Banco Santander, S.a. · BME:SAN
Banco Santander — Q1 2010 Earnings Presentation
64 slides from Banco Santander's earnings presentation, Apr 30, 2010
Slide 1: Activity and Results First Quarter 2010
ACTIVITY AND RESULTS First Quarter 2010 29 April 2010
Slide 2: Important information
Important information Banco Santander, S.A. (“Santander”) cautions that this presentation contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995. These forward-looking statements are found in various places throughout this presentation and i
Slide 3: Agenda
Agenda Group highlights Q1’10 Business areas results Q1’10 Conclusions Appendix
Slide 4: Consistent recurring profit and balance sheet strength
Consistent recurring profit Balance sheet strength 1Attrib. profit: EUR 2,215 mill. (+5.7%) Prudent balance sheet management: EPS: 0.26 € (+3.3% /Q1’09) 4Hedged credit and market risks Large loan-loss provisions underpinned by diversification by markets / businesses 2 The P&L reflects the management
Slide 5: High profit generation in Q1'10
1 High profit generation in Q1’10 ... Group’s quarterly attributable profit Earnings per share EUR million EUR cents +5.7% 2,423 +3.3% 2,221 2,202 2,215 2,096 0.2472 0.2553 Q1’09 Q2 Q3 Q4 Q1’10 Q1’09 Q1’10
Slide 6: Adequate geographic / business diversification (EUR)
1 backed by adequate geographic / business diversification Continental Europe: Data in EUR million Brazil Minority int. Retail units Q4’09: 95 mill. € Mill. Q1’10: 106 mill. € Mill. -2% +38% 1,046 1,024 950 882 1,030 Q1’10 Attributable profit* 628 578 603 525 436 +17% EUR Mill. and % +4% Q1’09 Q2 Q3
Slide 7: Adequate geographic / business diversification (constant US$)
1 backed by adequate geographic / business diversification Continental Europe: Brazil Minority int. Retail units Q4’09: 145 mill. constant US$ million Q1’10: 146 mill. € Mill. -2% +14% 937 1,046 1,024 950 882 1,030 Q1’10 Attributable profit* 730 825 823 833 +1% +17% EUR Mill. and % Q1’09 Q2 Q3 Q4 Q1
Slide 8: Grupo Santander income statement Q1'10
2 Grupo Santander income statement Q1’10 Sound income statement, with the most basic revenues, gross and net operating income and profit growing Var. / Q1’09 % excl. f.x. and EUR Mill. Q1’10 Amount % perimeter** Net interest income 7,122 +1,083 +17.9 +7.8 Fees 2,326 +162 +7.5 +0.1 A 1 Trading gains
Slide 9: Strong growth in operating profit
2 Maintaining strong growth in operating profit, with different contribution from the business drivers A Sound basic revenues (Net int. inc. + fees + insurance) % var. / same period previous year +10.6 +11.3 +10.7 +10.0 +5.8 Net operating income after loan-loss provisions Q1’09 H1’09 9M ‘09 12M ‘09
Slide 10: Sound revenues: growing at slower pace
2.A Sound revenues: growing although at slower pace Net interest income + fees + Key facts insurance activity EUR billion Volumes: lending still weak, strong growth of 9.1 9.2 9.2 9.5 deposit base and recovery of mutual funds 8.3 Fees and 2.5 2.4 2.3 2.4 insurance activity 2.3 Var. / Mar’09 +13% +12
Slide 11: Strict costs management and efficiency gain
2.B Strict costs management produced a further efficiency gain Costs by unit Efficiency ratios** (excl. perimeter and fx) Var. (%) / Q1’09 Var. / Q1’09 SAN Branch Network -1.0% Continental 35.5% -0.5 p.p. Banesto -0.2% Europe SCF -2.1% United Kingdom 38.4% -3.7 p.p. Portugal -1.7% United Kingdom (in
Slide 12: Lower pressure on provisions
3 Q1’10 Results. Lower pressure on provisions Significant slowdown on year-on-year growth, with specific provisions stable in the last quarters Specific provisions Group provisions* EUR million 3,597 2,694 2,637 2,833 2,811 EUR million 3,010 -7% +10% 2,417 2,574 2,436 2,209 2,284 Q1’09 Q2 Q3 Q4 Q1’1
Slide 13: Sound balance sheet backed by prudent management
4 Sound balance sheet backed by prudent management Management suitable to high risks and uncertain environment, anticipating more demanding legislation Demanding environment Santander management Still high levels of NPLs although Basic focus on credit risk and improving trend with differences by mar
Slide 14: Credit risk management
4 Sound balance sheet. Credit risk management Better credit quality than competitors and good performance of risk variables Group ratios (Dec.’09) NPLs and coverage ratios. Grupo SAN Percentages NPLs Coverage NPLs Coverage 5.84% 75% 80 72 73 75 74 54% 3.24% 2.49 2.82 3.03 3.24 3.34 +33 bp +21 bp +21
Slide 15: Credit risk management. Risk premiums
Credit risk management. Risk premiums* Risk premiums performance in the main areas underscore improvements in credit quality San+Banesto risk premium SCF risk premium Percentages Percentages 4.44 4.54 4.20 2.18 2.19 1.97 3.60 1.83 1.69 2.98 Mar’09 Jun Sep Dec Mar’10 Mar’09 Jun Sep Dec Mar’10 UK risk
Slide 16: Credit risk management. Loan-loss provisions
4 Credit risk management. Loan-loss provisions Larger loan-loss provisions in the quarter with generic ones remaining at over EUR 6.6 billion Loan-loss provisions EUR million Spain: Generic provisions 18,497 18,898 2,907 2,340 -401 - -126 -40 12,863 11,770 12,219 Dec’09 Recurring Substandard Reduced
Slide 17: Very comfortable liquidity position
5 Sound balance sheet. Very comfortable liquidity position Corporate strategy for capturing funds in an environment of deleveraging in mature markets Very active both in deposits and in ... which allow maturities on the issues ... liabilities side to be extended EUR bill. Deposits: increased custome
Slide 18: Improved solvency ratios
6 Sound balance sheet. Improved solvency ratios Organic generation of 18 basic points of core capital in the quarter, at the top of forecasts Core capital evolution Tier I evolution 10.1% 10.3% 8.6% 8.8% 9.1% 8.9% 7.5% 7.3% 7.7% 6.3% Dec’07 Dec’08 Mar’09 Dec’09 Mar’10 Dec’07 Dec’08 Mar’09 Dec’09 Mar
Slide 19: Business areas results Q1'10
Group highlights Q1’10 Business areas results Q1’10 Conclusions Appendix
Slide 20: Continental Europe Q1'10
Continental Europe Q1’10 Sound results with larger contribution from consumer and wholesale units. Resilient retail networks Attrib. profit: EUR 1,369 mill. Net operating income EUR million Var. Q1’10 / Q1’09 (%) Total 2,769 2,620 2,699 2,605 Global 2,319 businesses Gross +2.8% income 2,244 2,206 Re
Slide 21: Santander Branch Network Q1'10
Management drivers Results Activity: Improved assets spreads, defended those Net operating inc. Q1’10: 6.1 times the provisions on liabilities. Selective increase in loans and strong deposit growth Net operating income / Provisions Volumes (Var. Mar’10 / Mar’09) Net int. inc. / ATAs EUR million Var.
Slide 22: Banesto Q1'10
Banesto Q1’10 Management drivers Results Net operating inc. Q1’10: 4.6 times the provisions Activity: spreads management, selective growth on loans and differentiated growth in deposits Net operating income / Provisions EUR million Var.Q1’10 / Volumes (Var. Mar’10 / Mar’09) Net int. inc. / ATAs* Q1’
Slide 23: Credit quality in Spain
Credit quality in Spain. Management in Grupo Santander The rise in the Group’s NPL ratio in Spain decelerates, maintaining better credit quality and evolution than the sector Grupo Santander in Spain Percentages NPLs NPLs (%) 3.41 3.59 2.40 2.72 2.98 1.50 1.95 Banks + Savings banks 5.03 5.37 (Feb.)
Slide 24: Credit quality in Spain. NPL entries and recoveries
Credit quality in Spain. Management in Grupo Santander Improved trend of NPL entries thanks to reduction of gross entries and the efforts made in recoveries Net NPL entries Recoveries Base 100 Q1’08: % / entries 265 246 71 199 175 173 65 65 162 62 62 122 110 55 100 52 53 50 Q1’08 Q2 Q3 Q4 Q1’09 Q2 Q
Slide 25: Construction and real estate risk in Spain
Credit quality in Spain. Managing construction and real estate activity risk in Grupo Santander Construction and real estate activity Acquired and foreclosed properties lending portfolio in Spain portfolio Acquired: situation at March 2010 Data as of March 2010 — Gross portfolio: EUR 4.2 bill. - - C
Slide 26: Exposure to construction and real estate. Comparison with sector
Exposure to construction and real estate sectors. Summary. Comparison with the sector Lower exposure than the sector ... ... and higher coverage Volume of doubtful + substandard + Coverage / total exposure to construction acquired + foreclosed + nonperforming and real estate sectors (%) EUR billion
Slide 27: Santander Consumer Finance
Management drivers Results Activity: selective growth of volumes allows Net operating inc. Q1’10: 1.6 times the provisions spreads improvement trend to continue Loans: +3% Net operating income / Provisions Var. Mar’10 / Mar’09 EUR million Var.Q1’10/Q1’09 +42% +45% +10.8% Net operating 744 753 766 71
Slide 28: Portugal Q1'10
Portugal Q1’10 Management drivers Results Activity: lending spreads and growth in SMEs; Net operating inc. Q1’10: 12.0 times the provisions change of trend on liabilities Loans: 0% Savings: +15% Net operating income / Provisions Var. Mar’10 / Mar’09 +51% EUR million Var.Q1’10 / +12.3% Q1’09 Net oper
Slide 29: United Kingdom Q1'10
United Kingdom Q1’10 Further increase from retail banking and GBM, which registered double digit growth in the quarter Attributable profit: £ 426 mill. Net operating income (EUR 480 million) £ million Var. Q1’10 / Q1’09 in £ (%) 745 791 686 735 709 Total Gross Global +8.4% businesses income 674 632
Slide 30: United Kingdom Q1'10 Activity and Results
United Kingdom Q1’10 31 Activity Results Mortgage stock Lending spreads Efficiency ratio Balances in billion £ Percentage % var. Q1’10/Q1’09 1.82 1.90 +5% 161,9 1.67 153,9 42.1% 1.44 +8.4 20% market 1.13 share on gross new mortgages 38.4% (+5 p.p.) Q1’09 Q2 Q3 Q4 Q1’10 -1.2 Q1’09 Q1’10 Mar’09 Mar’10
Slide 31: United Kingdom Q1'10 risk profile
United Kingdom Q1’10 Maintaining a medium-low risk profile Active risk management ... of a better quality loan portfoliothan the market* Reduction of non core assets ... UPLs Securities NPLs (%) Coverage (%) Balances in Bill. £ Balances in Bill. £ 2.38 - -23% 13.9 > 100 -45% 1.43 5.2 22 < 65 7.7 17
Slide 32: Total Latin America Q1'10
Total Latin America Q1’10 Double digit profit growth due to good evolution of costs and provisions. Revenues impacted by lower volumes and portfolio sales in Q1’09 Attributable profit: US$ 1,409 mill. Net operating income (EUR 1,019 million) Constant US$ million Var. Q1’10 / Q1’09 in US$ (%) 4,114 4
Slide 33: Brazil Q1'10
Brazil Q1’10 Flat costs, provisions decelerating and lower revenues from trading gains. Higher minority interest in the last two quarters Attributable profit: US$ 833 mill. Net operating income (EUR 603 mill.) Constant US$ million 3,054 2,925 Var. Q1’10 / Q1’09 in US$ (%) 2,676 2,847 Excluding Total
Slide 34: Brazil Q1'10 Management drivers and results
Brazil Q1’10 Management drivers Results Activity: loans year-on-year performance impacted by lower volumes in 2009. Change of Gross income Expenses trend in recent months ... Base 100: Q1’09 Base 100: Q1’09 Total loans Loans. % change 110 110 (Var. Mar’10 / Mar’09) 105 107 100 101 100 101 100 +33% 9
Slide 35: Brazil Q1'10. Risks
Brazil Q1’10. Risks Good trend of credit quality ratios NPLs and coverage Provisions / net operating income Percentages Percentages NPLs Coverage 107 99 100 92 95 45% 47% 51% 48% 46% 4.75 5.09 5.27 5.04 3.86 Mar’09 Jun’09 Sep’09 Dec’09 Mar’10 Mar’09 Jun’09 Sep’09 Dec’09 Mar’10 Q1’09 Q2 Q3 Q4 Q1’10 N
Slide 36: Mexico Q1'10
Mexico Q1’10 Management drivers Results Activity: lower loans due to reduction in cards and Net operating inc. Q1’10: 2.8 times the provisions GBM loans lower demand (improved liabilities mix Loans: -9% Savings: +9% Net operating income / Provisions Var. Mar’10 / Mar’09 Constant US$ million +28% Var
Slide 37: Mexico Q1'10. Risks
Mexico Q1’10. Risks Improved trend of credit quality ratios and other NPL and risk indicators NPLs and coverage Provisions / net operating income Percentages Percentages NPLs Coverage 264 268 54% 53% 221 45% 46% 36% 3.04 128 122 2.80 2.45 1.84 1.86 Mar’09 Jun’09 Sep’09 Dec’09 Mar’10 Mar’09 Jun’09 Se
Slide 38: Chile Q1'10
Chile Q1’10 39 Management drivers Results Activity: good performance of individuals and Net operating inc. Q1’10: 2.8 times the provisions SMEs and GBM defending spreads Net operating income / Provisions Loans: -1% Savings: -4% Var. Mar’10 / Mar’09 Constant US$ million Var.Q1’10/Q1’09 +19% +16% +8%
Slide 39: Other Latin American units Q1'10
Other Latin American units Q1’10 Of note among other countries is the strong growth of Argentina and Uruguay Attributable profit Constant US$ million Change (%) Q1’10 Q1’09 Argentina 91 69 +32 Puerto Rico 12 12 -2 Uruguay 20 12 +65 Colombia 15 15 +2 Other countries 7 24 - -71 Santander Private Banki
Slide 40: Sovereign Q1'10
Sovereign Q1’10 Normalisation in results continues. The revenues, expenses and provisions performance in the quarter consolidates the break-even Management drivers Results Revenues: improved due to spreads management Net operating inc. Q1’10: 1.7 times the and assets & liabilities management ... pro
Slide 41: Sovereign Q1'10: Activity and risk
Sovereign Q1’10: Activity and risk In activity the 2009 strategy continues: Boosting basic segments and exiting less profitable loans and deposits. NPLs stabilising Volumes (US$ billion) Credit quality Percentages Gross loans - -9% NPLs Coverage 54.9 52.9 Exit non core segments 50.8 49.8 49.8 (/Mar’
Slide 42: Corporate Activities
Corporate Activities Higher negative contribution to the Group’s results because of trading gains and lower tax rebates Attributable profit (Change Q1’10 vs. Q1’09) Main effect: EUR million Net interest income +31 Trading gains -169 Expenses -7 Other items and taxes -92 Total impact on profit: -237
Slide 43: Secondary segments. Attributable profit to the Group
Secondary segments*. Attributable profit to the Group Good quarterly profit trend in all secondary segments. Q1’10 better than same quarter of 2009 and higher than the last two quarters Retail Banking Global Wholesale Banking EUR million EUR million +14% 1,920 2,049 +15% 1,798 1,845 1,854 822 779 67
Slide 44: Conclusions
Agenda Group highlights Q1’10 Business areas results Q1’10 Conclusions Appendix
Slide 45: Conclusions
Santander achieved in a still more complex scenario: Profits: recurring attributable profit maintained (Q1’10: EUR 2,215 mill., +5.7%): - - Sound revenues thanks to net interest income and fees ... - - ...flat expenses ... - - ... and provisions which absorb 40% of the Group’s net operating income C
Slide 46: In the coming quarters
In the coming quarters ... Economic and financial SAN management of business environment drivers Consolidate the beginning of 2009 volume trends Mature markets: undergoing deleveraging process in a low - Loans: re-launching, starting in LatinAmerica interest rates scenario Funds: maintaining capturi
Slide 47: Appendix
Agenda Group highlights Q1’10 Business areas results Q1’10 Conclusions Appendix
Slide 48: Appendix
Appendix Group’s balance sheet Secondary segments results Main units spreads and NPLs and coverage ratios
Slide 49: Group's balance sheet
Group’s balance sheet ntande:
Slide 50: Main trends of the Group's balance sheet
Main trends of the Group’s balance sheet Retail balance sheet, fitting the business nature, of low risk, liquid and well capitalised Balance sheet at March 2010 1 Lending: 60% of balance sheet EUR billion 1,142 1,142 2 Cash, Central Banks and credit Credit institutions: 12% 143 2 institutions 130 Ca
Slide 51: Secondary segments results
Secondary segments results
Slide 52: Retail Banking
Retail Banking Good quarterly trend because of higher revenues, cost control and stable provisions Retail Banking Net operating income Var. Q1’10 / Q1’09 (%) in euros EUR million +16% Excl. f.x. and 5,571 perimeter 5,130 5,384 5,261 4,801 Gross +12.6% +4% income Expenses +7.6% -1% Q1’09 Q2 Q3 Q4 Q1’
Slide 53: Global Wholesale Banking (GBM)
Global Wholesale Banking (GBM) Very good quarter versus the record start of 2009. Solid revenues absorb the investments made to consolidate the position achieved in 2009 Net operating income Attributable profit: EUR 779 million EUR million +12% Var. Q1’10 / Q1’09 1,165 1,113 997 1,003 Gross 762 +11.
Slide 54: Global Wholesale Banking. Recurring model focused on customers
Global Wholesale Banking (GBM) Recurring model focused on customers and with a low risk profile Solid revenue generation ... ... based on a diversified product portfolio By customer revenues Gross income (mill. € ) Gross income (mill. € ) 1,460 1,451 +12% 1,451 Total 1,297 1,311 195 282 143 176 1,11
Slide 55: Asset Management and Insurance
Asset Management and Insurance High contribution to the Group via revenues and profit Total Group revenues (cross-selling) Asset Management Volumes recovering with initial impact on In Q1’10: 945 mill. € = 9% of revenues of gross income from Group’s Managed assets ( € bill.) Revenues / expenses fund
Slide 56: Main units spreads and NPL ratios
Main units spreads and NPL ratios
Slide 57: Continental Europe. Main units spreads
Continental Europe. Main units spreads (%) SAN Branch Network Banesto Retail Banking 3.40 3.15 3.00 2.78 2.69 2.60 2.51 2.27 2.28 2.20 2.21 2.26 2.32 2.25 2.10 1.90 1.94 1.96 1.99 2.02 1.19 0.89 0.79 0.68 0.53 0.50 0.57 0.31 0.29 0.18 Q1’09 Q2 Q3 Q4 Q1’10 Q1’09 Q2 Q3 Q4 Q1’10 Loans Deposits Total Lo
Slide 58: Continental Europe. NPLs and coverage
Continental Europe. NPLs and coverage Banco Santander* Banesto 78% 69% 63% 73% 66% 85% 73% 70% 64% 61% 2.35% 2.59% 2.82% 3.41% 3.61% 1.96% 2.32% 2.62% 2.97% 3.13% Mar’09 Jun’09 Sep’09 Dec’09 Mar’10 Mar’09 Jun’09 Sep’09 Dec’09 Mar’10 NPLs Coverage NPLs Coverage Santander Consumer Portugal 89% 90% 92%
Slide 59: United Kingdom. Spreads and NPL ratios
United Kingdom. Spreads and NPL ratios (%) Spreads Retail Banking NPLs and coverage ratios 2.22 2.25 2.31 2.31 2.04 56% 45% 48% 44% (*) 1.13 1.90 40% 1.82 1.44 1.67 0.91 0.78 1.25% 1.54% 1.65% 1.71% 1.87% 0.58 0.49 0.41 Q1’09 Q2 Q3 Q4 Q1’10 Mar’09 Jun’09 Sep’09 Dec’09 Mar’10 Loans Deposits Total NPL
Slide 60: Exchange rates. Latin America Q1'10
Exchange rates. Latin America Q1’10 Appreciation of Latin American currencies against the dollar and euro AVERAGE RATES EUR / LOCAL CCY. Q1’10 Q1’09 Var. US DOLLAR 1.3820 1.3020 -6% BRAZILIAN REAL 2.4900 3.0175 +21% NEW MEXICAN PESO 17.6375 18.7402 +6% CHILEAN PESO 717.4219 787.3892 +10% AVERAGE RAT
Slide 61: Spreads main countries Latin America
Spreads main countries Latin America (%) Brazil Retail Banking Mexico Retail Banking 17.01 17.43 16.68 16.02 16.13 14.19 13.35 12.49 12.28 12.08 15.94 16.39 15.81 15.12 15.26 10.83 10.77 10.40 10.21 10.03 1.07 1.04 0.87 0.90 0.87 3.36 2.58 2.09 2.07 2.05 Q1’09 Q2 Q3 Q4 Q1’10 Q1’09 Q2 Q3 Q4 Q1’10 Loa
Slide 62: Latin America. NPL and coverage ratios
Latin America. NPL and coverage ratios Brazil Mexico 107% 92% 95% 99% 100% 221% 264% 268% 128% 122% 5.27% 2.80% 3.04% 2.45% 4.75% 5.09% 5.04% 1.84% 3.86% 1.86% Mar’09 Jun’09 Sep’09 Dec’09 Mar’10 Mar’09 Jun’09 Sep’09 Dec’09 Mar’10 NPLs Coverage NPLs Coverage Chile 95% 94% 94% 89% 99% 3.05% 3.30% 3.38
Slide 63: Sovereign. Spreads and NPL and coverage ratios
Sovereign. Spreads and NPL and coverage ratios (%) Spreads NPLs and coverage 2.68 2.71 2.88 2.60 2.30 66% 67% 68% 62% 64% 1.88 1.90 1.88 1.91 1.94 0.94 3.98% 4.34% 4.82% 5.35% 5.14% 0.70 0.80 0.80 0.42 Q1’09 Q2 Q3 Q4 Q1’10 Mar’09 Jun’09 Sep’09 Dec’09 Mar’10 Loans Deposits Total NPLs Coverage
Slide 64: Santander
Santander SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Banco Santander, S.A. Date: April 30, 2010 By: /s/ José Antonio Álvarez Name: José Antonio Álv