Banco Santander, S.a. · BME:SAN
Banco Santander — Merger or Acquisition (July 2008)
29 slides from Banco Santander's merger presentation, Jul 14, 2008
Slide 1: Recommended Offer for Alliance & Leicester
Recommended Offer for Alliance & Leicester 14 July 2008
Slide 2: Disclaimer
Disclaimer This document does not constitute an offer to sell, or an invitation to subscribe for or purchase, any securities or the solicitation of any approval in any jurisdiction, nor shall there be any sale, issuance or transfer of the securities referred to in this Investor Presentation in any j
Slide 3: Description of the deal
Description of the deal Strategic rationale Financial impact Summary
Slide 4: A full and fair offer
A full and fair offer 1 Santander share for every 3 A&L shares (1) The value of 299 pence per A&L share plus an 18 pence per share interim dividend 36.4% premium to closing price on 11 July 2008 9.3% premium based on average share prices over 4 weeks prior to 11 July 2008 Significant premium to peer
Slide 5: Additional information
Additional information Structured as Scheme of Arrangement Subject to Santander EGM to approve share issuance A&L shareholder approval and UK court sanction Regulatory and anti-trust approvals The Board of A&L will declare an interim dividend of 18 pence per share prior to completion A&L shareholder
Slide 6: Strategic rationale
Description of the deal Strategic rationale Financial impact Summary
Slide 7: Strong strategic rationale for A&L shareholders to accept the offer
Strong strategic rationale for A&L shareholders to accept the offer Santander believes that A&L’s business is affected by current market conditions and cannot take full advantage of growth opportunities Write-downs of treasury assets impacting regulatory capital position Treasury portfolio is relati
Slide 8: Abbey has performed well with Santander's business model
Abbey has performed well with Santander’s business model Cost/Income ratio FY 2007 vs. FY 2006 30% 60% 20% 10% 55% 0% (10% ) (20% ) 50% (30% ) (40% ) (50% ) 45% Gross Net Attributable FY 2006 FY 2007 operating operating profit income income Abbey A&L Abbey A&L
Slide 9: Strong strategic rationale for Santander
Strong strategic rationale for Santander Increased critical mass in the UK market (as part of 1 our “Vertical Strategy”) In-market synergies (migration to Partenon, 2 integration of back office functions) 3 Good geographic fit — better market reach Acceleration of Abbey’s planned expansion in SME /
Slide 10: Increased critical mass in the UK market
1 Increased critical mass in the UK market (as part of our “Vertical Strategy”) Branches 5.6% 2.0% 7.6% Savings Balances 5.9% 2.2% 8.1% Abbey A&L Unsecured Personal 3.0% 5.2% 8.2% Loan Balances Mortgage Balances 9.3% 3.6% 12.9% 0% 2% 4% 6% 8% 10% 12% 14% Market Share Note: Data as at December 2007
Slide 11: A&L's efficiency can be improved through best practices
2 We believe A&L’s efficiency can be improved through best practices Benchmarking: operating expenses (2008) 0.95% 1.0% 0.8% 0.67% 0.5% Total expenses (1) /total customer balances (2) 0.3% 0.0% A&L _____ Abbey Adjusting for differences in business mix, we believe there is a £30-50m opportunity on a
Slide 12: In-market synergies: migration to Partenon, integration of back office functions
2 In-market synergies: migration to Partenon, integration of back office functions Implementation of Partenon reaching final stages ... we are now ready to integrate A&L with low execution risk
Slide 13: Approximately £180 million in pre-tax cost synergies
2 These initiatives will allow Santander to capture approximately £180 million in pre-tax cost synergies £ million 200 £15m £180m £10m £35m 150 £25m 100 £65m 50 £30m 0 Efficiency _____ IT _____ Operations _____ Central and _____ Property _____ Other e.g. Total best _____ initiatives _____ support __
Slide 14: Good geographic fit — better market reach
3 Good geographic fit — better market reach 1 Abbey branch 1 A&L branch network _____ network 2 2 3 2 Total branches _____ Total branches 1 705 1 254 4 2 3 3 2 2 2 2 16 5 3 1 3 1 10 4 3 16 5 1 1 1 1 5 3 15 12 3 0 1 6 6 13 8 0 2 2 1 1 16 2 1 8 15 1 0 3 8 15 1 0 2 6 1 6 7 1 1 21 2 1 14 0 1 3 12 7 1 1
Slide 15: Acceleration of Abbey's planned expansion in SME / commercial market
4 Acceleration of Abbey’s planned expansion in SME / commercial market by 2-3 years A&L’s business centre network Business banking franchise Active Customers 212,400 77% 120,000 92,400 Abbey A&L Combined Commercial Loan Balances (£bn) 290% 11.3 8.4 2.9 Abbey _____ A&L _____ Combined
Slide 16: Measures will be taken to manage potential risks
Measures will be taken to manage potential risks Risks _____ Mitigants Credit and liquidity 1. Increase A&L regulatory capital ratios to higher levels Increasing Santander’s exposure to the UK... 2. Incremental provisions factored into our P&L projections ... at a time where asset quality across the
Slide 17: Financial impact
Description of the deal Strategic rationale Financial impact Summary
Slide 18: Additional £1bn of capital is required
In current market conditions, Santander’s conservative approach would imply that an additional £1bn of capital is required Santander will allocate £1 billion of capital against balance sheet strengthening and integration costs Protection against future adverse development of treasury portfolio Previ
Slide 19: Funding gap in A&L will be addressed
Funding gap in A&L will be addressed Significant funding gap in A&L’s balance sheet currently due to size of treasury and loan portfolios versus retail deposits Has created challenges for A&L in less benign market conditions Santander intends to close the funding gap by reducing the projected total
Slide 20: Estimate of potential adjustments to profits under prudent approach
Santander’s estimate of potential adjustments to profits under its prudent approach in current environment Net Profit Increase provisioning by 17 bps by 2010 over Adjust for: higher provisions average of analyst estimates of 44bps Projected assets of combined A&L and Abbey Adjust for: cost of de-lev
Slide 21: Financial impact: the deal meets our financial criteria
Financial impact: the deal meets our financial criteria 1 Santander share for every 3 A&L shares Price proposed per share 299p Total equity valuation £1.26bn Plus: additional capital £1.00bn Total cost £2.26bn Core Tier 1 impact (1) (7)bps 2009 2010 2011 Net attributable profit inc. synergies and ot
Slide 22: Summary
Description of the deal Strategic rationale Financial impact Summary
Slide 23: Summary
Summary The acquisition of A&L makes sense from an “industrial” point of view... Higher economies of scale / commercial reach In-market synergies (IT migration, integration of back offices) Recapitalisation ... and meets Santander’s financial criteria Return on investment of 19% in 2011 Earnings acc
Slide 24: Good balance between risks and opportunities
·We believe the proposed offer represents a good balance between risks and opportunities... ·... and it offers value for both A&L’s and Santander’s shareholders C73893 Page 65 of 71
Slide 25: Estimated Timetable
Estimated Timetable ‘08 14 July Announcement of transaction 29 July Santander and Abbey interim results 1 August A&L interim results August Scheme documents posted to A&L shareholders A&L shareholder meetings September Santander shareholder meeting Final UK court hearing to approve Scheme of Arrange
Slide 26: Appendix
Appendix
Slide 27: P&L and Balance Sheet (2007)
P&L and Balance Sheet (2007) Abbey _____ A&L _____ Aggregate Profit and loss (£m) Net interest income 1,597 801 2,398 Total revenue 2,635 1,426 4,061 Total expenses 1,312 774 2,086 of which staff costs 709 267 976 Impairment losses 214 100 314 Profit before tax 1,110 399 1,509 Net profit attributabl
Slide 28: Sources and Bases
Sources and Bases Historical financial information relating to Santander has been extracted from its audited annual accounts for the years to which such information relates and the interim and quarterly unaudited financial statements as published by Santander for the relevant periods, all of which a
Slide 29: Relations with Investors and Analysts
Relations with Investors and Analysts Ciudad Grupo Santander Edificio Pereda, 1 a planta Avda de Cantabria, s/n 28660 Boadilla del Monte, Madrid (España) Teléfonos: 91 259 65 14 — 91 259 65 20 Fax: 91 257 02 45 e-mail: investor@gruposantander.com www.gruposantander.com SIGNATURE Pursuant to the requ