0 Banco Santander Results 3Q13 Santiago, October 24, 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 (% of GDP) 5.8 5.9 5.6 1.5 4.2 3.8-1.3-3.5-3.5-3.0 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 6.4 5.0 10.8 8.9 6.1 6.3 5.3 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 2.5 2.9 8.4 7.2 6.5 6.3 6.7 2010 2011 2012 2013 (e) 2014 (e) 2010 2011 2012 2013 (e) 2014 (e) Central Bank Reference rate (%) Avg. Exchange Rates (Ch$ / US$) 510 485 487 494 535 5.3 5.0 4.8 4.4 3.3 2010 2011 2012 2013 (e) 2014 (e) 2010 2011 2012 2013 (e) 2014 (e) The Central bank should continue cutting interest rates in 4Q13 Source: Banco Central de. (e): Estimates Santander
Financial system: Capital and liquidity 5 Healthy financial system with high levels of liquidity BIS Ratio (%) Ample Access to Liquidity (US$ billions) 14.4 14.1 13.9 13.3 13.1 Central Bank reserves Sovereign funds Insurance Companies 263 41 220 217 21 42 2009 2010 2011 2012 Aug-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: Customer funds 6 Financial system with stable growth of customer funds Financial system s customer funds, US$ billions* Total Customer Funds Time Deposits 179 186 202 206 217 106 109 124 122 130 14.8 10.4 13.1 10.5 8.4 22.9 14.1 16.7 11.3 7.5 Sep-11 Mar-12 Sep-12 Mar-13 Aug-13 Demand Deposits Sep-11 Mar-12 Sep-12 Mar-13 Aug-13 Mutual Funds 39 42 42 46 47 34 35 37 39 40 11.7 11.7 7.6 8.8 11.4-2.2-1.1 8.4 10.1 7.8 Sep-11 Mar-12 Sep-12 Mar-13 Aug-13 Sep-11 Mar-12 Sep-12 Mar-13 Aug-13 * At constant exchange rate as of September 2013. Source: Superintendencia de Bancos de. Excludes Corpbanca Colombia Volume YoY Variation, %
Financial system: Loans 7 Loan growth in line with GDP growth Financial system loans, US$ billions* Total Loans 168 178 185 16.5% 16.0% 16.4% 198 209 11.2% 11.5% Loans to Companies 104 110 118 123 131 16.5% 16.0% 12.5% 11.2% 11.5% Sep-11 Mar-12 Sep-12 Mar-13 Aug-13 Consumer Loans 26 27 22 23 24 17.6% 16.2% 13.4% 11.1% 11.9% Sep-11 Mar-12 Sep-12 Mar-13 Aug-13 Residential Mortgages 42 45 47 49 51 12.0% 12.8% 11.1% 10.4% 11.0% Sep-11 Mar-12 Sep-12 Mar-13 Aug-13 Sep-11 Mar-12 Sep-12 Mar-13 Aug-13 Volumen YoY Variation, % * At constant exchange rate as of September 2013. Source: Superintendencia de Bancos de. Excludes Corpbanca Colombia
Agenda 8 Macro-economic environment and financial system Strategy and business Results Annexes
Our Franchise 9 Santander : The leading franchise in the country Sept. 2013 US$ billions Market Share* Rank Loans: 40.1 19.0% 2 Loans to individuals 20.4 22.2% 1 Deposits: 29.8 16.6% 3 Capital and reserves 3.0 18.0% 1 Net Income: 598 millions 21.7% 2 Attributable Net Profit 416 millions Clients: 3.4 millions 24.7% 1 Branches: 488 18.2% 2 Checking Accounts 821 ths 24.7% 1 ATM Machines 1,915 24.6% 1 Source: Superintendencia de Bancos de * Market share as of August 2013
Strategy 10 3 targets to grow with higher returns I. Transforming our Commercial Bank... II. improving relationships with customers and quality of service... III. and managing risks conservatively Project Transformation Balanced growth / sustainable ROEs
Strategy 11 I. Transforming our Commercial Banking: Upper Income Segment Loans (US$bn) Deposits (US$bn) 11.4 4.6 4.8 10.6 +12% 3.8 +26% 10.2 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Santander Select attention model for high income segment powers growth
Strategy 12 I. Transforming our Commercial Banking: Low income segment Average monthly net sales (Ch$mn) N of low income branches 25,583 98 93 22,734 74 19,730 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Monthly average write-offs (Ch$mm) Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Expected loss new loans originated (%) 8,233 8,960 5,930 2.1% 1.9% 1.9% Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Strategy to increase profitability of mid-lower income segment is yielding positive results
Strategy a II. Improving relationship with clients and quality of service 13 Total Clients (ths.) Higher income segment (ths.) 3,439 226 3,327 3,327 3,367 215 216 221 Customer growth driven by improvements in client service
60.0 50.0 40.0 30.0 20.0 10.0 - Strategy 14 III. Managing risks conservatively Non-performing consumer loans* (% of total) Recoveries in consumer loans(us$mn) 3.6% +80.7% 54.4 30.1 2.3% NPLs Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 9M12 9M13 Risk reduction in consumer loans reflects the loan portfolio mix change, improvements in risk models and greater focus on recoveries * 90 days non-performing according to Superintendency of Banks definitions 14
Business 15 Strong growth in targeted segments US$billions* Total Loans 36.3 37.1 37.8 39.4 40.1 US$billions Sept. 13 YoY QoQ Individuals 20.4 5.5% 2.5% High income 11.7 12.4% 3.7% Middle/Low Income 8.7-2.4% 0.9% Rest Targeted segments* +14.5% 23.5 24.2 25.1 26.1 26.9 SME s 6.3 15.7% 3.4% Middle Market 9.0 16.2% 2.1% Institutional 0.7 1.5% -6.6% Sep-13 Dec-13 Mar-13 Jun-13 Sep-13 (*) High Incomes, SME s, middle markets Corporate 3.7 3.3% -0.1% Total 40.1 10.4% 1.8% * At constant exchange rate as of September 2013
Business 16 Positive evolution of the deposit mix US$billions* Rest Client Deposits* Deposits 29.8 29.0 28.0 27.8 28.7 +18.0% 21.3 21.6 23.5 24.1 25.1 US$billions Sept. 13 YoY QoQ Demand 9.9 14.7% 1.2% Time 19.9 3.1% 3.1% Total deposits 29.8 6.6% 3.9% Deposit Structure (09.30.13) Stable Institutional deposits: 3% Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 (*) Deposits from non-institutional source Client deposits: 85% Others12% * At constant exchange rate as of September 2013 Core Deposits up 18.0% in 12 months
Business: Market Share 17 Focus on selective loan growth and core deposits Evolution of market share (%) Share Aug. 13 (%) Var. Dec. 12 Aug. 13 (bp) Loans 19.0-10 Individuals 24.8 +50 Mortgages 20.9-70 Companies* 17.1 +10 Total deposits 16.6 +0 Market share drop is explained by slower growth in low income and mortgage. In the remaining segments, the Bank outgrows the system * Includes government and large, medium and small companies. Source: Superintendencia de Bancos de, excludes Corpbanca Colombia
Agenda 18 Macro-economic environment and financial system Strategy and business Results Annexes
Results: Net Interest Income 19 Net Interest Income Loan Spread, % US$ millions* Commercial Bank 601 612 4.5 4.4 4.3 4.3 4.0 502 525 527 4.0 4.0 3.9 3.9 3.7 Total Loans 3Q12 4Q12 1Q13 2Q13 3Q13 Deposit Spread, % 3Q12 4Q12 1Q13 2Q13 3Q13 Inflation (%) -0.2 1.1 0.1-0.1 1.0 Commercial Bank 2.4 2.3 2.4 2.5 2.4 1.7 1.7 1.8 1.9 1.9 Total Deposits 3Q12 4Q12 1Q13 2Q13 3Q13 Net interest income rebounds with positive growth in targeted segments and higher inflation in the quarter * At constant exchange rate as of September 2013
Results: Fees 20 US$ millions* Fees US$ millions* 9M13 9M12 % Var. 13/12* 142 138 134 128 124 3Q12 4Q12 1Q13 2Q13 3Q13 Credit Cards 75.5 102.2-26.1% Insurance 16.6 21.6-23.0% Asset Management 85.7 101.1-15.3% Transactional banking 51.7 51.6 0.3% Foreign trade 28.0 24.5 14.4% Cash Management 50.4 48.7 3.5% Brokerage 15.2 17.6-13.6% Other Fees 62.2 67.1-7.1% Total Fees 386 435-11.2% Fees negatively affected by new regulations that eliminate or limit fee charges * At constant exchange rate as of September 2013
Results: Gross Income 21 Gross Income US$ millions* US$ millions* 9M13 9M12 % Var. 13/12* 695 773 708 730 790 Net interest income 1,664 1,612 3.4% Fees 386 435-11.2% Financial transactions 161 123 30.1% Other Income 17 12 39.9% 3Q12 4Q12 1Q13 2Q13 3Q13 Gross Income 2,228 2,181 2.2% Gross income rises 8.3% 3Q13 vs 2Q13 * At constant exchange rate as of September 2013
Results: Costs 22 Costs US$ millions* 300 307 299 322 322 US$ millions* 9M13 9M12 % Var. 13/12* Adm. expenses Depreciation 832 794 4.8% 110 93 18.0% Operating costs 942 888 6.2% 3Q12 4Q12 1Q13 2Q13 3Q13 Network 3Q 12 3Q 13 % Branches 496 488-1.6% --Traditional 355 367 3.4% --Select 43 44 2.3% --Banefe 98 77-21.4% Employees 12,339 12,299-0.3% Investing in better service for highincome Slowing cost growth 634 599 5,8% We remain leaders in efficiency * At constant exchange rate as of September 2013
Results: Provisions and Risk 23 Net Loan-loss provisions Net op income after provisions US$ millions* 3.1 3,0 3.0 3.2 3.0 US$ millions* 9M13 9M12 % Var. 13/12* 213 200 198 191 211 Net operating income Loan loss provisions 1,285 1,293-0.6% 600 534 12,2% Net op. income after prov 686 758-9.6% Coverage NPL Ratio 50% 61% 6.0% 5.0% 3Q12 4Q12 1Q13 2Q13 3Q13 Net loan-loss prov. Risk Premium Quarterly rise in provision expense is mainly due to one-time events in the Middle-Market. The risk premium remains stable * At constant exchange rate as of September 2013
Results: Net income 24 Consolidated profit US$ millions* 244 227 US$ millions* 9M13 9M 12 % Var. 13/12 170 189 182 Profit before taxes 696 757-8.1% Income taxes -96-100 -2.6% Consolidated profit 598 657-9.0% Attributable Net Profit 416 457-9.0% 3Q12 4Q12 1Q13 2Q13 3Q13 Effective Tax Rate, % 14.0% 13.2% Inflación (%) -0.2 1.1 0.1-0.1 1.0 Consolidated profit increases 24.7% 3Q13 vs 2Q13 * At constant exchange rate as of September 2013
Results: Ratios 25 ROE reaches 17.4% and Efficiency 42.3% Year-to-date financial ratios, % ROE Efficiency* 20.6 17.4 40.7 42.3 9M12 9M13 9M12 9M13 Fees / Costs 54.7 46.4 * Includes amortization 9M12 9M13
26 Conclusions
Conclusion 27 : Economy on track, but a slight slowdown is expected in 2014. Financial system continues to show healthy growth rates and results are rebounding despite higher provisions and costs 3Q13 Consolidated profits increase 24.7% compared to 2Q13 Net interest income rebounds with higher growth in targeted segments and greater inflation Improving deposit mix with strong core deposit growth Important improvements in consumer loan asset quality. Risk premium remains stable despite one-time events in the Middle-market segment Fees still affected by regulatory changes. Client base is beginning to grow Transformation Project has been evolving according to plan, which will continue to boost growth and efficiency Medium-term outlook for Santander continues to improve
Agenda 28 Macro-economic Environment and Financial System Strategy and business Results Annexes
29 Annexes Balance Income Statement Quarterly income statements
Balance 30
Income Statement US$ million. Constant currency* Variation 9M 13 9M 12 Amount % 31 Net interest income 1,664 1,610 54 3.4 Net fees 386 435 (49) (11.2) Gains (losses) on financial transactions 161 123 37 30.1 Other operating income** 17 12 5 39.9 Gross income 2,228 2,180 48 2.2 Operating expenses (942) (888) (55) 6.2 General administrative expenses (832) (794) (38) 4.8 Personnel (515) (498) (17) 3.4 Other general administrative expenses (317) (297) (21) 7.0 Depreciation and amortisation (110) (93) (17) 18.0 Net operating income 1,285 1,293 (7) (0.6) Net loan-loss provisions (600) (534) (65) 12.2 Other income 10 (1) 11 Profit before taxes 696 757 (61) (8.1) Tax on profit (97) (100) 3 (2.6) Profit from continuing operations 598 657 (59) (9.0) Net profit from discontinued operations Consolidated profit 598 657 (59) (9.0) Minority interests 182 200 (18) (9.0) Attributable profit to the Group 416 457 (41) (8.9) * As of YtD'13 ** Including dividends, income from equity-accounted method and other operating income/expenses
Quarterly statements of income 32 US$ million. Constant currency* 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 Net interest income 567 541 502 601 525 527 612 Net fees 146 147 142 138 134 128 124 Gains (losses) on financial transactions 21 54 49 35 40 68 52 Other operating income** 6 5 2 (1) 8 7 2 Gross income 740 746 695 773 708 730 790 Operating expenses (282) (306) (300) (307) (299) (322) (322) General administrative expenses (253) (273) (268) (271) (262) (287) (283) Personnel (155) (174) (168) (170) (161) (178) (176) Other general administrative expenses (98) (99) (100) (101) (101) (108) (108) Depreciation and amortisation (29) (33) (32) (36) (37) (35) (38) Net operating income 458 440 394 466 408 408 469 Net loan-loss provisions (164) (157) (213) (200) (198) (191) (211) Other income (6) (13) 18 8 (1) 4 7 Profit before taxes 289 270 199 274 209 221 265 Tax on profit (39) (32) (29) (30) (20) (39) (38) Profit from continuing operations 249 238 170 244 189 182 227 Net profit from discontinued operations Consolidated profit 249 238 170 244 189 182 227 Minority interests 77 75 48 74 57 56 69 Attributable profit to the Group 172 163 123 170 132 126 158 * As of YtD'13 ** Including dividends, income from equity-accounted method and other operating income/expenses
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