Activity and results 2012

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Activity and Results 2012.- Banco Santander

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Activity and results 2012

  1. 1. 131 January 2013
  2. 2. 2Important informationBanco Santander, S.A. ("Santander") cautions that this presentation contains forward-looking statements. These forward-lookingstatements are found in various places throughout this presentation and include, without limitation, statements concerning our futurebusiness development and economic performance. While these forward-looking statements represent our judgment and futureexpectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actualdevelopments 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 andinterest rates; (3) competitive pressures; (4) technological developments; and (5) changes in the financial position or credit worthiness ofour customers, obligors and counterparties. The risk factors that we have indicated in our past and future filings and reports, including thosewith the Securities and Exchange Commission of the United States of America (the “SEC”) could adversely affect our business andfinancial 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 andviews taken on the date on which they are made; such knowledge, information and views may change at any time. Santander does notundertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events orotherwise.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 soonly on the basis of such persons own judgment as to the merits or the suitability of the securities for its purpose and only on suchinformation as is contained in such public information having taken all such professional or other advice as it considers necessary orappropriate 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 orinvestments whatsoever.Neither this presentation nor any of the information contained therein constitutes an offer to sell or the solicitation of an offer to buy anysecurities. 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 toengage in investment activity for the purposes of the prohibition on financial promotion in the U.K. Financial Services and Markets Act2000.Note: Statements as to historical performance or financial accretion are not intended to mean that future performance, share price or futureearnings (including earnings per share) for any period will necessarily match or exceed those of any prior year. Nothing in this presentationshould 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 heremay 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.
  3. 3. 3 Agenda■ Group performance 2012 — Highlights — Results■ Business areas performance 2012■ Outlook■ Appendix
  4. 4. 2012 Highlights 4 2012 Data Evolution 1 Sustained results Group Pre-provision profit: Years increase: +2% generation EUR 23,559 mill. Increase since 2008: +32% 2 Group provisions: EUR 19 bn. Provisions > 100% of Royal Decrees Effort in Groups NPL ratio: 4.54% Best than financial systems average provisions Coverage ratio: 73% Coverage: Increased 11 p.p. in the year 3 Generating capital Core capital ratio (BIS II): Capital improvement Reducing RWAs 10.33% The ratio increased for the sixth year 4 Repaid EUR 24 bn. of LTROs (maximum) Loan-to-deposit (LTD) ratio: Improved Sharp improvement of LTD since 2008: Group 113% liquidity position Group 150% Spain 96% Spain 178% 2012 ordinary attributable profit: EUR 5,251 million Attributable profit after provisions: EUR 2,205 million
  5. 5. 1 Sustained results generation 5 In 2012 Santander maintained an excellent track record in pre-provision profit underpinned by solid revenues … Revenues and costs1 Pre-provision profit1 EUR Billion EUR Billion 42.8 43.7 40.6 23.2 23.6 38.2 22.0 22.7 32.6 17.8 19.6 20.1 16.2 17.9 14.8 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Gross income Costs Net operating income ... placing us in the small group of international banks with net operating income above EUR 23 billion(1) In order to make a homogeneous comparison the P&L accounts of previous years have been restated, including thecontribution from Santander Consumer USA and the insurance business in Latin America (included in the transaction withZurich Seguros) in the "income from the equity accounted method" line.
  6. 6. 2 Effort in Groups provisions 6 2012, an exceptional year in real estate provisions in Spain Groups Provisions (Group loan-loss provisions* + real estate Spain) EUR Billion Total Spain: EUR 9 bn. Of which real estate: EUR 6.1 bn. 18.8 11.6 12.2 11.0 Real estate provisions 7.1 2011-2012 > 100% Royal Decrees 2008 2009 2010 2011 2012(*) Before use of generic provisions
  7. 7. 2 Effort in Groups provisions 7 Real estate provisions in Spain (EUR 6,140 mill.; EUR 4,110 mill. net of tax) put attributable profit at EUR 2,205 mill. Impacts on 2012 attributable profit Accounting attributable profitEUR Million EUR Million +1,064 6,315 5,251 5,351 2,205 2,205 -4,1102012 Ordinary Capital gains TOTAL Real estate 2012 Accounting 2011 2012 attributable net of tax* provisions attributable profit net of tax profit(*) Iberia reinsurance transaction, Colombia, sale of Canalejas building, UK net
  8. 8. 2 Effort in Groups provisions 8 Net real estate exposure in Spain declined 69% since the onset of the crisis due to effort in provisions and sharp volumes reduction Total exposure coverage Total real estate exposure in Spain (including outstanding risk)EUR Billion 42.5 -EUR 28.5 bn.; -69% 37.6 47% 34.8 32.0 23.7 Gross exposure 22% 41.0 33.8 Coverage 30.6 24.9 3% 12.5 Net exposure Dec08 Dec11 Dec12 Dec08 Dec09 Dec10 Dec11 Dec12 Of which: Net loans: 8.8 • Coverage excl. outstanding risk1: 50% Net foreclosed: 3.7 • Outstanding risk coverage2 : 39%(1) Non-performing + Substandard + Foreclosed assets from real estate in Spain(2) Outstanding risk = performing loans
  9. 9. 2 Spain. Evolution of gross real estate exposure 9 Management of real estate exposure, a differential trait in the sector Sharp reduction in total gross real estate … makes Santander the bank with the exposure … lowest exposure among peers Jan-Sep’12 evolution (latest available) Gross balance at Sep’12 (latest available) EUR mill. EUR mill. SAN Jan-Dec’12: -8,289 SAN Dec’12: 36,700 Santander -5,500 23,700 34,100 C1 +300 30,200 27,900 26,500 C2 +700 C3 +900 C4 +5,100 Santander C1 C2 C3 C4Competitors data (BBVA, Caixabank, Banco Popular and Banco Sabadell) are on a like-for-like basis,assuming the perimeter they have after the acquisitions was the same in the two periods being compared
  10. 10. 2 Spain. Evolution of gross real estate exposure 10 Record sales of properties in order to reduce real estate risk (financing + foreclosures) In 2012 sales of properties doubled in On balance sheet foreclosed real estate order to reduce real estate risk dropped for the first time in 2012 Real estate sales (number of sales) Quarterly evolution - 2011 and 2012 EUR Mill. -714 33,500 +453 +373 X1.9 +225 -7 +37 • 16,000 by real estate 17,700 developers -111 -202 • 17,500 On-balance sheet real estate -438 (foreclosed) Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 2011 2012 Mortgages approved by Santander financed around 60% of sales
  11. 11. 2 Effort in Groups provisions. Coverage ratio 11 The sharp improvement of coverage ratio in Spain produced an increase at Group level for the fourth straight quarter Total Group Continental Europe % % Spain SCF 73 71 73 69 70 66 65 62 71 61 65 109 108 111 110 110 58 53 53 101 103 105 49 46 45 46 98 Dec10 Mar11 Jun11 Sep11 Dec11 Mar12 Jun12 Sep12 Dec12 D10 M11 J11 S11 D11 M12 J12 S12 D12 D10 M11 J11 S11 D11 M12 J12 S12 D12 United Kingdom and USA Latin America % % UK USA Brazil Latam Ex-Brazil 113 110 107 106 110 114 110 109 101 104 102 100 95 102 95 93 96 90 90 92 90 88 85 81 82 85 48 47 47 75 43 42 40 40 40 45D10 M11 J11 S11 D11 M12 J12 S12 D12 D10 M11 J11 S11 D11 M12 J12 S12 D12 D10 M11 J11 S11 D11 M12 J12 S12 D12 D10 M11 J11 S11 D11 M12 J12 S12 D12
  12. 12. 2 Effort in Groups provisions. NPL ratio 12 The Groups NPLs continue on an upward trend mainly because of Spain and Brazil Total Group Continental Europe % % Spain SCF 6.74 6.38 4.33 4.54 5.98 3.98 4.11 5.49 5.75 3.78 3.86 3.89 5.15 5.25 4.99 3.55 3.61 4.57 4.81 4.74 4.50 4.24 3.97 4.05 3.88 3.96 3.90 Dec10 Mar11 Jun11 Sep11 Dec11 Mar12 Jun12 Sep12 Dec12 D10 M11 J11 S11 D11 M12 J12 S12 D12 D10 M11 J11 S11 D11 M12 J12 S12 D12 United Kingdom and USA Latin America % % UK USA Brazil Latam Ex-Brazil 6.86 4.61 6.51 6.79 4.15 5.76 3.76 5.38 4.91 4.85 5.05 5.05 3.22 3.41 3.50 3.62 3.07 2.94 3.08 2.91 2.89 3.24 2.851.74 1.73 1.81 1.86 1.84 1.82 1.83 1.94 2.05 2.46 2.27 2.31 2.29D10M11 J11 S11 D11M12 J12 S12 D12 D10M11 J11 S11 D11M12 J12 S12 D12 D10M11 J11 S11 D11M12 J12 S12 D12 D10M11 J11 S11 D11M12 J12 S12 D12
  13. 13. 3 Capital improvement 13 In 2012, increase in core capital ratio for the sixth straight year Core capital ratio 2012 evolution 10.33% 10.02% +31 b.p. +1.34 8.61% 8.80% 10.02 10.33 7.58% -1.03 6.25% 5.91% Dec’11 Ordinary profit Net provisions Dec’12 generation + + FX rate Mexico IPO Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12Note: Dec’06 and Dec’07 according to BIS I
  14. 14. 4 Improved liquidity position 14 Strong liquidity improvement, a priority in the years strategy, allowed us to return the entire LTROs (EUR 24 bn.) borrowed in Dec11 Deleveraging in Spain + Portugal Net loan-to-deposit1 ratio. Total GroupVar. Dec12/Dec11 in € bn. +22 bn. 150% 135% Gap reduction: 117% 117% 113% -42 bn. -20 bn. Net loans Deposits 1 D08 D09 D10 D11 D12 Groups high issuance capacity Deposits1 + M/L term financing / net loansJan-Dec’12 in € bn. 43.0 8.0 9.0 31.1 M/L term 118% 115% 113% 10.0 issues 104% 106% 16.0 11.9 Securitisations2 Q1’12 Q2’12 Q3’12 Q4’12 Total D08 D09 D10 D11 D12(1) Including retail commercial paper(2) Placed in the market and including structured financing
  15. 15. 15 Agenda■ Group performance 2012 — Highlights — Results■ Business areas performance 2012■ Outlook■ Appendix
  16. 16. Grupo Santander Results 2012 vs. 2011 16 The results underscored the soundness of the pre-provision profit and the impact of the effort made in provisions Var. / 2011 % excl. fx EUR Mill. 2012 Amount % and perimeter Gross income 43,675 +921 +2.2 +3.7 Operating expenses -20,116 -557 +2.9 +2.8 Net operating income 23,559 +364 +1.6 +4.4 Loan-loss provisions -12,666 -2,766 +27.9 +31.3 Other results -2,446 +538 -18.0 -17.0 Ordinary profit before tax 8,447 -1,864 -18.1 -15.2 Tax and minority interests -3,189 +77 -2.4 -9.5 Profit before real estate provisions 5,251 -1,769 -25.2 -17.6 Net capital gains and provisions -3,047 -1,377 +82.4 +82.8 Accounting attributable profit 2,205 -3,146 -58.8 -48.9NOTE: In order to make a homogeneous comparison the P&L accounts of previous years have been restated, including thecontribution from Santander Consumer USA and the insurance business in Latin America (included in the transaction withZurich Seguros) in the "income from the equity accounted method" line.
  17. 17. Gross income 17 High recurring basic revenues as the main driver of profits Basic revenues Groups gross income Q412 / Q312:Constant EUR Million -EUR 73 mill.; -0.7%Total 10,867 10,663 10,739 11,106 11,218 10,732 10,619 10,283 Q412 / Q312Other2 Continental Europe -51 9,858 9,868 10,047 10,243 10,328 10,057 9,984 UK +24 9,428 Basic Latam +12 revenues1 USA -5 Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 Corporate Centre -53 (1) Basic revenues: Net interest income + fee income + insurance activities (2) Trading gains + dividends + equity accounted income + other operating results
  18. 18. Operating Expenses 18 Stable in recent quarters. Declined in Europe and rose in Latam (increased commercial capacity and signing of salary agreements) Expenses Groups expenses Q412 / Q312:Constant EUR Million -EUR 3 mill.; -0.1% Q412 / Q312 5,146 4,994 4,981 5,072 5,069 4,663 4,817 4,901 Continental Europe -8 UK -23 Latam +119Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 USA +10 Corporate Centre -101
  19. 19. Provisions 19 Higher provisions in recent quarters because of real estate provisions in Spain. Provisions > 100% of Royal Decrees Loan-loss provisions Groups Provisions Q412 / Q312:Constant EUR Million +EUR 229 mill.; +7.6% 2,780 2,230 1,130 Q412 / Q312 1,812 Continental Europe +223 3,028 3,409 3,000 3,229 UK +9 2,481 2,650 2,5881,991 Latam -6Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 USA +12 Net loan-loss provisions Real estate provisions in Spain Corporate Centre -9
  20. 20. 20 Agenda■ Group performance 2012 — Highlights — Results■ Business areas performance 2012■ Outlook■ Appendix
  21. 21. Business areas 2012 21 High geographic diversification in profits generation Ordinary attributable profit by geographic segment in 2012(1) Portugal, 1% Poland, 5% Spain, 15% Germany, 4% Brazil, 26% Other Europe, 2% United Kingdom, 13% Mexico, 12% USA, 10% Other Latam, Chile, 6% 6%(1) Over operating areas ordinary attributable profit
  22. 22. Continental Europe 2012 22 Stable revenues in recent quarters and tight cost control. Year-on-year comparison impacted by the larger provisions made Attributable profit: Basic revenues EUR 2,305 mill. EUR Million Var. 2012 / 2011 +5% Excl. perimeter 3,391 3,278 3,444 3,312 3,264 3,023 3,109 3,262 Basic revenues +4% +2% Gross income +4% +3% Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 Expenses +1% -1% Attributable profit EUR Million Net op. income +8% +7% 878 Net op. income 700 -5% -6% 584 627 602 after provisions 491 443 266 Attrib. profit +1% 0% Q111* Q2 Q3 Q4 Q112 Q2 Q3 Q4(*) Including use of generic provisions for EUR 396 million
  23. 23. Continental Europe 23 Evolution of main units ordinary attributable profit SAN Branch Network Banesto Portugal EUR million EUR million EUR million +7% 660 709 -28% -29% 174 130 124 94 1 2011 2012 2011 2012 2011 2012 Santander Consumer Finance Poland (BZ WBK) EUR million Constant EUR million +9% 727 +44%2 666 330 228 2011 2012 Apr-Dec11 2012(1) Contribution under Groups criteria. Under individual criteria, loss of EUR 955 mill(2) Perimeter impact: in 2011, consolidated for three quarters. Excl. perimeter in local criteria: +21%
  24. 24. Santander Branch Network 2012 24 Excellent deposits performance, and thus improving liquidity position. Revenues remained stable in the period Activity Basic revenues EUR Million Volumes Balances (€ bn.) and LDR1 +13% Var. Dec12 / Dec11 122% 92% 1,219 1,178 1,167 +24% 1,072 1,136 1,094 1,031 1,116 103 95 104 84 -7% Loans Deposits 2 Loans Dep. 2 Loans Dep. 2 Dec11 Dec12 Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 Return on net interest income Attributable profit Return / Cost Net interest inc. / ATAs EUR Million Return 3.66% 3.74% 3.68% 3.50%3.04% 3.43% 274 266 226 2.95% 173 196 Cost2 101 58 75 1.62%1.30% 1.36% 1.46% 1.44%Q111 Q411 Q212 Q312 Q412 2011 2012 Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4(1) Net loan-to-deposit ratio(2) Including retail commercial paper
  25. 25. Banesto 2012 25 Very good performance of deposits in the quarter, maintaining the trend of narrowing the commercial gap Activity Deposit2 growth very focused on individuals Volumes2 Loan-to-deposit1 ratio Balances in EUR bn. and Var. Dec’12 / Dec’11 Var. Dec’12 / Dec’11 +EUR 2,019 mill.; +5% 134% +4% 123% +7% +4% -7% 24 -7% 16 Loans Deposits Dec11 Dec12 3 Individuals Companies + WholesaleLOANS: Retail stable, GBM deleveraging and Public sector real estate declining NPL and coverage ratios Balances in EUR bn. much better than the sectors and var. Dec’12 / Dec’11 -2% NPL Coverage 71% -2% -9% -1% -10% -34% 53% 20 21 6.28% 12 5.01% 4 4 Individuals Other Companies + Wholesale Real estate mortgages individuals Public sector 2011 2012 2011 2012(1) Net loan-to-deposit ratio(2) Loans excluding Repos. Deposits + retail commercial paper (excl. Repos)
  26. 26. Banesto 2012 26 Soundness in the upper part of the income statement: net operating income +15% … … individual P&L impacted by real estate provisionsEUR million Basic revenues Net operating income Reconciliation of Banestos P&L under +2% the Groups criteria with individual P&L +14% 2,017 2,059 EUR million 1,267 1,112 Attrib. profit under Group criteria: 94 Retail banking profit 368 Liquidity, ALCO and markets -274 2011 2012 2011 2012 Real estate provisions -977 (Group Corporate Activities) Loan-loss provisions Attributable profit Minority interests and consolidation adjustments -72 +43% 943 -28% 661 Net loss in Banesto books -955 130 94 2011 2012 2011 2012
  27. 27. Banesto a solid franchise 27 Good performance versus competitors during the crisis Capital soundness Good liquidity position Core capital ratio Deposits1 + M/L term financing / net loans After fully absorbing the loss Repaid 100% of LTROs borrowed in Dec’11: EUR 4 bn. 9.0% 9.2% 8.3% 108% 114% 108% 111% 7.2% 7.7% 104% 6.3% Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec08 Dec09 Dec10 Dec11 Dec12 NPL ratio better than the sectors More efficient than peers% Sector Banesto Peers* Banesto % 11.38 (Nov.) Net interest income / ATAs Efficiency 7.84 Var. 2012 / 2007 in b.p. 5.81 49.6 5.08 3.37 6.28 43.7 0.92 5.01 4.11 -6 2.97 43.8 1.64 -35 0.47 41.0 Banesto Peers* Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 2007 2012(*) Banco Sabadell, Banco Popular y Bankinter(1) Including retail commercial paper
  28. 28. Banesto 2012. Santander, Banesto & Banif integration 28 Operation rationale derived from Spains market situation, aimed at improving profitability and efficiency High EUR 520 mill. Costs: 420 mill. synergies by the third year Revenues: 100 mill. New business Improved profitability Efficiency improvement structure Market share gain Will strengthen SMEs/ corporate More products in a core segments and high income clients broader branch network Neutral impact EPS in 2015: ROTE target: on capital +3% o/ consensus 12-15%
  29. 29. Spain1. Loans and deposits 29 Improved balance sheet structure and loan-to-deposit ratio in the year Appropiate loan-to-deposit structure Improved net loan-to-deposit2 ratioEUR Billion TOTAL 206 202 TOTAL Real estate Retail purpose 16 11 comm. paper Household 55 Reduced mortgages commercial Gap: Time deposits -40 bn. 106 / other Other loans 18 178% to individuals 149% Companies w/o 119% real estate 118% purposes + 104 96%suppliers financ.3 Demand 85 depositsOther Public sector 13 Gross loans Deposits D08 D09 D10 D11 D12(1) Including Santander Branch Network, Banesto, GBM Spain, Santander Consumer Spain and Banif(2) Including retail commercial paper(3) Companies: EUR 100 bn.; Financing to suppliers (Public sector): EUR 4 bn.
  30. 30. Spain1. Deposits evolution 30 Leader in deposit capturing in 2012, which produced sharp market share gain ... and segment, with special focus on Diversified growth by product ... individualsEUR Billion Change in balances in 2012 +12% +22 bn EUR Billion and % 202 Total 180 11 +5 bnRetail commercial 6 paper +11.9 Time deposits 106 +10 bn 96 and other +5.3 +3.0 Demand 85 +7 bn +1.4 deposits 78 Individuals Private Bkg. Companies Institutions Dec11 Dec12 +19% +13% +6% +14% Market share (e): +220 b.p. in the year(1) Including Santander Branch Network, Banesto, GBM Spain, Santander Consumer Spain and Banif(e) Estimated data
  31. 31. Spain1. Loans to customers 31 The sectors deleveraging continues, basically due to reduction of real estate exposure Gross loans EUR Billion Different evolution by segment 219 -6% 206 Total 23 Real estate Sharp reduction in real estate exposure -32% 16 purposes 59 Household 55 mortgages Lower household indebtedness -7% 20 18 Other loans to individuals Companies w/o 105 real estate 104 purposes + suppliers financ.2 Financing to companies continues --- 12 13 Other Public sector Dec11 Dec12(1) Including Santander Branch Network, Banesto, GBM Spain, Santander Consumer Spain and Banif(2) Companies: EUR 100 bn.; Financing to suppliers (Public sector): EUR 4 bn.
  32. 32. Spain1. Breakdown of NPL ratio and entries 32 NPL ratio increased mainly because of real estate and reduced total lending. Stable NPLs entries in individual customers and companies2 in recent quarters NPL ratio NPL entries >90 days % With real Base 100: H108 estate Non-real estate companies 47.7 purpose 287 266 283 42.8 207 235 216 219 234 144 100 28.6 Mortgages to individual customers Total 17.0 6.4 6.7 164 154 5.5 100 100 107 105 103 96 89 95 4.2 Total w/o 4.0 real estate 3.6 purpose Other loans to individuals 3.3 2.9 165 157 Dec10 Dec11 Sep12 Dec12 100 101 Consumer 138 142 76 67 62 56 56 55 100 88 2.2 2.7 2.7 2.8 Household Cards 64 53 53 mortgages 48 48 47 3.1 3.5 3.9 4.3 Rest of portfolio H108 H2 H109 H2 H110 H2 H111 H2 H112 H2(1) Including SAN Branch Network, Banesto, GBM Spain, Santander Consumer Spain and Banif(2) Companies without real estate purpose
  33. 33. Portugal 2012 33Santander Totta continued its deleveraging in a scenario of strong adjustments, with stable profit in the last quarters Activity Basic revenues EUR Million Volumes Balances (€ bn.) and LDR1 -11% Var. Dec12 / Dec11 121% 108% 273 258 +2% 242 225 246 225 28 219 195 23 26 24 -9% Loans Deposits Loans Dep. Loans Dep. Dec11 Dec12 Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 Return on net interest income Attributable profit EUR Million Return / Costs Net interest inc. / ATAs 3.98% 3.68% Return3.30% 3.40% 3.11% 1.29% 1.30% 90 41 45 38 2.51% 2.37% 2.32% 33 27 27 2.25%1.58% Costs -2Q111 Q411 Q212 Q312 Q412 Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 2011 2012(1) Net loan-to-deposit ratio
  34. 34. Santander Consumer Finance Continental Europe 2012 34 Differential evolution in its sector, against a backdrop of reduced activity. Higher profit fuelled by recurring revenues and lower provisions. High financing capacity Activity Basic revenues EUR Million Volumes Net interest income / Provisions (% /ATAs) +1% Var. Dec12 / Dec11 3.44% 3.22% Net interest 0% income 792 828 825 777 815 778 790 783 2.20 -4% 2.20 Provisions 1.24% 1.02% Loans Deposits 2011 2012 Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 Gross loans: EUR 59 bn. New loans: +1% Attributable profit*% o/ total Var. % 2012/2011 EUR Million Other +5% Germany Germany 186 201 206 Poland 183 176 181 163 5 6 Nordic countries +14% Italy 11 96 Poland +9%Spain 12 52 Spain -4% 14 Italy -29% Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 Nordic Others -11% * Excluding Santander Consumer UKs profit as it is recorded in Santander countries UK. Including it, 2012 attributable profit was EUR 827 mill. (+11%)
  35. 35. Poland (BZ WBK) 2012 35 The contribution to the Groups profits increased 44% (21% on a like-for-like period). Selective growth in lending (individuals) and savings (current a/c and mutual funds) Activity1 Basic revenues Volumes Balances (€ bn.) and LDR2 Constant EUR million Var. Dec12 / Dec11 +8% 82% 87%Individuals current a/c 225 +9% +13% 218 220 200 209 209 11 11 199 +5% 9 10 -1% Loans Dep. Loans Dep. Dec11 Dec12 Loans Deposits Q2 Q3 Q4 Q112 Q2 Q3 Q4 Return on net interest income Attributable profit Return / Costs Net interest inc. / ATAs Constant EUR million6.84% 7.06% 7.09% 7.20% 7.23% 93 3.75% 89 85 Return 3.41% 77 74 78 63 Costs 3.19% 3.19%2.65% 2.96% 3.00%Q211 Q411 Q212 Q312 Q412 Q211 2012 Q2 Q3 Q4 Q112 Q2 Q3 Q4(1) Local currency(2) Net loan-to deposit ratio
  36. 36. United Kingdom 2012 36 Improved spreads in the front book started to be reflected in revenues Good trend in costs and provisions Better funding structure and successful retail transformation Activity1 Basic revenues Volumes Loans / deposits diff. £ Million Balances in £ bn. & var. Dec12/Dec11 -17% 1.54% 1.56% 1.43% 1.41% 1.46% -5% -1% 0% 1,183 1,202 1,175 1,154 Excl. Type A 1,044 954 936 955 +5% Net interest income / customer assets 164 SMEs +18% 149 1.77% 1.63% 31 1.42% 1.35% 1.35%Mortgages Companies Deposits 2 Q4 Q112 Q2 Q3 Q42 Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 Attributable profit: £ 952 mill. (EUR 1,175 mill.) Attributable profit Var. 2012 / 2011 in £ £ Million Gross income -18% 431 Expenses -1% 375 355 255 268 219 Net op. income -30% 210 (**) Net op. income after provis. -43% -101 203 Ordinary attrib. profit -16% Q111 Q2* Q3 Q4 Q112 Q2 Q3 Q4 Attributable profit -10% (*) Impact from PPI provision (**) Positive impact of £65 mill. from net between capital gains and provisions(1) Local criteria. Balances in billion sterling(2) Excluding GBM balances and other deposits for £9 bn. at December 2012Note.- SMEs do not include non-core balances
  37. 37. Brazil 2012 37 Strong growth of net operating income in the year (+17%) backed by revenues. In the quarter, impact from spreads on revenues and lower provisions Activity1 Basic revenues Volumes NII / Provisions (o/ATAs) Constant US$ million +3% Var. Dec12 /Dec11 Net 8.23% 7.42% interest income 4,851 5,022 5,218 5,152 5,004 4.28 4,355 4,452 4,522 +6% +6% 4.63 Provisions 3.95% 2.79% Loans Deposits 2 2011 2012 Attributable profit: US$ 2,841 mill. Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 (EUR 2,212 mill.)Var. 2012 / 2011 in constant US$ Excl. Attributable profit perimeter Basic revenues +12% +12% Constant US$ million Gross income +12% +13% Net profit 1,031 957 983 Expenses +5% +5% Minority 920 833 849 874 894 174 165 213 interests 155 132 174 177 194 Net op. income +17% +17% Attributable 857 765 792 770 Net op. income 701 655 700 717 after provisions -8% -7% profit Attrib. profit -9% 0% Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 (1) Local currency (2) Excluding Repos. Including «letras financieras»
  38. 38. Latin America Ex-Brazil 2012 38 Very good year with activity and profits excluding perimeter growing at double digit. Expansion of commercial capacity will continue in 2013 Activity1 Basic revenues Constant US$ million Volumes NII / Provisions (o/ATAs) +10% Var. Dec12 / Dec11 4.20% 3.61% Net interest 2,271 2,230 2,223 2,387 +12% income 1,930 2,014 2,068 2,177 +10% 2.79 3.17 Provisions 0.82% 1.03% Loans Deposits 2 2011 2012 Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 Attributable profit: US$ 2,687 mill. Attributable profit by country (EUR 2,092 mill.)Var. 2012 / 2011 in constant US$ (%) Excl. Constant US$ million perimeter Basic revenues +11% +14% 756 796 769 818 752 762 Net profit 687 709 Gross income +10% +14% 76 80 79 62 77 49 149 Minority 47 Expenses +6% +9% interests 720 739 Net op. income +13% +17% 694 640 689 675 660 613 Attributable profit Net op. income after provisions +8% +13% Attrib. profit -2% +9% Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 (1) Constant currency. In volumes, excluding impact from Colombia sale (2) Excluding Repos
  39. 39. Mexico 2012 39 In 2012, sharp activity increase and profits growing at double digit rates. In Q412 revenues grew for the seventh quarter and costs reflected the increased commercial capacity Activity1 Basic revenues Volumes NII / Provisions (o/ATAs) Constant US$ million Var. Dec12 /Dec11 3.78% 4.04% +19% Net interest +19% income 906 936 3.01 3.10 770 787 849 850 +7% 703 714 Provisions 0.77% 0.94% Loans Deposits 2 2011 2012 Attributable profit: US$ 1,304 mill. (EUR 1,015 mill.) Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 Var. 2012 / 2011 in constant US$ Excl. perimeter Attributable profit Basic revenues +19% +19% Constant US$ million Gross income +17% +18% 383 Net profit 344 345 Expenses +11% +11% 321 296 323 287 307 74 Minority Net op. income +21% +23% interests 321 323 383 344 345 296 287 Net op. income 233 Attributable after provisions +17% +19% profit Attrib. profit +6% +14% Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4(1) Local currency(2) Excluding Repos
  40. 40. Chile 2012 40 Improved loans and deposits trend in the quarter. In profits, favourable impact on revenues due to higher inflation (UF portfolio). Activity1 Basic revenues Volumes NII / Provisions (o/ATAs) Constant US$ million Var. Dec12 /Dec11 +4% 3.92% 4.15% Net interest +9% income +6% 2,77 691 715 715 690 741 2,94 634 641 646 Provisions 1.38% 0.98% Loans Deposits 2 2011 2012 Attributable profit: US$ 640 mill. Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 (EUR 498 million ) Var. 2012 / 2011 in constant US$ Excl. Attributable profit perimeter Basic revenues +4% +4% Constant US$ million Gross income +4% +5% 334 Net profit 281 282 75 253 241 247 Expenses +6% +6% Minority 61 206 77 interests 78 75 174 74 Net op. income +3% +5% 45 Attributable 259 49 Net op. income profit 220 205 -14% 161 175 166 173 after provisions -11% 125 Attrib. profit -24% -10% Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4(1) Local currency(2) Excluding Repos
  41. 41. 41 Latin America ex-Brazil The remaining countries in the region registered growth, mainly driven by basic revenues Attributable profit. Constant US$ million Argentina Puerto Rico Uruguay +16% 422 +56% +128% 363 74 60 47 26 2011 2012 2011 2012 2011 2012 Perú IPB* +32% +6% 185 196 20 15 2011 2012 2011 2012(*) International Private Banking
  42. 42. United States 2012 42 Profit of US$ 1,042 mill. (EUR 811 mill.) in the US. Sovereign Bank recovered its growth pace in the quarter. SCUSA kept up its contribution backed by sharp activity increase Activity1 Quarterly profit US$ Mill. Trust PIERS impact: Volumes NII / Provisions (o/ATAs) US$127 mill. Var. Dec12 / Dec11 3.21% 2.79% Net interest income 176 183 195 177 191 171 190 +5% +5% 2.50 2.35 Provisions 54 0.71% 0.44% Loans Deposits 2011 2012 Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4 Activity1 Quarterly contribution US$ Mill. Use of provisions: US$ 77 million Gross loans New loans US$ billion (avg. balances) US$ billion SCUSA profit 240 +15% +51% 17.6 Minority int. and 191 15.3 8.6 perimeter 164 163 172 162 159 163 5.7 Contribution to SAN 156 (constant 107 106 112 124 105 103 104 perimeter) 2011 2012 2011 2012 Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4(1) Local currency
  43. 43. Corporate Activities 43 Lower revenues (liquidity measures) and larger provisions (Italys goodwill and real estate fund) 2012 2011 Var. EUR million Cost of credit and: -352 liquidity buffer Revenues -1,895 -1,392 -503 Metrovacesa: -100 Operating expenses -837 -838 +1 Italys goodwill: -156 Provisions, tax and minority interests -531 67 -598 Real estate fund: -169 Ordinary attributable profit -3,263 -2,163 -1,100
  44. 44. 44 Agenda■ Group performance 2012 — Highlights — Results■ Business areas performance 2012■ Outlook■ Appendix
  45. 45. 45Economic-financial scenario still demanding in 2013 Gradual recovery in the confidence in the euro: ongoing reforms Reduced tensions in peripheral countries (Italy, Spain, Ireland, Portugal) Eurozone Spain: banking recapitalisation / restructuring + private sector adjustment + started reforms … will begin to bear fruit USA: recovery will continue, although still with uncertainties (fiscal cliff). Other Financial business growing weakly and lower spreads developed countries United Kingdom: slower recovery. Financial business, significant improvement of funding costs Emerging Sustained growth in Latin America. Improvement in Brazil countries Poland: deceleration, although better than the eurozones average In short, 2013 macroeconomic scenario still weak. Improvement expected throughout the year towards solid recovery in 2014 Global Specification of regulatory changes started: LCR defined, CRD IV underway, delayed application of BIS III
  46. 46. 2013 Outlook 46 Weak macroeconomic scenario, although improving Main management focus: Santander-Banesto-Banif merger Spain In business, mortgages repricing and lower liabilities costs Towards cost of credit normalisation in second half of 2013 / 2014 Selective market share increase SCF Keep credit quality at differential levels High profitability, above competitors Main management focus: BZ WBK and Kredyt Bank merger Poland Significant activity growth Achieving the targets announced during the merger Selective balance sheet growth United Focus on reducing liabilities cost. It will reflect on revenues from Kingdom the second half of the year onwards Keep increasing market share in companies
  47. 47. 2013 Outlook 47 Volumes recovering double digit growth; spreads under pressure Brazil General and personnel expenses below inflation Gradual improvement of credit quality with macroeconomic recovery Mexico: gaining market share with the expansion plan. It will Latam-ex reflect in activity and profits. Maintaining good risk quality Brazil Chile: volumes recovery (mainly liabilities). Stability / gradual reduction of cost of credit Consolidation of retail franchise will continue, taking advantage of growth potential in companies USA Scenario of lower spreads, which will be offset by volumes Cost of credit will continue sliding downwards
  48. 48. 48 Agenda■ Group performance 2012 — Highlights — Results■ Business areas performance 2012■ Outlook■ Appendix
  49. 49. 49 Groupsbalance sheet
  50. 50. Main trends of the Group’s balance sheet 50 Retail balance sheet, appropriate for the business nature, of low risk, liquid and well capitalised Balance sheet at December 2012 1 Lending: 57% of balance sheet EUR billion 1,270 1,270 2 Cash, Central Banks and credit Credit institutions: 17% Cash and credit institutions institutions 153 212 2 Derivatives 131 3 Derivatives 118 3 Other 36 Derivatives (with counterparty AFS Portfolio 74 4 on the liabilities side): 9% of Trading portfolio 49 5 balance sheet Other* 96 6 Customer Deposits** 638 4 Available for sale portfolio (AFS): 6% Loans to customers 721 1 5 Issues and Trading portfolio: 4% subordinated 213 liabilities Shareholders’ equity & fixed liabilities 99 6 Other (goodwill, fixed assets, Assets Liabilities accruals): 7%(*) Other assets: Goodwill EUR 25 bn., tangible and intangible assets EUR 17 bn., other capital instruments at fair value EUR 1 bn., accruals and other accounts EUR 53 bn.(**) Including retail commercial paper
  51. 51. 51Secondary segments results
  52. 52. Retail Banking 52 In the year, the positive evolution of basic revenues did not feed through to profit because of larger provisions and minority interests Activity Basic revenues1EUR billion EUR million Loans Deposits2 -1% +5% -2% 573 9,086 9,430 9,438 9,443 9,913 9,813 9,727 9,334 547 660 648 Dec11 Dec12 Dec11 Dec12 Attributable profit: EUR 6,385 million Q111 Q2 Q3 Q4 Q112 Q2 Q3 Q4Var. 2012 / 2011 Attributable profit Basic revenues +4% EUR million Gross income +4% 2,187 Expenses +3% 1,727 1,570 1,647 1,619 1,605 1,513 1,427 Net op. income +4% Net op. income after provisions -14% Ordinary attrib. profit -9% Q111 Q2 Q3 Q4 Q112 Q2 Q3* Q4 (*) Positive impact of EUR 81 mill. from the net between capital gains and provisions in Attrib. profit -8% the UK(1) Net interest income + fee income + Insurance activity(2) Including retail commercial paper and "letras financieras"

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