Banco Santander, S.A. · BME:SAN
Banco Santander — Debt Investor Presentation (July 2024)
64 slides from Banco Santander's debt investor presentation, Jul 24, 2024
Slide 1: Fixed income investors presentation H1'24
24 July 2024 Fixed income investors presentation H1’24
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 While these forward-looking statements represent our judgement and future expectations concerning our business developments and results may differ materially from those anticipated, expected, projected or assumed in forward-looking statements. In particular, forward looking sta
Slide 4: Santander, a leading financial group
Santander, a H1’24 Highlights leading financial group Total assets (€ bn) 1,786 Customer loans (€ bn excluding reverse repos) 1,027 Customer deposits + mutual funds (€ bn excluding repos) 1,171 Branches 8,285 H1'24 Net operating income (pre-provision profit) (€ mn) 18,137 H1'24 Attributable profit (
Slide 5: Index
Index 1 2 3 4 5 6 7 8 H1'24 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 5
Slide 6: H1'24 Summary: double-digit YoY profit increase
H1'24 Summary Double-digit YoY profit increase driven by strong growth in net operating income, supported by customer revenue and efficiency improvements ex. Argentina P&L Current Constant Current Constant € million H1'24 H1'23 % % % % NII 23,457 20,920 12 11 11 10 Net fee income 6,477 6,103 6 6 8 7
Slide 7: High-single digit revenue growth backed by customer activity
H1'24 Summary High-single digit revenue growth backed by customer activity across our businesses Total revenue Constant € mn +10% Total 16,273 revenue 14,489 15,323 15,727 with official 14,107 14,303 14,785 Argentine FX rate • >95% of total revenue is customer related which drove the vast majority o
Slide 8: ONE Transformation driving structural efficiency gains and positive jaws
H1'24 Summary ONE Transformation is driving structural efficiency gains and positive jaws Efficiency and costs Efficiency • Strong quarterly trend. H1’24 efficiency ratio improved 3pp YoY to Quarterly 44.1% 44.3% 43.6% 44.4% 42.6% 41.6%, even when we are investing in our transformation 40.6% • Trans
Slide 9: Stable credit quality in line with 2024 target
H1'24 Summary Stable credit quality in line with 2024 target LLPs and credit quality 1.05% 1.08% 1.13% 1.18% 1.20% 1.21% CoR • YTD CoR stood at 1.17%, despite increasing CHF mortgage 12 month portfolio coverage 3,234 3,391 Credit • Credit quality remains robust, backed by overall good economic 3,104
Slide 10: FL CET1 ratio well above target of >12%
H1'24 Summary FL CET1 ratio well above our target of >12%, driven by strong capital generation Jun-24 FL CET1 ratio performance +0.52 - 12.5 Capital ratios 12.3 -0.25 -0.07 Jun-23 Jun-24 Diff. FL CET1 ratio 12.2% 12.5% 22bps FL Total capital ratio 15.9% 16.4% 45bps FL Leverage ratio 4.8% 4.7% -5bps
Slide 11: All-time high profit, upgrade of 2024 targets
H1'24 Summary All-time high quarterly and half-year profit, driving an upgrade of our 2024 targets Upgraded H1’24 2024 targets 2024 targets Mid-single Revenue1 High-single +9% digit growth digit growth UPGRADED Efficiency 41.6% <43% c.42% UPGRADED CoR 1.2% c.1.2% CONFIRMED FL CET1 12.5% >12.0% after
Slide 12: Index
Index 1 2 3 4 5 6 7 8 H1'24 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 12
Slide 13: Group organizational structure
Santander Business Model & Strategy Santander is managed according to primary and secondary segments Primary segments Retail Consumer CIB Wealth Payments Group organizational structure Secondary segments from January 2024 Europe DCB Europe North America South America Group functions and Corporate Ce
Slide 14: Our business model remains unchanged
Santander Business Model & Strategy Our business model remains unchanged to continue to deliver for all our stakeholders 1. Customer focus 2. Scale 3. Diversification Building a digital bank Global and in-market Business, geographical and with branches scale balance sheet Contribution to Group reven
Slide 15: Geographic and business diversification 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, Jun-24) (excluding repos, Jun-24) By product/business By product/business Other Other CIB 5% CIB 6%
Slide 16: Loans steady despite changing interest rate dynamics
Santander Business Model & Strategy … with loans that remained steady despite changing interest rate dynamics… Customer loans Customer loans by country Jun-24, € bn and % change YoY in constant € Jun-24, € bn and % change YoY in constant € €1,027bn +2% SAN +2 1,027 Others 51 +3% 561 -1 CIB 144 +7% 1
Slide 17: A strong and diversified deposit base
Santander Business Model & Strategy … and a strong and diversified deposit base Customer deposits Customer deposits by country Jun-24, € bn and % change YoY in constant € Jun-24, € bn and % change YoY in constant € €953bn +2% SAN 953 +2 Others 63 +8% 611 +1 CIB 130 134 -4 -6% 129 +8 Consumer 122 +14
Slide 18: Index
Index 1 2 3 4 5 6 7 8 H1'24 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 18
Slide 19: Enhanced capital strength and record distributions
Capital Enhanced capital strength: profitable organic generation, with new front book at 23% RoTE, and record distributions Maximize capital productivity by: Value generation and profitability Asset rotation Increase RWAs with EVA>0 Front book pricing and risk transfer EVA <0 portfolios EVA >0 portf
Slide 20: 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)** Jun-24 16.71% Jun-24 16.39% >15% 13.88% +283bps 2.82% T2 13.88% +251bps 2.52% AT1 2.40% T2 T2 2.44% +245bps 1.4
Slide 21: 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%: €45.95bn Distance to trigger1 • The first line of defence is the Group’s strong pre-provision profitability providing a high capacity to absorb provisions du
Slide 22: AT1 issuances distributed by call date
Capital AT1 issuances distributed by call date Banco Santander, S.A. AT1 issuances outstanding at Jun-24 Call date Nominal Next call Reset 1,824 EUR mn Currency € mn Coupon Structure date Spread 1,500 1,500 Banco Santander S.A. EUR 188 4.75% PNC7 19-Mar-25 409.7 bps 1,260 Banco Santander S.A. EUR 1,
Slide 23: 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 Illustrative example: Strategic management of exposure to Hedged Exposure Group exchange rates in equity and dynamic CET1 management of the FX hedges related to 12.5%1 the units’ next 12 months results in eu
Slide 24: Diversified bond portfolio represents just 7% of total assets
Capital Diversified bond portfolio represents just 7% of total assets Bond portfolio %, Jun-24 €129bn Other South America Chile Liquidity 3% 6% portfolio Brazil €26bn 8% Spain 29% • Bond portfolio represents 7% of total assets US 12% €129bn • HTC&S duration: 1.7 years o/w HTC €82bn (64%) ALCO IRRBB
Slide 25: Index
Index 1 2 3 4 5 6 7 8 H1’24 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 25
Slide 26: Credit quality remains solid
Asset Quality Credit quality remains solid… Credit quality ratios H1'23 Q1'24 H1'24 H1'23 Q1'24 H1'24 q 8bps QoQ Cost of p 1bps QoQ NPL ratio 3.07% 3.10% 3.02% 1.08% 1.20% 1.21% q 5bps YoY risk2 p 13bps YoY 4.08% 3.73% 3.32% 3.21% 3.16% 3.08% 3.13% 3.14% 3.10% 3.05% 3.07% 3.02% 1.28% 1.13% 1.18% 1.2
Slide 27: At the Group and country level
Asset Quality … at the Group and country level NPL ratios Cost of risk1 Q2 2023 Q1 2024 Q2 2024 Q2 2023 Q1 2024 Q2 2024 % % Retail 3.22 3.24 3.15 Retail 0.92 1.03 1.03 Consumer 4.18 4.86 4.81 Consumer 1.86 2.12 2.17 CIB 1.38 1.14 1.05 CIB 0.18 0.14 0.15 Wealth 0.82 0.64 0.77 Wealth 0.00 -0.05 0.05 P
Slide 28: 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 Jun-24, % of operating areas Jun-24, % of operating areas Wealth, 0.5% Payments, Payments, 3.2% Wealth, 0.5% CIB, 7.3% 7.3% CIB, 4.9% DCB, 29.5% Retail, 53.7% Retail, 59.4% DCB
Slide 29: Strong portfolio diversification with 56% exposure to individuals
Asset Quality Strong portfolio diversification with a 56% exposure to individuals and stable sector distribution Credit quality Sector distribution 1 Wholesale and retail trade 23% Jun-23 Mar-24 Jun-24 Manufacturing 16% Real estate activities 14% NPL ratio 3.07% 3.10% 3.02% Construction 6% Professio
Slide 30: Index
Index 1 2 3 4 5 6 7 8 H1'24 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 30
Slide 31: Business model combines local knowledge with global best practices
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-23 Banco Santander S.A.1 Santander Banco Consumer Santander Santander Finance Totta SGPS, SA Banco
Slide 32: Resolution groups resolved separately through multiple entry points
Liquidity and Funding … divided into different resolution groups that can be resolved separately though multiple entry points MPE resolution strategy Banking Union European Union 3rd Countries Spain1 Poland US Brazil UK Resolution Group PE PE PE PE PE PE Point of Entry Chile Mexico Argentina Integra
Slide 33: 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 34: 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 Jun-24 Includes the issuance of Green and Sustainable Bonds in line with the Group’s ESG strategy and Responsible Banking AT1 / Preferred Agenda: shares, €8.5bn, 4% Tier 2 / Type D
Slide 35: Conservative and decentralized liquidity and funding model
Liquidity and Funding Conservative and decentralized liquidity and funding model €29.0bn1 issued in public markets in H1’24 Very manageable maturity profile € bn, Jun-24 € bn, Jun-24 16.5 Covered 4.5 11.3 11.0 4.7 4.2 Bonds 12.1 0.5 0.7 0.2 21.4 2.3 8.1 14.9 0.3 0.4 Senior 4.5 11.5 6.5 9.9 6.3 2.1 1
Slide 36: 2024 issuances against funding plan
Liquidity and Funding 2024 issuances against funding plan YtD execution of 2024 funding plan € bn, Jun-24 AT1 + Tier 2 SNP + Senior Covered Bonds TOTAL Plan Issued Plan Issued Plan Issued Plan Issued 1 2 Banco Santander, S.A 4-5 5.2 16 - 18 18.4 0-1 0.5 20 - 24 24.1 UK - - 1-2 0.3 5-6 4.7 6-8 5.1 SC
Slide 37: TLAC/MREL for the Resolution Group
Liquidity and Funding TLAC/MREL for the Resolution Group headed by Banco Santander, S.A. TLAC Jun-24(e) MREL Jun-24(e) % % and € bn 167.1 Requirement 40.0% Requirement CBR CBR 25.0 28.7% Buffer 6.1% Buffer Senior 4.1% 33.0 6.6% SNP 4.0 Sub debt 13.6 T2 4.1% 8.4 AT1 Req.2 16.7% 33.8% Req. 9.7% 29.7%
Slide 38: Well-funded, diversified 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, Jun-24 1,515 1,515 1 Jun-24 Mar-24 M
Slide 39: Main metrics show strength 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 Jun-24 (Deposits + M/LT 1 2020 2021 2022 2023 Jun-24 LTD Ratio funding) / Loans 3 1 Loans / net assets 76% 75% 72% 68%
Slide 40: 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 17/04/2018 ↑ - - - AAAu 16/11/2023 ↑ Senior Debt A2 11/01/2019 ↑ A+ 16/12/
Slide 41: 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 11/01/2019 ↑ POSITIVE A+ 16/12/2021
Slide 42: Index
Index 1 2 3 4 5 6 7 8 H1'24 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 42
Slide 43: Our sustainability strategy
ESG Our sustainability strategy Our sustainability strategy focuses on issues that are material to Santander. We conduct a double materiality assessment to identify the topics that pose the biggest risks to, and create commercial opportunity for the bank; and where we can have the biggest impact Amb
Slide 44: We continue to make progress on our ESG agenda
ESG We continue to make progress on our ESG agenda Jun-24 2025 targets Green Finance raised and facilitated €123.4bn €120bn (since 2019) Socially responsible Investments (SRI) AuMs €74.0bn €100bn Financial inclusion (# People)1 2.8mn 5mn Note: targets were set before the publication of the European
Slide 45: ESG Ratings/Indices (1/2)
ESG ESG Ratings/Indices (1/2) 2023 or latest 2022 available CCC B BB BBB A AA AAA We maintained our positioning at AA AA Laggard Average Leader Within top 36% with AA (among 201; only 5% reached AAA) We maintained our positioning at Leadership level, even D- D C- C B- B A- A though decreased from
Slide 46: ESG Ratings/Indices (2/2)
ESG ESG Ratings/Indices (2/2) 2023 or latest 2022 available 98th percentile 0 20 40 60 80 100 23 years in a row, featuring on the Dow Jones ≈ 80 Sustainability Index World (DJSI World) and in the DJSI Europe Index 15th position worldwide and 2nd among our peers 97th percentile in banking sec
Slide 47: Index
Index 1 2 3 4 5 6 7 8 H1'24 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 47
Slide 48: 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 49: Index
Index 1 2 3 4 5 6 7 8 H1'24 Santander Capital Asset Liquidity & ESG Concluding Links, Summary Business Quality Funding. Remarks Appendix Model & Ratings and Strategy Glossary 49
Slide 50: 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 or icons below H1 2024 financial results Other information Financial report Earnings presentation Series Shareholders report 2023 Digital annual review (Excel) 2
Slide 51: Retail & Commercial Banking
Links, Appendix and Glossary Retail & Commercial Banking ‘A new global business integrating all our retail and commercial banking businesses globally to better serve our customers, improve efficiency and drive value creation’ H1’24 Highlights Strategic priorities Customer loans (€ bn) 619 Customer d
Slide 52: Digital Consumer Bank
Links, Appendix and Glossary Digital Consumer Bank ‘Global leader in auto financing and digital consumer activities’ H1’24 Highlights Strategic priorities Customer loans (€ bn) 213 ▪ Expand our leadership in consumer lending across our footprint (e.g. #1 finance New business volumes (€ bn) 46.7 comp
Slide 53: Corporate & Investment Banking
Links, Appendix and Glossary Corporate & Investment Banking ‘Santander CIB supports corporate and institutional clients, delivering tailored services and value-added wholesale products suited to their complexity and sophistication’ H1’24 Highlights Strategic priorities Customer loans (€ bn) 144 ▪ Ou
Slide 54: Wealth Management & Insurance
Links, Appendix and Glossary Wealth Management & Insurance ‘We want to become the best wealth and insurance manager in Europe and the Americas’ H1’24 Highlights Strategic priorities 480 1 Total assets under management (€ bn) ▪ Continue building our global platform leveraging the connectivity of our
Slide 55: Payments
Links, Appendix and Glossary Payments ‘One-of-a-kind paytech business that offers innovative payment solutions’ H1’24 Highlights Strategic priorities EBITDA margin 20.1% ▪ We are a one-of-a-kind paytech business backed by Santander ▪ Helping our customers prosper and accelerate their growth through
Slide 56: Cards Payments
Links, Appendix and Glossary Cards Payments ‘Provide exceptional payments experiences, fostering customer loyalty and leveraging transactional data to enhance profitability’ H1’24 Highlights Strategic priorities # cards (mn) 104 ▪ Expand our business, in a profitable and sustainable way, developing
Slide 57: Secondary segments
Links, Appendix and Glossary Secondary segments 57
Slide 58: Europe
Links, Appendix and Glossary Europe 'We continue to accelerate our business transformation to achieve higher growth and a more efficient operating model' H1'24 Highlights Strategic priorities Branches 3,033 ▪ Grow the business, by acquiring new customers, increasing customer loyalty and Employees 67
Slide 59: Digital Consumer Bank Europe
Links, Appendix and Glossary Digital Consumer Bank Europe ‘Europe’s consumer finance leader: solid business model, geographic diversification and leading market shares in auto/mobility finance and consumer’ H1'24 Highlights Strategic priorities Branches 327 ▪ Secure leadership positions in global di
Slide 60: North America
North America 'We provide a full range of financial services with a particular focus on Retail, Private, Corporate and Investment Banking' H1'24 Highlights Strategic priorities Branches 1,765 ▪ Remain focused on executing the transformation of our Retail and Consumer businesses in both countries. Th
Slide 61: South America
Links, Appendix and Glossary South America 'Moving forward to become the primary bank for our customers and the most profitable franchise in each country in which we operate in the region. while promoting synergies across our global and regional businesses' H1'24 Highlights Strategic priorities Bran
Slide 62: Glossary and Acronyms
Links, Appendix and Glossary Glossary and Acronyms ▪ ADIs: Available distributable items ▪ G-SIB: Global Systemically Important Banks ▪ RoRWA: Return on risk-weighted assets ▪ ALCO: Assets and liabilities committee ▪ HQLA: High quality liquid asset ▪ RoTE: Return on tangible equity ▪ AT1: Additional
Slide 63: 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 64: 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 (July 2024) on 6ix