Banco Santander, S.a. · BME:SAN
Banco Santander — Investor Day (April 2019)
44 slides from Banco Santander's investor day presentation, Apr 3, 2019
Slide 1: Santander Investor Day
3 April 2019 Santander Investor Day Jose Antonio Álvarez Group CEO
Slide 2: Important Information
Important Information Non-IFRS and alternative performance measures In addition to the financial information prepared in accordance with International Financial Reporting Standards (“IFRS”), this presentation contains certain financial measures that constitute alternative performance measures (“APMs
Slide 3: Important Information
Important Information Forward-looking statements speak only as of the date of this presentation and are based on the knowledge, information available and views taken on such date; such knowledge, information and views may change at any time. Santander does not undertake any obligation to update or r
Slide 4: Our medium-term goals
Our medium-term goals People Customers • Top 10 company to work: • Loyal customers3: c.26 Mn 6 geographies • Digital customers4: c.50 Mn • Top 3 in customer satisfaction: People Customers All markets2 • Digital sales5: >50% Communities Shareholders • Financially empowered Communities Shareholders •
Slide 5: Operational levers to enhance profitability
01 Operational levers to 02 Solvency & capital 03 Group enhance profitability allocation medium- term goals 5
Slide 6: Operational levers to enhance profitability
A GROUP Operational levers to B Core Banks enhance profitability C Global Businesses 6
Slide 7: Management team focused on further improving profitability
Management team focused on further improving profitability Operating performance Accelerate digitisation Capital allocation • BAU cost control • Digitisation driving higher • Natural reweighting towards • Outperform in integrations & customer satisfaction & market more profitable businesses restruct
Slide 8: Drivers behind our targeted profitability improvement
Drivers behind our targeted profitability improvement: top line growth, operational efficiency & capital allocation Operational levers2 to enhance underlying RoTE (%) Key expected drivers1 Revenues NII and volumes growing at mid-single digit 15-14% Fee income above volumes 14-13% BAU cost control Co
Slide 9: Global capabilities expected to deliver c.€1.2 Bn in new efficiencies
Global capabilities expected to deliver c.€1.2 Bn in new efficiencies at a Group level, of which c.€1 Bn in Europe Global EUROPE1 REST TOTAL capabilities to enhance IT & Ops c.€730Mn c.€270Mn c.€1Bn operating efficiency across the Shared Group services & c.€220Mn c.€220Mn Others Total c.€1Bn c.€270M
Slide 10: Operational levers: Core Banks
A Group Operational levers to B CORE BANKS enhance profitability C Global Businesses 10
Slide 11: Further leveraging our diversification and scale
Further leveraging our diversification and scale US Europe Accelerating Building the leading growth with European bank in sustainable customer experience profitability and profitability, leveraging our scale & digital LatAm A region with structural growth and high and increasing profitability 11
Slide 12: LatAm: a high growth & profitability region
LatAm LatAm: a high growth & profitability region that will consequently increase its weight Key expected levers Medium-term goals High structural growth: Loans Financial (2018 > Medium-term) Commercial (2018 > Medium-term) to GDP at 49% Focus on customer experience Loyal/Active & digitalisation C/I
Slide 13: Strong position in all of our LatAm markets
LatAm Strong position in all of our LatAm markets with a sharp improvement in profitability since 2015 Top-tier in most countries High potential to increase its contribution (loans market share) (as % of total Group; 2018) RWAs Loans Deposits Att. Profit3,4 26% 18% 17% #3 42% #152 #31 LatAm offers h
Slide 14: Brazil: improved commercial franchise and profitability since 2015
LatAm Brazil: we have significantly improved our commercial franchise and profitability since 2015… Performance Underlying RoTE Macro Significant 20% Recovery • Orthodox macro reforms to improvement 14% cycle picking unleash GDP growth of our up potential commercial 2015 2018 franchise • Structural
Slide 15: Brazil: continuing to gain market share and profitability
LatAm …and we expect to continue gaining market share and profitability Business priorities Goals Continue • Sound volume growth with market converging share gains 2018 Medium-term goal towards best- • Increase loyal and digital in-class customers & sales RoTE1 20% >20% • High focus on retail: consu
Slide 16: Mexico: improved returns while heavily investing
LatAm Mexico: we have significantly improved returns while heavily investing in the franchise… Performance Underlying RoTE Macro Significantly High growth • GDP growth potential still 20% increase in 13% potential at sound levels profitability while growing • Low inflation environment 2015 2018 our
Slide 17: Mexico: investment plan to drive profitability growth
LatAm …and we expect our investment plan to drive growth in profitability Business priorities Goals Customer • Build on recent investments to centric model gain market share 2018 Medium-term goal highly focused on digital • Increase loyal & digital RoTE1 20% 19-21% customers & sales. Grow in Loyal/A
Slide 18: Chile: profitability improvement in the medium-term
LatAm Chile: profitability improvement in the medium-term Business priorities Goals Reinforce • Sustain volume growth, with market high focus on retail 2018 Medium-term goal leadership • Expand fee income… RoTE1 18% 19-20% • …by developing key Loyal/Active customers 46% 54% commercial initiatives: W
Slide 19: USA: potential to improve profitability through operational leverage
US USA: high potential to improve profitability on the back of strong operational leverage Key expected levers Medium-term goals Attractive US market: better Financial (2018 > Medium-term) Commercial (2018 > Medium-term) risk return dynamics Benefitting from Group Loyal/Active scale customers2 19% 2
Slide 20: Europe: focus on improving profitability, leveraging cost efficiencies
Europe Europe: focus on improving profitability, leveraging cost efficiencies Key expected levers Medium-term goals1 Low credit demand & rates: Financial (2018 > Medium-term) Commercial (2018 > Medium-term) limited revenue growth… …and CoR at lows… C/I 52% 47-49% Loyal/Active 33% 40% customers1 …req
Slide 21: Leading positions in Europe, with potential for €1Bn in cost efficiencies
Europe Leading positions in Europe, with potential for €1Bn in cost efficiencies through further operational integration Leading market shares… …and key contributor for the Group (loans market share) (as % of total Group; 2018) RWAs Loans Deposits Attr. Profit3,4 54% 52% 70% 75% #5 Solid returns des
Slide 22: €700Mn new efficiencies from new cost paradigm in Europe
Europe €700Mn expected new efficiencies coming from our new cost paradigm in Europe: digital transformation & a cross-border approach IT & Operations Shared services • Public cloud Expected efficiency gains derived IT • Agile from further integration in Europe • Core system evolution • Global platfo
Slide 23: Popular integration ahead of plan, €250Mn additional efficiencies
Europe The integration of Popular is ahead of plan and we expect €250Mn of additional efficiencies Increasing local scale Commitments Delivering ahead of target 2018 loans market share Original synergy expectation (2017) Additional cost synergies 12% 18% New c.€250Mn c.€500Mn Increased expected cost
Slide 24: Spain: committed to maintaining market leadership
Europe Spain: committed to maintaining our market leadership… Performance Underlying RoTE Macro Reinforcement 11% Positive cycle 8% • >2% GDP growth above of customer expected to Eurozone average loyalty and continue in the experience coming years • Falling unemployment and through digital 2015 2018
Slide 25: Spain: ongoing improvements in profitability & efficiency
Europe …while delivering ongoing improvements in profitability & efficiency Business priorities Goals Maintaining • Maintain SME & corporate leadership leadership leveraging on 2018 Medium-term goal while Popular’s know-how achieving RoTE1 11% 14-16% • Consumer & payments growth best-in-class Loyal/
Slide 26: UK: operational & capital efficiency gains
Europe UK: operational & capital efficiency gains Business priorities Goals Increasing • Improving customer profitability experience & satisfaction 2018 Medium-term goal through • Profitable growth in retail and efficiency and improved corporate returns by RoTE1 9% 10-12% capital focusing on selecte
Slide 27: SCF: the company of choice for auto-makers in Europe
Europe SCF: the company of choice for auto-makers in Europe Business priorities Goals Extracting • Maintain our number #1 value from our position in auto market share Medium position as a 2018 term goal • Market share gains in the specialised consumer business monoliner RoTE1 16% 14-15% • Strengthen
Slide 28: Portugal & Poland: improving profitability and efficiency
Europe Portugal & Poland: improving profitability and efficiency on the back of successful integrations Business priorities Goals Medium Reinforce our • High focus on retail deposits, 2018 term goal position as the AuMs and insurance first privately- • Grow market share in RoTE1 12% 13-15% owned ban
Slide 29: Operational levers: Global Businesses
A Group Operational levers to B Core Banks enhance profitability GLOBAL C BUSINESSES 29
Slide 30: CIB & Wealth management: Group's scale & global footprint
CIB & Wealth management are two well-established and highly profitable global businesses which benefit from the Group’s scale & global footprint Existing Corporate and Investment Banking global businesses Wealth Management1 Consumer Finance2 Global Merchant Services Payment related Global Trade Serv
Slide 31: CIB: sustainable returns through the cycle
CIB: our corporate-centric business has delivered sustainable returns through the cycle Strong track-record… …which is expected to continue (RoRWA2; %) 1.8% Enhance our Capital light 1.3% tailor-made model services C/I 39% 41% Improve Maintain RoRWA best-in-class 2015 2018 efficiency Focused on incr
Slide 32: WM: capital-efficient business model with high growth potential
WM: capital-efficient business model which offers very high growth potential, especially in insurance Strategic priorities Our medium-term focus Weighted market share2 (%, 2018) Current market share3 Potential market share upside1 Capture the SME opportunity +2x potential increase in PAT if natural
Slide 33: Solvency & capital allocation
01 Operational levers to 02 Solvency & 03 Group enhance profitability capital allocation medium- term goals 33
Slide 34: FL CET1 increased by 304bps since 2014, accumulating €18Bn
FL CET1 increased by 304bps since 2014, accumulating €18Bn of capital Capital generation between December 2014 and December 2018 (bps) FL CET1 435 35 2018 11.30% 304 214 118 186 2014 8.27% Organic capital Perimeter exc. Dividends +AT1 Organic capital 2015 capital Total capital generation Popular 1 g
Slide 35: High focus on profitability enhancement and efficient capital allocation
High focus on profitability enhancement and efficient capital allocation Improved capital allocation Profitability enhancement Natural Minimum Commercial Operational reweighting profitability transformation efficiency: towards our thresholds in & profitability simplification & most profitable all se
Slide 36: Efficient capital allocation standards of CIB to be implemented in all businesses
Efficient capital allocation standards of our CIB business to be implemented in all of our businesses & segments…. CIB’s strong performance… …expected to be achieved in all segments Revenues +2% CAGR RORAC-based tools to maximise the 1 return on capital… …ensuring that all customer 2 relationships c
Slide 37: RoRWA improvements across the board
…should result in RoRWA improvements across the board RoRWA1 RoRWA 20181 Medium-term RoRWA1 evolution ~ ~ <2% 2-3% <2% 2-3% ~ >3% >3% Higher expected profitability driven by business improvement and capital allocation (1) Underlying 37
Slide 38: Continue generating ~40 bps per annum while remunerating shareholders
We aim to continue generating ~40 bps per annum while remunerating our shareholders and growing the business Annual organic capital generation Medium-term in the medium-term ~40 bps cumulative one-offs 13-15% 40-50% Headwinds to be offset RoTE2 Pay-out with management 175-190 bps actions 11-12% 11.3
Slide 39: Additional levers to neutralise regulatory impacts
Santander has additional levers to neutralise regulatory impacts Expected regulatory impacts… … to be offset with management actions IFRS 16: IFRS 16 requires lease obligations to Minimum profitability c.20 bps be brought on balance sheet as a A thresholds for all segments liability at the present v
Slide 40: Strong credit fundamentals
Strong credit fundamentals Liquidity Coverage Net Stable Funding Santander S.A. meets current MREL Ratio (LCR) Ratio (NSFR) requirement1 and Group capital requirements (AT1: >1.5%; T2: 2%)… 158% 114% Group …so going forward we will focus more Funding Plan on preferred instruments and covering 2018 2
Slide 41: Group medium-term goals
01 Operational levers to 02 Solvency & capital 03 Group enhance profitability allocation medium- term goals 41
Slide 42: Our medium-term goals
Our medium-term goals RoTE1 FL CET1 13-15% 11-12% Dividend Efficiency pay-out ratio 42-45% 40-50% • We are the leading LatAm • Laid foundations for • Leading European bank accelerating growth bank in profitability and • Continue structural profitable • Mid-term RoTE1 11- growth growth 13%2 • Mid-ter
Slide 43: Our medium-term goals
Our medium-term goals People Customers • Top 10 company to work: • Loyal customers3: c.26 Mn 6 geographies • Digital customers4: c.50 Mn • Top 3 in customer satisfaction: People Customers All markets2 • Digital sales5: >50% Communities Shareholders • Financially empowered Communities Shareholders •
Slide 44: 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: