banco santander earning prsentation
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ACTIVITY AND RESULTS
First Quarter 2009
29 April 2009
2
Banco Santander, S.A. ("Santander") cautions that this presentation contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995. These forward-looking statements are found in various places throughout this presentation and include, without limitation, statements concerning our future business development and economic performance. While these forward-looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: (1) general market, macro-economic, governmental and regulatory trends; (2) movements in local and international securities markets, currency exchange rates, and interest rates; (3) competitive pressures; (4) technological developments; and (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties. The risk factors and other key factors that we have indicated in our past and future filings and reports, including those with the Securities and Exchange Commission of the United States of America (the “SEC”), could adversely affect our business and financial performance. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements.
Neither this presentation nor any of the information contained therein constitutes an offer to sell or the solicitation of an offer to buy any securities or any advice or recommendation with respect to such securities.
The information contained in this presentation is subject to, and must be read in conjunction with, all other publicly available information, including, where relevant any fuller disclosure document published by Santander. Any person at any time acquiring securities must do so only on the basis of such person's own judgment as to the merits or the suitability of the securities for its purpose and only on such information as is contained in such public information having taken all such professional or other advice as it considers necessary or appropriate in the circumstances and not in reliance on the information contained in the presentation.
Nothing contained in this presentation is an offer of securities for sale into the United States or in any other jurisdiction. No offering of Securities shall be made in the United States except pursuant to registration under the U.S. Securities Act of 1933, as amended, or an exemption therefrom.
Nothing contained in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotion in the U.K. Financial Services and Markets Act 2000. In making this presentation available, Santander makes no recommendation to buy, sell or otherwise deal in shares in Santander or in any other securities or investments whatsoever and you should neither rely nor act upon, directly or indirectly, any of the information contained in this presentation in respect of any such investment activity.
Note: Statements as to historical performance, historical share price or financial accretion are not intended to mean that future performance, historical share price or future earnings (including earnings per share) for any period will necessarily match or exceed those of any prior year. Nothing in this presentation should be construed as a profit forecast.
Important information
3
Group highlights Q1’09
Business areas performance Q1’09
Conclusions
Appendix
Agenda
4Soundness of Santander’s model
Consistent results
Amid a global recession scenario we maintain our capacity to generate profits and high solvency
Backed by the operating areas’performance …
… the income statement shows strong underlying business …
Balance sheet strength
Low risk retail balance sheet– Better portfolio quality than that of
competitors in the main markets …
– … and large provisions
Capital base strength
– High quality core capital: 7.3% ...
– … with solvency “best in class” …
– … generating capital and paying dividends
… and reflects the management priorities:
– Revenues increaseMix management of volume/return
– Flat costsDiscipline across all units
– Allowances according to forecastsActive management of risks/recoveries
1
2
3
4
5
5
2,4912,358 2,383 2,291
2,568
Q1'08 Q2 Q3 Q4 Q1'09
Grupo Santander maintained consistent results backed by the operating areas …
2,0961,941
2,205
2,524
2,206
Q1'08 Q2 Q3 Q4 Q1'09
EUR million
Group’s quarterly attributable profit
EUR million
Operating areas quarterly attributable profit
1
-5%
+3%
6
2,206 2,096
Q1'08 Q1'09
… which, before exchange rates, registered a 9% profit increase …
EUR million
Group’s attributable profit
-5%
1
EUR million
Group’s attributable profit
2,2062,096
+226
+9%-148
-188
Q1’08 Operating areas w/o
exchg. rate
Operating areas exchg. rate impact
Corporate activities Q1’09
7
439513513563 568
Q1'08 Q2 Q3 Q4 Q1'09
235 250 254252372
Q1'08 Q2 Q3 Q4 Q1'09 *
United Kingdom+58%
Brazil
+1%
361178104197 253
Q1'08 Q2 Q3 Q4 Q1'09
GBM and other Continental Europe (€ Mill.)
Attributable profit*875911
1,0291,013 1,036
Q1'08 Q2 Q3 Q4 Q1'09 *
Retail UnitsContinental Europe
+2%
17%
16%
EUR Mill. and %
OtherLatam
… backed by their diversification and strong resilience to the cycle
€ Mill.
€ Mill.
£ Mill.
Constant US$ mill.
+28%
+18%
+47%
+29%
1
10%
(*) Perimeter: +60 mill. £
28%
SAN Network +Banesto
12%SCF+Portugal
(*) Perimeter SCF: -1 mill. €
UK
17%
GlobalEurope
571624570572 590
Q1'08 Q2 Q3 Q4 Q1'09
Other Latam
+3%Constant US$ mill.
+3%
Commercial Units Europe
Brazil
(*) Operating areas attributable profit: EUR 2,568 mill. (including -20 million from Sovereign)
8
Active management of risks: slowdown in provisions
Strict expenses control with further efficiency improvement
Revenues increase in a low growth environment (assets spreads)
Net operating income offsets the larger provisions
Change Group results Q1’09 Q1’08 % w/o f.x. / EUR Mill. % perimeter
Net interest income 6,234 5,101 +22.2 +18.8Fees 2,210 2,334 -5.3 -7.7
Trading gains, other* 1,010 1,003 +0.7 +10.4
Gross income 9,454 8,438 +12.0 +10.5
Operating expenses -4,080 -3,780 +7.9 +1.8
Net operating income 5,374 4,658 +15.4 +17.5
Loan-loss provisions -2,234 -1,290 +73.2 +67.8
Attributable profit 2,096 2,206 -5.0 -0.5
A
B
C
The income statement highlights the resilience of the underlying business and the management focus for the year
(*) Including dividends, equity method and other operating results. Trading gains change o/Q1’08: +12.7%
D
2
EPS (EUR) 0.2472 0.3086 -19.9 n.s.
9
4.7 4.8 5.0
5.05.0
6.56.46.0
QT'08 Q2 Q3 Q4 Q1'09
LatamUS$ billion
5.1 5.4 5.6 5.4 5.6
2.4 2.4 2.5 2.3 2.1
7.5 7.8 8.17.7
8.5
Q1'08 Q2 Q3 Q4 Q1'09
EUR billion
Commissions and insurance activity
Net interest income
Net interest income + commissions + insurance activity
3.2 3.3 3.4 3.53.9
QT'08 Q2 Q3 Q4 Q1'09
EuropeEUR billion
621 625 674 731
1,038
QT'08 Q2 Q3 Q4 Q1'09
United Kingdom£ Million
The most commercial revenues remained solid in the quarter, backed by net interest income …
A&L
Constant US$
3A
GE3,7
790
Perimeter
10
+15.6%
+10.8%
+17.2%
-6.9%
-7.1%
+87.1%
+43.5%
+47+41
Dec' 08 M ar' 09
+26+25
Dec' 08 M ar' 09
… and by spreads management in an environment of falling interest rates and lower volume growth
Customer spreads. Group’s totalIn percentage
Volumes. Group’s total Year-on-year change (%) excluding exchange rate
Loans Deposits w/o Repos
SAN Network + Banesto
Portugal
Brazil (real)
United Kingdom (£)
Chile (pesos)
Mexico (pesos)
Net interest income growthChange Q1’09 / Q1’08 (%)
SCF
Excl. perimeter : (+39.4%)
+10 +7+14
+15
3A
Contribution from new consolidated entities
Excl. perimeter: (+19.3%)
4.654.764.634.664.57
3.182.57 2.66 2.60 2.78
1.471.99 2.00 1.982.03
Q1'08 Q2 Q3 Q4 Q1'09
Loans
Deposits
Total
11
3,590
490
4,0803,780
Q1'08 Q1'09
Strict cost control in all Group units…
Change o/ Q1’08Mill. (EUR) %
Santander Network +1 +0Banesto +4 +2SCF* +2 +1Portugal -1 -1
United Kingdom (% in sterling) +107 +49of which:
Abbey +8 +2
Brazil (% in real) -184 -3Mexico (% in pesos) -27 +2Chile (% in pesos) -13 +4
(*) Excl. perimeter. With incorporations: +36%
EUR million
+7.9%
Group operating expenses*
Perimeter
Expenses performance by large operating units
(*) Including Personnel + administrative expenses + depreciation and amortisation
3B
Excluding exchange rate and perimeter:
+1.8%
12
66.164.1
61.459.7
56.354.7 54.1
45.4 44.643.2
49.7
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Q1'09
Group efficiency ratio*
(*) Efficiency ratio with amortisations.
… continuing the efficiency track-record improvement of the Group and the areas
36.0%
74.5%
38.3%
42.1%
Sovereign
LatinAmerica
UnitedKingdom
ContinentalEurope
Efficiency ratio* by principal segments
Change o/ Q1’08
-2.3 p.p.
-5.1 p.p.
-4.3 p.p.
In percentage
Abbey’s entry
B. Real’s entry
3B
SOV, A&L and GE’s entry
Perimeter
41.5
13
-181 -108 -175
-746-420
Q108 Q2 Q3 Q4 Q109
2,4641,366 1,6532,036
2,720 2,731
Q108 Q2 Q3 Q4 Q1091,2901,609
1,8061,957
1,992
2,234
Q108 Q2 Q3 Q4 Q109
EUR million
+73%
Group provisionsSpecific provisions
Generic provisions+2%
EUR million
EUR million
-9%
Provisions were much higher than in Q108, but lower than in Q408 because of specific ones …
3C
Perimeter impact
-395
Note: Positive data: provision; negative data: release.
*
* Including release of EUR 380 mill. because of substandard
14
Europe 1,122 429 +693 -345 62 -407
UK 275 80 +195 -65 -6 -59
LatAm 1,240 865 +375 -1 -245 +244
Other 94 -8 +102 -9 8 -17
Total 2,731 1,366 +1,365 -420 -181 -239
Loan-loss provisions* by geographic areas
Specific**
Q1’09 Q1’08 Change
Generic
Q1’09 Q1’08 ChangeEUR million
(*) Country-risk not included. Positive data: provision; negative data: release. (**) Specific loan-loss provisions are reduced by written-off assets recoveries
SAN network + Banesto: +368 SCF: +242
Brazil: +196Mexico: +87Chile: +47
SAN network + Banesto: -361
… while maintaining the release of generic provisions as forecasted ...
Year-on-year change
3C
A&L: +66 A&L: -16
Brazil: +259
Sovereign: -15Sovereign: +108
15
Large on-balance sheet allowances accumulated in recent years, strengthened by 6.3 bll. of generic ones to face the coming years
4,725 5,667 6,027 6,181 6,261
3,177
6,6828,905
7,9028,627 9,302
12,863
15,166
2,9603,275
Dec'05 Dec'06 Dec 07 Dec 08 Mar 09
Specific
Generic
EUR million
Totalallowances
Loan-loss allowances
... and maintaining high coverage funds
*
3C
Spain: 3,431LatAm: 1,312Other countries: 1,518
16The recurrent business maintained the high capacity to absorb the larger provisions, placing ...
Grupo Santander performance
0.52 0.651.11 1.36
1.78
2.051.92
2.30
2.70
3.16 3.28
2.05
2006 2007 2008 1T'09*
Provisions / loans
Net op. income / loans
%
Negative data
… our operating results* among the best of our peer group
* Annualised quarterly data
3C
Operating results
(Net operating income – provisions) / net loans. 2008 data (%)
2.3
2.1
2.0
1.9
1.4
1.3
1.1
0.8
0.7
0.5
0.5
0.4
0.3
0.3
0.0
12,8C1
C2
SAN
C3
C4
C5
C6
C7
C8
C9
C10
C11
C12
C13
C14
C15
C16
C17
C18
C19
Note: “Peers Group” are 20 large banks that because of their size, charateristics and/or degree of competition are the reference group to surpass: Banco Itaú, Bank of America, Barclays, BBVA, BNP Paribas, Citigroup, Credit Agricole, HBOS, HSBC, Intesa Sanpaolo, JP Morgan, Lloyds, Nordea, Royal Bank of Canada, RBS, Societe Generale, UBS, Unicredito, Wells Fargo.
17
In a sharp slowdown scenario, Santander maintains good levels ofcredit quality in all areas …
Non-performing loans
Balance sheet strength: credit quality
Coverage ratio
Mar.’09
Mar.’09
4
1.24 1.43 1.71 2.042.49
Mar-08 Jun-08 Sep-08 Dec-08 Mar-09
NPLs and coverage ratios. Grupo SAN
Moro
134 120 105 91 80
Mar-08 Jun-08 Sep-08 Dec-08 Mar-09
Percentage
56%
107%81%
Spain UK Latam
1.25%
3.27%2.40%
Spain UK Latam
... furthermore, mortgage guarantees placed our coverage ratio at 115%
18Balance sheet strength: credit quality4
0.69 0.72 0.72 0.770.95
1.10 1.21 1.33 1.44
1.88
Dec'07 Mar'08 Jun'08 Sep'08 Dec'08
Sector
3.2%3.5%
3.7%4.0%
3.8% 3.9% 4.0%4.4%
3.5%
3.9%
Dec'07 Mar'08 Jun'08 Sep'08 Dec'08
Sector
Sector’s Source: Council Mortgage Lenders Sector’s Source: Central Banks
NPLs in % NPLs in %
(*) Average European banks included in our peer group(**) Data in local criteria, on a like-for-like basis with the sector’s sources
United Kingdom** Latin America**
0.64 0.88 1.081.50
1.952.400.83 1.11
3.324.18
1.61
2.56
Dec'07 Mar'08 Jun'08 Sep'08 Dec'08 Mar'09
Grupo SAN
Banks + Savings BanksNPLs in %
Sector’s Source: Banco de España
SpainGroup Ratios (Dec.’08)
3.52%
2.04%
SAN European peers*
91%
59%
SAN European peers*
NPLs ratio Coverage ratio
Santander compares very well with peers at Group level and in the main markets where we operate
Grupo SAN
Grupo SAN
(Feb.)
19
6.1% 5.9%6.3%
7.5% 7.3%
2005 2006 2007 Dec'08 Mar'09
Core capital
Previous target 6%
Current target 7%
Note: 2008 and 2009 under BIS II rules, previous years under BIS I
7.3%
Strong capital base5
Solvency “best in class” thanks to solid core capital ...
In Q1’09:Capital generation: +20 bpAcquisitions impact: -40 bp
20
6.93.83.8
3.63.23.2
2.82.8
2.62.52.42.42.3
2.01.61.61.6
1.41.3
1.0
Banco Itau
Grupo SAN
JP Morgan
Intesa Sanpaolo
Nordea
BBVA
Bank of America
Unicredito
HSBC
Societe Generale
Credit Agricole
Royal Bank of Canada
Wells Fargo
BNP Paribas
RBS
Lloyds TSB
Citigroup
HBOS
Barclays
UBS
Tangible Common Equity / Tangible Assets(Source: Bloomberg, Dec.08)
Strong capital base5
... consistent with our outstanding position in other
capital ratios
21
Book value per share *
Santander maintained the capacity to generate recurrent capital and pay dividends in the most complicated part of the cycle
Dividend per share
Strong capital base5
0.3883
0.4854
0.60680.6325
2005 2006 2007 2008
EUR per share
NAV pershare**
Note. Share and valores Santander adjusted to the capital increase
Book value per share consistent increase
(*) Calculated as (capital + reserves – own shares + profit - dividends) / (shares + valores Santander)(**) Calculated as (capital + reserves – own shares + profit - dividends – value adjustments – goodwill - intangibles) /
(shares + valores Santander)
5.355.98
7.237.58 7.83
Dec'05 Dec'06 Dec'07 Dec'08 Mar'09
+46%
+11%+5%
+8%
+12%+30%
% variation Mar’09 vs. Dec’08 quarterly annualised
22
Group highlights Q1’09
Business areas performance Q1’09
Conclusions
Appendix
Agenda
23Operating areas results
The management focus shows the strength of the operating areasin a slowdown environment
+3.1%
+0.9%
+19.3%
+7.1%
+14.2%
Attributableprofit
Net oper.inc. net of
LLPs
Netoperatingincome
Expenses
Grossincome
Var. Q1’09 / Q1’08 (%)
Operating areas Net operating income
5,106 5,116 5,243 5,322
8,709 8,733 9,009 8,996
6,090
9,950
Q1'08 Q2 Q3 Q4 Q1'09
Attributable profit
Net operating income
Expenses
Revenues
2,491 2,358 2,383 2,2912,568
Q1'08 Q2 Q3 Q4 Q1'09
Excl. f.x. and perimeter
+13%
+1%
+21%
+5%
+7%
Perimeter impact
2,522
24
1,210 1,133 1,0891,236 1,289
Q1'08 Q2 Q3 Q4 Q1'09
Continental Europe Q1’09
+8.9%
+15.9%
+6.5%
+8.8%
+20.2%
Attributableprofit
Net oper.inc. net of
LLPs
Netoperatingincome
Expenses
Grossincome
Attributable profit
Attrib. profit: EUR 1,289 mill.Var. Q1’09 / Q1’08 (%)
EUR million
Recurrent revenues in retail and wholesale businesses and cost control are the bases of our results
2,166 2,157 2,2522,528
1,9571,985
2,201
1,9071,833
2,605
Q1'08 Q2 Q3 Q4 Q1'09
Net operating income
TotalGlobal
businesses
Retail banking
EUR million Excludingperimeter
+9%
+1%
+14%
+7%
+6.5%
1,290
Perimeter impact:
25
190
253
144
156
546
(*) Attributable profit excluding extraordinary provisions
Continental Europe main units Q1’09 EUR Mill. and % o/ Q1’08
635
1,385
1,035
328
687Other
Portugal
SantanderConsumerFinance
Banesto
SANBranchNetwork
378
426
197
745
859+3.4%
+4.4%
+42.0%
+7.0%
+30.0%
+5.4%
+6.4%
+44.3%
+12.8%
+39.4%
+7.2%
-0.4%
-10.3%
+3.3%
+28.4%
+13% +17% +2%
Net operating income:2,605 mill.; +20.2%
Gross income:4,071 mill.; +15.9%
Attributable profit1,289 mill.; +6.5%
The three large retail units and GBM increased their recurrent profit. Consumer impacted by environment and perimeter
[+6%]*
26
-1% +7%+19%
+44%
-31%
Mortgages Other loans Deposits Mutual +Pen. funds
InsuranceSavings-Inv
Santander Branch Network Q1’09
Savings: -2%Loans: +3%Var. Q1’09 o/ Q1’08
Management drivers
+3.4
+0.3
Revenues Expenses
Gross incomeBase 100: Q1’08
ResultsEfficiency ratio
Net operating income / Provisions
10099
103 103
100
Q1'08 Q2 Q3 Q4 Q1'09
EUR million
% var. Q1’09/Q1’08
39.2%
38.0%
Q1'08 Q1'09
Net op. income net of LLPs
+8.1%
+5.4%
Provisions
2.83%3.34%
Q1'08 Q1'09
+19%
+3%
Loans Deposits
Var. Q1’09 o/ Q1’08
Volumes Net interest inc. / ATAs
698 648 574736
814 815 804 867
754
859
Q1'08 Q2 Q3 Q4 Q1'09
Var.Q109/Q108
Spreads management vs. lower growth
Focus on costs and risks /recoveries
Net op. income
27
+0% +4%+16%
-24%
+40%
Mortgages Other loans Depositsexcl. Repos
Mutual +Pen. funds
InsuranceSavings-Inv
Banesto Q1’09
Savings: +7%Loans: +2%
+2%
+16%
Loans Depositsexcl. Repos
Volume
+4.4
+1.6
Revenues Expenses
Gross incomeBase 100: Q1’08
Efficiency ratio
Net operating income / Provisions
% var. Q1’09/Q1’08
41.7%
40.5%
Q1'08 Q1'09
+1.3%
+6.4%
103 103101
104
100
Q1'08 Q2 Q3 Q4 Q1'09
293 299 292 259
355 369 366 353
297
378
Q1'08 Q2 Q3 Q4 Q1'09
Var. Q109/Q108
Spreads management vs. lower growth
Focus on costs and risks /recoveries
2.56%2.92%
Q1'08 Q1'09
Net interest inc. / ATAs*
*Retail banking
Management drivers Results
Var. Q1’09 o/ Q1’08
Var. Q1’09 o/ Q1’08
EUR million
Net op. income net of LLPs
Provisions
Net op. income
28
3.15%4.18%
4.64%
86%92% 89%
Mar'08 Dec'08 Mar'09
+50%+23%
Loans* Dep. excl.Repos*
Santander Consumer Finance Q1’09
Var. Q1’09 o/ Q1’08
Volumes
(*) Excl. perimeter: +13%; +33%
Net operating income / Provisions
29.2%
28.0%
Q1'08 Q1'09
-1.4%**
+44.3%*
248 307 253 196
516594 617 668
244
745
Q1'08 Q2 Q3 Q4 Q1'09
111 118125
143
100
Q1'08 Q2 Q3 Q4 Q1'09
+42.0 +36.3
Revenues Expenses
Gross incomeBase 100: Q1’08
Efficiency ratio% var. Q1’09/Q1’08
(*) Excl. perimeter: +20%; +1%
* *
(*) Excl. perimeter: +27% (**) Excl. perimeter: -8%
Var.Q109/Q108
Spreads management and volume growth
Expenses under control– Spain expenses: -6.6% o/Q4’08 (-5.5% o/Q1’08)– Obtaining synergies from GE and RBS integrations– Adjusting presence in non-core countries
Focus on provisions / recoveries
Management drivers Results
EUR million
Net op. income net of LLPs
Provisions
Net op. income
NPLs Coverage CM
– Maintaining high coverage ratios
– NPLs as forecasted
Loan Spreads
3.78 3.76 3.85 4.034.32
Q108 Q2 Q3 Q4 Q1'09
29Portugal Q1’09
+2%+12% +7%
+22%+12%
-39%Individuals SMEs /
BusinessesCompanies Dep. excl.
ReposMutual +
Pen. fundsIns.
Savings-Inv.
Savings: +3%Loans: +6%
+22%
+6%
Loans Dep. excl.Repos
Volumes
+7.0
-0.7Revenues Expenses
Gross income
Base 100: Q1’08
Efficiency ratio
% var. Q1’09/Q1’08
43.0%
39.9%
Q1'08 Q1'09
+5.1%
+12.8%
100 99 97
107100
Q1'08 Q2 Q3 Q4 Q1'09
176 166 169 154
175 173 168 162
185
197
Q1'08 Q2 Q3 Q4 Q1'09
Assets spreads, focus on deposits and SMEs growth
Expenses: reduction in absolute termsMaintains low provisions level
Net operating income / Provisions
Var.Q109/Q108
1.79% 1.85%
Q1'08 Q1'09
Net interest inc. / ATAs
Management drivers Results
Var. Q1’09 o/ Q1’08
Var. Q1’09 o/ Q1’08
EUR million
Net op. income net of LLPs
Provisions
Net op. income
30
354
374 392 422501
373
571
322317
686
Q1'08 Q2 Q3 Q4 Q1'09
235 250 252 254 312
372
Q1'08 Q2 Q3 Q4 Q1'09
United Kingdom Q1’09
49.0%
67.1%
57.8%
58.4%
83.3%
Attributableprofit
Net oper.inc. net of
LLPs
Netoperatingincome
Expenses
Grossincome
Attributable profit
Attributable profit: £ 372 mill. (EUR 409 mill.)
Var. Q1’09 / Q1’08 in sterling (%)Sterling million
Sterling million
Excellent revenues and profit performance backed by Abbey and GBM. Moreover, positive contribution from the new units
Net operating income
TotalGlobal
businessesUK Retail
Excl. perimeter
Perimeter impact
+27%
+2%
+49%
+32%
+32%
31United Kingdom Q1’09
314 334 334 345
374 392 422501
497
686
Q1'08 Q2 Q3 Q4 Q1'09
Net operating income
£ Mill.
+58.4%
+83.3%
Net operating income net of LLPs
Provisions
Sustainable results due to management of assets spreads, costs under control ...
Sustainable results Assets spreads improvement …
+67.1
+49.0
Revenues Expenses
“Jaws”% var. Q1’09/Q1’08
47.2%
42.1%
Q1'08 Q1'09
Percentage
0.66 0.70 0.770.88
1.13
Q108 Q2 Q3 Q4 Q1'09*
… significant efficiency gains …
Efficiency
(*) Including A&L
32
9.6 9.9
9.1 10.3
20.318.7
Q1'08 Q1'09
Note: Data in local criteria. A&L proforma data for Q1’08 (*) Including retail and corporate deposits and investments
United Kingdom Q1’09… development of business strategy underlying
the bank’s priorities ...
113.3 122.9
41.8 37.1
160.0155.1
Q1'08 Q1'09
Corporate loans stock
+8%
-11%
69.7 80.4
26.829.9
130.1
Q1'08 Q1'09
+15%
+35%
+12%Abbey
A&L
+8%
Mortgage stock Deposits stock*
19.8
Abbey
A&L
B&B
+3%
+13%
96.5
2.6 2.2
3.9 3.2
5.46.5
Q1'08 Q1'09
-15%
-18%
Other
Abbey
A&L -18%
UPLs
Balances in Bill. £
15.013.9
Q4'08 Q1'09
Securities portfolio
-8%
Balances in Bill. £
Balances in Bill. £ Balances in Bill. £Balances in Bill. £
+3%
33
0.07
0.20
SAN Market
United Kingdom Q1’09
… we have better credit quality than the market* ...
… and the integration potential of new the businesses
Costs synergies on track:– Eliminating overlaps in central functions
B&B IT integration: ahead of schedule
A&L IT integration: on schedule
Focus on core business
(*) Data in local criteria at December 2008
0
4
SAN Market
Self Cert. (%) Buy to let (%) PIPs /portfolio (%)
1
SAN Market
25 18
SAN UKmortgages
Mortgagemarket
70100
UPLs SAN UK
UPLsmarket
>
Coverage (%)1.88
0.95
SAN UKmortgages
Marketmortgages
NPLs (%)
12-13
34
1,135 1,083 1,136 1,010
1,451 1,423 1,468
9401,158
Q1'08 Q2 Q3 Q4 Q1'09
Total Latin AmericaPerformance in dollars very impacted by exchange rates. Excluding it, net
operating income increased 22% and absorbed the larger provisions
-20.2%
-24.0%
-5.2%
-20.8%
-11.8%
Attributableprofit
Net oper. inc.net of LLPs
Net operatingincome
Expenses
Gross income
Attributable profit: US$ 1,158 mill. (EUR 890 mill.)
US$ million
3,054 3,132 2,9352,250 2,666
3,660 3,846 3,695
2,790
3,469
Q1'08 Q2 Q3 Q4 Q1'09
Total Global
businesses
LatAmRetail
Net operating incomeUS$ million
Note: 2008 proforma with Banco Real
+13%
+1%
+22%
-3%
+0.3%
Attributable profit
Constant US$ million
Var. Q1’09 / Q1’08 in US$ (%) Excl. exchg. rate
35
1,179
1,616 1,568 1,531 1,523
1,1861,601
1,2341,303
2,048
Q1'08 Q2 Q3 Q4 Q1'09
439513513
563 568
Q1'08 Q2 Q3 Q4 Q1'09
+0.8%
+0.1%
+26.8%
-2.5%
+13.7%
Attributableprofit
Net oper. inc.net of LLPs
Net operatingincome
Expenses
Gross income
Attributable profit
Attributable profit: US$ 568 mill.(EUR 436 mill.) Constant US$ million
Constant US$ million
Net operating income
TotalGlobal
businesses
Retail
Brazil Q1’09Sound commercial revenues and costs cuts offset the larger provisions
because of environment and integration
Var. Q1’09 / Q1’08 in constant US$ (%)
Note.- 2008 proforma with Banco Real
36
44.5%
38.2%
Q1'08 Q1'09
Results*Management drivers
+21% +25%
Loans Dep. excl.Repos
Var. Q1’09 o/ Q1’08 in local currency
Volumes
+13.7
-2.5Revenues Expenses
Gross incomeBase 100: Q1’08
Efficiency ratio
Net operating income / Provisions
99 99 100
114
100
Q1'08 Q2 Q3 Q4 Q1'09
% var. Q1’09/Q1’08
+0.1%
+26.8%
Brazil Q1’09
1,128 994 896 705
1,616 1,568 1,531 1,523
1,129
2,048
Q1'08 Q2 Q3 Q4 Q1'09
Assets spreads management in a lower growth environment
Provisions: increase due to environment worsening and alignment because of integration
We reaffirm our results targets set during
Investors’ Day
Loan spreads
15.51 15.2015.59 15.94
15.00
Q108 Q2 Q3 Q4 Q1'09
Retail banking (%)
Var.Q109/Q108
Expenses: significant potential for reduction
* Data in constant US$
Net op. income net of LLPs
Provisions
Net op. income
Note.- 2008 proforma with Banco Real
37Brazil Q1’09: Integration update
Reducción de activos no estratégicos
Unified Central ServicesBusiness integration completed in:
– Wholesale– Financing units
Progress on the operational integration of both networks (SAN and Real)
– Basic functions at branches / ATMs for all customers
– Transfer of best commercial practices
Integrations programmed for the remainder of the year on schedule
Operating expenses
3,235
2,9283,098
Average 2008 Q4'08 Q1'09
Real million -9%
Significant progress in line with the announced plans
Quarterly synergies*:>R$ 300 mill.
(2009 target: 800 mill.)
(*) Calculated with average inflation of 4.5% for 2009. Investors’ Day target: R$ 800 mill. in 2009Note: 2008 proforma data with Banco Real
Operational and technological integration Synergies
Legal merger expected in Q2’09
38
389
505593
453 429
366 390510
429
524
Q1'08 Q2 Q3 Q4 Q1'09
73
190203211
145
Q1'08 Q2 Q3 Q4 Q1'09
-31.6%
-30.8%
+3.7%
+3.2%
+2.1%
Attributableprofit
Net oper. inc.net of LLPs
Net operatingincome
Expenses
Grossincome
Attributable profit
Attributable profit: US$ 145 mill.(EUR 111 mill.)
Var. Q1’09 / Q1’08 in constant US$ (%)
Constant US$ million
Constant US$ million
Net operating income
Mexico Q1’09
TotalGlobal
businesses
Retail
Strict management of costs and risks in order to recover the profit levels existing before the recession
39Mexico Q1’09Results*Management drivers
+5%
-6%
Loans Dep. excl.Repos
Var. Q1’09 o/ Q1’08 in local currency
Volumes
33.6%
33.3%
Q1'08 Q1'09
+3.2+2.1
Revenues Expenses
Gross incomeBase 100: Q1’08
Efficiency ratio
Net operating income / Provisions
111
95 97103100
Q1'08 Q2 Q3 Q4 Q1'09
% var. Q1’09/Q1’08
-30.8%
+3.7%
347 358176 108
505593
453 429
241
524
Q1'08 Q2 Q3 Q4 Q1'09
Loans: slowdown due to environment and lower in cards (-16%)
Toward “zero costs” (+10% in 2008; +2% in Q109)
Lower provisions: measures in cards place NPLs better than the market Var.Q109/Q108
Loan spreads
11.19 11.4410.69 10.8310.99
Q108 Q2 Q3 Q4 Q1'09
Retail banking (%)
113
152 147
129120
103
126
131
100
Q108 Q2 Q3 Q4 Q1'09
Cards: entries into arrears (Q1’08=100)
In arrears 1 to 30 days
In arrears 31 to 60 days
* Data in constant US$
Net op. income net of LLPs
Provisions
Net op. income
40
308
280330
410 412
352 291267257
395
Q1'08 Q2 Q3 Q4 Q1'09
176202
152152 152
Q1'08 Q2 Q3 Q4 Q1'09
+0.1%
+10.7%
+41.1%
+26.8%
+4.2%
Attributableprofit
Net oper. inc.net of LLPs
Net operatingincome
Expenses
Grossincome
Attributable profit
Attributable profit: US$ 152 mill.(EUR 117 mill.)
Net operating income
Var. Q1’09 / Q1’08 in constant US$ (%)
Constant US$ million
Constant US$ million
TotalGlobal
businesses
Retail
Chile Q1’09Good quarter in customer revenues and strong slowdown in costs.
Negative impact from inflation in UF porfolio
41Chile Q1’09
Results*Management drivers
+12%+8%
+20%
+8% +9%
Individuals SMEs Companies+GBM
Depositsexcl. Repos
Mutual funds
% var. Q1’09 o/ Q1’08 in local currency
Savings: +9%Loans: +11%
+11%+8%
Loans Dep. excl.Repos
Var. Q1’09 o/ Q1’08 in local currency
Volumes38.9%
31.9%
Q1'08 Q1'09
+26.8
+4.2
Revenues Expenses
Gross incomeBase 100: Q1’08
Efficiency ratio
Net operating income / Provisions
115132 132 127
100
Q1'08 Q2 Q3 Q4 Q1'09
% var. Q1’09/Q1’08
+10.7%
+41.1%
198 215297 278
280330
410 412
220
395
Q1'08 Q2 Q3 Q4 Q1'09
Var. Q109/Q108
Sound customer revenues and impact from negative inflation in UF
Loan spreads
5.33 5.45 5.35
5.90
5.24
Q108 Q2 Q3 Q4 Q1'09
Retail banking (%)
Expenses slowdown (+8.5% in 2008; +4% in Q109)
Active management of risks: recoveries as new business unit
Net op. income net of LLPs
Provisions
Net op. income
* Data in constant US$
42
Q1’09
Argentina 75 67 +12
Venezuela 104 79 +32
Puerto Rico 12 -9 -/+
Colombia 12 10 +18
Other countries Latam 38 -4 -/+
Countries subtotal 241 143 +69
Santander Private Banking 52 65 -20
Total other Latam 293 208 +41
Attributable profit
Other Latin American units Q1’09
Change (%)Q1’08Constant US$ million
Good performance in general terms of other countries in the region
43Corporate Activities
Attributable profit Main impacts Q1’09 / Q1’08 variation:
Equity method -112(Cepsa and Sovereign)
Gains on financial transactions* -34
Other items and taxes -42
Total impact on profit: -188
Lower results from equity method and lower revenues from gains on financial transactions (hedges) and larger expenses from renting
EUR million
-285
-473
Q1'08 Q1'09
-188
(*) Including the charge of EUR 190 mill. for Metrovacesa
44
SECONDARY SEGMENTS
45
1,981 1,844 1,843 1,643 1,828
Q1'08 Q2 Q3 Q4 Q1'09
Retail BankingStrong resilience of retail banking to the environment, maintaining
results sustainability
Net operating income
4,293 4,318 4,358 4,2014,942
Q1'08 Q2 Q3 Q4 Q1'09
Attributable profit
EUR million
EUR million
-7.7%
-9.6%
15.1%
9.4%
12.7%
Attributableprofit
Net oper.inc. net of
LLPs
Netoperatingincome
Expenses
Grossincome
Retail BankingVar. Q1’09 / Q1’08 (%) in EUR
Excl. f.x. and perimeter
+9%
+1%
+15%
-7%
-6%
1.782
Perimeter impact
+15%
-8%
+18%
+11%
46
394 379435
533634
Q1'08 Q2 Q3 Q4 Q1'09
805 799980 1,097
149 13461
169
1,148
116954 933
1,0411,266 1,264
Q1'08 Q2 Q3 Q4 Q1'09
Global Wholesale Banking (GBM)Very good quarter thanks to customer revenues and markets,
maintaining the business risk profile
EUR million
Attributable profitTotal
Trading
Customers
EUR million
Gross income
Operating expensesEUR million
325 328 327 315 290
Q1'08 Q2 Q3 Q4 Q1'09
Customers Q1’09/Q1’08: +43%
Loans: +2% o/Mar’08Average VaR Q1’09:
US$ 34 mill.
47
304439
576
611
1,051
880
Q1'08 Q1'09
115136
105115
106
Q1'08 Q2 Q3 Q4 Q1'09
Insurance
Total
Asset management
Asset Management and Insurance
Total business contribution: Total revenues to the Group
Contribution to the Group close to EUR 880 mill. in revenues in the quarter
EUR million EUR million
Attributable profit
Insurance: better performance in Brazil and Germany; weaker in the rest of EuropeFunds: reduced costs because of structure adjustment to the new environment
-31%
-6%
-16%
Area’s gross income + fees paid to the networks
48
SOVEREIGN
49Sovereign: integration in Grupo Santander
Group’s share: Balance sheet / Structure
US$ Bill. SOV % o/ Group
Total assets 76 5%
Gross loans 57 6%
Customer funds 70 6%
- Deposits 51 8%
Branches (#) 750 5%
Headcount (‘000) 10.2 6%
6%
31%
15%
48%
Geographic distribution
Continental Europe
Latam
United Kingdom
USA (Sov)Loans
8%
31%
24% 37%
Deposits
Continental EuropeLatam
United Kingdom
USA (Sov)
SOV’s Group share of 5-6%, increasing its diversification
Data as of March 2009 under Spain’s criteria.
50Sovereign: balance sheet, loans and portfolio structureLoan portfolioUS$ Bill. % portfolio NPL% Cov%
1
Securities available for sale (fair value)
US Treasury and govt. agencies* 4.8 0.4 56
States and counties 1.7 > 10 19
MBS 2.2 6.8 25
Total 8.7 5.9 100
ALCO portfolio
AverageAA-
US$ Bill. Avg. Life %
51
7
18
2
Liabilities
55
8
96
Assets
US$ Billion
Gross loans
78 78
Cash & Banks
Deposits
Bonds
Other*
2
1
Loans available for sale
Equity
Other
(*) Other: goodwill and intangibles 3.7; own insurance 1.9; fixed assets 0.5
Note: data under US GAAP(*) FNMA: Federal National Mortgage Association; FHLMC: Federal Home Loan Mortgage Corporation; FHLB: Federal Home Loan Bank of Pittsburgh, Boston and New York)
2
Companies 31.0 56.4 3.67 80• Commercial RE 13.1 23.9 4.24• C&I and others 13.3 24.2 3.33• Multifamily 4.6 8.3 3.04
Partic. & SMEs 23.9 43.6 2.15 83• Secured loans 18.7 34.2 2.69
– Residential 11.8 21.6 3.59– Home equity 6.9 12.6 1.14
• Automotive /other 5.2 9.4 0.22
Total 54.9 100.0 3.01 92
March 2009 balance sheet
51Sovereign: deposits
Deposits
Retail 41.0 81.2 +4.4%• Demand* 15.5 30.7 -3.3%
• Money markets 11.7 23.1 +3.2%
• Term 13.8 27.3 +16.1%
Institutional 9.5 18.8 -2.0%• Wholesale 5.2 10.2 +37.0%
• Government 2.7 5.4 -17.2%
• Repos / other 1.6 3.2 -38.4%
Total 50.5 100.0 +3.2%
US$ Bill. % Var.o/M’0850.5
48.4
43.1
47.349.0
Mar'08 Jun'08 Sep'08 Dec'08 Mar'09
US$ billion
On-balance sheet deposits
Note: data under US GAAP(*) Demand deposits, NOW accounts (Negotiable Order of Withdrawal) and Savings
Deposit balances recovered after Santander’s acquisition. Focus on profitability for the coming quarters
52Sovereign: first measures adopted
Lower risks
Costs savings
(Target: approx.US$ 215 mill.** in
three years)
Personnel & general adm. expenses***
413372386
Average 2008 Q4'08 Mar'09
US$ Mill. -10%
Write-downs initially
envisaged
Provisions / total loans
2.10%
2.76%
1.79%
Sep'08 Dec'08 Mar'09
(*) Var. last quarter annualised(**) Before tax(***) Including deposit insurance premiumsNote: data under US GAAP
Add further provisions for US$ 750 mill. in two years to reach an approximate ratio of 3.1% of loansAccelerate periods
Initial structure adjustments: -7% headcount o/Dec.’08
Identified 20% of general costs (no headcount), subject to sharp adjustments
Low risk securities portfolio already adjusted (-36% o/ Dec.07)– Mar.’09: 75% of the total with function
ALCO
Loans: reduction process of non-basic loans
Total loans
55.9 54.957.8
Dec'07 Dec'08 Mar'09
US$ Bill. -3% Autos:
-41%*-7%*
53Sovereign: contribution to Grupo Santander results
Contribution to the Group
SOV
Data as of March 2009 under Spain’s criteria.(*) Adjusted to the same generation period
% o/ Group*
Gross income 334 5%
Expenses 249 9%
Net op. income 85 2%
Provisions 122 8%
Attributable profit -25 --
Global integration of only two months (February and March). Costs and provisions have a larger weight than revenues in the Group’s total
Once the acquisition
is completed we confirm
the announced
guidance for the coming
years
US$ Mill.
54
Group highlights Q1’09
Business areas performance Q1’09
Conclusions
Appendix
Agenda
55During a very complicated Q1’09 for banking business ...
Q1’09 profit: EUR 2,096 mill…
… EUR 2,568 mill. in the operating areas …
… solid net operating income comfortably doubling the provisions made
Maintaining high credit quality versus our competitors, with over EUR 6,200 million still in generic funds
Generating capital to maintain core capital above the 7% target afteracquisitions and ranking among the best peers in terms of solvency
Reaching the first synergies targets on the integrations started in 2008
... Santander achieve:
The strength of Santander’s model enable stable resultsin the coming quarters
56Santander’s management for the coming quarters will continue to evolve around two main focuses
Boost commercial revenues …
…via spreads and focusing on deposits
Maintain emphasis on expenses
Obtain value from the “recovery business”
Maintain high discipline in liquidity and capital use
Strengthen the “management drivers” to face slowdown
Manage first steps in SovereignAccelerate the obtaining of synergies in integrationsTake advantage of belonging to Grupo Santander– Global factories: IT & operations,
purchases, services management …– Without restriction (liquidity,
capital) for profitable growth
Obtain value from the Group’snew incorporations
High potential and low execution risk
1 2
Based on our business model
57
Group highlights Q1’09
Business areas performance Q1’09
Conclusions
Appendix
Agenda
58
3.82 3.87 3.95 3.863.40
2.21
1.38 1.39 1.43 1.70 1.19
2.44 2.48 2.52 2.16
Q1'08 Q2 Q3 Q4 Q1'09
Loans Deposits Total
Continental Europe. Main units spreads(%)
SAN Branch Network
1.90 1.64
3.27 3.43 3.35 3.17
1.531.451.421.37
1.902.011.90
0.79
2.69
Q1'08 Q2 Q3 Q4 Q1'09
Loans Deposits Total
Banesto Retail Banking
3.76 3.85 4.03 4.324,10
Q1'08 Q2 Q3 Q4 Q1'09
Santander Consumer Lending
1.61
1.481.371.391.47 0.74
1.571.901.941.96
3.43 3.33 3.27 3.052.35
Q1'08 Q2 Q3 Q4 Q1'09
Loans Deposits Total
Portugal Retail Banking
59Continental Europe. NPLs and coverage
3.15%4.18% 4.64%
86%92% 89%
Mar'08 Dec'08 Mar'09NPLs Coverage
Santander Consumer
1.37%1.87%1.72%
71%107%77%
Mar'08 Dec'08 Mar'09NPLs Coverage
Portugal
Banco Santander*
96%230%
78%
1.93% 2.35%0.75%
Mar'08 Dec'08 Feb'09
NPLs Coverage
(*) The Santander Branch Network NPL ratio was 3.14% and coverage 61% at March 2009
106%269%
85%
1.64% 1.96%0.59%
Mar'08 Dec'08 Mar'09
NPLs Coverage
Banesto
60
0.77 0.88
1.24 1.14
2.00 1.95 2.01 2.02 2.04
0.700.66
1.131.251.34
0.91
Q1'08 Q2 Q3 Q4 Q1'09*
Loans Deposits Total
United Kingdom. Spreads and NPL ratios(%)
Spreads Retail Banking
1.04% 1.25%0.66%
69%59% 56%
Mar'08 Dec'08* Mar'09*NPLs Coverage
NPLs and coverage ratios
(*) Including A&L (*) Including A&L
61Exchange rates. Latin America Q1’09
Strong depreciation of Latin American currencies against the dollar and euro
AVERAGE RATESEUR / LOCAL CCY.
US DOLLARBRAZILIAN REALNEW MEXICAN PESOCHILEAN PESO
Q1'09 Q1'08 Var.1.302 1.497 15%3.017 2.602 -14%
18.740 16.181 -14%787.389 692.770 -12%
AVERAGE RATESUS$ / LOCAL CCY.
Q1'09 Q1'08 Var.2.318 1.738 -25%
14.393 10.810 -25%BRAZILIAN REALNEW MEXICAN PESOCHILEAN PESO 604.738 462.812 -23%
(*) Positive sign: currency appreciation; negative sign: currency depreciation
62
15.00 15.59
1.29 1.28
16.76 16.44 16.29 16.87 17.01
15.2015.51 15.94
1.241.25 1.07
Q1'08 Q2 Q3 Q4 Q1'09
Loans Deposits Total
Spreads main countries Latin America(%)
3.71 3.58
14.71 14.90 14.70 14.27 14.19
10.6910.9911.4411.19 10.83
3.463.52 3.36
Q1'08 Q2 Q3 Q4 Q1'09
Loans Deposits Total
Mexico Retail Banking
8.40 8.61 8.69 8.51 7.92
5.355.245.455.33 5.90
3.45 3.163.163.072.02
Q1'08 Q2 Q3 Q4 Q1'09
Loans Deposits Total
Chile Retail Banking
Brazil Retail Banking
63Latin America. NPL and coverage ratios
Mexico
Chile
3.65%3.58%3.20%
107%123% 102%
Mar'08 Dec'08 Mar'09NPLs Coverage
Brazil
1.31%2.41% 2.80%
132%175% 128%
Mar'08 Dec'08 Mar'09NPLs Coverage
2.64% 3.05%2.23%
102%109% 95%
Mar'08 Dec'08 Mar'09
NPLs Coverage
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