Santander Institutional Presentation

Transcription

1 Santander Institutional Presentation 2017

2 Santander, a leading financial group Key data 2017 Total balance sheet ( trill.) 1.44 Gross loans ( bill.; w/o repos) 854 Customer deposits + mutual funds ( bill.; w/o repos) 890 Branches 13, Attributable profit ( mill.) 6, Attributable profit ( mill.) 6,619 Market capitalisation ( bill.; ) 88 People (employees) 202,251 Customers (mill.)* 133 Shareholders (mill.) 4.0 Communities (million people helped, 2017)* (*) Excluding Banco Popular

3 Agenda Our purpose and business model Aim and value creation Corporate governance and Internal control Group structure and business units 2017 Highlights Results and Activity 3

4 A model of sustainable, predictable growth Our purpose to help people and businesses prosper Our aim to be the best retail and commercial bank, earning the lasting loyalty of our people, customers, shareholders and communities A bank that is Our model and the results it generates show that Santander is on the right track 4

5 Our strengths to continue to grow and to be successful in the long term We have SCALE and the potential to grow organically PREDICTABLE GROWTH: diversification by country and business, which contributes higher profits in a more stable manner Focus on INNOVATION to increase customer loyalty and operational excellence 5

6 SCALE 133 million 02 customers in markets with a total population of more than one billion Customers by country, Dec 17 Huge potential for organic growth through increased loyalty and digitalisation Others 1% USA 4% Spain 9% Argentina 3% Chile 3% Loyal customers (millions) Digital customers (millions) Mexico 11% 133 million customers SCF 15% Poland 3% Portugal 3% % % 25.4 Brazil 29% UK 19% Dec'16 Dec'17 Dec'16 Dec'17 Our scale gives us efficiency, sources of growth and new business opportunities Note: All figures excluding Banco Popular 6

7 SCALE We are leaders in market share in five of our core markets 7 USA Brazil Argentina Portugal UK Mkt. share 1,4 : 3% Branches: 683 Mkt. share 1 : 9% Branches: 3,465 Mkt. share 1 : 10% Branches: 482 Mkt. share 1 : 16% Branches: 563 Mkt. share 2 : 10% Branches: 808 Mexico Mkt. share 1 : 13% Branches: 1,401 SCF Nº countries 5 : 15 Branches: 546 Chile Mkt. share 1 : 19% Branches: 439 Poland Mkt. share 1,3 : 10% Branches: 576 Spain Mkt. share 1,6 : 18% Branches: 2,843 (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% (7) Argentina and Portugal only include private sector banks. Data: Dec 17 or latest available. Branches do not include Santander Consumer Finance business 7

8 GROWTH Our model is based on a balanced geographic diversification Underlying attributable profit 2017* Balanced distribution between mature markets, which provide stability, and developing markets, which fuel growth in revenue Other Latam, 1% Argentina, 4% Chile, 6% UK, 16% Americas Europe 48% 52% Spain 1 ; 15% Brazil, 26% SCF, 13% Mexico, 7% USA, 4% Portugal, 5% Poland, 3% (*) Excluding Corporate Centre and Real Estate Activity Spain (1) Popular included (3%) 8

9 GROWTH with good business mix between products and segments Loan portfolio by business Customer funds by business Other individuals, 11% Individuals demand deposits, 38% GCB, 11% Home mortgages, 36% GCB, 9% Corporates, 15% 774bn Corporates, 13% 816bn SMEs, 9% Consumer, 18% SMEs, 9% Consumer, 4% Individuals time deposits, 13% Individuals mutual funds, 14% Good mix between products for individuals, consumer finance, SMEs, companies and other products Note: Excluding Popular. Loans excluding repos. Customer funds: deposits excluding repos + marketed mutual funds 9

10 GROWTH is key to our stable and predictable growth Profitability drivers Quarterly reported EPS volatility (Jan 99-9M 17) EPS volatility calculated using quarterly date from Jan 99-Sep % 3.28% 3.26% 3.25% 3.06% 2.94% 3.04% 2.90% 2.83% 2.97% 711% 358% Pre-provision profit / loans 128% 113% 92% 1.02% 1.36% 1.40% 1.65% Cost of credit 2.44% 1.69% 1.43% 1.25% 1.18% 1.07% 78% 52% 46% 44% 32% 9% x -9x -1x 1x 5x 2x 3x 2x 1x 6x 4x Net income increase Our unique business model allows us to deliver better results with less volatility and higher growth Note: 2017 figures include Popular. Source: Bloomberg; Note: GAAP criteria Note: Standard deviation of the quarterly EPS starting from the first available data since Jan 99 10

11 GROWTH Our profitability allows us to grow, to accumulate capital and to pay dividends Finance business growth Accumulate capital Pay dividends +11% customer revenues (2017 vs. 2016) +29 bps 10.84% FL CET1 (2017 vs. 2016) +11% Cash dividend per share (2017 vs. 2016) 11

12 INNOVATION Focus on innovation to efficiently improve customer experience Focus on digital innovation Blockchain Data & A.I. Payments Platform & Services We have launched a wide array of initiatives at the bank Súper Wallet Select Me Automatic service by bots New digital account opening process Investment Hub Biometric voice solution aimed at large companies Electronic guarantees New app Digilosofía We are market leaders in mobile payments Santander ONE Consignado, 100% digital WebCasas Full digital On Boarding process WorkCafé 12

13 INNOVATION New digital solutions: agile global platforms Superdigital A digital mobile-first payment solution Openbank The fully digital bank >1Mn customers +2.4x Revenues ( ) +26% Loyal customers +20% Deposit growth Santander Cash Nexus An agile cash management platform Single entry point Up to 75% workload reduction Machine learning Global platform to know our customers better Open source platform and a team of >100 data scientists Learning from >5Bn transactions Results obtained on >10Mn customers 13

14 INNOVATION Digital transformation: simpler and more personalised and modern products & services Smart watch Pay Santander App Facebook ChatBot First bank to offer smart watch payments Speak directly or set up a meeting with your banker from your App Real time assistant through Facebook Messenger 14

15 INNOVATION increase digital sales, customer satisfaction and loyalty Percentage of transactions and sales in digital channels Top 3 in customer satisfaction 39% of transactions are digital 31% of total sales are digital Our digital transformation is paying off: as well as more digital customers, we have more digital transactions and sales 15

16 Agenda Our purpose and business model Aim and value creation Corporate governance and Internal control Group structure and business units 2017 Highlights Results and Activity 16

17 Aim and value creation People 202,251 employees Customers 133 million Santander is a strong brand Global Bank of the Year award (The Banker magazine) 6 th best global Retail Banking brand (BrandZ ranking) 2 nd most valuable bank brand in Europe (Brand Finance Banking 500 ranking) Communities 2.1 million people helped in 2017 Shareholders 4.0 million Risk culture: risk pro Risk pro defines the way in which we understand and manage risks in our day-to-day activities >94% of employees recognise and are responsible for the risks in their daily work Note: Figures excluding Banco Popular, except number of employees and data on shareholders 17

18 People 202,251 employees Dec'17 55% women 45% with university degrees Global engagement survey 81% employees believe that their colleagues behave in ways that are more simple, personal and fair 77% employee engagement rate in 2017 Our people management strategy focuses on six key areas The SPF culture is based on our corporate behaviours Talent management Knowledge and development I show respect I truly listen I talk straight I keep promises Culture Our aim is to be the best bank to work for Remuneration and benefits I actively encourage cooperation I bring passion I support people I embrace change Systems Employee experience A new corporate management evaluation model 60% what we do 40% how we do it Top 3 leading banks to work for in 5 countries 18

19 Customers 133 million Dec (+13%) million loyal customers 25.4 (+21%) million digital customers Our value proposal aims to meet the needs of our different customer profiles Innovative, simple, personalised solutions Our value proposition for individual customers: Operational excellence to maximise the bank s efficiency and customer service quality New and redesigned branches World Santander Plus As I Want it Account A new global division: Santander Wealth Management A global solution making us partners in SMEs growth: Santander SMEs Digital branch Smart Red WorkCafé 20% more productive 96% customer satisfaction Increase brand visibility New digital solutions Top 3 bank in seven countries in customer satisfaction 1 Openbank Santander Cash Nexus Superdigital Machine Learning (1) Corporate benchmark of customer satisfaction Note: All figures excluding Banco Popular 19

20 Shareholders 4.0 million Dec % Cash dividend per share growth in % Total shareholder return in Increased shareholder remuneration, maintaining the payment of the four dividends We offer our shareholders an attractive sustainable return to maintain their lasting confidence Among the best banks in Europe by profitability Share capital distribution (By investor, 31-December-17) Group Strategy Update: sharing the bank's strategy and outlook with analysts and investors Underlying RoTE % 38% 1% 61% Institutional investors Board Retail shareholders New York, October 2017 Meeting our commitments Largest bank in the Eurozone by stock market value Market capitalisation 2017 year end 88,410Mn We strengthened our capital Fully loaded CET1 Dec % Chairman, CEO, CFO, UK, Brazil, Spain, USA, Mexico and Country Heads of the rest of units Note: All figures including Banco Popular. (1) Total dividends charged to 2017's earnings are subject to the Board and AGM approval. 20

21 Communities 2.1 million people helped in ,862 scholarships granted in ,295 agreements with universities and academic institutions in 21 countries Contributing to the economic and social progress of people and businesses in a responsible and sustainable way Community investment: we invest more in supporting education than any other private company in the world We support and promote financial inclusion Firm support of higher education 150 million in microfinance loans micro-entrepreneurs supported >250,000 Firm commitment to the environment Project finance to support renewable energies 3,390 MW Total installed capacity of solar and wind generation supported by the Bank in 2017 In the DJSI socially responsible investment index (since 2000) and in the FTSE4Good (since 2002) 21 Additional information in the 2017 sustainability report (click link ) Note: All figures refer to 2017 and exclude Banco Popular

22 Our 2017 performance makes us highly confident to meet our 2018 targets Employees People Customers 1 Shareholders Communities Top 3 bank to work for in the majority of our geographies 17 million loyal retail customers 1.6 million 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 million digital customers (x2) FL CET1 > 11% C. 10% CAGR of fee income (*) Except the US approaching peers 22

23 Agenda Our purpose and business model Aim and value creation Corporate governance and Internal control Group structure and business units 2017 Highlights Results and Activity 23

24 Corporate governance Composition of the Board 14% 7% 57% Non-executive directors (independent) Executive directors Balanced Board composition Respect for shareholders rights 22% Non-executive directors (neither proprietary nor independent) Proprietary non-executive directors (proprietary) Percentage of women on the Board 33% 36% Maximum transparency in terms of remuneration At the forefront of best practices and long-term vision 11% 19% Clear and robust governance, with well-defined accountabilities and prudent management of risks and opportunities (*) Data as of 31/12/

25 Internal control framework Parent-subsidiary governance model 1 Presence of Santander Group in the Boards of Directors of the Subsidiaries and guidelines for Board dynamics and effectiveness 2 Reporting of the CEO/ Country Heads to the Group CEO and Group Executive Committee 3 Interaction between Group and Subsidiaries Control, Management and Business Functions The Group s appointment and suitability assessment procedure is a key element of Governance 25

26 Agenda Our purpose and business model Aim and value creation Corporate governance and Internal control Group structure and business units 2017 Highlights Results and Activity 26

27 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 businesses 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, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the UK 27

28 Spain excl. Popular Santander Spain maintains its loyalty-centred strategy and is making progress in its digital transformation 2017 Highlights Branches 2,843 Employees 22,916 Loyal customers (millions) 1.9 Digital customers (millions) 3.2 Gross loans* 148,585 Customer funds* 251,196 Underlying attributable profit* 1,180 Contribution to Group s profit** 12% Strategic priorities Integrate Banco Popular combining the best of both banks Profitable, loyalty-based growth Bank of choice for SMEs and corporates Digital transformation to improve efficiency and the customer experience (*) Million euros (**) Including Popular: 15% Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 28

29 Santander Consumer Finance SCF is the consumer finance leader in Europe, present in 15 European countries Highlights Branches 546 Employees 15,131 Customers** (millions) 19.9 Gross loans* 92,431 Customer funds* 35,398 Underlying attributable profit* 1,254 E-commerce open platform Digital interaction Mobile payments Awards Germany Spain Italy Portugal Poland France Finland Norway Sweden Denmark Netherlands Austria Belgium Switzerland Contribution to Group s profit 13% UK 1 Strategic priorities Maintain our leadership position Support the transformation of manufacturers and dealers Develop innovative products and digitalise the customer cycle processes Implement open e-commerce platforms in the businesses and sign new agreements with distributors 29 (*) Million euros. Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds. Underlying profit does not include - 85Mn related to integration costs. (1) UK data considered in SAN UK; (**) Customers with an active contract

30 Poland Third bank in Poland reinforced by the acquisition of the retail and private banking business of Deutsche Bank Polska 2017 Highlights Branches 576 Employees 11,572 Loyal customers (thousands) 1,387 Digital customers (thousands) 2,089 Gross loans* 22,974 Customer funds* 27,803 Underlying attributable profit* 300 Contribution to Group s profit 3% 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 Remain the leader in profitability (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 30

31 Portugal excl. Popular Portugal s most profitable bank with high market share in loans and deposits 2017 Highlights Branches 563 Employees 5,895 Loyal customers (thousands) 686 Digital customers (thousands) 558 Gross loans* 31,296 Customer funds* 32,213 Underlying attributable profit* 440 Contribution to Group s profit 5% Strategic priorities Integrate Banco Popular Portugal, improving efficiency Increase loyalty Keep on gaining profitable market share Deepen our digital transformation and streamline processes (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 31

32 United Kingdom One of the leading banks in the country, with an innovative value offering for retail customers and small businesses 2017 Highlights Branches 808 Employees 25,971 Loyal customers (millions) 4.2 Digital customers (millions) 5.0 Gross loans* 235,783 Customer funds* 210,305 Underlying attributable profit* 1,498 Contribution to Group s profit 16% Strategic priorities Increased customer loyalty as the key driver of business growth Provide operational and digital excellence through expertise and innovation Achieve profitability growth and a strong balance sheet Leverage our Investment Hub and increase crossborder customer relationship (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 32

33 Brazil Santander Brasil met its profitability target thanks to its customer-centred model and a strategy focused on profitable growth 2017 Highlights Branches 3,465 Santander One SMEs Agribusiness Santander Way Employees 47,135 Loyal customers (millions) 4.2 Digital customers (millions) 8.6 Payrolls Gross loans* 74,341 Customer funds* 106,959 Underlying attributable profit* 2,544 Contribution to Group s profit 26% Strategic priorities Maintain a sustainable profit and solid organic growth Gain market share in acquiring, consumer credit, SMEs, Risk and recovery management Continue the digital transformation in terms of innovative products and services (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 33

34 Mexico The second largest bank in Mexico in terms of mortgages and loans to companies, and the third largest in credit cards 2017 Highlights Branches 1,401 Employees 18,557 Select Me Women proposition Loyal customers (thousands) 1,993 Digital customers (thousands) 1,948 Gross loans* 26,962 Customer funds* 35,548 Underlying attributable profit* 710 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 digital platforms & investment plan Improve customer service in all channels and throughout the Bank (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds 34

35 Chile Chile s leading private sector bank in terms of assets and customers 2017 Highlights Branches 439 Employees 11,675 Loyal customers (thousands) 622 Digital customers (thousands) 1,012 Gross loans* 38,249 Customer funds* 33,104 Underlying attributable profit* 586 Contribution to Group s profit 6% 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 nonlending services Boost growth among mass consumer market customers 35 (*) Million euros Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds

36 Argentina The country s leading private sector bank in terms of business market share following the integration of Citibank's retail bank 2017 Highlights Branches 482 Employees 9,277 Loyal customers (thousands) 1,340 Digital customers (thousands) 1,957 Gross loans* 7,608 Customer funds* 12,855 Underlying attributable profit* 359 Contribution to Group s profit 4% Strategic priorities Continue the transformation towards a fully digital bank New Citi customers: focus on increasing profitability Growing loans sustaining profitability Develop business with the Public Sector and grow wealth management businesses 36 (*) 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)

37 United States excl. Popular Santander US has built a strong presence in the Northeast of the US 2017 Highlights Branches 683 Employees 17,560 Loyal customers** (thousands) 303 Digital customers** (thousands) 814 Gross loans* 75,389 Customer funds* 59,329 Underlying attributable profit* 408 Contribution to Group s profit 4% Strategic priorities Improve customer experience and loyalty across segments Provide auto financing to all customer segments Improve profitability Continue to comply with regulatory expectations (*) Million euros (**) Santander Bank Note: Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds. Underlying profit does not include - 76Mn related to hurricane provisions, increased stake in SC USA, tax reform and others 37

38 Santander Global Corporate Banking (SGCB) SGCB is the global business division for corporate and institutional customers that require a tailored service and value-added wholesale products 2017 Highlights Underlying attributable profit* 1,821 Contribution to Group s profit 20% 11% 33% Global Transaction Banking 31% Revenues breakdown (2017) Global Debt Financing Global Markets 25% Capital & Other Strategic priorities Capture international business flows between the countries in which the Group is present Offer value-added products for specialised customers of the retail and commercial banking network Evolve towards a low capital consumption business Be the best bank for its customers in LATAM and Europe, with solid business units in the USA and Asia 38 (*) Million euros Note: excluding Banco Popular

39 Santander Wealth Management 2017 Highlights Private Banking Customers Assets Under Management 1 c.170k c. 333bn Vision and strategic priorities Our vision: To become the Best Wealth Manager in Europe and the Americas PAT Contribution 2 c. 961mm Private Banking Asset Management Develop a global Private Banking proposition for our customers Become the partner of choice for our local banks Complete commercial model and product offering in each geography Complete the value proposition Develop the UHNW 3 segment proposition Develop our institutional value proposition Private banking digital transformation Develop our future IT platform Foster collaboration among private banks, SAM, GCB and the retail and corporate networks 39 (1) Private Banking + SAM excluding AUMs of Private Banking customers (2) PAT + After tax fees paid from SAM to SAN excluding Private Banking customers (3) Ultra High Net Worth

40 Banco Popular Santander acquires Banco Popular, strengthening its leadership in Spain and Portugal Strengthening of the franchise Banco Santander + Banco Popular Key figures and milestones of this acquisition The appointments of new members to the board of directors and its committees A capital increase of Banco Santander of 7,072 million to support the transaction. The issue was eight times oversubscribed Largest bank in Spain ~19% market share in business Portugal s leading private bank ~17% market share in lending Strong deposit recovery since acquisition Disposal of 51% of Banco Popular s RE business Loyalty bonds: 764Mn subscribed, 78% of the total amount Expected return on investment of 13-14% in year three Agreement to sell TotalBank: estimated positive impact in capital (+5 bps) Agreement with Labour Unions for the Corporate Centre integration 40

41 Agenda Our purpose and business model Aim and value creation Corporate governance and Internal control Group structure and business units 2017 Highlights Results and Activity 41

42 2017 Key achievements GROWTH PROFITABILITY STRENGTH Customer revenues 45,892Mn (+11%) Loans 1 +12% (+2% ex-pop) Underlying PBT 13,550Mn (+20%) Underlying RoTE c.12% (+70 bps) FL CET % (+29 bps) NPL ratio 4.08% (+15 bps) Customer funds 1 +17% (+8% ex-pop) EPS (+1%) Cost of credit 1.07% (-11 bps) 42 (1) % change in constant euros. Loans excluding repos. Funds: deposits excluding repos + marketed mutual funds

43 Excellent quality and strong top-line growth with performance sustained QoQ Mn 2017 % vs Euros Constant euros Net interest income 34, Net fees 11, Customer revenues 45, Other income 2, Gross income 48, Operating expenses -22, Net operating income 25, Net loan-loss provisions -9, Underlying PBT 13, Underlying attrib. profit 7, Net capital gains and provisions Attributable Profit 6, Quarterly gross income performance excluding Popular (constant Mn) 8,342 8,458 7,969 7,632 2,582 2,608 1,638 1,523 1,679 1,734 1,790 1,711 2,836 2, Q'16 2Q 3Q 4Q 1Q'17 2Q 3Q 4Q Underlying attributable profit (constant Mn) 1,700 2,022 1,993 1,854 1,909 1Q'16 2Q 3Q 4Q 1Q'17 2Q 3Q 4Q NII Fees Other Incl. Pop Excl. Pop 43 Note: Contribution to the SRF (net of tax) recorded in 2Q 16 and 2Q 17. Contribution to the DGF (net of tax) in 4Q 16 and 4Q 17.

44 Results impacted by several one-offs, mainly related to integrations and goodwill 2017 % vs Mn Euros Constant euros Net interest income 34, Net fees 11, Customer revenues 45, Other income 2, Gross income 48, Operating expenses -22, Net operating income 25, Net loan-loss provisions -9, Underlying PBT 13, Underlying attrib. profit 7, Net capital gains and provisions Attributable Profit 6, ( Mn, net of tax) Allfunds +297 Integration processes -385 Goodwill -603 Other -206 Total

45 RoTE improves +70 bps YoY to c.12% Underlying RoTE c.12% Europe (YoY) 12% (+1pp) Local peers avg. 8% 9% Americas Local peers avg. Global Peers (YoY) 17% (+2pp) 17% Source: Company data and Bloomberg. Note: RoTE as of 9M 17 for peers. Global Peers included in the average are Wells Fargo, JP Morgan, Bank of America, UBS, BBVA, ING, BNP Paribas, HSBC, Unicredit, Lloyds, Citibank, Intesa Sanpaolo, Société Générale, Standard Chartered and Deutsche Bank. Santander vs peers average based on RoTEs in local criteria 45

46 Our cost-to-income improves by 70 bps YoY to c.47% Cost-to-income Top 3 in customer satisfaction c.47% 64% Global Peers Source: Cost to income company data and Bloomberg. Note: Cost-to-income as of 9M 17 for peers. Peers included for average are Wells Fargo, JP Morgan, Bank of America, UBS, BBVA, ING, BNP Paribas, HSBC, Unicredit, Lloyds, Citibank, Intesa Sanpaolo, Société Générale, Standard Chartered, Deutsche Bank and Barclays 46

47 Loan-loss provisions: lower even though the loan portfolio increased Better cost of credit at Group level and in most geographies

48 NPL ratio: The Group's ratio improved YoY for the 4th straight year (ex-popular) Group NPL ratio improving YoY backed by 8 geographies Including Popular D'16 M'17 J'17 S'17 D'17 48

49 Progress in reaching our target of fully-loaded CET1 >11% in 2018 Fully-loaded CET1 evolution Dec 16 Capital increase Popular acquisition Organic generation Corporate transactions Markets & other Dec 17 49

50 Delivered all strategic targets ahead of plan Targets Loyal customers (Mn) Digital customers (Mn) Fee income 1 Cost of credit risk Cost-to-income EPS ( ) DPS ( ) 2 FL CET1 RoTE 3 (organic per year) 13% 1.07% 47.4% bps 11.8% Increase Improve Broadly stable Increase Increase +40 bps Increase Note: Customer metrics exclude Popular (1) % change (constant euros) (2) Total dividends charged to 2017 earnings are subject to the Board and AGM approval (3) Underlying 50

51 Santander financial information For more details on the Group & countries, click below Group presentations: Activity and Results Investor Day 2015 Annual Report Quarterly Financial 2017 Report Group Strategy Update 2017 Units presentations SCF 51

52 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 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. 52

53 Important Information 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 of the APMs and Non-IFRS Measures used, including its definition or a reconciliation between any applicable management indicators and the financial data presented in the consolidated financial statements prepared under IFR, see Section 26 of the Documento de Registro de Acciones for Banco Santander filed with the CNMV on July 4, 2017 (available on the Web page of the CNMV - and at Banco Santander - 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 ) and section Alternative Performance Measures of the Consolidated Directors Report which is part of the 2017 Auditors Report and Annual Consolidated Accounts (available at Banco Santander 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 ( 53

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