Slide 1: Activity and Results First Half 2011
ACTIVITY AND RESULTS First Half 2011 27 July 2011
Slide 2: Important information
Important information 2 Banco Santander, S.A. (“Santander”) cautions that this presentation contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995. These forward-looking statements are found in various places throughout this presentation and
Slide 3: Agenda
Agenda 3 Group highlights H1’11 H1’11 Results – Group – Business areas Trends for the coming quarters Appendix
Slide 4: Group highlights H1'11
Group highlights H1’11 4 1 Recurring profit for the quarter: EUR 2,013 million. In the first half: EUR 4,121 million Attributable One-off provision of £538 million (net of tax) in relation to payment profit protection insurance (PPI) remediation in the UK After one-off, accounting profit of EUR 3,50
Slide 5: Solid generation of recurring profits
1 Solid generation of recurring profits 5 Solid generation of QUARTERLY RECURRING PROFITS before the extraordinary provision for PPI (UK) is maintained Group’s quarterly attributable Group’s profit attributable EUR million EUR million 4,445 4,121 3,736 3,501 2,215 2,230 2,101 2,108 2,013 1,635 1,393
Slide 6: Solid generation of recurring profits by growth stage in each market
1 Solid generation of recurring profits 6 Results are underpinned by the Group’s different growth stages in each market Continental Europe (ex Poland) Brazil EUR million Constant US$ mill.; continued operations 2,264 Attributable profit(1) H1’11 +7% 2,200 2,350 1,780 In euros Poland -21% BZ WBK Glob
Slide 7: Emerging markets: profits growing at a faster pace
1 Emerging markets1: profits growing at a faster pace, backed 7 by revenues Revenues growing at a faster pace and improved cost of credit drove profit growth at double digits Basic revenues Expenses and provisions Constant EUR billion Constant EUR billion 5.7 Expenses Provisions 5.3 4.9 5.1 4.8 4.9
Slide 8: Mature markets: recovered revenues not yet feeding through to profits
1 Mature markets1: recovered revenues are not yet feeding through to profits Higher underlying results due to revenues and specific provisions are absorbed by lower generic provisions in Spain Basic revenues Expenses and provisions Constant EUR billion Constant EUR billion Expenses Spain provisions
Slide 9: Credit quality: NPL ratio
2 Credit quality The Group’s ratio slides slightly Sharp improvement in SCF and Sovereign Total Group Continental Europe % % Spain SCF 3.78 5.12 5.23 5.13 3.42 3.55 3.61 4.95 3.34 3.37 4.81 4.63 4.24 4.57 4.42 3.71 3.88 3.59 Mar’10 Jun’10 Sep’10 Dec’10 Mar’11 Jun’11 M’10 J’10 S’10 D’10 M’11 J’11 M’1
Slide 10: Credit quality: coverage ratio
2 Credit quality 10 The Group’s coverage ratio Group total Continental Europe % % Spain SCF 128 128 122 122 74 75 108 111 73 73 71 69 68 64 65 58 53 49 Mar’10 Jun’10 Sep’10 Dec’10 Mar’11 Jun’11 M’10 J’10 S’10 D’10 M’11 J’11 M’10 J’10 S’10 D’10 M’11 J’11 United Kingdom and USA Latin America % % UK So
Slide 11: Liquidity
3 Liquidity 11 Maintaining a good liquidity position. Larger growth of deposits than loans; very active in issues Total Group: funds capturing and outflows Group’s liquidity EUR billion Loans / Deposits (%) 2010 H1’11 +75 147 150 +19 135 40 72 117 116 21 Dec’08 Dec’09 Dec’10 Jun’11 Outflows Funds ca
Slide 12: Solvency
4 Solvency 12 Strong generation of organic capital in the current scenario and a proactive management of RWA strengthened our high solvency ratios Core capital performance 9.66% 9.20% Main impacts in 8.61% 8.80% 7.58% ??Organic generation 6.25% of capital : +20 b.p. ??BZ WBK consolidation -55 b.p. ?
Slide 13: Solvency ratios. Stress test
4 Solvency ratios. Stress test 13 Even in the adverse scenario Santander is the bank obtaining the highest profits, paying the most dividends and retaining the most profit Profit generated in 2011-2012 Stress test impact on Grupo Santander* Santander 8,092 P1 6,247 EUR million P2 3,958 P3 3,280 ??Ne
Slide 14: Agenda
Agenda 14 ??Group highlights H1’11 ??H1’11 Results – Group – Business areas ??Trends for the coming quarters ??Appendix
Slide 15: Grupo Santander results H1'11
Grupo Santander results. H1’11 15 Var. / H1’10% excl. fx and EUR Mill. H1’11 Amount % perimeter Net interest income 15,152 +653 +4.5 +1.5 Fees 5,323 +515 +10.7 +6.9 Trading gains and other1 1,662 +96 +6.2 +2.8 Gross income 22,137 +1,264 +6.1 +2.9 1 Operating expenses -9,731 -921 +10.4 +6.6 2 Net ope
Slide 16: Grupo Santander results: revenues and expenses
Grupo Santander results 16 REVENUES growing at a faster pace and differentiated management of EXPENSES reflect the countries’ 1 2 Gross income Expenses EUR million +4% 11,285 10,852 10,614 10,563 10,613 +2% 11,037 10,260 +2% 4,824 4,908 4,548 4,687 4,698 4,263 4,794 -1% Q1’10 Q2 Q3 Q4 Q1’11 Q2 Q1’10
Slide 17: Loan-loss provisions
Grupo Santander results 17 3 LOAN-LOSS PROVSIONS: lower specific provisions are offset by the lower release of generic ones Specific provisions EUR million Net loan-loss provisions1 5,738 5,252 EUR million H1’10 H1’11 2,935 2,684 2,436 2,483 2,404 2,188 Use of generic provisions EUR million Q1’10 Q2
Slide 18: Agenda
Agenda 18 ??Group highlights H1’11 ??H1’11 Results – Group – Business areas ??Trends for the coming quarters ??Appendix
Slide 19: Europe
EUROPE
Slide 20: Continental Europe H1'11
Continental Europe. H1’11 20 EUR million and % / H1’10 Networks still impacted by environment but improved underlying trend. Very positive evolution of SCF and Attributable profit: EUR 1,874 million Net operating income Var. H1’11 / H1’10 in euros (%) Excl. EUR million perimeter Total 2,465 2,318 2,
Slide 21: Spain. Business performance
Spain*. Business performance 21 Deleveraging continues. The good liquidity situation attained in 2010 enables the management of price / volume parity Activity More liquidity and higher return Net loans: -6% / Dec. ’09 Loans / Deposits (%) 238 240 183 229 223 153 122 122 Dec.’09 Jun’10 Dec’10 Jun’11
Slide 22: Spain H1'11. Business performance
Spain* H1’11. Business performance 22 The accounting profits are impacted by the lower release of generic provisions, but the underlying results are positive Net interest income + Fees + Insurance EUR million Revenues 2,291 2,108 2,146 accelerating 1,955 1,853 1,993 Q1’10 Q2 Q3 Q4 Q1’11 Q2 Specific
Slide 23: Santander Branch Network H1'11
Santander Branch Network H1’11 23 Improved underlying business backed by higher gross income, lower costs and specific loan-loss provisions Activity Net operating income / Provisions EUR million Loans Deposits Profitability / cost Var. EUR billion Net operating Profitability income 691 639 576 588 2
Slide 24: Banesto H1'11
Banesto H1’11 24 Banesto shows the same underlying results as Santander Branch Network Activity Net operating income / Provisions EUR million Deposits Loans Profitability / Cost excl. repos Net operating Var. in EUR billion income 384 Profitability 362 317 312 324 3.30% Provisions 2.89% 2.94% 273 +7
Slide 25: Spain. Lending portfolio
Spain. Lending portfolio 25 Gross loans Loans with real estate purposes. Coverage EUR billion EUR million Risk Coverage TOTAL 245 236 Public sector 230 229 Amount Amount % 10 12 Household 12 13 64 mortgages 61 60 59 ??????????????? loans 5,399 1,659 31 Other loans to 31 30 28 28 individuals ????????
Slide 26: Portugal H1'11
Portugal H1’11 26 Solid starting point of Santander Totta to face the greater environment demands and meet the Financial Assistant Programme requirements Solid balance sheet Liquidity improvement ??Santander Totta has the most solid position ??Strong deleveraging process in the Portuguese banking sy
Slide 27: Portugal H1'11. Active and prudent management
Portugal H1’11 27 Active and prudent management amid a sharp business slowdown Activity Net operating income / Provisions EUR million Var. Jun’11 / Jun’10 Net interest inc. / ATAs Net operating 192 income 188 +21% Provisions 138 151 1.49 132 1.40 1.37 1.39 1.36 1.36 112 Net operating income after 17
Slide 28: Santander Consumer Finance H1'11
Santander Consumer Finance H1’11 28 Sharp profit increase underpinned by the main units Activity Results Volumes Net interest inc. / Net operating income / Provisions Provisions (% / ATAs) Var. Jun’11 / Jun’10 +43% EUR million 4.92 5.09 Net 890 920 917 Net operating 825 860 interest income 786 incom
Slide 29: Poland (BZ WBK) Q2'11
Poland (BZ WBK) Q2’11 29 Poland, market with great GDP is almost 40% of the other 11 Has not suffered a recession in the new EU members. last 10 years 38.5 million inhabitants GDP (YoY %)(1) 6% 7% 4% 5% 4% 5% 4% 4% 4% 2% 3% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Low debt vs. GDP High
Slide 30: Poland (BZ WBK) Q2'11: solid and well financed bank
Poland (BZ WBK) Q2’11 30 Solid and well financed bank, profitable and with a solid structure to achieve expected macroeconomic growth. Consolidates since April EUR billion Very solid balance sheet ??Total Assets 14.1 Well capitalised Activity ??Net loans 8.7 (Jun. ’11)??Deposits 10.2 Loans/ TIER I D
Slide 31: Poland (BZ WBK) Q2'11 results
Poland (BZ WBK) Q2’11 31 Data in local criteria. Constant EUR million In Q2’11 the focus on ... profitable obtained results* business growth was maintained and ... over 2010 Loans Basic revenues Costs Total +5% 9,092 +10% 8,674 425 386 +7% Companies and 229 Leasing 6,076 215 5,793 +5% Individual +5%
Slide 32: United Kingdom
UNITED KINGDOM ® Santander
Slide 33: United Kingdom H1'11
United Kingdom H1’11 33 Strong recurring profits absorbed regulatory and funding costs. Impact from one-off provision1 Recurring attributable profit: £ 839 Net operating income mill. (EUR 966 mill.) £ million Var. H1’11 / H1’10 en £ (%) Excl. regulatory impacts2 Total 830 825 805 Global 741 729 728
Slide 34: United Kingdom H1'11 activity and results
United Kingdom H1’11 34 Activity Results Mortgages Companies loans Deposits(1) Gross income £ billion £ billion £ billion £ Million 164 165 1,375 1,380 153 1,348 +8% 28 148 1,284 1,285 +1% 26 1,280 5 4 +3% 21 24 +16%(2) Jun’10 Jun’11 Jun’10 Jun’11 Jun’10 Jun’11 Core Non core Q1’10 Q2 Q3 Q4 Q1’11 Q2
Slide 35: Brazil
Brazil
Slide 36: Brazil H1'11
Brazil H1’11 36 Solid increase in of basic revenues accelerated net operating income.. In In profits, profits, impact impact from from higher higher tax tax rate and and minority minority interest interest Attributable profit: US$ 1,936 mill. Net operating income (EUR 1,381 million) Constant US$ mil
Slide 37: Brazil H1'11 activity and results
Brazil H1’11 37 Activity(1) Results Total loans Jun’11 / Jun’10 Basic revenues % Var. year-on-year Constant US$ million _____ % Var. year-on-year +28% 5,306 5,428 +13.2% +17% +23% +16% 5,035 +6% +8% 4,851 4,778 4,700 +5.9% -5% Individual Car financing Businesses Corporate + Dec’09 Dec’10 Jun’11 cust
Slide 38: Latin America ex-Brazil
Latin America ex-Brazil
Slide 39: Latin America ex-Brazil H1'11
Latin America ex-Brazil H1’11 39 Sharp profit increase spurred by retail banking: picked up in activity, higher basic revenues and lower cost of credit Attributable profit: US$ 1,510 mill. (EUR 1,077 million) Attributable profit by country Var. H1’11 / H1’10 in constant US$ (%) Constant US$ million
Slide 40: Latin America ex-Brazil H1'11 activity and results
Latin America ex-Brazil H1’11 40 Activity(1) Results Total loans Jun’11 / Jun’10 Basic revenues % Var. year-on-year Constant US$ million _____ % Var. year-on-year +21% +31% 2,203 +14% +26% 2,124 2,108 +21% +20% 2,079 2,061 +6.1% 1,985 +10% +3.7% -6% -2% Dec’09 Dec’10 Jun’11 (2) M o rtg. Co nsumer Ca
Slide 41: Mexico H1'11
Mexico H1’11 41 Profit fuelled by improved trend in revenues and lower provisions needs. Moreover, positive impact from minority interests Attributable profit: US$ 682 mill. Activity and Profitability(1) (EUR 486 million) % Var. year-on-year Net interest income / Var. H1’11 / H1’10 in constant US$ (
Slide 42: Chile H1'11
Chile H1’11 42 Similar trends to Mexico’s enabled net profit to grow at double digits Attributable profit: US$ 489 mill. Activity and Profitability(1) (EUR 349 million) % Var. year-on-year Net interest income / Var. H1’11 / H1’10 in constant US$ (%) Loans Deposits Provisions (% / ATAs) 4.46 Basic 3.
Slide 43: Sovereign
SOVEREIGN ® Santander
Slide 44: Sovereign H1'11
Sovereign H1’11 44 Consolidating the franchise’s business and enhanced credit quality Attributable profit: US$ 359 mill. Activity and Profitability(1) (EUR 256 million) % Var. year-on-year Net interest income / Var. H1’11 / H1’10 in US$ (%) Provisions (% / ATAs) Loans Deposits 3.29 3.28 +14% Net Gro
Slide 45: Corporate Activities
CORPORATE ACTIVITIES @® Santander
Slide 46: Corporate Activities
Corporate Activities 46 More negative contribution because of funding costs and lower tax rebates Attributable profit (H1’11 vs. H1’10) Main impacts: EUR million ??Net interest income -260 ??Trading gains +213 ??Other results -21 ??Tax -245 ??Total impact on profit: -313
Slide 47: Agenda
Agenda 47 ??Group highlights H1’11 ??H1’11 Results – Group – Business areas ?Trends for the coming quarters ??Appendix
Slide 48: Main trends for the coming quarters
Main trends for the coming quarters 48 Revenues growth Spain Lower specific provisions not feeding through to profit because of lower release of generic ones Good starting point to face the Portugal Impact on results without eroding the capital SCF Solid profit generation thanks to diversification a
Slide 49: Main trends for the coming quarters: Poland, UK, Latin America, Sovereign
Main trends for the coming quarters 49 Poland Entering the Group with good trends in revenues and profitability (BZ WBK) Confirming initial expectations at the moment of its acquisition United Environment of low growth and strong liquidity competition Kingdom Regulatory impacts Latin Faster growth o
Slide 50: Agenda
Agenda 50 ??Group highlights H1’11 ??H1’11 Results – Group – Business areas ??Trends for the coming quarters ?Appendix
Slide 51: Appendix
51 Appendix ??Group’s Balance Sheet ??Secondary Segments Results ??Spreads, NPL and coverage ratios of the main units ??Construction and real estate sector in Spain
Slide 52: Group's balance sheet
Group’s balance sheet
Slide 53: Main trends of the Group's balance sheet
Main trends of the Group’s 53 Retail balance sheet, appropriate for the business nature, of low risk, liquid and well capitalised Balance sheet at June 2011 1 ??Lending: 59% of balance sheet EUR billion 1,232 1,232 2 Cash, Central Banks and credit Credit ? Cash and credit institutions 146 institutio
Slide 54: Secondary segments results
54 Secondary segments results
Slide 55: Retail Banking
Retail Banking 55 Improved trend in gross income and net operating income backed by lower provisions Recurring attributable profit: Net operating income EUR 4,228 million Var. H1’11 / H1’10 en euros (%) Excl. fx and EUR million perimeter +6% Gross 5,980 +7.3% +4% 5,640 5,621 5,685 income 5,448 5,380
Slide 56: Global Wholesale Banking (GBM)
Global Wholesale Banking (GBM) 56 Recurring model focused on customers and with a low risk profile Solid revenues generation ... based ... on a portfolio ??By customer revenues Gross income (mill. € ) Gross income (mill. € ) 1,364 TOTAL 2,667 -5% 2,538 Total 1,303 1,337 1,230 1,252 Trading 385 1,201
Slide 57: Global Wholesale Banking (GBM) Q2'11
Global Wholesale Banking (GBM) 57 Q2’11 revenues dented by sluggish provisions because of increased volumes Net operating income Attributable profit EUR million EUR million -15% 1,023 922 943 -25% 848 865 782 714 641 586 584 548 441 Q1’10 Q2 Q3 Q4 Q1’11 Q2 Q1’10 Q2 Q3 Q4 Q1’11 Q2
Slide 58: Asset Management and Insurance
Asset Management and Insurance 58 High contribution to the Group via revenues and profits: 10% revenues of the Group’s Asset Management Insurance Total revenues / Total PBT+ paid fees to networks: EUR 1,569 mill. Assets under management Assets (*) Var. / H1’10 (const. € ) EUR Billion % annualised Br
Slide 59: Main units spreads and NPL ratios
59 Main units spreads and NPL ratios
Slide 60: Continental Europe. Main units spreads
Continental Europe. Main units spreads 60 (%) SAN Branch Network Banesto Retail Banking 2.60 2.53 2.04 1.87 1.89 1.95 2.20 2.00 1.92 1.99 2.03 2.08 2.10 1.90 1.97 2.02 2.20 1.94 1.83 1.83 1.65 1.67 1.41 1.47 0.50 0.56 0.12 0.10 0.04 0.06 0.05 0.18 -0.35 -0.51 -0.52 -0.36 Q1’10 Q2 Q3 Q4 Q1’11 Q2 Q1’1
Slide 61: Continental Europe. NPLs and coverage ratios
Continental Europe. NPLs and coverage ratios 61 Banco Santander* Banesto 66% 61% 61% 54% 49% 44% 61% 58% 60% 54% 52% 52% 3.61% 3.65% 3.79% 4.24% 4.68% 5.08% 3.13% 3.49% 3.83% 4.11% 4.31% 4.54% Mar’10 Jun Sep Dec Mar’11 Jun Mar’10 Jun Sep Dec Mar’11 Jun NPLs Coverage NPLs Coverage Santander Consumer
Slide 62: Spain. Loans to customers and NPL ratio
Spain. Loans to customers and NPL ratio 62 Gross Loans NPL ratio EUR billion % 18.9 21.3 With real estate 17.0 purpose(1) TOTAL Public sector 245 236 230 229 11.1 10 12 12 13 Household mortgages 64 61 60 59 Total portfolio Other loans to 4.6 4.8 31 30 4.2 Spain individuals 28 28 3.4 3.4 Other portfo
Slide 63: United Kingdom. Spreads and NPL ratios
United Kingdom. Spreads and NPL ratios 63 (%) Spreads Retail Banking NPLs and coverage 2.28 2.34 2.35 2.13 2.20 2.05 1.99 1.99 2.03 2.03 2.04 1.97 46% 46% 48% 46% 45% 41% -0.06 -0.14 -0.17 -0.25 -0.30 -0.38 1.88% 1.85% 1.77% 1.76% 1.75% 1.82% Q1’10 Q2 Q3 Q4 Q1’11 Q2 Mar’10 Jun Sep Dec Mar’11 Jun Loa
Slide 64: Spreads main countries Latin America
Spreads main countries Latin America 64 (%) Retail Banking Brazil Retail Banking Mexico 16.13 16.23 15.81 15.42 15.84 16.17 12.08 11.42 11.23 10.98 10.67 10.44 15.26 15.29 14.73 14.29 14.72 15.05 10.03 9.50 9.20 8.93 8.58 8.40 0.87 0.94 1.08 1.13 1.12 1.12 2.04 2.05 1.92 2.03 2.05 2.09 Q1’10 Q2 Q3 Q
Slide 65: Latin America. NPLs and coverage ratios
Latin America. NPLs and coverage ratios 65 Brazil Mexico 268% 257% 215% 234% 222% 199% 100% 98% 98% 101% 104% 102% 2.20% 5.04% 5.01% 4.97% 4.91% 4.85% 5.05% 1.86% 1.77% 1.84% 1.58% 1.63% Mar’10 Jun Sep Dec Mar’11 Jun Mar’10 Jun Sep Dec Mar’11 Jun* NPLs Coverage NPLs Coverage Chile 99% 97% 94% 89% 89
Slide 66: Sovereign. Spreads and NPL and coverage ratios
Sovereign. Spreads and NPL and coverage ratios 66 (%) Spreads NPLs and coverage 2.88 2.95 2.94 2.90 2.66 2.61 82% 85% 64% 67% 72% 75% 2.16 2.24 1.94 1.96 2.04 2.08 0.94 0.99 5.14% 5.11% 4.80% 4.61% 4.15% 3.76% 0.62 0.78 0.66 0.53 Q1’10 Q2 Q3 Q4 Q1’11 Q2 Mar’10 Jun Sep Dec Mar’11 Jun Loans Deposits T
Slide 67: Construction and real estate sector in Spain
67 Construction and real estate sector in Spain
Slide 68: Chart 1. Financing for construction and real estate development
68 Chart 1. Financing provided for construction and real estate development and the respective allowance(1). Data pertaining to the consolidated Group (businesses in Spain) Excess over Gross _____ Specific value of amount (2) allowance EUR million collateral 1) Loans registered by the Group’s credit
Slide 69: Chart 2. Breakdown of financing to construction and real estate development
69 Chart 2. Breakdown of the financing provided to construction and real estate development. Transactions registered by credit institutions (businesses in Spain) Loans: Gross EUR million amount 1. Without mortgage guarantee 5,673 2. With mortgage guarantee 19,674 2.1 Finished buildings 13,263 2.1.1
Slide 70: Chart 3. Loans to households for house purchasing
70 Chart 3. Loans to households for house purchasing. Transactions registered by credit institutions (businesses in Spain) of which: Gross amount Doubtful EUR million Loans for house purchasing 59,981 1,433 Without mortgage guarantee 689 32 With mortgage guarantee 59,292 1,401 Chart 4. Breakdown of
Slide 71: Chart 5. Foreclosed assets
71 Chart 5. Foreclosed assets to the consolidated Group entities (businesses in Spain) Gross of which: Net amount amount Allowance EUR million 1. Real estate assets from loans to construction and real estate development 6,337 2,170 4,167 1.1 Finished buildings 1,336 329 1,007 1.1.1 Residential 830 2
Slide 72: 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: July 28, 2011 By: /s/ José Antonio Álvarez Name: José Antonio Álvarez Title: