Banco Santander, S.a. · BME:SAN
Banco Santander — Q4 2020 Earnings Presentation
124 slides from Banco Santander's earnings presentation, Feb 4, 2021
Slide 1: 2020 Earnings Presentation
3 February 2021 2020 Earnings Presentation All. Together. Now.
Slide 2: Important information
Important information Non-IFRS and alternative performance measures This presentation contains, in addition to the financial information prepared in accordance with International Financial Reporting Standards (“IFRS”) and derived from our financial statements, alternative performance measures (“APMs
Slide 3: Important information
Important information Numerous factors could affect our future results and could cause those results deviating from those anticipated in the forward-looking statements. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements
Slide 4: Index
Index 1 2 3 Performance in 2020 Progress on Medium term outlook and areas review transformation in and key takeaways 2020 and next steps 4
Slide 5: Business model and capital allocation delivered strong operating performance
Our business model and discipline in capital allocation delivered strong operating performance, resulting in a 7.4% underlying RoTE 2020 (vs. 2019) Growth Profitability Strength Loyal customers Efficiency ratio CET12 22.8mn (+6%) 47% (-3 bps) 12.34% (+69 bps) Customer revenues Net operating income C
Slide 6: In a challenging 2020, we delivered +2% YoY net operating income and €5bn underlying profit
In a challenging 2020, we delivered +2%1 YoY net operating income and €5bn underlying profit % change EUR mn 2020 2019 Constant Euros Euros Net interest income 31,994 35,283 -9 1 Net fee income 10,015 11,779 -15 -5 Customer revenue 42,009 47,062 -11 0 Trading and other income 2,591 2,432 7 9 Total i
Slide 7: Our geographical and business diversification continues to add value
Our geographical and business diversification continues to add value Loyal Customer Net operating Contribution to customers loans income Group’s underlying 2020 (vs. 2019) (mn) (EUR bn) (EUR mn) profit1 10.0 658 9,379 Europe 37% +1% +4% -5% North 3.9 121 6,379 21% America +13% +2% +1% South 8.6 119
Slide 8: We have worked hard to mitigate the impact of the crisis
We have worked hard to mitigate the impact of the crisis… Employees Customers Communities >100k employees working c.6mn customers supported >€100mn in aid from home during Covid19 €56mn for essential health c.€175bn in new loans equipment and materials MiVuelta app for contact tracing and health mon
Slide 9: Further embedding ESG to build a more responsible bank
… further embedding ESG to build a more responsible bank Environmental: Social: building a Governance: doing supporting the more inclusive business the right green transition society way Helping customers go green Talented & diverse team A strong culture 86% €32.6bn €6.9bn AUM Top 101 in 6 23.7% wom
Slide 10: Group review
Group review 10
Slide 11: 2020 showed resilient revenue and net operating income
2020 showed resilient revenue and net operating income1… Growth Underlying attributable profit P&L1 2020 Vs. 2019 Constant EUR mn Net interest income 31,994 1% Net fee income 10,015 -5% 1,886 1,837 1,802 Customer revenue 42,009 0% 1,686 1,798 1,524 1,508 Trading and other income2 2,591 9% Total inco
Slide 12: Investing to improve our operating model and productivity
… while investing to improve our operating model and productivity FY2020 Goodwill impairment -10,100 UK -6,101 US -2,330 Poland -1,192 SCF (Nordics and others) -477 Deferred tax assets -2,500 Of which allocated in Q4: Other -1,252 → Other -1,146 Restructuring costs -1,039 Restructuring costs -1,114
Slide 13: Top line showed strong signs of recovery in the last two quarters
Top line showed strong signs of recovery in the last two quarters Growth Revenues and costs Net operating income Constant EUR mn. Changes vs. Q3’20 Constant EUR mn +4% 8,392 Net interest 7,971 7,986 7,860 8,043 7,695 7,938 7,698 income +3% vs.Q4’19 +3% 2,569 2,585 2,668 2,666 2,646 2,502 2,568 Net f
Slide 14: NII and fees continued to recover in Q4
NII and fees continued to recover in Q4… NII evolution Net fee income - breakdown by Global Business Growth Constant EUR mn As % of total Group1 2020 Q4’20 +1,902 vs. 2019 vs. Q3’20 31,590 +257 31,994 Retail Banking -11% 0% -1,240 -516 15% WM&I 0% +5% +2% 54% vs. 2019 31% SCIB +12% +6% Total Group -
Slide 15: Efficiency gains exceeded 2020 target
… and efficiency gains exceeded 2020 target Costs Profitability % change YoY in constant EUR -10% -2% Europe -5.8% -6% -6% -5% North -5% America -1.7% +5% Increasing productivity in most markets South +1% America1 1.5% 0% Group -2.0% Digital Consumer Bank2 -0.4% (1) Excluding Argentina, otherwise +4
Slide 16: Cost of credit in line with guidance, with improved coverage
Cost of credit in line with guidance, with improved coverage Strength Loan-loss provisions Credit quality indicators Constant EUR bn Dec-19 Dec-20 2.8 12.2 Cost of credit1 1.00% 1.28% +47% 2.7 YoY NPL ratio 3.32% 3.21% 3.1 3.6 Coverage ratio 68% 76% Loan-loss 20.4bn 24.3bn reserves Q1'20 Q2 Q3 Q4 20
Slide 17: 79% of moratoria have already expired
79% of moratoria have already expired with 3% in stage 3. 78% of the €23bn active moratoria are secured Strength Total moratoria by segment Active moratoria by segment Total moratoria as of 31 December 20, EUR bn Active moratoria as of 31 December 20, EUR bn Expired Total o/w: Mortgages 14 0 15 mora
Slide 18: Group CET1 rose 69 bps YoY, exceeding our 11%-12% target
Group CET1 rose 69 bps YoY, exceeding our 11%-12% target Strength CET1 ratio evolution +69 bps +0.02 +1.04 +0.29 12.34 -0.43 -0.09 11.65 -0.14 Dec-19 Organic generation Regulatory & One-offs & corp Markets & others No complementary Dividend accrual Dec-20 Models transactions dividend 2019 2020 18
Slide 19: Business areas review
Business areas review 19
Slide 20: Europe
EUROPE KEY DATA 2020 % 2019 P&L* Q4'20 % Q3'20 2020 % 2019 Loyal / active customers (%) 36 +1 pp NII 3,710 4.6 14,046 0.0 Net fee income 1,162 0.1 4,737 -9.4 Digital customers (mn) 15.2 +10% Total income 4,987 -3.1 19,693 -5.4 NPL ratio (%) 3.15 -10 bps Operating expenses -2,534 -0.3 -10,314 -5.8 Ne
Slide 21: Spain
Europe Spain main markets KEY DATA 2020 % 2019 P&L* Q4'20 % Q3'20 2020 % 2019 Loyal / active customers (%) 34 +2 pp NII 1,067 3.2 3,957 1.0 Net fee income 573 2.0 2,314 -6.7 Digital customers (mn) 5.2 +11% Total income 1,632 -9.3 6,782 -9.6 NPL ratio (%) 6.23 -71 bps Operating expenses -873 -2.2 -3,
Slide 22: UK
Europe UK main markets KEY DATA 2020 % 2019 P&L* Q4'20 % Q3'20 2020 % 2019 Loyal / active customers (%) 31 -1 pp NII 1,063 8.7 3,808 1.9 Net fee income 99 -16.1 506 -40.8 Digital customers (mn) 6.3 +8% Total income 1,146 2.4 4,339 -7.0 NPL ratio (%) 1.21 +20 bps Operating expenses -626 -3.3 -2,642 -
Slide 23: North America
NORTH AMERICA KEY DATA 2020 % 2019 P&L* Q4'20 % Q3'20 2020 % 2019 Loyal / active customers (%) 36 +6 pp NII 2,055 -1.5 8,469 0.2 Net fee income 394 -4.3 1,661 -0.1 Digital customers (mn) 6.0 +16% Total income 2,691 0.0 11,011 0.1 NPL ratio (%) 2.23 +3 bps Operating expenses -1,194 8.0 -4,631 -1.7 Ne
Slide 24: South America
SOUTH AMERICA KEY DATA 2020 % 2019 P&L* Q4'20 % Q3'20 2020 % 2019 Loyal / active customers (%) 27 +0 pp NII 2,566 7.1 10,723 4.6 Net fee income 878 8.2 3,566 -2.1 Digital customers (mn) 20.2 +17% Total income 3,514 4.9 14,845 4.7 NPL ratio (%) 4.39 -47 bps Operating expenses -1,314 10.9 -5,312 4.0 C
Slide 25: Brazil
South America Brazil main market KEY DATA 2020 % 2019 P&L* Q4'20 % Q3'20 2020 % 2019 Loyal / active customers (%) 23 +1 pp NII 1,786 3.4 7,625 -0.2 Net fee income 677 3.8 2,824 -2.0 Digital customers (mn) 15.6 +16% Total income 2,544 2.3 10,866 2.7 NPL ratio (%) 4.59 -73 bps Operating expenses -897
Slide 26: Global Businesses
GLOBAL BUSINESSES Corporate & Investment Banking Wealth Management & Insurance P&L* Q4'20 % Q3'20 2020 % 2019 Underlying Total fees Efficiency AUMs Total fees NII 113 9.7 454contribution -15.3 RoRWA €1,550mn €370bn €3,108mn Total 1.86% 38.3% Net P&L*fee income (+4% QoQ) 306 Q4'20 6.4 % Q3'20 31% of
Slide 27: Index
Index 1 2 3 Performance in 2020 Progress on Medium term outlook and areas review transformation in and key takeaways 2020 and next steps 27
Slide 28: We have laid the foundations for the Santander of Tomorrow
We have laid the foundations for the Santander of Tomorrow Our purpose Our aim Our how To help people and To be the best open financial Everything we do should be businesses prosper services platform, by acting Simple, Personal and Fair responsibly and earning the lasting loyalty of our people, cust
Slide 29: Our strategy and model transformation has doubled profits and improved RoTE
Our strategy and model transformation has doubled profits and improved RoTE, with a €29 bn higher capital base, a c.70% increase 2 Change 2013 2019 (bn) (%) Underlying attributable profit to €4.2 1 €8.3 +€4.1 +98% the Group, (bn) Underlying RoTE, (%) 7.7% 11.8% +4.1 p.p. (1) 2013 Statutory attributa
Slide 30: We will continue to allocate capital to higher growth opportunities
We will continue to allocate capital to higher growth opportunities Disciplined capital allocation 1 2 3 EPS + TNAVps growth High RoRWA Fee income Santander of organic growth businesses Tomorrow Primarily in Americas SCIB, Wealth One Santander, Dividend growth Management, PagoNxt and Digital (40%-50
Slide 31: Reinvesting for profitable growth
Reinvesting for profitable growth 2020 underlying RoRWA RWAs as % (Dif. vs Group avg.) of total Group North 1.60% 18% America +54bps High 1 RoRWA organic growth South 2.83% 20% c.40% America +177bps Primarily in the of our capital Americas delivered double Digital 1.40% 14% DCB Consumer Bank +34bps
Slide 32: The Santander of Tomorrow – priorities for profitable growth
3 The Santander of Tomorrow – 3 priorities for profitable growth 2 c 1 ONE SANTANDER New operating model leveraging our global scale to deliver a better customer experience, 1 3 supported by common culture and higher degrees of commonality, technology being one 2 PAGONXT Our Group technology “backbo
Slide 33: One Santander: creating a better bank with a new operating model
One Santander: creating a better bank for our customers with a 1 2 3 new operating model… One Santander Improving our customer … strengthening our … by creating a common service… relationship with customers… operating model Simplify mass market New distribution Shared processes and value proposition
Slide 34: One Santander will deliver customer growth and higher productivity
… will deliver customer growth and higher productivity 1 2 3 Medium-term goals One Santander • Focus on capital-efficient growth opportunities • Leverage PagoNxt global solutions with particular focus on Underlying RoTE: 10-12% Europe1 SMEs and merchants • Re-invent (Work-Cafés) our branch network,
Slide 35: PagoNxt is our global payments company
PagoNxt is our global payments company providing services to SME/ 1 2 3 Merchant and Consumers, leveraging our scale and technology PagoNxt Payments is a sizeable and fast growth market… … in which Santander already has significant scale Merchant Acquiring +11% €80bn >1.1mn c.60mn Merchant Active Me
Slide 36: PagoNxt offers SMEs digital Merchant and Trade solutions
PagoNxt offers SMEs cutting-edge digital Merchant and Trade 1 2 3 solutions PagoNxt Merchant Solutions Trade Solutions We have made significant investments in 4 key Merchant Spain assets which strengthen our trade offering Active +76% +88% ‘18-’20 growth customers From 506k to 891k From 69k to 130k
Slide 37: Our Digital Consumer Bank: building on a strong foundation
Our Digital Consumer Bank: building on a strong foundation 1 2 3 A B Digital Santander Consumer Bank Openbank Auto Global consumer financing Largest full-service Auto loan and leasing business + >75 business serving offline global digital bank serving OEMs and dealers and e-commerce merchants in the
Slide 38: Digital Consumer Bank ambition: grow revenues and double profit
Our ambition: to grow revenues and x2 PAT1 in the medium term and 1 2 3 build the most innovative consumer lending business in Europe Digital Consumer Bank … and deliver strong Great potential… … to build a new paradigm… financial results Medium-term goals Common apps, data and systems c.18mn infr
Slide 39: Our Digital Consumer Bank: flywheel powers growth
Our Digital Consumer Bank: flywheel powers growth 1 2 3 Already working Being developed Digital Consumer Bank Online More merchants Checkout Merchants offering offering our services Merchants SAN solutions to (through APIs) consumers… Digital Data Digital Banking API’s Openbank & Growth Consumers De
Slide 40: Index
Index 1 2 3 Performance in 2020 Progress on Medium term outlook and areas review transformation in and key takeaways 2020 and next steps 40
Slide 41: Reiterate medium-term goals and 9-10% RoTE goal for 2021
Reiterate our medium-term goals and a goal of 9-10% RoTE4 for 2021 … and the medium-term impact … allow us to reiterate our Our 2021 goals… of the new model… medium-term goals2 Cost income ratio Underlying RoTE <47% Best-in-class NPS 13-15% Cost of credit <1.28% 11-12% CET1 Mid-single Underlying ROT
Slide 42: Clear strategic priorities and plan for growth in EPS + TNAVps
Clear strategic priorities and plan for growth in EPS + TNAVps Our resilient business model delivered sound results in 2020 • €5bn underlying profit and resilient net operating income (+2% YoY) while growing loyal (+6%) and digital customers (+15%) • Robust credit quality with cost of credit at 1.28
Slide 43: 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:
Slide 44: Appendix
Appendix 44
Slide 45: Appendix
Appendix Other countries. Detail Secondary segments Balance sheet and capital management Yield on loans and cost of deposits NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements Glossary 45
Slide 46: SCF
Europe SCF SCF main markets KEY DATA 2020 % 2019 P&L* Q4'20 % Q3'20 2020 % 2019 NII 961 1.8 3,832 1.2 Active customers (mn) 17.6 -9% Net fee income 199 -2.8 750 -8.4 NPL ratio (%) 2.36 +6 bps Total income 1,223 2.4 4,685 0.9 Operating expenses -515 6.6 -1,981 -1.5 Cost of credit (%) 0.88 +40 bps Net
Slide 47: Portugal
Europe Portugal other markets KEY DATA 2020 % 2019 P&L* Q4'20 % Q3'20 2020 % 2019 Loyal / active customers (%) 48 +2 pp NII 195 1.1 787 -8.1 Net fee income 103 9.1 388 -0.6 Digital customers (k) 930 +20% Total income 317 1.5 1,296 -5.7 NPL ratio (%) 3.89 -94 bps Operating expenses -149 2.1 -590 -5.3
Slide 48: Poland
Europe Poland other markets KEY DATA 2020 % 2019 P&L* Q4'20 % Q3'20 2020 % 2019 Loyal / active customers (%) 55 +1 pp NII 243 0.2 1,037 -8.5 Net fee income 120 8.5 452 0.2 Digital customers (k) 2,756 +10% Total income 388 -0.2 1,524 -8.3 NPL ratio (%) 4.74 +43 bps Operating expenses -154 -2.8 -629 -
Slide 49: USA
USA North America KEY DATA 2020 % 2019 P&L* Q4'20 % Q3'20 2020 % 2019 Loyal / active customers (%) 22 +3 pp NII 1,348 -2.2 5,645 -0.3 1 Net fee income 206 -3.2 889 -4.3 Digital customers (k) 1,011 +6% Total income 1,801 0.3 7,360 -1.4 NPL ratio (%) 2.04 -16 bps Operating expenses -772 8.5 -3,079 -4.
Slide 50: Mexico
Mexico North America KEY DATA 2020 % 2019 P&L* Q4'20 % Q3'20 2020 % 2019 Loyal / active customers (%) 39 +6 pp NII 707 0.1 2,825 1.2 Net fee income 188 -5.6 772 5.2 Digital customers (mn) 5.0 +20% Total income 891 -0.7 3,651 3.2 NPL ratio (%) 2.81 +62 bps Operating expenses -422 7.0 -1,552 5.0 Cost
Slide 51: Chile
South America Chile other markets KEY DATA 2020 % 2019 P&L* Q4'20 % Q3'20 2020 % 2019 Loyal / active customers (%) 44 -2 pp NII 494 16.8 1,787 9.9 Net fee income 94 26.7 335 -5.0 Digital customers (k) 1,547 +24% Total income 594 10.8 2,263 2.4 NPL ratio (%) 4.79 +15 bps Operating expenses -219 -2.1
Slide 52: Argentina
South America Argentina other markets KEY DATA 2020 % 2019 P&L* Q4'20 % Q3'20 2020 % 2019 Loyal / active customers (%) 44 -3 pp NII 192 20.2 912 48.8 Net fee income 71 32.8 273 -6.1 Digital customers (k) 2,650 +21% Total income 226 15.4 1,128 31.5 NPL ratio (%) 2.11 -128 bps Operating expenses -141
Slide 53: Uruguay and Andean region
South America Uruguay and Andean region other markets Underlying attributable profit URUGUAY PERU COLOMBIA +8% +19% +40% 124 134 53 45 19 28% 22% 14 14% Underlying Underlying Underlying RoTE RoTE RoTE 2019 2020 2019 2020 2019 2020 Double-digit volume growth in all countries, both in customer loans a
Slide 54: Corporate Centre
Corporate Centre P&L* 2020 2019 NII -1,374 -1,252 NII impacted by the increased liquidity buffer Gains/Losses on FT 287 -297 Positive impact of FX hedging cost reflected in results Operating expenses -329 -373 from financial transactions LLPs and other provisions -443 -273 Operating expenses down -1
Slide 55: Appendix
Appendix Other countries. Detail Secondary segments Balance sheet and capital management Yield on loans and cost of deposits NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements Glossary 55
Slide 56: Retail Banking
Retail Banking P&L* Q4'20 % Q3'20 2020 % 2019 Activity EUR bn and % change YoY in constant euros NII 7,371 4.1 29,544 0.1 Net fee income 1,661 0.7 6,850 -9.6 768 Total income 9,159 0.4 37,215 -3.1 710 Operating expenses -4,179 4.2 -16,847 -2.6 Net operating income 4,980 -2.6 20,368 -3.5 +4% +7% LLPs
Slide 57: Corporate & Investment Banking
SCIB Corporate & Investment Banking Total income (Constant EUR mn) P&L* Q4'20 % Q3'20 2020 % 2019 NII 781 1.6 2,953 20.4 5,397 +15% 4,688 353 +2% Net fee income 379 6.0 1,550 12.5 Capital & Other +27% Total income 1,274 -6.6 5,397 15.1 1,754 Global Markets Operating expenses -530 7.5 -2,069 -2.7 1,5
Slide 58: Wealth Management & Insurance
WM&I Wealth Management & Insurance ACTIVITY EUR bn and % change in constant euros QoQ YoY P&L* Q4'20 % Q3'20 2020 % 2019 NII 113 9.7 454 -15.3 Total AUM 370 +4% 0% Funds and investments2 Net fee income 306 6.4 1,194 6.5 225 +2% +3% Total income 568 14.7 2,135 3.3 - Asset Management (SAM) 181 +1% +1%
Slide 59: Appendix
Appendix Other countries. Detail Secondary segments Balance sheet and capital management Yield on loans and cost of deposits NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements Glossary 59
Slide 60: Highly liquid balance sheet with large contribution from customer deposits
Santander has a highly liquid balance sheet with a large contribution from customer deposits and diversified MLT wholesale debt instruments Liquidity Balance Sheet Liquidity Coverage Net Stable Funding EUR bn, Dec-20 1,199 1,199 Ratio (LCR) Ratio (NSFR) Dec-201 Dec-19 Sep-20 Loans and Spain2 175% 14
Slide 61: 2020 MLT debt issuance and maturity profile
In 2020, the Group has issued EUR 30 bn1 of MLT debt and is able to cover its very manageable maturity profile Public market issuances in 2020 Maturity profile EUR bn, Dec-20 EUR bn, Dec-20 42.8 15.3 Spain 3.3 9.0 7.9 7.2 8.5 1.5 2.3 SCF 4.4 6.2 2.5 3.9 2.1 1.0 2021 2022 2023 2024 2025 2026+ 6.9 6.5
Slide 62: Interest rate risk and ALCO portfolios
We actively manage interest rate risk and our ALCO portfolios to optimize results while maintaining an appropriate risk profile Positive interest rate sensitivity in Europe ALCO portfolios reflect our geographic diversification Net interest income sensitivity to a +/-100 bp parallel shift Distributi
Slide 63: Issuances 2020 against funding plan
Issuances 2020 against funding plan Covered Bonds + Senior Senior Non-Preferred Hybrids TOTAL EUR bn, Dec-20 Plan Issued Plan Issued Plan Issued Plan Issued Santander S.A 4-5 3.1 7-8 6.9 1-2 3.81 12-15 13.8 SCF 6-8 3.8 - 0.0 - 0.0 6-8 3.8 UK 6-8 4.9 2-3 1.6 - 0.0 8-11 6.5 SHUSA - - 1-2 1.3 - 0.0 1-2
Slide 64: 2021 funding plan
2021 funding plan Snr non- Covered Hybrids TOTAL EUR bn pref + Snr Bonds 1 Santander S.A 2-3 8 - 10 - 10 - 13 SCF - 3-4 0-1 3-5 UK - 2.5 - 3.5 - 2.5 - 3.5 SHUSA - 3-4 - 3-4 TOTAL 2 - 31 16.5 - 21.5 0-1 18.5 - 25.5 o The Financial Plan is focused on covering TLAC/MREL requirements, with no secured is
Slide 65: Increased CET1 management buffer to nearly 350 bps
Regulatory changes in Q1 and increased capital levels, increased the Group’s CET1 management buffer to nearly 350 bps SREP capital requirements (phased-in) CET1 management buffer2 16.18% 2.23% T2 13.19% 13.01% 1.61% AT1 T2 2.00% 2.38% AT1 1.50% CCyB1 +189 bps +349 bps 0.19% 1.78% G-SIB buffer 1.00%
Slide 66: TLAC ratios for the Resolution Group
TLAC ratios for the Resolution Group headed by Banco Santander, S.A. TLAC Ratio EUR mn Mar-20 Jun-20 Sep-20 Dec-20 (e) • TLAC ratio at 31-Dec-20 increased 46 bps in Own Funds 91,550 86,335 86,191 86,686 the quarter to 23.8%1 (compared with the fully- of which: Common Equity Tier 1 (CET1) capital 75,
Slide 67: Group CET1 grows 36 bps QoQ
Group CET1 grows 36 bps QoQ, exceeding our 11%-12% target CET1 ratio quarterly evolution +0.10 12.34 +0.08 +0.22 +0.23 11.98 -0.27 Sep-20 Organic generation Regulatory & One-offs & corp Markets & others Dividend accrual Dec-20 Models transactions release 67
Slide 68: Appendix
Appendix Other countries. Detail Secondary segments Balance sheet and capital management Yield on loans and cost of deposits NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements Glossary 68
Slide 69: Yield on loans (%)
Yield on loans (%) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 EUROPE 2,77 2,75 2,70 2,68 2,66 2,47 2,40 2,42 Spain 2,05 2,08 2,02 2,02 1,99 1,86 1,82 1,85 Santander Consumer Finance 4,51 4,48 4,41 4,26 4,27 4,17 4,08 4,08 United Kingdom 2,72 2,67 2,63 2,59 2,52 2,37 2,35 2,39 Portugal 1,79 1,76
Slide 70: Cost of deposits (%)
Cost of deposits (%) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 EUROPE 0,42 0,42 0,41 0,41 0,39 0,28 0,16 0,12 Spain 0,14 0,14 0,13 0,13 0,06 0,04 0,04 0,04 Santander Consumer Finance 0,60 0,61 0,60 0,58 0,57 0,53 0,48 0,42 United Kingdom 0,67 0,70 0,70 0,69 0,69 0,52 0,29 0,23 Portugal 0,14 0,
Slide 71: Appendix
Appendix Other countries. Detail Secondary segments Balance sheet and capital management Yield on loans and cost of deposits NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements Glossary 71
Slide 72: Breakdown of moratoria by segments, regions and countries
Breakdown of moratoria by segments, regions and main countries: Credit quality of expired moratoria remains solid Expired Total Expired as % EUR bn, 31-Dec-20 moratoria % loan book (*) o/w: expired of Total % Stage 1 % Stage 2 % Stage 3 Total Group 112 12% 89 79% 82% 15% 3% Detail by segments Mortga
Slide 73: Stage coverage
Stage coverage Exposure ¹ Coverage Dec-20 Sep-20 Jun-20 Mar-20 Dec-19 Dec-20 Sep-20 Jun-20 Mar-20 Dec-19 Stage 1 864 862 878 891 898 0.5% 0.6% 0.6% 0.6% 0.5% Stage 2 69 60 61 53 53 8.5% 8.8% 7.7% 8.2% 8.7% Stage 3 32 31 33 33 34 43.4% 43.3% 41.1% 40.8% 41.7% (1) Exposure subject to impairment in EUR
Slide 74: NPL ratio (%)
NPL ratio (%) Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 EUROPE 3,61 3,48 3,47 3,25 3,19 3,24 3,13 3,15 Spain 7,29 7,02 7,23 6,94 6,88 6,55 5,98 6,23 Santander Consumer Finance 2,33 2,24 2,25 2,30 2,43 2,52 2,50 2,36 United Kingdom 1,17 1,13 1,08 1,01 0,96 1,08 1,30 1,21 Portugal 5,77 5
Slide 75: Coverage ratio (%)
Coverage ratio (%) Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 EUROPE 49,5 49,9 48,2 49,8 54,1 53,4 55,8 57,3 Spain 43,3 42,9 40,6 41,1 44,6 43,3 46,0 47,1 Santander Consumer Finance 105,3 105,9 104,2 106,1 109,6 106,1 108,2 111,0 United Kingdom 30,9 31,9 34,1 36,5 43,0 46,0 44,5 47,9 Po
Slide 76: Non-performing loans and loan-loss allowances by operating area
Non-performing loans and loan-loss allowances. Breakdown by operating areas. December 2020 Non-performing loans Loan-loss allowances Brasil, 10.9% Brasil, 16.2% Chile, 6.5% España, 27.1% Argentina, 0.3% Otros Sudamérica, 0.4% Chile, 5.2% México, 2.9% España, 43.9% Argentina, 1.1% Otros Sudamérica, 0
Slide 77: Cost of credit (%)
Cost of credit (%) Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 EUROPE 0,24 0,24 0,25 0,28 0,40 0,47 0,53 0,62 Spain 0,40 0,41 0,41 0,43 0,64 0,68 0,80 1,01 Santander Consumer Finance 0,38 0,36 0,38 0,48 0,66 0,78 0,84 0,88 United Kingdom 0,07 0,06 0,08 0,10 0,14 0,23 0,27 0,28 Portugal 0
Slide 78: Appendix
Appendix Other countries. Detail Secondary segments Balance sheet and capital management Yield on loans and cost of deposits NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements Glossary 78
Slide 79: Santander Responsible Banking goals
Santander Responsible Banking goals We are building a more Responsible Bank aligned with our commitments 2018 2019 2020* 2021 2025 Top 10 company to work for1 4 5 6 6 Women on the Board 33 33% 40% 40% 40%-60% Women in senior leadership positions2 20% 20 23% 23.7% 30% Equal pay gap3 3% 2% 1.5% ~0% Fi
Slide 80: Appendix
Appendix Other countries. Detail Secondary segments Balance sheet and capital management Yield on loans and cost of deposits NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements Glossary 80
Slide 81: Santander Group (EUR mn)
SANTANDER GROUP (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 8.682 8.954 8.806 8.841 8.487 7.715 7.773 8.019 35.283 31.994 Net fee income 2.931 2.932 2.955 2.961 2.853 2.283 2.423 2.456 11.779 10.015 Gains (losses) on financial transactions and other 472 465
Slide 82: Santander Group (Constant EUR mn)
SANTANDER GROUP (Constant EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 7.695 7.938 7.971 7.986 7.860 7.698 8.043 8.392 31.590 31.994 Net fee income 2.569 2.585 2.668 2.666 2.646 2.299 2.502 2.568 10.488 10.015 Gains (losses) on financial transactions and othe
Slide 83: Europe (EUR mn)
EUROPE (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 3.561 3.580 3.530 3.531 3.435 3.352 3.549 3.710 14.201 14.046 Net fee income 1.327 1.304 1.310 1.319 1.315 1.098 1.162 1.162 5.260 4.737 Gains (losses) on financial transactions and other 337 304 455 443 22
Slide 84: Europe (Constant EUR mn)
EUROPE (Constant EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 3.517 3.536 3.520 3.476 3.391 3.358 3.566 3.731 14.048 14.046 Net fee income 1.318 1.295 1.309 1.306 1.304 1.100 1.166 1.167 5.228 4.737 Gains (losses) on financial transactions and other 337 302 4
Slide 85: Spain (EUR mn)
Spain (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 1.009 1.009 967 934 925 931 1.034 1.067 3.919 3.957 Net fee income 623 624 614 620 643 535 562 573 2.481 2.314 Gains (losses) on financial transactions and other 224 216 408 258 220 96 204 (8) 1.107 512 Tota
Slide 86: Santander Consumer Finance (EUR mn)
Santander Consumer Finance (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 941 971 977 960 979 947 945 961 3.848 3.832 Net fee income 214 201 213 195 187 159 205 199 823 750 Gains (losses) on financial transactions and other 13 (18) 14 30 5 (11) 45 63 39 103 To
Slide 87: Santander Consumer Finance (Constant EUR mn)
Santander Consumer Finance (Constant EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 924 953 960 948 972 952 945 962 3.785 3.832 Net fee income 213 200 212 194 186 159 205 200 819 750 Gains (losses) on financial transactions and other 12 (18) 14 29 6 (11) 46 63
Slide 88: United Kingdom (EUR mn)
United Kingdom (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 975 944 908 961 898 871 976 1.063 3.788 3.808 Net fee income 216 207 217 226 193 96 117 99 866 506 Gains (losses) on financial transactions and other 15 32 (5) 33 6 12 23 (16) 74 25 Total income 1.2
Slide 89: United Kingdom (GBP mn)
United Kingdom (GBP mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 850 825 820 827 774 773 881 958 3.322 3.386 Net fee income 189 181 195 194 166 87 107 90 759 449 Gains (losses) on financial transactions and other 13 28 (4) 29 5 10 21 (14) 65 22 Total income 1.052
Slide 90: Portugal (EUR mn)
Portugal (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 216 213 214 213 202 197 193 195 856 787 Net fee income 98 99 96 98 101 90 94 103 390 388 Gains (losses) on financial transactions and other 44 42 22 21 47 30 25 19 129 121 Total income 357 354 331 332 350
Slide 91: Poland (EUR mn)
Poland (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 281 284 298 307 296 251 246 243 1.171 1.037 Net fee income 113 117 119 117 116 104 112 120 467 452 Gains (losses) on financial transactions and other (18) 39 24 34 (48) 23 35 24 80 35 Total income 377 440 4
Slide 92: Poland (PLN mn)
Poland (PLN mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 1.209 1.216 1.288 1.317 1.279 1.134 1.095 1.096 5.030 4.604 Net fee income 488 499 514 504 503 467 498 541 2.005 2.009 Gains (losses) on financial transactions and other (76) 168 104 147 (206) 95 156 109 34
Slide 93: Other Europe (EUR mn)
Other Europe (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 139 159 166 155 134 155 155 182 620 626 Net fee income 62 56 52 63 74 115 71 68 234 328 Gains (losses) on financial transactions and other 60 (7) (8) 68 (6) (23) 110 33 112 114 Total income 261 209 21
Slide 94: Other Europe (Constant EUR mn)
Other Europe (Constant EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 139 159 166 154 134 153 156 183 618 626 Net fee income 62 56 52 63 73 114 72 69 233 328 Gains (losses) on financial transactions and other 60 (8) (9) 67 (7) (23) 111 33 111 114 Total income 2
Slide 95: North America (EUR mn)
NORTH AMERICA (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 2.173 2.230 2.259 2.265 2.261 2.079 2.075 2.055 8.926 8.469 Net fee income 439 463 448 427 461 400 406 394 1.776 1.661 Gains (losses) on financial transactions and other 142 226 277 257 214 228 196 2
Slide 96: North America (Constant EUR mn)
NORTH AMERICA (Constant EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 2.087 2.117 2.130 2.120 2.131 2.065 2.152 2.121 8.454 8.469 Net fee income 416 434 418 395 431 401 423 405 1.663 1.661 Gains (losses) on financial transactions and other 145 223 271 246 208
Slide 97: United States (EUR mn)
United States (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 1.407 1.453 1.460 1.449 1.462 1.429 1.406 1.348 5.769 5.645 Net fee income 234 244 238 230 250 215 218 206 947 889 Gains (losses) on financial transactions and other 174 222 278 215 217 157 206 247 8
Slide 98: United States (USD mn)
United States (USD mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 1.598 1.633 1.623 1.604 1.612 1.573 1.644 1.608 6.457 6.437 Net fee income 266 275 264 255 275 237 255 247 1.059 1.014 Gains (losses) on financial transactions and other 197 250 310 238 239 173 240 2
Slide 99: Mexico (EUR mn)
Mexico (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 766 777 798 816 798 650 669 707 3.157 2.825 Net fee income 204 218 210 197 211 185 189 188 829 772 Gains (losses) on financial transactions and other (32) 4 (1) 42 (2) 70 (10) (4) 13 54 Total income 939 999
Slide 100: Mexico (MXN mn)
Mexico (MXN mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 16.703 16.694 17.231 17.393 17.484 16.706 17.310 17.322 68.021 68.822 Net fee income 4.455 4.695 4.535 4.188 4.617 4.719 4.868 4.596 17.873 18.799 Gains (losses) on financial transactions and other (687) 83
Slide 101: South America (EUR mn)
SOUTH AMERICA (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 3.222 3.425 3.314 3.356 3.065 2.606 2.486 2.566 13.316 10.723 Net fee income 1.178 1.178 1.204 1.228 1.074 774 841 878 4.787 3.566 Gains (losses) on financial transactions and other 88 45 59 130 25 3
Slide 102: South America (Constant EUR mn)
SOUTH AMERICA (Constant EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 2.365 2.565 2.617 2.701 2.611 2.597 2.663 2.852 10.248 10.723 Net fee income 847 869 948 977 907 786 900 974 3.641 3.566 Gains (losses) on financial transactions and other 71 50 56 110 23 29
Slide 103: Brazil (EUR mn)
Brazil (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 2.459 2.520 2.560 2.534 2.270 1.813 1.756 1.786 10.072 7.625 Net fee income 931 924 970 974 869 614 664 677 3.798 2.824 Gains (losses) on financial transactions and other 21 9 (7) 57 (3) 224 114 82 81 417 T
Slide 104: Brazil (BRL mn)
Brazil (BRL mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 10.516 11.095 11.272 11.534 11.100 10.725 11.066 11.446 44.416 44.336 Net fee income 3.980 4.070 4.271 4.429 4.250 3.679 4.167 4.324 16.750 16.420 Gains (losses) on financial transactions and other 91 41 (3
Slide 105: Chile (EUR mn)
Chile (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 440 500 462 464 448 425 420 494 1.867 1.787 Net fee income 103 97 102 102 92 74 74 94 404 335 Gains (losses) on financial transactions and other 56 59 82 71 12 85 38 6 268 142 Total income 600 656 646 638 55
Slide 106: Chile (CLP mn)
Chile (CLP mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 333.439 383.545 363.195 386.260 397.015 384.057 383.394 447.669 1.466.440 1.612.135 Net fee income 78.010 74.473 80.052 85.052 81.770 67.170 67.421 85.452 317.587 301.814 Gains (losses) on financial transact
Slide 107: Argentina (EUR mn)
Argentina (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 213 298 180 250 241 261 218 192 940 912 Net fee income 116 125 88 118 76 56 70 71 446 273 Gains (losses) on financial transactions and other 2 (33) (31) (8) 1 (8) (14) (36) (70) (57) Total income 331 389
Slide 108: Argentina (ARS mn)
Argentina (ARS mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 10.117 14.548 18.638 19.924 16.991 22.846 24.646 29.613 63.227 94.096 Net fee income 5.486 6.131 8.976 9.403 5.327 5.132 7.611 10.109 29.996 28.179 Gains (losses) on financial transactions and other 102
Slide 109: Other South America (EUR mn)
Other South America (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 109 108 112 108 106 107 91 94 437 398 Net fee income 29 32 44 34 37 29 33 35 138 134 Gains (losses) on financial transactions and other 8 9 16 10 14 9 13 20 43 56 Total income 146 149 172 153 1
Slide 110: Other South America (Constant EUR mn)
Other South America (Constant EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 89 91 95 96 97 105 96 100 370 398 Net fee income 23 27 38 30 34 29 34 37 118 134 Gains (losses) on financial transactions and other 7 8 14 9 13 9 13 20 38 56 Total income 119 126 147 1
Slide 111: Santander Global Platform primary segment (EUR mn)
SANTANDER GLOBAL PLATFORM primary segment (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 22 23 23 23 31 32 33 33 92 129 Net fee income 2 1 2 2 13 18 24 26 6 81 Gains (losses) on financial transactions and other (5) (4) (1) (7) 1 (6) (9) (4) (17) (18) Total inc
Slide 112: Corporate Centre (EUR mn)
CORPORATE CENTRE (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income (296) (304) (319) (333) (304) (354) (371) (345) (1.252) (1.374) Net fee income (14) (13) (9) (15) (9) (6) (11) (3) (50) (29) Gains (losses) on financial transactions and other (90) (106) (85) (34)
Slide 113: Retail Banking (EUR mn)
RETAIL BANKING (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 8.083 8.323 8.227 8.229 7.885 7.141 7.148 7.371 32.862 29.544 Net fee income 2.178 2.134 2.108 2.141 2.024 1.495 1.671 1.661 8.561 6.850 Gains (losses) on financial transactions and other 150 201 48
Slide 114: Retail Banking (Constant EUR mn)
RETAIL BANKING (Constant EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 7.200 7.414 7.455 7.453 7.323 7.134 7.391 7.696 29.522 29.544 Net fee income 1.899 1.872 1.896 1.914 1.867 1.511 1.730 1.743 7.582 6.850 Gains (losses) on financial transactions and other 1
Slide 115: Corporate & Investment Banking (EUR mn)
CORPORATE & INVESTMENT BANKING (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 654 700 657 716 671 713 788 781 2.728 2.953 Net fee income 352 374 421 373 404 406 361 379 1.520 1.550 Gains (losses) on financial transactions and other 272 217 153 337 225 307 248
Slide 116: Corporate & Investment Banking (Constant EUR mn)
CORPORATE & INVESTMENT BANKING (Constant EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 575 615 611 653 621 705 807 820 2.454 2.953 Net fee income 316 336 382 345 379 407 371 393 1.379 1.550 Gains (losses) on financial transactions and other 223 184 141 308 199
Slide 117: Wealth Management & Insurance (EUR mn)
WEALTH MANAGEMENT & INSURANCE (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 141 143 141 146 132 104 104 113 570 454 Net fee income 273 298 298 330 320 279 290 306 1.199 1.194 Gains (losses) on financial transactions and other 110 121 113 114 134 100 104 149 4
Slide 118: Wealth Management & Insurance (Constant EUR mn)
WEALTH MANAGEMENT & INSURANCE (Constant EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 130 132 136 137 125 103 108 118 536 454 Net fee income 254 278 281 308 306 278 295 314 1.121 1.194 Gains (losses) on financial transactions and other 99 109 101 101 126 101 1
Slide 119: Santander Global Platform secondary segment (EUR mn)
SANTANDER GLOBAL PLATFORM secondary segment (EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 100 92 100 83 103 112 104 98 375 416 Net fee income 142 139 137 132 115 109 111 114 549 449 Gains (losses) on financial transactions and other 30 32 40 34 43 29 23 35 13
Slide 120: Santander Global Platform secondary segment (Constant EUR mn)
SANTANDER GLOBAL PLATFORM secondary segment (Constant EUR mn) Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2019 2020 Net interest income 85 81 88 77 96 111 107 102 331 416 Net fee income 113 112 117 114 104 109 116 121 457 449 Gains (losses) on financial transactions and other 27 29 38 32 42 29 2
Slide 121: Appendix
Appendix Other countries. Detail Secondary segments Balance sheet and capital management Yield on loans and cost of deposits NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements Glossary 121
Slide 122: Glossary - Acronyms
Glossary - Acronyms AuM: Assets under Management LLPs: Loan-loss provisions RoRWA: Return on risk-weighted assets BFG: Deposit Guarantee Fund in Poland M/LT: Medium- and long-term RoTE: Return on tangible equity bn: Billion mn: million RWA: Risk-weighted assets CET1: Common equit
Slide 123: 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 124: 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: