Banco Santander, S.a. · BME:SAN
Banco Santander — Banco Santander Central Hispano — 9M 2003 Earnings Presentation
57 slides from Banco Santander's earnings presentation, Nov 17, 2003
Slide 1: Performance by business areas; average yield and cost of funds
The performance by business areas also varied considerably. Of note was Santander Central Hispano Retail Banking with growth of 11.5% and Portugal (+30.4%). Latin America registered a decline of 20.0% in euros over the first nine months of 2002, but was 4.7% higher after eliminating the exchange rat
Slide 2: Net fees and commissions; personnel and general expenses
Hispano Retail Banking, down 2.2%. Retail Banking in Latin America reduced its personnel costs by 25.7% (+0.5% excluding the exchange rate impact and a noteworthy reduction in real terms). The general expenses of European Retail Banking dropped 1.6% while the fall in Retail Banking Latin America was
Slide 3: Jan-Sep 2002 _Jan-Sep
5228 5119 4296 22a» Jan-Sep 02 2002 _Jan-Sep 03
Slide 4: Net loan-loss and country risk provisions
Santander Group | January - - September 2003 11 Net loan-loss and country risk provisions Million euros Variation Jan-Sep 03 Jan-Sep 02 Amount (%) Non - performing loans 1,157.9 1,713.0 (555.1 ) (32.40 ) Country - risk 200.6 26.1 174.5 667.59 Recovery of written - off assets (255.2 ) (309.6 ) 54.4 (
Slide 5: lan-Sep _Jan-Sep a103 0203. 9303,
a 2.408 lan-Sep 02 _Jan-Sep 03 402 a103 0203. 9303, ()Behange rate eet sca +2279
Slide 6: Goodwill amortization, other income and cash basis income
ahead of time EUR 699.1 million (EUR 642.5 million more than at September 2002). In addition, and not directly appearing in the results, EUR 318.0 million of the goodwill relating to the sale of 24.9% of Santander Serfin was also amortized, and also the goodwill in Argentina was written off using th
Slide 7: Net income, ROE and balance sheet
The income generated in the third quarter (EUR 637.2 million) was slightly lower than in the second quarter of 2003, but higher than in the same period of 2002 (+21.3%). This also happened in the second quarter, consolidating the trend envisaged by the Group. ROE was 14.1%, higher than in the first
Slide 8: Lending growth and loans breakdown
year-on-year in September 2002 to 9% in March 2003 and to 17% in September. The pace at Banesto over the same period increased from around 13% to 27%. Most of this growth was due to mortgages. Lending to SMEs and corporates also rose. In the rest of Europe, lending increased 8.4% (excluding securiti
Slide 9: Funds, pension funds and consolidated goodwill
(+55.1%). The increase in Mexico was 5.5%. Overall growth was 19%. With regards pension funds, almost two-thirds of the total balance comes from Latin American entities. The success in this segment is underscored by the fact that all countries (eliminating the exchange rate effect) registered high g
Slide 10: Ratings and credit risk
Rating agency Financial Long term Short term Strength Moody’s A1 P1 B- Standard & Poor’s A A1 Fitch Ratings A+ F1 B/C Santander Group | January - - September 2003 19 Risk management Credit risk The ratio of non-performing loans (NPLs) for the whole Group was 1.69% in September, slightly above that o
Slide 11: Eecnang gore «188—~—~«NEBSSCS
209 199 | 169 300902 31.1202 300903, Eecnang gore «188—~—~«NEBSSCS
Slide 12: Quarterly non-performing loans evolution
Quarterly non-performing loans evolution Million euros 2002 2003 3 rd quarter 4 th quarter 1 st quarter 2 nd quarter 3 rd quarter Balance at beginning of period 3,728.9 4,105.1 3,676.5 3,518.5 3,394.2 + Net additions 584.4 48.3 353.1 95.2 200.9 - Write-offs (208.1 ) (477.0 ) (511.1 ) (219.6 ) (133.8
Slide 13: Balance sheet management in Latin America
Balance sheet management in Latin America During the third quarter, interest rate risk in balance sheet management, measured by the sensitivity of equity to changes of 100 basis points in the yield curve increased. The sensitivity of net interest revenue over one year to changes of 100 basis points
Slide 14: Santander Group | January-September 2003
Santander Group | January - - September 2003 47 www.gruposantander.com
Slide 15: Forward-looking statements cautionary note
Santander Central Hispano cautions that this presentation contains forward looking statements. These forward looking statements are found in various places throughout this presentation and include, without limitation, statements concerning our future business development and economic performance. Wh
Slide 16: (*) Before ordinary amortization of goodwill
(*) Before ordinary amortization of goodwill
Slide 17: 1,892 1,631 4,055 ° 4,621 1,823 4,047 2203 3°03 2203 303
1,892 1,631 4,055 ° 4,621 1,823 4,047 203 303 2203 3°03 2203 303
Slide 18: Quarterly trading gains
Quarterly trading gains 316 268 256 240 246 207 178 Argentina *. Brazil Q101 = =Q2 Q3 Q4 Qt02 = Q2 Q4 Q103) Q2 Q303
Slide 19: Net operating income + income from equity-accounted holdings
Net operating income + income from ————— acc. holdings 1, an eo , 599 . a, 524 7,493 1,514 l i [ l l | Q1'02 Q2'02 Q3'02 Q4'02 Q1'03 Q2'03 Q3'03
Slide 20: Total net provisions rose in Q3 2003
...though total net provisions** in Q3 '03 rose due to lower income from sales and the closure of brokerage branches (*) Deducting the transfer of Argentine country-risk, previously allocated to “other provisions”
Slide 21: Net attributable income YTD performance
Net attributable income YTD performance 12.1% 8.0% 526 525 525 8.7% Q1'02 A202 Q3'02 A4'02 Q1'03 Q2'03 A3'03 Jan-Mar'03_ Jan-Jun’03_ Jan-Sep’03
Slide 22: Currency depreciation vs euro
Depreciation of average exch. Depreciation of period-end rate Jan-Sep’03 / Jan-Sep’02 exch. rate Sep’03 / Sep’02 US$ US$ Brazilian Brazilian Real Real Mexican Mexican Peso Peso Chilean Chilean Peso Peso 4% Venezuelan Venezuelan Bolivar Bolivar
Slide 23: Includes loan-loss provisions, accelerated goodwill amortization, Group
(*) Includes loan-loss provisions, accelerated goodwill amortization, Group transactions and other income
Slide 24: (**) Exchange rate impact: -EUR million
(**) Exchange rate impact: -EUR 282 million (*) Includes loan-loss provisions, accelerated goodwill amortization, Group transactions and other income
Slide 25: NPL ratio and coverage
NPL coverage ratio 2.09% 149% 147% 1.89% i 140% 140% 1.67% 1.69% Oi si Sep'02 Dec’02 Mar'03 Jun’03 Sep'03 Sep'02 Dec'02 Mar'03 Jun’03 Sep’03
Slide 26: NPL ratio
NPL ratio (%) @ Sep’02 mSep'03 Retail SAN Banesto Portugal Consumer Retail B. Finance Latam
Slide 27: NPL coverage ratio
NPL coverage ratio (%) 2 Sep 02 mSep'03 307 4 276 222 _ — 151 Tyg 188 Tagg 180 : L l Retail SAN Banesto Portugal Consumer Retail. + GWB Finance Latam
Slide 28: (*) January - September 2003 and difference
(*) January - September 2003 and difference with the same period in 2002
Slide 29: (*) Before ordinary amortization of goodwill
(*) Before ordinary amortization of goodwill (**) Data as of September annualized
Slide 30: Q1'02 and Q2'02 figures have been adjusted including AKB's contribution
Q1'02 and Q2'02 figures have been adjusted including AKB's contribution
Slide 31: Q1'02 and Q2'02 figures have been adjusted including AKB's contribution
Q1'02 and Q2'02 figures have been adjusted including AKB's contribution
Slide 32: Net attributable income and tax burden
(*) Net attrib. income affected by the higher tax burden and minority interests IBT: +9.4% (**) Net attributable income affected by the higher tax burden. Income before taxes: +33.3%
Slide 33: Net interest revenue and net fees and commissions
Net interest revenue Net fees and commissions 102 Q2'02 Q3'02 Q4'02 Q1'03 Q2'03 Q3'03 Q1'02 Q2'02 3'02 a4'02 Q1'03 A203 A3'03,
Slide 34: Net commissions: +11.5%
Net commissions: +11.5% Million euros 865 Jan-Sep'02 Jan-Sep'03 Breakdown Mutual + Million euros % pension funds +34 49.3 Securities Insurance Cards Rest ‘al +37 +98.9 +19 +113.7 +8 -+8.2 +1 - +99
Slide 35: Personnel and general expenses
(*) Personnel + general expenses
Slide 36: Qt02 Q2'02 Q3'02 4°02 Q1'03 Q2'03 3°03
Qt02 Q2'02 Q3'02 4°02 Q1'03 Q2'03 3°03
Slide 37: Lending growth
(*) Includes securitization
Slide 38: Customer funds
(*) Demand deposits + time deposits + mutual funds + pension plans (EPSV's included)
Slide 39: Basic revenue, expenses, net operating income
Basic revenue 380 387 357 388 355 356 | Personnel + general expenses 189 189 494 72 190 190 494 Q1'02 Q2'02 Q3'02 Q4'02 Q103 A203 A303, Q1102 Q2'02 Q3'02 Q4'02 Q1'03 Q2'03 Q3'03 Net operating income jeg 176 179 451 160 158 aboaldl Income before taxes 176 163 140 4157 116 ol il Q1'02 Q2'02 Q3'02 Q4'0
Slide 40: Customer funds, Banesto
(*) Demand deposits + time deposits + mutual funds + pension plans Note: Banesto Retail Banking data
Slide 41: Management drivers
Management drivers m The economy is still in recession, but with good prospects = Defense of net interest revenue m Net commissions rose for the sixth quarter running m= Good performance of costs m Recovery of net operating income mlmproved NPLs and NPL coverage Net operating income 109 100 93 gs 88
Slide 42: Q1'02 and Q2'02 figures have been adjusted to include AKB's contribution
Q1'02 and Q2'02 figures have been adjusted to include AKB's contribution
Slide 43: Latin America results
(*) Retail B. + Global Wholesale B. + Asset Mgmt. & Private B. (**) Net attrib. income affected by minority interests. Net income: -19.6% (***) Includes the rest of the countries and cost assignments. Lower losses if the variation is positive
Slide 44: (*) Retail B. + Global Wholesale B. + Asset Mgmt. & Private
(*) Retail B. + Global Wholesale B. + Asset Mgmt. & Private B
Slide 45: Latin America customer funds
(*) Excluding exchange rate effect. Customer funds include deposits (excluding REPOs) and mututal funds
Slide 46: Net interest revenue evolution; inflation and real exchange rate
Net interest revenue evolution Inflation & real / US$ exch. rate 1200 | "=== Customers Index evolution Real exchange rate +100 6.0 tooo | | Inflation linked bonds 50 goo | | —® - Other 40 800 3.0 700 20 600 1.0 500 0.0 -1.0 -2.0 aroz az02 302 a¥o2 at's A203 A303 +++ IPCA——IGP-M—Real /US$
Slide 47: (*) Equivalent to last year's quarters (including BoA minority interests)
Note: growth in balances, eliminating the exchange rate effect (*) Equivalent to last year's quarters (including BoA minority interests)
Slide 48: Management drivers
Management drivers = Improved business mix: growth in the most profitable segments m Increase in fees and commissions: focus on 5 key areas = Cost reduction after the merger m Already 100% focused on commercial activities and core business. Sep'03_ Sep’02 NPL ratio 4.31% 3.43% NPL coverage 105% 99%
Slide 49: Asset management: net attributable income
ical aspects Net attributable income = Assets under management of more than EUR 100,000 million 90 85 81 a1 , 78 = Spain: nm 74 Q Mutual funds: market share gain in revenues Q Insurance: market share gain and higher contribution to results @ Latin America: growth in local currency a1'02 0202 Q3'02 A
Slide 50: Assets under management
Assets under management > EUR 100,000 million Q Spain: 64% Growth in 2003: +14% Average fee: 1.46% Alternative mutual funds Real 2% Estate mutual funds
Slide 51: Management fees
Source: INVERCO (*) Management fees. Data in million euros according to CNMV
Slide 52: Insurance: critical aspects
ical aspects @ Strong increase in commissions generated: SAN: x2 Q Banesto: +30% m Market share increase, correcting our historical deficit in Life-risk and Household = Arranging the insurance business: acquired 100% of SAN Seguros Contribution to results * Million euros 97 +71% 57 Jan-Sep'02 Market
Slide 53: (*) Impact of the closure of the brokerage business in Europe: -EUR 13
(*) Impact of the closure of the brokerage business in Europe: -EUR 13 million
Slide 54: (*) Impact of the closure of the brokerage business in Europe: -EUR 13
(*) Impact of the closure of the brokerage business in Europe: -EUR 13 million
Slide 55: Trading gains
Trading gains Critical aspects 224 mALCO revenues: 193.5 million +218 mill (+42% o/ 2002) m Lower funding cost Jan-Sep'02 Jan-Sep'03 mHigher trading gains . . Net att. income (cash-ba: m Equity management: lower volatility and lower costs — m Higher expenses due to Partenon Ds = Capital gains alloca
Slide 56: Group net attributable income
Group net attributable income Million euros >2, Bi ‘orecast) 1,930 2,247 670 1,197 9% ES a 612 2002 2003 Jan-Mar Jan-Jun Jan-Sep Jan-Dec
Slide 57: Investor Relations
Investor Relations Plaza de Canalejas, 1. 28014 Madrid (Spain) Tel. 3491 558 19 86 – 3491 558 10 31 – 3491 558 20 40 – 3491 558 13 70 Fax: 3491 558 14 53 – 3491 522 66 70 www.gruposantander .com/inversores www.gruposantander .com/investor
Banco Santander Central Hispano — 9M 2003 Earnings Presentation on 6ix