEO, CFO, UK, Brazil, Spain, USA, Mexico and Country Heads of the rest of units 4.20 euro Sep % CET1 fully loaded Sep Note: All figures including Banco Popular. (1) Total dividends charged to 2017's earnings are subject to the Board and AGM approval. The Board already approved the first interim dividend for 0.06 paid on 4 August and to apply the Santander Dividendo Elección (scrip dividend) programme in the second interim dividend.

24 Communities 1.7 million people helped in ,684 scholarships granted in ,183 agreements with universities and academic institutions in 21 countries Contributing to the economic and social prosper of people and businesses in a responsible and sustainable way Firm support of higher education with Santander Universities Integration of ethical, social and environmental criteria in the development of our business Nº 1 Support higher education by the Varkey Foundation in cooperation with UNESCO 1.7 million people helped 209 million social investment in communities in million invested in higher education in ,082 megawatts financed in renewable energy projects in % reduction in electricity consumption in ,407 universities in 23 countries form part of Universia in the DJSI socially responsible investment index (since 2000) and in the FTSE4Good (since 2002) 1 st bank in Europe and 6 th in the world in the 24 Additional information in the 2016 sustainability report (click link ) Note: All figures refer to 2016 and exclude Banco Popular

25 Our 2018 targets Employees People Customers Shareholders Communities Top 3 bank to work for in the majority of our geographies 17 mill. retail loyal customers 1.6 mill. loyal SMEs and corporates Customer loans growth above peers All geographies top 3 in customer service* Cost / Income 45-47% average cost of credit: 1.2% RoTE >11.5% Increasing EPS, reaching double digit growth by %-40% cash dividend pay-out: Yearly DPS increase People supported in our communities: 5.0 mill. in c. 130k scholarships in mill. digital customers (x2) FL CET1 > 11% C. 10% CAGR of fee income (*) Except the US approaching peers 25

26 Agenda Our purpose and business model Aim and value creation Structure and businesses 9M'17 Highlights Results and Activity 26

27 Corporate governance Robust corporate governance is key for guaranteeing a sustainable business model over the long term Annual General Meeting Balanced Board composition Respect for shareholders rights Board of Directors Maximum transparency, particularly in terms of remuneration At the forefront of international best governance practices Board Committees 27

28 Board of directors Board of directors (December 2016) Decision-making process A board of directors is aware of the business, is well balanced and has vast experience 73% 27% 60% 40% female directors It makes decisions by consensus and has a long-term vision Executive Committee 50% Risk Supervision, Regulation and Compliance Committee 100% Debate of the issues and effective challenge by external board members 50% Executives Non-executives Other Board Committees 1 : Audit Committee, Appointments Committee, Remuneration Committee International Committee, Innovation and Technology Committee International Advisory Board 28 (1) For more information about the Board committees, click on a Board Committee name

29 Internal control framework Parent-subsidiary governance model The Santander Group is structured around subsidiaries, whose parent is Banco Santander S.A., that are autonomous in capital and liquidity Its internal governance system comprises a governance model and corporate frameworks The model sets the principles that regulate the relationship between the Group and its subsidiaries and the interaction that must exist between them at three levels The corporate frameworks establish common principles of action in matters that are significant for their impact on the Group s risk profile 3 (1) Senior executive (2) Second-ranking executive (3) Such as risks, compliance, technology, auditing, accounting, finances, strategy, human resources and communications 29

30 Group structure Based on 9 markets and on the consumer finance business in Europe, supported by the Corporate Centre activities and other functions USA Brazil Mexico Chile Argentina Units and business Spain Portugal United Kingdom SCF 1 Poland Uruguay Peru Colombia Global Corporate Banking Wealth Management Asia Pacific Representative offices Group functions and Corporate Centre activities Risk Compliance & Conduct Internal Audit Chairman s Office and Strategy Santander Digital Universities Communications, Corporate Marketing and Research Costs General Secretariat and Human Resources Technology and Operations Financial Accounting and Control Financial Fin. Planning & Corporate Development (1) Santander Consumer Finance (SCF) with presence in Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland and UK 30

31 Units and business 31

32 Spain excl. Popular Top 3 in customer funds, corporate loans and private banking Highlights 9M'17 STRATEGIC PRIORITIES Profitable growth Branches 2,857 Employees 22,904 Loyal customers (millions) 1.6 Bank of choice for corporates Digital customers (millions) 3.0 Gross loans* 148,838 Customer funds* 240,192 Improve efficiency and customer experience Underlying attributable profit* 914 Contribution to Group s profit** 13% Best bank to work for (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 32

33 Santander Consumer Finance SCF is Europe s market leader in consumer finance, generating business in 15 countries 1 Highlights 9M'17 Branches 549 Employees 15,045 Customers** (millions) 19.6 Gross loans* 89,003 Customer funds* 35,777 Underlying attributable profit* 943 Contribution to Group s profit 13% STRATEGIC PRIORITIES Maintain profitability Gain market share Manage agreements with vehicle manufacturers proactively Germany Spain Italy Portugal Poland France Mobile payments Finland Norway Sweden Denmark Netherlands Austria Belgium Switzerland UK 1 Digital interaction Speed up the digitalisation of the business (*) Million euros. Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds. Underlying profit does not include - 85MM in 3Q 17 related to integration costs. (1) UK data considered in SAN UK; (**) Customers with an active contract (do not consider SC UK) 33

34 Poland One of Poland s main banks. The leader in mobile and online banking and second in the card market Highlights 9M'17 Branches 592 Employees 11,691 Loyal customers (thousands) 1,350 Digital customers (thousands) 2,030 Gross loans* 22,226 Customer funds* 26,824 STRATEGIC PRIORITIES Top 3 in quality of service, increasing the number of loyal customers Remain the leader in digital channels in Poland Gain market share in volumes Underlying attributable profit* 219 Contribution to Group s profit 3% Remain the leader in profitability (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 34

35 Portugal excl. Popular Portugal s most profitable bank with high market share in loans and deposits Highlights 9M'17 Branches 587 STRATEGIC PRIORITIES Keep on gaining profitable market share Employees 6,022 Loyal customers (thousands) 681 Optimise the cost of funds Digital customers (thousands) 551 Gross loans* 31,190 Customer funds* 32,017 Improve efficiency and cost of credit Underlying attributable profit* 336 Contribution to Group s profit 5% Adjust the capital structure to the new regulatory requirements (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 35

36 United Kingdom Santander UK is strengthening its position as a customer-centric retail and commercial bank Highlights 9M'17 STRATEGIC PRIORITIES Grow customer loyalty and market share Branches 820 Employees 25,722 Loyal customers (millions) 4.2 Digital customers (millions) 5.0 Gross loans* 235,704 Customer funds* 207,861 Underlying attributable profit* 1,201 Deliver operational and digital excellence Growing profitability and a strong balance sheet Live the Santander way through our behaviours Contribution to Group s profit 16% Support communities through skills, knowledge and innovation (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 36

37 Brazil Solid model, accelerating its commercial transformation to focus on the customer STRATEGIC PRIORITIES Highlights 9M'17 Focus on revenue growth Branches 3,422 Employees 46,261 Loyal customers (millions) 4.0 Digital customers (millions) 8.0 Gross loans* 75,622 Gain market share in acquiring, consumer credit, SMEs, Santander One SMEs Agribusiness Santander Way Customer funds* 113,031 Digital transformation Underlying attributable profit* 1,902 Contribution to Group s profit 26% Risk management and recoveries Payrolls (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 37

38 Mexico The country s third largest bank with high market share in loans and deposits. Its main strength is innovation in customer service Highlights 9M'17 Branches 1,401 Employees 18,217 Loyal customers (thousands) 1,896 Digital customers (thousands) 1,808 Gross loans* 29,347 Customer funds* 38,643 Underlying attributable profit* 532 Contribution to Group s profit 7% STRATEGIC PRIORITIES Boost payrolls & strengthen Santander Plus offering to drive attraction & loyalty Consolidate our positioning in SMEs and recover leadership in mortgages Operational & IT transformation through CRM & digital platforms Enhance customer service quality across the Bank Select Me Women proposition (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 38

39 Chile Chile s leading private sector bank in terms of assets and customers Highlights 9M'17 Branches 406 Employees 11,673 Loyal customers (thousands) 615 Digital customers (thousands) 988 Gross loans* 37,281 Customer funds* 33,215 Underlying attributable profit* 440 STRATEGIC PRIORITIES Consolidate commercial transformation via the new branch network model and digital banking Continue to improve the quality of customer attention and experience for individuals and SMEs Strengthen business with large and medium sized companies through non-lending services Contribution to Group s profit 6% Focus on fee income and on long-term profitability (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 39

40 Argentina Consolidation as the country s leading private sector bank following its acquisition of Citibank s 1 retail business Highlights 9M'17 Branches 482 Employees 9,346 Loyal customers (thousands) 1,324 Digital customers (thousands) 1,907 Gross loans* 8,208 Customer funds* 12,788 Underlying attributable profit* 263 Contribution to Group s profit 4% STRATEGIC PRIORITIES Continue the transformation towards a full digital bank New Citi customers: focus on increasing profitability Growing loans sustaining profitability (RoRWA > 3%) Develop business with Public Sector Develop and grow wealth management businesses Best Workplace 2016 Best internet banking 2007 to 2016 Best Mobile Banking Latam 2015 and 2016 Best Comex Bank 2016 Best Bank 2010 to 2016 Best Bank 2015 and (*) Million euros. Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds (1) Incorporation of Citibank's retail portfolio into balance sheet on March 31 st (P&L from 2Q 17)

41 United States excl. Popular Santander US has built a strong presence in the Northeast of the US Highlights 9M'17 Branches 694 STRATEGIC PRIORITIES Meet regulators expectations Employees 17,566 Loyal customers (thousands) 278 Digital customers (thousands) 778 Gross loans* 76,725 Customer funds* 60,916 Improve customer experience & loyalty Become a full spectrum auto lender Underlying attributable profit* 337 Contribution to Group s profit 5% Improve profitability (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 41

42 Santander Global Corporate Banking (SGCB) Focused on corporate clients and institutions that, given their size or sophistication, require tailor-made services or value-added wholesale products Highlights 9M'17 Underlying attributable profit* 1,501 Contribution to Group s profit 21% STRATEGIC PRIORITIES Consolidate position as experts on LATAM Develop high value added products with low capital consumption Increase the offer of products for commercial banking customers SGCB business model rests on three pillars: 12% Focus on the customer Strong global product capabilities Approx. 88% of the revenues come from customers, through a Global Relationship Model and a product factory dedicated to retail banking customers which generates revenues in the amount of 1,184MM Reference position in Export Finance, Corporate Loans, Project Finance and Issuances, and Structured Finance, among others, in Europe and LATAM 32% Revenues breakdown (9M 17) 32% Global Transaction Banking Financing Solutions & Advisory Global Markets Interconnection with the local units Leveraging on the Group's network of banks and in the local expertise generating 1,188MM of revenues through connectivity 24% Capital & Other 42 (*) Million euros Note: excluding Banco Popular

43 Santander Wealth Management Our vision: Become the best Wealth Manager in Europe and the Americas PRIVATE BANKING STRATEGIC PRIORITIES ASSET MANAGEMENT STRATEGIC PRIORITIES Highlights 9M'17 Private Banking Customers c.170k Develop a global Private Banking proposition for our customers Become the partner of choice for our local banks Private Banking Assets Under Management¹ SAM Assets Under Management¹ c.160 c. 180 Develop the UHNW 2 segment proposition Complete the value proposition collaborating with third parties Complete product and service offering Develop our institutional value proposition Private banking digital transformation Develop our future IT platform 43 (1) Billion euros (2) Ultra high net worth

44 Popular Top 3 in customer funds, corporate loans and private banking BANCO POPULAR S MEASURES IN 3Q 17 Highlights 9M'17 Branches 1,777 Employees 11,695 Gross loans* 79,573 Customer funds* 79,240 Underlying attributable profit* 178 Contribution to Group s profit 2% Capital increase of 7,072 million Loyalty bonds: subscribed by ~60% of beneficiaries Real Estate disposal 4 : agreement to sell 51% of RE business to Blackstone Rebranding of the branch network under Banco Santander umbrella Santander ATMs available to Popular s customers and euro transactions between the two banks free of charge Strong deposits recovery since acquisition (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds. Underlying profit does not include - 300MM in 3Q 17 related to integration costs. 44

45 Agenda Our purpose and business model Aim and value creation Structure and businesses 9M'17 Highlights Results and Activity 45

46 9M 17 FINANCIAL HIGHLIGHTS Group including Popular 9M 17 / 9M 16 change Improving profitability and financials per share together with a higher capital ratio Strong and high quality profit growth Attributable profit Underlying att. profit 1 5,077 mill.; +10% 5,592 mill.; +14% (constant euros) Improved capital adequacy and profitability FL CET % Underlying RoTE 11.8% Committed to generating value for shareholders EPS 0.316; +6% TNAV/share 4.20; +2% 46 (1) 9M 17 including integration costs and other (details on page 48). 9M 16 including capital gains from the disposal of the stake in Visa Europe and restructuring costs

47 9M 17 FINANCIAL HIGHLIGHTS Group excluding 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 Loyal customers: 16.5 million 15.1 million individuals and 1.4 million companies Individuals +1.6 mill. +12% NII 1 Fee income 1 25,124 mill.; +7% 8,489 mill.; +10% Companies +151k +12% Loans 1 +1% Digital customers: 24.2 million 13.9 million mobile Customer funds 1 +8% Digital Mobile +4.1 mill. +20% +4.5 mill. +47% NPL ratio Cost of credit 3.51%; -64 bps 1.15%; -4 bps 47 (1) % change in constant euros

48 9M'17 P&L One-off items and profit reconciliation 3Q'17 profit impacted by several one-offs, primarily related to integrations 3Q'17 Profit million 515 1,976 Non-recurring items ( million, net of tax) 1, % 1 YoY Popular's integration process Q'17 Attr. profit Non-recurring 3Q'17 Underlying profit Germany's integration process -85 9M'17 Profit Equity stakes, intangible assets and other -130 million 5, ,592 Total % 1 YoY 9M'17 Attr. profit Non-recurring 9M'17 Underlying profit 48 (1) % change in constant euros

49 9M'17 P&L P&L breakdown Excellent quality and strong top-line growth Total Group 9M 17 million Constant Euros euros Popular w/o Popular % / 9M 16 w/o Popular Gross income 36, , Operating expenses -16, , Like-for-like basis (w/o Popular) Revenue growth driven by NII: +7% Fees: +10% Net operating income 19, , Loan-loss provisions -6, , C/I ratio: 46.3% (-1.7 pp) Underlying PBT 10, , Taxes -3, , Underlying attrib. profit 5, , Cost of credit: 1.15% (-4 bps) Non-recurring Attributable profit 5, , (1) 9M 17 included integration costs and others (details on page 48). 9M 16 included capital gains from the disposal of the stake in Visa Europe and restructuring costs

50 Note: Contribution to the SRF (net of taxes) recorded in 2Q 16 (- 120 mill.) and 2Q 17 (- 146 mill.) (1) Excluding Popular 2Q 17 ( 1,738 million) and 3Q 17 ( 1,809 million) 9M'17 P&L P&L breakdown Solid profit growth across the board Underlying attributable profit Constant million Underlying attributable profit in core units 9M 17 million and % change / 9M 16 in constant euros Popular Brazil 1, % 1,657 1,541 1,699 1,754 1,813 1, ,723 2, ,878 SCF UK SCF Spain ,201 +8% +14% +16% Mexico % Chile % USA % 1Q'16 2Q 3Q 4Q 1Q'17 2Q 3Q Portugal % Underlying attributable profit million Argentina Poland % +3% 1,633 1,526 1,695 1,766 1,867 1, ,976 1 Popular 178 n.a. 50

51 9M'17 P&L P&L breakdown Higher revenues, improved efficiency and positive dynamics in loan-loss provisions excl. Popular Revenues: +7% Costs: +4% (0% in real terms 2 ) LLPs: -7% Rose in 8 of 10 markets driven by strong recurring customer revenues million Net interest income Cost control reflected a better C/I ratio in 8 units Nominal In real terms 2 Revenues vs. costs Enhanced cost of credit in most markets million Cost of credit 3 8,512 8,172 7,862 7,835 Fee income 2,770 2,851 2,609 2,476 Other income Q'16 2Q 3Q 4Q 1Q'17 2Q 3Q Brazil UK SCF Spain Mexico Chile USA Portugal Argentina Poland Corporate Centre Group ,393 9M 16 LLPs -7% ,883 9M 17 LLPs Note: Constant euros. (1) Other income includes gains on financial transactions, income from the equity accounted method, dividends and other operating results. Contribution to the SRF recorded in 2Q'16 and 2Q'17; (2) Excluding inflation and perimeter (3) Cost of credit excluding SC USA: Sep % 51

52 REAL ESTATE EXPOSURE IN SPAIN Accelerating the reduction of real estate exposure Credit quality ratios 1 %, including Popular Real estate exposure 2 billion Coverage ratio NPL ratio Gross value Jun 17 Blackstone transaction and other Gross value Sep 17 Provisions Net value Sep S'16 D'16 M'17 J'17 S'17 Net value ( billion) Banco Popular NPL ratio Coverage ratio S 17 11% 47% Real estate assets 4.6 Foreclosed assets 3.4 Rental assets 1.2 RE non-performing loans (NPLs) 1.3 RE assets + RE non-perf. loans (1) Performance in 3Q 17 impacted by Blackstone transaction (2) Santander Real estate Activity in Spain and Banco Popular

53 CAPITAL AND PROFITABILITY RATIOS In 3Q'17 we continued to generate capital and to increase profitability FL CET1(%) RoRWA (%) RoTE (%) M'16 9M'17 9M'16 9M'17 Underlying Total EPS 2 (euros) TNAV/share 2 (euros) CET1 D 16 CET1 J 17 Pro-forma 1 Organic generation Market & Other (AFS) CET1 S 17 before Non-recurring Integration and other CET1 S M'16 9M'17 S'16 S'17 53 (1) Including rights issue completed on July, 27 th 2017 (2) Adjusted for the rights issue completed on 27 July 2017

54 Delivering on our commitments to reach our targets Customers and results FY2016 9M 17 excl. Popular 2017 targets Loyal customers (Million) Digital customers (Million) Fee income 1 8% 10% Increase Cost of credit 1.18% 1.15% Improve Cost to income 48.1% 46.3% Broadly stable Group ratios FY2016 9M 17 incl. Popular 2017 targets EPS ( ) (9M 17) Increase DPS 2 ( ) FL CET Increase 10.55% 10.80% +40 bps organic per year 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. 54

55 Santander financial information For more details on the Group & countries, click below Annual Report 2016 Online Annual Report 2016 Quarterly Financial Report Group presentations: Activity and Results Investor Day 2015 Group Strategy Update 2017 Countries presentations SCF 55

56 Important information 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. 56

57 Important Information 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 currencydenominated 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 ( 57

58 Thank you Our purpose is to help people and businesses prosper. Our culture is based on the belief that everything we do should be