Banco Santander, S.a. · BME:SAN
Banco Santander — Debt Investor Presentation (October 2022)
65 slides from Banco Santander's debt investor presentation, Oct 26, 2022
Slide 1: 9M 2022 Fixed Income Investors Presentation
9M 2022 FIXED INCOME INVESTORS PRESENTATION It's time to build together a better future for you
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 Forward looking statements are based on current expectations and future estimates about Santander’s and third-parties’ operations and businesses and address matters that are uncertain to varying degrees, including, but not limited to developing standards that may change in the
Slide 4: Santander at a Glance
Santander at a Glance 9M'22 Highlights Santander, a Total assets (€ bn) 1,816 leading financial Customer loans (€ bn excluding reverse repos) 1,040 group Customer deposits + mutual funds (€ bn; excluding repos) 1,129 Branches 9,134 9M'22 Net operating income (pre-provision profit) (€ mn) 21,034 Simp
Slide 5: Index
Index 1 2 3 4 5 6 7 8 9M’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 5
Slide 6: 9M'22 highlights
9M’22 Summary 9M’22 highlights Activity remained robust supported by larger customer base (+8mn) Steady growth Volumes1 +6% in customers, Accelerating revenue growth. NII +5% QoQ volumes and revenue NII + Fee income1 +8% Favourable FX impact. In euros, volumes +10% and NII + Fees +15% Increased
Slide 7: We maintained the main P&L trends leading to quarterly profit growth
9M’22 Summary We maintained the main P&L trends leading to quarterly profit growth % change Constant Attributable profit € million 9M'22 9M'21 Euros euros € mn NII 28,460 24,654 15 8 Net fee income 8,867 7,810 14 7 2,543 2,422 2,275 2,351 Trading and other income 1,302 2,162 -40 -45 2,138 2,067 2,17
Slide 8: Revenue, particularly NII, improved QoQ driven by higher rates and volume growth
9M’22 Summary Revenue, particularly NII, improved QoQ driven by higher interest rates and volume growth Revenue breakdown Constant € mn Net interest income QoQ 13,341 Changes in constant euros 12,571 12,651 12,070 Revenue +10% +5% Europe +7% 9,943 +3% +11% 9,429 Increased pace of growth 8,791 8,929
Slide 9: Focus on productivity and efficiency with costs below inflation
9M’22 Summary Focus on productivity and efficiency with the aim of maintaining costs below inflation Costs Efficiency ratio YoY % changes in constant euros In real terms1 9M'22 YoY change Group +6% -5% Group 45.5% -0.1pp Europe +1% -7% Europe 47.4% -4.1pp North North America +5% -3% America 47.0% +2
Slide 10: Credit quality remains robust; additional LLPs on macro assumptions
9M’22 Summary Credit quality remains robust. In 2022, additional LLPs due to updated macro assumptions Credit quality Loan-loss provisions Constant € bn Sep-21 Jun-22 Sep-22 CoR¹ 0.90% 0.83% 0.86% 2.6 2.7 2.4 NPL ratio 3.18% 3.05% 3.08% 2.2 2.2 1.9 Coverage ratio 74% 71% 70% 1.6 Stage 1 €912bn €998b
Slide 11: We continue to organically generate capital
9M’22 Summary We continue to organically generate capital Q3 fully-loaded CET1 ratio performance % +0.34 12.05 -0.08 12.10 -0.06 -0.15 Jun-22 Gross Cash Regulatory Markets Sep-22 1 organic dividend accrual & models & others generation Q3'21 Q3'22 Diff. FL CET1 ratio 11.85% 12.10% 25bps FL Total capi
Slide 12: Index
Index 1 2 3 4 5 6 7 8 9M’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 12
Slide 13: Santander is managed according to primary and secondary segments
Santander Business Model & Strategy Santander is managed according to primary and secondary segments One Santander (Europe, North Primary segments America and South America). New operating model leveraging our Europe North America South America Digital Consumer Bank global scale to deliver a bette
Slide 14: Our business model drives predictable and profitable growth
Santander Business Model & Strategy Our business model drives predictable and profitable growth Our business model is based on three pillars 01. Scale 02. Customer focus 03. Diversification2 Local scale and leadership. Unique personal banking relationships Our geographic and business Worldwide reach
Slide 15: Our geographic and business diversification in assets and liabilities
Santander Business Model & Strategy Our geographic and business diversification both in assets and liabilities … Loans and advances to customers (excluding reverse repos, Sep-22) Customer funds (excluding repos, Sep-22) By area1 By area1 DCB DCB South 5% 12% Total gross loans America Total custome
Slide 16: Customer loans growing across products, segments and countries
Santander Business Model & Strategy … which continue to grow well across products, segments and countries… Customer loans: +7% YoY Customer loans by country YoY % changes YoY in constant € € bn and % change YoY in constant € SAN 1,040 +7 590 +5 €406bn +6% 165 +9 €346bn +7% 159 +13 €289bn +7% 152 SCI
Slide 17: Particular strength in time deposits
Santander Business Model & Strategy … with particular strength in time deposits… Customer deposits: +5% YoY Customer deposits by country YoY % changes YoY in constant € € bn and % change YoY in constant € SAN 943 +6 622 +7 134 +3 €716bn +1% 130 +6 DCB 57 +6 319 +13 €227bn +27% 218 -1 43 +3 37 +6 Dem
Slide 18: Customer growth and commercial strategy reflected in profit and RoTEs
Santander Business Model & Strategy … together with steady customer growth and commercial strategy are reflected in profit and RoTEs … 9M’22 Total Net operating Underlying vs. 9M’21 customers income att. profit RoTE1 (mn) (€mn) (€mn) 46.8 6,977 2,837 12.5% Europe +1% +19% +32% +2.9 pp North 25.7 4,7
Slide 19: Resilient throughout the cycle
Santander Business Model & Strategy … which is resilient throughout the cycle… Resilient profit generation throughout the cycle Group net operating income, € bn 25.5 25.6 26.2 24.4 25.0 23.9 23.6 23.7 23.6 23.0 22.6 22.8 19.9 17.7 14.8 11.4 2006 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 19
Slide 20: Long-term stable and predictable growth
Santander Business Model & Strategy … resulting in long-term stable and predictable growth Predictable results with the lowest volatility among peers coupled with growth in earnings Quarterly reported EPS volatility1, 1999-Q2’22 647% 320% 139% 120% 115% 95% 83% 42% 40% 39% 12% US IT CH CH FR FR US U
Slide 21: Efficient profit generation with one of the best C/I ratios
Santander Business Model & Strategy Moreover, we are able to generate profit efficiently, with one of the best C/I ratios and net operating income /loans well above most European peers Efficiency Net operating income/Loans Cost-to-income, Q2’22 %, European peers, Q2’22 Peer 1 44% Peer 2 45% Peer 1 3
Slide 22: Index
Index 1 2 3 4 5 6 7 8 9M’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 22
Slide 23: Disciplined capital allocation strategy
Capital Disciplined capital allocation strategy to drive profitability improvement & maximize shareholder returns 2021 9M 2022 2022 Targets Capital accretive RWA growth below loan +1% < +4% +1% < +7% RWA < low-single growth RWAs loans RWAs loans growth digit growth Risk Risk adjusted adjusted 1 new
Slide 24: Capital levels exceed minimum regulatory requirements
Capital Santander’s capital levels, both phased-in and fully loaded, exceed minimum regulatory requirements SREP capital requirements and MDA* Assumed Assumedcapital capitalrequirements requirements(fully-loaded)*** (fully-loaded)** Sep-22 Sep-22 16.18% 16.00% T2 >15% 13.01% +316bps 2.47% 1.46% AT1
Slide 25: Strong fundamentals for AT1 bond holders
Capital Strong fundamentals for AT1 bond holders Santander Group’s CET1 levels are well above the minimum loss absorption trigger of 5.125%: €44bn. Distance1to trigger The first line of defense is the Group’s strong pre-provision profitability providing a high capacity to absorb provisions durin
Slide 26: AT1 issuances distributed by call date
Capital AT1 issuances distributed by call date Banco Santander, S.A. AT1 issuances outstanding at Sep-22 Nominal Next call Reset Currency € mn Coupon Structure date Spread EUR 1,000 5.25% PNC6 29-Sep-23 499.9bps USD 1,223 7.50% PNC5 08-Feb-24 498.9bps EUR 1,500 4.75% PNC7 19-Mar-25 409.7bps EUR 1,50
Slide 27: FX hedging policy on capital ratio and P&L
Capital FX hedging policy on capital ratio and P&L Stable capital ratio hedge Our P&L Policy Hedged Exposure Group Strategic management of the exposure to exchange CET1 12.10%1 rates on equity and dynamic on the countervalue of the units’ annual results in euros. Mitigate impact of FX volatility
Slide 28: Interest rate risk hedging
Capital Interest rate risk hedging Generally positive NII sensitivity… € mn Year 1 1 Loan portfolios mainly floating and funded by non-maturity deposits (NMDs) with low +2,000 rate sensitivity and fixed-rate wholesale funding 2 High capacity to manage and administer both asset and liability customer
Slide 29: Index
Index 1 2 3 4 5 6 7 8 9M’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 29
Slide 30: Credit quality remains solid
Asset Quality Credit quality remains solid… Credit quality ratios Q3'21 Q2'22 Q3'22 Q3'21 Q2'22 Q3'22 p 3bps QoQ Cost of p 3bps QoQ NPL ratio 3.18% 3.05% 3.08% 0.90% 0.83% 0.86% q 10bps YoY risk3 q 4bps YoY 4.08% 1.28% 3.93% 1.18% 3.73% 1.07% 1.08% 1.00% 1.00% 0.94% 0.90% 0.86% 3.32% 0.83% 3.26% 0.7
Slide 31: At the Group and country level
Asset Quality … at the Group and country level NPL ratios by country Cost of risk1 by country % Q3 2021 Q2 2022 Q3 2022 % Q3 2021 Q2 2022 Q3 2022 Spain 4.86 3.83 3.69 Spain 0.97 0.79 0.71 UK 1.27 1.17 1.16 UK 0.01 -0.02 0.02 Portugal 3.44 3.33 3.03 Portugal 0.35 -0.05 -0.12 Poland 4.34 3.45 3.63 Pol
Slide 32: Distribution of credit impaired loans in line with total portfolio
Asset Quality Distribution of credit impaired loans in line with total portfolio Credit impaired loans Loan-loss allowances Digital Consumer Digital Consumer Bank, 7.7% Bank, 10.3% Other South America, 0.5% Argentina, 0.4% Other South America, 0.9% Spain, 22.4% Chile, 6.2% Argentina, 1.0% Spain, 32.
Slide 33: Stage 3 ratio of vulnerable sectors in line with Group
Asset Quality The Stage 3 ratio of the most vulnerable sectors is broadly in line with the Group ratio Exposure to vulnerable sectors Jun-22, € bn Industry Exposure Stage 1 Stage 2 Stage 3 Automobile 34.4 94% 5% 1% 1 Hotel & Leisure 15.1 63% 23% 14% Transport 17.0 86% 9% 4% Oil & Gas 25.5 98% 1% 1%
Slide 34: Index
Index 1 2 3 4 5 6 7 8 9M’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 34
Slide 35: Legally, financially and operationally autonomous subsidiaries
Liquidity and Funding The Group’s business model combines local knowledge with global best practices through legally, financially and operationally autonomous subsidiaries… Legal autonomy structure Dec-21 Santander S.A.1 Santander Consumer Santander Finance2 Holdings USA Banco Santander Santander UK
Slide 36: Resolution groups with multiple entry points
Liquidity and Funding … divided into different resolution groups that can be resolved separately though multiple entry points MPE resolution strategy Dec-21, € bn Banking Union European Union 3rd Countries Spain1 Poland Brazil Mexico Resolution Group PE PE PE PE PE Point of Entry Portugal UK Chile A
Slide 37: Autonomous capital and liquidity model
Liquidity and Funding Santander follows an autonomous capital and liquidity model Capital ratios by country Jun-22, %, local figures (phased-in) US UK 18.93 17.22 20.77 18.65 16.92 15.54 Portugal 24.46 Brazil 24.04 Poland 14.20 21.60 19.18 Mexico 12.18 17.31 19.28 11.10 15.70 Santander 17.31 S.A. 13
Slide 38: Liquidity management principles
Liquidity and Funding Santander’s liquidity management is based on the following principles Decentralized liquidity model. Needs derived from medium- and long-term activity must be financed by medium- and long-term instruments. High contribution from customer deposits, due to the retail nature
Slide 39: Stock of issuances shows diversification
Liquidity and Funding Stock of issuances shows diversification across instruments and entities Debt outstanding by type Sep-22 Preference shares, Senior, €8.9bn, 5% €63.9bn, 33% Includes the issuance of 3 Green Bonds in line with the Sub debt, Group’s ESG strategy and Responsible Banking Agenda: €18
Slide 40: Conservative and decentralized liquidity and funding model
Liquidity and Funding Conservative and decentralized liquidity and funding model €35bn1 issued in public markets in 9M’22 Very manageable maturity profile € bn, Sep-22, Average exchange rates € bn, Sep-22 21.5 Covered 3.5 7.7 4.3 7.0 16.2 Bonds 1.0 2.8 18.7 0.7 14.6 1.3 12.6 9.0 1.4 9.6 7.6 6.4 1.8
Slide 41: YTD issuances against 2022 funding plan
Liquidity and Funding YTD issuances against 2022 funding plan Execution of 2022 funding plan € bn, Sep-22 Hybrids SNP + Senior Covered Bonds TOTAL Plan Issued Plan Issued Plan Issued Plan Issued 1 2 Banco Santander, S.A. 3 - 3.5 1.8 9 - 10 17.2 - 3.4 12 - 13.5 22.4 SCF - 0.0 5-6 1.4 0 - 0.5 - 5 - 6.
Slide 42: TLAC/MREL for the Resolution Group
Liquidity and Funding TLAC/MREL for the Resolution Group headed by Banco Santander, S.A. TLAC Sep-22(e) MREL Sep-22(e) % % and € bn 39.0% 6.5% 145.9 26.0% 3.5% 22.1 Senior 4.5% 29.1 SNP 2.7 Sub debt 3.5% 10.9 T2 15.8% Req. 8.2 AT1 32.5% 2.6% 29.0% Req. 8.7% 21.5% 18.0% 1.9% 72.9 13.2% CET1 6.8% % RW
Slide 43: Well-funded, highly liquid balance sheet
Liquidity and Funding Well-funded, diversified, prudent and highly liquid balance sheet (large % contribution from customer deposits), reflected in solid liquidity ratios Liquidity Balance Sheet € bn, Sep-22 Liquidity Coverage Net Stable Funding 1,437 1,437 Ratio (LCR) Ratio (NSFR) 1 Sep-22 Jun-22 J
Slide 44: Key liquidity metrics show strength and stability
Liquidity and Funding The main metrics show the strength and stability of the Group’s liquidity position Evolution of key liquidity metrics LTD and MLT funding metrics by geography Sep-22 (Deposits + M/LT 1 2018 2019 2020 2021 Sep-22 LTD Ratio funding) / Loans 3 1 Loans / net assets 76% 77% 76% 75%
Slide 45: Banco Santander S.A. ratings
Liquidity and Funding Banco Santander S.A. ratings Moody's S&P Fitch Date last Direction Direction Date last Direction Rating Rating Date last change Rating change last change last change change last change Covered Bonds Aa1 03/12/2019 - - - - AAu 28/01/2022 ↑ Senior Debt (P)A2 17/04/2018 ↑ A+ 16/12
Slide 46: Parent & Subsidiaries' Senior Debt Ratings
Liquidity and Funding Santander Parent & Subsidiaries’ Senior Debt Ratings Moody's S&P Fitch Date last Direction Date last Direction Date last Direction Rating Outlook Rating Outlook Rating Outlook change last change change last change change last change Group A2 17/04/2018 ↑ STABLE A+ 16/12/2021 ↑
Slide 47: Index
Index 1 2 3 4 5 6 7 8 9M’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 47
Slide 48: ESG strategy
ESG ESG strategy Overarching goal: Achieving our purpose by promoting sustainable & inclusive growth 3 strategic pillars Ambition Strategic Actions Main SDGs Deliver our Net zero • Alignment of the sectors with highest level of GHG emissions with our Net zero ambition by 2050 helping commitment, in
Slide 49: Our achievements
ESG Our achievements Key green and sustainability metrics Social & Governance Mobilized Green1 9M’22 Green loans 9M’22 Microfinance ~€79bn >€3bn >€670mn since 2019 from SCF >1.1mn microentrepreneurs Target: €120bn by 2025 >100k electric vehicles 8 Latam Countries 9M’22 Global League Socially respons
Slide 50: ESG public targets
ESG ESG public targets 2018 2019 2020 2021 9M’22 2025 / 2030 target 43% 50% 57% 75% 100% 120bn by 2025 19bn 33.8bn 65.7bn 78.7bn 220bn by 2030 27bn 54bn 100bn by 2025 7.0 bn 0 by 2030 0.21 0.17 0.11 tCO2e / MWh in 2030 23.84 16.98 mtCO2e in 2030 New 92.47 61.71 grCO2e / RPK in 2030 1.58 1.07 tCO2e /
Slide 51: ESG Ratings/Indices (1/2)
ESG ESG Ratings/Indices (1/2) CCC B BB BBB A AA AAA AA Out of 191 banks, 3% are AAA and 29% AA Laggard Average Leader D- D C- C B- B A- A A- Above the sector average (B) Disclosure Awareness Management Leadership >40 40-30 30-20 20-10 <10 23.9 268th out of 1,045 banks / 86th of 407 diversified
Slide 52: ESG Ratings/Indices (2/2)
ESG ESG Ratings/Indices (2/2) 98th percentile in banks sector 0 1 2 3 4 5 Banco Santander has been part of the FTSEGood Index 4.5 since 2003. In June 2021, we obtained 4.5 points ranking two points above sector’s average 0 29 49 59 100 ≈ 61 Weak Limited Robust Advanced 11th out of 31 diversifi
Slide 53: Index
Index 1 2 3 4 5 6 7 8 9M’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 53
Slide 54: Concluding Remarks
Concluding Remarks Concluding Remarks The Group’s stable capital generation has been supported by strong pre-provision profits providing Santander with a high capacity to absorb provisions. Strong capital levels in line with Santander’s business model based on geographic diversification, solid m
Slide 55: Index
Index 1 2 3 4 5 6 7 8 9M’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 55
Slide 56: Links to Grupo Santander public materials
Links, Appendix and Glossary Links to Grupo Santander public materials For additional information on the Group, please click on the images, icons or flags below 9M’22 financial results Other information Financial report Earnings presentation Series Shareholders report 2021 Digital Annual review (Exc
Slide 57: Europe
Links, Appendix and Glossary EUROPE 'Accelerating our business transformation in One Europe to achieve superior growth with a more efficient operating model' 9M'22 Highlights Strategic priorities Branches 3,163 Employees 64,925 ▪ Grow our business by better serving our customers through regional Tot
Slide 58: North America
Links, Appendix and Glossary NORTH AMERICA 'We provide a full range of financial services with particular focus on Retail, Private and Corporate Banking' 9M'22 Highlights Strategic priorities Branches 1,852 Employees 44,500 ▪ Strengthen One Santander in North America by unifying a common and regiona
Slide 59: South America
Links, Appendix and Glossary SOUTH AMERICA 'We remain focused on expanding, sharing best practices from each country and delivering profitable growth' 9M'22 Highlights Strategic priorities Branches 3,754 ▪ Strengthen connectivity and share best practices across countries, capturing new Employees 76,
Slide 60: Digital Consumer Bank
Links, Appendix and Glossary Digital Consumer Bank 'Europe’s consumer finance leader: solid business model, geographic diversification and leading market shares in auto/mobility finance and in personal finance/e-commerce' 9M'22 Highlights Strategic priorities Branches 365 ▪ To become the largest dig
Slide 61: Santander Corporate & Investment Banking
Appendix, Links, Appendix Links and and Glossary Glossary Santander Corporate & Investment Banking 'Santander CIB supports corporate and institutional customers, offering tailored services and value-added wholesale products suited to their complexity and sophistication' 9M'22 Highlights Strategic pr
Slide 62: Wealth Management & Insurance
Links, Appendix and Glossary Wealth Management & Insurance ‘We strive to become the best responsible wealth and insurance manager in Europe and the Americas' Total assets under management1 (€ bn) 402 ▪ Continue to build our global platform Total fees generated as % of the Group’s total fees2 o Expan
Slide 63: PagoNxt
'Innovative payments solutions for both Santander and non-Santander clients' 9M'22 Highlights PagoNxt revenue (€ mn) 655; +75% YoY We are a one-of-a-kind paytech business backed by Santander. Helping our customers prosper and accelerate their growth through a one-stop shop, Merchants providing solut
Slide 64: Glossary and Acronyms
Links, Appendix and Glossary Glossary and Acronyms ▪ ADIs: Available distributable items ▪ EPS: Earning per share ▪ RoRWA: Return on risk-weighted assets ▪ ALCO: Assets and Liabilities Committee ▪ ESG: Environmental, social and governance ▪ RoTE: Return on tangible equity ▪ AT1: Additional Tier 1 ▪
Slide 65: 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:
Banco Santander — Debt Investor Presentation (October 2022) on 6ix