Argentina 3M13 Results Buenos Aires, April 25 th 2013
Important Information 2 IMPORTANT INFORMATION Banco Santander, S.A. ("Santander") and Banco Santander Río S.A. 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 (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 Banco Santander S.A. or Banco Santander Río S.A. 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 Banco Santander S.A. or Banco Santander Río S.A. 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 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, 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 by Banco Santander Río S.A.
Agenda 3 Macroeconomic scenario and financial system 3M13: Strategy and business 3M13: Results
Macroeconomic scenario 4 Growth slowdown in a rising prices environment. GDP (% Real annual growth) Short term interest rate (Average, %) 9.2 17.3 17.5 8.9 10.2 13.4 13.9 1.9 3.0 2.0 2010 2011 2012 2013 (e) 2014 (e) 2010 2011 2012 2013 (e) 2014 (e) Inflation INDEC*, % Exchange rate vs. US Dollar (Average) 10.9 9.5 10.6** 12.0 13.0 3.9 4.1 4.5 5.6 6.7 2010 2011 2012 2013 (e) 2014(e) 2010 2011 2012 2013 (e) 2014 (e) * Instituto Nacional de Estadísticas y Censos and Santander estimates of the index for 2013 and 2014 ** Inflation of Fundación de Investigaciones Económicas Latinoamericanas. Feb. 2013 Y/Y : 24.3%. Source: BCRA and Santander estimates
Financial system 5 The financial system remains transactional, profitable, with low scale of businesses, low delinquency rates, and unaffected by international financial market turbulences. Transactional Loans/ GDP: 16% Deposits / PIB: 18% Loans / Deposits: 90% Liquidity and capitalization Balance sheet quality Liquid assets / Deposits = 25% Loans durations: 26% < 1 month; 56% < 1 year BIS ratio: 16.9% Public Risk : from 50% of total assets in 2003 to 20 % a 1M12 NPL: 1.7% Coverage : 139% Profitability Net income (US$ bill) ROE 2008 1.5 13% 2009 2.1 19% 2010 2.9 24% 2011 3.6 25% 2012 4.3 26% 1M13 0.4 29%
Financial system: banking savings dynamics 6 Total banking savings increase at 32%, mainly due to time deposits in local currency Constant US Billions as of 3M13 Banking Savings: Deposits + Mutual Funds Deposits Mutual funds 58 63 67 70 76 80 84 93 100 Local currency Dollars Sight +34.7% -43.2% Term +44.4% -18.6% 54 59 62 65 69 73 76 84 89 11 33 % 33 % 30 % 26% 32 % 32% 33% 29% 23% 29% 5 5 5 37% 41% 6 7 51% 9 8 8 57% 57% Mar - 11 Sep - 11 Mar - 12 Sep - 12 Mar - 13 Mar - 11 Sep - 11 Mar - 12 Sep - 12 Mar - 13 Mar - 11 Sep - 11 Mar - 12 Sep - 12 Mar - 13 Source: Central Bank Volume Inter annual Variation, %
Financial System: credit dynamics 7 Total credit grows at 31%, driven by commercial loans in local currency (+54%) and consumer loans (+35%). Constant US Billions as of 3M13 Private sector credit Individual loans Companies loans 42 42% 47 53 52% 57 59 43% 63 78 74 67 28% 31% Mortgages +27.9% Consumer +35.0% 21 36% 24 26 29 31 46% 45% 33 41 39 35 34% 34% Local currency 53.6% Dollars -40.2% 20 50 % 23 26 58% 28 29 42% 30 32 36 37 22% 28% Mar - 11 Sep - 11 Mar - 12 Sep - 12 Mar - 13 Mar - 11 Sep - 11 Mar - 12 Sep - 12 Mar - 13 Mar - 11 Sep - 11 Mar - 12 Sep - 12 Mar - 13 Source: Central Bank Volume Inter annual Variation, %
Financial System Delinquency Mild increase in delinquency rates from historical lows 8 NPL %: Historical view Private Sector Credit Coverage %: Historical view Private Sector Credit 38. 6 33. 5 18. 6 103 125 130 130 131 126 166 172 149 139 7. 6 4. 5 3. 2 3. 1 3.5 2. 1 1. 4 1. 7 1. 8 74 79 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Central Bank
Our franchise: a universal customers bank 9 The largest financial private franchise in Argentina (Mill US$) Mar-13 Share % Mar-13 Deposits: 8,348 9.2 Credit: 6,859 8.8 Total Savings : 9,247 9.0* Traditional Branches: 328 7.6** Other offices: 43 Other point sales ***: 384 ATM s: 1,036 6.8** Customers (Millions): 2.5 * Deposits + mutual funds ** As of Nov-12 *** Complementary active points of sale in commercial positions from other companies * Local criteria
Agenda 10 Macroeconomic scenario and financial system 3M13: Strategy and business 3M13: Results
Strategy and business 11 Strategic levers Strong balance sheet, liquid and well capitalized (all TIER 1). Focus on customer businesses and non performing loan management Growth focused on the most dynamic sectors with high added value: middle and high income customers, SMEs and Agro Companies Customer growth focused on cross-selling and profitability: fee-generating services + spread management + transactional deposits Differentiated attention model, with a multi-channel distribution network and tailored products Focus on customer satisfaction to improve quality and service levels Cost management, efficiencies, and economies of scale.
Customers: focus on cross-selling and transactional products 12 Customers in thousands Total individual customers +6% 2.364 2.308 2.170 +9% -2% Mar-11 Mar-12 Mar-13 Total SME s and companies customers +36% 158 138 116 +19% 14% Linked individual customers* Linkage 43% 45% 49% +19% 1.122 1.064 939 +13% +xx% Mar-11 Mar-12 Mar-13 Linked SME s and companies customers* Linkage 50% 51% 48% +29% 70 75 58 +21% +7% Mar-11 Mar-12 Mar-13 Mar-11 Mar-12 Mar-13 *Linked Individual Clients: clients with transactional account, debit card and 3 additional products *Linked SME and large companies customers: clients with 1 C.A., 1 cash management product or 8 monthly movements and 1 additional product
Business: Market share Mild decrease in total savings, due to system contraction in dollar business. Credit share increases in 1Q13 driven by commercial loans in local currency 13 Market Share Mar-13* Var. last 12 month (basis points) Var. last 3 month (basis points) Banking savings Sight Term Mutual funds Credits Individual Companies 9.0% -81 11.2% -113 7.4% +58 8.0% -474 8.8% -19 10.8% +37 7.6% -40-19 -12 +13-70 +14-13 +41 * Local criteria
Business: Evolution in banking savings 14 Total savings grow 22% (+39% in local currency) driven by time deposits growing at 41% (+55% in local currency) and sight deposits in local currency (+31%) Constant US Millions as of 3M13 Liquidity: loans/deposits from clients = 84% ; Liquid assets / deposits = 31% Non dependence on markets: Deposits from clients = 99.6% of third parties funding Liabilities in local currency: Deposits in local currency / Total deposits = 92% Sight deposits/ total deposits = 62% 7,611 7,789 7,915 8,681 9,248 31.03.20133 Volume US$ Mill* Annual variation, % Sight* 4,449.9 10.8% Term 2,185.0 31.1% 25.0 19.3 12.7 20.9 21.5 Mutual funds 360.7 10.1% Commercial banking 6,995.6 16.4% Corporate 2,252.0 40.6% Total 9,247.6 21.5% 1Q12 2Q12 3Q12 4Q12 1Q13 * Total volumes ** Includes: Current Accounts and Savings Accounts. Saving Volume Inter annual variation, %
Business: Evolution in private sector credit 15 Total loans in local currency grow at 42%, driven by consumer and SME s. Commercial loans in local currency increase 61%. Constant US Millions as of 3M13 6,859 6,509 5,966 5,652 5,480 25.2 21.8 21.1 17.7 14.1 1Q12 2Q12 3Q12 4Q12 1Q13 Credit Volume Inter annual variation, % 31.03.2013 Volume US$ Mill* Annual variation.,% Individuals 3,850.1 31.5% Consumer 3,389.8 37.5% Mortgages 421.3-3.3% SMEs 702.2 57.5% Companies 1,133.4 24.6% Commercial banking 5,685.8 32.8% Corporativa** 1,173.4-2.0% Total 6,859.1 25.2% * Total volumes * * Includes institutional
Agenda 16 Macroeconomic scenario and financial system 3M13: Strategy and business 3M13: Results
Results: Net interest income 17 Net interest margin grows at 29% in the quarter, due to spreads management and volumes increase US$ millions 3M13 constant average Deposits spread, % +29% 6. 82 5. 28 6.70 7. 04 7. 65 181 190 205 223 233 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 Credits spread, % 1 Q 12 2 Q 12 3 Q 12 4Q12 1 Q 13 6.41 Net interest margin 5. 99 5. 76 5. 54 5. 67 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13
Results: Fees 18 Fee income grows at 23% driven by credit cards, cash and account management transactional businesses as well as strength in the insurance business US$ millions 3M13 constant average +23% 119 133 136 138 146 1 Q 12 2 Q 12 3 Q 12 4Q12 1 Q 13 Fees 3M13 3M12 VAR Cards 55.0 44.3 24.3% Account management 15.2 13.8 10.1% Cash management 39.2 30.3 29.7% Insurance * 19.5 14.4 35.0% Foreign trade services 5.5 5.4 2.0% Others 8.8 8.4 4.8% Mutual funds 2.0 2.0-2.0% Brokerage 0.9 0.5 70.6% Total 146.1 119.0 22.7% * Includes insurance fees and insurance activity results
Results: Gross Income 19 Gross income grows at 30% faster than costs, boosted by a significant increase in net interest income, fees, and gains on other financial income US$ millions 3M13 constant average +30% 412 387 367 347 2 317 4 3 30 2 22 1 23 22 16 138 146 119 133 136 181 190 205 223 233 0.5% 7.2% 35.5% 56.8% 3M13 3M12 VAR, % NII 233.4 181.1 28.9% Fees 146.1 119.0 22.7% Subtotal 379.5 300.1 26.4% G/L on financial trans 29.9 16.4 82.1% Other operating income 2.3 0.6 264.9% Total gross income 411.6 317.1 29.8% 1 Q 12 2 Q 12 3 Q 12 4 Q 12 1 Q 13 NII Fees Gains (losses) on financial transactions Other operating income/expenses
Results: Costs 20 Costs grow at 29% impacted by rising prices in the economy and increase of 10 branches in the last 12 months US$ millions 3M13 constant average +29% 11 13 14 15 17 3M13 3M12 Var, % General adm. expenses 179.5 141.3 27.0% Personal expenses 99.7 78.6 26.8% 141 153 152 162 179 Other expenses 79.8 62.7 27.2% Amortizations 16.8 11.3 48.7% GAE + Amort. 196.3 152.7 28.6% 1 Q 12 2 Q 12 3 Q 12 4 Q 12 1 Q 13 GAE Amortizations +3% Traditional branches 4T11 313 1T12 318 2T12 324 3T12 327 4T12 327 1T13 328
Results: Provisions, risk premium and loans quality 21 Provisions grow at 34% compared to 1Q12 due to increase in specific provisions. Risk premium and NPL decrease vs. 4Q12 due to total credit portfolio increase. US$ millions 3M13 constant average Net loan-losses provisions NPL & Coverage, % 45* 196.0 22 1. 01 1. 69 26 1. 94 32 30 2. 25 2. 21 1.22 130.4 1.55 1 Q 12 2 Q 12 3 Q 12 4 Q 12 1 Q 13 3M12 3M13 Provisions Risk Premium Coverage NPL * Without one-off charge from corporate segment, provisions at 2Q12 are $ 24 MM
Results: Net operating income 22 Net operating income after provisions grows 30%, mainly due to higher income and lower provisions. US$ millions 3M13 constant average 215 +31% Net operating income 164 +31% -30 Net provisions -22 164 182 201 210 215 Net operating income after provisions 142 +30% 186 1 Q 12 2 Q 12 3 Q 12 4 Q 12 1 Q 13 3M12 3M13
Results: Attributable profit 23 Attributable profit reaches 114 MM, growing 29% Y/Y. US$ millions 3M13 constant average +29% 3M13 3M12 Var, % PBT 173.8 130.8 32.8% 88 78 102 111 114 Taxes -59.5-42.0 41.7% Consolidated profit 114.3 88.8 28.6% Minority interests 0.75 0.60 23.6% Attributable profit to the Group 113.5 88.2 28.7% 1 Q 12 2Q12 3 Q 12 4 Q 12 1 Q 13
Results: Ratios 24 Maintaining good efficiency and profitability. Cost-to-income 1, % Fees / Costs, % ROE, % 84.2 81.4 48.1 47.7 44.4% - 448 bp -283 bp -515 bp 39.2% 3M12 3M13 3M12 3M13 3M12 3M13 (1) Includes amortizations
Conclusions 25 Financial system remains solid with stable rates and sustainable volumes grow Market share gains in total credit in the quarter. Loans represent 84% of customer deposits. Solid capital and liquidity position with prudent risk policy. Consolidated profit reaches US$ 114 M and grows 29% y/y.
26 APPENDIX Accumulated results Quarterly results Balance sheet
Income statment Spanish criteria 27 US$ million. Constant currency as of 3M13 Variation Q1 13 Q1 12 Amount % Net interest income 233,4 181,1 52,3 28,9 Net fees 146,1 119,0 27,0 22,7 Gains (losses) on financial transactions 29,9 16,4 13,5 82,1 Other operating income* 2,3 0,6 1,6 264,9 Gross income 411,6 317,1 94,5 29,8 Operating expenses (196,3) (152,7) (43,6) 28,6 General administrative expenses (179,5) (141,3) (38,1) 27,0 Personnel (99,7) (78,6) (21,0) 26,8 Other general administrative expenses (79,8) (62,7) (17,1) 27,2 Depreciation and amortisation (16,8) (11,3) (5,5) 48,7 Net operating income 215,3 164,5 50,8 30,9 Net loan-loss provisions (29,7) (22,1) (7,6) 34,3 Other income (11,8) (11,5) (0,3) 2,7 Profit before taxes 173,8 130,8 42,9 32,8 Tax on profit (59,5) (42,0) (17,5) 41,7 Profit from continuing operations 114,3 88,8 25,4 28,6 Net profit from discontinued operations Consolidated profit 114,3 88,8 25,4 28,6 Minority interests 0,7 0,6 0,1 23,6 Attributable profit to the Group 113,5 88,2 25,3 28,7 * Including dividends, income from equity-accounted method and other operating income/expenses
Quartely Income statment Spanish criteria 28 US$ million. Constant currency as of 3M13 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Net interest income 181 190 205 223 233 Net fees 119 133 136 138 146 Gains (losses) on financial transactions 16 22 23 22 30 Other operating income* 1 2 3 4 2 Gross income 317 347 367 387 412 Operating expenses (153) (166) (166) (177) (196) General administrative expenses (141) (153) (152) (162) (179) Personnel (79) (88) (84) (86) (100) Other general administrative expenses (63) (65) (68) (76) (80) Depreciation and amortisation (11) (13) (14) (15) (17) Net operating income 164 182 201 210 215 Net loan-loss provisions (22) (45) (26) (32) (30) Other income (12) (18) (17) (9) (12) Profit before taxes 131 118 157 169 174 Tax on profit (42) (39) (55) (57) (60) Profit from continuing operations 89 78 103 112 114 Net profit from discontinued operations Consolidated profit 89 78 103 112 114 Minority interests 1 1 1 1 1 Attributable profit to the Group 88 78 102 111 114 * Including dividends, income from equity-accounted method and other operating income/expenses
Balance sheet Spanish criteria US$ million. Constant currency as of 3M13 29 Variation 31.03.13 31.03.12 Amount % Loans and credits* 7.202 5.665 1.538 27,1 Trading portfolio (w/o loans) 159 90 69 76,1 Available-for-sale financial assets 768 576 192 33,4 Due from credit institutions* 272 280 (8) (2,8) Intangible assets and property and equipment 331 215 116 54,1 Other assets 2.713 2.369 344 14,5 Total assets/liabilities & shareholders' equity 11.445 9.193 2.251 24,5 Customer deposits** 8.594 6.911 1.682 24,3 Marketable debt securities** 33 40 (7) (17,8) Subordinated debt Insurance liabilities Due to credit institutions 248 335 (87) (25,9) Other liabilities 1.306 1.030 275 26,7 Shareholders' equity*** 1.264 876 388 44,3 Off-balance-sheet funds 930 922 8 0,8 Mutual funds 930 922 8 0,8 Pension funds Managed portfolios Customer funds under management 9.557 7.874 1.683 21,4 * Certain amounts of the credit portfolio in the slide N 15 are in Other assets ** Certain amounts of the saving portfolio in the slide N 14 are in Other liabilities *** Not including profit of the year
30 Relaciones con inversionistas Argentina Bartolomé Mitre 480, Piso 12 (1036AAH) - Buenos Aires - Argentina Teléfono: (5411) 4341-1255 Fax: (5411) 4341-1074 Email: laragon@santanderrio.com.ar www.santanderrio.com.ar Relaciones con inversores y analistas Ciudad Grupo Santander - Avda de Cantabria, s/n 28660 Boadilla del Monte (Madrid) Tel. 34 91 259 65 20 34 91 259 65 14 Centralita: 34 91 289 00 00 Fax: 34 91 257 02 45 E-mail: investor@gruposantander.com www.gruposantander.com/inversores www.gruposantander.com/investor