27 April 2016 SANTANDER CONSUMER FINANCE January March 2016
Disclaimer Banco Santander, S.A. ("Santander") cautions that this presentation contains forward-looking statements. These forward-looking statements are found in various places throughout this presentation and include, without limitation, statements concerning our future business development and economic performance. While these forward-looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: (1) general market, macroeconomic, governmental and regulatory trends; (2) movements in local and international securities markets, currency exchange rates and interest rates; (3) competitive pressures; (4) technological developments; and (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties. The risk factors that we have indicated in our past and future filings and reports, including those with the Securities and Exchange Commission of the United States of America (the SEC ) could adversely affect our business and financial performance. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forwardlooking statements. Forward-looking statements speak only as of the date on which they are made and are based on the knowledge, information available and views taken on the date on which they are made; such knowledge, information and views may change at any time. 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. 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 2000. 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 my differ materially from those of such subsidiaries. 2
Agenda Macroeconomic environment and financial system Strategy and business Results Appendix
Eurozone s macroeconomic environment The economic recovery in Europe is driving market activity Annual GDP Growth (%, real) New car sales (millions)* 12.2 13.3 13.6 13.9 0.9 1.5 1.5 1.6 2014 2015 2016 (e) 2017 (e) 2014 2015 2016 (e) 2017 (e) Unemployment rate (%) Interest rates (%, year-end) 11.6 10.9 10.4 10.1 0.16 0.05 0.05 0.05 2014 2015 2016 (e) 2017 (e) 2014 2015 2016 (e) 2017 (e) Source: Santander Research Dept. *New car sales forecast 2016-2017 (SCF countries including SC UK). Source: MSI and market consensus 4
Agenda Macroeconomic environment and financial system Strategy and business Results Appendix
Our Franchise Leadership in Europe s consumer finance market Main figures (Mar-16) 14 Top 3 17 79.1 33.2 251 Countries Market Share* Million customers** billion in credits billion in deposits million in attributable profit in 1Q16 * Top 3 market share in main markets: New production of auto and durable goods financing (Dec-15). ** Customers with an active contract (excluding PSA agreement) 6
Strategy Executing agreements and integrations Banque PSA Finance 11 geographies 1, 21.3bn loan portfolio 2016:, Italy and the Netherlands (1Q 16), Germany, Belgium, Poland and Austria GE Nordics Fits Nordic countries, enhancing product mix 2.7bn loan portfolio Car financing Consumer loans Boosting new business Increasing retail financing penetration rates Focusing on customer loyalty products Increasing customer renewal rates Pan-European top retailers agreements Increasing presence in digital channels Enlarging customer databases for conversion SCF vs Peers* (Dec-15) Leadership in the EU market 39% 47% SCF Peers 1.27% 0.78% Organic business growth leveraging on our competitive advantages Cost to income LLPs/Outstanding (1) Including SC UK joint venture *SCF including UK consumer business and excluding Retail Germany. Peers average of BNP Personal Finance and Crèdit Agricole Consumer Credit 7
Customers Active customers 1 (MM) 17.1 17.4 300,000 new active customers (excl. Banque PSA agreement) 1Q'15 1Q'16 Loan portfolio growth 2 (y/y,%) 9 21 11 Double-digit loan growth outperforming main competitors Dec'14 Dec'15 Mar'16 Dealer satisfaction 3 (%) >80 >80 Ensuring dealer satisfaction above 80% Dec'14 Dec'15 (1) Customers with an active contract (excluding PSA agreement); (2) Peers loan portfolio growth: 2014 (+0%); 2015 (+3%); (3) Annual SCF satisfaction survey to active auto POS partners (including SC UK). % = dealers with scores of 8 out of 10 or higher. Rolling weighted average 5 year. 8
Activity Increasing new loans and perimeter Differential funding mix with a strong deposit base Total deposits ( Bn) Total gross loans ( Bn) +8.2% Currency-neutral 30.7 31.6 31.8 32.7 33.2 +11.3% Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 79.1 76.8 Funding ( Bn) 71.1 72.0 73.4 Secured Unsecured -3.9% 1 2 3 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 4 12.1 10.8 10.0 10.9 9.2 7.8 8.0 9.9 10.3 9.9 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 (1) PSA France incorporation, (2) PSA Portugal incorporation, (3) PSA Spain and Switzerland incorporation (4) PSA Italy and Netherlands incorporation 9
Agenda Macroeconomic environment and financial system Strategy and business Results Appendix
Net interest income and spreads Growth in NII driven by increasing activity, funding costs and perimeter Net Interest Income ( MM) Loan spreads (%) Currency-neutral 714 754 779 799 811 5.34 5.44 5.13 5.09 5.09 1Q 15 2Q 3Q 4Q 1Q 16 1Q 15 2Q 3Q 4Q 1Q 16 11
Gross income Positive trends in revenues backed by geographic diversification and critical mass in key products Gross income ( MM) Currency-neutral % var 943 969 1008 993 1045 1Q 16 1Q 15 YoY QoQ Net interest income 811 714 +13.5 +1.4 Net fees 230 219 +5.2 +6.0 Subtotal 1,041 933 +11.6 +2.4 Other 1 4 10-55.1 n.s. 1Q 15 2Q 3Q 4Q 1Q 16 Gross income 1,045 943 +10.9 +5.3 12 (1) Other includes Gains (losses) on financial transactions and Other operating income
Operating expenses Expenses are under control, but impacted by recent incorporations Currency-neutral Operating expenses ( MM) % var 1Q 16 1Q 15 YoY QoQ 415 433 438 465 483 General expenses 435 378 +15.2 +3.8 - Personnel 201 176 +14.4 +4.9 - Other 234 202 +15.9 +2.8 Amortisations 48 37 +29.0 +6.0 Total 483 415 +16.5 +4.0 1Q 15 2Q 3Q 4Q 1Q 16 Efficiency ratio (%) 46.2 44.0 (with amortisations) 13
Net operating income after loan-loss provisions (LLPs) Lower provisions and cost of credit despite the perimeter impact after agreements LLPs and Cost of credit ( MM; %) % var Cost of credit 1 Net LLPs 0.93 0.91 0.87 0.77 Currency-neutral 165 128 140 96 0.64 114 1Q 16 1Q 15 YoY QoQ Net operating income 562 528 +6.5 +6.5 Loan-loss provisions 114 165-30.7 +18.3 Net operat. income after provisions 448 363 +23.3 +3.8 1Q 15 2Q 3Q 4Q 1Q 16 Coverage ratio (%) 111.9 103.6 NPL ratio (%) 3.28 4.52 14 (1) Cost of credit = 12 month loan-loss provisions / average lending. Calculated in current euros
Attributable profit Revenues growth and lower provisions offset the rise in costs and boosted net income Currency-neutral Attributable profit ( MM) % var 1Q 16 1Q 15 YoY QoQ Profit before taxes 410 341 +20.0 +7.3 215 234 238 235 251 Tax on profit 117 95 +23.4 +4.6 Net income 293 246 +18.8 +8.4 Attributable profit 251 215 +16.7 +6.9 Effective tax rate (%) 28.5 27.8 1Q 15 2Q 3Q 4Q 1Q 16 15
Conclusions Strategy & Business SCF is the leader in Europe s consumer finance market. Priorities: executing agreements and integrations, enhancing new business and maintaining our leadership in European markets. In activity, increasing new loans and perimeter. SCF has a differential funding mix backed by a strong deposit base. Results Positive trends in revenues backed by geographic diversification and critical mass in key products. Lower provisions and cost of credit despite the perimeter impact after agreements Revenues growth and lower provisions offset the rise in costs and boosted net income 16
Agenda Macroeconomic environment and financial system Strategy and business Results Appendix
Balance sheet EUR million Currency-neutral Change Mar 16 Mar 15 Amount % Loans and credits* 76,235 67,799 8,436 12.4 Trading portfolio (w/o loans) 34 29 6 19.6 Available-for-sale financial assets 3,624 1,074 2,549 237.3 Due from credit institutions* 4,034 5,465 (1,430) (26.2) Intangible assets and property and equipment 672 775 (103) (13.3) Other assets 4,647 4,191 456 10.9 Total assets/liabilities & shareholders' equity 89,247 79,333 9,914 12.5 Customer deposits* 33,195 30,684 2,511 8.2 Marketable debt securities* 22,363 18,672 3,691 19.8 Subordinated debt 70 69 1 1.5 Insurance liabilities Due to credit institutions* 20,707 17,919 2,788 15.6 Other liabilities 4,640 4,242 398 9.4 Stockholders' equity** 8,271 7,747 524 6.8 Off-balance-sheet funds 7 7 (0) (2.9) Mutual funds 2 2 (0) (10.0) Pension funds 5 5 (0) (0.5) Managed portfolios Customer funds under management 55,635 49,432 6,203 12.5 *Including all non-balance sheet balances for this item ** Capital + reserves + retained profit + valuation adjustments 18
Income statement Constant EUR million Change 1Q 16 1Q 15 Amount % Net interest income 811 714 97 13.5 Net fees 230 219 11 5.2 Gains (losses) on financial transactions (1) (0) (1) Other operating income* 6 10 (4) (42.4) Gross income 1,045 943 103 10.9 Operating expenses (483) (415) (68) 16.5 General administrative expenses (435) (378) (57) 15.2 Personnel (201) (176) (25) 14.4 Other general administrative expenses (234) (202) (32) 15.9 Depreciation and amortisation (48) (37) (11) 29.0 Net operating income 562 528 34 6.5 Net loan-loss provisions (114) (165) 50 (30.7) Other income (39) (22) (16) 74.4 Profit before taxes 410 341 68 20.0 Tax on profit (117) (95) (22) 23.4 Profit from continuing operations 293 246 46 18.8 Net profit from discontinued operations 0 (0) (100.0) Consolidated profit 293 246 46 18.8 Minority interests 42 31 10 33.0 Attributable profit to the Group 251 215 36 16.7 *Including dividends, income from equity-accounted method and other operating income/expenses 19
Quarterly income statements 1Q15 2Q15 3Q15 4Q15 1Q16 Net interest income 714 754 779 799 811 Net fees 219 214 222 217 230 Gains (losses) on financial transactions (0) (8) 3 (5) (1) Other operating income* 10 9 4 (18) 6 Gross income 943 969 1,008 993 1,045 Operating expenses (415) (433) (438) (465) (483) General administrative expenses (378) (389) (394) (419) (435) Personnel (176) (196) (172) (192) (201) Other general administrative expenses (202) (193) (222) (227) (234) Depreciation and amortisation (37) (44) (44) (45) (48) Net operating income 528 536 569 528 562 Net loan-loss provisions (165) (128) (140) (96) (114) Other income (22) (36) (44) (50) (39) Profit before taxes 341 372 385 382 410 Tax on profit (95) (108) (107) (112) (117) Profit from continuing operations 246 264 278 270 293 Net profit from discontinued operations 0 0 (0) Consolidated profit 246 264 278 270 293 Minority interests 31 31 40 35 42 Attributable profit to the Group 215 234 238 235 251 *Including dividends, income from equity-accounted method and other operating income/expenses 20
Thank you Nuestra Our purpose misión to es help contribuir people al and progreso de las businesses personas prosper. y de las empresas. Nuestra Our culture cultura is based basa on the en la belief creencia that de que everything todo lo we que do hacemos should debe ser