Banco Santander, S.a. · BME:SAN
Banco Santander — Investor Presentation (October 2017)
36 slides from Banco Santander's investor presentation, Oct 10, 2017
Slide 1: Helping people and businesses prosper
Helping people and businesses prosper José Antonio Álvarez Group Chief Executive Officer
Slide 2: Forward-looking statements
1 Banco Santander, S . A . ("Santander") cautions that this presentation contains statements that constitute “forward - looking statements” within the meaning of the U . S . Private Securities Litigation Reform Act of 1995 . Forward - looking statements may be identified by words such as “expect”, “
Slide 3: Contents
2 Contents Key takeaways 4 Uniquely positioned in the new environment 1 Focus on delivering the best execution 2 Main opportunities to strengthen growth in our franchises 3
Slide 4: Uniquely positioned in the new environment
3 Uniquely positioned in the new environment 1
Slide 5: Our differentiators offer profitable growth opportunities
4 Our 3 differentiators offer profitable growth opportunities… 131MM customers. Top player in 10 markets with ~1Bn people Critical mass Predictability and growth in earnings = less capital or capital at a lower cost Geographic diversification Scalable digital transformation Working as a Group within
Slide 6: Creating shareholder value relative to peers
5 Depth Breadth Large market share high RoTEs Well diversified low earnings volatility = = Sustainable & high growth = Emerging Markets presence Growth portfolio …while creating shareholder value relative to peers
Slide 7: Depth: Large market share leads to high profitability
6 7% 13% 7% - 5% 14% 8% 28% 17% 13% 11% 16% 11% 14% 18% 11% 32% 20% 4% 17% Market Position Loans market share RoTE avg. sector (1H’17) RoTE (1H'17) Depth: Large market share leads to high( - er ) profitability 19% #1 10% #3 13% #3 19% #1 (1) Spain & Portugal includes Popular , UK: Mortgages (excludi
Slide 8: Breadth: Geographic diversification = low earnings volatility
7 Breadth: Our geographic diversification = low earnings volatility (1) Top 5 according to volume of assets in the world’s 50 largest economies according to IMF (2) Peers include: BBVA, BNP Paribas, Citigroup, Deutsche, HSBC, Intesa Sp , JP Morgan, Lloyds, Société Générale , UBS, UniCredit , Bank of
Slide 9: Growth portfolio: Emerging Markets presence
8 0 50 100 150 200 250 Global financial crisis 13 5 13 17 5 3 26 7 6 4 1 52% 48% Developed Markets Emerging Markets Developed Markets Emerging Markets Higher and sustainable earnings growth in Emerging Markets Growth portfolio: Our presence in Emerging Markets = sustainable & high growth Santander 1
Slide 10: Developed Markets: Cyclical macro acceleration
9 Europe recovers steadily and US remains solid Interest rates and credit demand slowly improving Developed Markets: Cyclical macro acceleration Robust growth cycle Better asset quality and strong credit demand Solid global economic growth with gradual interest rate increases: best macro scenario Po
Slide 11: Solid economic growth and gradual interest rate increase
10 +100bps in Europe and US generates ~ € 1.4Bn additional annual revenues 1Y 4Y 8Y 12Y 20Y -1.0 - 1.0 2.0 3.0 EURO SWAPS CURVE US Dollar Swaps GBP UK Sovereign Curve 30Y 1 Positive GDP growth in our markets 2 Higher interest rates accelerate NII growth 2018E 2.8% 1.9% 1.4% 2.3% 1.7% 3.5% 2.4% 2.1%
Slide 12: Credit outlook robust, inflows into Latam strong
11 ~ $170Bn FDI into Latam Brazil is the #4 host economy in the world in terms of FDI inflows 2009 2016 7% 10% 3 Improving credit quality 4 Increasing investment into Latam 47% 20% 6 % 8 % Credit outlook remains robust, inflows into Latam continue to be strong Latam share of total Foreign Direct Inv
Slide 13: Different trajectories, different market opportunities
12 Interest rates 0 - 2% 3 - 9% Inflation ~2% 2 - 5% Nominal GDP growth 2 - 3% 6 - 8% Middle class growth 0% +73% Growing population 0 - 1% +2% Banking penetration ~95% ~40% Return on Equity ~10% >15% Debt/ GDP ~200% <100% Credit growth Single digit Double digit RoRWA ~1.5% >3% Source: Eurostat, U.S
Slide 14: Focus on delivering the best execution
13 Focus on delivering the best execution 2
Slide 15: Four strategic levers to continue improving profitability
14 • More loyal & digital customers • Best customer experience • Focus on profitable segments REVENUES COSTS CAPITAL DIGITALISATION Market share gains • Operational excellence • Reducing the cost of credit risk across the cycle • Efficiency improvement • Improving customer experience • Capital accum
Slide 16: Progressing on our commercial transformation
15 …and more satisfied customers 6 of our 10 markets are top 3 in customers experience …more digital… Digital customers (MM) More loyal … Loyal customers (MM) Progressing on our commercial transformation… REVENUES 2014 2015 2016 1H'17 14.1 16.6 20.9 23.0 2014 2015 2016 1H'17 12.6 13.8 15.2 16.3 (1)
Slide 17: Strengthening segments with high RoRWA
16 Consumer finance SMEs & Corporates Private Banking & AM 20% Group’s profit RoRWA >2% 21% Group’s profit RoRWA ~2% 6% Group’s profit RoRWA >6% Reinforce investment for a greater exposure on our portfolio Consolidating our leading position in auto loans/ personal finance Increasing investment in SM
Slide 18: Profitable share gains and revenue acceleration
17 + 97 payrolls REVENUES The outcome is profitable share gains & revenue acceleration… 19% 8% 10% 17% 19% 9% 11% 14% 3% 10% Note: Growth rates in constant euros (1) Spain and Portugal including Popular, UK: Mortgages (excluding Social Housing), consumer credit and commercial loans (excluding Financ
Slide 19: Outperforming peers in fees and revenue growth
18 16% 15% 10% 10% 8% 6% 6% 6% 6% 5% 3% 3% 3% 0% - 1% - 1% - 4% 12% 6% 5% 5% 5% 5% 3% 2% 2% 2% 2% 1% 1% 0% Leaders in fees growth… …and customer revenues growth - 11% - 9% - 3% REVENUES …allowing us to outperform peers in fees and revenues growth Fees (Change 1H’17 vs. 1H’16) Customer revenues (Chan
Slide 20: Operational excellence: customer experience and cost control
19 COSTS Top customer experience 1H’17 Top 3 in 6 countries 4 th 2 nd 5 th 2 nd 3 rd 10 th 1 st 3 rd 2 nd C/I 1H’17 46% 55% 35% 49% 49% 41% 43% 56% 39% 45% 45% <50% C/I in most of our geographies vs. 1H’16 Operational excellence: Consistent improvement in customer experience and cost control 86% 78%
Slide 21: Digitalisation: our digital transformation examples
20 DIGITALISATION Lower cost per transaction : 10 % of traditional systems Lower processing cost Higher sales Tailor made offerings Digitalisation as a means to… Market share gains Better customer experience (1) Versus December 2016 (2) July ‘17 (YoY) Our digital transformation - examples Santander
Slide 22: On track to meet our capital target by 2018
21 On track to meet our capital target by 2018 (1) Pro - forma, including Jan ’15 capital increase (2) Constant euros, NII + Fees (3) Group excluding Popular CAPITAL Accumulate capital Pay dividends Fund Business growth ~ 1/3 ~ 1/3 ~ 1/3 Top tier profitability allows us to: +9% Cash dividend share (
Slide 23: We are delivering ahead of plan on our commitments
22 (1) % change (constant euros ) ( 2) Total dividends charged to 2017 earnings are subject to the Board and AGM approval ( 3) Grupo ex - Popular ( 4) Underlying 2017 1H'17 2016 Loyal customers (MM) 17 16.3 15.2 13.8 Digital customers (MM) 25 23.0 20.9 16.6 Fee income Increase 11% 8.1% 4.3% Cost of
Slide 24: Improved RoTE target for 2018, other targets reiterated
23 (1) Except for the US - approaching peers We improve our RoTE target for 2018 and reiterate all other targets • Cost - to - income ratio 45 - 47% • 2015 - 18 average cost of credit risk 1.2% • FL CET1 >11% • Increasing EPS, reaching double digit EPS growth by 2018 • 30 - 40% cash dividend pay - o
Slide 25: Main opportunities to strengthen growth in our franchises
24 Main opportunities to strengthen growth in our franchises 3
Slide 26: Main opportunities to strengthen growth in our franchises
25 Main opportunities to strengthen growth in our franchises Popular , positive delivery on a transformational deal We have built a great and improving bank 2 Efficiently relaunching our commercial banking while improving the risk - return - p rofile of SCUSA 3 SCF : Consolidate our leadership while
Slide 27: Spain & Portugal: Popular, positive delivery on a transformational deal
26 Spain & Portugal: Popular, positive delivery on a transformational deal Main priorities ahead • Preserve Popular's leadership in SME • E arn Popular’s customers loyalty Improving core KPIs RoTE 10% 19% ~ 13% ~ 20% 2020E 2016 w/synergies (1) 11% over RWA and in Spain using public perimeter (2) Loc
Slide 28: Brazil: We have built a great and improving bank
27 1H'14 1H'15 1H'16 1H'17 Efficiency 1H'14 1H'15 1H'16 1H'17 49.4 44.2 43.5 45.0 41.7 39.3 1H'14 1H'15 1H'16 1H'17 15.7% 16.0% 19.5% Peer 1 Peer 2 Peer 1 Peer 2 NPL Peer 2 Peer 1 2.9% 3.9% 4.9 % 3.5 % 3.7 % 4.1% Brazil: We have built a great and improving bank 2 Business market share Close the gap
Slide 29: US: Relaunching commercial banking and improving SCUSA risk-return profile
28 US: Efficiently relaunching our commercial banking and improving the risk - return - profile of SCUSA 3 At scale auto finance company • +15,000 dealer network relationships Regional bank presence in attractive US geography • 670 branches in Northeast region Leading private banking in Latam • Top
Slide 30: Argentina and Poland
29 Argentina: Great potential to grow & consolidate market leadership Poland: Most profitable bank in the country with double digit earnings growth 4 5 • Economy normalisation means high potential growth for the country… …and a large re - bancarisation of Argentina • Leader private bank after Citi a
Slide 31: SCF and UK
30 6 SCF: Consolidate our leadership while increasing penetration in personal loans via digital transformation Car finance Consumer Finance • Support partners: Original Equipment Manufactures & dealers • Enhancing agreements through value added • Participate in new market opportunities • Value propo
Slide 32: Mexico and Chile
31 Mexico: High growth potential in a stable and largely untapped market 8 • Consolidating our strengths on: SME, middle market, GCB and mortgages • Increasing market share in retail segments by leveraging our leading position in corporates, and executing initiatives to attract customers and promote
Slide 33: GCB and Wealth Management
32 Focus on trade corridors • The best Latam franchise ( # 1 in DCM, PF, ECM, ECA) • Outperforming our competitors (a corporate bank vs institutional banks) Focus on.. • Increasing international / connectivity revenues • Accelerating growth in collaboration revenue between R&CB, PB, AM • Evolving to
Slide 34: Key takeaways
33 Key takeaways 4
Slide 35: Key takeaways
34 • Our 3 differentiators offer profitable growth and earnings stability : C ritical mass in Developed and Emerging markets, geographic diversification and scalable digital transformation • The macro outlook "ticks the right boxes" for Santander : 1. Developed Markets: Cyclical macro acceleration a
Slide 36: Thank you
35 Thank you Our purpose is to help people and businesses prosper. Our culture is based on the belief that everything we do should be 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 undersigne
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