Banco Santander, S.a. · BME:SAN
Banco Santander — H1 2023 Earnings Presentation
48 slides from Banco Santander's earnings presentation, Jul 26, 2023
Slide 1: Form 6-K Report of Foreign Issuer
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 July, 2023 Commission File Number: 001-12518 Banco Santander, S.A. (Exact name of registrant as specified in its chart
Slide 2: Table of Contents
BANCO SANTANDER, S.A. ________________________ TABLE OF CONTENTS Item 1. January - June 2023 Earnings presentation
Slide 3: Earnings Presentation H1'23
Earnings Presentation — H1’23 26 July 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: Important information
3 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 unpredictab
Slide 6: Index
4 Index H1’23 Highlights & progress on our strategy 1 Final remarks 3 Appendix 42 Group review
Slide 7: H1'23 highlights
5 H1 Attributable Profit Strong H1 results with 9 million new customers YoY contributing to a 12% revenue increase ONE TRANSFORMATION driving efficiency improvement and growth in profitability Strong balance sheet supporting value creation and shareholder remuneration H1’23 highlights Q2 Attributabl
Slide 8: Profit increased in H1'23 supported by customer revenue and efficiency
6 Profit increased in H1’23, supported by customer revenue and efficiency improvement, with double-digit growth in net operating income (*) Including the temporary levy in Spain (-€224mn) in Q1’23. 2,543 2,351 2,422 2,289 2,571 2,670 Q1'22 Q2 Q3 Q4 Q1'23 Q2 € mn Attributable profit Attributable prof
Slide 9: Well on track to achieve our 2023 financial targets
7 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. H1’23FY 2023 targets Well on track to achieve our 2023 financial targets … Double-digit growth 44-45% <1.2% >12%
Slide 10: Consistent execution of One Transformation and Global and Network businesses
8 … backed by consistent execution of One Transformation and value added from our Global and Network businesses • Multilatinas / Multieuropeans: +70% revenue growth YTD • WM&I: new global alternative asset manager, €2bn commitments • Auto: expansion of agreements with OEMs, +c.$4bn volume p.a. • Glo
Slide 11: Digital bank with branches: One Transformation delivering results
9 Digital bank with branches: One Transformation delivering results H1’23 data. Changes in constant euros Process automation Best-in-class Tech Platform (1) In real terms. Simplification Cost1 per active customer -2% Revenue per active customer YoY +11% YoY Transactions per active customer +10% # Op
Slide 12: Global and Network businesses: revenue growing above Group
10 Global and Network businesses: revenue growing above Group H1’23 data. Changes YoY in constant euros ID Targets (CAGR 22-25) Total revenue €2.0bn +27% Network revenue SCIB c.10% WM&I PB network AuMs €50bn +10% c.10% Payments # Transactions 17bn +13% PagoNxt c.30% PagoNxt Auto Auto loans and lease
Slide 13: Progressing towards our 2025 profitability targets
11 Progressing towards our 2025 profitability targets Europe South America North America Digital Consumer Bank Group DCB (1) Adjusted RoTE: adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12%. 2025 TargetH1'23 SCIB WM&I Auto RoTERoTE EBITDA Margin 2025 TargetH1'23 1
Slide 14: Index: Group review
12 Index H1’23 Highlights & progress on our strategy 1 Final remarks 3 Appendix 42 Group review
Slide 15: Double-digit revenue growth backed by customer activity
13 12,502 12,466 13,039 13,493 13,927 14,307 Q1'22 Q2 Q3 Q4 Q1'23 Q2 Total revenue Double-digit revenue growth backed by good customer activity across businesses and regions Revenue trends • >95% of total revenue is customer related which drives the vast majority of total revenue growth • Double-dig
Slide 16: NII and NIM up YoY
14 NII and NIM up YoY, supported by volumes and margin improvement Note: NIM = NII / Average earning assets. Changes in constant euros NII drivers • Strong NII growth of 6% in the quarter • NII growing YoY across regions: - Europe (+32%) and Mexico (+12%), strong increase driven by positive sensitiv
Slide 17: Net fee income grew driven by customer activity
15 2,848 2,952 2,910 2,950 3,040 3,063 Q1'22 Q2 Q3 Q4 Q1'23 Q2 Net fee income grew driven by customer activity and value-added products, with 42% of total fees from Global and Network businesses YoY % changes in constant euros Net fee income drivers +4% Constant € mn Net fee income n.s. 6,103 -6 5,8
Slide 18: Focus on productivity and efficiency with costs decreasing in real terms
16 12,479 11,287 +269 +229 +595 +89 +10 H1'22 Europe North America South America DCB CC H1'23 5,557 5,730 5,929 6,331 6,128 6,351 Q1'22 Q2 Q3 Q4 Q1'23 Q2 Focus on productivity and efficiency with costs decreasing in real terms Note: Costs in real terms exclude the impact from weighted average inflat
Slide 19: Credit quality remains robust
17 0.77% 0.83% 0.86% 0.99% 1.05% 1.08% 2,176 2,590 2,686 2,992 2,886 2,885 Q1'22 Q2 Q3 Q4 Q1'23 Q2 Credit quality remains robust, on track to achieve Group 2023 CoR target Note: Provisions to cover losses due to impairment of loans in the last 12 months / average customer loans and advances of the l
Slide 20: Diversified balance sheet funded with stable retail deposits
18 548 250 142 193 Customer funds +4% 350 157 130 250 136 Customer loans Diversified balance sheet funded with stable retail deposits Note: Management breakdown. YoY % changes in constant euros. (1) Transactional deposits: deposits from individuals and SMEs plus other operational corporate deposits
Slide 21: Capital in line with our target of >12%
19 12.2-0.11 -0.04 -0.03 12.2 +0.21 Mar-23 Gross organic generation Cash dividend accrual¹ Minority interests, Mexico buyback & other Markets & others Jun-23 Capital in line with our target of >12%. Front-book RoTE above 15% % % RWAs with RoRWA > CoE Asset rotation and risk transfer activities RWAs
Slide 22: Index: Final remarks
20 Index H1’23 Highlights & progress on our strategy 1 Final remarks 3 Appendix 42 Group review
Slide 23: Well-positioned to create shareholder value and sustainable profitability
21 Well-positioned to create shareholder value and sustainable profitability H1’23 >12% FL CET1 14.5% RoTE +13% EPS +11% TNAVps + DPS Acceleration of our structural changes to a simpler & more integrated model through ONE TRANSFORMATION is driving efficiency and profitable growth Strong balance shee
Slide 24: Index: Appendix
22 Index H1’23 Highlights & progress on our strategy 1 Final remarks 3 Appendix 42 Group review
Slide 25: Appendix: Investor Day 2025 targets summary
23 Appendix Investor Day 2025 targets summary 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 Information", published together
Slide 26: Investor Day 2025 targets summary
24 Profitability RoTE (%) 13.4 14.5 15-17 Payout (Cash + SBB)1 (%) 40 50 50 EPS Growth (%) 23 13 Double-digit Customer centric Total customers (mn) 160 164 c.200 Active customers (mn)2 99 99 c.125 Simplification & automation Efficiency ratio (%) 45.8 44.2 c.42 Network contribution Global & network b
Slide 27: Appendix: Primary and Secondary segments
25 Appendix Investor Day 2025 Targets summary 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 Information", published together
Slide 28: Primary segments
26 Primary segments Detail by region and country
Slide 29: Europe Highlights
27 Europe Highlights Note: H1’23 data and YoY changes (loans, deposits and mutual funds in constant euros). • On track to achieve our key transformation projects such as One App, tech commonality and shared services • Customer growth continued in the region (+1mn YoY) • Loans affected by lower deman
Slide 30: Spain and UK
28 Spain UK España and UK Note: H1’23 data and YoY changes (loans, deposits and mutual funds in constant euros). • Strong YoY growth in customers (+738k) and deposits (+3%). Loans affected by prepayments and lower corporate demand • Profit +74% driven by higher NII, boosted by active pricing managem
Slide 31: Portugal and Poland
29 Portugal and Polonia Portugal Poland Note: H1’23 data and YoY changes (loans, deposits and mutual funds in constant euros). • Loan volumes remained under pressure due to higher rates • Excellent management of liquidity ratios, mitigating the effect on deposits from the migration to public sector
Slide 32: North America Highlights
30Note: H1’23 data and YoY changes (loans, deposits and mutual funds in constant euros). North America Highlights Key data and P&L Loans Deposits Mutual Funds €160bn +5% €140bn +13% €28bn -2% 47.7% +1.1pp 1.70% +61bps 11.1% -1.1pp Efficiency CoR RoTE Underlying P&L* Q2'23 % Q1'23 H1'23 % H1'22 % H1'
Slide 33: US and Mexico
31Note: H1’23 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 8.5%. USA y Mexico US Mexico €46bn +3% €44bn +11% €16bn +1% 42.1% -2.3pp 2.
Slide 34: South America
32 South America Note: H1’23 data and YoY changes (loans, deposits and mutual funds in constant euros). Highlights • We are focusing on increasing the value we bring to the Group and promoting synergies across our global and regional businesses • 11% customer growth driven by higher transactionality
Slide 35: Brazil and Chile
33Note: H1’23 data and YoY changes (loans, deposits and mutual funds in constant euros). Brazil • Selective volumes growth focused on secured and higher rated customers • Profit down YoY affected by negative NII sensitivity, inflation and higher provisions • In Q2, revenue up with better fees and co
Slide 36: Argentina, Uruguay, Peru and Colombia
34Note: H1’23 data and YoY changes (profit, loans, deposits and mutual funds in constant euros). Argentina • Changes affected by high inflation • Customer and volumes growth, with stable credit quality. #1 NPS, with one of the best rated apps among local banks • Profit up driven by strong revenue gr
Slide 37: Digital Consumer Bank Highlights
35 Highlights Note: H1’23 data and YoY changes (loans and customer funds in constant euros). Digital Consumer BankDCB • We have the most OEM relationships in Europe supporting our auto business. Additionally, we are focusing on being a leader in leasing and mobility • Renewed our partnership with St
Slide 38: Corporate Centre Highlights
36 Corporate Centre Highlights • NII improved significantly driven by the higher liquidity buffer remuneration as a result of the rising interest rates • Lower negative FX hedging impact resulted in greater gains on financial transactions • Slight decrease in LLPs and other provisions Income stateme
Slide 39: Secondary segments
37 Secondary segments Detail on CIB, WM&I and Payments businesses
Slide 40: Corporate & Investment Banking and Wealth Management & Insurance
38 Corporate & Investment Banking Note: H1’23 data and YoY changes (revenue lines and commercial activity in constant euros). (2) Including fees generated by asset management and insurance ceded to the commercial network. Wealth Management & Insurance Strong growth in contribution to Group profit (+
Slide 41: PagoNxt and Cards
39Note: H1’23 and YoY changes in constant euros. Cards does not include Digital Consumer Bank or PagoNxt. PagoNxt • Merchant Acquiring: strong TPV growth (+25% YoY) with market share gains in core markets • Revenue increased 31% YoY (+27% in constant euros) due to overall increase in business activi
Slide 42: Appendix: Reconciliation of underlying results
40 Appendix Investor Day 2025 Targets summary Primary and Secondary segments Reconciliation of underlying results to statutory results Glossary
Slide 43: Reconciliation of underlying results to statutory results
41 Reconciliation of underlying results to statutory results Explanation of January-June 2023 adjustments: • Temporary levy on revenue in Spain amounted to EUR 224 million, which was moved from total income to other gains (losses) and provisions. • Provisions to strengthen the balance sheet, which n
Slide 44: Appendix: Glossary
42 Appendix Investor Day 2025 Targets summary Primary and Secondary segments Reconciliation of underlying results to statutory results Glossary
Slide 45: Glossary - Acronyms
43 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 46: Glossary - Definitions
44 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 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:
Slide 48: 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: 26 July 2023 By: /s/ José García Cantera Name: José García Cantera Title: Ch