Banco Santander, S.a. · BME:SAN
Banco Santander — Q1 2023 Earnings Presentation
55 slides from Banco Santander's earnings presentation, Apr 26, 2023
Slide 1: Earnings Presentation Q1'23
25 April 2023 Earnings Presentation — Q1’23
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 Q1’23 Highlights Group Final Appendix review remarks Our steps towards value creation 4
Slide 5: Strong first quarter performance keeps us on track to meet our 2023 targets
Strong first quarter performance keeps us on track to meet our 2023 targets Strength Disciplined capital allocation Q1’23 FL CET1 Q1’23 RWAs with RoRWA > CoE 12.2% 81% Including second 2022 share buyback programme TNAVps + DPS +5% in the quarter Shareholder remuneration Profitability 2023 Payout Q1’
Slide 6: Q1'23 Highlights
Q1’23 Highlights Strong growth in customers and volumes with deposits up 6% YoY Double-digit revenue growth and efficiency improvement Sound liquidity ratios and CoR in line with targets Q1’23 profit of €2.6bn. Improved profitability (RoTE: 14.4%) Strong organic capital generation and TNAVps + DPS g
Slide 7: Strong top line with efficiency improvement and contained CoR
Strong top line with efficiency improvement and contained CoR % change Underlying P&L Q1’23 drivers € million Q1'23 Q1'22 Euros Constant euros 14 • Volumes and interest rate tailwinds drove YoY revenue growth NII 10,185 8,855 15 Net fee income 3,043 2,812 8 7 • Efficiency: 44.1% driven by positive o
Slide 8: Very solid start to the year that puts us on track to meet our 2023 targets
Very solid start to the year that puts us on track to meet our 2023 targets 2023 targets Q1’23 Revenue1 Double-digit growth +12% Efficiency ratio 44-45% 44.1% CoR <1.2% 1.05% FL CET1 >12% 12.2% RoTE >15% 14.4%² Note: targets market dependent. Based on macro assumptions aligned with international eco
Slide 9: Pillars for value creation across the Group
5 pillars for value creation across the Group, with focus on Retail & Commercial banking Customer centric Total customer: 161mn 1 Value creation RoTE1: 14.4% Simplification & automation 2 TNAVps + DPS2: +5% Efficiency ratio: 44.1% Digital Bank with Branches Capital 5 3 Network contribution FL CET1:
Slide 10: Customer focus driving volume and revenue growth across the Group
1 Customer focus driving volume and revenue growth across the Group 4 Customer related initiatives Customer centric • Network business initiatives Q1’23 YoY Revenue growth YoY in Multi-Latinas (+53%) and Multi-Europeans (+72%) Total customers 161mn +9mn Active customers 99mn +2mn • Branch of the fut
Slide 11: Simplifying our product offering and automating operations
Making progress on simplifying our product offering and fully automating our 2 front- and back-end operations ONE Transformation Efficiency ratio • Product portfolio simplification Simplified product catalogue -42% in Group in the last two years 45.8% 44.1% • Reducing in branch administrative and op
Slide 12: Global and Network businesses' revenue grew above Group
Our Global and Network businesses’ revenue grew above Group 3 Investor Day strategy progress Revenue growth1 • Further strengthening our centres of expertise with capabilities in value-added, sophisticated SCIB products and services +25% • Growing our franchise in the US, leveraging product and advi
Slide 13: Robust credit quality and strong capital generation
Robust credit quality and strong capital generation 5 Credit quality ratios FL CET1 ratio CoR1 NPL ratio 0.99% 1.05% 3.08% 3.05% 12.2% 12.0% Dec-22 Mar-23 Dec-22 Mar-23 Dec-22 Mar-23 Rock-solid balance sheet further strengthened by our diversification and disciplined capital allocation (1) Provision
Slide 14: Increased profitability and shareholder value creation
Increased profitability and shareholder value creation RoTE EPS TNAVps + Cash DPS € cents € per share 14.4% 13.5 15.0 4.47 13.4% 4.26 +11% +5% FY'22 Q1'23 FY'22* Q1'23 Dec-22 Mar-23 (*) 2022 quarterly average. Mar-23 includes €5.95 cents of cash dividend. Completed the second 2022 share buyback prog
Slide 15: Index
Index 1 2 3 4 Q1’23 Highlights Group Final Appendix review remarks Our steps towards value creation 15
Slide 16: Strong top line with efficiency improvement and contained CoR
Strong top line with efficiency improvement and contained CoR % change Underlying P&L € million Q1'23 Q1'22 Euros Constant euros Attributable profit NII 10,185 8,855 15 14 € mn Net fee income 3,043 2,812 8 7 4 2,571 Trading and other income 707 638 11 2,543 2,422 2,351 Total revenue 13,935 12,305 13
Slide 17: Continued revenue growth supported by Europe and global businesses
Continued revenue growth supported by good performance in Europe and global businesses Revenue breakdown Revenue trends Constant € mn €1.5bn • Strong positive sensitivity of our balance sheet, 13,935 especially to euro (Europe up 30% YoY) 13,523 12,250 12,458 NII +3% • Solid quarter despite lower da
Slide 18: NII and NIM up YoY
NII and NIM up YoY, supported by volumes, interest rate increases and margin management NII and NIM NII drivers YoY Constant € mn • Loans up 3% backed by consumer and mortgages 2.63% Volume • Deposits increased 6% in all regions supported by 2.45% growth1 individuals and SCIB NIM +14% Higher • Benef
Slide 19: Net fee income grew, supported by customer activity
Net fee income grew, supported by customer activity and growth in value-added products Net fee income YoY % changes in constant euros Net fee drivers Constant € million • Active customers increased 2mn YoY Retail • Transactionality and specific services for each segment • Growth in all regions. Of n
Slide 20: Focus on productivity and efficiency with costs decreasing in real terms
Focus on productivity and efficiency with costs decreasing in real terms Costs Costs and efficiency drivers Efficiency 47.9% 45.6% 45.0% 46.0% 46.6% 44.1% • Group efficiency of 44.1%. Most countries better Efficiency than Q1’22. Europe continued to improve (-6pp). improvement • Ongoing transformatio
Slide 21: Credit quality remains robust
Credit quality remains robust… LLPs and CoR LLPs and CoR drivers 0.99% 1.05% 1.05% 0.77% 0.77% 0.83% 0.86% CoR • Q1 LLPs decreased 3% QoQ. South America (-11%) and North America (-5%; US better than expected) LLPs Constant € bn • Higher LLPs YoY due to normalization in the US. Brazil in line with gu
Slide 22: Backed by a highly collateralized and diversified loan portfolio
…backed by a highly collateralized and diversified loan portfolio Credit quality Low-risk loan portfolio Mar-23 and % YoY Mar-22 Mar-23 €1,015bn NPL ratio 3.26% 3.05% CIB 14% +1% >70% investment grade2 SMEs 24% +0.4% >50% secured Coverage ratio 69% 68% & Corp Non-auto & others 13% +5% Stage 1 €967bn
Slide 23: Brazil and US credit quality
Brazil and US credit quality Brazil US Cost of risk Auto Net Total Charge-Off Rates 6.70% 3M CoR 4.00% 4.89% 4.35% 4.79% 4.84% 3.70% 3.60% 5.5 0% 5.0 0% 4.50% 3.93% 4.40% 3.73% 4.5 0% 1.70% 4.0 0% 3.5 0% 3.0 0% 2.5 0% 2.0 0% 2015 2016 2019 2020 2021 2022 Mar-23 2019 2020 2021 2022 Q1'23 NCO rate (an
Slide 24: Conservative structural risk management with liquidity ratios well above requirements
Conservative structural risk management with liquidity ratios well above requirements Strong liquidity position Balanced bond portfolio Mar-23 € bn, Mar-23 €304bn HTC&S NSFR2 HTC €111bn 46% LCR2 54% 194 Cash 152% ~120% Deps + M/LT LTD funding ratio3 104% 120% • Bond portfolio represents 6% of total
Slide 25: Diversified and stable deposit structure
Our diversified and stable deposit structure supports YoY growth across regions and segments Quarterly deposit performance Stable deposit structure based on retail funding Constant € bn Mar-23 • Seasonal drop in SCIB balances 59% Individuals Total 879 950 928 deposits SMEs & 26% Corporates Retail 85
Slide 26: Strong organic capital generation ensures sustainability of shareholder remuneration
Strong organic capital generation ensures sustainability of shareholder remuneration Q1’23 FL CET1 performance Maximize capital productivity % Mar-23 or latest available data Front book pricing 2.8% +0.24 RoRWA of new book +0.07 12.2 +0.11 12.0 Asset rotation and risk transfer activities -0.25 c.9%
Slide 27: Index
Index 1 2 3 4 Q1’23 Highlights Group Final Appendix review remarks Our steps towards value creation 27
Slide 28: Entering a new phase of shareholder value creation
Entering a new phase of shareholder value creation Customers One Network Solid and revenue Transformation contribution balance sheet • Strong growth in customers • Automation & simplification • Identify the best business • We continue to have a and volumes to better serve our customers opportunities
Slide 29: On track to meet our 2023 financial targets
On track to meet our 2023 financial targets 2023 targets Q1’23 Revenue1 Double-digit growth +12% Efficiency ratio 44-45% 44.1% CoR <1.2% 1.05% FL CET1 >12% 12.2% RoTE >15% 14.4%² Note: targets market dependent. Based on macro assumptions aligned with international economic institutions. 29 (1) YoY c
Slide 30: 2023-2025 targets announced at the Investor Day
2023-2025 targets announced at the Investor Day Strength Disciplined capital allocation FL CET1 RWAs with RoRWA > CoE >12% TNAVps+DPS c.85% Double-digit growth Average Shareholder remuneration through-the-cycle Profitability Payout RoTE 50% Cash dividend + SBB 15-17% Note: Target payout is c.50% of
Slide 31: Index
Index 1 2 3 4 Q1’23 Highlights Group Final Appendix review remarks Our steps towards value creation 31
Slide 32: Appendix
Appendix Primary and Secondary segments Responsible Banking 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 with this present
Slide 33: Primary segments
Primary segments Detail by region and country 33
Slide 34: Increased volumes across the board, mainly in deposits
Increased volumes across the board, mainly in deposits. Profit supported by Europe and the Corporate Centre Loans Deposits Contribution Profit RoTE Mar-23 (€ bn) (€ bn) to Group profit (€ mn) 566 599 1,189 12.8% Europe 42% -2% +3% +19% +3.1 pp North 157 137 627 10.5% America +6% +9% 22% -28% -2.1 pp
Slide 35: Europe
Europe Highlights Key data and P&L Loans Deposits Mutual Funds • Continued progress in our transformation projects, developing €566bn -2% €599bn +3% €95bn -6% a common front and back as well as advances in shared services Efficiency CoR RoTE • High total customer growth in the region (+1mn YoY) 41.9
Slide 36: Spain and UK
Spain UK • Strong YoY growth in customers (+736k) and deposits (+7%). • Loan volumes were flat on the back of disciplined pricing and Loan volumes affected by prepayments softer mortgage market. Customer growth (+199k) • Profit boosted by NII, cost control and CoR improvement. • Strong net operating
Slide 37: Portugal and Poland
Portugal Polan Poland d • Increased customer base (+74k). Lower volumes as • Higher volumes driven by customer growth (211k) and deposits were used to repay mortgages early corporate loans (SMEs and CIB) • Profit +21% YoY as higher rates boosted NII and cost of risk • Profit up 51% YoY, as NII growt
Slide 38: North America
North America Highlights Key data and P&L Loans Deposits Mutual Funds • Product rationalization and business simplification on track and beginning to deliver savings €157bn +6% €137bn +9% €29bn +3% Efficiency CoR RoTE • Larger customer base and enhanced customer experience 47.7% +2.7pp 1.62% +70bps
Slide 39: USA and Mexico
USA Mexico • Strong growth in volume: loans up mainly due to Auto, • Successful customer attraction strategy reflected in multifamily and SCIB. Deposits supported by time deposits +1.3mn new customers and growth in volumes • Continued LLP normalization and lower lease income YoY • Profit up YoY with
Slide 40: South America
South America Highlights Key data and P&L • Continued progress in increasing connectivity across the Loans Deposits Mutual Funds region and executing the digital agenda to improve €160bn +12% €130bn +10% €63bn +11% efficiency and profitability Efficiency CoR RoTE • Total customer growth (+10%) drive
Slide 41: Brazil and Chile
Brazil Chile • Selective volume growth focused on secured and higher • Continued transformation of the business to offer the best rated customers products and services • Profit down YoY due to higher provisions and costs, affected • Profit YoY impacted by negative NII sensitivity. Fees grew by infla
Slide 42: Argentina and Uruguay, Peru and Colombia
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 volume growth, with stable credit quality. #1 NPS, with one of the best rated apps among local ban
Slide 43: Digital Consumer Bank
DCB Digital Consumer Bank Highlights Key data and P&L New lending Loans Customer Funds • We further expanded our value proposition with new capabilities in BNPL and mobility (leasing, subscription) €13bn +7% €127bn +11% €64bn +10% • New lending up 7% YoY, with margins beginning to improve Efficiency
Slide 44: Corporate Centre
Corporate Centre Highlights Income statement Underlying P&L* Q1'23 Q1'22 • NII improved significantly driven by the higher liquidity NII -52 -172 buffer remuneration as a result of the higher interest rates Gains/losses on financial transactions -54 -119 • Lower negative FX hedging impact resulted i
Slide 45: Secondary segments
Secondary segments Detail by CIB, WM&I and payment business 45
Slide 46: Corporate & Investment Banking and Wealth Management & Insurance
Corporate & Investment Banking Wealth Management & Insurance • Creation of Santander US Capital Markets (SanCap)1, enabling us to Strong growth in contribution to Group profit (+28%) in a offer our clients enhanced capabilities and strengthen our US and complex market environment: global franchise •
Slide 47: Cards
Cards • Merchant Acquiring: Total Payments Volume rose backed • 97 million cards managed globally by Brazil (+16%), Europe (+35%) and Mexico (+39%) • Revenue grew 20% YoY (+18% in constant in euros) • Revenue increased 50% YoY (+41% in constant euros) due to overall increase in business activity and
Slide 48: Appendix
Appendix Primary and Secondary segments Responsible Banking Reconciliation of underlying results to statutory results Glossary 48
Slide 49: We continue to make progress on our ESG agenda
We continue to make progress on our ESG agenda Mar-23 2025 targets Green Finance raised and facilitated €96.2bn €120bn (since 2019) Socially responsible Investments (AuM) €58.1bn €100bn Financial inclusion (# People)1 0.4mn 5mn Note: Not taxonomy. Mar-23 data not audited. Definitions in the Glossary
Slide 50: Appendix
Appendix Primary and Secondary segments Responsible Banking Reconciliation of underlying results to statutory results Glossary 50
Slide 51: Reconciliation of underlying results to statutory results
Reconciliation of underlying results to statutory results January-March 2023 January-March 2022 Statutory Underlying Statutory Underlying Adjustments Adjustments results results results results Net interest income 10,396 (211) 10,185 8,855 — 8,855 Net fee income 3,043 — 3,043 2,812 — 2,812 Gains (lo
Slide 52: Appendix
Appendix Primary and Secondary segments Responsible Banking Reconciliation of underlying results to statutory results Glossary 52
Slide 53: 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 54: 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 55: 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: