Banco Santander, S.a. · BME:SAN
Banco Santander — Q1 2023 Earnings Presentation
58 slides from Banco Santander's earnings presentation, Apr 25, 2023
Slide 1: Form 6-K cover
FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of April, 2023 Commission File Number: 001-12518 Banco Santander, S.A. (Exact name of registrant as specified in its char
Slide 2: Table of Contents
BANCO SANTANDER, S.A. ________________________ TABLE OF CONTENTS Item 1. January - March 2023 Earnings presentation
Slide 3: Earnings Presentation Q1'23
Q1’23 Earnings presentation v080323pm Earnings Presentation — Q1’23 25 April 2023
Slide 4: Important information
2 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
Slide 5: Forward-looking statements risk factors
3 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 factors, could affe
Slide 6: Index
4 Index Q1’23 Highlights Our steps towards value creation 1 Final remarks 3 Appendix 42 Group review
Slide 7: Strong first quarter performance keeps us on track to meet 2023 targets
5 Strong first quarter performance keeps us on track to meet our 2023 targets TNAVps + DPS RoTE Profitability FL CET1 Strength RWAs with RoRWA > CoE Disciplined capital allocation 2023 Payout Cash dividend + SBB 50% Shareholder remuneration Note: Target payout is c.50% of Group reported profit (excl
Slide 8: Q1'23 Highlights
6 Q1’23 Highlights Double-digit revenue growth and efficiency improvement Strong growth in customers and volumes with deposits up 6% YoY On track to reach our 2023 targets Strong organic capital generation and TNAVps + DPS growth in Q1’23 (+5%) Sound liquidity ratios and CoR in line with targets Q1’
Slide 9: Strong top line with efficiency improvement and contained CoR
7 Strong top line with efficiency improvement and contained CoR (*) Including the temporary levy in Spain. (1) Provisions to cover losses due to impairment of loans in the last 12 months / average customer loans and advances of the last 12 months. Considering annualized Q1’23 provisions, cost of ris
Slide 10: Very solid start to the year on track to meet 2023 targets
8 Very solid start to the year that puts us on track to meet our 2023 targets Revenue1 Efficiency ratio CoR FL CET1 RoTE Note: targets market dependent. Based on macro assumptions aligned with international economic institutions. (1) YoY change in constant euros. (2) RoTE without annualizing the tem
Slide 11: Digital Bank with Branches pillars for value creation
9 Digital Bank with Branches 5 pillars for value creation across the Group, with focus on Retail & Commercial banking Note: Q1’23 data and YoY changes. (1) RoTE without annualizing the temporary levy in Spain: 15.3%. (2) In Q1’23. Capital FL CET1: 12.2% 2 Customer activity Transactions per active cu
Slide 12: Customer focus driving volume and revenue growth
10 Customer focus driving volume and revenue growth across the Group Note: Loans and advances to customers excluding reverse repos. Customer deposits excluding repos. YoY changes in constant euros. Transactions include merchant acquiring, cards and electronic A2A payments. 1 4 Active customers Trans
Slide 13: ONE Transformation: simplifying products and automating operations
11 • Reducing in branch administrative and operational tasks We aim to optimize around 80-90% of customer-related processes Making progress on simplifying our product offering and fully automating our front- and back-end operations Efficiency ratioONE Transformation • Product portfolio simplificatio
Slide 14: Global and Network businesses' revenue grew above Group
12 • Our merchant platform expanded innovative value-added services, deployed new global e-commerce capabilities and further developed specialized vertical solutions sharing them across countries • Our Payments Hub operation already managing a significant part of all payments in Europe, mainly in Sp
Slide 15: Robust credit quality and strong capital generation
13 Robust credit quality and strong capital generation 12.0% 12.2% Dec-22 Mar-23 Credit quality ratios FL CET1 ratio 5 0.99% 1.05% Dec-22 Mar-23 CoR1 (1) Provisions to cover losses due to impairment of loans in the last 12 months / average customer loans and advances of the last 12 months. Consideri
Slide 16: Increased profitability and shareholder value creation
14 13.5 15.0 FY'22 Q1'23 13.4% 14.4% FY'22 Q1'23 Increased profitability and shareholder value creation 4.26 4.47 Dec-22 Mar-23 (1) Includes share buybacks completed in Nov-21, May-22, Jan-23 and Apr-23. € cents RoTE TNAVps + Cash DPSEPS Completed the second 2022 share buyback programme, having repu
Slide 17: Index
15 Index Q1’23 Highlights Our steps towards value creation 1 Final remarks 3 Appendix 42 Group review
Slide 18: Strong top line with efficiency improvement and contained CoR
16 Strong top line with efficiency improvement and contained CoR € mn Attributable profit 2,275 2,543 2,351 2,422 2,289 2,571 Q4'21 Q1'22 Q2 Q3 Q4 Q1'23 (*) Including the temporary levy in Spain (-€224mn). Attributable profit (Constant € mn) (1) Excluding the temporary levy in Spain €2,795mn 1 1 2,3
Slide 19: Continued revenue growth supported by Europe and global businesses
17 12,250 12,458 13,523 13,935 (1) Includes trading gains and other income. Continued revenue growth supported by good performance in Europe and global businesses Fees NII Constant € mn Other income1 Revenue 399 680 373 707 Q4'21 Q1'22 Q2 Q3 Q4 Q1'23 2,783 2,840 2,959 3,043 Revenue trends • Strong p
Slide 20: NII and NIM up YoY
18 Volume growth1 8,938 10,185 Q1'22 Q1'23 NII and NIM up YoY, supported by volumes, interest rate increases and margin management 2.45% 2.63% NIM Note: NIM = NII / Average earning assets. (1) In constant euros. In euros +2% in loans; +4% in deposits. NII drivers YoY • Loans up 3% backed by consumer
Slide 21: Net fee income grew, supported by customer activity
19 2,840 3,043 Q1'22 Q1'23 Net fee income grew, supported by customer activity and growth in value-added products Constant € million Retail SCIB WM&I PagoNxt Auto • Active customers increased 2mn YoY • Transactionality and specific services for each segment • Growth in all regions. Of note, Europe •
Slide 22: Focus on productivity and efficiency
20 Focus on productivity and efficiency with costs decreasing in real terms Note: Costs in real terms exclude the impact from weighted average inflation. Costs and efficiency drivers Costs grew below inflation • Costs in real terms: -1% YoY • Investments in IT, digitalization and salary agreements a
Slide 23: LLPs and CoR: credit quality remains robust
21 LLPs and CoR 0.77% 0.77% 0.83% 0.86% 0.99% 1.05% Credit quality remains robust… Note: Provisions to cover losses due to impairment of loans in the last 12 months / average customer loans and advances of the last 12 months. Considering annualized Q1’23 provisions, Group cost of risk would be 1.08%
Slide 24: Highly collateralized and diversified loan portfolio
22 …backed by a highly collateralized and diversified loan portfolio Low-risk loan portfolio (1) Management breakdown. YoY % changes in constant euros. Loans and advances to customers excluding reverse repos. (2) Considering investment grade exposures with rating above rating agencies’ BBB equivalen
Slide 25: Brazil and US credit quality
23 Brazil and US credit quality Cost of risk Note: NCOs are in IFRS. 2019-2023 NCO % (inc. repo expense). (1) Consumer Retail instalment contract (RICs) and auto loans, excludes commercial fleet. Excludes LHFS. 4.50% 4.89% 3.93% 4.35% 3.73% 4.79% 4.84% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50%
Slide 26: Conservative structural risk management with liquidity above requirements
24 Conservative structural risk management with liquidity ratios well above requirements (1) 12 month average HQLAs. Provisional data. Cash includes withdrawable central bank reserves and deposit facility. Other liquid assets mainly includes public debt and covered bonds. (2) Provisional data. NSFR
Slide 27: Stable deposit structure based on retail funding
25 Mar-23Constant € bn Stable deposit structure based on retail fundingQuarterly deposit performance Demand Time 27%-5% YoY Mutual funds Note: Customer deposits excluding repos. Our diversified and stable deposit structure supports YoY growth across regions and segments 59% 26% Retail 85% Insured c.
Slide 28: Strong organic capital generation
26 12.2 -0.25 12.0 +0.24 +0.11 +0.07 Dec-22 Gross organic generation Share buyback & cash dividend accrual Regulatory & models Markets & others Mar-23 Strong organic capital generation ensures sustainability of shareholder remuneration % % RWAs with RoRWA > CoE Asset rotation and risk transfer activ
Slide 29: Index
27 Index Q1’23 Highlights Our steps towards value creation 1 Final remarks 3 Appendix 42 Group review
Slide 30: Supporting shareholder value creation and sustainable profitability
28 • Automation & simplification to better serve our customers • This is beginning to deliver savings, reflected in efficiency • We intend to accelerate this process in the coming quarters Supporting shareholder value creation and sustainable profitability Entering a new phase of shareholder value c
Slide 31: On track to meet our 2023 financial targets
29 On track to meet our 2023 financial targets Note: targets market dependent. Based on macro assumptions aligned with international economic institutions. (1) YoY change in constant euros. (2) RoTE without annualizing the temporary levy in Spain: 15.3%. Revenue1 Efficiency ratio CoR FL CET1 RoTE Q1
Slide 32: 2023-2025 targets announced at the Investor Day
30 2023-2025 targets announced at the Investor Day TNAVps+DPS Double-digit growth Average through-the-cycle RoTE 15-17% Profitability FL CET1 >12% Strength RWAs with RoRWA > CoE c.85% Disciplined capital allocation Payout Cash dividend + SBB 50% Shareholder remuneration Note: Target payout is c.50%
Slide 33: Index
31 Index Q1’23 Highlights Our steps towards value creation 1 Final remarks 3 Appendix 42 Group review
Slide 34: Appendix
32 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 pres
Slide 35: Primary segments
33 Primary segments Detail by region and country
Slide 36: Group profit by region
34 1,189 12.8% +19% +3.1 pp 627 10.5% -28% -2.1 pp 790 15.3% -14% -4.6 pp 244 9.9% -12% -2.7 pp Increased volumes across the board, mainly in deposits. Profit supported by Europe and the Corporate Centre Profit (€ mn) Contribution to Group profit RoTE Europe South America North America Digital Consu
Slide 37: Europe Highlights
35 Europe Highlights Key data and P&L Note: Q1’23 data and YoY changes (loans, deposits and mutual funds in constant euros). Loans Deposits Mutual Funds Efficiency CoR RoTE €566bn -2% €599bn +3% €95bn -6% 41.9% -5.9pp 0.42% +4bps 12.8% +3.1pp • Continued progress in our transformation projects, deve
Slide 38: España and UK
36 Loans Deposits Mutual Funds Spain UK España and UK Note: Q1’23 data and YoY changes (loans, deposits and mutual funds in constant euros). Loans Deposits Mutual Funds €242bn -3% €301bn +7% €74bn -4% 39.8% -8.3pp 0.62% -26bps 11.1% +3.7pp Efficiency CoR RoTEEfficiency CoR RoTE • Strong YoY growth i
Slide 39: Portugal and Poland
37 Portugal and Polonia Loans Deposits Mutual Funds Loans Deposits Mutual Funds Portugal Poland Underlying P&L* Q1'23 % Q4'22 % Q1'22 NII 261 13.0 53.6 Net fee income 124 5.0 1.6 Total revenue 405 11.8 21.8 Operating expenses -132 5.2 5.5 Net operating income 273 15.4 31.7 LLPs -14 75.3 72.8 Attribu
Slide 40: North America
38Note: Q1’23 data and YoY changes (loans, deposits and mutual funds in constant euros). North America Key data and P&L Loans Deposits Mutual Funds Highlights • Product rationalization and business simplification on track and beginning to deliver savings • Larger customer base and enhanced customer
Slide 41: USA and Mexico
39Note: Q1’23 data and YoY changes (loans, deposits and mutual funds in constant euros). (2) Adjusted RoTE: adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12%. Using tangible equity, RoTE is 7.5%. €44bn +3% €42bn +9% €15bn +1% 41.6% -2.5pp 1.98% -24bps 18.0% +3.3pp
Slide 42: South America
40 €160bn +12% €130bn +10% €63bn +11% 39.1% +3.8pp 3.39% +66bps 15.3% -4.6pp South America Note: Q1’23 data and YoY changes (loans, deposits and mutual funds in constant euros). Highlights Key data and P&L Loans Deposits Mutual Funds• Continued progress in increasing connectivity across the region a
Slide 43: Brazil and Chile
41Note: Q1’23 data and YoY changes (loans, deposits and mutual funds in constant euros). Loans Deposits Mutual Funds Brazil • Selective volume growth focused on secured and higher rated customers • Profit down YoY due to higher provisions and costs, affected by inflation and negative NII sensitivity
Slide 44: Argentina and Uruguay, Peru, Colombia
42 Loans Deposits Mutual Funds Note: Q1’23 data and YoY changes (profit, loans, deposits and mutual funds in constant euros). Argentina • Changes affected by high inflation • Customer and volume growth, with stable credit quality. #1 NPS, with one of the best rated apps among local banks • Profit up
Slide 45: Digital Consumer Bank
43 New lending Loans Customer Funds Highlights Key data and P&L Note: Q1’23 data and YoY changes (loans and customer funds in constant euros). Digital Consumer Bank €13bn +7% €127bn +11% €64bn +10% 49.1% -0.1pp 0.48% +4bps 9.9% -2.7pp DCB Efficiency CoR RoTE • We further expanded our value propositi
Slide 46: Corporate Centre
44 Corporate Centre Highlights Income statement • NII improved significantly driven by the higher liquidity buffer remuneration as a result of the higher interest rates • Lower negative FX hedging impact resulted in higher trading gains • Slight decrease in LLPs and other results Underlying P&L* Q1'
Slide 47: Secondary segments
45 Secondary segments Detail by CIB, WM&I and payment business
Slide 48: Corporate & Investment Banking and Wealth Management & Insurance
46 Underlying P&L* Q1'23 % Q4'22 % Q1'22 % Q1'22³ Total revenue 830 10.3 42.9 44.8 Net operating income 551 16.4 68.2 69.6 Attributable profit 377 10.4 62.2 63.8 Contribution to profit 773 -0.7 28.3 30.7 (*) € mn and % change in constant euros. (3) % change in current euros. Total fees Profit RoTE C
Slide 49: PagoNxt and Cards
47Note: Q1’23 and YoY changes in constant euros. Cards does not include Digital Consumer Bank or PagoNxt. Quarterly revenue performance +41% Q1’23 vs. Q1’22 Merchant €46bn +27% 172 244 Q1'22 Q1'23 Total Payments Volume (TPV) Constant € mn PagoNxt Cards Cards €75bn +10% Number of transactions +6% • 9
Slide 50: Appendix
48 Appendix Primary and Secondary segments Responsible Banking Reconciliation of underlying results to statutory results Glossary
Slide 51: We continue to make progress on our ESG agenda
49 We continue to make progress on our ESG agenda Note: Not taxonomy. Mar-23 data not audited. Definitions in the Glossary of this presentation. (1) Starting Jan-23. Does not include financial education. 2025 targets Green Finance raised and facilitated (since 2019) €120bn€96.2bn Socially responsibl
Slide 52: Appendix
50 Appendix Primary and Secondary segments Responsible Banking Reconciliation of underlying results to statutory results Glossary
Slide 53: Reconciliation of underlying results to statutory results
51 Reconciliation of underlying results to statutory results (1) Includes exchange differences. Explanation of adjustments in Q1’23: • Temporary levy on revenue in Spain amounted to EUR 224 million, which was moved from total income to other gains (losses) and provisions. Considering the temporary n
Slide 54: Appendix
52 Appendix Primary and Secondary segments Responsible Banking Reconciliation of underlying results to statutory results Glossary
Slide 55: Glossary - Acronyms
53 Glossary - Acronyms • ALCO: Assets and Liabilities Committee • AM: Asset management • AT1: Additional Tier 1 • AuMs: Assets under Management • BFG: Deposit Guarantee Fund in Poland • bn: Billion • BNPL: Buy now, pay later • bps: Basis points • c.: Circa • CAL: Customer assets and liabilities • CE
Slide 56: Glossary - Definitions
54 Glossary - Definitions Notes: The averages for the RoTE and RoRWA denominators are calculated using the monthly average over the period, which we believe should not differ materially from using daily balances. The risk-weighted assets included in the denominator of the RoRWA metric are calculated
Slide 57: 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 58: Signature
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Banco Santander, S.A. Date: 25 April 2023 By: /s/ José García Cantera Name: José García Cantera Title: C