Banco Santander, S.a. · BME:SAN
Banco Santander — Debt Investor Presentation (July 2023)
61 slides from Banco Santander's debt investor presentation, Jul 26, 2023
Slide 1: Fixed Income Investors Presentation H1'23
FIXED INCOME INVESTORS PRESENTATION — H1’23 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: Santander at a Glance
Santander at a Glance H1’23 Highlights Santander, a leading financial Total assets (€ bn) 1,780 group Customer loans (€ bn excluding reverse repos) 1,022 Customer deposits + mutual funds (€ bn excluding repos) 1,134 Branches 8,823 Simple Personal Fair H1'23 Net operating income (pre-provision profit
Slide 5: Index
Index 1 2 3 4 5 6 7 8 H1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 5
Slide 6: Profit increased in H1'23, supported by customer revenue and efficiency
H1’23 Summary Profit increased in H1’23, supported by customer revenue and efficiency improvement, with double-digit growth in net operating income Underlying P&L Current Constant Attributable profit € million H1'23 H1'22 % % € mn NII 20,920 18,409 14 15 +14% Net fee income 6,103 5,852 4 5 2,670 2,5
Slide 7: Well on track to achieve our 2023 financial targets
H1’23 Summary Well on track to achieve our 2023 financial targets FY 2023 targets H1’23 Revenue1 Double-digit growth +13% Efficiency ratio 44-45% 44.2% CoR <1.2% 1.08% FL CET1 >12% 12.2% RoTE >15% 14.5% Note: targets market dependent. Based on macro assumptions aligned with international economic in
Slide 8: Double-digit revenue growth backed by good customer activity
H1’23 Summary Double-digit revenue growth backed by good customer activity across businesses and regions Revenue trends Total revenue Constant € mn +15% 13,493 13,927 14,307 • >95% of total revenue is customer related which drives the vast Total 12,502 12,466 13,039 majority of total revenue growth
Slide 9: Focus on productivity and efficiency with costs decreasing in real terms
H1’23 Summary Focus on productivity and efficiency with costs decreasing in real terms Costs and efficiency drivers Costs 46.0% 45.6% 46.6% Efficiency 45.0% 44.1% 44.3% Quarterly • Transformation towards simpler and more 5,730 5,929 6,331 6,128 6,351 integrated models is driving cost improvements 5,
Slide 10: Credit quality remains robust, on track to achieve 2023 CoR target
H1’23 Summary Credit quality remains robust, on track to achieve Group 2023 CoR target Credit quality drivers LLPs and Credit quality 0.99% 1.05% 1.08% 0.77% 0.83% 0.86% • Credit quality remains robust supported by record CoR Group low unemployment in most countries 2,992 2,590 2,686 2,886 2,885 NPL
Slide 11: Capital in line with our target of >12%
H1’23 Summary Capital in line with our target of >12% Q2’23 FL CET1 performance Jun-23 +0.21 12.2 -0.11 -0.04 12.2 -0.03 Capital ratios H1'22 H1'23 Diff. FL CET1 ratio 12.0% 12.2% 19bps FL Total capital ratio 15.9% 15.9% -1bps FL Leverage ratio 4.7% 4.8% 12bps Mar-23 Gross organic Cash dividend Mino
Slide 12: Index
Index 1 2 3 4 5 6 7 8 H1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 12
Slide 13: Group organizational structure
Santander Business Model & Strategy Santander is managed according to primary and secondary segments Primary segments Group Europe North America South America Digital Consumer Bank organizational Spain UK United States Brazil Uruguay SCF structure Portugal Poland Mexico Chile Peru Other Europe Argen
Slide 14: Our business model is the foundation for generating value
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 Distribution b
Slide 15: We maintain our geographic and business diversification
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 Total
Slide 16: Loans remained flat despite changing interest rate dynamics
Santander Business Model & Strategy … with loans that remained flat despite changing interest rate dynamics… Customer loans Customer loans by country Jun-23, € bn and % change YoY in constant € Jun-23, € bn and % change YoY in constant € SAN €1,022bn 0% 1,022 0 564 -5 SCIB 136 -4% 160 +5 165 +8 SMEs
Slide 17: A strong and diversified deposit base
Santander Business Model & Strategy … and a strong and diversified deposit base Customer deposits Customer deposits by country Jun-23, € bn and % change YoY in constant € Jun-23, € bn and % change YoY in constant € €941bn +4% SAN 941 +4 604 +1 SCIB 142 +18% 140 +13 134 +8 SMEs, Corp 250 +1% & Other
Slide 18: Index
Index 1 2 3 4 5 6 7 8 H1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 18
Slide 19: Capital allocation discipline is key to improving profitability
Capital Capital allocation discipline is key to improving profitability and creating value Maximize capital productivity by: Value generation and profitability Asset rotation Increase RWAs with EVA>0 Front book pricing and risk transfer Base 100 EVA <0 portfolios EVA >0 portfolios activities 20% 17%
Slide 20: 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-23 16.03% Jun-23 15.93% >15% T2 +270bps 13.33% +260bps 13.33% 2.32% 2.29% 2.00% T2 1.40% AT1 1.40% T2 2.40%
Slide 21: 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%: >€45bn. Distance to trigger1 • The first line of defense is the Group’s strong pre-provision profitability providing a high capacity to absorb provisions dur
Slide 22: AT1 issuances distributed by call date
Capital AT1 issuances distributed by call date Banco Santander, S.A. AT1 issuances outstanding at Jun-23 Nominal Next call Reset Call date Currency € mn Coupon Structure date Spread 1,500 1,500 EUR 1,000 5.25% PNC6 29-Sep-23 499.9bps 1,100 USD 1,100 7.50% PNC5 08-Feb-24 498.9bps 1,000 1,000 916 EUR
Slide 23: 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 Strategic management of the exposure to Hedged Exposure Group exchange rates on equity and dynamic on CET1 the countervalue of the units’ annual 12.2%1 results in euros. Mitigate impact of FX volatility. Cor
Slide 24: Diversified bond portfolio represents just 7% of total assets
Capital Diversified bond portfolio represents just 7% of total assets Bond portfolio %, Jun-23 €116bn Other South America SCF 5% 5% Liquidity Chile portfolio 11% €29bn Spain 22% • Bond portfolio represents 7% of total assets Brazil €116bn 11% • HTC&S duration: 1.3 years o/w HTC €63bn (54%) UK • Mark
Slide 25: Index
Index 1 2 3 4 5 6 7 8 H1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 25
Slide 26: Credit quality remains solid…
Asset Quality Credit quality remains solid… Credit quality ratios H1'22 Q1'23 H1'23 H1'22 Q1'23 H1'23 p 2bp QoQ Cost of p 3bps QoQ NPL ratio 3.05% 3.05% 3.07% 0.83% 1.05% 1.08% p 2bps YoY risk3 p 25bps YoY 4.08% 3.93% 3.73% 3.32% 3.21% 3.16% 3.26% 3.05% 3.08% 3.08% 3.05% 3.07% 1.28% 1.18% 1.07% 1.00
Slide 27: … at the Group and country level
Asset 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 Portugal 3.33 3.05 3.09 Portugal -0.05 0.06 0.10 Poland 3.45 3.66 3.74 Pola
Slide 28: 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 Jun-23, % of operating areas Jun-23, % of operating areas Digital Consumer Digital Consumer Bank, 7.6% Bank, 10.4% Other South America, 0.7% Argentina, 0.4% Other South America
Slide 29: Strong portfolio diversification with c.60% exposure to individuals
Asset Quality Strong portfolio diversification with c.60% exposure to individuals and stable sector distribution Credit quality Sector distribution 1 Wholesale and retail trade 22% Manufacturing 17% Real estate activities 13% Jun-22 Mar-23 Jun-23 Professional, scientific and technical activities 6%
Slide 30: Index
Index 1 2 3 4 5 6 7 8 H1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 30
Slide 31: Autonomous subsidiaries combining local knowledge with global practices
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 Jun-23 Banco Santander S.A.1 Santander Banco Consumer Santander Santander Finance Totta SGPS, SA Banco
Slide 32: 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 Banking Union European Union 3rd Countries Spain1 Poland US Brazil UK Resolution Group PE PE PE PE PE PE Point of Entry Chile Mexico Argentina Integra
Slide 33: Subsidiaries autonomous in capital and liquidity
Liquidity and Funding Santander follows a model subsidiaries autonomous in capital and liquidity Capital ratios by country Mar-23, %, local figures (phased-in) US 15.3 UK 20.5 13.2 18.4 12.7 15.4 Portugal 18.0 Brazil 16.2 Poland 13.8 13.8 21.0 Mexico 11.8 19.4 22.1 10.8 19.2 Santander 19.4 S.A. 17.7
Slide 34: Santander's 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 35: Stock of issuances shows diversification across instruments and entities
Liquidity and Funding Stock of issuances shows diversification across instruments and entities Debt outstanding by type Jun-23 Includes the issuance of Green and Sustainable Bonds in line with the Group’s ESG strategy and Responsible Banking Preference shares, Agenda: €8.7bn, 5% Issuer Product Nomin
Slide 36: Conservative and decentralized liquidity and funding model
Liquidity and Funding 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 3.0 1.7 7.7 3.0
Slide 37: H1'23 issuances against funding plan
Liquidity and Funding 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 1.7 8-10 2.9 SCF
Slide 38: TLAC/MREL for the Resolution Group
Liquidity and Funding TLAC/MREL for the Resolution Group headed by Banco Santander, S.A. TLAC Jun-23(e) MREL Jun-23(e) % % and € bn 147.3 36.3% 20.4 Senior 2.7% 24.6% 3.8% 27.3 SNP 2.8% 3.7 11.1 Sub debt 3.8% 8.0 T2 AT1 Req. 33.6% 15.7% Req. 29.8% 8.7% 4.2% CET1 21.8% 76.8 18.0% 2.0% 11.5% 6.8% % RW
Slide 39: 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 Liquidity Coverage Net Stable Funding Ratio (LCR) Ratio (NSFR) € bn, Jun-23 1,481 1,481 1 Jun-23 Mar-23 M
Slide 40: Key liquidity metrics show strength and stability
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-23 (Deposits + M/LT 1 2019 2020 2021 2022 Jun-23 LTD Ratio funding) / Loans 3 Loans / net assets 1 77% 76% 75% 72%
Slide 41: 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+ 16/1
Slide 42: 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 43: Index
Index 1 2 3 4 5 6 7 8 H1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 43
Slide 44: 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 45: We continue to make progress on our ESG agenda
ESG We continue to make progress on our ESG agenda Jun-23 2025 targets Green Finance raised and facilitated €98.6bn €120bn (since 2019) Socially responsible Investments (AuM) €58.6bn €100bn Financial inclusion (# People)1 0.9mn 5mn Note: Not taxonomy. Definitions in the Glossary of this presentation
Slide 46: ESG Ratings/Indices (1/2)
ESG ESG Ratings/Indices (1/2) 2023 or latest Previous available CCC B BB BBB A AA AAA AA We maintained the same score in 2022 Laggard Average Leader D- D C- C B- B A- A Leadership band, above the sector (B-) and Europe A average (B) Disclosure Awareness Management Leadership >40 40-30 30-20 20-1
Slide 47: ESG Ratings/Indices (2/2)
ESG ESG Ratings/Indices (2/2) 2023 or latest Previous available 98th percentile 0 20 40 60 80 100 ≈ 83 22 years in a row, featuring on the Dow Jones Sustainability Index World (DJSI World) and in the DJSI Europe Index 77th percentile in banks sector 0 1 2 3 4 5 Banco Santander has been part
Slide 48: Index
Index 1 2 3 4 5 6 7 8 H1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 48
Slide 49: 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 50: Index
Index 1 2 3 4 5 6 7 8 H1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 50
Slide 51: 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 H1’23 financial results Other information Financial report Earnings presentation Series Shareholders report 2022 Digital Annual review (Exc
Slide 52: Europe
EUROPE 'We continue to accelerate our business transformation to achieve higher growth and a more efficient operating model' H1'23 Highlights Strategic priorities Branches 3,103 ▪ Customer centric: grow our active customer base through better customer Employees 66,819 service and experience Total cu
Slide 53: North America
NORTH AMERICA 'We provide a full range of financial services with a particular focus on Retail, Private and Corporate Banking' H1'23 Highlights Strategic priorities Branches 1,814 ▪ Continue to target segments with proven competitive advantages and strong Employees 45,657 Group network contributions
Slide 54: South America
SOUTH AMERICA 'Moving forward to become the most profitable bank in each of the countries in which we operate in the region while promoting synergies across our global and regional businesses' H1'23 Highlights Strategic priorities Branches 3,543 ▪ In consumer finance, continue to strengthen our lead
Slide 55: Digital Consumer Bank
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' H1'23 Highlights Strategic priorities Branches 363 Employees 16,624 Secure leadership in global digital con
Slide 56: Corporate & Investment Banking
Corporate & Investment Banking 'Santander CIB supports corporate and institutional customers, offering tailored services and value-added wholesale products suited to their complexity and sophistication' H1'23 Highlights Strategic priorities Total revenue (€ mn) 4,353 • Become a World-class CIB busin
Slide 57: Wealth Management & Insurance
Wealth Management & Insurance “We want to become the best responsible Wealth and Protection Manager in Europe and the Americas” H1'23 Highlights Strategic priorities Total assets under management1 (€ bn) 440 ▪ Continue building our global platform leveraging the connectivity of our teams Total fees
Slide 58: PagoNxt paytech business
‘One-of-a-kind paytech business that offers innovative payment solutions’ H1'23 Highlights PagoNxt revenue (€ mn) 521; +27% YoY 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, providing solutions beyond pa
Slide 59: Glossary and Acronyms
Links, Appendix and Glossary Glossary and Acronyms ▪ ADIs: Available distributable items ▪ G-SIB: Global Systemically Important Banks ▪ QoQ: Quarter-on-quarter ▪ ALCO: Assets and liabilities committee ▪ HQLA: High quality liquid asset ▪ RoRWA: Return on risk-weighted assets ▪ AT1: Additional Tier 1
Slide 60: Glossary - Definitions
Links, Appendix and Glossary Glossary - Definitions PROFITABILITY AND EFFICIENCY • RoTE: Return on tangible capital: Group attributable profit / average of: net equity (excluding minority interests) – intangible assets (including goodwill) • RoRWA: Return on risk-weighted assets: consolidated profit
Slide 61: 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