Banco Santander, S.a. · BME:SAN
Banco Santander — Debt Investor Presentation (November 2022)
58 slides from Banco Santander's debt investor presentation, Nov 8, 2022
Slide 1: Banco Santander, S.A. Covered Bonds Investors Presentation 9M 2022
9M 2022 BANCO SANTANDER, S.A. COVERED BONDS INVESTORS PRESENTATION Here to help you prosper Cédulas hipotecarias (CH) Cédulas territoriales (CT) Cédulas de internacionalización (ECA CBs)
Slide 2: Important information: Non-IFRS and alternative performance measures
Important information Non-IFRS and alternative performance measures This report contains, in addition to the financial information prepared in accordance with International Financial Reporting Standards (“IFRS”) and derived from our financial statements, alternative performance measures (“APMs”) as
Slide 3: Important information: Forward-looking statements
Important information Forward-looking statements Santander advises that this report contains “forward-looking statements” as per the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by words like “expect”, “project”, “anticipate”, “should”, “in
Slide 4: Key highlights
Key highlights Expected annual GDP Growth in 20221 Economic growth is expected to slow in the coming quarters with +3.1% +3.6% Macroeconomic several downside risks. environment The Spanish economy is facing a slowdown (inflation and tightening financial conditions), but is expected to grow above the
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 is expected to slow globally in the coming quarters
Macroeconomic environment Economic growth is expected to slow globally in the coming quarters with several downside risks Annual GDP Growth (real, %) +5.2 +7.4 +3.1 +3.6 +1.6 +1.7 EMU UK -9.3 -6.1 2019 2020 2021 2022** 2019 2020 2021 2022** +5.7 +6.9 +2.3 +3.5 US +1.6 LatAm +0.2 -3.4 -4.0 2019 2020
Slide 7: The Spanish economy is facing a slowdown but expected to grow above the EMU
Macroeconomic environment The Spanish economy is facing a slowdown due to inflationary pressures and tightening of financial conditions, but is expected to grow above the EMU Annual GDP Growth (real, %) Interest rates (official rate, %) 1.50 +5.1 +4.5 +3.0 +2.3 +2.1 -10.8 0.00 0.00 0.00 0.00 0.00 20
Slide 8: Loan and deposit trends diverged in Spain as rates remain low
Macroeconomic environment Loan and deposit trends diverged in Spain as rates remain low Total loans (€ bn) Household debt ratio remained at a relatively low level, c.57% 1,202 1,194 1,184 1,192 1,183 of GDP. Floating-rate loans contracted by 2% YoY following the recent interest rate hikes On the
Slide 9: Better-than-expected loan performance though credit risk could deteriorate
Macroeconomic environment Better-than-expected loan performance though credit risk could deteriorate due to the economic slowdown and interest rate hikes… Spain Mortgage NPL ratio (%) European Banks Total NPL ratio by country (%) – Q2’22 7.0% 6.0% 5.0% 4.5% 5.0% 4.0% 4.0% 3.5% 3.0% 3.0% 2.5% 2.7% 2.
Slide 10: After a year of pent-up demand, some moderation in housing sales is expected
Macroeconomic environment After a year of pent-up demand, some moderation in housing sales is expected… Housing starts (thousand units)1 Total housing sales (thousand units)1 Jul-22 vs Jul-21: +11% Finished 728 101 106 108 109 houses: 674 92 86 2015: 30 532 583 570 78 81 2016: 26 491 487 458 64 2017
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 drives predictable and profitable growth
Grupo Santander: Business Model & Strategy Our business model drives predictable and profitable growth… Our business model is based on three pillars 01. Scale 02. Customer focus 03. Diversification2 Local scale and leadership. Unique personal banking relationships Our geographic and business Worldwi
Slide 13: Geographic and business diversification in assets and liabilities
Grupo Santander: Business Model & Strategy … through geographic and business diversification both in assets and liabilities Loans and advances to customers (excluding reverse repos, Sep-22) Customer funds (excluding repos, Sep-22) By area1 By area1 DCB DCB South 5% 12% Total gross loans America To
Slide 14: Growth is resilient throughout the cycle
Grupo Santander: Business Model & Strategy Growth is resilient throughout the cycle resulting in long-term stability and predictability Resilient profit generation throughout the cycle Predictable results with the lowest volatility among peers Group net operating income, € bn Quarterly reported EPS
Slide 15: Efficient profit generation with one of the best cost-to-income ratios
Grupo Santander: Business Model & Strategy Moreover, we are able to generate profit efficiently, with one of the best cost-to-income ratios and PPP/loans well above most European peers… Efficiency Net operating income/Loans Cost-to-income, Q2’22 %, European peers, Q2’22 Peer 1 44% Peer 2 45% Peer 1
Slide 16: Doing business sustainably and responsibly
Grupo Santander: Business Model & Strategy … while doing business sustainably and responsibly Key green and sustainability metrics Social & Governance Mobilized Green1 9M’22 Green loans 9M’22 Microfinance ~€79bn >€3bn >€670mn since 2019 from SCF >1.1mn microentrepreneurs Target: €120bn by 2025 >100k
Slide 17: In 9M'22, profit momentum continued
Grupo Santander: Business Model & Strategy In 9M’22, profit momentum continued, maintaining the main P&L trends… % change € million 9M'22 9M'21 Euros Constant euros Attributable profit € mn NII 28,460 24,654 15 8 Net fee income 8,867 7,810 14 7 Trading and other income 1,302 2,162 -40 -45 2,543 2,42
Slide 18: Supported by our regional organizational structure
Grupo Santander: Business Model & Strategy … supported by our regional organizational structure… 9M’22 Total Customer Customer Net operating Underlying vs. 9M’21 customers loans deposits income att. profit RoTE1 (mn) (€mn) (€mn) (€mn) (€mn) 46.8 590 622 6,977 2,837 12.5% Europe +1% +5% +7% +19% +32%
Slide 19: Solid credit quality at the Group and country level
Grupo Santander: Business Model & Strategy … and solid credit quality at the Group and country level NPL ratios by country Cost of risk1 by country % Q3 2021 Q2 2022 Q3 2022 % Q3 2021 Q2 2022 Q3 2022 Spain 4.86 3.83 3.69 Spain 0.97 0.79 0.71 UK 1.27 1.17 1.16 UK 0.01 -0.02 0.02 Portugal 3.44 3.33 3.
Slide 20: Spain
Grupo Santander: Santander Spain Spain 'The commitment to and collaboration with our customers demonstrates the full potential of Santander España' 9M'22 Highlights Strategic priorities Branches 1,914 ▪ Grow our customer base providing the best customer experience across all channels Employees 26,67
Slide 21: Spain 9M 2022 results summary
Grupo Santander: Santander Spain Spain 9M 2022 results summary • Grew customer base every month YTD, reflected in individuals (loans, deposits and insurance up) P&L* 9M'22 % 9M'21 • Profit grew YoY fueled by CoR improvement and cost NII 3,134 -0.1 control. NII up 10% QoQ supported by higher interest
Slide 22: Banco Santander, S.A. ratings
Grupo Santander: Santander Spain 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 17/04/201
Slide 23: 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 24: Well-funded, diversified, prudent and highly liquid balance sheet
Grupo Santander: Funding and Liquidity The Group’s balance sheet is well-funded, diversified, prudent and highly liquid (high weight of customer deposits), reflected in solid liquidity ratios Liquidity Balance Sheet € bn, Sep-22 Liquidity Coverage Net Stable Funding 1,437 1,437 Ratio (LCR) Ratio (NS
Slide 25: Conservative and decentralized liquidity and funding model
Grupo Santander: Funding and Liquidity Conservative and decentralized liquidity and funding model €35bn1 issued in public markets in 9M’22 Very manageable maturity profile € bn, Sep-22, Average exchange rates € bn, Sep-22 21.5 Covered 3.5 7.7 4.3 7.0 16.2 Bonds 1.0 2.8 18.7 0.7 14.6 1.3 12.6 9.0 1.4
Slide 26: YTD issuances against 2022 funding plan
Grupo Santander: Funding and Liquidity YTD issuances against 2022 funding plan Execution of 2022 funding plan € bn, Sep-22 Hybrids SNP + Senior Covered Bonds TOTAL Plan Issued Plan Issued Plan Issued Plan Issued 1 2 Banco Santander, S.A. 3 - 3.5 1.8 9 - 10 17.2 - 3.4 12 - 13.5 22.4 SCF - 0.0 5-6 1.4
Slide 27: Stock of issuances is 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 %, Sep-22 € bn and %, Sep-22 Preference shares, Preference shares, Senior, €8.9bn, 5% €8.1bn, 8% €63.9bn, 33
Slide 28: 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 29: 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
Slide 30: 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, Sep-22 Substitute Liquid Assets, 0 € mn, Sep-22 Assets, 0 55,629 22,147 €65,795mn In the market
Slide 31: 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 Sep-22, % Sep-22 Land + other com. 2% 2% Industrial Commercial 13% 9% Retail 100 100 1% Se
Slide 32: Concentrated in urban areas with lower unemployment rates
Mortgage covered bonds “Cédulas Hipotecarias (CH)” ... concentrated in urban areas with lower unemployment rates Sep-22 Castile-La % Mancha, Regions Back-book Extremadura Galicia Murcia Madrid 26.16 Canary Islands Asturias Catalonia 17.87 Andalusia 1 16.90 Valencian Community 7.06 1 Galicia 4.60 And
Slide 33: Manageable maturity profile
Mortgage covered bonds “Cédulas Hipotecarias (CH)” Manageable maturity profile Distribution of CHs by maturity Maturity profile of segregated cover pool and CH issuances % total outstanding, Sep-22 € bn, Sep-22 53.6 2023 2024 ≥2032 2025 2%5% 35.2 17% 6% 2026 9.6 7% 8.7 25.6 9.2 3.0 3.3 3.9 4.7 0.1 0
Slide 34: 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 35: 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 36: 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 diver
Slide 37: 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, Sep-22 Substitute Liquid Assets, 0 € mn, Sep-22 Assets, 0 1,845 345 In the market €3,199mn Retained 1,500 P
Slide 38: Regional distribution
Public sector covered bonds “Cédulas Territoriales (CT)” Regional distribution Sep-22 % Back Regions Book Andalusia Canary Islands Valencian Community, Castile and Leon 24.8% Murcia Cantabria Basque Country 14.4% Castile-La Mancha Madrid 14.2% Castile and Leon Catalonia Aragon, Navarre, La Rioja 10.
Slide 39: Type of exposure and borrower concentration
Public sector covered bonds “Cédulas Territoriales (CT)” Type of exposure and borrower concentration Type of exposure Borrower concentration Sep-22 Sep-22 Spain 100% 90% 80% Central Government 0.8% 70% Cover Pool 60% 50% 1 Regional/federal state Government 81.5% 40% 30% 20% Local Government 17.6% 10
Slide 40: 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, Sep-22 € mn, Sep-22 1,380 2023 2024 1,000 5% ≥2032 14% 27% 500 381 332 303 332 329 250 141 95 0 0 0 54% 2027-2031
Slide 41: 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 42: 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 43: 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 gover
Slide 44: 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 description* ECA covered bonds description € mn, Sep-22 € mn, Sep-22 Substitute Liquid Assets, 18 Assets, 0 7,192 In the market 0 €13,316mn 7,192 Retained Primary Assets,
Slide 45: 100% of eligible cover pool 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 15.4% A+, 3.1% France 13.0% Spain 12.9% Denmark 4.9% Germany 4.2% Finland 2.
Slide 46: 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 10.8% United Arab Emirates 8.2% United States 7.8% Mexico 6.7% Brazil 5.6% 100% Panama 4.3% 90% France 4.2%
Slide 47: 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 6,420 2025 5,073 16% 4,712 14% 2026 1,100 971 1,019 70% 556 385 2027
Slide 48: FX distribution
ECA covered bonds “Cédulas de Internacionalización” … FX distribution … Cover pool and ECA covered bond currency distribution € mn 8,329 4,892 3,621 2,300 1,009 340 0 0 Cover pool ECA covered bonds Note: data as of Sep-22. Cover pool refers to primary assets. 48 (1) Others includes PLN, COP, AUD and
Slide 49: Interest profile with a high-quality book
ECA covered bonds “Cédulas de Internacionalización” … and interest profile with a high-quality book Interest rate profile Loan asset quality % balance sheet, Sep-22 # of loans 700 600 16% 500 400 100% 300 84% 200 100 0 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Assets Liab
Slide 50: 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 Article 11 of 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 cumulat
Slide 51: 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 52: 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 53: 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 54: 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 ES0413790249 EUR 95,000,000 14/03/2013 14/03/2023 N/
Slide 55: 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 56: 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 57: 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 58: Thank you
Thank you Our purpose is to help people and business prosper Our culture is based on believing that everything we do should be
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