Banco Santander, S.a. · BME:SAN
Banco Santander — FY2022 Earnings Presentation
54 slides from Banco Santander's earnings presentation, Feb 2, 2023
Slide 1: Earnings Presentation 2022
2 February 2023 Earnings Presentation — 2022
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: Index
Index 1 2 3 4 2022 Highlights Group and Business Final Appendix areas review remarks 4
Slide 5: Our strategy execution delivered record results with a 18% increase in attributable profit
Our strategy execution delivered record results with a 18% increase in attributable profit Customers +7mn Customer focus and scale drove profitable growth Total revenue +12% Delivered record year in profit, with €2.3bn in Q4 Attributable profit €9.6bn RoTE 13.4% Increased profitability, shareholder
Slide 6: Record profit boosted by 12% revenue growth...
Record profit boosted by 12% revenue growth... % change Constant € million 2022 2021 Euros euros Delivered on Group 2022 targets NII 38,619 33,370 16 9 Net fee income 11,790 10,502 12 7 • Revenue growth backed by volume increase and initial interest rate tailwinds Trading and other income 1,745 2,53
Slide 7: ...led to increased profitability, shareholder remuneration and returns
…led to increased profitability, shareholder remuneration and returns Profitability + EPS growth TNAVps + Cash DPS € cents € per share RoTE EPS 53.9 4.37 13.4% 43.8 +23% 4.12 +6% 12.0% YoY YoY 2021 2022 2021 2022 2021 2022 2022 includes €0.11 of cash dividends2 Cash DPS1 growth: +16% YoY In the last
Slide 8: Disciplined capital allocation plus our diversification further strengthen our rock-solid balance sheet
Disciplined capital allocation plus our diversification further strengthen our rock-solid balance sheet 0.99% 3.16% 3.08% 0.77% Credit quality Delivered Improved remained NPL ratio on our CoR robust target (<1%) 2021 2022 2021 2022 Wholesale High quality 152% 17% funding and High quality / Regulator
Slide 9: In-market scale coupled with global network allowed us to be among the most profitable banks
In-market scale coupled with global network allowed us to be among the most profitable banks in our markets In-market scale in volumes Digital Ranking in lending Consumer Bank #32 #1 in Europe #51 Additionally, #2 #1 we are leaders in #2 profitability in #3 #3 4 out of 10 markets #1 #2 Our global an
Slide 10: Our global businesses continue to drive in-market and Group profitable growth and value
Our global businesses continue to drive in-market and Group profitable growth and value CIB: leaders in LatAm and strengthening WM&I: Top 3 Best Global Private Banking and preferred common value proposition in Europe and the US asset manager and insurance provider in LatAm and Europe Our global reac
Slide 11: Auto and Payments global scale advantages and capabilities are driving profitable growth
Auto and Payments global scale advantages and capabilities are driving profitable growth across our 10 core markets and beyond Auto mobility services: a worldwide leader Payments: expanding our merchant and supported by our global OEM partnerships card capabilities through the Group New loan growth
Slide 12: Our actions are enabling us to deliver on our customer and digital targets
Our actions are enabling us to deliver on our customer and digital targets while supporting the transition to a green economy Customer centric Our ESG approach is embedded in all our businesses 2022 YoY Project finance Green finance1 Renewables2 SCIB Total customers 160mn +7mn c.€91bn #2 global lead
Slide 13: Supporting our teams, strengthening our culture and promoting financial inclusion
Supporting our teams, strengthening our culture and promoting financial inclusion Teams & Culture Social & Governance Financial inclusion ahead of targets Women in senior positions1 c.29% Financially empowered >10mn (30% 2025 target) people since 2019 Microcredits (LatAm) >€900mn 54 Global eNPS2 (16
Slide 14: Index
Index 1 2 3 4 2022 Highlights Group and Business Final Appendix areas review remarks 14
Slide 15: Record profit boosted by 12% revenue growth...
Record profit boosted by 12% revenue growth... % change Constant Attributable profit € million 2022 2021 Euros euros € mn NII 38,619 33,370 16 9 Net fee income 11,790 10,502 12 7 2,543 2,351 2,422 2,275 2,289 Trading and other income 1,745 2,532 -31 -37 2,138 2,174 2,067 Total revenue 52,154 46,404
Slide 16: ...and our geographic footprint
…and our geographic footprint Loans Deposits Contribution Underlying Underlying (€ bn) (€ bn) to Group’s attributable profit RoTE1 underlying profit (€ mn) Group +5% +9% Europe 579 643 33% 3,810 12.5% +3% +9% +38% +3.2 pp North 157 136 2,878 20.5% America 25% +9% +14% -14% -3.6 pp South 152 123 3,65
Slide 17: Q4 revenue growth supported by all regions and global businesses
Q4 revenue growth supported by all regions and global businesses Revenue breakdown Q4’22 vs. Q3’22 Quarterly revenue drivers Constant € mn 1.4bn 13,750 13,220 12,539 12,391 • Growth in Europe (+13%) and South America (+6%) Revenue NII • Strong quarter in North America, after record NII in Q3 1.2bn 1
Slide 18: Full-year NII and NIM improved, supported by volumes and interest rate increases
Full-year NII and NIM improved, supported by volumes and interest rate increases NII and NIM NII drivers Constant € million • Loans (+5%) up in all markets 2.53% Volume • Deposits (+9%) increased in all regions 2.41% growth1 • All segments grew. Of note loans in CIB (+11%) NIM +9% • Benefiting the U
Slide 19: Net fee income supported by cross-border collaboration and growth in loyal customers
Net fee income supported by cross-border collaboration and growth in loyal customers driving both higher volumes and improved activity Net fee income Net fee income drivers YoY % changes in constant euros Constant € million Private Banking Insurance Trade net new money premiums +7% +13% €11.7bn +24%
Slide 20: Focus on productivity and efficiency with real costs decreasing across our footprint
Focus on productivity and efficiency with real costs decreasing across our footprint Costs and Efficiency drivers Costs and efficiency ratio Constant € million Costs grew • Costs in real terms: -5% 46.2% 45.8% Efficiency below inflation • Investments in digitalization and salary in all regions agree
Slide 21: We achieved our <1% CoR target…
We achieved our <1% CoR target… LLPs and CoR drivers LLPs and CoR Constant € million • Q4 LLPs of €3.0bn (+11% QoQ) 0.99% 0.77% • 2022 includes additional LLPs due to updated macro CoR LLPs assumptions (mainly US, Spain and UK) • Normalization in some countries vs. releases in 2021 +31% 10,509 8,011
Slide 22: …backed by a loan portfolio that is highly collateralized, diversified...
…backed by a loan portfolio that is highly collateralized, diversified... Solid loan portfolio structure Credit quality Dec-22, YoY % changes in constant euros Dec-21 Dec-22 €1,019bn €1,019bn NPL ratio 3.16% 3.08% CIB +11% >65% investment grade2 14% Unsecured 35% SMEs & Corps Coverage ratio 71% 68%
Slide 23: ...medium-low risk and predictable
...medium-low risk and predictable Loan portfolio structure in the main countries • Average mortgage portfolio LTV of 62%. 75% of the mortgage portfolio at variable rate • Employment remains resilient Spain • Simple average mortgage LTV: 40% (LTV over 80% <5%). New business vintage delinquency rates
Slide 24: Brazilian portfolio well-balanced between individuals and companies
Brazilian portfolio well-balanced between individuals and companies while we increased collateralization. 2022 impacted by a one-off, though main individuals' segments improved slightly Individual + CF portfolio breakdown Cost of risk Others 4.50% 4.89% 4.36% 4.06% 3.93% 4.35% 3.73% 4.79% Agro Auto
Slide 25: In the US, credit normalization to continue in 2023
In the US, credit normalization to continue in 2023, but the shift in Auto loan mix is supporting a CoR below pre-pandemic levels $ million US Net Total Charge-Offs US Auto 60+ DQ 2019-2023 SC and SBNA Delinquency Rates 7.00% $3,238 6.00% $494 5.00% $1,897 4.00% 3.00% $2,597 Estimated to be $1,755 2
Slide 26: Strengthening our capital position
Strengthening our capital position 2022 FL CET1 performance Disciplined capital allocation strategy % 2022 TARGETS 2022 ACHIEVEMENT +1.38 RWAs rising below 11.96 -0.62 12.04 loan growth RWAs +1% < Loans +5% -0.27 -0.34 -0.07 (excluding FX impact) 2022 front book Dec-211 Gross Shareholder Regulatory
Slide 27: Index
Index 1 2 3 4 2022 Highlights Group and Business Final Appendix areas review remarks 27
Slide 28: Strong performance in 2022, delivering on profitability, capital and CoR targets
Strong performance in 2022, delivering on profitability, capital and CoR targets We continue to serve more customers while maintaining a rock-solid balance sheet - +7 million customers in 2022 - Top 3 by NPS in 8 markets - FL CET1 above 12%, while delivering on CoR target (<1%) As a result, 2022 has
Slide 29: We achieved our 2022 and 2019 medium-term Group financial targets
We achieved our 2022 and 2019 medium-term Group financial targets 2019 2022 2022 medium-term targets targets Mid-single digit Revenue +6% growth1 Efficiency ratio 42-45% ~45% 45.8% CoR <1% 0.99% RoTE 13-15% >13% 13.4% FL CET1 11-12% ~12% 12.04% Payout 40-50% 40% 40% Note: our 2022 shareholder remune
Slide 30: Looking ahead, we are well positioned to drive profitable growth in 2023
Looking ahead, we are well positioned to drive profitable growth in 2023 We are confident that our customer focus and consistent track record in increasing profitability will enable us to achieve the following 2023 targets Efficiency Revenue CoR FL CET1 RoTE ratio Double-digit 44-45% <1.2% >12% >15%
Slide 31: Our aim, our purpose, our how
Our purpose and how we want to be different (S P F) will drive customer growth and customer loyalty, increasing profitability to drive shareholder remuneration and value creation Our aim To be the best open financial services platform, by acting responsibly and earning the lasting loyalty of our p
Slide 32: Investor event details, 28 February 2023
DATE 28 February 2023 8.00 am - 1.00 pm SPEAKERS Ana Botín Executive Chair Héctor Grisi CEO of Grupo Santander José García Cantera CFO of Grupo Santander EVENT 8 Northumberland Avenue LOCATION London WC2N 5BY United Kingdom Phone: +44 20 3263 1011 32
Slide 33: Index
Index 1 2 3 4 2022 Highlights Group and Business Final Appendix areas review remarks 33
Slide 34: Appendix
Appendix Primary and Secondary segments Responsible Banking Glossary The other information in the Appendix regularly provided each quarter can be found in the document entitled "Supplementary Information", published together with this presentation on the Group's corporate website. 34
Slide 35: Primary segments
Primary segments Detail by region and country 35
Slide 36: Europe
Europe Highlights Key data and P&L Loans Deposits Mutual Funds • Business transformation to deliver accelerated growth, a more efficient operating model and increased customer satisfaction €579bn +3% €643bn +9% €93bn -13% Efficiency CoR RoTE1 • Customers, loans and deposits up in most countries 47.3
Slide 37: Spain and UK
España and UK Spain UK • Increased service quality reflected in customer and volumes • Strong net mortgage lending (£9.8bn in 2022) growth, mainly in mortgages, consumer, CIB and deposits • NOI up 22% YoY supported by NII and efficiency gains • Profit x2.5 vs. 2021 on the back of 9% higher NII, good
Slide 38: Portugal and Poland
Portugal and Polonia Portugal Poland • Strengthened customer loyalty (#2 in NPS) and increased • Strong operating performance, NII doubled supported by activity in mortgages and protection insurance higher rates, while costs grew well below inflation • Profit up supported by fees, further efficiency
Slide 39: North America
North America Highlights Key data and P&L Loans Deposits Mutual Funds • Larger customer base and enhanced customer experience €157bn +9% €136bn +14% €28bn 0% through tailored products and services Efficiency CoR RoTE1 • Overall volumes growth, driven by most segments in Mexico 47.7% +1.9pp 1.49% +57
Slide 40: USA and Mexico
USA y Mexico USA Mexico • Strong volume growth: loans up mainly due to Auto, CRE and • Successful customer attraction strategy (+0.6mn total CIB, while time deposits grew on the back of higher rates customers YoY) reflected in growth in loans and fees • High profit (€1.8bn) from strong NII and good
Slide 41: South America
South America Highlights Key data and P&L Loans Deposits Mutual Funds • Strengthening the connection and sharing best practices among units, capturing new business opportunities €152bn +10% €123bn +5% €59bn +7% Efficiency CoR RoTE1 • Customer base growth (+7mn YoY) 37.0% +2.0pp 3.32% +72bps 25.1% -1
Slide 42: Brazil and Chile
Brasil and Chile Brazil Chile • Selective volume growth, mainly secured and corporates • Focus on Getnet and Santander Life, boosting banking penetration. #1 in NPS • Profit remained high in a difficult scenario given inflation and higher interest rates • Profit up YoY due to higher revenue (fees an
Slide 43: Argentina; Uruguay, Peru and Colombia
Argentina y Uruguay Argentina Uruguay, Peru and Colombia • Changes affected by high inflation • Consumer credit expansion in Uruguay and joint initiatives between CIB and Corporates in Peru and Colombia • Strengthened the customer loyalty. #1 in NPS • Strong customer loyalty reflected in loan growth
Slide 44: Digital Consumer Bank
DCB Digital Consumer Bank Highlights Key data and P&L • We expanded our value proposition further with new New lending Loans Customer Funds commercial alliances, leasing, subscription and BNPL services €52bn +10% €125bn +9% €62bn +7% • Significant market share gains as new lending (+10% YoY) Efficie
Slide 45: Corporate Centre
Corporate Centre Highlights Income statement P&L* 2022 2021 • NII impacted by the rising interest rates NII -652 -624 Gains/losses on financial transactions -724 -140 • Negative FX hedging results offset by the positive impact from exchange rates in the countries' results Operating expenses -372 -34
Slide 46: Secondary segments
Secondary segments Detail by business 46
Slide 47: Global businesses
Global businesses Corporate & Investment Banking Wealth Management & Insurance • SCIB´s client centric transformation from lenders to strategic • Strong growth in contribution to Group profit on a like-for-like partners is yielding strong results basis (+18%) in a challenging market environment • Pr
Slide 48: PagoNxt and Cards
Cards PagoNxt • Merchant Acquiring: Total Payments Volume rose backed • 97 million cards managed globally by Brazil (+16%), Europe (+39%) and Mexico (+35%) • Revenue grew 29% YoY (+19% in constant in euros) • Revenue increased 93% YoY (+72% in constant euros) due to overall increase in business acti
Slide 49: Appendix
Appendix Primary and Secondary segments Responsible Banking Glossary 49
Slide 50: We continue to make progress on our ESG agenda
We continue to make progress on our ESG agenda 2018 2019 2020 2021 2022 2025 / 2030 target • Electricity used from renewable energy sources 43% 50% 57% 75% 86% 100% 120bn by 2025 • Green finance raised and facilitated (€) 19bn 33.8bn 65.7bn 90.9bn 220bn by 2030 • Socially Responsible Investments AuM
Slide 51: Appendix
Appendix Primary and Secondary segments Responsible Banking Glossary 51
Slide 52: Glossary - Acronyms
Glossary - Acronyms ▪ ALCO: Assets and Liabilities Committee ▪ FY: Full year ▪ PoS: Point of Sale ▪ AM: Asset management ▪ GDF: Global Debt Finance ▪ pp: Percentage points ▪ AML: Anti-Money Laundering ▪ GDP: Gross domestic product ▪ Ps: Per share ▪ AT1: Additional Tier 1 ▪ GTB: Global Transaction Ba
Slide 53: Glossary - Definitions
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 / average risk-weighted asse
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: