Banco Santander, S.a. · BME:SAN
Banco Santander — Debt Investor Presentation (July 2022)
66 slides from Banco Santander's debt investor presentation, Jul 28, 2022
Slide 1: H1 2022 Fixed Income Investors Presentation
H1 2022 FIXED INCOME INVESTORS PRESENTATION It's time to build together a better future for you
Slide 2: Important information
Important information Non-IFRS and alternative performance measures This presentation 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
Slide 3: Important information
Important information Numerous factors could affect our future results and could cause those results deviating from those anticipated in the forward-looking statements. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements
Slide 4: Santander at a Glance
Santander at a Glance H1’22 Highlights Santander, a Total assets (€ bn) 1,723 leading financial Customer loans (€ bn excluding reverse repos) 1,015 group Customer deposits + mutual funds (€ bn; excluding repos) 1,099 Branches 9,193 H1'22 Net operating income (pre-provision profit) (€ mn) 13,685 Simp
Slide 5: Index
Index 1 2 3 4 5 6 7 8 H1’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 5
Slide 6: H1’22 highlights
H1’22 Summary H1’22 highlights Growth Profitability Strength YoY percentage changes in constant euros H1’22 data and YoY percentage change H1’22 data and YoY percentage change Total customers +5% Profit €4,894mn CoR 0.83% Digital customers +10% Digital sales / total +4pp Efficiency ratio 45.5% NPL r
Slide 7: Continued profit momentum, maintaining main P&L trends
H1’22 Summary Continued profit momentum, maintaining main P&L trends Attributable profit % change € mn € million H1'22 H1'21 Euros Constant euros NII 18,409 16,196 14 7 2,543 Net fee income 5,852 5,169 13 7 2,275 2,351 2,138 2,067 2,174 Trading and other income 859 1,330 -35 -40 Total revenue 25,120
Slide 8: Revenue up boosted by NII and fees, partly offset by lower trading gains
H1’22 Summary Revenue up boosted by NII and fees, partly offset by lower trading gains and other income Total revenue Revenue breakdown Constant € mn 12,546 12,574 Constant € bn 11,971 Revenue 24.1 25.1 9,384 9,025 0.9 8,722 Other income 1.4 NII 5.9 Fees 5.5 2,865 2,987 2,761 Fees Trading NII 17.2 1
Slide 9: Structural changes to operating model driving sustainable efficiencies
H1’22 Summary We continue to make structural changes to our operating model, driving sustainable efficiencies and mitigating the effects of overall higher inflation Costs by region Efficiency ratio H1’22 vs. H1’21 In real terms1 H1’22 YoY change Group +5% -4.1% Group 45.5% -0.2pp Europe -1% -6.8% Eu
Slide 10: Asset quality remains robust with LLPs normalizing
H1’22 Summary Asset quality remains robust with LLPs normalizing following releases in 2021 Credit quality Loan-loss provisions Constant € bn Jun-21 Mar-22 Jun-22 CoR2 0.94% 0.77% 0.83% 3 2.3 2.6 NPL ratio 3.22% 3.26% 3.05% 2.1 2.2 1.9 Coverage ratio 73% 69% 71% 1.6 Stage 1 €904bn €967bn €998bn Stag
Slide 11: Continued organic generation, maintaining the CET1 ratio above 12%
H1’22 Summary Continued organic generation, maintaining the CET1 ratio above 12% Q2 fully-loaded CET1 ratio performance % +0.26 +0.03 12.05 -0.08 12.05 -0.05 -0.16 Mar-22 Gross Cash Corporate Regulatory Markets Jun-22 Pro forma 1 organic dividend transactions & models & others 3 generation accrual 2
Slide 12: Index
Index 1 2 3 4 5 6 7 8 H1’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 12
Slide 13: Santander is managed according to primary and secondary segments
Santander Business Model & Strategy Santander is managed according to primary and secondary segments One Santander (Europe, North Primary segments America and South America). New operating model leveraging our Europe North America South America Digital Consumer Bank global scale to deliver a bette
Slide 14: Our business model drives predictable and profitable growth
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 Worldwide reach
Slide 15: Our geographic and business diversification both in assets …
Santander Business Model & Strategy Our geographic and business diversification both in assets … Loans and advances to customers by area Loans and advances to customers by business Breakdown of total gross loans excluding reverse repos, % of operating areas Jun-22 Breakdown of total gross loans excl
Slide 16: … which continue to grow well across products, segments and countries…
Santander Business Model & Strategy … which continue to grow well across products, segments and countries… Customer loans: +6% YoY Customer loans by country € bn and % change YoY in constant € SAN 1,015 +6 589 +5 152 +7 €391bn +4% 148 +12 €344bn +7% DCB 119 +4 €280bn +6% SCIB 142 +13% Other +20% Pri
Slide 17: … and in liabilities …
Santander Business Model & Strategy … and in liabilities … Customer funds by area Customer funds by business Breakdown of total customer funds excluding repos, % of operating areas Jun-22 Breakdown of total customer funds excluding repos, Jun-22 DCB SCIB 12% South 5% America 17% 1 Corporates 36% 15%
Slide 18: … with particular strength in time deposits…
Santander Business Model & Strategy … with particular strength in time deposits… Customer deposits: +5% YoY Customer deposits by country € bn and % change YoY in constant € SAN 915 +5 609 +5 124 +4 €718bn +3% 124 +5 DCB 58 +7 303 +12 €197bn +13% 221 -3 44 +6 37 +6 Demand deposits Time deposits 88 +5
Slide 19: … regional structure delivers growth and profitability…
Santander Business Model & Strategy … coupled with our regional organizational structure, delivers growth and profitability… H1’22 Total Customer Customer Net operating Underlying vs. H1’21 customers loans deposits income att. profit RoTE1 (mn) (€bn) (€bn) (€mn) (€mn) 46.4 589 609 4,417 1,839 12.1%
Slide 20: … which is resilient throughout the cycle…
Santander Business Model & Strategy … which is resilient throughout the cycle… Resilient profit generation throughout the cycle Group net operating income, € bn 25.5 25.6 26.2 24.4 25.0 23.9 23.6 23.7 23.6 23.0 22.6 22.8 19.9 17.7 14.8 11.4 2006 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 20
Slide 21: … resulting in long-term stable and predictable growth
Santander Business Model & Strategy … resulting in long-term stable and predictable growth Predictable results with the lowest volatility among peers coupled with growth in earnings Quarterly reported EPS volatility1, 1999-Q1’22 650% 321% 115% 101% 93% 82% 80% 43% 40% 40% 12% US IT CH CH US FR FR US
Slide 22: Generate profit efficiently, with one of the best C/I ratios
Santander Business Model & Strategy Moreover, we are able to generate profit efficiently, with one of the best C/I ratios and net operating income /loans well above most European peers Efficiency Net operating income/Loans Cost-to-income, Q1’22 %, European peers, Q1’22 Peer 1 41% 12 pp 3.8 Peer 1 45
Slide 23: Index
Index 1 2 3 4 5 6 7 8 H1’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 23
Slide 24: Disciplined capital allocation strategy
Capital Disciplined capital allocation strategy to drive profitability improvement & maximize shareholder returns 2021 H1 2022 2022 Targets Capital accretive RWA growth below loan +1% < +4% +1% < +6% RWA < low-single growth2 RWAs loans RWAs loans growth digit growth Risk Risk adjusted adjusted 1 new
Slide 25: Capital levels exceed minimum regulatory requirements
Capital Santander’s capital levels, both phased-in and fully loaded, exceed minimum regulatory requirements SREP capital requirements and MDA* Assumed capital requirements (fully-loaded)** Jun-22 Mar 22 Jun-22 16.39% 16.18% 2.54% T2 15.95% 13.01% +317bps 2.47% >15% AT1 +307bps 1.52% 1.45% 13.01% +30
Slide 26: Strong fundamentals for AT1 bond holders
Capital Strong fundamentals for AT1 bond holders Santander Group’s CET1 levels are well above the minimum loss absorption trigger of 5.125%: €43bn. Distance1to trigger The first line of defense is the Group’s strong pre-provision profitability providing a high capacity to absorb provisions durin
Slide 27: AT1 issuances distributed by call date
Capital AT1 issuances distributed by call date Banco Santander, S.A. AT1 issuances outstanding at Jun-22 Nominal Next call Reset Currency € mn Coupon Structure date Spread EUR 1,000 5.25% PNC6 29-Sep-23 499.9bps USD 1,149 7.50% PNC5 08-Feb-24 498.9bps EUR 1,500 4.75% PNC7 19-Mar-25 409.7bps EUR 1,50
Slide 28: FX hedging policy on capital ratio and P&L
Capital FX hedging policy on capital ratio and P&L Stable capital ratio hedge Our P&L Policy Hedged Exposure Group Strategic management of the exposure to exchange CET1 12.05%1 rates on equity and dynamic on the countervalue of the units’ annual results in euros. Mitigate impact of FX volatility
Slide 29: Interest rate risk hedging
Capital Interest rate risk hedging Mostly positive interest rate sensitivity ALCO portfolios reflect our geographic diversification 12m net interest income sensitivity to a +/-100 bp parallel shift Distribution of ALCO portfolios by country € mn, May-22 %, Jun-22 +100 bps -100 bps Other South SCF, A
Slide 30: Index
Index 1 2 3 4 5 6 7 8 H1’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 30
Slide 31: Credit quality remains solid…
Asset Quality Credit quality remains solid… Credit quality ratios Q2'21 Q1'22 Q2'22 Q2'21 Q1'22 Q2'22 q 21bps QoQ Cost of p 7bps QoQ NPL ratio 3.22% 3.26% 3.05% 0.94% 0.77% 0.83% q 17bps YoY risk3 q 11bps YoY 4.08% 1.28% 3.93% 1.18% 3.73% 1.07% 1.08% 1.00% 1.00% 0.94% 0.90% 3.32% 0.83% 3.26% 0.77% 0
Slide 32: … at the Group and country level
Asset Quality … at the Group and country level NPL ratios by country Cost of risk1 by country % Q2 2021 Q1 2022 Q2 2022 % Q2 2021 Q1 2022 Q2 2022 Spain 5.16 4.47 3.83 Spain 0.91 0.88 0.79 UK 1.30 1.42 1.17 UK 0.09 -0.08 -0.02 Portugal 3.71 3.42 3.33 Portugal 0.41 0.03 -0.05 Poland 4.58 3.50 3.45 Pol
Slide 33: Distribution of credit impaired loans in line with total portfolio
Asset Quality Distribution of credit impaired loans in line with total portfolio Credit impaired loans Loan-loss allowances DCB, 8.0% DCB, 10.7% Other South America, 1.0% Other South America, 1.9% Spain, 23.6% Chile, 6.1% Spain, 34.6% Chile, 5.1% Brazil, 19.0% UK, 4.1% Brazil, 24.3% Portugal, 4.3% P
Slide 34: Stage 3 ratio of the most vulnerable sectors
Asset Quality The Stage 3 ratio of the most vulnerable sectors is broadly in line with the Group ratio Exposure to vulnerable sectors Mar-22, € bn Industry Exposure Stage 1 Stage 2 Stage 3 Automobile 31.4 91.3% 7.0% 1.7% 1 Hotel & Leisure 15.2 60.9% 23.7% 15.5% Transport 18.2 84.6% 10.2% 5.2% Oil &
Slide 35: Index
Index 1 2 3 4 5 6 7 8 H1’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 35
Slide 36: Local knowledge with global best practices through autonomous subsidiaries
Liquidity and Funding The Group’s business model combines local knowledge with global best practices through legally, financially and operationally autonomous subsidiaries… Legal autonomy structure Dec-21 Santander S.A.1 Santander Consumer Santander Finance2 Holdings USA Banco Santander Santander UK
Slide 37: Resolution groups with multiple entry points
Liquidity and Funding … divided into different resolution groups that can be resolved separately though multiple entry points MPE resolution strategy Dec-21, € bn Banking Union European Union 3rd Countries Spain1 Poland Brazil Mexico Resolution Group PE PE PE PE PE Point of Entry Portugal UK Chile A
Slide 38: Autonomous capital and liquidity model
Liquidity and Funding Santander follows an autonomous capital and liquidity model Capital ratios by country Mar-22, %, local figures (phased-in) US UK 20.26 18.54 20.78 18.63 18.23 15.47 Portugal 25.00 Brazil 24.56 Poland 14.71 21.88 18.12 Mexico 12.75 16.19 20.21 11.74 16.69 Santander 16.19 S.A. 14
Slide 39: Liquidity management principles
Liquidity and Funding Santander’s liquidity management is based on the following principles Decentralized liquidity model. Needs derived from medium- and long-term activity must be financed by medium- and long-term instruments. High contribution from customer deposits, due to the retail nature
Slide 40: Stock of issuances shows diversification
Liquidity and Funding Stock of issuances shows diversification across instruments and entities Debt outstanding by type Jun-22 Preference shares, Senior, €8.7bn, 5% €60.3bn, 33% Includes the issuance of 3 Green Bonds in line with the Sub debt, Group’s ESG strategy and Responsible Banking Agenda: €17
Slide 41: Conservative and decentralized liquidity and funding model
Liquidity and Funding Conservative and decentralized liquidity and funding model €23bn1 issued in public markets in H1’22 Very manageable maturity profile € bn, Jun-22, Average exchange rates € bn, Jun-22 18.1 Covered 7.7 6.9 3.5 3.9 12.4 Bonds 2.9 2.3 18.0 0.3 12.6 12.9 0.9 1.2 7.4 Senior 4.9 4.5 5
Slide 42: YTD issuances against 2022 funding plan
Liquidity and Funding YTD issuances against 2022 funding plan Execution of 2022 funding plan € bn, Jun-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 11.6 - - 12 - 13.5 13.4 SCF - 0.0 5-6 1.2 0 - 0.5 - 5 - 6.5
Slide 43: TLAC/MREL for the Resolution Group
Liquidity and Funding TLAC/MREL for the Resolution Group headed by Banco Santander, S.A. TLAC Jun-22(e) MREL Jun-22(e) % % and € bn Requirement 36.0% Requirement CBR 3.5% CBR 136.2 Surplus 3.5% Surplus Senior 19.3 24.1% 25.4 SNP 2.6% 2.4 Sub debt 3.5% 10.9 T2 Req. + CBR 15.4% 8.0 AT1 32.5%2 29.0% 2.
Slide 44: Well-funded, diversified, highly liquid balance sheet
Liquidity and Funding Well-funded, diversified, prudent and highly liquid balance sheet (large % contribution from customer deposits), reflected in solid liquidity ratios Liquidity Balance Sheet € bn, Jun-22 1,373 1,373 Liquidity Coverage Net Stable Funding Ratio (LCR) Ratio (NSFR) 1 Jun-22 Mar-22 M
Slide 45: Main metrics show strength of liquidity position
Liquidity and Funding The main metrics show the strength and stability of the Group’s liquidity position Evolution of key liquidity metrics LTD and MLT funding metrics by geography Jun-22 (Deposits + M/LT 1 2018 2019 2020 2021 Jun-22 LTD Ratio funding) / Loans 3 1 Loans / net assets 76% 77% 76% 75%
Slide 46: Banco Santander S.A. ratings
Liquidity and Funding 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 17/04/2018 ↑ A+ 16/12
Slide 47: Parent & Subsidiaries’ Senior Debt Ratings
Liquidity and Funding Santander Parent & Subsidiaries’ Senior Debt Ratings Moody's S&P Fitch Date last Direction Date last Direction Date last Direction Rating Outlook Rating Outlook Rating Outlook change last change change last change change last change Group A2 17/04/2018 ↑ STABLE A+ 16/12/2021 ↑
Slide 48: Index
Index 1 2 3 4 5 6 7 8 H1’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 48
Slide 49: ESG strategy
ESG ESG strategy Overarching goal: Achieving our purpose by promoting sustainable & inclusive growth 3 strategic pillars Ambition Strategic Actions Main SDGs Deliver our Net zero • Alignment of the sectors with highest level of GHG emissions with our Net zero ambition by 2050 helping commitment, in
Slide 50: Our achievements
ESG Our achievements Environmental Social Governance Green finance1 AuMs in SRI 2 Microcredits ESG metrics €74bn since 2019 €30bn Jun-22 €426mn 20% of long-term loans through microfinance Decarbonization targets in 2030 (vs 2019) programmes in incentives in top Power -46% 8 countries management scor
Slide 51: ESG public targets
ESG ESG public targets 2018 2019 2020 2021 H1’22 2025/ 2030 target 43% 50% 57% 75% 100% 120bn by 2025 19bn 33.8bn 65.7bn 74.4bn 220bn by 2030 27.0bn 30.1bn 100bn by 2025 7.0 bn 0 by 2030 0.21 0.17 0.11 tCO2e / MWh in 2030 23.84 16.98 mtCO2e in 2030 New 92.47 61.71 grCO2e / RPK in 2030 1.58 1.07 tCO2
Slide 52: ESG Ratings/Indices (1/2)
ESG ESG Ratings/Indices (1/2) CCC B BB BBB A AA AAA AA Out of 191 banks, 3% are AAA and 29% AA Laggard Average Leader D- D C- C B- B A- A A- Above the sector average (B) Disclosure Awareness Management Leadership >40 40-30 30-20 20-10 <10 23.9 268th out of 1,045 banks / 86th of 407 diversified
Slide 53: ESG Ratings/Indices (2/2)
ESG ESG Ratings/Indices (2/2) 98th percentile in banks sector 0 1 2 3 4 5 Banco Santander has been part of the FTSEGood Index 4.5 since 2003. In June 2021, we obtained 4.5 points ranking two points above sector’s average 0 29 49 59 100 ≈ 61 Weak Limited Robust Advanced 11th out of 31 diversifi
Slide 54: Index
Index 1 2 3 4 5 6 7 8 H1’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 54
Slide 55: Concluding Remarks
Concluding Remarks Concluding Remarks The Group’s stable capital generation has been supported by strong pre-provision profits providing Santander with a high capacity to absorb provisions. Strong capital levels in line with Santander’s business model based on geographic diversification, solid m
Slide 56: Index
Index 1 2 3 4 5 6 7 8 H1’22 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 56
Slide 57: Links to Grupo Santander public materials
Links, Appendix and Glossary Links to Grupo Santander public materials For additional information on the Group, please click on the images, icons or flags below H1’22 financial results Other information Financial report Earnings presentation Series Shareholders report 2021 Digital Annual review (Exc
Slide 58: Europe
Links, Appendix and Glossary EUROPE 'Accelerating our business transformation in One Europe to achieve superior growth with a more efficient operating model' H1’22 Highlights Strategic priorities Branches 3,178 Employees 63,579 ▪ Grow our business by better serving our customers through regional Tot
Slide 59: North America
Links, Appendix and Glossary NORTH AMERICA 'We provide a full range of financial services with particular focus on Retail, Private and Corporate Banking' H1’22 Highlights Strategic priorities Branches 1,859 Employees 43,779 ▪ Strengthen One Santander in North America by unifying a common and regiona
Slide 60: South America
Links, Appendix and Glossary SOUTH AMERICA 'We remain focused on expanding, sharing best practices from each country and delivering profitable growth' H1’22 Highlights Strategic priorities Branches 3,786 ▪ Strengthen connectivity and share best practices across countries, capturing new Employees 75,
Slide 61: Digital Consumer Bank
Links, Appendix and Glossary Digital Consumer Bank 'Europe’s consumer finance leader: solid business model, geographic diversification and leading market shares in auto/mobility finance and in personal finance/e-commerce' H1’22 Highlights Strategic priorities Branches 370 ▪ To become the largest dig
Slide 62: Santander Corporate & Investment Banking
Appendix, Links, Appendix Links and and Glossary Glossary Santander Corporate & Investment Banking 'Santander CIB supports corporate and institutional customers, offering tailored services and value-added wholesale products suited to their complexity and sophistication' H1’22 Highlights Strategic pr
Slide 63: Wealth Management & Insurance
Links, Appendix and Glossary Wealth Management & Insurance ‘We strive to become the best responsible wealth and insurance manager in Europe and the Americas' H1’22 Highlights Strategic priorities Total assets under management1 (€ bn) 395 ▪ Continue to build our global platform Total fees generated a
Slide 64: PagoNxt
'Innovative payments solutions for both Santander and non-Santander clients' H1’22 Highlights PagoNxt revenue €398mn; +87% We are a one of a kind paytech business backed by Santander. Helping our customers prosper and accelerate their growth through a one-stop shop, Merchants providing solutions bey
Slide 65: Glossary and Acronyms
Links, Appendix and Glossary Glossary and Acronyms • ADIs: Available distributable items • mn: Million • bn: Billion • MPE: Multiple Point of Entry • bps: Basis points • MREL: Minimum Required Eligible Liabilities • CCoB: Capital Conservation Buffer • NII: Net interest income • CCyB: Countercyclical
Slide 66: 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:
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