Banco Santander, S.a. · BME:SAN
Banco Santander — H1 2023 Earnings Presentation
45 slides from Banco Santander's earnings presentation, Jul 26, 2023
Slide 1: Earnings Presentation H1'23
26 July 2023 Earnings Presentation — H1’23
Slide 2: Important information
Important information Non-IFRS and alternative performance measures This presentation contains financial information prepared according to International Financial Reporting Standards (IFRS) and taken from our consolidated financial statements, as well as alternative performance measures (APMs) as de
Slide 3: Important information
Important information The following important factors (and others described elsewhere in this presentation and other risk factors, uncertainties or contingencies detailed in our most recent Form 20-F and subsequent 6-Ks filed with, or furnished to, the SEC), as well as other unknown or unpredictable
Slide 4: Index
Index 1 2 3 4 H1’23 Group Final Appendix Highlights & review remarks progress on our strategy 4
Slide 5: H1'23 highlights
H1’23 highlights Q2 Attributable Profit H1 Attributable Profit Strong H1 results with 9 million new customers YoY contributing to a 12% revenue increase €2.7bn €5.2bn +14% vs. Q2’22 +7% YoY EPS RoTE ONE TRANSFORMATION driving efficiency improvement and growth in profitability +13% YoY 14.5%+80bps Yo
Slide 6: Profit increased in H1'23, supported by customer revenue and efficiency improvement
Profit increased in H1’23, supported by customer revenue and efficiency improvement, with double-digit growth in net operating income Underlying P&L Current Constant Attributable profit € million H1'23 H1'22 % % € mn NII 20,920 18,409 14 15 +14% Net fee income 6,103 5,852 4 5 2,670 2,543 2,571 Other
Slide 7: Well on track to achieve our 2023 financial targets
Well on track to achieve our 2023 financial targets … FY 2023 targets H1’23 Revenue1 Double-digit growth +13% Efficiency ratio 44-45% 44.2% CoR <1.2% 1.08% FL CET1 >12% 12.2% RoTE >15% 14.5% Note: targets market dependent. Based on macro assumptions aligned with international economic institutions.
Slide 8: Consistent execution of One Transformation and value from Global and Network businesses
… backed by consistent execution of One Transformation and value added from our Global and Network businesses Global & network Global Tech FY’22 One Transformation businesses capabilities & others H1’23 45.8% -85 bps -43 bps -36 bps 44.2% • Product simplification: 362 fewer • Multilatinas / Multieur
Slide 9: Digital bank with branches: One Transformation delivering results
Digital bank with branches: One Transformation delivering results H1’23 data. Changes in constant euros Simplification Process automation Best-in-class Tech Platform Gravity Cost1 # Operational FTEs Deployed in 3 countries per active customer per mn customers -2% -3% 50bn YoY YTD Transactions YTD Re
Slide 10: Global and Network businesses: revenue growing above Group
Global and Network businesses: revenue growing above Group H1’23 data. Changes YoY in constant euros SCIB WM&I Payments Auto Network revenue PB network AuMs # Transactions Auto loans and leases €2.0bn €50bn 17bn €174bn +27% +10% +13% +7% Total +24% +25% +27% PagoNxt -3% 1 revenue ID Targets (CAGR 22
Slide 11: Progressing towards our 2025 profitability targets
Progressing towards our 2025 profitability targets RoTE H1'23 2025 Target RoTE H1'23 2025 Target Europe 13.5% c.15% SCIB 29.2% >20% North 89.3% c.60% America 11.1% c.15%1 WM&I South 18.3% >15% America 14.0% c.19% Auto Digital DCB Consumer 10.8% c.15% EBITDA Margin H1'23 2025 Target Bank Group 14.5%
Slide 12: Index
Index 1 2 3 4 H1’23 Group Final Appendix Highlights & review remarks progress on our strategy 12
Slide 13: Double-digit revenue growth backed by good customer activity
Double-digit revenue growth backed by good customer activity across businesses and regions Revenue trends Total revenue Constant € mn +15% 13,493 13,927 14,307 • >95% of total revenue is customer related which drives the vast Total 12,502 12,466 13,039 majority of total revenue growth Other income G
Slide 14: NII and NIM up YoY, supported by volumes and margin improvement
NII and NIM up YoY, supported by volumes and margin improvement NII drivers Net interest income and NIM 2.74% 2.63% • Strong NII growth of 6% in the quarter 2.56% 2.56% 2.52% NIM 2.45% • NII growing YoY across regions: Quarterly +17% - Europe (+32%) and Mexico (+12%), strong increase 10,771 NII driv
Slide 15: Net fee income grew driven by customer activity and value-added products
Net fee income grew driven by customer activity and value-added products, with 42% of total fees from Global and Network businesses Net fee income drivers Net fee income YoY % changes in constant euros Constant € mn • Active customers increased by 2mn YoY +4% Retail • Transactionality and well-targe
Slide 16: Focus on productivity and efficiency with costs decreasing in real terms
Focus on productivity and efficiency with costs decreasing in real terms Costs and efficiency drivers Costs 46.0% 45.6% 46.6% Efficiency 45.0% 44.1% 44.3% Quarterly • Transformation towards simpler and more 5,730 5,929 6,331 6,128 6,351 integrated models is driving cost improvements 5,557 Efficiency
Slide 17: Credit quality remains robust, on track to achieve Group 2023 CoR target
Credit quality remains robust, on track to achieve Group 2023 CoR target Credit quality drivers LLPs and Credit quality 0.99% 1.05% 1.08% 0.77% 0.83% 0.86% • Credit quality remains robust supported by record CoR Group low unemployment in most countries 2,992 2,590 2,686 2,886 2,885 NPL and • NPL rat
Slide 18: Diversified balance sheet funded with stable retail deposits
Diversified balance sheet funded with stable retail deposits Loan portfolio and customer funds Deposit structure Jun-23 Jun-23 €1,022bn 0% €1,134bn +4% Total SCIB 136 Mutual deposits1 Transactional c.75% -4% 193 +4% funds SMEs SCIB 142 +18% 250 -2% & Corp SMEs, Corp +1% Deposits 250 Consumer 130 +5%
Slide 19: Capital in line with our target of >12%. Front-book RoTE above 15%
Capital in line with our target of >12%. Front-book RoTE above 15% Q2’23 FL CET1 performance Maximize capital productivity % Jun-23 or latest available data +0.21 Front book pricing 2.9% RoRWA of new book 12.2 -0.11 12.2 -0.04 -0.03 Asset rotation and risk transfer activities c.9% RWAs mobilized vs.
Slide 20: Index
Index 1 2 3 4 H1’23 Group Final Appendix Highlights & review remarks progress on our strategy 20
Slide 21: Well-positioned to create shareholder value and sustainable profitability
Well-positioned to create shareholder value and sustainable profitability Our profitability was up YoY, supported by customer growth and double-digit increase in revenue H1’23 Acceleration of our structural changes to a simpler & more integrated 14.5% >12% +13% model through ONE TRANSFORMATION is dr
Slide 22: Index
Index 1 2 3 4 H1’23 Group Final Appendix Highlights & review remarks progress on our strategy 22
Slide 23: Appendix
Appendix Investor Day 2025 targets summary Primary and Secondary segments Reconciliation of underlying results to statutory results Glossary The other information in the Appendix regularly provided each quarter can be found in the document entitled "Supplementary Information", published together wit
Slide 24: Double-digit growth in value creation
Double-digit growth in value creation 2022 H1’23 2025 targets RoTE (%) 13.4 14.5 15-17 Profitability Payout (Cash + SBB)1 (%) 40 50 50 EPS Growth (%) 23 13 Double-digit Total customers (mn) 160 164 c.200 Customer centric Active customers (mn)2 99 99 c.125 Simplification & Efficiency ratio (%) 45.8 4
Slide 25: Appendix
Appendix Investor Day 2025 Targets summary Primary and Secondary segments Reconciliation of underlying results to statutory results Glossary The other information in the Appendix regularly provided each quarter can be found in the document entitled "Supplementary Information", published together wit
Slide 26: Primary segments
Primary segments Detail by region and country 26
Slide 27: Europe
Europe Highlights Key data and P&L • On track to achieve our key transformation projects such as One Loans Deposits Mutual Funds App, tech commonality and shared services €564bn -5% €604bn +1% €100bn +3% • Customer growth continued in the region (+1mn YoY) Efficiency CoR RoTE 41.9% -6.6pp 0.42% +5bp
Slide 28: Spain and UK
España and UK Spain UK • Strong YoY growth in customers (+738k) and deposits (+3%). • Higher rates and economic slowdown continued to affect loan Loans affected by prepayments and lower corporate demand volumes, while deposits up YoY (mainly in saving accounts) • Profit +74% driven by higher NII, bo
Slide 29: Portugal and Poland
Portugal and Polonia Portugal Poland • Loan volumes remained under pressure due to higher rates • Loans increased in CIB, corporates and consumer but were • Excellent management of liquidity ratios, mitigating the effect offset by the drop in mortgages on deposits from the migration to public sector
Slide 30: North America
North America Highlights Key data and P&L • Larger customer base and enhanced customer experience Loans Deposits Mutual Funds through tailored products and services €160bn +5% €140bn +13% €28bn -2% • Strong performance in both loans (especially individuals Efficiency CoR RoTE and corporates) and tim
Slide 31: US and Mexico
USA y Mexico US Mexico • Stable and diversified deposit base supported YoY growth • Successful customer attraction strategy reflected in 1mn (time deposits). Lending up driven by Auto, Multifamily and new customers and growth in volumes CIB • Excellent profit and profitability performance supported
Slide 32: South America
South America Highlights Key data and P&L • We are focusing on increasing the value we bring to the Loans Deposits Mutual Funds Group and promoting synergies across our global and €165bn +8% €134bn +8% €62bn +7% regional businesses Efficiency CoR RoTE • 11% customer growth driven by higher transacti
Slide 33: Brazil and Chile
Brasil and Chile Brazil Chile • Selective volumes growth focused on secured and higher • Continued business transformation to offer the best products rated customers and services • Profit down YoY affected by negative NII sensitivity, inflation • Profit YoY impacted by negative NII sensitivity. Soli
Slide 34: Argentina, Uruguay, Peru and Colombia
Argentina y Uruguay Argentina Uruguay, Peru and Colombia • Changes affected by high inflation • Focus on digital expansion in Uruguay and on joint initiatives between CIB and Corporates in Peru and Colombia • Customer and volumes growth, with stable credit quality. #1 NPS, with one of the best rated
Slide 35: DCB Digital Consumer Bank
DCB Digital Consumer Bank Highlights Key data and P&L • We have the most OEM relationships in Europe supporting our auto business. Additionally, we are focusing on being a New lending Loans Customer Funds leader in leasing and mobility €26bn +5% €128bn +8% €65bn +11% • Renewed our partnership with S
Slide 36: Corporate Centre
Corporate Centre Highlights Income statement Underlying P&L* H1'23 H1'22 • NII improved significantly driven by the higher liquidity NII -94 -353 buffer remuneration as a result of the rising interest rates Gains/losses on financial transactions -189 -371 • Lower negative FX hedging impact resulted
Slide 37: Secondary segments
Secondary segments Detail on CIB, WM&I and Payments businesses 37
Slide 38: Corporate & Investment Banking and Wealth Management & Insurance
Corporate & Investment Banking Wealth Management & Insurance • Our unique, diversified business model (geographical, customer type Strong growth in contribution to Group profit (+30% YoY) in a capital- and products) combined with our global reach and local strength light business, reflected in an Ro
Slide 39: PagoNxt and Cards
PagoNxt Cards • Merchant Acquiring: strong TPV growth (+25% YoY) with market • 97 million cards managed globally share gains in core markets • Revenue grew 9% YoY (+10% in constant euros) • Revenue increased 31% YoY (+27% in constant euros) due to overall increase in business activity and volumes ac
Slide 40: Appendix
Appendix Investor Day 2025 Targets summary Primary and Secondary segments Reconciliation of underlying results to statutory results Glossary 40
Slide 41: Reconciliation of underlying results to statutory results
Reconciliation of underlying results to statutory results January-June 2023 January-June 2022 Statutory Underlying Statutory Underlying Adjustments Adjustments results results results results Net interest income 20,920 — 20,920 18,409 — 18,409 Net fee income 6,103 — 6,103 5,852 — 5,852 Gains (losses
Slide 42: Appendix
Appendix Investor Day 2025 Targets summary Primary and Secondary segments Reconciliation of underlying results to statutory results Glossary 42
Slide 43: Glossary - Acronyms
Glossary - Acronyms • ALCO: Assets and Liabilities Committee • GDF: Global Debt Finance • Ps: Per share • AM: Asset management • GDP: Gross domestic product • QoQ: Quarter-on-Quarter • AT1: Additional Tier 1 • GTB: Global Transaction Banking • Repos: Repurchase agreements • AuMs: Assets under Manage
Slide 44: Glossary - Definitions
Glossary - Definitions PROFITABILITY AND EFFICIENCY • RoTE: Return on tangible capital: Group attributable profit / average of: net equity (excluding minority interests) – intangible assets (including goodwill) • RoRWA: Return on risk-weighted assets: consolidated profit / average risk-weighted asse
Slide 45: Thank You.
Thank You. Our purpose is to help people and businesses prosper. Our culture is based on believing that everything we do should be: