0 Banco Santander Results 2Q13 Santiago, July 30, 2013
Important information 1 Banco Santander caution 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, could adversely affect our business and financial performance. Note: the information contained in this presentation is not audited. Nevertheless, the consolidated accounts are prepared on the basis of generally accepted accounting principles. All figures presented are in nominal terms. Historical figures are not adjusted by inflation. Historical figures have been restated in accordance with the new accounting standards adopted by an banks in 2009. Please note that this information is provided for comparative purposes only and that this restatement may undergo further changes during the year and, therefore, historical figures, including financial ratios, presented in this report may not be entirely comparable to future figures presented by the Bank.
Agenda 2 Macro-economic environment and financial system Strategy and business Results Annexes
Macro-economic environment 3 GDP (YoY growth, %) Current Account Deficit (% del GDP) 5.8 5.9 5.6 4.7 4.2 1.5-1.3-3.5-3.5-3.0 2010 2011 2012 2013 (e) 2014 (e) 2010 2011 2012 2013 (e) 2014 (e) Investment (YoY growth, %) Private Consumption (YoY growth, %) 12.2 14.7 12.3 10.8 8.9 6.2 6.4 6.1 5.2 4.4 2010 2011 2012 2013 (e) 2014 (e) 2010 2011 2012 2013 (e) 2014 (e) Good prospects for 2013 and 2014, but adjusted downwards Source: Banco Central de. (e): Estimates Santander
Macro-economic environment 4 Annual inflation(%) Unemployment (Annual average, %) 3.0 4.4 1.5 2.2 2.5 8.4 7.2 6.5 6.6 7.0 2010 2011 2012 2013 (e) 2014 (e) 2010 2011 2012 2013 (e) 2014 (e) Central Bank Reference rate(%) Avg. Exchange Rates(Ch$ / US$) 3.3 5.3 5.0 4.9 4.1 510 485 487 515 540 2010 2011 2012 2013 (e) 2014 (e) 2010 2011 2012 2013 (e) 2014 (e) The Central bank should start cutting interest rates in the 2H13 Source: Banco Central de. (e): Estimates Santander
Financial system: Capital and liquidity 5 Healthy financial system BIS ratio (%) and stock internal savings (US$ billions) BIS Ratio (%) Ample Access to Liquidity (US$ billions) 14.4 14.1 13.9 13.3 13.7 Central Bank reserves Central Gov. reserves Insurance Companies 263 41 220 212 21 42 2009 2010 2011 2012 Mar-13 Stock of internal savings* is equivalent to 1.8 x GDP Pension Funds (**) 159 Liquidity Deposits * Total savings in bank deposits, pension funds, sovereign funds plus Central Bank reserves ** Pension funds excludes deposits in Banks. Source: Superintendencias de Bancos and Fondos de Pensiones, Ministerio de Hacienda and Banco Central de
Financial System: Growth of Deposits 6 Financial System with stable growth of customer funds Financial system savings, US$ billions* Total Customer Funds Time Deposits 173 186 196 204 212 99 108 117 119 124 8.2 13.2 13.4 9.8 8.4 14.5 20.5 18.5 9.8 8.2 Jun-11 Dec-11 Jun-12 Dec-12 May-13 Demand Deposits Jun-11 Dec-11 Jun-12 Dec-12 May-13 Mutual Funds 39 43 43 49 47 35 34 36 36 40 10.3 11.6 9.3 13.9 6.8-8.2-3.4 3.8 5.0 10.7 Jun-11 Dec-11 Jun-12 Dec-12 May-13 Jun-11 Dec-11 Jun-12 Dec-12 May-13 * At constant exchange rate as of June 2013. Source: Superintendencia de Bancos de. Excludes Corpbanca Colombia Volume YoY Variation, %
Financial System: Loan Growth 7 Loan growth in line with GDP growth Financial system savings, US$ billions* 160 13.0% Total Loans 174 186 187 196 17.3% 16.1% 14.2% 12.2% Loans to Companies 98 108 116 117 122 19.4% 18.2% 15.8% 12.3% 13.0% Jun-11 Dec-11 Jun-12 Dec-12 May-13 Consumer Loans 21 23 24 24 26 17.0% 18.0% 14.8% 12.5% 11.8% Jun-11 Dec-11 Jun-12 Dec-12 May-13 Residential Mortgages 41 43 46 46 48 12.6% 12.3% 11.9% 11.2% 10.5% Jun-11 Dec-11 Jun-12 Dec-12 May-13 Jun-11 Dec-11 Jun-12 Dec-12 May-13 Volumen YoY Variation, % * At constant exchange rate as of June 2013. Source: Superintendencia de Bancos de. Excludes Corpbanca Colombia
Financial System: Results 8 US$mn Consolidated Profit 3,733 3,903 +5% US$mn Operating Expenses 2,539 2,780 +10% May-12 May-13 May-12 May-13 US$mn Net Loan Loss Provisions US$mn Net Profit 1,023 1,212 589 472 +19% -7% May-12 May-13 May-12 May-13 System s results fall due to higher cost and provisions * At constant exchange rate in June 2013. Source: Superintendencia de Bancos de. Excludes Corpbanca Colombia
Agenda 9 Macro-economic environment and financial system Strategy and business Results Annexes
Our Franchise 10 Santander : The leading franchise in the country June 2013 US$ billions Market Share* Rank Loans: 39.5 18,9% 2 Loans to individuals 19.8 22,2% 1 Deposits: 28.8 16,8% 3 Capital and reserves 3.0 18,3% 1 Net Income: 378 millions 21,4% 2 Attributable Net Profit 263 millions Clients: 3.3 millions 24,7%** 1 Branches: 485 18,2% 2 Checking Accounts 772 ths 24,7% 1 ATM Machines 1,972 24,6% 1 * As of may 2013 or latest available information. Source: Superintendencia de Bancos de ** Marketshare in terms of clients with checking accounts
Strategy 11 3 targets for healthy growth with high profitability I. Transforming our Commercial Banking Strategy since 2011... II. improving relationships with customers and quality of service... III. and managing risks conservatively Project Transformation Healthy growth / high and stable ROEs
Strategy: 12 I. Transforming our Commercial Banking Strategy Increase % of pre-approved loans Pre-Approved Sales % of total consumer loans 35.0% 46.0% 2011 2Q13 Provisions: Pre-approved vs 1*1 Cost of Credit(%) consumer 1.7% 0.9% 1*1 pre-approved Increase alternative sales channels % alternative sales channels % of consumer sales 20.0% 36.0% Cost per sale % of consumer sales 9.0% 5.0% 2011 2Q13 Branch Alt. Channel Increase business with High income segment Number of specialized branches(% total) 36 44 2Q11 +22% 2Q13 Loans (YoY%) 10.8% Higher income -3.7% Mid to lower income
Strategy 13 I. Transforming our Commercial Banking Strategy Launching new model of service for high incomes Value-added products o Select Debit Card o Black Credit Card o Select Mutual Funds o Investor Account o Insurance with Savings Select Network Select Office Increase business with High income segment Differentiated Channels o Web Select o Vox Select o Mobile o Budget Manager Investment Advice 13
7.0 6.0 5.0 4.0 3.0 2.0 1.0-9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0-18 16 14 12 10 8 6 4 2 - Strategy 14 II. Improving relationships with customers and quality of service SBIF: Complaints per 10,000 debtors* Time of response* 6.1 Number of days 16 15 3.9 4.1 4.2 12 12 7 BSAC Bank 1 Bank 2 Bank 3 SERNAC: Complaints per 10.000 debtors* BSAC Bank 1 Bank 2 Bank 3 Avg Satisfaction of use of different channels** 5.7 8.4 6.6 86.5 89.4 99.0 97.3 90.2 91.4 5.0 BSAC Bank 1 Bank 2 Bank 3 Branches Internet Telephone VOX 2011 2012 * Source: SBIF and SERNAC Financiero Dec. 2012 ** Percentage rate service at good or very good
15.0% 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 25.0 20.0 15.0 10.0 5.0 - Strategy 15 III. Managing risks conservatively Impaired consumer loans* (%) Consumer loan loss recoveries (US$mn) 21.1 14.0% 14.4 15.3 14.6 10.5% 10.4 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 2T12 3T12 4T12 1T13 2T13 Consumer loan loss recoveries up 103% YoY in 2Q13 * Impaired consumer loans includes renegotiated loans and NPLs. Source: SBIF 15
Business Strong growth in targeted segments: 13.5% compared with 8.5% of the total portfolio 16 US$billions* Rest Targeted segments* Total Loans 36.4 36.5 37.2 37.9 39.5 +13.5% 23.0 23.5 24.1 25.1 26.1 US$billions 1H 13 YoY QoQ Individuals 19.8 3.9% 1.8% High income 11.2 10.8% 3.7% Middle/Low Income 8.7-3.7% -0.6% SME s 6.1 15.5% 3.0% Middle Market 8.8 14.9% 4.9% Institutional 0.8 5.2% 4.3% Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 (*) High Incomes, SME s, middle markets Corporate 4.0 10.0% 7.0% Total 39.5 8.5% 4.1% * At constant exchange rate as of June 2013
Business 17 Positive evolution of the deposit mix US$billions* Rest Client Deposits* Deposits 29.1 28.1 28.1 27.9 28.8 +16.4% 20.7 21.3 21.6 23.5 24.1 US$billions 1H 13 YoY QoQ Demand 9.8 14.1% 4.6% Time 19.0-6.6% 3.0% Total deposits 28.8-0.9% 3.4% Deposit Structure (06.30.13) Stable Institutional deposits: 4% Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 (*) Deposits from non-institutional source Client deposits: 83% Others13% * At constant exchange rate as of June 2013 Core Deposits up 16.4% in 12 months
Business: Market Share 18 Focus on selective loan growth Evolution of market share (%) Share May 13, % Var. Dec. 12 May 13 (pb) Loans 18.9-20 Individuals 22.2-30 Companies* 16.9-10 Total deposits 16.8 +20 Market share drop is explained by slower growth in low income and Global Banking and Markets. In the remaining segments the Bank outgrows the system * Includes government and large, medium and small. Source: Superintendencia de Bancos de, excludes Corpbanca Colombia
Agenda 19 Macro-economic environment and financial system Strategy and business Results Annexes
Results: Net Interest Income 20 Net Interest Income Loan Spread, % US$ millions* Commercial Bank 551 512 613 536 538 4.6 4.5 4.4 4.3 4.3 4.1 4.0 4.0 3.9 3.9 Total Loans 2Q12 3Q12 4Q12 1Q13 2Q13 Deposit Spread, % 2Q12 3Q12 4Q12 1Q13 2Q13 Inflation (%) 0.4-0.2 1.1 0.1-0.1 Commercial Bank 2.4 2.4 2.3 2.4 2.5 1.7 1.7 1.7 1.8 1.9 Total Deposits 2Q12 3Q12 4Q12 1Q13 2Q13 NIM should rebound with the expected rise in inflation and the fall in rates * At constant exchange rate as of June 2013
Results: Fees 21 Fees US$ millions* 150 145 141 137 131 2Q12 3Q12 4Q12 1Q13 2Q13 US$ millions* Total Fees 1H13 1H12 % Var. 13/12* Credit Cards 62 70-11.4% Insurance 53 71-25.0% Asset Management 35 35-1.4% Transactional banking 33 33-0.9% Foreign trade 18 16 8.1% Cash Management 12 15-20.4% Brokerage 11 12-12.0% Other Fees 43 47-8.5% 267 299-10.5% Insurance fees affected by new bidding process. Credit cards and Checking accounts fees affected by regulations that limit price increases * At constant exchange rate as of June 2013
Results: Gross Income 22 Gross Income US$ millions* US$ millions* 1H13 1H12 % Var. 13/12* 761 708 788 722 744 Net interest income 1,073 1,130-5.0% Fees 267 299-10.5% Financial transactions 110 76 45.2% Other Income 15 11 40.3% 2Q12 3Q12 4Q12 1Q13 2Q13 Gross Income 1,466 1,515-3.2% Gross income grows 3.1% 2Q vs 1Q. Declines in long-term rates boosted the gain in financial transactions, which partially compensated the fall in Net Interest Income due to lower inflation * At constant exchange rate as of June 2013
Results: Costs 23 Costs US$ millions* 312 306 313 305 328 US$ millions* 1H13 1H12 % Var. 13/12* Adm. expenses 560 536 4.3% Depreciation 74 63 17.4% Operating costs 633 599 5.7% 2Q12 3Q12 4Q12 1Q13 2Q13 Network 1H 12 1H 13 % Branches 497 485-2.4 --Select 43 44 2.3 --Banefe 98 77-21.4 Investing in better service for highincome Slowing cost growth 634 599 5,8% We remain leaders in efficiency Employees 12,263 12,233-0.2 * At constant exchange rate as of June 2013
Results: Provisions and Risk 24 Net Loan-loss provisions Net op income after provisions US$ millions* 2.8% 3.1% 3.0% 3.0% 3.2% US$ millions* 1H13 1H12 % Var. 13/12* 160 218 204 202 195 Net operating income 833 916-9.1% Loan loss provisions -397-327 21.1% Net op. income after prov 436 589-25.9% Coverage 50% 64% NPL Ratio 5.8% 4.7% 2Q12 3Q12 4Q12 1Q13 2Q13 Net loan-loss prov. Risk Premium * At constant exchange rate as of June 2013 Slight decline in provision expenses in 2Q13 due to stricter admissions and credit risk policies.
Results: Net income 25 Net Income Consolidated profit US$ millions* 242 249 US$ millions* 1H 13 1H 12 % Var. 13/12 174 193 185 Profit before taxes 439 569-22.9 Income taxes -60-73 -16.7 Net Income 378 496-23.8 Attributable Net Profit 263 341-22.9 2T12 3T12 4T12 1T13 2T13 Effective Tax Rate, % -13.8% 12.8% +100pb Inflaiton (%) 0.4-0.2 1.1 0.1-0.1 Evolution of profits before taxes affected by lower inflation, which should start to normalize in second half of 2013 * At constant exchange rate as of June 2013
Results: Ratios 26 ROE reaches 16.0% and Efficiency of 41.0% Accumulated financial ratios, % ROE Efficiency* 21.6 16.0 39.5 43.2 1H12 1H13 1H12 1H13 Fees / Costs 55.7 47.8 1H12 1H13 * Includes amortization
27 Conclusions
Conclusion 28 : Economy on track, but a slight slowdown is expected in 2H13 and 2014. Financial system continues to grow well, but results fall 6.6% in May 2013 due to higher provisions and regulations Results 2Q13 affected mainly by lower inflation MIN should rebound with rising inflation and low rates Strong loan growth in targeted segments Improving deposit mix Stabilizing credit risk Transformation Project has been evolving according to plan, which will continue to boost growth and efficiency We maintain our outlook unchanged for 2013
Agenda 29 Macro-economic Environment and Financial System Strategy and business Results Annexes
30 Annexes Balance Income Statement Quarterly income statements
Balance 31 US$ million. Constant currency* Variation 30.06.13 30.06.12 Amount % Loans and credits* 39,494 36,411 3,083 8.5 Trading portfolio (w/o loans) 1,930 2,214 (285) (12.9) Available-for-sale financial assets 3,108 3,583 (475) (13.3) Due from credit institutions* 4,099 3,504 595 17.0 Intangible assets and property and equipment 447 451 (4) (1.0) Other assets 3,493 5,365 (1,872) (34.9) Total assets/liabilities & shareholders' equity 52,571 51,529 1,042 2.0 Customer deposits* 28,830 29,089 (260) (0.9) Marketable debt securities* 7,911 6,937 975 14.1 Subordinated debt 1,364 1,696 (331) (19.5) Insurance liabilities Due to credit institutions* 6,159 6,229 (70) (1.1) Other liabilities 5,270 4,747 524 11.0 Shareholders' equity** 3,037 2,832 205 7.2 Off-balance-sheet funds 7,464 6,419 1,045 16.3 Mutual funds 5,710 6,419 (710) (11.1) Pension funds Managed portfolios 1,755 1,755 Customer funds under management 45,570 44,141 1,429 3.2 * As of 30.06.13 * Includes all stock of concept classified in the balance sheet ** Not including profit of the year
Income Statement 32 US$ million. Constant currency* Variation H1 13 H1 12 Amount % Net interest income 1,073 1,130 (57) (5.0) Net fees 267 299 (31) (10.5) Gains (losses) on financial transactions 110 76 34 45.2 Other operating income** 15 11 4 40.3 Gross income 1,466 1,515 (49) (3.2) Operating expenses (633) (599) (34) 5.7 General administrative expenses (560) (536) (23) 4.3 Personnel (346) (336) (10) 3.0 Other general administrative expenses (214) (200) (13) 6.6 Depreciation and amortisation (74) (63) (11) 17.4 Net operating income 833 916 (83) (9.1) Net loan-loss provisions (397) (327) (69) 21.1 Other income 3 (19) 22 Profit before taxes 439 569 (130) (22.9) Tax on profit (61) (73) 12 (16.7) Profit from continuing operations 378 496 (118) (23.8) Net profit from discontinued operations Consolidated profit 378 496 (118) (23.8) Minority interests 115 155 (40) (25.7) Attributable profit to the Group 263 341 (78) (22.9) * As of Jan-Jun'13 ** Including dividends, income from equity-accounted method and other operating income/expenses
Quarterly statements of income 33 US$ million. Constant currency* Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Net interest income 578 551 512 613 536 538 Net fees 149 150 145 141 137 131 Gains (losses) on financial transactions 21 55 50 35 41 69 Other operating income** 6 5 2 (1) 9 7 Gross income 755 761 708 788 722 744 Operating expenses (287) (312) (306) (313) (305) (328) General administrative expenses (258) (279) (274) (277) (267) (293) Personnel (158) (178) (172) (174) (164) (182) Other general administrative expenses (100) (101) (102) (103) (103) (111) Depreciation and amortisation (30) (33) (33) (37) (38) (36) Net operating income 467 449 402 475 417 416 Net loan-loss provisions (167) (160) (218) (204) (202) (195) Other income (6) (14) 19 8 (2) 4 Profit before taxes 294 275 203 279 214 226 Tax on profit (40) (33) (29) (30) (20) (40) Profit from continuing operations 254 242 174 249 193 185 Net profit from discontinued operations Consolidated profit 254 242 174 249 193 185 Minority interests 79 76 49 75 58 57 Attributable profit to the Group 175 166 125 173 135 128 * As of Jan-Jun'13 ** Including dividends, income from equity-accounted method and other operating income/expenses
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