Banco Santander, S.a. · BME:SAN
Banco Santander — Debt Investor Presentation (July 2023)
54 slides from Banco Santander's debt investor presentation, Jul 27, 2023
Slide 1: Banco Santander, S.A. Covered Bonds Investors Presentation
H1’23 BANCO SANTANDER, S.A. COVERED BONDS INVESTORS PRESENTATION Cédulas hipotecarias (CH) Cédulas territoriales (CT) Cédulas de internacionalización (ECA CBs) Q1’23 Earnings presentation v080323pm
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: Key highlights
Key highlights Expected annual GDP Growth in 20231 Economic growth is expected to slow globally in the coming quarters, though the +0.9% +0.4% Macroeconomic forecasts for 2023 are slightly higher than predicted in April 2023 environment Spain above EMU growth, GDP above pre-covid levels but expected
Slide 5: Index
Index 1 2 3 4 5 6 7 Macroeconomic Grupo Grupo Mortgage Public Sector ECA Covered Appendix environment Santander Santander Covered Bonds Covered Bonds Bonds - Business Model funding and “Cédulas “Cédulas “Cédulas de & Strategy liquidity hipotecarias” territoriales” internacionalización” - Santander S
Slide 6: Economic growth expected to slow globally in coming quarters
Macroeconomic environment Economic growth is expected to slow globally in the coming quarters although the IMF’s forecasts for 2023 are slightly higher than predicted in April 2023 Estimated Annual GDP Growth (real, %) +5.3 +7.6 +3.5 +4.1 +1.6 +1.6 +0.9 +0.4 EMU UK -6.1 -11.0 2019 2020 2021 2022 202
Slide 7: Spain above EMU growth, slowdown expected from monetary tightening
Macroeconomic environment Spain above EMU growth with GDP above pre-covid levels but expected slowdown due to monetary policy tightening in the second part of 2023 Annual GDP Growth (real, %) Interest rates (ECB deposit facility rate, %) 3.50 +5.5 +5.5 +4.2 +2.3 +2.0 2.00 -11.3 -0.40 -0.50 -0.50 -0.
Slide 8: Reduction in loans and increase in time deposits
Macroeconomic environment Reduction in loans and an increase in time deposits driven by higher interest rates Total loans (€ bn) The stock of loans reduced 2% YoY mainly driven by credit to non- 1,202 1,192 financial corporations and mortgages. 1,186 1,183 1,169 In non-financial corporations, la
Slide 9: Better-than-expected loan performance, though credit risk could deteriorate
Macroeconomic environment Better-than-expected loan performance, though credit risk could deteriorate … Spain Mortgage NPL ratio (%) European Banks Total NPL ratio by country (%) – Q1’23 7.0% 5.0% 6.0% 4.5% 4.0% 5.0% 3.5% 4.0% 3.0% 2.5% 3.0% 2.4% 2.0% 2.0% 1.5% 1.0% 1.0% 0.5% 0.0% 0.0% Source: Banco
Slide 10: Housing sales adjusting to the new interest rate context
Macroeconomic environment Housing sales are adjusting to the new interest rate context … Housing starts (thousand units)1 Total housing sales (thousand units)1 Apr-23 vs Apr-22: 0.1% Finished 101 106 108 109 110 houses: 674 718 700 86 2016: 26 583 570 78 81 64 2017: 36 458 532 487 50 2018: 41 349 36
Slide 11: Index
Index 1 2 3 4 5 6 7 Macroeconomic Grupo Grupo Mortgage Public Sector ECA Covered Appendix environment Santander Santander Covered Bonds Covered Bonds Bonds - Business Model funding and “Cédulas “Cédulas “Cédulas de & Strategy liquidity hipotecarias” territoriales” internacionalización” - Santander S
Slide 12: Our business model is the foundation for generating value for shareholders
Grupo Santander: Business Model & Strategy Our business model is the foundation for generating value for our shareholders 1. Customer focus 2. Scale 3. Diversification Digital bank with branches Local & global scale Geographic and business diversification. Solid and diversified balance sheet Distrib
Slide 13: Geographic and business diversification in assets and liabilities
Grupo Santander: Business Model & Strategy We maintain our geographic and business diversification both in assets and liabilities Loans and advances to customers Customer deposits (excluding reverse repos, Jun-23) - (excluding repos, Jun-23) - By area1 By area1 DCB DCB South Total customer deposits
Slide 14: Profit increased in H1'23, supported by customer revenue and efficiency
Grupo Santander: Business Model & Strategy Profit increased in H1’23, supported by customer revenue and efficiency improvement, with double-digit growth in net operating income. LLPs normalizing in line with expectations… Underlying P&L Current Constant Attributable profit € million H1'23 H1'22 % %
Slide 15: Solid credit quality at Group and country level
Grupo Santander: Business Model & Strategy … while maintaining solid credit quality at the Group and country level NPL ratios by country Cost of risk1 by country % Q2 2022 Q1 2023 Q2 2023 % Q2 2022 Q1 2023 Q2 2023 Spain 3.83 3.19 3.11 Spain 0.79 0.62 0.62 UK 1.17 1.27 1.32 UK -0.02 0.12 0.11 Portuga
Slide 16: Spain
Grupo Santander: Santander España Spain 'Focus on creating a better bank where our customers and people feel a deep connection with Santander España' H1'23 Highlights Strategic priorities Branches 1,884 Employees 26,679 ▪ Grow our customer base, providing the best customer experience across all chan
Slide 17: Spain H1'23 results summary
Grupo Santander: Santander España Spain H1’23 results summary • Strong YoY growth in customers (+738k) and deposits (+3%). Loans affected by prepayments and lower corporate demand H1’23 Key data • Profit +74% driven by higher NII, boosted by active pricing management in a context of interest rate hi
Slide 18: Banco Santander, S.A. ratings
Grupo Santander: Santander España Banco Santander, S.A. ratings Moody's S&P Fitch Date last Direction Direction Date last Direction Rating Rating Date last change Rating change last change last change change last change Covered Bonds Aa1 03/12/2019 - - - - AAu 28/01/2022 ↑ Senior Debt (P)A2 17/04/20
Slide 19: Index
Index 1 2 3 4 5 6 7 Macroeconomic Grupo Grupo Mortgage Public Sector ECA Covered Appendix environment Santander Santander Covered Bonds Covered Bonds Bonds - Business Model funding and “Cédulas “Cédulas “Cédulas de & Strategy liquidity hipotecarias” territoriales” internacionalización” - Santander S
Slide 20: Well-funded, diversified, prudent and highly liquid balance sheet
Grupo Santander: Funding and Liquidity Well-funded, diversified, prudent and highly liquid balance sheet (large % contribution from customer deposits), reflected in solid liquidity ratios Liquidity Balance Sheet Liquidity Coverage Net Stable Funding Ratio (LCR) Ratio (NSFR) € bn, Jun-23 1,481 1,481
Slide 21: Conservative and decentralized liquidity and funding model
Grupo Santander: Funding and Liquidity Conservative and decentralized liquidity and funding model €23bn1 issued in public markets in H1’23 Very manageable maturity profile € bn, Jun-23 € bn, Jun-23 16.8 10.7 Covered 7.7 4.6 10.2 9.1 0.6 Bonds 1.2 0.6 0.2 7.4 1.5 0.1 1.7 18.7 14.6 16.9 Senior 3.9 9.7
Slide 22: H1'23 issuances against funding plan
Grupo Santander: Funding and Liquidity H1’23 issuances against funding plan Execution of 2023 funding plan € bn, Jun-23 Hybrids SNP + Senior Covered Bonds TOTAL Plan Issued Plan Issued Plan Issued Plan Issued 1 Banco Santander, S.A 0.5 - 1.5 1.5 9-10 7.2 6-7 4.0 15.5 - 18.5 12.7 2 UK - - 3-4 1.2 5-6
Slide 23: Stock of issuances diversified across instruments and entities
Grupo Santander: Funding and Liquidity Stock of issuances is diversified across instruments and entities Group outstanding debt by type Banco Santander, S.A. outstanding debt by type € bn and %, Jun-23 € bn and %, Jun-23 Preference shares, €8.7bn, 5% Preference shares, Sub debt, €7.9bn, 8% €18.7bn,
Slide 24: Index
Index 1 2 3 4 5 6 7 Macroeconomic Grupo Grupo Mortgage Public Sector ECA Covered Appendix environment Santander Santander Covered Bonds Covered Bonds Bonds - Business Model funding and “Cédulas “Cédulas “Cédulas de & Strategy liquidity hipotecarias” territoriales” internacionalización” - Santander S
Slide 25: Mortgage Covered Bonds are direct obligations collateralized by a segregated portfolio
Mortgage covered bonds “Cédulas Hipotecarias (CH)” Mortgage Covered Bonds are direct obligations of Banco Santander, S.A. collateralized by a segregated mortgage portfolio Banco Santander, S.A.’s mortgage portfolio has a low risk profile, focused on residential and first home financing… … and is wel
Slide 26: Cover pool and issuance description under Royal Decree-Law 24/2021
Mortgage covered bonds “Cédulas Hipotecarias (CH)” Cover pool and issuance description under Royal Decree-Law 24/2021 Segregated cover pool description Outstanding mortgage covered bonds description € mn, Jun-23 Liquid Assets, 0 € mn, Jun-23 Substitute Assets, 0 42,204 24,684 €62,013mn In the market
Slide 27: High quality, low risk cover pool: low LTVs
Mortgage covered bonds “Cédulas Hipotecarias (CH)” High quality, low risk cover pool: low LTVs, focused on residential and first home financing… Segregated cover pool by LTV Segregated cover pool property type Jun-23 Jun-23 3% Land + other com. 12% 2% Industrial Commercial 7% Retail 1% Second homes
Slide 28: Concentrated in urban areas with lower unemployment rates
Mortgage covered bonds “Cédulas Hipotecarias (CH)” ... concentrated in urban areas with lower unemployment rates Jun-23 % Regions Back-book Castile-La Balearic Madrid 26.44 Mancha, Islands Murcia Extremadura Catalonia 17.97 Canary Islands Andalusia1 16.78 Valencian Madrid Valencian Community 7.04 Co
Slide 29: Manageable maturity profile
Mortgage covered bonds “Cédulas Hipotecarias (CH)” Manageable maturity profile Maturity profile of segregated cover pool and CH Distribution of CHs by maturity issuances % total outstanding, Jun-23 € bn, Jun-23 50.1 ≥2033 2023 2024 2025 6% 1% 5% 5% 2026 26.3 12% 9.4 8.1 9% 5.0 3.8 17.0 2027 0.2 0.2
Slide 30: Liquidity buffer (under Royal Decree-Law 24/2021)
Mortgage covered bonds “Cédulas Hipotecarias (CH)” Liquidity buffer (under Royal Decree-Law 24/2021) Cash flow projection Royal Decree-Law 24/2021 establishes that the cover pool shall at all times include a liquidity buffer composed of HQLAs available to cover the maximum net cumulative outflow fro
Slide 31: Index
Index 1 2 3 4 5 6 7 Macroeconomic Grupo Grupo Mortgage Public Sector ECA Covered Appendix environment Santander Santander Covered Bonds Covered Bonds Bonds - Business Model funding and “Cédulas “Cédulas “Cédulas de & Strategy liquidity hipotecarias” territoriales” internacionalización” - Santander S
Slide 32: Cédulas territoriales collateralized by public sector portfolio
Public sector covered bonds “Cédulas Territoriales (CT)” Cédulas territoriales are direct obligations of Banco Santander, S.A. collateralized by its public sector portfolio Banco Santander, S.A.’s public sector portfolio is focused on autonomous regions and local governments… … and is well diversifi
Slide 33: Cover pool and issuance description under Royal Decree-Law 24/2021
Public sector covered bonds “Cédulas Territoriales (CT)” Cover pool and issuance description under Royal Decree-Law 24/2021 Cover pool description Public sector covered bonds description € mn, Jun-23 Substitute Liquid Assets, 0 € mn, Jun-23 Assets, 0 1,750 250 €6,015mn In the market 1,500 Primary As
Slide 34: Regional distribution
Public sector covered bonds “Cédulas Territoriales (CT)” Regional distribution Jun-23 % Back Castile-La Mancha Regions Book Balearic Islands Valencian Community, Murcia Madrid 20.6% Cantabria Castile and Leon 18.9% Extremadura Catalonia Madrid Galicia, Asturias 17.2% 1 Canary Islands 9.4% Andalusia
Slide 35: Type of exposure and borrower concentration
Public sector covered bonds “Cédulas Territoriales (CT)” Type of exposure and borrower concentration Type of exposure Borrower concentration Jun-23 Jun-23 Spain 100% 90% 80% Central Government 0.7% 70% Cover Pool 60% 50% 40% 1 Regional/federal state Government 87.4% 30% 20% 10% 0% Local Government 1
Slide 36: Comfortable maturity profile
Public sector covered bonds “Cédulas Territoriales (CT)” Comfortable maturity profile Distribution of CTs by maturity Maturity profile of cover pool and CT issuances % total outstanding, Jun-23 € mn, Jun-23 2,364 2,042 2024 14% 1,000 500 384 400 250 289 316 57% 29% 219 2028-2032 2027 0 0 0 0 2023 20
Slide 37: Liquidity buffer (under Royal Decree-Law 24/2021)
Public sector covered bonds “Cédulas Territoriales (CT)” Liquidity buffer (under Royal Decree-Law 24/2021) Cash flow projection Royal Decree-Law 24/2021 establishes that the cover pool shall at all times include a liquidity buffer composed of HQLAs available to cover the maximum net cumulative outfl
Slide 38: Index
Index 1 2 3 4 5 6 7 Macroeconomic Grupo Grupo Mortgage Public Sector ECA Covered Appendix environment Santander Santander Covered Bonds Covered Bonds Bonds - Business Model funding and “Cédulas “Cédulas “Cédulas de & Strategy liquidity hipotecarias” territoriales” internacionalización” - Santander S
Slide 39: ECA Covered Bonds collateralized by ECA Loans
ECA covered bonds “Cédulas de Internacionalización” ECA Covered Bonds are direct obligations of Banco Santander, S.A. collateralized by ECA Loans1 Banco Santander, S.A.’s ECA loan portfolio has a very low risk profile, as all loans are guaranteed by ECAs who act on behalf of their respective soverei
Slide 40: Cover pool and issuance description under Royal Decree-Law 24/2021
ECA covered bonds “Cédulas de Internacionalización” Cover pool and issuance description under Royal Decree-Law 24/2021 Cover pool description1 ECA covered bonds description € mn, Jun-23 € mn, Jun-23 Liquid Assets, 0 Substitute 8,573 Assets, 0 In the market 500 €11,863mn Retained 8,073 Primary 2 Asse
Slide 41: 100% of primary assets guaranteed by an ECA or Multilateral Institution
ECA covered bonds “Cédulas de Internacionalización” 100% of eligible cover pool primary assets guaranteed by an ECA or Multilateral Institution ECA1 country distribution by rating Cover pool distribution by ECA rating Italy 18.1% A+, 3.0% France 12.1% Spain 11.2% Denmark 8.1% Germany 5.3% Sweden 2.7
Slide 42: Highly diversified borrower base by country and concentration
ECA covered bonds “Cédulas de Internacionalización” Highly diversified borrower base in terms of country and concentration Borrower country distribution Borrower concentration distribution UK 13.5% United States 7.5% United Arab Emirates 7.2% Spain 4.5% 100% Panama 4.3% Mexico 4.3% 90% France 4.0% 8
Slide 43: Low risk and balanced maturity profile
ECA covered bonds “Cédulas de Internacionalización” Low risk and balanced composition in terms of maturity profile, … Distribution of ECA CBs by maturity Maturity profile of cover pool and ECA covered bonds % total outstanding € mn 2025 2028-32 5,636 13% 22% 4,682 2026 11% 3,820 1,875 500 1,100 54%
Slide 44: FX distribution
ECA covered bonds “Cédulas de Internacionalización” … FX distribution … Cover pool and ECA covered bond currency distribution € mn 6,367 5,773 4,056 2,800 1,128 313 0 0 Cover pool ECA covered bonds Note: data as of Jun-23. Cover pool refers to primary assets. 44 (1) Others includes PLN, COP, NOK and
Slide 45: Interest rate profile with a high-quality book
ECA covered bonds “Cédulas de Internacionalización” … and interest rate profile with a high-quality book Interest rate profile Loan asset quality % balance sheet, Jun-23 # of loans 603 599 610 590 579 588 563 574 557 6% 554 533 546 515 20% 94% 80% 0 0 0 0 0 0 0 0 0 0 0 0 0 Assets Liabilities Floatin
Slide 46: Liquidity buffer (under Royal Decree-Law 24/2021)
ECA covered bonds “Cédulas de Internacionalización” Liquidity buffer (under Royal Decree-Law 24/2021) Cash flow projection Royal Decree-Law 24/2021 establishes that the cover pool shall at all times include a liquidity buffer composed of HQLAs available to cover the maximum net cumulative outflow fr
Slide 47: Index
Index 1 2 3 4 5 6 7 Macroeconomic Grupo Grupo Mortgage Public Sector ECA Covered Appendix environment Santander Santander Covered Bonds Covered Bonds Bonds - Business Model funding and “Cédulas “Cédulas “Cédulas de & Strategy liquidity hipotecarias” territoriales” internacionalización” - Santander S
Slide 48: Mortgage Covered Bonds - outstanding issuances
Appendix – Banco Santander, S.A. issuances by ISIN Mortgage Covered Bonds - outstanding issuances Issuance Expected Extended Interest Type of Retained / ISIN Currency Outstanding Amount Coupon Date Maturity Maturity Rate Type Structure Market ES0413900129 EUR 1,500,000,000 06/02/2006 06/02/2026 N/A
Slide 49: Mortgage Covered Bonds - outstanding issuances
Appendix – Banco Santander, S.A. issuances by ISIN Mortgage Covered Bonds - outstanding issuances Issuance Expected Extended Interest Type of Retained / ISIN Currency Outstanding Amount Coupon Date Maturity Maturity Rate Type Structure Market ES0413900541 EUR 200,000,000 20/11/2018 20/11/2023 N/A Fi
Slide 50: Public Sector Covered Bonds - outstanding issuances
Appendix – Banco Santander, S.A. issuances by ISIN Public Sector Covered Bonds - outstanding issuances Issuance Expected Extended Interest Type of Retained / ISIN Currency Outstanding Amount Coupon Date Maturity Maturity Rate Type Structure Market ES0413790447 EUR 250,000,000 18/05/2016 18/05/2024 N
Slide 51: ECA Covered Bonds - outstanding issuances
Appendix – Banco Santander, S.A. issuances by ISIN ECA Covered Bonds - outstanding issuances Issuance Expected Extended Interest Type of Retained / ISIN Currency Outstanding Amount Coupon Date Maturity Maturity Rate Type Structure Market ES0413900632 EUR 1,100,000,000 17/04/2020 17/04/2025 N/A Float
Slide 52: Spanish system – outstanding covered bonds
Appendix – System volumes and issuances Spanish system – outstanding covered bonds Outstanding (in EUR million) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total Covered Bonds Outstanding Public Sector 32,657 33,609 30,352 25,495 28,505 26,887 25,362 18,362 20,763 18,262 17,544 Mortgage 3
Slide 53: Spanish system – covered bond issuance
Appendix – System volumes and issuances Spanish system – covered bond issuance Issuance (in EUR million) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total Covered Bonds Issuance Public Sector 20,334 6,407 5,895 1,853 10,400 7,250 350 800 800 2,900 1,000 Mortgage 72,077 98,846 22,919 23,03
Slide 54: 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:
Banco Santander — Debt Investor Presentation (July 2023) on 6ix