Banco Santander, S.A. · BME:SAN
Banco Santander — Debt Investor Presentation (December 2022)
66 slides from Banco Santander's debt investor presentation, Dec 30, 2022
Slide 1: FY 2022 Fixed Income Investors Presentation
FY 2022 FIXED INCOME INVESTORS PRESENTATION It's time to build together a better future for you
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 2022 Highlights Santander, a Total assets (€ bn) 1,735 leading financial Customer loans (€ bn excluding reverse repos) 1,019 group Customer deposits + mutual funds (€ bn; excluding repos) 1,146 Branches 9,019 2022 Net operating income (pre-provision profit) (€ mn) 28,251 Simple
Slide 5: Index
Index 1 2 3 4 5 6 7 8 2022 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 5
Slide 6: 2022 highlights
2022 Summary 2022 highlights Customers +7mn Customer focus and scale drove profitable growth Total revenue +12% Delivered record year in profit, with €2.3bn in Q4 Attributable profit €9.6bn RoTE 13.4% Increased profitability, shareholder value and returns EPS +23% FL CET1 12.04% Further strengthened
Slide 7: Record profit boosted by 12% revenue growth
2022 Summary Record profit boosted by 12% revenue growth % change Constant Attributable profit € million 2022 2021 Euros euros € mn NII 38,619 33,370 16 9 Net fee income 11,790 10,502 12 7 2,543 2,351 2,422 2,275 2,289 Trading and other income 1,745 2,532 -31 -37 2,138 2,174 2,067 Total revenue 52,1
Slide 8: Q4 revenue growth supported by all regions and global businesses
2022 Summary Q4 revenue growth supported by all regions and global businesses Revenue breakdown Q4’22 vs. Q3’22 Quarterly revenue drivers Constant € mn 1.4bn 13,750 13,220 12,539 12,391 • Growth in Europe (+13%) and South America (+6%) Revenue NII • Strong quarter in North America, after record NII
Slide 9: Focus on productivity and efficiency with real costs decreasing
2022 Summary Focus on productivity and efficiency with real costs decreasing across our footprint Costs and Efficiency drivers Costs and efficiency ratio Constant € million Costs grew • Costs in real terms: -5% 46.2% 45.8% Efficiency below inflation • Investments in digitalization and salary in all
Slide 10: In 2022, we achieved our <1% CoR target
2022 Summary In 2022, we achieved our <1% CoR target LLPs and CoR drivers LLPs and CoR Constant € million • Q4 LLPs of €3.0bn (+11% QoQ) 0.99% 0.77% • 2022 includes additional LLPs due to updated macro CoR LLPs assumptions (mainly US, Spain and UK) • Normalization in some countries vs. releases in 2
Slide 11: Strengthening our capital position
2022 Summary Strengthening our capital position 2022 fully-loaded CET1 ratio performance % +1.38 11.96 12.04 -0.62 -0.27 -0.34 -0.07 1 Dec-21 Gross Shareholder Regulatory Markets Corporate Dec-22 organic remuneration & models & others transactions generation Q4'21 Q4'22 Diff. FL CET1 ratio 12.12% 12
Slide 12: Index
Index 1 2 3 4 5 6 7 8 2022 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 12
Slide 13: Santander is managed according to primary and secondary segments
Santander Business Model & Strategy Santander is managed according to primary and secondary segments One Santander (Europe, North Primary segments America and South America). New operating model leveraging our Europe North America South America Digital Consumer Bank global scale to deliver a bette
Slide 14: Our business model drives predictable and profitable growth
Santander Business Model & Strategy Our business model drives predictable and profitable growth Our business model is based on three pillars 01. Scale 02. Customer focus 03. Diversification2 Local scale and leadership. Unique personal banking relationships Our geographic and business Worldwide reach
Slide 15: Our geographic and business diversification both in assets and liabilities
Santander Business Model & Strategy Our geographic and business diversification both in assets and liabilities … Loans and advances to customers (excluding reverse repos, Dec-22) - Customer funds (excluding repos, Dec-22) - By area1 By area1 DCB DCB South 5% 12% Total gross loans America Total cus
Slide 16: … which continue to grow well across products, segments and countries
Santander Business Model & Strategy … which continue to grow well across products, segments and countries… Customer loans: +5% YoY Customer loans by country Dec-22, YoY % changes YoY in constant € Dec-22, € bn and % change YoY in constant € SAN 1,019 +5 579 +3 157 +9 €390bn +3% €344bn +6% 152 +10 €2
Slide 17: … with particular strength in time deposits
Santander Business Model & Strategy … with particular strength in time deposits… Customer deposits: +9% YoY Customer deposits by country Dec-22, YoY % changes YoY in constant € Dec-22, € bn and % change YoY in constant € SAN 962 +9 643 +9 136 +14 €710bn -1% 123 +5 DCB 59 +7 335 +15 €252bn +48% 222 +
Slide 18: … reflected in profit and RoTEs
Santander Business Model & Strategy … together with our commercial strategy are reflected in profit and RoTEs… 2022 vs. Customer Customer Net operating Underlying Adjusted 2021 loans deposits income att. profit RoTE1 (€mn) (€mn) (€mn) (€mn) 579 643 9,507 3,810 12.5% Europe +3% +9% +25% +38% +3.2 pp
Slide 19: … which is resilient throughout the cycle
Santander Business Model & Strategy … which is resilient throughout the cycle… Resilient profit generation throughout the cycle Group net operating income, € bn 28.3 25.5 25.6 26.2 24.4 25.0 23.9 23.6 23.7 23.6 23.0 22.6 22.8 19.9 17.7 14.8 11.4 2006 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 1
Slide 20: … resulting in long-term stable and predictable growth
Santander Business Model & Strategy … resulting in long-term stable and predictable growth Predictable results with the lowest volatility among peers coupled with growth in earnings Quarterly reported EPS volatility1, 1999-Q3’22 643% 318% 139% 119% 110% 98% 83% 42% 40% 39% 12% US IT US FR CH CH FR U
Slide 21: One of the best C/I ratios and net operating income/loans
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, Q3’22 %, European peers, Q3’22 Peer 1 43% Peer 2 45% Peer 1 3
Slide 22: Index
Index 1 2 3 4 5 6 7 8 2022 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 22
Slide 23: Disciplined capital allocation strategy to drive profitability
Capital Disciplined capital allocation strategy to drive profitability improvement & maximize shareholder returns 2021 2022 2022 Targets Capital accretive RWA growth below loan +1% < +4% +1% < +5% RWA < low-single growth RWAs loans RWAs loans growth digit growth Risk Risk adjusted adjusted 1 new new
Slide 24: 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)** Dec-22 Dec-22 15.99% T2 15.81% 13.26% +272bps 2.36% >15% AT1 13.26% +254bps 2.32% 1.45% T2 T2 2.40% +276bps 2.0
Slide 25: 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%: €43bn. Distance1to trigger The first line of defense is the Group’s strong pre-provision profitability providing a high capacity to absorb provisions durin
Slide 26: AT1 issuances distributed by call date
Capital AT1 issuances distributed by call date Banco Santander, S.A. AT1 issuances outstanding at Dec-22 Nominal Next call Reset Currency € mn Coupon Structure date Spread EUR 1,000 5.25% PNC6 29-Sep-23 499.9bps USD 1,124 7.50% PNC5 08-Feb-24 498.9bps EUR 1,500 4.75% PNC7 19-Mar-25 409.7bps EUR 1,50
Slide 27: 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 Hedged Exposure Group Strategic management of the exposure to exchange CET1 12.04%1 rates on equity and dynamic on the countervalue of the units’ annual results in euros. Mitigate impact of FX volatility
Slide 28: Rebuilding ALCO portfolios from current exposure
Additional opportunities from rebuilding ALCO portfolios from current exposure, especially in euros Bond Portfolio1 %, Dec-22 Other South SCF; America; 7% 7% Chile; Spain; 11% 16% Portfolio size o/w euro area Brazil; UK; 4% countries €107bn 12% (HTC&S €55bn) 25% Poland; 11% Mexico; Portugal; 15% 2%
Slide 29: Index
Index 1 2 3 4 5 6 7 8 2022 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 29
Slide 30: Credit quality remains solid…
Asset Quality Credit quality remains solid… Credit quality ratios Q4'21 Q3'22 Q4'22 Q4'21 Q3'22 Q4'22 p 1bp QoQ Cost of p 13bps QoQ NPL ratio 3.16% 3.08% 3.08% 0.77% 0.86% 0.99% q 8bps YoY risk3 p 22bps YoY 4.08% 3.93% 3.73% 3.32% 1.28% 3.21% 3.20% 3.22% 3.18% 3.16% 3.26% 1.18% 1.07% 1.00% 1.00% 1.0
Slide 31: … at the Group and country level
Asset Quality … at the Group and country level NPL ratios by country Cost of risk1 by country % Q4 2021 Q3 2022 Q4 2022 % Q4 2021 Q3 2022 Q4 2022 Spain 4.72 3.69 3.27 Spain 0.92 0.71 0.61 UK 1.43 1.16 1.21 UK -0.09 0.02 0.12 Portugal 3.44 3.03 2.99 Portugal 0.09 -0.12 0.04 Poland 3.61 3.63 3.80 Pola
Slide 32: 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 Dec-22, % of operating areas Dec-22, % of operating areas Digital Consumer Digital Consumer Bank, 7.6% Bank, 10.2% Other South America, 0.5% Argentina, 0.4% Other South America
Slide 33: 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 21% Manufacturing 17% Dec-21 Dec-22 Real estate activities 12% Transport and storage 6% NPL ratio 3.16% 3.08% Constructio
Slide 34: Index
Index 1 2 3 4 5 6 7 8 2022 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 34
Slide 35: 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 Santander S.A.1 Santander Consumer Santander Finance2 Holdings USA Banco Santander Santander UK
Slide 36: 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 37: Santander follows an autonomous capital and liquidity model
Liquidity and Funding Santander follows an autonomous capital and liquidity model Capital ratios by country Sep-22, %, local figures (phased-in) US UK 17.17 15.46 20.65 18.53 15.17 15.45 Portugal 20.92 Brazil 20.52 Poland 14.48 17.93 18.93 Mexico 12.40 17.16 18.90 11.30 15.35 Santander 17.16 S.A. 13
Slide 38: 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 39: 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 Dec-22 Includes the issuance of Green and Sustainable Bonds in line with the Group’s ESG strategy and Responsible Banking Preference Agenda: shares, €8.7bn, Issuer Product Nominal
Slide 40: Conservative and decentralized liquidity and funding model
Liquidity and Funding Conservative and decentralized liquidity and funding model €40bn1 issued in public markets in 2022 Very manageable maturity profile € bn, Dec-22, Average exchange rates € bn, Dec-22 21.6 Covered 7.6 4.5 6.9 Bonds 3.4 18.1 3.0 1.4 18.4 12.0 15.3 1.7 Senior 7.3 12.4 6.4 9.4 1.5 1
Slide 41: 2022 issuances against funding plan
Liquidity and Funding 2022 issuances against funding plan Execution of 2022 funding plan € bn, Dec-22 Hybrids SNP + Senior Covered Bonds TOTAL Plan Issued Plan Issued Plan Issued Plan Issued 1 2 Banco Santander, S.A. 3 - 3.5 1.8 9 - 10 17.5 - 3.4 12 - 13.5 22.8 SCF - - 5-6 1.5 0 - 0.5 - 5 - 6.5 1.5
Slide 42: 2023 funding plan and issuances YTD
Liquidity and Funding 2023 funding plan and issuances YTD 2023 funding plan € bn, Jan-23 Hybrids SNP + Senior Covered Bonds TOTAL Plan Issued Plan Issued Plan Issued Plan Issued 1 Banco Santander, S.A 0.5 - 1.5 - 9-10 5.8 6-7 3.5 15.5 - 18.5 9.3 UK - - 3-4 1.2 5-6 1.7 8-10 2.9 SCF - - 2-4 - - - 2-4
Slide 43: TLAC/MREL for the Resolution Group headed by Banco Santander
Liquidity and Funding TLAC/MREL for the Resolution Group headed by Banco Santander, S.A. TLAC Dec-22(e) MREL Dec-22(e) % % and € bn 38.2% 5.5% 145.2 25.1% 3.7% 21.6 Senior 3.4% 27.8 SNP 3.0 Sub debt 3.7% 10.1 T2 16.3% Req. 8.0 AT1 32.6% 3.1% 29.0% Req. 8.9% 21.7% 18.0% 2.1% 74.8 13.2% CET1 6.8% % RW
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 € bn, Dec-22 Liquidity Coverage Net Stable Funding 1,442 1,442 Ratio (LCR) Ratio (NSFR) 1 Dec-22 Sep-22 S
Slide 45: Main metrics show strength and stability of 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 Dec-22 (Deposits + M/LT 1 2018 2019 2020 2021 Dec-22 LTD Ratio funding) / Loans 3 1 Loans / net assets 76% 77% 76% 75%
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 2022 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 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: Our achievements
ESG Our achievements Our ESG approach is embedded in all our Teams & Culture Social & Governance businesses SCIB Financial inclusion Project finance Women in senior Financially empowered Green finance1 Renewables2 positions5 people7 #2 c.€91bn c.29% >10mn global leader Consumer businesses Global NPS
Slide 51: ESG public targets
ESG ESG public targets Note: 2022 provisional data. 51
Slide 52: ESG Ratings/Indices (1/2)
ESG ESG Ratings/Indices (1/2) 2022 2021 or latest 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 53: ESG Ratings/Indices (2/2)
ESG ESG Ratings/Indices (2/2) 2022 2021 or latest 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 54: Index
Index 1 2 3 4 5 6 7 8 2022 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 54
Slide 55: 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 56: Index
Index 1 2 3 4 5 6 7 8 2022 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Glossary Strategy 56
Slide 57: 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 2022 financial results Other information Financial report Earnings presentation Series Shareholders report 2021 Digital Annual review (Exce
Slide 58: Europe
Links, Appendix and Glossary EUROPE 'Business transformation in order to achieve superior growth with a more efficient operating model' 2022 Highlights Strategic priorities Branches 3,148 ▪ Grow our business by serving our customers better, focusing on capital efficient Employees 65,581 opportunitie
Slide 59: North America
Links, Appendix and Glossary NORTH AMERICA 'We provide a full range of financial services with particular focus on Retail, Private and Corporate Banking' 2022 Highlights Strategic priorities Branches 1,854 Employees 44,518 ▪ Simplifying our regional business model to generate efficiencies and profit
Slide 60: South America
Links, Appendix and Glossary SOUTH AMERICA 'We remain focused on expanding, sharing best practices from each country and delivering profitable growth' 2022 Highlights Strategic priorities Branches 3,653 ▪ Strengthen connectivity and share best practices across countries, capturing new Employees 78,2
Slide 61: 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' 2022 Highlights Strategic priorities Branches 364 ▪ To become the largest digi
Slide 62: Corporate & Investment Banking
Corporate & Investment Banking 'Santander CIB supports corporate and institutional customers, offering tailored services and value-added wholesale products suited to their complexity and sophistication' 2022 Highlights Strategic priorities Total revenue (€ mn) 7,395 ▪ Our ambition is to become a wor
Slide 63: Wealth Management & Insurance
Links, Appendix and Glossary Wealth Management & Insurance 'We strive to become the best responsible wealth and insurance manager in Europe and the Americas' 2022 Highlights Strategic priorities Total assets under management1 (€ bn) 401 ▪ Continue to build our global platform o Expand and develop ou
Slide 64: PagoNxt: innovative payments solutions
'Innovative payments solutions for both Santander and non-Santander clients' 2022 Highlights PagoNxt revenue (€ mn) 953; +72% YoY We are a one-of-a-kind paytech business backed by Santander Merchants Helping our customers prosper and accelerate their growth through a one-stop shop, providing solutio
Slide 65: Glossary and Acronyms
Links, Appendix and Glossary Glossary and Acronyms ▪ ADIs: Available distributable items ▪ EPS: Earning per share ▪ RoRWA: Return on risk-weighted assets ▪ ALCO: Assets and Liabilities Committee ▪ ESG: Environmental, social and governance ▪ RoTE: Return on tangible equity ▪ AT1: Additional Tier 1 ▪
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 (December 2022) on 6ix