evolving business models and capital markets contexts: the santander … · 6 9 avoid subscale...
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May 2012
José Antonio ÁlvarezCFOGrupo Santander
Evolving Business Models and Capital Markets Contexts:
The Santander Model
2
Headcount 193,349
Branches (units) 14,756
Profit3 (EUR million) 5,351
Highlights
Customers (million)2 102,1
Total Assets (EUR trillion) 1.25
(1) Over operating areas attributable profit
Santander: key figures
USA
UK
Germany
Other Europe
Poland
Mexico
Brazil
OtherLatam
Chile
Spain
Attributable profit Q1'12(1)
Portugal
56% emergingmarkets
Focused on retail banking:We are the international Group with the
largest branch network
3
OPERATIONAL INTEGRATION
SUBSIDIARY MODEL with financialautonomy
Santander: our model
3
UK US Mexico Brazil ChilePortugal
…
Santander Group
STRONG LOCAL PRESENCE/ economies
of scale (“vertical strategy”)
1 2
3
4
LOCAL CRITICAL MASS is key to
achieve superior profitability…
… especially in the new
environment; ROE pressures, regulatory costs
We are focused on 10 key large markets
STRONG LOCAL PRESENCE: dominant local positions in large and attractive countries
1
710
2
3
4
85
1
6 9
Avoid subscalebusinesses
(1) Loans + deposits (balance sheet funds) + mutual funds(2) Santander Consumer not included (in Spain: 2.0 million customers and 73 branches; Portugal: 0.3 million customers and 7 branches)(3) Mortgages and retail savings (4) Present in 14 countries. Loyalty cards not included under customers(5) Excluding public-sector banks (6) Only data from Sovereign Bank. Customer-homes data (7) Attributable profit and branches. Data as of Dec'11 not including Kredyt Bank.
6.USA7.Germany8. Argentina9. Poland10.Portugal
5
UK US Mexico Brazil ChilePortugal…
Each subsidiary is responsible for its own capital and funding needs:
No cross border funding
Santander Group
Financial independent subsidiaries’ based model…2
6
USA0.3 Bn
México2 Bn
México2 Bn
Brasil7 Bn
Chile1 Bn
San13 Bn
BAN3 BnBAN3 Bn
UK13 Bn
SCF EU0.4 Bn
TOTAL40 Bn €
0.1 Bn
BZ WBK
0.1 Bn
M/L term issuance2 – 2011
(1) Including retail commercial paper (2) Excluding securitisations and structured funding.
Data in euros, 2011
Marketdiversification: aprox. 1/3 GBP
area; 1/3 EUR area; 1/3 USD area
… with diversified funding sources
• Business units mostly funded through LOCAL DEPOSITS…
• … additional funding raised in LOCAL WHOLESALE MARKETS (stand-alone basis)
� Own ratings and programs in each subsidiary
7
INCREASED INTEGRATION…
Spain Portugal UK US Brazil Mexico
GBMGBM
Asset ManagementAsset Management
CardsCards
SegurosInsurance
IT/OPs - Medios
Funciones soporteSupport Functions: Finance, Risks
Corporate Management
Technology and Operations
Strong operational integration…
Continue to exploit intra-group synergies:
Costs synergies: a) IT infrastructureb) Application development /
maintenancec) Operations (back-office)d) Centralised purchases
Revenue synergies:a) Shared commercial modelb) Product factories (e.g., cards)c) Distribution model of products
originated in global factories (insurance, AM, treasury)
Governance synergies:a) Shared risk management systemsb) Shared financial management systemsc) Shared accounting / MIS systemsd) Shared corporate governance systems
3
8
66,1
64,1
61,4
59,7
56,3
54,754,1
45,544,6
41,7
44,9
43,3
49,7
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Positive jaws are key to remain competitive; going forward, we expect our efficiency ratio to
continue to improve
This allows us to reach “best in class” status in terms of cost efficiency….
In percentage
(**) “Peer Group” are large banks that because of their size, characteristics and/or degree of direct competition are the reference group to surpass: BBVA, Banco Itaú, BNP Paribas, Credit Suisse, HSBC, ING Group, IntesaSanpaolo, JP Morgan, Mitsubishi, Nordea, Royal Bank of Canada, Societe Generale, Standard Chartered, UBS, Unicredito y Wells Fargo.
Group efficiency ratio*
(*) Efficiency ratio with amortisations.
Abbey’s entry
B. Real’s entry
Sovereign, A&L and GE’s entry
9
Our model is producingtangible results…
10Healthy volume growth in emerging markets…… in spite of the deleveraging trend in Spain / Portugal
Spain-gross loans
Res of LatAmBrazil Poland
Emerging markets-gross loans
Loan / deposits ratio:
From 178% in 2008…
… to 111% in 2012
11
While our results have been under pressure in Spain and Portugal…
…. the rest of the Group has continued to perform well
Group PBT- Operating units
Spain +Portugal
Rest
7,483 8,512 10,250
12,866 12,262
4,222 4,413
4,548
2,357 1,292
2007 2008 2009 2010 2011
12
Final remarks
1. STRONG LOCAL PRESENCE (local economies of scale)
2. FINANCIAL AUTONOMY: local capital + local fundingsources (deposits / wholesale funding) + local supervision…
3. … WITH STRONG OPERATIONAL INTEGRATION (intra-group synergies)
• Resilient model during the financial crisis
• No «contagion» from the eurozone crisis.
• Volume growth reflects local demand / local market conditions
• Loans in e.g., LatAm or Poland, continue to grow, while Spain continues to deleverage
OUR MODEL
TANGIBLE RESULTS
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