Banco Santander, S.a. · BME:SAN
Banco Santander — Debt Investor Presentation (April 2023)
66 slides from Banco Santander's debt investor presentation, Apr 25, 2023
Slide 1: Fixed Income Investors Presentation Q1'23
FIXED INCOME INVESTORS PRESENTATION — Q1’23
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 Q1’23 Highlights Santander, a Total assets (€ bn) 1,749 leading financial Customer loans (€ bn excluding reverse repos) 1,015 group Customer deposits + mutual funds (€ bn excluding repos) 1,118 Branches 8,993 Q1'23 Net operating income (pre-provision profit) (€ mn) 7,790 Simple
Slide 5: Index
Index 1 2 3 4 5 6 7 8 Q1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 5
Slide 6: Strong top line with efficiency improvement and contained CoR
Q1’23 Summary Strong top line with efficiency improvement and contained CoR % change Underlying P&L Q1’23 drivers € million Q1'23 Q1'22 Euros Constant euros 14 • Volumes and interest rate tailwinds drove YoY revenue growth NII 10,185 8,855 15 Net fee income 3,043 2,812 8 7 • Efficiency: 44.1% driven
Slide 7: Value creation
Q1’23 Summary 5 pillars for value creation across the Group, with focus on Retail & Commercial banking Customer centric Total customer: 161mn 1 Value creation RoTE1: 14.4% Simplification & automation 2 TNAVps + DPS2: +5% Efficiency ratio: 44.1% Digital Bank with Branches Capital 5 3 Network contribu
Slide 8: Customer focus driving volume and revenue growth across the Group
Q1’23 Summary 1 Customer focus driving volume and revenue growth across the Group 4 Customer related initiatives Customer centric • Network business initiatives Q1’23 YoY Revenue growth YoY in Multi-Latinas (+53%) and Multi-Europeans (+72%) Total customers 161mn +9mn Active customers 99mn +2mn • Bra
Slide 9: Making progress on simplifying our product offering and fully automating operations
Q1’23 Summary Making progress on simplifying our product offering and fully automating our front- 2 and back-end operations ONE Transformation Efficiency ratio • Product portfolio simplification Simplified product catalogue -42% in Group in the last two years 45.8% 44.1% • Reducing in branch adminis
Slide 10: Our Global and Network businesses' revenue grew above Group
Q1’23 Summary Our Global and Network businesses’ revenue grew above Group 3 Investor Day strategy progress Revenue growth1 • Further strengthening our centres of expertise with capabilities in value-added, sophisticated SCIB • Strengthen products centers of expertise and our originate to share model
Slide 11: Continued revenue growth supported by good performance in Europe and global businesses
Q1’23 Summary Continued revenue growth supported by good performance in Europe and global businesses Revenue breakdown Revenue trends Constant € mn €1.5bn • Strong positive sensitivity of our balance sheet, 13,935 especially to euro (Europe up 30% YoY) 13,523 12,250 12,458 NII +3% • Solid quarter de
Slide 12: Focus on productivity and efficiency with costs decreasing in real terms
Q1’23 Summary Focus on productivity and efficiency with costs decreasing in real terms Costs Costs and efficiency drivers Efficiency 47.9% 45.6% 45.0% 46.0% 46.6% 44.1% • Group efficiency of 44.1%. Most countries better Efficiency than Q1’22. Europe continued to improve (-6pp). improvement • Ongoing
Slide 13: Credit quality remains robust
Q1’23 Summary Credit quality remains robust LLPs and CoR LLPs and CoR drivers 0.99% 1.05% 1.05% 0.77% 0.77% 0.83% 0.86% CoR • Q1 LLPs decreased 3% QoQ. South America (-11%) and North America (-5%; US better than expected) LLPs Constant € bn • Higher LLPs YoY due to normalization in the US. Brazil in
Slide 14: Strengthening our capital position. Fully-loaded CET1 reaching 12.2%
Q1’23 Summary Strengthening our capital position. Fully-loaded CET1 reaching 12.2% Q1’23 FL CET1 performance Mar-23 +0.24 +0.07 12.2 +0.11 Capital ratios 12.0 Q1'22 Q1'23 Diff. -0.25 FL CET1 ratio 12.0% 12.2% 17bps FL Total capital ratio 16.1% 15.8% -27bps FL Leverage ratio 5.0% 4.8% -21bps Dec-22 G
Slide 15: Very solid start to the year that puts us on track to meet our 2023 targets
Q1’23 Summary Very solid start to the year that puts us on track to meet our 2023 targets 2023 targets Q1’23 Revenue1 Double-digit growth +12% Efficiency ratio 44-45% 44.1% CoR <1.2% 1.05% FL CET1 >12% 12.2% RoTE >15% 14.4%² Note: targets market dependent. Based on macro assumptions aligned with int
Slide 16: Index
Index 1 2 3 4 5 6 7 8 Q1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 16
Slide 17: 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 18: Our business model is the foundation for generating value for our shareholders
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 19: We maintain our geographic and business diversification both in assets and liabilities
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, Mar-23) (excluding repos, Mar-23) By area1 By area1 DCB DCB South Total customer deposits Total gro
Slide 20: … with loans that continue to grow well across products, segments and countries
Santander Business Model & Strategy … with loans that continue to grow well across products, segments and countries… Customer loans: +3% YoY Customer loans by country Mar-23, change YoY in constant € Mar-23, € bn and % change YoY in constant € SAN 1,015 +3 €1,015bn 566 -2 CIB 14% +1% >70% investment
Slide 21: … and a strong and diversified deposit base
Santander Business Model & Strategy … and a strong and diversified deposit base Customer deposits: +6% YoY Customer deposits by country Constant € bn Mar-23, € bn and % change YoY in constant € SAN 928 +6 • Seasonal drop in SCIB balances 599 +3 879 950 928 137 +9 130 +10 DCB 61 +9 529 549 543 Indivi
Slide 22: We 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, Q4’22 %, European peers, Q4’22 Peer 1 43% Peer 2 45% 9 pp Peer
Slide 23: Index
Index 1 2 3 4 5 6 7 8 Q1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 23
Slide 24: Capital allocation discipline is key to improving profitability and creating value
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% 19%
Slide 25: Santander's 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)** Mar-23 Mar-23 15.89% 15.81% >15% T2 13.26% +263bps 2.19% 13.26% +254bps 2.15% 2.00% T2 1.44% AT1 1.44% T2 2.40%
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%: €44bn. Distance to trigger1 • The first line of defense is the Group’s strong pre-provision profitability providing a high capacity to absorb provisions duri
Slide 27: AT1 issuances distributed by call date
Capital AT1 issuances distributed by call date Banco Santander, S.A. AT1 issuances outstanding at Mar-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 1,105 USD 1,105 7.50% PNC5 08-Feb-24 498.9bps 1,000 921 1,000 EUR
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 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 29: Diversified bond portfolio represents just 6% of total assets
Capital Diversified bond portfolio represents just 6% of total assets Bond portfolio %, Mar-23 €111bn Other South America SCF 5% 7% Liquidity Chile 11% portfolio €30bn Spain 20% • Bond portfolio represents 6% of total assets Brazil €111bn 11% • HTC&S duration: 1.4 years o/w HTC €60bn UK • Mark to ma
Slide 30: Index
Index 1 2 3 4 5 6 7 8 Q1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 30
Slide 31: Credit quality remains solid…
Asset Quality Credit quality remains solid… Credit quality ratios Q1'22 Q4'22 Q1'23 Q1'22 Q4'22 Q1'23 q 3bp QoQ Cost of p 6bps QoQ NPL ratio 3.26% 3.08% 3.05% 0.77% 0.99% 1.05% q 21bps YoY risk3 p 29bps YoY 4.08% 3.93% 3.73% 3.32% 3.21% 3.26% 3.16% 3.08% 3.05% 3.08% 3.05% 1.18% 1.28% 1.07% 1.00% 1.0
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 % Q1 2022 Q4 2022 Q1 2023 % Q1 2022 Q4 2022 Q1 2023 Spain 4.47 3.27 3.19 Spain 0.88 0.61 0.62 UK 1.42 1.21 1.27 UK -0.08 0.12 0.12 Portugal 3.42 2.99 3.05 Portugal 0.03 0.04 0.06 Poland 3.50 3.80 3.66 Polan
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 Mar-23, % of operating areas Mar-23, % of operating areas Digital Consumer Digital Consumer Bank, 7.8% Bank, 10.4% Other South America, 0.6% Argentina, 0.4% Other South America
Slide 34: 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 Mar-22 Mar-23 17% Real estate activities 12% Construction NPL ratio 3.26% 3.05% 6% Information and comm
Slide 35: Index
Index 1 2 3 4 5 6 7 8 Q1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 35
Slide 36: Business model combines 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-22 Banco Santander S.A.1 Santander Consumer Santander Finance2 Holdings USA Banco Santander Santan
Slide 37: Divided into different 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 € bn, Dec-22 Banking Union European Union 3rd Countries Spain1 Poland Brazil Mexico Colombia Resolution Group PE PE PE PE PE PE Point of Entry Portuga
Slide 38: Subsidiaries autonomous in capital and liquidity
Liquidity and Funding Santander follows a model subsidiaries autonomous in capital and liquidity Capital ratios by country Dec-22, %, local figures (phased-in) US 15.9 UK 20.4 13.9 18.3 13.2 15.2 Portugal 20.9 Brazil 19.2 Poland 13.9 16.8 19.3 Mexico 11.9 17.5 19.4 10.8 15.8 Santander 17.5 S.A. 13.9
Slide 39: 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 40: 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 Mar-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 41: Conservative and decentralized liquidity and funding model
Liquidity and Funding Conservative and decentralized liquidity and funding model €17bn1 issued in public markets in Q1’23 Very manageable maturity profile € bn, Mar-23, Average exchange rates € bn, Mar-23 15.9 Covered 7.7 9.9 9.1 7.9 4.6 0.4 Bonds 2.2 6.3 0.3 0.1 0.5 0.6 1.7 18.6 14.5 15.2 Senior 5.
Slide 42: 2023 issuances against funding plan
Liquidity and Funding 2023 issuances against funding plan Execution of 2023 funding plan € bn, Mar-23 Hybrids SNP + Senior Covered Bonds TOTAL Plan Issued Plan Issued Plan Issued Plan Issued Banco Santander, S.A 0.5 - 1.5 - 9-10 6.1 6-7 4.0 15.5 - 18.5 10.1 UK - - 3-4 1.2 5-6 1.7 8-10 2.9 SCF - - 2-
Slide 43: TLAC/MREL for the Resolution Group headed by Banco Santander, S.A.
Liquidity and Funding TLAC/MREL for the Resolution Group headed by Banco Santander, S.A. TLAC Mar-23(e) MREL Mar-23(e) % % and € bn 39.4% 150.6 6.7% 27.4 Senior 23.5% 3.7% 27.5 SNP 1.8% 3.7% 3.3 Sub debt 9.7 T2 Req. 17.4% 8.0 AT1 32.7% 29.0% 4.2% Req. 21.7% 8.6% 18.0% 74.6 CET1 1.8% 13.2% 6.8% % RWA
Slide 44: Well-funded, diversified, prudent and 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, Mar-23 1,448 1,448 1 Mar-23 Dec-22 D
Slide 45: Main metrics show strength of the Group's 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 Mar-23 (Deposits + M/LT 1 2019 2020 2021 2022 Mar-23 LTD Ratio funding) / Loans 3 Loans / net assets 1 77% 76% 75% 72%
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+ 16/1
Slide 47: Santander 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 Q1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 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: We continue to make progress on our ESG agenda
ESG We continue to make progress on our ESG agenda Mar-23 2025 targets Green Finance raised and facilitated €96.2bn €120bn (since 2019) Socially responsible Investments (AuM) €58.1bn €100bn Financial inclusion (# People)1 0.4mn 5mn Note: Not taxonomy. Mar-23 data not audited. Definitions in the Glos
Slide 51: ESG Ratings/Indices (1/2)
ESG ESG Ratings/Indices (1/2) 2022 or latest 2021 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 20-10 <1
Slide 52: ESG Ratings/Indices (2/2)
ESG ESG Ratings/Indices (2/2) 2022 or latest 2021 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 77 th percentile in banks sector 0 1 2 3 4 5 Banco Santander has been part of
Slide 53: Index
Index 1 2 3 4 5 6 7 8 Q1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 53
Slide 54: 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 55: Index
Index 1 2 3 4 5 6 7 8 Q1’23 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 55
Slide 56: 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 Q1’23 financial results Other information Financial report Earnings presentation Series Shareholders report 2022 Digital Annual review (Exc
Slide 57: Europe
Links, Appendix and Glossary EUROPE 'We continue to accelerate our business transformation to achieve higher growth and a more efficient operating model' Q1'23 Highlights Strategic priorities Branches 3,133 ▪ Customer centric and activity: grow our active customer base through better Employees 66,66
Slide 58: North America
Links, Appendix and Glossary NORTH AMERICA 'We provide a full range of financial services with a particular focus on Retail, Private and Corporate Banking' Q1'23 Highlights Strategic priorities Branches 1,844 Employees 45,170 ▪ Continue to target segments with proven competitive advantages and stron
Slide 59: South America
Links, Appendix and Glossary SOUTH AMERICA 'Pan-regional leader player. We remain focused on expanding, sharing best practices from each country and delivering profitable growth' Q1'23 Highlights Strategic priorities Branches 3,653 Employees 79,749 ▪ Strengthen connectivity & share best practices to
Slide 60: 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' Q1'23 Highlights Strategic priorities Branches 363 Employees 16,642 Secure lea
Slide 61: Corporate & Investment Banking
Links, Appendix and Glossary Corporate & Investment Banking 'Santander CIB supports corporate and institutional customers, offering tailored services and value-added wholesale products suited to their complexity and sophistication' Q1'23 Highlights Strategic priorities Total revenue (€ mn) 2,206 ▪ S
Slide 62: Wealth Management & Insurance
Links, Appendix and Glossary Wealth Management & Insurance ‘We want to become the best responsible Wealth and Protection Manager in Europe and the Americas’ Q1'23 Highlights Strategic priorities Total assets under management1 (€ bn) 421 ▪ Continue building our global platform leveraging the connecti
Slide 63: Innovative payments solutions for both Santander and non-Santander clients
Links, Appendix and Glossary 'Innovative payments solutions for both Santander and non-Santander clients' Q1'23 Highlights PagoNxt revenue (€ mn) 244 ; +41% 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 sh
Slide 64: Glossary and Acronyms
Links, Appendix and Glossary Glossary and Acronyms ▪ ADIs: Available distributable items ▪ FY: Full year ▪ Pp: percentage points ▪ ALCO: Assets and liabilities committee ▪ FX: Foreign exchange ▪ QoQ: Quarter-on-quarter ▪ AT1: Additional Tier 1 ▪ G-SIB: Global Systemically Important Banks ▪ RoRWA: Re
Slide 65: 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 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:
Banco Santander — Debt Investor Presentation (April 2023) on 6ix