Banco Santander, S.a. · BME:SAN
Banco Santander — Investor Presentation (October 2017)
27 slides from Banco Santander's investor presentation, Oct 10, 2017
Slide 1: Helping people and businesses prosper
Helping people and businesses prosper Jose García Cantera Group Chief Financial Officer
Slide 2: Forward-looking statements disclaimer
1 Banco Santander, S . A . ("Santander") cautions that this presentation contains statements that constitute “forward - looking statements” within the meaning of the U . S . Private Securities Litigation Reform Act of 1995 . Forward - looking statements may be identified by words such as “expect”, “
Slide 3: Contents
2 Contents Disciplined capital management 1 Conservative funding and hedging management 2 Key takeaways 3
Slide 4: Our financial strategy combines five levers
3 Our financial strategy combines five levers Business growth (1) Group ex - Popular as of 1H’17 CET1 : 10.72% ( meeting our targets consistently) Growing TNAV/share ( from € 4.01 Dec’14 to € 4.15 Jun'17) RoTE : 11.7% Ź Top 3 vs. peers RoRWA : 1.47 % Committed to grow organically Leveraging our busi
Slide 5: Disciplined capital management
4 Disciplined capital management 1
Slide 6: Santander outperforms in profitability with much lower volatility
5 0.9 0.6 0.9 1.1 1.2 1.2 1.3 1.5 1.1 1.7 1.3 1.7 1.5 2.2 1.3 1.5 1.8 1.7 RoTE (%) RoRWA (%) RWA Density (%) 29 23 42 28 26 41 64 27 43 35 30 36 53 27 66 44 58 68 Santander outperforms in profitability with much lower volatility… - 5 4 5 6 7 7 8 8 9 10 10 10 11 11 11 12 14 14 Note: Peers included ar
Slide 7: Higher profitability, higher coverage, conservative density
6 Higher profitability… …with higher coverage… …over a conservative density 1.6 2.1 2.2 2.2 2.2 2.5 2.6 2.9 3.4 4.1 …as business models matter: Santander has wide room to absorb losses Note: Peers included: BBVA, Unicredit, BNP Paribas, Société Générale, Intesa Sanpaolo, ING, Barclays, Lloyds and HS
Slide 8: Santander's capital ratio is well above regulatory requirements
7 2017 SREP requirement among the lowest in Europe… …due to a reduced pillar 2R… …which results into a comfortable buffer 9.50 9.00 8.75 8.00 7.77 7.75 7.25 2.75 2.50 1.75 1.50 1.50 1.50 1.25 380 395 418 431 525 540 550 (%) (%) (bps) Santander s capital ratio is well above regulatory requirements
Slide 9: We meet consistently our organic capital accumulation commitment
8 2018E 1 1.27% 11.0% • Committed to accumulate organically an average of 10bps CET1 per quarter • RWA growth below profit growth • Plans to optimise return on capital • Capital increase for the Popular acquisition is capital neutral 2014 2015 2016 1H'17 9.65% 10.05% 10.55% 10.72% 1.47% 11.7% We mee
Slide 10: On track to meet >11% CET1 in 2018
9 70 - 80 bps >11% 10.7 % 40 - 50 bps 11.7% RoTE > 11.5 % RoTE 10 - 20 bps 170 - 190 bps 1H’17 FL CET1 Capital accumulation Payout RWA Perimeter optimisation & others 2018 target FL CET1 …therefore we are on track to meet >11% CET1 in 2018 Note: Assuming no change in AFS portfolios valuation. Data e
Slide 11: Building a low capital consumption business and improving recurrence
10 (YoY) 2015 2016 1H'17 2015-18 CAGR Target 4% 8% 11% ~10 % Building a low capital consumption business and improving recurrence… • Enhanced customer loyalty • Fee generating business growth • Increased recurrence ratio from 48% to 52% YoY Significant fee growth Note: Constant euros (1) Fees to cos
Slide 12: Disciplined M&A and capital allocation
11 • ROI : 13 - 14% in 2020 • EPS : Accretive by ~3% in 2020 • TNAVPS : ~3% accretion …and disciplined M&A and capital allocation Banco Popular SAM BANIF Citi Argentina Becoming leader in Spain and Portugal • ROI : Aligned with Santander Portugal RoTE • EPS : Accretive • CET1 : No negative impact Re
Slide 13: Increased capacity to grow faster and improve dividends
12 Increased capacity to grow faster and improve dividends (1) Constant euros, NII + Fees Accumulate capital Pay dividends Fund Business growth +9% Cash dividend per share (2017E over 2016) +8% Customer revenues (1H’17 vs. 1H’16 ) +40bps per year 10.72% FL CET1 1H’17 Room for higher dividends … …and
Slide 14: AT1/T2 buckets to be achieved during the transitional period
13 • No excess of generic provision in 2018 considered (0.6pp) • AT1 issuances to target of 1.5% in 2018: ~ € 2.5Bn (o/w € 1Bn issued in Sep 17) • T2 issuances to target of 2% in 2018: ~ € 2.1Bn AT1/T2 buckets to be achieved during the transitional period Note: Assuming constant RWA. All amounts e
Slide 15: Targeted distance to MDA in December 2018
14 Targeted distance to MDA in December 2018 > 11.0% 4.5% 1.5% 2.0% 1.5% 2.5% 1.0% CET1 T2 AT1 CCB Pilar II requirement Minimum Pilar I G - SIB buffer Regulatory ratios Dec - 18 Target Assumed regulatory requirement 2019 FL CET1 Comfortable buffer for AT1 bondholders >150bps ( 1 ) As of Dec’16 ADIs
Slide 16: Conservative funding and hedging management
15 Conservative funding and hedging management 2
Slide 17: Parent Bank funding plan
16 Senior Non preferred Senior preferred Parent Bank funding p lan Funding plan focus on TLAC - eligible instruments Hybrids AT1 T2 Total Total Group issuances : € 18.4Bn (~ € 13Bn TLAC - eligible as of Sep’17) Diversified issuers : Parent bank, SCF, UK and USA Diversified currencies : EUR, USD, GBP
Slide 18: Very manageable maturity profile
17 U.S Parent SCF Chile Very manageable maturity profile Data as of Jun’17 ( € Bn ) € 18Bn issued during 1H’17 3.4 0.4 8.1 1.6 UK 3.4 Conservative and decentralised liquidity and funding model Portugal 1.0 1 (1) Medium and long term debt including covered bonds until June 30 th Parent SCF UK Brazil
Slide 19: Well funded and highly liquid balance sheet
18 Securitisations Group 140% 132% 130% 133% Liquidity Coverage Ratio (LCR) 163 23 96 153 861 127 52 764 Deposits Funding M/LT Funding ST Net loans to customers Financial assets Fixed assets & other Equity and other 1H’17 ( € Bn) Assets Liabilities Well funded and highly liquid balance sheet Net sta
Slide 20: Prudent FX hedging policy on capital ratio and P&L
19 Group FL CET1 Pro - forma 10.72% Hedged Exposure • Budget generally hedged on a 12 - month basis • Reduced impact of FX volatility • More conservative approach in 2017 • Corporate Centre assumes all hedging costs • Neutralises FX volatility in our FL CET1 ratio • Based on Group regulatory capital
Slide 21: Prudent interest rate risk hedging
20 38% 4% 10% 5% 14% 18% 8% 3% € 103Bn Net interest income sensitivity to +100bps parallel shift ( € MM) Ÿ 566 Ÿ 121 Ÿ 123 ź 103 Ÿ 549 Mostly positive interest rates sensitivity AFS portfolios reflect our geographic diversification parent …and prudent interest rates risk hedging Ÿ 150 Note: Data as
Slide 22: Key takeaways
21 Key takeaways 3
Slide 23: We are delivering ahead of plan on our commitments
22 Cost of credit risk Cost - to - income EPS ( € ) DPS ( € ) FL CET1 RoTE 1H’17 1.19% 46.3% 0.24 0.22 10.72% 11.7% 2016 1.18% 48.1% 0.41 0.21 10.55% 11.1% 2017 Improve Broadly stable Increase Increase +40bps Organic per year Increase We are delivering ahead of plan on our commitments 1.25% 47.6% 0.
Slide 24: We improve our RoTE target for 2018 and reiterate all other targets
23 FL CET1 >11 % Cost of Credit Risk 1.2% 2015 - 18 average Increasing EPS, reaching double digit growth Cash Dividend 30 - 40% cash dividend pay - out: Yearly DPS increase Cost - to - income 45 - 47 % RoTE > 11.5% We improve our RoTE target for 2018 and reiterate all other targets
Slide 25: Targets by country versus peers
24 Growth (loans YoY) Operational excellence (C/I ratio) Risk Mgt. (NPL ratio) Profitability (RoTE) 2018 Target 2015 1H’17 2016 2018 Target 52% DD +58 % 37% 56% 56 % 54% < 1.5 % 1.2% 2.2 % 1.5% ~3 0 % 32% 32% 36% 48 - 49% 2015 1H’17 2016 2018 Target 2015 1H’17 2016 2018Target S D 11 % +4 % 8% ~40 %
Slide 26: Key takeaways
25 • A unique model that offers best - in - class efficiency and RoTE allowing us to accumulate capital, pay growing cash dividends and finance profitable growth • Efficient and prudent balance sheet management through recurrent capital accumulation and prudent liquidity, funding model and hedging p
Slide 27: Thank you
26 Thank you Our purpose is to help people and businesses prosper. Our culture is based on the belief that everything we do should be 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 undersigne
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