Banco Santander, S.a. · BME:SAN
Banco Santander — FY2022 Earnings Presentation
57 slides from Banco Santander's earnings presentation, Feb 2, 2023
Slide 1: Form 6-K
FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of February, 2023 Commission File Number: 001-12518 Banco Santander, S.A. (Exact name of registrant as specified in its c
Slide 2: Table of Contents
BANCO SANTANDER, S.A. ________________________ TABLE OF CONTENTS Item 1. January - December 2022 Earnings presentation
Slide 3: Earnings Presentation 2022
Earnings Presentation — 2022 2 February 2023
Slide 4: Important information
2 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
Slide 5: Important information
3 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 unpredictab
Slide 6: 2022 Highlights
4 Index 1 Appendix 3 Group and Business areas review Final remarks 2 4 2022 Highlights
Slide 7: Strategy execution delivered record results with 18% increase in attributable profit
5 Our strategy execution delivered record results with a 18% increase in attributable profit Note: FY’22 data or YoY changes in euros. In constant euros: attributable profit +8%, total revenue +6%. Customer focus and scale drove profitable growth +7mnCustomers Total revenue +12% Increased profitabil
Slide 8: Record profit boosted by 12% revenue growth
6(1) 2021: restructuring costs (net of tax), corresponding mainly to the UK and Portugal. Record profit boosted by 12% revenue growth... € million 2022 2021 Euros NII 38,619 33,370 16 9 Net fee income 11,790 10,502 12 7 Trading and other income 1,745 2,532 -31 -37 Total revenue 52,154 46,404 12 6 Op
Slide 9: Increased profitability, shareholder remuneration and returns
7 12.0% 13.4% 2021 2022 …led to increased profitability, shareholder remuneration and returns € per share 4.12 4.37 2021 2022 (1) Our 2022 shareholder remuneration policy is c.40% payout split in approximately equal parts (cash and share buybacks). Cash DPS estimated as 20% of the profit for the yea
Slide 10: Disciplined capital allocation strengthens balance sheet
8 Disciplined capital allocation plus our diversification further strengthen our rock-solid balance sheet 11.96% 12.04% 2021 2022 3.16% 3.08% 2021 2022 Improved NPL ratio Delivered on our CoR target (<1%) Continued growth in FL CET1 152% LCR 0.77% 0.99% 2021 2022 Credit quality remained robust High
Slide 11: In-market scale and global network among the most profitable banks
9 In-market scale coupled with global network allowed us to be among the most profitable banks in our markets #2 In-market scale in volumes Ranking in lending Note: considering privately-owned banks. (1) Retail auto originations. (2) Mortgages. #51 Additionally, we are leaders in profitability in 4
Slide 12: Global businesses drive profitable growth and value
10 Our global businesses continue to drive in-market and Group profitable growth and value Note: Santander data - FY’22. Peer data – 9M’22 or latest available. Peer group corresponds to the those included in the benchmarking exercise for the variable renumeration calculations for these businesses. (
Slide 13: Auto and Payments global scale advantages
11 Auto and Payments global scale advantages and capabilities are driving profitable growth across our 10 core markets and beyond Payments: expanding our merchant and card capabilities through the Group Auto mobility services: a worldwide leader supported by our global OEM partnerships #1 in Europe
Slide 14: Delivering on customer and digital targets while supporting green economy
12 Our actions are enabling us to deliver on our customer and digital targets while supporting the transition to a green economy Our ESG approach is embedded in all our businesses Green finance1 #2 global leader c.€91bn Project finance Renewables2 WM&I SCIB Consumer businesses €53bn Innovative Partn
Slide 15: Supporting teams, culture and financial inclusion
13 Supporting our teams, strengthening our culture and promoting financial inclusion Social & GovernanceTeams & Culture Financial inclusion ahead of targets Microcredits (LatAm) Financially empowered people since 2019 >10mn >€900mn Corporate Governance Board gender composition Women in senior positi
Slide 16: Group and Business areas review
14 Index 1 Appendix 3 Group and Business areas review Final remarks 2 4 2022 Highlights
Slide 17: Record profit boosted by 12% revenue growth
15(1) 2021: restructuring costs (net of tax), corresponding mainly to the UK and Portugal. Record profit boosted by 12% revenue growth... 1,608 2,067 2,174 2,275 2,543 2,351 2,422 2,289 2,138 Q1'21 Q2 Q3 Q4 Q1'22 Q2 Q3 Q4 Attributable profit (Constant € mn) € mn Attributable profit Underlying profit
Slide 18: Geographic footprint results
16Note: YoY changes in constant euros. (1) Adjusted RoTEs: adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12%. Using tangible equity, RoTE is 9.3% for Europe, 11.1% for North America, 18.8% for South America and 13.7% for DCB. …and our geographic footprint Europe So
Slide 19: Q4 revenue growth supported by all regions and global businesses
17 12,539 12,391 13,220 13,750 Q4 revenue growth supported by all regions and global businesses Fees NII Constant € mn 337 344 354 582Trading gains Other income Revenue 557 61 109 -234 Q1'21 Q2 Q3 Q4 Q1'22 Q2 Q3 Q4 8,904 9,178 9,808 10,400 2,741 2,808 2,949 3,002 Revenue breakdown 1.2bn 1.4bn Quarte
Slide 20: Full-year NII and NIM improved
18 Volume growth1 35,417 38,619 2021 2022 Full-year NII and NIM improved, supported by volumes and interest rate increases 2.41% 2.53% NIM (1) In constant euros. In euros +6% in loans; +9% in deposits. NII drivers • Loans (+5%) up in all markets • Deposits (+9%) increased in all regions • All segmen
Slide 21: Net fee income supported by cross-border collaboration
19 Net fee income supported by cross-border collaboration and growth in loyal customers driving both higher volumes and improved activity Constant € million Net fee income 11,045 11,790 2021 2022 YoY % changes in constant euros • Increase in all regions and DCB • Greater transactional activity and h
Slide 22: Focus on productivity and efficiency
20 22,336 23,903 2021 2022 Focus on productivity and efficiency with real costs decreasing across our footprint 46.2% 45.8% Constant € million Efficiency Note: costs in real terms exclude the impact from weighted average inflation. Costs and Efficiency drivers Costs and efficiency ratio Costs Costs
Slide 23: We achieved our <1% CoR target
21 We achieved our <1% CoR target… 0.77% 0.99% CoR LLPs and CoR LLPs LLPs and CoR drivers Constant € million • Q4 LLPs of €3.0bn (+11% QoQ) • 2022 includes additional LLPs due to updated macro assumptions (mainly US, Spain and UK) • Normalization in some countries vs. releases in 2021 Cost of risk •
Slide 24: Loan portfolio highly collateralized and diversified
22 …backed by a loan portfolio that is highly collateralized, diversified... Credit quality Dec-22, YoY % changes in constant euros Solid loan portfolio structure Secured 65% Unsecured 35% Guarantee Indiv. mortgage 34% Auto 15% Non-auto & other 13% SMEs & Corps 24% CIB 14% Segments Adequate risk-ret
Slide 25: Medium-low risk loan portfolios in main countries
23 • c.80% of total US portfolio is prime. Auto NPL coverage ratio c.90% and >10% coverage of the total auto portfolio • Historically low unemployment rate and high collateral values (used car prices 43% higher than 2019, but correcting) ...medium-low risk and predictable UK Spain Loan portfolio str
Slide 26: Brazilian portfolio well-balanced
24 Brazilian portfolio well-balanced between individuals and companies while we increased collateralization. 2022 impacted by a one-off, though main individuals' segments improved slightly Strong growth of collateralized portfolio weight Cost of risk Q4’19 4.50% 4.89% 4.36% 4.06% 3.93% 4.35% 3.73% 4
Slide 27: US credit normalization and auto loan mix
25 In the US, credit normalization to continue in 2023, but the shift in Auto loan mix is supporting a CoR below pre-pandemic levels Note: NCO’s are in IFRS. (1) Consumer Retail instalment contract (RICs) and auto loans, excludes commercial fleet. Excludes LHFS. US Net Total Charge-Offs US RICs and
Slide 28: Strengthening our capital position
26 Strengthening our capital position % 2022 FL CET1 performance 12.04-0.62 -0.27 -0.34 -0.07 11.96 +1.38 Dec-21 Gross organic generation Shareholder remuneration Regulatory & models Markets & others Corporate transactions Dec-22 In Q4, +40bps of gross organic capital generation, -23bps from cash di
Slide 29: Final remarks
27 Index 1 Appendix 3 Group and Business areas review Final remarks 2 4 2022 Highlights
Slide 30: Strong performance in 2022
28 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
Slide 31: Achieved 2022 and 2019 medium-term targets
29 We achieved our 2022 and 2019 medium-term Group financial targets 2019 medium-term targets 2022 targets 2022 45.8%42-45%Efficiency ratio RoTE FL CET1 Payout 13-15% 11-12% 40-50% 13.4% 12.04% 40% ~45% >13% ~12% 40% +6%Revenue Mid-single digit growth1 0.99%CoR <1% Note: our 2022 shareholder remuner
Slide 32: Well positioned to drive profitable growth in 2023
30 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 Revenue Double-digit growth Efficiency ratio 44-45% CoR <1.2% FL CET1 >12%
Slide 33: Our purpose and how we want to be different
31 To be the best open financial services platform, by acting responsibly and earning the lasting loyalty of our people, customers, shareholders and communities Our aim Everything we do should be Simple, Personal and Fair To help people and businesses prosper Our howOur purpose Our purpose and how w
Slide 34: Event date, speakers and location
32 28 February 2023 8.00 am - 1.00 pm 8 Northumberland Avenue London WC2N 5BY United Kingdom Phone: +44 20 3263 1011 Ana Botín Executive Chair Héctor Grisi CEO of Grupo Santander José García Cantera CFO of Grupo Santander DATE SPEAKERS EVENT LOCATION
Slide 35: Appendix
33 Index 1 32 4 AppendixGroup and Business areas review Final remarks 2022 Highlights
Slide 36: Appendix
34 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.
Slide 37: Primary segments
35 Primary segments Detail by region and country
Slide 38: Europe
36 Europe Highlights Key data and P&L Loans Deposits Mutual Funds Efficiency CoR RoTE1 €579bn +3% €643bn +9% €93bn -13% 47.3% -4.9pp 0.39% 0bps 12.5% +3.2pp Note: 2022 data and YoY changes (loans, deposits and mutual funds in constant euros). (1) Adjusted RoTE: adjusted based on Group’s deployed cap
Slide 39: Spain and UK
37 Spain UK Efficiency CoR RoTE1 P&L* Q4'22 % Q3'22 2022 % 2021 NII 1,405 25.5 4,539 9.0 Net fee income 646 -7.3 2,818 1.0 Total revenue 2,175 2.5 8,233 6.3 Operating expenses -1,057 6.0 -3,998 -1.3 Net operating income 1,118 -0.6 4,236 14.6 LLPs -390 -7.5 -1,618 -30.3 Underlying att. profit 456 1.0
Slide 40: Portugal and Poland
38 Loans Deposits Mutual Funds Loans Deposits Mutual Funds €40bn 0% €42bn -1% €4bn -17% 38.7% -4.1pp 0.04% -5bps 29.6% +6.0pp €31bn +1% €39bn +6% €3bn -29% 28.0% -13.0pp 1.43% +76bps 18.1% +11.3pp Note: 2022 data and YoY changes (loans, deposits and mutual funds in constant euros). (1) Adjusted RoTE
Slide 41: North America
39 North America Note: 2022 data and YoY changes (loans, deposits and mutual funds in constant euros). (1) Adjusted RoTE: adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12%. Using tangible equity, RoTE is 11.1%. (2) % change in current euros. Key data and P&L Loans
Slide 42: USA and Mexico
40 USA Mexico • Strong volume growth: loans up mainly due to Auto, CRE and CIB, while time deposits grew on the back of higher rates • High profit (€1.8bn) from strong NII and good cost control, offsetting LLP normalization and lower lease income • Successful customer attraction strategy (+0.6mn tot
Slide 43: South America
41 South America Note: 2022 data and YoY changes (loans, deposits and mutual funds in constant euros). (1) Adjusted RoTE: adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12%. Using tangible equity, RoTE is 18.8%. (2) % change in current euros. Highlights Key data and
Slide 44: Brazil
42 €92bn +8% €76bn +4% €45bn 0% 32.4% +2.6pp 4.79% +106bps 24.9% -2.8pp Note: 2022 data and YoY changes (loans, deposits and mutual funds in constant euros). (1) Adjusted RoTEs: adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12%. Using tangible equity, RoTE is 19.2%
Slide 45: Argentina and Uruguay
43 Loans Deposits Mutual Funds €6bn +72% €11bn +87% €4bn +136% 53.9% -4.2pp 2.91% -10bps 47.1% +12.5pp Note: 2022 data and YoY changes (underlying profit, loans, deposits and mutual funds in constant euros). (1) Adjusted RoTEs: adjusted based on Group’s deployed capital calculated as contribution of
Slide 46: Digital Consumer Bank
44 New lending Loans Customer Funds Efficiency CoR RoTE1 €125bn +9% €62bn +7% 46.7% -0.4pp 0.45% 0bps 14.4% +1.3pp €52bn +10% P&L* Q4'22 % Q3'22 2022 % 2021 % 2021² NII 990 -0.2 4,022 -0.5 -0.5 Net fee income 215 5.4 843 2.8 2.7 Total revenue 1,382 5.6 5,269 3.2 3.3 Operating expenses -609 1.6 -2,46
Slide 47: Corporate Centre
45 Corporate Centre Highlights Income statement • NII impacted by the rising interest rates • Negative FX hedging results offset by the positive impact from exchange rates in the countries' results • Significant decrease in LLPs and other provisions P&L* 2022 2021 NII -652 -624 Gains/losses on finan
Slide 48: Secondary segments
46 Secondary segments Detail by business
Slide 49: Corporate & Investment Banking
47 Total fees Profit RoTE Global businesses Corporate & Investment Banking €1,988mn +9% 22.0% +4.5pp€2,805mn +31% Note: 2022 data and YoY changes (fees, profit and commercial activity in constant euros). (1) Including fees generated by asset management and insurance ceded to the commercial network;
Slide 50: PagoNxt and Cards
48Note: 2022 and YoY changes in constant euros. Cards does not include Digital Consumer Bank or PagoNxt. PagoNxt quarterly revenue performance +72% 2022 vs. 2021 Merchant Acquiring €165bn +27% International Trade 78 139 159 179 173 232 253 295 Q1'21 Q2 Q3 Q4 Q1'22 Q2 Q3 Q4 • Merchant Acquiring: Tota
Slide 51: Responsible Banking
49 Appendix Primary and Secondary segments Responsible Banking Glossary
Slide 52: Progress on our ESG agenda
50 We continue to make progress on our ESG agenda Note: 2022 provisional data. 2025 / 2030 target2020 20% 3% 23% 23.7% 30% by 2025 ~0% by 2025 5mn 10mn by 20257mn 26.3% 2018 2019 2021 100bn by 202527bn 0.11 tCO2e / MWh in 2030 0 by 2030 0.21 7bn 43% 100% 19bn 33.8bn 120bn by 2025 220bn by 203065.7bn
Slide 53: Glossary
51 Appendix Primary and Secondary segments Responsible Banking Glossary
Slide 54: Glossary - Acronyms
52 Glossary - Acronyms ▪ ALCO: Assets and Liabilities Committee ▪ AM: Asset management ▪ AML: Anti-Money Laundering ▪ AT1: Additional Tier 1 ▪ AuMs: Assets under Management ▪ BFG: Deposit Guarantee Fund in Poland ▪ bn: Billion ▪ BNPL: Buy now, pay later ▪ bps: Basis points ▪ c.: Circa ▪ CET1: Common
Slide 55: Glossary - Definitions
53 Glossary - Definitions Notes: The averages for the RoTE and RoRWA denominators are calculated using 13 months from December to December. For periods less than one year, and if there are results in the net capital gains and provisions line, the profit used to calculate RoE and RoTE is the annualiz
Slide 56: 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:
Slide 57: Signature
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Banco Santander, S.A. Date: 2 February 2023 By: /s/ José García Cantera Name: José García Cantera Title: