Post on 29-May-2015
1 1
27 October 2011
2 2
Important information
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, 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 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.
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.
3 3
Group highlights 9M’11
Agenda
Results 9M’11: business areas
Conclusions
Appendix
4 4
3
1 Solid basic revenues generation as the driver of profit
Lower market revenues and larger provisions at this moment in the cycle
2 Good liquidity and capital position
Solid balance sheet structure
Deleveraging of mature economies
Complying with the new capital requirements
Worsening
of macroeconomic
scenario in Q3’2011:
Drop in expections
Sovereign debt crisis
Volatility in markets and currencies
Stressed wholesale funding
The balance sheet will be strengthened by the allocation of capital gains in the fourth quarter
Expected capital gains (EUR 1,500 million) will be used to strengthen the balance sheet
Grupo Santander – Management drivers
Basic ideas
5 5 Profit
The Group maintains its capacity to generate profits in a very complex scenario. In Q3 impact from markets and larger provisions
EPS of EUR 0.2030 in Q3'11 and 0.5981* in 9M'11
Quarterly attributable profit. Group
EUR million
Q1'10 Q2 Q3 Q4 Q1'11 Q2* Q3
2,215 2,230
1,635
2,101 2,108
1,393
1,803
Attributable profit. Group
EUR million
9M'10 9M'11
6,080 5,303
-13%
(*) Impact from PPI provision (EUR 620 mill. net of tax). Before this provision, EPS for 9M'11: EUR 0.6680
1
6 6 Basic revenues1
Solid basic revenues as the driver of profits
Basic revenues. Group
EUR million
1
1.- Basic revenues: Net interest income + fees + insurance fee income
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
9,536 9,972 9,967 9,861
10,230 10,493 10,497
Basic revenues:
+ EUR 1,745 mill.; +6%
SCF (organic and
inorganic growth)
BZ WBK entry
Latam dynamism +1,761
Mature markets
+565
+416
-997
9M’11/9M’10
7 7
+6%
+1%
-1%
Peers avg. European peers avg.
Grupo Santander
Grupo Santander Peers avg. Peers avg.
3.6% 3.0%
2.5%
Total revenues
Different evolution of revenues versus our competitors
Gross income vs Peers
Var. 2011/2010*
1
Gross income. Group
EUR million
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
9,536 9,972 9,967 9,861 10,230 10,493 10,497
10,260 10,614 10,563 10,613
10,852 11,285 11,117 Total
Trading gains / other
Basic revenues Gross income / Assets vs Peers
% / ATA’s 2011*
(*) Latest available information from each entity. “Peer Group” are large banks that because of their size, characteristics and /or degree of direct competition are the reference ones to surpass: Banco Itaú, BBVA, BNP Paribas, Credit Suisse, HSBC, ING Group, Intesa Sanpaolo, JP Morgan, Mitsubishi, Nordea, Royal Bank of Canada, Societe Generale, Standard Chartered, UBS, Unicredito and Wells Fargo.
Impact from market's revenues in the third quarter
8 8 Expenses
Differentiated management by units and businesses
Expenses. Group
EUR million
1
Expenses:
+ EUR 1,227 mill.; +9%
Develop franchises and businesses in mature ones
(Germany, UK, USA, GBM)
Investments to capture
growth in emerging
countries
Latam: +683
BZ WBK: +217
+359
9M’11/9M’10
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
4,263 4,548 4,687 4,698 4,824 4,908 4,994
Reduce retail units in Spain and Portugal
(-1% / -2%) -32
9 9
Efficiency
Revenues and expenses evolution enable us to make investments and continue as the "best in class" among our peers
Efficiency ratio1 vs Peers (%)
Data 2011*
1
C16
C15
C14
C13
C12
C11
C10
C9
C8
C7
C6
C5
C4
C3
C2
Grupo SAN
C1
77.6
74.2
65.3
63.8
61.1
59.8
58.5
58.5
58.2
56.9
53.7
53.2
51.8
50.1
48.5
44.3
41.7
GrupoSantander
Peers avg. Europeanpeers avg.
44.3
58.4 59.6
Data 2011*
Efficiency ratio vs Peers (%)
(1) Expenses / Revenues
(*) Latest available information from each entity. “Peer Group” are large banks that because of their size, characteristics and /or degree of direct competition are the reference ones to surpass: Banco Itaú, BBVA, BNP Paribas, Credit Suisse, HSBC, ING Group, Intesa Sanpaolo, JP Morgan, Mitsubishi, Nordea, Royal Bank of Canada, Societe Generale, Standard Chartered, UBS, Unicredito and Wells Fargo.
10 10
-1,269
-483
9M’10 9M’11
Loan-loss provisions
LLPs still high at the current moment of the cycle …
Specific provisions
EUR million
1
Net loan-loss provisions1
EUR million
Use of generic provisions
EUR million
(1) Including country-risk
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
2,436 2,483
2,935
2,404 2,188
2,684 2,906
9M'10 9M'11
9,126 8,255
-871
-787
…. with performance impacted by the lower use of generic ones
11 11
3.42 3.55 3.61 3.78 3.86
Sep'10 Dec'10 Mar'11 Jun'11 Sep'11
The Group's NPLs continue sliding upwards, because of Spain. Downward trend in SCF, Sovereign and LatAm Ex-Brazil
Group's Total
%
United Kingdom and USA
%
1.77 1.76 1.75 1.82 1.88
S'10 D'10 M'11 J'11 S'11
UK Sovereign
4.80 4.61
4.15
3.76
3.22
S'10 D'10 M'11 J'11 S'11
Latin America
%
4.97 4.91 4.85 5.05 5.05
S'10 D'10 M'11 J'11 S'11
Brazil Latam ex-Brazil
3.11 3.07 2.94 2.87 2.84
S'10 D'10 M'11 J'11* S'11*
Continental Europe
%
3.88 4.24
4.57 4.81 5.15
S'10 D'10 M'11 J'11 S'11
Spain SCF
5.13 4.95
4.63 4.42
4.29
S'10 D'10 M'11 J'11* S'11
1
(*) On a like-for-like basis, deducting the acquired GE portfolio in Mexico. Including it: 3.08% in June 2011 and 2.91% in September 2011.
Credit quality
12 12
75 73 71 69 66
Sep'10 Dec'10 Mar'11 Jun'11 Sep'11
The Group's coverage ratio is 66%. Stable in the last quarter in most units
Group's Total
%
United Kingdom and USA
%
48 46 45 41 40
S'10 D'10 M'11 J'11 S'11
UK Sovereign
72 75 82 85
93
S'10 D'10 M'11 J'11 S'11
Latin America
%
98 101 104 102 100
S'10 D'10 M'11 J'11 S'11
Brazil
113 110 114 114 111
S'10 D'10 M'11 J'11* S'11*
Continental Europe
%
65 58 53 49 46
S'10 D'10 M'11 J'11 S'11
Spain SCF
122 128 122 128 132
S'10 D'10 M'11 J'11 S'11
1 Credit quality
(*) On a like-for-like basis, deducting the acquired GE portfolio in Mexico. Including it: 110% in June 2011 and 108% in September 2011.
Latam ex-Brazil
13 13
Santander is not taking advantage yet of the normalisation of the cost of credit as done by its peers
Net provisions / loans
Net provisions / loans vs. peers (%)
1.07%
0.73%
1.45% 1.39%
2010 2011*
SAN
Peers
C16
C15
C14
C13
C12
C11
C10
C9
C8
C6
C3
C7
C5
C4
C2
Grupo SAN
C1
0.00 0.03
0.17 0.19 0.25 0.31 0.36
0.64 0.74
0.91 0.99 1.00 1.00 1.06 1.10
1.39 4,93 -0.25
-0.06
-0.31
-0.11
-0.58
-1.55
-1.13
-0.28
-0.05
-0.03
-0.13
-0.09
-0.11
-0.12
-0.13
+0.08
-0.03
Y-o-y change
Loan-loss provisions 1
Data 2011*
(*) According to the latest available information from each entity. “Peer Group” are large banks that because of their size, characteristics and /or degree of direct competition are the reference one to surpass: Banco Itaú, BBVA, BNP Paribas, Credit Suisse, HSBC, ING Group, Intesa Sanpaolo, JP Morgan, Mitsubishi, Nordea, Royal Bank of Canada, Societe Generale, Standard Chartered, UBS, Unicredito and Wells Fargo.
14 14
Var. / 9M'10 % excl. forex EUR Mill. 9M'11 Amount % and perimeter
(1) Including dividends, equity accounted income and other operating results
Grupo Santander Results
Larger growth of net operating income after provisions, thanks to higher basic revenues and stable provisions …
1
Net interest income 22,853 +957 +4.4 +2.8
Fees 8,017 +728 +10.0 +7.2
Trading gains and other1 2,384 +133 +5.9 +3.5
Gross income 33,254 +1,818 +5.8 +3.9
Operating expenses -14,725 -1,227 +9.1 +6.3
Net operating income 18,529 +591 +3.3 +2.0
Loan-loss provisions -7,777 +78 -1.0 -1.8
Net op. income after provisions 10,752 +668 +6.6 +5.0
15 15
Var. / 9M'10 % excl. forex EUR Mill. 9M'11 Amount % and perimeter
(1) Including dividends, equity accounted income, and other operating results
(2) Including provision for PPI in Q2’11 in the UK (EUR 842 mill. before tax)
Grupo Santander Results
… not feeding through to profits because of larger provisions (PPI) and higher taxes
1
Net interest income 22,853 +957 +4.4 +2.8
Fees 8,017 +728 +10.0 +7.2
Trading gains and other1 2,384 +133 +5.9 +3.5
Gross income 33,254 +1,818 +5.8 +3.9
Operating expenses -14,725 -1,227 +9.1 +6.3
Net operating income 18,529 +591 +3.3 +2.0
Loan-loss provisions -7,777 +78 -1.0 -1.8
Net op. income after provisions 10,752 +668 +6.6 +5.0
Other results and provisions2 -2,474 -1,256 n.m. n.m.
Profit before tax 8,278 -588 -6.6 -8.6
Tax and minority interests -2,975 -189 +6.8 +5.2
Attributable profit 5,303 -777 -12.8 -14.9
PPI2 provision
Higher taxes
16 16
Dec'08 Dec'09 Dec'10 Sep'11
104 106 115 116
Liquidity
Solid and sustained liquidity position, favoured by deleveraging of mature markets
Group's liquidity ratios
Dec'08 Dec'09 Dec'10 Sep'11
150 135
117 118
Dep.+ M/L term funding / Loans (%)
Loans / Deposits (%)
Q3’11 trends
Capacity to issue in the M/L term in a strongly stressed market
Approx. € 100 bn
9M'11 = 117% 2011 maturities
9M'11 issues Maturities
36 31
Reduced recourse to wholesale funding in the short
term (only 2% of Group's balance sheet):
— Short term in US market (parent bank): < €1 bn
High discounting capacity at Central Banks
Moreover, € 20 bn in market
securitisations
2
17 17
Solvency ratio
Core capital (%)
Note: Dec’07 according to BIS I
Capital ratios adequate to a diversified balance sheet and with a low risk profile ...
2
Dec'07 Dec'08 Dec'09 Dec'10 Jun'11 Sep'11
6.25%
7.58%
8.61% 8.80% 9.20% 9.42%
… and high capacity for organic capital
generation
18 18 Preliminary estimate of the impact on Santander from the new EBA criteria
In a simulation exercise with the recapitalisation hypothesis: core Tier I of 7.9% at June'11…
9.20%
7.90%
-0.2%
-0.5%
-0.2%
-0.4%
June 2011 as reported
June 2011 adjusted with EBA criteria
Intangibles and other
Basel 2.5 MtM – sovereign
debt
-130 b.p.
2
… which would reach 8.12% after the Q3’11 capital
generation
7.90% 8.12% +0.22%
June 2011 adjusted with EBA criteria
Increase core Tier I in Q3’11
September 2011 adjusted with EBA criteria
Financial stakes /
securitisations
(*) Including convertible capital instruments
(*)
Deficit at 9% -6,474 +1,250 -5,224
EUR million
19 19
8.12%
9.22%
+0.40% +0.30%
+0.40%
Santander Projections
September 2011 adjusted with EBA criteria
June 2012 adjusted with EBA criteria
Roll-out of internal models
Ongoing Optimisation of RWA (internal projection)
Generation 3 quarters:
Q4’11 + H1’12
+110 b.p.
2
We estimate that under the new criteria, we can reach a core Tier I of 9.2% by June 2012 via internal generation of
capital and optimisation of RWA
To reach the objective of
10%
Other measures
and assets sales
+0.80% additional
Deficit at 9% -5,224 +1,700
EUR million
Surpluss at 9% +1,076 +2,300 +2,300
20 20
Capital gains and their application
Estimates at year-end 2011
Estimated capital gains net of tax1 (€ mill.)
3
Sale InsuranceHolding Latam
SC USAOperation
Total
750
1,500 750
Will be used at the end of the year to
strengthen the balance sheet
(1) Expected to be recorded in the fourth quarter
21 21
Group highlights 9M’11
Agenda
Results 9M’11: business areas
Conclusions
Appendix
22 22
Brazil
9M'10 9M'11
2,952 2,773
Constant US$ million
-6%
Profit distribution by geographic area
Results are underpinned by the Group’s diversification and by managing the different growth stages in each market
(1) Over recurring operating areas 9M’11 attributable profit before PPI provision
Continental Europe (ex-BZ WBK)
9M'10 9M'11
2,739 2,269
EUR million
-17%
9M'10 9M'11*
1,503 1,377
Constant EUR million
-9%
UK Sovereign
+44%
LatAm Ex-Brazil
9M'10 9M'11
1,873 2,186
Constant US$ million
+17%
Attributable profit(1) 9M’11
Poland (BZ WBK)
EUR 172 million (6 months)
Sovereign
UK
SAN network + Banesto
Portugal
Global Europe
SCF
UK and Sovereign
(*) After PPI provision: € 757 mill. (-50%)
Poland (BZ WBK)
2%
25%
20% 5%
18%
10%
2% 5%
13%
9M'10 9M'11
273 394
23 23
24 24
Continental Europe (excl. BZ WBK) 9M’11
Networks and wholesale business impacted by macroeconomic environment and market's evolution. SCF growing strongly
Attributable profit: EUR 2,269 mill.
Var. 9M’11 / 9M’10 (%)
Basic revenues
Gross income
Expenses
Net op. income
Net op. income afterprovisions
Attributable profit
+4%
-1%
+7%
-6%
-6%
-17%
SAN network
Banesto
Portugal
SCF
Other
602
189
129
990
358
Units' profit
Var. / 9M’10 EUR million
-10%
-54%
-65%
+65%
-48% (GBM,
Asset Mgmt. …)
Basic revenues
EUR million
9M'10 9M'11
10,407 10,795
+4%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
3,568 3,432 3,406 3,306
3,554 3,674 3,567
+5%
25 25 Santander Branch Network 9M’11
Activity
Net interest income return
Basic revenues
Net operating income / provisions
1.44% 1.42% 1.27%
2.87% 2.99%
3.59%
Sep'10 Dec'10 Sep'11
3.06%
2.69% 2.55% 2.52%
2.77%
3.08% 3.02%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
EUR million
EUR million
-2.5 -6.7
+14.8
-4.6
9M’10 9M’11 9M’10 9M’11
Loans Deposits
Var. in EUR billion
Return / Cost
Return
Cost
Net int. income /ATAs Net operating income
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
691 576
497 462 588 639 588
9M'10 9M'11
3,246 3,303
+2%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
1,184 1,060 1,002 974
1,072 1,136 1,094
9M'10 9M'11
897 845
1,765 1,815
+3%
-6%
+18%
+9%
Improved underlying business backed by higher spreads and gross income and lower costs. Larger loan-loss provisions because of depletion of generic ones
Prov.
Net op. income after LLPs
Net op. income
26 26
9M'10 9M'11
605 415
1,064 876
Banesto 9M’11
Banesto's trends are similar to those of the Santander Branch Network
1.73% 1.95%
1.67%
2.89% 2.94%
3.48%
Sep'10 Dec'10 Sep'11
1.44% 1.31%
1.21% 1.05% 1.13%
1.33% 1.36%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
EUR million
EUR million
-1.1
-6.4
+6.7
-7.1
9M’10 9M’11 9M’10 9M’11
Loans Deposits excl. Repos
Var. in EUR billion
Return / Cost
Return
Cost
Net int. income /ATAs
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
384 362 317 312
273 324
280
9M'10 9M'11
1,706 1,531
-10%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
601 570 535 481 489 525 516
-12%
-4%
-18%
-31%
Net operating income
Activity
Net interest income return
Basic revenues
Net operating income / provisions
Prov.
Net op. income after LLPs
Net op. income
27 27
Spain. Customer lending and NPLs
Gross loans
Dec'09 Dec'10 Jun'11 Sep'11
31 27 25 24
108 106 104 104
31 30 28 27
64 61 59 59
10 12
13 12
245 236 229 226
-12% -7% -4%
NPL ratio
3.4 4.2
4.8 5.1
2.5 2.2 2.4 2.5
2.4 3.1
3.4 3.4
11.1
17.0
21.3
24.9
Dec'09 Dec'10 Jun'11 Sep'11
%
TOTAL
EUR billion
Companies w/o construc. and real estate
Real estate purpose
Household mortgages
Public sector
Other loans to individuals
With real estate
purpose
Total portfolio
Spain
Other portfolio
Household
mortgages
Coverage. Loans with real estate purpose
EUR million
100% of substandard and 40% of NPLs are up-to-date with payments
Risk Coverage
NPLs 6,062 1,864 31
Substandard 3,425 382 11
Amount Amount %
28 28
LOANS. Real estate purposes
Breakdown (Sep’11 / Dec’10)
Foreclosed ASSETS (gross amount)
Breakdown Sep’11
EUR million
EUR billion EUR billion
Sep’11 Dec’10 Var.
Finished buildings 12,523 12,709 -186
Buildings under constr. 1,737 2,548 -811
Developed land 2,814 3,678 -864
Building land 1,516 2,023 -507
Other land 194 252 -58
No mortgage guarantee 5,585 6,124 -539
Total 24,369 27,334 -2,965
Gross amount Coverage
Finished buildings 3,467 25% 2,611
Buildings under constr. 827 25% 621
Developed land 2,854 38% 1,756
Building land 1,040 42% 607
Other land 371 42% 215
Total 8,559 32% 5,810
Change / Dec’10 +1,050 +615
Net amount
Dec'08 Dec'09 Dec'10 Jun'11 Sep'11
37.7
31.1 27.3 25.3 24.4
Dec'08 Dec'09 Dec'10 Jun'11 Sep'11
4.8 6.5 7.5 8.3 8.6
+EUR 3.8 bn
-EUR 13.3 bn
Loans with real estate purposes and foreclosed assets
EUR million
29 29
-2.0 bn -2.2 bn
Plan 2011
Reached in Sep’11
Dec'10 Sep'11
49
44
-13%
+15%
Loans Deposits
Portugal 9M'11
Managing a “bail-out” scenario and deleveraging
Deleveraging process
continues
Balance sheet
reduction
Reduction of
commercial GAP
NPLs evolution:
as envisaged
Total Assets (€ bn)
Activity
9M'10 9M'11
415
233
518
355
Basic revenues
Net operating income / provisions
EUR million
EUR million
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
192 188
138 132
151
112 93
9M'10 9M'11
855 740
-13%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
293 289 273 262 273
242 225
-33%
-18%
-31%
-44%
% var. Sep’11/Sep’10
2.9% 3.8% 4.1%
Dec'10 Sep'11 Dec'11 (e)
Net operating income
-11%
Prov.
Net op. income after LLPs
Net op. income
30 30
Santander Consumer Finance 9M’11
Activity
Sharp profit increase, fuelled by the main units and excellent credit management
Net interest income / provisions (% /ATAs)
2.80%
1.91%
4.97% 5.03%
9M'10 9M'11
Provisions
Net interest income
2.17 3.12
Loans Deposits
+10%
+34%
Var. Sep’11 / Sep’10
Volumes
Total portfolio = EUR 74 billion (+10%)
EUR billion
Germany
USA
Italy
Spain
Nordic countries
Other eurozone
UK
Poland
30
12
8
7
7
4
3
3
+38%
Var. Sep’11 / Sep’10
-6%
+1%
-13%
+10%
+3%
+8%
-9%
9M'10 9M'11
980 1,563
2,501 2,738
Basic revenues
Net operating income / provisions
EUR million
EUR million
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
786 825 890 860 920 917 900
9M'10 9M'11
3,400
3,965
+17%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
1,068 1,114 1,218 1,217
1,324 1,322 1,320
+1%
+8%
+9%
+59%
Net operating income
Prov.
Net op. income after LLPs
Net op. income
31 31 Poland (BZ WBK) Data in local criteria. Constant EUR million
(*) 2010 proforma information.
Loans and deposits growth since its incorporation to the Group
Results* show sharp growth over 2010
Mar'11 Sep'11
2,610 2,856
5,209 5,775
7,819 8,631
Total
Companies
Individuals
Loans
+10%
+11%
+9%
Mar'11 Sep'11
5,780 5,941
3,558 3,995
9,338 9,936 Total
Companies
Individuals
Deposits
+6%
+12%
+3%
Basic revenues
Provisions
9M'10 9M'11
577 637
+10%
Expenses
9M'10 9M'11
324 338
+4%
9M'10 9M'11
79 70
-11%
9M'10 9M'11
176
245 +40%
Attributable profit
32 32
33 33
United Kingdom 9M'11
Results affected by sluggish activity environment, regulatory impacts and PPI1 provision
(1) In Q2'11 before provision of sterling 538 million (net of tax) for possible claims related to payment protection insurance (PPI).
(2) Loans to SMEs: +27% (3) Not including GBM balances and other deposits for sterling 11 billion as of September 2011.
Attributable profit1: £ 1,198 mill. (EUR 1,377 mill.)
Var. 9M’11 / 9M’10 in £ (%)
Gross income
Expenses
Net op. income
Net op. income afterprovisions
Attributable profitbefore PPI provision
-8%
+1%
-14%
-4%
-9%
Attributable profit 9M’11 after one-off = £ 659 mill.
Activity
Mortgages
Sep'10 Sep'11
166 166
Sep'10 Sep'11
21 25
5 4 26 29
Sep'10 Sep'11
151 151
Companies' loans Deposits3
+19%2
+0%
+11%
+0%
Core Non core
Net operating income / Provisions
£ Mill.
Net operating income
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
830 825 805 741 729 728 666
Prov.
Net op. income after LLPs
-17%
-14%
-4%
Net op. income
£ billion. Local criteria
9M'10 9M'11
1,817 1,747
2,460
2,123
34 34
35 35
9M'10 9M'11
5,500 5,678
9,467 10,653
Brazil 9M'11
Solid increase in basic revenues accelerated net operating income. In profit, impact from larger provisions, higher tax rate and minority interests
Attributable profit: US$ 2,773 mill. (EUR 1,973 mill.)
Var. 9M’11 / 9M’10 in constant US$ (%)
Net operating income / Provisions
Constant US$ million
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
3,134 3,107 3,226
3,377 3,459 3,610 3,584
+11%
+13%
+3%
Basic revenues
Net operating income
Constant US$ million
9M'10 9M'11
14,329
16,229
+13%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
4,700 4,778 4,851 5,034
5,305 5,428 5,495
+13%
Activity1
NII / Provisions (/ ATAs)
Loans Deposits*
+19%
+10%
Var. Sep’11 / Sep’10
Volumes
2.73% 2.89%
7.56% 7.28%
9M'10 9M'11
Provisions
Net int. income
4.39 4.83
Basic revenues
Gross income
Expenses
Net op. income
Net op. incomeafter provisions
Attributable profit
+13%
+12%
+11%
+13%
+3%
-6%
Prov.
Net op. income after LLPs
Net op. income
(1) Local currency (*) On a like-for-like comparison
36 36
37 37
Latin America Ex-Brazil 9M’11
Profit increase spurred by retail banking: faster growing basic revenues and lower cost of credit. Negative impact from trading gains in Q3'11
+59%
Var. / 9M’10
-6%
+8%
+12%
+6%
-76%
-1%
Attributable profit by country
Mexico
Chile
Argentina
Colombia
P. Rico
Uruguay
Other
1,028
655
288
42
37
18
117
Constant US$ million
Attributable profit: US$ 2,186 mill. (EUR 1,555 mill.)
Var. 9M’11 / 9M’10 in constant US$ (%)
Activity1
NII / Provisions (/ ATAs)
Loans Deposits
+19% +15%
Var. Sep’11 / Sep’10
Volumes
Basic revenues
Gross income
Expenses
Net op. income
Net op. income afterprovisions
Attributable profit
+7%
+5%
+12%
-1%
+1%
+17%
1.02% 0.86%
4.15% 3.87%
9M'10 9M'11
Provisions
Net int. income
3.01 3.13
9M'10 9M'11
6,102 6,552
+7%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
1,977 2,071 2,053 2,115 2,099 2,195 2,258
+10%
Basic revenues
Constant US$ million
(1) Constant currency (2) Excluding minority interest: Mexico +25%; Total area: +6% (3) Including Peru, New York and International Private Banking
2
2
3
38 38
Mexico 9M'11
(1) Local currency (2) Excluding perimeter: +24%
Attributable profit: US$ 1,028 mill. (EUR 731 million )
Var. 9M’11 / 9M’10 in constant US$ (%)
Activity1
NII/Provisions (/ ATAs)
Loans Deposits
+32%
+13%
Var. Sep’11 / Sep’10
Volumes
(2)
Basic revenues
Gross income
Expenses
Net op. income
Net op. income afterprovisions
Attributable profit
+7%
+3%
+8%
-1%
+12%
+59%
9M'10 9M'11
2,315
2,471 +7%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
768 781 766 765 793 804 874
+14%
9M'10 9M'11
1,057 1,188
1,555 1,543 Constant US$ million
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
532 506 517 435
525 539 479
-7%
-1% Net operating income
Basic revenues
Net operating income / provisions
1.19% 0.77%
4.04% 3.81%
9M'10 9M'11
Provisions
Net int. income
3.04 2.85
Constant US$ million
+12%
Prov.
Net op. income after LLPs
Net op. income
Profit fuelled by strong basic revenues and lower provisions needs. Moreover, positive impact from minority interests
39 39
Chile 9M'11
Activity continued to grow strongly, focused on deposits. In Q3’11 lower revenues in UF portfolio due to low inflation and one-time charge in provisions
(1) Local currency
Basic revenues
Net operating income / provisions
Constant US$ million
9M'10 9M'11
2,077
2,112
+2%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
658
720 699 700 679
744 688
-2%
Constant US$ million
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
472 465 465 439 450 496
392
-16%
Net operating income
Attributable profit: US$ 655 mill. (EUR 466 million )
Activity1
NII/Provisions (/ ATAs)
Loans Deposits
+14%
+23%
Var. Sep’11 / Sep’10
Volumes
1.05% 1.00%
4.44% 3.90%
9M'10 9M'11
2.90 3.39
Basic revenues
Gross income
Expenses
Net op. income
Net op. income afterprovisions
Attributable profit
+2%
+1%
+10%
-5%
-9%
-6%
Var. 9M’11 / 9M’10 in constant US$ (%)
9M'10 9M'11
1,022 929
1,402 1,338
-5%
-9%
Prov.
Net op. income after LLPs
Net op. income
Provisions
Net int. income
40 40
41 41 Sovereign 9M’11
Attributable profit: US$ 554 mill. (EUR 394 mill.)
Activity and profitability1
Year-on-year change US$
Var. 9M’11 / 9M’10 in US$ (%)
(1) Local currency
Gross income
Expenses
Net op. income
Net op. income afterprovisions
Attributable profit
+9%
+8%
+9%
+58%
+44%
Loans Deposits Net interest income /
Provisions (% / ATAs)
-12%
-1%
+5%
-8% -4%
+15%
Dec’09 Dec’10 Sep’11 Dec’09 Dec’10 Sep’11 1.14%
0.67%
3.31% 3.26%
9M'10 9M'11
Provisions
Net int. income
2.59 2.17
Note: Loans data (excl. securitisations) and deposits under US GAAP
9M'10 9M'11
574 910
1,169 1,272
Net operating income / Provisions
US$ million
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
385 382 401 378 422 418 432
+8%
+9%
+58%
Net operating income
Consolidating the franchise’s profitability: higher revenues, increased activity and enhanced credit quality
Prov.
Net op. income after LLPs
Net op. income
42 42
43 43
Corporate Activities
Larger trading gains (fx hedging) offset the negative impact from funding cost and lower tax returns
EUR mill.
Attributable profit
(Change 9M'11 vs. 9M'10)
Main effects:
Net interest income -308
Trading gains +596
Other results and tax -199
Total impact on profit: +89
44 44
Group highlights 9M’11
Agenda
Results 9M’11: business areas
Conclusions
Appendix
45 45 Conclusions (I)
In the quarter solid profit for the Group amid a complex scenario
In the year-to-date
improved underlying results (net operating income after provisions +7%)
due to sustained growth and increased revenues
larger provisions (PPI) and tax pressure tarnish profits
By unit
retail units in Europe and the UK more impacted by environment
SCF, Poland and Sovereign kept up sharp profit growth
Latin American units maintain very solid underlying results, underpinned by the top part of the income statement
RESULTS: high generation underpinned by the top part of the P&L
46 46 Conclusions (II)
Liquidity
capacity to issue in the M/L term + deposit capturing
low recourse to short term + discounting capacity in central banks
deleveraging in mature markets
Capital
high quality balance sheet
continuous capacity of free capital generation
complying with the new capital requirements
Capital gains at year-end, the announced capital gains will be used to further strengthened the balance sheet
BALANCE SHEET STRENGTH: Solid liquidity and capital position
Basic trends in profits and balance sheet in line with those announced at Investor Day for the coming quarters
47 47
Group highlights 9M’11
Agenda
Results 9M’11: business areas
Conclusions
Appendix
48 48
Group Balance Sheet
49 49 Main trends of the Group’s balance sheet
Retail balance sheet, appropriate for the business nature of low risk, liquid and well capitalised
(*) Other assets: Goodwill EUR 26 bn , tangible and intangible assets 17 bn , other capital instruments at fair value 8 bn, accruals and other accounts 51 bn
Balance sheet at September 2011
Assets Liabilities
734
103
102
224
66
620
68 37
112 122
168 144
1,250 1,250
EUR billion
1
6
5
4
3
2
Lending: 59% of balance sheet
Derivatives (with counterpart on the liabilities side): 9% of balance sheet
Cash, Central Banks and credit institutions: 14%
Other (goodwill, fixed assets, accruals): 8%
Available for sale portfolio (AFS): 5%
Trading portfolio: 5%
1
3
2
4
5
6
Loans to
customers
Derivatives
Cash and credit institutions
Other*
AFS Portfolio
Trading portfolio
Customer Deposits
Issues and subordinated
liabilities
Shareholders’ equity & fixed liabilities
Credit institutions
Other
Derivatives
50 50
Secondary segments results
51 51
Retail Banking
High one-digit growth in net operating income after provisions fuelled by recovered basic revenues and lower provisions
Attributable profit: EUR 5,330 mill.
Var. 9M’11 / 9M’10 in euros
Activity
EUR billiion
Basic revenues
Gross income
Expenses
Net op. income
Net op. income afterprovisions
Attributable profit
+7%
+6%
+9%
+4%
+8%
-8%
9M'10 9M'11
27,434 29,283
+7%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
8,837 9,239 9,357 9,115
9,556 9,857 9,870
+5%
9M'10 9M'11
8,941 9,654
16,709 17,341 EUR million
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
5,448 5,640 5,621 5,380 5,685 5,980 5,675
+1%
+4% Net operating income
Basic revenues
Net operating income / provisions
EUR million
+8%
Deposits Loans
Sep'10 Sep'11
644 656
+2%
Sep'10 Sep'11
505 522
+3%
Prov.
Net op. income after LLPs
Net op. income
(1) After PPI provision. Before it: +3%.
1
52 52
Global Wholesale Banking (GBM)
Customer revenues resilient to the environment. Impact on revenues from markets and on costs from investments
Gross income
EUR million
9M'10 9M'11
3,324 3,155
574 480
3,898 3,635
-7% -11%
9M'10 9M'11
2,794 2,275
2,793
2,405
EUR million
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
1,023 922 848 865 943
782 680
-20%
-14% Net operating income
Gross income
Net operating income / provisions
EUR million
-19%
1,738 1,785
1,067 1,022
38 47
481 301
574 480
9M'10 9M'11
3,898 3,635
-7%
+23%
+3%
Customer revenues
-37%
-16%
TOTAL
-4%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
1,082 1,199 1,042 1,090 1,127 1,053 976
282 104 188 162 210
148 122
1,364 1,303 1,230 1,252 1,337 1,201 1,098
Total
Trading
Customers
Total
Trading
Customers
(1) Including Global Transaction Banking and Credit
Prov.
Net op. income after LLPs
Net op. income
Trading
Investment banking
Corporate banking1
Hedging of interest /
exchange rates
Equities
53 53
Asset Management and Insurance
High contribution to the Group via revenues and profits: 10% of the operating areas total revenues (+15% / 9M’10)
Total revenues. Group
9M'10 9M'11
756 865
+14%
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
229 269
258 276 288 293 284
+10%
9M'10 9M'11
552 608
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
169 196 187 186
202 216 190
+1% +10%
Basic revenues
Net operating income 9M'10 9M'11
2,965
3,403
Insurance Asset Management
9M'10 9M'11
959 958
9M'10 9M'11
2,006 2,445
+22%
+15%
0%
EUR million
EUR million
EUR million
54 54
Main units spreads and NPL ratios
55 55
2.10 1.94 1.83 1.83 1.90 1.97 2.03
0.50 0.10 0.04 0.06 0.05
0.56 0.65
2.60 2.04 1.87 1.89 1.95
2.53 2.68
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
Loans Deposits Total
2.02
2.00 1.92 1.99 2.03
2.08 2.12
0.18 -0.35 -0.51 -0.52 -0.36
0.12 0.42
2.20
1.65 1.41 1.47 1.67
2.20 2.54
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
Loans Deposits Total
1.76 1.82 1.82 1.88 1.96
2.06 2.15
0.09 0.10 0.21 0.23 0.12 -0.31 -0.47
1.85 1.92 2.03 2.11 2.08
1.75 1.68
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
Loans Deposits Total
5.90 6.19 6.72 6.94 6.69 5.99 5.98
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
Loans
Continental Europe. Main units spreads (%)
SAN Branch Network Banesto Retail Banking
Santander Consumer Lending Portugal Retail Banking
56 56
Banco Santander (*)
3.61% 3.65% 3.79% 4.24% 4.68% 5.08% 5.63%
66% 61% 61% 54% 49% 44% 39%
Mar'10 Jun Sep Dec Mar'11 Jun Sep
NPLs Coverage
Banesto
Santander Consumer
Portugal
2.32% 2.40% 2.43% 2.90% 3.03% 3.25% 3.78%
64% 65% 69% 60% 62% 62%
53%
Mar'10 Jun Sep Dec Mar'11 Jun Sep
NPLs Coverage
5.12% 5.23% 5.13% 4.95% 4.63% 4.42% 4.29%
108% 111% 122% 128% 122% 128% 132%
Mar'10 Jun Sep Dec Mar'11 Jun Sep
NPLs Coverage
3.13% 3.49% 3.83% 4.11% 4.31% 4.54% 4.69%
61% 58% 60% 54% 52% 52% 53%
Mar'10 Jun Sep Dec Mar'11 Jun Sep
NPLs Coverage
Continental Europe. NPLs and coverage ratios
(*) Santander Branch Network NPL ratio was 7.70% and coverage 41% as of September 2011
57 57
Spreads Retail Banking
2.05 2.13 2.20 2.28 2.34 2.35 2.42
-0.06 -0.14 -0.17 -0.25 -0.30 -0.38 -0.45
1.99 1.99 2.03 2.03 2.04 1.97 1.96
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
Loans Deposits Total
NPL and coverage
1.88% 1.85% 1.77% 1.76% 1.75% 1.82% 1.88%
46% 46% 48% 46% 45% 41% 40%
Mar'10 Jun Sep Dec Mar'11 Jun Sep
NPLs Coverage
United Kingdom. Spreads and NPL ratios (%)
58 58
15.26 15.29 14.73 14.29 14.72 15.05 14.23
0.87 0.94 1.08 1.13 1.12 1.12 1.18
16.13 16.23 15.81 15.42 15.84 16.17 15.41
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
Loans Deposits Total
10.03 9.50 9.20 8.93 8.58 8.40 8.27
2.05 1.92 2.03 2.05 2.09 2.04 1.99
12.08 11.42 11.23 10.98 10.67 10.44 10.26
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
Loans Deposits Total
5.24 5.03 4.76 4.52 4.38 4.14 4.18
2.25 2.30 2.27 2.17 3.09 2.90 2.65
7.49 7.33 7.03 6.69 7.47 7.04 6.83
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
Loans Deposits Total
Spreads main countries Latin America (%)
Retail Banking Brazil Retail Banking Mexico
Retail Banking Chile
59 59
(*) On a like-for-like basis, excluding the acquired GE portfolio. Including it, NPL ratio: June 2.45%, September 1.78%. Coverage ratio: June 165%, September 176%
Brazil
5.04% 5.01% 4.97% 4.91% 4.85% 5.05% 5.05%
100% 98% 98% 101% 104% 102% 100%
Mar'10 Jun Sep Dec Mar'11 Jun Sep
NPLs Coverage
Mexico
Chile
1.86% 1.77% 2.20%
1.84% 1.58% 1.63% 1.45%
268% 257%
199% 215% 234% 222% 217%
Mar'10 Jun Sep Dec Mar'11 Jun* Sep*
NPLs Coverage
3.36% 3.31% 3.58% 3.74% 3.80% 3.65% 3.63%
99% 97% 94% 89% 89% 89% 88%
Mar'10 Jun Sep Dec Mar'11 Jun Sep
NPLs Coverage
Latin America. NPLs and coverage ratios
60 60
1.94 1.96 2.04 2.08 2.16 2.24 2.22
0.94 0.99 0.62 0.53
0.78 0.66 0.40
2.88 2.95 2.66 2.61
2.94 2.90 2.62
Q1'10 Q2 Q3 Q4 Q1'11 Q2 Q3
Loans Deposits Total
5.14% 5.11% 4.80% 4.61% 4.15% 3.76% 3.22%
64% 67% 72% 75% 82% 85%
93%
Mar'10 Jun Sep Dec Mar'11 Jun Sep
NPLs Coverage
Sovereign. Spreads and NPL and coverage ratios (%)
Spreads Retail Banking NPLs and coverage
61 61