Brazil Results 1Q10 April 29 th, 2010
Important information 2 Banco Santander, S.A. ("Santander") cautions that this presentation contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995. These forward-looking statements are found in various places throughout this presentation and include, without limitation, statements concerning our future business development and economic performance. While these forward-looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: (1) general market, macro-economic, governmental and regulatory trends; (2) movements in local and international securities markets, currency exchange rates, and interest rates; (3) competitive pressures; (4) technological developments; and (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties. The risk factors and other key factors that we have indicated in our past and future filings and reports, including those with the Securities and Exchange Commission of the United States of America (the SEC ), could adversely affect our business and financial performance. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. The information contained in this presentation is subject to, and must be read in conjunction with, all other publicly available information, including, where relevant any fuller disclosure document published by Santander. Any person at any time acquiring securities must do so only on the basis of such person's own judgment as to the merits or the suitability of the securities for its purpose and only on such information as is contained in such public information having taken all such professional or other advice as it considers necessary or appropriate in the circumstances and not in reliance on the information contained in the presentation. In making this presentation available, Santander gives no advice and makes no recommendation to buy, sell or otherwise deal in shares in Santander or in any other securities or investments whatsoever. No offering of Securities shall be made in the United States except pursuant to registration under the U.S. Securities Act of 1933, as amended, or an exemption there from. 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 2000. Note: Statements as to historical performance, historical share price or financial accretion are not intended to mean that future performance, historical share price or future earnings (including earnings per share) for any period will necessarily match or exceed those of any prior year. Nothing in this presentation should be construed as a profit forecast. Note: The results information contained in this presentation has been prepared according to Spanish accounting criteria and regulation in a manner applicable to all subsidiaries of the Santander Group and as a result it may differ from the one disclosed locally. All figures in this presentation were converted to constant currency at na average during 1Q10 of US$ 1.8017 (for income statements and average balances figures) and at US$ 1.7837 at the end of 1Q10 (for final balance sheet figures).
Table of Contents 3 Macroeconomic Scenario and Financial System 1Q10 -Strategies - Business -Results
Macroeconomic Scenario 4 Retake of economic growth in 2010 GDP (real annual growth %) Interest rate Selic (Final %) 6.1 5.1 5.8 4.5 11.25 13.75 8.75 12.00 12.00-0.2 2007 2008 2009 2010(e) 2011(e) 2007 2008 2009 2010(e) 2011(e) Inflation (IPCA %) Exchange rate R$/US$ 4.5 5.9 4.3 5.5 5.0 End of Period 1.77 2.34 1.74 1.95 2.10 2007 2008 2009 2010(e) 2011(e) 2007 2008 2009 2010(e) 2011(e) Source: The Central Bank of Brazil, IBGE and Santander Research
Macroeconomic Scenario 5 International reserves and foreign direct investment flow remains high International reserves and External debt US$ billion Current Account Balance vs. FDI US$ billion, in 12 months External debt Reserves Current account balance Foreign direct investment Unemployment rate (%) Exchange rate End of Period Source: The Central Bank of Brazil and IBGE
Financial System: Credit Evolution Credit in the private sector grows 8% in 12 months. Corporate loans shows some recovery signs 6 %12M Total Loans Total Loans %12M Private Banks %12M Public Banks US$ billion (constant FX rate) Nonearmarked Loans to Individuals US$ billion (constant FX rate) Nonearmarked Loans to Corporations US$ billion (constant FX rate) US$ billion (constant FX rate) Regulated Loans Volume Y-o- Y Variation % Source: The Central Bank of Brazil
Financial System: Deposits + Funds Evolution US$ Billion (Constant FX Rate) Deposits and Funds grew at 16%, driven by demand + savings and mutual funds 7 Deposits + Mutual Funds Deposits Mutual funds Var. 12M Feb.10 Demand + Savings: 17.5% Time: 0.4% 536 544 558 569 574 Var. 12M Feb.10 Retail: 15% Non Retail: 24% 670 718 753 783 819 530 570 602 627 658 148 140 151 156 161 Time Demand + Savings Feb. 09 May. 09 Aug. 09 Nov. 09 Feb. 10 Volume Y-o- Y Variation % Source: The Central Bank of Brazil
Solid macroeconomic fundamentals... 8...driven by an optimistic enviroment Lower external vulnerability Solid economic policies Elections 2010 (stability of economic policies) Favorable expectations for investment
Table of Contents 9 Macroeconomic Scenario and Financial System 1Q10 -Strategies - Business -Results
Franchise 10 Santander is the 3rd largest private bank in Brazil, with scale to compete and grow Mar/10 Share (%)* Loan¹ (US$ Bi) 80.7 12.1% Market share Number of branches February/2010 Deposits (US$ Bi) 60.4 9.5% Deposits + Funds (US$ Bi) 115.3 8.4% North: 5% of GDP Market Share: 5% Net Profit (US$ MM) 979 Attributable profit (US$MM) 833 * Data from February/2010 Northeast: 13% of GDP Market Share: 7% Solid distribution platform Bank with one of the higher numbers of point of sales in South/South East (73% of GDP) 2,091 1,496 18,102 Center-west: 9% of GDP Market Share: 5% Southeast: 57% of GDP Market Share: 15% Branches Mini branches +10.3 Clients(million)² +52 thousand employees 3 ATM s South: 16% of GDP Market Share: 9% Source: The Central Bank of Brazil and IBGE. 2007 GDP 1) Volume refers to total loans and market share of unrestricted loans 2) Current account holders within 30 days, according to Central Bank as of March/2010 3) Includes Isban, Produban and Universia
Integration 11 Integration process moves as planned.. 1 st stage 2 nd stage 3 rd stage Aug/08 Mar/09 May/10 Sep/10 I Senior Management Integrated II Centralized areas integrated Risk management, Human resources, Marketing, Auditing financial control, Compliance, etc. III III Wholesale, Private & Asset integrated GB&M, Corporate, e Middle Re-branding IV IV Credit card system VIV ATMs integrated VI V ATMs plataform Upgrade on branches infrastructure Insurance System VIII VI Complete Integration/ Unified Network/ Unified Brands VII V New comercial model Branches Big Bang Call center integration Unification of Brands
Integration 12 Sinergies R$ million 800 800 1.000 1,000 +338 1,338 1.338 We reached cost synergies of R$ 1,338 MM in 2009, R$ 338 MM above expectations 2009e 1T10e 1Q10e 1Q10 1T10 Estimates Actual
Santander Acquiring / Conta Integrada 13 Pioneer strategy of commercial model... Brand MASTERCARD License Integrated value offer Acquiring and Banking Business FINANCIAL SERVICES ACQUIRER SERVICES Investment in Capturing Network and Processing Platform Other POS Capturing Services Commercial Model Distribution/Pricing Communication and Media Time To Market 165 thousands POS (Capturing Terminals - 2009) 2012 Goals 150,000 new current accounts originated by the acquiring business 300,000 new affiliated merchants ~ R$ 5 billion in loans 10% market share in terms of transaction volume of the cards market
Santander Acquiring / Conta Integrada Santander (Acquiring + Financial Services) & Getnet = Capillarity Synergy and corporate client base + technological knowledge 14 A Win-win Relationship: the bank recognizes the financial volume of the client in transactions made with MASTERCARD brand credit cards: Reduction of up to 100% of checking account fee for financial transaction volume over R$ 3 thousand/month in each POS 5 days without interest rate charge by using overdraft Guarateed Account or Working Capital limits based on financial transaction volume multiples directty in the POS Corporate current account with integrated bank domicile POS connection using both dial-up and/or broadband. SECONDARY BENEFITS: Competitive rates for prepayment of receivables Prepayment of receivables through POS (pioneer in the market) Call center support to merchants 24hours / 7 days Mobile Recharge SERASA / RECHEQUE* consultancy Regional cards capture * Credit Bureau
Table of Contents 15 Macroeconomic Scenario and Financial System 1Q10 -Strategies - Business -Results
Business: Portfolio Evolution 16 Fall in twelve months explained by the impact of the crisis on companies. Recovery in individuals and consumer since Sep-09 US$ Billion (Constant FX Rate) 86.3 84.6-6.5% 0.2% 79.4 80.5 80.7 31.3.10 US$ Bi 31.3.09 US$ Bi Y-o-Y Variation Individuals 24.7 22.7 8.6% Consumer financing 14.8 14.1 5.1% SMEs/Companies 17.3 18.7-7.2% Retail 56.8 55.5 2.4% Corporate¹ 23.9 30.8-22.6% Total 80.7 86.3-6.5% Mar.09 Jun.09 Sep.09 Dec.09 Mar.10 Total + Purchase of Portfolio 2 82.1 86.8-5.4% 1. Includes Corporate Activities, Corporate and GB&M 2. Includes purchase of portfolio of other banks with co-obligation
Business: Loans by products 17 Highlight to Payroll, Mortgage and Credit Cards Payroll Loans¹ Auto US$ Million 32.9% US$ Million 6.8% Credit Cards Mortgage ² US$ Million 22.5% US$ Million 30.4% 5,432 4,166 55.8% 15.2% 1.Includes purchase of portfolio of US$ 474 million in Mar/09 and US$ 1,421 million in Mar/10. 2.Includes funding for Individuals and Corporate.
Business: Deposits + Funds Evolution 18 Highlight to the growth recovery Funds, that grew 22%. Demand deposit + savings grew 21% US$ Billion (Constant FX Rate) 1.6% -1.4% 113.5 115.7 119.1 116.9 115.3 31.3.10 US$ Bi 31.3.09 US$ Bi Y-o-Y Variation Demand+Savings 22.1 18.4 20.5% Time Deposits 38.3 50.0-23.5% Mutual Funds¹ 54.9 45.1 21.6% Total 115.3 113.5 1.6% Funds Total Deposits 1. Refer only to funds managed by Asset Management.
Business: Market Share 19 Market Share Share (%) Feb/10 Var. 12 months (b.p) Var. YTD (b.p) Total Unrestricted Loans¹ 12.1% -203-20 - Unrestricted Individuals Loans 13.7% -110-20 Payroll Loans 7.2% -140-20 Auto Loans¹ 14.8% -80-10 Personal Loans 20.5% -95-80 Credit Card 10.4% +30 +50 - Unrestricted Corporate Loans 10.6% -290-40 Deposits 9.5% -120-20 - Core Deposits 8.1% 10-10 Mutual Funds 7.5% -20 0 Source: The Central Bank of Brazil and Anbid 1. Includes leasing.
Table of Contents 20 Macroeconomic Scenario and Financial System 1Q10 -Strategies - Business -Results
Results: Net Interest Income 21 Net Interest Income rose 11% in 12 months US$ Million (Constant FX Rate) Deposits Spread, % 11.3% 0.3% 2.961 3.118 3.209 3.285 3.295 1,1 0,9 1,0 1,0 0,9 0,8 0,9 0,9 Retail 0,9 0,8 Total Deposits 1Q09 2Q09 3Q09 4Q09 1Q10 1Q09 2Q09 3Q09 4Q09 1Q10 Loans Spread, % Net interest income 15,9 16,4 15,8 15,1 Retail 15,3 12,0 12,1 12,0 11,9 12,0 Interest Rate (average) Selic Total Loans 11.70% 9.54% 8.65% 8.65% 8.65% 1Q09 2Q09 3Q09 4Q09 1Q10
Results: Net Fees 22 Net Fees grow 3% in 12 months, highlight for credit cards and mutual funds US$ Million (Constant FX Rate) 3.5% 1Q10 1Q09 Y-o-Y Variation -6.9% Current Account 258 248 4.0% 995 Mutual Funds 113 94 20.2% 964 950 927 Credit Cards 128 97 32.3% Insurance¹ 156 135 15.8% 896 Values² 72 52 40.2% Foreign Trade (COMEX) 65 73-9.9% 1Q09 2Q09 3Q09 4Q09 1Q10 Net Fees Cash 79 78 2.0% Others³ 56 119-52.9% Total 927 896 3.5% 1. Includes capitalization in 2009 2. Securities brokerage, placement and custody services. 3. Includes pensions funds.
Results: Gross Operating Income 23 Gross Customer Operating Income grows 5% in 12 months US$ Million (Constant FX Rate) 5.1% -4.1% 4,692 4,665 4,260 4,292 4,475 403 211 533 385 253 896 964 950 995 927 2,961 3,118 3,209 3,285 3,295 1Q09 2Q09 3Q09 4Q09 1Q10 Net Customers Interest Income Net Fees Gain / losses on financial transaction + Others Net Interest Income 1Q10 1Q09 Y-o-Y Variation 3,295 2,961 11.3% Net Fees 927 896 3.5% Subtotal 4,222 3,857 9.5% Gain/ losses on financial transaction + Others 253 403-37.2% Total 4,475 4,260 5.1%
Results: General Administrative Expenses and Amortization Business expansion strategy having expenses under control 24 US$ Million (Constant FX Rate) 0.2% 1,741 1,625 1,616 1,638 129 135 132 137 1,490 1,484 1,501 1,612-6.4% 1,628 149 1,479 Administrative Expenses 1Q10 1Q09 Y-o-Y Variation 1,479 1,490-0.7% Amortization 149 135 10.3% Total 1,628 1,625 0.2% 1Q09 2Q09 3Q09 4Q09 1Q10 Amortization Administrative Expenses
Results: Net Operating Income 25 Net Operating Income increase is driven by revenue growth and expenses under control US$ Million (Constant FX Rate) 8.1% -2.6% 1Q10 1Q09 Y-o-Y Variation 2,635 2,676 3,054 1 2,925 2,847 Net Interest Income + Fees² 4,229 3,930 7.6% Gain/ losses on financial transaction 247 330-25.2% Adm. Expenses + Amortization. (1,628) (1,625) 0.2% 1Q09 2Q09 3Q09 4Q09 1Q10 Net Operating Income 2,847 2,635 8.1% 2. Includes others revenues Operating Income 1) 3Q09: Includes the effects of Visanet (green shoe) of US$ 137 MM.
Results: Gross Revenue vs Expenses Sustainable growth of the jaws 26 Gross Revenue¹ and Adm. Expenses² US$ Million (Constant FX Rate) Var. 1Q10 vs. 1Q09 (%) 3,930 4,133 4,211 4,246 4,229 7.6% 2.6 2.9 1,490 1,484 1,501 1,612 1,479-0.7% 1Q09 2Q09 3Q09 4Q09 1Q10 Gross Revenue Adm. Expenses 1. Gross Revenue = Net Interest Income (includes dividends) + Net Fees 2. Total Administrative Expenses, excluding amortization
Results: Provisions and Loan Quality 27 Provisions follow growth of the market US$ MM (Constant FX Rate) Provisions and Risk Premium¹ NPL and Coverage 5.3% 6.2% 6.5% 6.1% 6.3% 1,183 1,247 1,548 1,414 1,308 3.9% 5.0% 107 100 1Q09 1Q10 Specific Generic + Country Risk Risk Premium NPL Coverage 1. Risk Premium: ((Initial NPL Balance Ending NPL Balance) + Charge Offs Recoveries) / Average Loan portfolio
Results: Net Profit 28 Net Income of US$ 979 MM in 1Q10, growth of 32% in 12 months US$ MM (Constant FX Rate) 32.3% 1.1% 1Q10 1Q09 Var 10/09,% Profit before Taxes 1,221 1,174 4.0% -Taxes (242) (435) -44.2% Net Profit 979 740 32.3% Attributable profit 833 730 14.0% Tax Rate % 19.8% 37.0%
Results: Indicators 29 Cost control improves Coverage Fees Over Expenses ratio Efficiency*, % Coverage Fees Over Expenses¹, % ROE, % +260 b.p. -180 b.p 60.2 62.7-390 b.p. 38.2 36.4 24.7 20.8 1Q09 1Q10 1Q09 1Q10 1Q09 1Q10 (*) Includes amortization 1. Fees Coverage over Expenses (Fees/ expenses).
Conclusões: 30 Integration of cards platform in 1Q10 Final phase of the integration process Improvement in credit quality Expenses under control with capture of synergies Net Profit growth of 32% (1Q10 vs. 1T09)
31 ANNEXES Results Quartely Results Balance Sheet
Results Criterion Spain US$ million. Constant currency* Variation Q1 10 Q1 09 Amount % 32 Net interest income 3,295 2,961 334 11.3 Net fees 927 896 31 3.5 Gains (losses) on financial transactions 247 330 (83) (25.3) Other operating income** 6 73 (67) (91.5) Gross income 4,475 4,260 215 5.1 Operating expenses (1,628) (1,625) (3) 0.2 General administrative expenses (1,479) (1,490) 11 (0.7) Personnel (774) (761) (13) 1.6 Other general administrative expenses (706) (729) 23 (3.2) Depreciation and amortisation (149) (135) (14) 10.3 Net operating income 2,847 2,635 212 8.1 Net loan-loss provisions (1,308) (1,183) (125) 10.6 Other income (318) (278) (40) 14.5 Profit before taxes 1,221 1,174 47 4.0 Tax on profit (242) (435) 192 (44.2) Profit from continuing operations 979 740 239 32.3 Net profit from discontinued operations Consolidated profit 979 740 239 32.3 Minority interests 146 10 137 Attributable profit to the Group 833 730 102 14.0 * As of Q1'10 ** Including dividends, income from equity-accounted method and other operating income/expenses
Quarterly Results Criterion Spain 33 US$ million. Constant currency* Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Net interest income 2,961 3,118 3,209 3,285 3,295 Net fees 896 964 950 995 927 Gains (losses) on financial transactions 330 160 481 419 247 Other operating income** 73 51 52 (34) 6 Gross income 4,260 4,292 4,692 4,665 4,475 Operating expenses (1,625) (1,616) (1,638) (1,740) (1,628) General administrative expenses (1,490) (1,484) (1,501) (1,612) (1,479) Personnel (761) (771) (756) (835) (774) Other general administrative expenses (729) (713) (745) (777) (706) Depreciation and amortisation (135) (132) (137) (129) (149) Net operating income 2,635 2,676 3,054 2,925 2,847 Net loan-loss provisions (1,183) (1,247) (1,548) (1,414) (1,308) Other income (278) (345) (223) (162) (318) Profit before taxes 1,174 1,084 1,284 1,348 1,221 Tax on profit (435) (245) (330) (380) (242) Profit from continuing operations 740 839 954 969 979 Net profit from discontinued operations Consolidated profit 740 839 954 969 979 Minority interests 10 14 17 145 146 Attributable profit to the Group 730 825 937 823 833 * As of Q1'10 ** Including dividends, income from equity-accounted method and other operating income/expenses
Balance Sheet Criterion Spain US$ million. Constant currency* Variation 31.03.10 31.03.09 Amount % 34 Loans and credits** 76,313 80,708 (4,395) (5.4) Trading portfolio (w/o loans) 13,240 14,364 (1,123) (7.8) Available-for-sale financial assets 21,447 17,120 4,327 25.3 Due from credit institutions** 12,653 24,033 (11,380) (47.4) Intangible assets and property and equipment 4,204 3,721 483 13.0 Other assets 38,979 28,927 10,052 34.8 Total assets/liabilities & shareholders' equity 166,836 168,873 (2,037) (1.2) Customer deposits** 85,006 87,581 (2,574) (2.9) Marketable debt securities** 6,301 6,452 (151) (2.3) Subordinated debt 5,525 5,279 246 4.7 Insurance liabilities 6,331 6,922 (591) (8.5) Due to credit institutions** 18,041 29,281 (11,240) (38.4) Other liabilities 28,607 19,872 8,735 44.0 Shareholders' equity*** 17,025 13,486 3,539 26.2 Off-balance-sheet funds 55,221 45,841 9,380 20.5 Mutual funds 50,581 42,327 8,254 19.5 Pension funds Managed portfolios 4,640 3,092 1,548 50.1 Savings-insurance policies (100.0) Customer funds under management 152,053 145,153 6,900 4.8 * As of 31.03.10 ** Includes all stock of concept classified in the balance sheet *** Not including profit of the year
Investor Relations (Brazil) 2,235 Juscelino Kubitschek Avenue - 10º floor São Paulo SP Brazil 04543-011 Tel. 55 11 3553-3300 Fax. 55 11 3553-7797 e-mail: ri@santander.com.br Relaciones con Inversores y Analistas Ciudad Grupo Santander Edificio Pereda, 1ª planta Avda de Cantabria, s/n 28660 Boadilla del Monte, Madrid (España) Teléfonos: 91 259 65 14-91 259 65 20 Fax: 91 257 02 45 e-mail: investor@gruposantander.com www.gruposantander.com