Banco Santander, S.a. · BME:SAN
Banco Santander — Q3 2023 Earnings Presentation
47 slides from Banco Santander's earnings presentation, Oct 25, 2023
Slide 1: Earnings Presentation 9M'23
25 October 2023 Earnings Presentation — 9M’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 9M'23 Group Final Appendix Highlights & review remarks progress on our strategy 4
Slide 5: 9M'23 highlights
9M'23 highlights Q3 Attributable Profit 9M Attributable Profit Strong 9M results with 9mn new customers YoY contributing to a double-digit revenue increase €2.9bn €8.1bn +20% vs. Q3’22 +11% YoY RoTE EPS ONE TRANSFORMATION driving efficiency improvement and profitable growth 14.8% +17% +126bps YoY Yo
Slide 6: Profit increased in 9M'23, supported by customer revenue and efficiency improvement
Profit increased in 9M'23, supported by customer revenue and efficiency improvement, with double-digit growth in net operating income Attributable profit P&L Current Constant € mn € million 9M'23 9M'22 % % +20% 2,902 NII 32,139 28,460 13 16 Net fee income 9,222 8,867 4 6 2,670 2,543 2,571 +9% Other
Slide 7: On track to deliver on our 2023 financial targets
On track to deliver on our 2023 financial targets 2023 targets 9M'23 Revenue1 Double-digit growth +13% Efficiency ratio 44-45% 44.0% CoR <1.2% 1.13% FL CET1 >12% 12.3% RoTE >15% 14.8% Note: targets market dependent. Based on macro assumptions aligned with international economic institutions. 7 (1) Y
Slide 8: Building up capital organically and delivering higher shareholder remuneration
Building up capital organically and delivering double-digit value creation with higher shareholder remuneration FL CET1 TNAVps + Cash DPS Interim distribution in Nov-23 % € per share +0.3pp +0.92 Cash dividend +12% per share of €8.10 cents 12.3 12.0 -0.69 4.75 +39% YoY 4.26 Current share buyback pro
Slide 9: Improving efficiency due to One Transformation and Global & Network businesses
Improving efficiency due to the execution of One Transformation and extracting value from our Global & Network businesses Global & Network Global Tech FY’22 One Transformation businesses capabilities & others 9M’23 45.8% -117 bps -39 bps -29 bps 44.0% • Product simplification: 8% fewer • Multi-Latin
Slide 10: One Transformation driving simplification, reducing cost to serve
One Transformation driving simplification, reducing cost to serve and increasing transactionality 9M’23 data (or latest available). Changes in constant euros Simplification Process automation Best-in-class Tech Platform Gravity Cost1 # Operational FTEs Deployed in 3 countries and SCIB per active cus
Slide 11: Global and Network businesses: revenue growing above Group
Global and Network businesses: revenue growing above Group 9M'23 data. Changes in constant euros SCIB WM&I Payments Auto Network revenue PB network AuMs # Transactions Auto loans and leases €3.0bn €52bn 26bn €179bn +27% +12% +15% +7% Total +21% +23% PagoNxt -4% 1 revenue +22% ID Targets (CAGR 22-25)
Slide 12: Progressing towards our 2025 profitability targets
Progressing towards our 2025 profitability targets RoTE 9M'23 2025 Target RoTE 9M'23 2025 Target Europe 14.8% c.15% SCIB 28.4% >20% North 10.4% c.15% 1 America WM&I 92.1% c.60% South 14.8% c.19% America EBITDA Margin 9M'23 2025 Target Digital DCB Consumer 11.3% c.15% Bank 19.6% >30% Group 14.8% 15-1
Slide 13: Index
Index 1 2 3 4 9M'23 Group Final Appendix Highlights & review remarks progress on our strategy 13
Slide 14: Double-digit revenue growth backed by good customer activity
Double-digit revenue growth backed by good customer activity across businesses and regions Total revenue Revenue trends Constant € mn +15% • >95% of total revenue is customer related which drives the Total vast majority of total revenue growth revenue 13,431 13,889 14,219 14,987 Group 12,517 12,467
Slide 15: NII and NIM up YoY, supported by volumes and margin improvement
NII and NIM up YoY, supported by volumes and margin improvement Net interest income and NIM NII drivers 2.82% 2.63% 2.74% • NII growth of 7% in the quarter 2.52% 2.56% 2.56% NIM 2.45% • NII growing YoY in Europe and North America: Quarterly +19% - Europe (+32%) and Mexico (+13%), driven by positive
Slide 16: Net fee income grew driven by customer activity and value-added products
Net fee income grew driven by customer activity and value-added products, with 42% of total fees from Global and Network businesses Net fee income YoY % changes in constant euros Net fee income drivers Constant € mn +9% • Active customers increased by 2.1mn YoY 3,160 Retail • Transactionality and we
Slide 17: Focus on One Transformation and efficiency, resulting in positive jaws
Focus on One Transformation and efficiency, resulting in positive jaws Costs Costs and efficiency drivers 45.0% 45.6% 46.6% Efficiency 46.0% 44.1% 44.3% 43.6% Quarterly • Transformation towards simpler and more integrated models keeps driving efficiency improvements 6,298 6,563 5,553 5,719 5,902 6,2
Slide 18: Credit quality remains robust, on track to achieve Group 2023 CoR target
Credit quality remains robust, on track to achieve Group 2023 CoR target LLPs and credit quality Credit quality drivers 1.05% 1.08% 1.13% 0.86% 0.99% • Credit quality remains robust supported by 0.83% CoR 0.77% record low unemployment in most countries 3,257 Group 3,000 2,892 2,888 • NPL ratio stood
Slide 19: Diversified commercial banking model funded with stable retail deposits
Diversified commercial banking model funded with stable retail deposits Loan portfolio and customer funds Deposit structure Sep-23 Sep-23 €1,017bn -2% €1,160bn +5% Total SCIB 133 Mutual deposits1 Transactional c.75% -11% funds 204 +11% SMEs 248 SCIB 153 +9% -2% & Corp SMEs, Corp Deposits 249 Consume
Slide 20: CET1 well above our target of >12%
CET1 well above our target of >12%, driven by strong capital generation, with profitable front-book growth >15% RoTE Q3’23 FL CET1 performance Maximize capital productivity % Sep-23 estimates +0.45 Front book pricing +0.04 2.7% RoRWA of new book 12.5 -0.12 -0.13 12.2 12.3 Asset rotation and -0.21 ri
Slide 21: Index
Index 1 2 3 4 9M'23 Group Final Appendix Highlights & review remarks progress on our strategy 21
Slide 22: Well-positioned to create shareholder value and deliver sustainable profitability
Well-positioned to create shareholder value and deliver sustainable profitability We increased our profitability YoY, supported by customer growth and double-digit increase in revenue 9M'23 Completed our changes to a simpler & more integrated model through ONE TRANSFORMATION that will accelerate eff
Slide 23: Index
Index 1 2 3 4 9M'23 Group Final Appendix Highlights & review remarks progress on our strategy 23
Slide 24: Appendix
Appendix Investor Day 2025 targets summary and our last step towards ONE SANTANDER Primary and Secondary segments 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 "Supplement
Slide 25: One Transformation driving double-digit growth in value creation
One Transformation driving double-digit growth in value creation 2022 9M'23 2025 targets RoTE (%) 13.4 14.8 15-17 Profitability Payout (Cash + SBB)1 (%) 40 50 50 EPS Growth (% CAGR 22-25) 23 17 Double-digit Total customers (mn) 160 166 c.200 Customer centric Active customers (mn)2 99 101 c.125 Simpl
Slide 26: We recently completed our last step towards ONE SANTANDER
We recently completed our last step towards ONE SANTANDER, creating a simpler, more efficient operating model Our journey began in 2015 with SCIB leading the way 2023 2022 2021 2021 Global product 2017 factory / 2015 ONE infrastructure PagoNxt & Cards, DCB as a first Transformation Forged a new for
Slide 27: Appendix
Appendix Investor Day Targets summary and our last step towards ONE SANTANDER Primary and Secondary segments 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 I
Slide 28: Primary segments
Primary segments Detail by region and country 28
Slide 29: Europe
Europe Highlights Key data and P&L • On track to achieve our key transformation projects such as Loans Deposits Mutual Funds One App, tech commonality and shared services €552bn -7% €609bn 0% €101bn +9% • Customer growth continued in the region (+970k YoY) Efficiency CoR RoTE • Loans affected by low
Slide 30: Spain and UK
España and UK Spain UK • Strong YoY growth in customers (+744k) and stable deposits. • Higher rates continued to affect loan volumes, while deposits Loan volumes affected by prepayments and lower demand were flat YoY with a higher weight of saving accounts • Profit +68% driven by higher NII, boosted
Slide 31: Portugal and Poland
Portugal and Polonia Portugal Poland Poland • Loan volumes under pressure from higher rates. Excellent • Loans increased mainly driven by consumer lending, SMEs liquidity management, with cost of deposits under control, and corporates. Deposits grew across segments in a context of early redemption o
Slide 32: North America
North America Highlights Key data and P&L • Focus on the most profitable segments and on promoting Loans Deposits Mutual Funds Group network collaboration €165bn +4% €143bn +10% €29bn -4% • Attracting new customers, supported by our enhanced Efficiency CoR RoTE customer experience through tailored p
Slide 33: US and Mexico
USA y Mexico US Mexico • Stable and diversified deposit base growing 8% YoY (time • Successful customer attraction strategy reflected in strong deposits). Lending up driven by Auto, Multifamily and CIB YoY growth in customers (+708k), loans (+5%) and deposits • YoY and QoQ profit trends affected by
Slide 34: South America
South America Highlights Key data and P&L • We are focusing on increasing the value added to the Loans Deposits Mutual Funds Group and promoting synergies across our global and regional €162bn +5% €137bn +12% €70bn +21% businesses Efficiency CoR RoTE • Customer growth (c.7.5mn YoY) and higher transa
Slide 35: Brazil and Chile
Brasil and Chile Brazil Chile • Growth in loans (individuals and SMEs) and deposits (time) • Continued business transformation to offer the best products • Profit down YoY affected by negative NII sensitivity, lower gains and services on financial transactions (lower market activity), inflation and
Slide 36: Argentina and Uruguay, Peru and Colombia
Argentina y Uruguay Argentina Uruguay, Peru and Colombia • #1 NPS, with one of the best rated apps among local banks • Focus on digital expansion in Uruguay and on joint initiatives between CIB and Corporates in Peru and Colombia • Profit up YoY driven by strong revenue growth and efficiency improve
Slide 37: Digital Consumer Bank
DCB Digital Consumer Bank Highlights Key data and P&L • We continue to reinforce our leadership in mobility though New lending Loans Customer Funds new strategic alliances, our leasing & subscription businesses €40bn +5% €131bn +9% €70bn +18% • Leasing contracts grew +17% YoY, consumer financing inc
Slide 38: Corporate Centre
Corporate Centre Highlights Income statement Underlying P&L* 9M'23 9M'22 • NII improved significantly driven by the higher liquidity NII -124 -510 buffer remuneration as a result of the rising interest rates Gains/losses on financial transactions -473 -624 • Lower negative FX hedging impact resulted
Slide 39: Secondary segments
Secondary segments Detail on CIB, WM&I, PagoNxt and Card businesses 39
Slide 40: Corporate & Investment Banking; Wealth Management & Insurance
Corporate & Investment Banking Wealth Management & Insurance • Strong performance of the US franchise with relentless focus on the • Strong growth in contribution to Group profit (+26% YoY) in a execution of our growth strategy capital-light business, reflected in an RoTE of 92% • Double-digit reven
Slide 41: PagoNxt and Cards
PagoNxt Cards • Merchant Acquiring: strong TPV growth (+24% YoY) with market • 98 million cards, best quarter of the last six in portfolio growth share gains in core markets underpinned by all regions • Payments Hub already one of the largest processors of A2A • Best quarter in customer activity (€8
Slide 42: Appendix
Appendix Investor Day Targets summary and our last step towards ONE SANTANDER Primary and Secondary segments Reconciliation of underlying results to statutory results Glossary 42
Slide 43: Reconciliation of underlying results to statutory results
Reconciliation of underlying results to statutory results January-September 2023 January-September 2022 Statutory Underlying Statutory Underlying Adjustments Adjustments results results results results Net interest income 32,139 — 32,139 28,460 — 28,460 Net fee income 9,222 — 9,222 8,867 — 8,867 Gai
Slide 44: Appendix
Appendix Investor Day Targets summary and our last step towards ONE SANTANDER Primary and Secondary segments Reconciliation of underlying results to statutory results Glossary 44
Slide 45: 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 46: 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 47: 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: