FIXED INCOME INVESTORS PRESENTATION - Here to help you prosper H1 2019 - Banco Santander SA
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H1 2019 FIXED INCOME INVESTORS PRESENTATION Here to help you prosper
Important information
Non-IFRS and alternative performance measures
In addition to the financial information prepared in accordance with International Financial Reporting Standards (“IFRS”) and derived from our financial statements, this presentation contains
certain financial measures that constitute alternative performance measures (“APMs”) as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and
Markets Authority (ESMA) on 5 October 2015 (ESMA/2015/1415en) and other non-IFRS measures (“Non-IFRS Measures”). The financial measures contained in this presentation that qualify as
APMs and non-IFRS measures have been calculated using the financial information from Santander Group but are not defined or detailed in the applicable financial reporting framework and have
neither been audited nor reviewed by our auditors. We use these APMs and non-IFRS measures when planning, monitoring and evaluating our performance. We consider these APMs and non-
IFRS measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period. While we believe that these APMs and non-IFRS
measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute of IFRS measures. In addition, other companies,
including companies in our industry, may calculate or use such measures differently, which reduces their usefulness as comparative measures. For further details of the APMs and Non-IFRS
Measures used, including its definition or a reconciliation between any applicable management indicators and the financial data presented in the consolidated financial statements prepared under
IFRS, please see 2019 2Q Financial Report, published as Relevant Fact on 23 July 2019 and 2018 Annual Financial Report, filed with the Comisión Nacional del Mercado de Valores of Spain
(CNMV) on 28 February 2019. These documents are available on Santander’s website (www.santander.com).
The businesses included in each of our geographic segments and the accounting principles under which their results are presented here may differ from the included businesses and local
applicable accounting principles of our public subsidiaries in such geographies. Accordingly, the results of operations and trends shown for our geographic segments may differ materially from
those of such subsidiaries
Forward-looking statements
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”, “project”, “anticipate”, “should”, “intend”, “probability”, “risk”, “VaR”, “RoRAC”, “RoRWA”, “TNAV”, “target”, “goal”, “objective”,
“estimate”, “future” and similar expressions. 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 and our shareholder remuneration policy. 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.
The following important factors, in addition to those discussed elsewhere in this presentation, could affect our future results and could cause outcomes to differ materially from those anticipated in
any forward-looking statement: (1) general economic or industry conditions in areas in which we have significant business activities or investments, including a worsening of the economic
environment, increasing in the volatility of the capital markets, inflation or deflation, and changes in demographics, consumer spending, investment or saving habits; (2) exposure to various types
of market risks, principally including interest rate risk, foreign exchange rate risk, equity price risk and risks associated with the replacement of benchmark indices; (3) potential losses associated
with prepayment of our loan and investment portfolio, declines in the value of collateral securing our loan portfolio, and counterparty risk; (4) political stability in Spain, the UK, other European
countries, Latin America and the US (5) changes in laws, regulations or taxes, including changes in regulatory capital and liquidity requirements, including as a result of the UK exiting the
European Union and increased regulation in light of the global financial crisis; (6) our ability to integrate successfully our acquisitions and the challenges inherent in diverting management’s focus
and resources from other strategic opportunities and from operational matters while we integrate these acquisitions; and (7) changes in our ability to access liquidity and funding on acceptable
terms, including as a result of changes in our credit spreads or a downgrade in our credit ratings or those of our more significant subsidiaries. Numerous factors could affect the future results of
Santander and could result in those results deviating materially from those anticipated in the forward-looking statements. Other unknown or unpredictable factors could cause actual results to differ
materially from those in the forward-looking statements.
2Important information
Forward-looking statements speak only as of the date of this presentation and are based on the knowledge, information available and views taken on such date; such knowledge,
information and views may change at any time. Santander does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information,
future events or otherwise.
No offer
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 this presentation. No investment activity should be undertaken on the basis of the information
contained in this presentation. In making this presentation available Santander gives no advice and makes no recommendation to buy, sell or otherwise deal in shares in Santander or in
any other securities or investments whatsoever.
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. 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.
Historical performance is not indicative of future results
Statements as to historical performance or financial accretion are not intended to mean that future performance, share price or future earnings (including earnings per share) for any
period will necessarily match or exceed those of any prior period. Nothing in this presentation should be construed as a profit forecast.
3CONTENT
1. Markets and Macroeconomic Environment
2. Santander Business Model & Strategy
3. Capital
4. Asset Quality
5. Liquidity and Funding
6. Concluding Remarks
7. Appendix
4Markets and
Macroeconomic
Environment
01Markets and Macroeconomic Environment
Environment of subdued global growth weighed down by trade tariffs, global tech
supply chain concerns, Brexit and geopolitical tensions
IMF 2019 GDP Outlook1
Forecast for global economic growth in 2019: 3.2% (3.6% World Output 3.2%
in 2018), though estimations continue to be revised down Euro Area 1.3%
Mature economies are estimated to grow 1.9%, down from UK 1.3%
2.2% in 2018 as cyclical forces begin to wane United States 2.6%
LatAm and the Caribbean 0.6%
Developing economies will grow by around 4.1%, below the
Mexico 0.9%
4.5% 2018 growth as all regions were revised downwards
Brazil 0.8%
Santander is well-positioned for growth due to its balanced geographic diversification
AMERICAS EUROPE
(55% underlying attributable profit2) (45% underlying attributable profit2)
1. World Economic Outlook, July 2019 Update
2. Q2 2019 underlying attributable profit as a % of operating areas excluding SGP 6Markets and Macroeconomic Environment
The expansionary cycle in Spain is expected to continue, but at a slower pace
backed by employment creation, higher consumption and real estate recovery
Annual GDP Growth Contribution to GDP Growth
Real, % % YoY
6
3.2 3.0 4
2.6
2.3 2
1.9 1.7
0
-2
2016 2017 2018 2019 (e) 2020 (e) 2021 (e)
-4
2013 2014 2015 2016 2017 2018 2019(e) 2020(e) 2021(e)
Net external demand Domestic demand
Unemployment rate in Spain Housing sales and permits
% k
600 New building permits 120
19.6
17.2 550 110
Sales
14.4 100
13.9 13.0 500
12.2 90
450 80
400 70
60
350
50
300 40
2016 2017 2018 2019 (e) 2020 (e) 2021 (e) 250 30
* 12m rolling sum 7
Source: Santander Research Department, Bank of SpainMarkets and Macroeconomic Environment
Loan decrease and deposit building in Spain leading to the continued closing of
the funding gap and improved credit quality
Funding Gap Non-performing loans
EUR bn, Spanish system, latest available data May-19 EUR bn and %, Spanish system, latest available data May-19
250 16%
2,000 1,200
14%
1,750 1,000 200
12%
1,500 800 150 10%
8%
1,250 600
100 6%
1,000 400
4%
50
750 200 2%
0 0%
500 0
Dec-06
Dec-07
Dec-08
Dec-10
Dec-11
Dec-13
Dec-14
Dec-16
Dec-17
Dec-18
Dec-09
Dec-12
Dec-15
Jun-08
Jun-09
Jun-11
Jun-12
Jun-13
Jun-14
Jun-16
Jun-17
Jun-07
Jun-10
Jun-15
Jun-18
May-19
Dec-06
Dec-07
Dec-09
Dec-10
Dec-11
Dec-13
Dec-14
Dec-15
Dec-16
Dec-18
Dec-08
Dec-12
Dec-17
Jun-07
Jun-08
Jun-09
Jun-10
Jun-12
Jun-13
Jun-14
Jun-16
Jun-17
Jun-18
Jun-11
Jun-15
May-19
Total loans inc. reverse repos (LHS) Non-performing loans (LHS)
Total deposits inc. repos (LHS) NPL ratio (RHS)
Funding Gap (RHS)
Source: Bank of Spain and Santander calculations 8Markets and Macroeconomic Environment
UK economy relatively stable, however uncertainty remains
Annual GDP Growth Bank of England base rate
Real % Year end, %
1.8 1.8 0.75 0.75 0.75 0.75
1.4 1.6
1.2 0.50
2017 2018 2019 (e) 2020 (e) 2021 (e) 2017 2018 2019 (e) 2020 (e) 2021 (e)
Annual CPI inflation rate1 Average exchange rate
Annual average, % EUR/GBP
0.90
2.7 2.5 0.88
2.1 1.9 1.8
0.87 0.87 0.87
2017 2018 2019 (e) 2020 (e) 2021 (e) 2017 2018 2019 (e) 2020 (e) 2021 (e)
2016, 2017 and 2018 source: Office for National Statistics and Bank of England. 2019 (e), 2020 (e) and 2021 (e) source: Santander UK forecasts at June 2019 9
1. Consumer Price IndexMarkets and Macroeconomic Environment
Steady loan growth, deposit growth expected to continue
Total loans
GBP bn1
2,017 2,030
2,040 2,053 Mortgage lending growth at c.3% in 2019, with weaker buyer
2,000
demand and subdued house price growth likely to continue
Consumer credit growth has slowed from double-digit rates
3.8 3.9 3.9
YoY 3.7 3.9 to c.7%, and is expected to slow further to c.5% in 2019
(%)
Corporate borrowing market is expected to grow by c.2-3%,
as uncertainty continues to dampen investment intentions
Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 (e)
Total deposits
GBP bn2
1,947 1,947
1,978 Retail deposit growth is expected to be c.4% in 2019
1,909 1,921
Household saving ratio has fallen since the end of 2018 from
4.5% to 4.1% in Q1 2019 and remains low by historical
standards
YoY
(%) 3.6 3.6 3.6 3.6 3.6 Corporate deposit growth expected to remain at c.5%
Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 (e)
Source:Bank of England Bankstats (Monetary and Financial Statistics) published at end-Jun 2019, internal estimates for latest month. Annual growth rates are calculated using Bank of
England methodology. As a result, stated growth rates may differ from percentage change in assets
1. Total loans includes household (mortgages and consumer credit) plus corporate loans
10
2. Total deposits include household deposits (with banks and NS&I) and corporate deposits, excluding cash holdingsMarkets and Macroeconomic Environment
Gradual recovery in economic activity expected starting in 2020
Annual GDP Growth Interest rate – Selic
Real, % Year end, %
2.5
2.1
7.00 6.50 6.00 7.00
1.0 1.1 5.50
0.8
2017 2018 2019 (e) 2020 (e) 2021 (e) 2017 2018 2019 (e) 2020 (e) 2021 (e)
Annual inflation rate End of period exchange rate
IPCA, % BRL/USD
3.87 3.80 3.80 3.81
3.30
3.8 3.8 3.9 3.8
3.0
2017 2018 2019 (e) 2020 (e) 2021 (e) 2017 2018 2019 (e) 2020 (e) 2021 (e)
Sources: Brazilian Central Bank, IBGE and “Pesquisa Focus” estimates (July 12 2019). 11Markets and Macroeconomic Environment
Privately owned banks continue to support loan growth
Total loans
Constant EUR bn1
Loans slight following resumption of the Brazilian economy with
730 749 751 755
721
different dynamics in the segments.
5.7% 5.5% Loans to Individuals grew 9.9%, while Corporate & SME Loans
5.0%
YoY 3.8%
(%) 1.5% rose 0.3% (YoY).
Privately owned banks grew 13.2% YoY, while state-owned
banks dropped 1.2% YoY.
Jun-18 Sep-18 Dec-18 Mar-19 May-19
Total customer funds
Constant EUR bn1,2
1,743
1,684 1,708
1,651 Total customer funds increased 9.2%, mostly influenced by
1,602
YoY Time Deposits (+13.7%), Savings Deposits (+7.2%) and
7.8% 9.2%
(%) 6.3% 7.1% 7.1% Funds (+12.3%).
Jun-18 Sep-18 Dec-18 Mar-19 May-19
Source: Central Bank of Brazil
(1) End period exchange rate as of May-19.
12
(2) Total Deposits+ mutual funds + other funding (debentures, real estate credit notes - LCI, agribusiness credit notes - LCA, treasury notes (letras financeiras) and
Certificate of Structured Transactions - COEs).Markets and Macroeconomic Environment
US growth projected to slow as interest rates level off
GDP Growth Interest Rate
%, real %, period average1
2.60 2.55 2.55
2.9 2.31
2.5
2.2
1.7 1.5 1.26
2017 2018 2019 (e) 2020 (e) 2021 (e) 2017 2018 2019 (e) 2020 (e) 2021 (e)
CPI Inflation Rate USD/EUR Exchange Rate
%, period average Period end
1.20 1.14 1.14 1.13
1.10
2.4 2.3 2.3
2.1 1.9
2017 2018 2019 (e) 2020 (e) 2021 (e) 2017 2018 2019 (e) 2020 (e) 2021 (e)
Source: FRB, Knoema.com (U.S. IMF Forecasts), LongForecast.com, and estimates by Santander Research La Semana as of 12 July 2019. 13
1. 3-month LIBOR rate from ICE Benchmarking Administration.Markets and Macroeconomic Environment
Industry loan growth driven by commercial balances
Total loans Total deposits
USD bn 1 USD bn 1
10,155 10,150 13,866 13,926
9,942 13,529 13,469 13,574
9,755 9,859
YoY YoY 3.4% 3.5% 2.9%
4.9% 4.4% 4.1% 2.8% 2.7%
(%) 4.2% 4.0% (%)
Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19
Quarter over Quarter Jun-19
2 Jun-18 Sep-18 Dec-18 Mar-19
Growth % (est.)
Total Loans 4.8% 0.0% 11.6% (0.4%) 8.0%
C&I 7.6% 0.4% 24.4% 3.6% 2.0% Mortgages and C&I Loans projected to drive
Real Estate 1.2% (0.4%) (2.0%) (0.4%) 2.4%
growth in Q2 2019. Home equity continues to
Resi Mortgages 0.8% 2.8% (2.0%) (0.8%) 6.8%
CRE 6.8% (2.8%) 0.0% 2.0% (0.4%) decline
Home Equity (13.6%) (10.8%) (9.2%) (8.0%) (10.8%)
Deposits expected to grow in Q2 2019
Deposits (2.8%) 4.0% 15.6% (0.4%) 2.4%
Loan to Deposit Ratio 71.6% 70.9% 70.2% 70.3% 71.3%
Source: FDIC Statistics on Depository Institutions; data available one quarter in arrears.
1. Gross Loans. 14
2. Annualised large banks ending QoQ growth rate based on Federal Reserve data.Markets and Macroeconomic Environment
Economy expected to decelerate, with lower inflation and 8.00% benchmark rate
Annual GDP Growth Central Bank rate
Real, % Year end, % 8.25 8.00
7.25 7.50
7.00
2.1 2.0
1.7 1.7
1.0
2017 2018 2019 (e) 2020 (e) 2021 (e) 2017 2018 2019 (e) 2020 (e) 2021 (e)
Annual Inflation Rate Average Exchange Rate
% MXN/USD
20.5 20.8
6.8 18.9 19.2 19.7
4.8
3.9
3.5 3.5
2017 2018 2019 (e) 2020 (e) 2021 (e) 2017 2018 2019 (e) 2020 (e) 2021 (e)
Source: Deputy General Direction of Analysis, Strategy & Public Affairs 15Markets and Macroeconomic Environment
Softer system loan and deposit growth
Total loans
Constant EUR bn1
230 237 240 243 Consumer loans growing at a moderate pace reflecting
227
persistently high interest rates
YoY 11.6%
(%) 10.2% 9.3% 10.1% Deceleration in corporate loan growth
8.3%
Jun-18 Sep-18 Dec-18 Mar-19 May-19
Total customer deposits
Constant EUR bn1
225 224 232 233 236
Slower YoY deposit expansion mainly driven by lower growth
rates in demand deposits experienced since Q3’18
YoY 11.9%
9.6% Sequentially, softer deposit growth was mainly driven by
(%) 8.3% 8.4% 7.6%
term deposits while demand deposit growth was stable
Jun-18 Sep-18 Dec-18 Mar-19 May-19
(1) End period exchange rate as of May-19 16
Source: CNBV Banks as of May-19 (last available)Santander
Business Model &
Strategy
02Santander Business Model & Strategy
Our business model has unique competitive advantages
1
1 Our scale provides potential for organic growth
2 Unique personal banking relationships strengthen customer loyalty
Our geographic and business diversification and our model of
3 subsidiaries makes us more resilient under adverse circumstances
18Santander Business Model & Strategy
We have in-market scale in our core markets, with customers distributed across 1
geographies with high growth potential
Market shares Customers distributed across geographies
Jun-19
9%
Loans
1 Billion
9%
Deposits
Total Population
12%
18% Loans
3%
Loans
16%
12%
Deposits 142 mn
Loans
3%
Deposits Top 3 Total Customers
13% 17%
Loans Deposits Loans
Argentina; 3% Others; 1%
14% 19% Chile; 2% Spain; 10%
Deposits Deposits
10%
Loans SCF; 14%
11%
18% Deposits Brazil; 31%
Loans
17% 10%
Deposits Loans UK; 18%
12%
Deposits Poland; 3%
Mexico; 12%
US; 4% Portugal; 2%
Data: Market-share as at Mar-19 and the US latest available. The UK: includes London Branch. Poland: including SCF business in Poland. The US: in all states 19
where Santander Bank operates. Brazil: deposits including debenture, LCA (agribusiness notes), LCI (real estate credit notes), financial bills (letras financieras) and
COE (certificates of structured operations)Santander Business Model & Strategy
Focus on increasing customer loyalty via unique personal banking 2
relationships...
Total customers Loyal customers Loyal / Active
142 mn (+4%) 20.6 mn (+10%) customers
Individuals (mn) Companies (k)
+11% +7% 29% 30%
142 18.9 1,626 1,743
139 141 17.1
136 138
135 Jun-18 Jun-19
Increased loyalty ratio in
Q1'18 Q2 Q3 Q4 Q1'19 Q2 Jun-18 Jun-19 Jun-18 Jun-19 8 core countries
Note: Year-on-year changes 20Santander Business Model & Strategy
… together with increased digitalisation… 2
Digital customers1 # Accesses2 # Active transactions3
(online and mobile) (monetary and voluntary)
34.8 mn (+22%) 3,725 mn in H1’19 (+28%) 1,062 mn in H1’19 (+25%)
1,895 545
33.9 34.8 1,768 1,830 517
32.0 1,624 498
30.1 1,521 443 456
27.5 28.4 1,381 409
Q1'18 Q2 Q3 Q4 Q1'19 Q2 Q1'18 Q2 Q3 Q4 Q1'19 Q2 Q1'18 Q2 Q3 Q4 Q1'19 Q2
Note: YoY changes.
1. Data as of 30 June. Every natural or legal person that, being part of a commercial bank, has logged in to their personal area of internet banking or mobile phone (or both) in the
last 30 days. Digital customers in the last 90 days: 38.4 mn. 21
2. Private accesses. Logins of bank’s customers on Santander internet banking or apps. ATM accesses by mobile are not included.
3. Customer interaction through mobile or internet banking which resulted in a change of balance (monetary and voluntary). ATM transactions are not included.Santander Business Model & Strategy
… improves operational excellence by helping to deliver sustained top line 2
growth and increase cost savings
Increased customer revenue… …with better cost-to-income than peers1
Constant EUR mn Cost-to-income, Peers Mar-19, Santander Jun-19
47% 9 pp
better than
Peer 1 49% peer avg.
Net interest income
8,650 8,986
8,278 Peer 2 49%
Peer 3 53%
Peer 4 54%
Net fee income
2,843 2,917 2,946 Peer 5 56%
Peer 6 56%
Peer 7 57%
Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Peer 8 63%
Peer 9 70%
22
1. Peers included are: BBVA, BNP Paribas, Citibank, Credit Agricole, HSBC, ING, Itau, Scotiabank and UnicreditSantander Business Model & Strategy
Our geographic and business diversification, coupled with our subsidiaries 3
model…
Loan portfolio by country Loan portfolio by business
Breakdown of total gross loans excluding reverse repos, % of operating areas ex. SGP Breakdown of total gross loans excluding reverse repos, Jun-19
Jun-19
Argentina;
Other individuals;
Chile; 5% 1% Other S. Am.; 1% 11%
Brazil; 9% Spain; 22%
Mexico; 4% CIB; 12% Home
mortgages;
35%
US; 10%
SCF; 11%
Corporates;
Other Eur; 4% 14%
Portugal; 4%
Poland; 3%
UK; 26% SMEs; 11% Consumer;
17%
Total gross loans excluding reverse repos: EUR 899 bn
RWAs as of Jun-19: EUR 605 bn 88% of loan portfolio is Retail, 12% Wholesale
23Santander Business Model & Strategy
… with strong balance sheet growth… 3
Loans and advances to customers in core markets Customer funds in core markets
Jun-19 Jun-19
232 0% 317 +5%
201 -4% 205 +2%
SCF 101 +7% 121 +11%
90 +10% 70 +10%
78 +9% 42 +7%
41 +7% 42 +2%
37 -1% SCF 38 +3%
33 +8% 36 +22%
30 +26% 35 +5%
6 +14% 11 +40%
Group Group
899
899
896 +4% Total1 350
954 +6%
Total1
1. Group Total also includes Other Europe, Other South America, Santander Global Platform and Corporate Centre. 24
Note: Gross loans and advance to customers excluding reverse repos. Customer funds: deposits excluding repos + marketed mutual fundsSantander Business Model & Strategy
… and underlying attributable profit distributed across regions… 3
Underlying attributable profit distribution1 H1’19 Underlying attributable profit in core markets
% underlying profit, H1’19 EUR mn and % change vs. H1’18 in constant euros
1,482 +18%
Spain;
Brazil;
13% 694 +5%
29%
SCF 658 -1%
582 -13%
South Europe SCF;
America 13%
465 +30%
45%
38%
424 +12%
Chile; 6% North America
UK; 311 +4%
Argentina; 1%
17% 11%
260 +14%
Uruguay and
Andean Region;2 Portugal;
2% 5% 150 -1%
Mexico; Poland;
8% USA; 3%
9% 73 0%
1. Excluding Corporate Centre (EUR -1,108 mn) and Santander Global Platform (EUR -51 mn) 25
2. Uruguay and Andean Region underlying profit (EUR 95 mn)Santander Business Model & Strategy
… has allowed us to generate high and recurring pre-provision profit, leading to 3
resilient growth through the economic cycle…
Resilient profit generation throughout the cycle PPP/Loans well above most European peers1
Group attributable profit, EUR bn %, Jun-19, Santander calculations
Peer 1 3.1
2.8
9.1 8.9 8.9
8.2
Peer 2 2.6
7.6 7.8
6.6
6.0 6.2
5.3
5.8 Peer 3 2.3
4.2
Peer 4 2.0
2.3
Peer 5 1.9
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Peer 6 1.4
1. European peers include: BBVA, BNP Paribas, Credit Agricole, HSBC, ING and Unicredit 26Santander Business Model & Strategy
… and to generate stable and predictable growth 3
Predictable results with the lowest volatility among peers coupled with growth in earnings
Quarterly reported EPS volatility1, 1999-Q1’19
695% 344%
123%
108%
88%
76%
61%
44% 42%
34%
9%
US IT CH CH FR FR US US NL US
2x 2x 0x 0x 6x 4x 6x 4x 1x 10x 5x
Net income increase 1999-2018
1. Source: Bloomberg, with GAAP Criteria. Note: Standard deviation of the quarterly EPS starting from the first available data since Jan-99 27Santander Business Model & Strategy
The Group’s medium-term strategy is based on three main pillars
Improving operating performance
Our three-pillar
plan for Accelerating digitalisation:
building an open financial
increasing services platform
profitability
Continuing to improve
capital allocation
28Santander Business Model & Strategy
Improving operational performance: Further leveraging our diversification and
scale and adding value via our global businesses and shared capabilities
Accelerating growth Global capabilities to enhance operating
with sustainable profitability efficiency across the Group
USA Europe
Mexico
Building the leading European
bank in customer experience
and profitability, leveraging Medium-term efficiency
South
our scale & digital expected, mainly in Europe:
America
IT & Operations
A region with structural
growth and high and Shared services & Others
increasing profitability
29Santander Business Model & Strategy
Improving operational performance: Key regional expected levers
Europe North America South America
Low credit demand & rates: Attractive US market: better High structural growth
limited revenue growth… risk return dynamics. Mexico:
high growth potential
…and CoR at lows… Focus on customer
Benefitting from Group
scale and strong experience & digitalisation
…requires a cross-border operational leverage
approach in a fragmented High & sustainable revenue
market Volume growth expected to growth (double digit expected
be above the market to CAGR4)
Further operational drive higher revenues
integration and cost Organically deploying more
Stable cost to income
efficiencies (c.€1Bn) capital (>30% of RWAs in the
despite heavy investment
in Mexico medium-term)
Focus on customer
experience & digitisation Stable credit quality Stable credit quality
30Santander Business Model & Strategy
Accelerating digitalisation: creation of Santander Global Platform to accelerate
progress towards being the best open financial services platform in order to
improve customer experience and lower cost of delivery
Santander Global Platform (SGP)
Openbank Global Payments Services Digital Assets
Paymentsplatform
Payments platform to
to better
betterserve
serve
Fully digital banking platform Our common digital assets and
existing
existing andand
newnew customerswith
customers
and value proposition in our existing Centres of Digital Expertise help our
with best-in-class
best-in-class value
value propositions
propositions
markets and in new markets banks in their digital transformation
developed globally
developed globally
• Openbank • Superdigital • Digital assets – SaaS model1
• Open Digital Services (ODS) • Pago FX • Centres of Expertise2
• Global Merchant Services (GMS) • InnoVentures
• Global Trade Services (GTS)
1. SaaS: Software as a Service 31
2. Contact Centre Digitalisation; Conversion Rate Optimisation; Machine Learning; …Santander Business Model & Strategy
Continuing to improve capital allocation: executing the following levers to drive
further improvement in profitability, aligned with our strategic plan
Improved capital Capital Further alignment
allocation: efficiency: Digitalisation: of senior
more capital to our minimum profitability driving higher revenue management
most profitable thresholds and faster growth & operational remuneration with
geographies asset rotation efficiency capital goals
Higher profitability leads to higher capital generation capacity and potential
to increase growth & shareholder remuneration
32Capital
03Capital
Santander’s capital levels, both phased-in and fully loaded, exceed minimum
regulatory requirements
SREP capital requirements (phased-in) and MDA Assumed capital requirements (fully loaded)
Jun-19 Jun-19
14.83% 14.80% >15%
13.20% +163 bps 13.20% 2.00%
1.96% T2 +160 bps 2.07% T2
T2 2.00% 1.57% AT1 T2 2.00% 1.43% 1.50% AT1
AT1 1.50% +160 bps AT1 1.50% +160 bps
G-SIB buffer 1.00% G-SIB buffer 1.00%
CCyB; CCyB;
1
CCoB 2.50% 0.20% CCoB 2.50% 0.20%
11.30% CET1 11.30% 11-12% CET1
Pillar 2 R 1.50% Pillar 2 R 1.50%
Pillar 1 4.50% Pillar 1 4.50%
Regulatory Requirement Group ratios Jun-19 Assumed regulatory Group ratios Jun-19 Medium-term
2019 requirement Mar-19 target ratios
The minimum CET1 to be maintained by the Group as for 2019 AT1 and T2 issuance to target 1.5% and 2% of RWAs
following the results of the Supervisory Review and Evaluation respectively is close to zero assuming constant RWAs
Process (SREP) is 9.70% Santander currently complies with the minimum required
As of Jun-19, the distance to the MDA for 2019 is 160 bps2 eligible liabilities (MREL)3 following the MREL eligible
issuances over the last two years
Note: Data calculated using the IFRS 9 transitional arrangements.
1. Estimated Countercyclical buffer 2. MDA trigger = min (A;B;C) = 1.60%; (A) Group CET1 (11.30%) + AT1 (1.57%) + T2 (1.96%) vs. Regulatory Total Capital (13.20%) = 1.63%; 34
(B) Group CET1 (11.30%) + AT1 (1.57%) vs. Regulatory T1 Capital (11.20%) = 1.67%; (C) Group CET1 (11.30%) vs. Regulatory CET1 Capital (9.70%) = 1.60%.
3. Parent bank, preliminary dataCapital
We consistently generate capital organically
CET1 ratio
% 11.30 +0.29 +0.15 11.30
10.80 10.94
-0.08
-0.36
Jun-18 Dec-18 Regulatory Organic Perimeter and Market Jun-19
impacts1 generation restructuring and others
costs2
H1'19 H1'18 Diff.
CET1 ratio 10.80% 11.30% 50 bps
FL Total capital ratio 14.24% 14.80% 56 bps Santander has a high RoTE with strong capital quality:
FL Leverage ratio 4.98% 4.97% -1 bp • Equal density (40% vs 40% European peers)
RoRWA 1.55% 1.48% -7 bps • Similar FL leverage ratio (5.0% vs 5.4% European
RoTE 11.79% 10.51% -128 bps peers)
Density 41.48% 40.04% -144 bps
1. IFRS 16 (-19 bps); models and TRIM (-15 bps); Other (-2 bps) 2. Restructuring costs (-13 bps); Prisma (+2 bps); Other (+3 bps) 35
Note: 2019 data applying the IFRS 9 transitional arrangements. As indicated by the consolidating supervisor a pay-out of 50%, the maximum within the target range
(40%-50%), was applied for the calculation of the capital ratios in 2019. Previously, the average cash pay-out for the last three years was considered.Capital
2018 EBA stress test - Fully loaded CET1: adverse scenario
Fully loaded CET1: adverse scenario (%) FL CET1: 2017 vs 2020 adverse scenario (bps)
-141
-141 bps System: -395 bps -193
Peer average: -403 bps
-219
-265
-288
-334
10.61 9.20 -341
-363
-381
2017 2020 -437
-533
-576
Santander is the bank with lowest fully -625
loaded CET1 capital destroyed in the -657
adverse scenario compared to its peers -694
36Capital
2018 EBA stress test - Fully loaded CET1: baseline scenario
Fully loaded CET1: baseline scenario (%) FL CET1 2017 vs 2020 baseline scenario (bps)
326
+326 bps 233
199
196
175
13.87 113
10.61 108
102
102
2017 2020 82
62
System: 126 bps
59 Peer average: 114 bps
Santander is the bank with the strongest 43
capital generation in the baseline -45
scenario compared to its peers -52
37Capital
Strong fundamentals for AT1 bond holders
Distance to trigger1
Santander Group’s CET1 levels are well above the minimum loss absorption trigger of 5.125%: >EUR 37 bn
The first line of defense is the Group’s strong pre-provision profitability providing a high capacity to absorb provisions during crisis
periods
MDA
As of Jun-19, the distance to the MDA for 2019 is 1.60%2
Targeting a comfortable management buffer to MDA of >100 bps at all times, in line with Santander’s business model and
predictable results
ADIs
Santander Parent Bank has EUR 56.4 bn in Available Distributable Items
This amount of ADI represents more 110x times the 2019 full AT1 cost of the Parent
Santander has never been prohibited from making a Tier 1 payment or dividend due to insufficient ADIs. Santander has never
cancelled the payment of coupons of any of its Tier 1 securities
1. CET1 level below which AT1 capital instruments must either convert into ordinary shares or have their principal about written down 38
2. MDA trigger = min (A;B;C) = 1.60%; (A) Group CET1 (11.30%) + AT1 (1.57%) + T2 (1.96%) vs. Regulatory Total Capital (13.20%) = 1.63%; (B) Group CET1 (11.30%) +
AT1 (1.57%) vs. Regulatory T1 Capital (11.20%) = 1.67%; (C) Group CET1 (11.30%) vs. Regulatory CET1 Capital (9.70%) = 1.60%Capital
AT1 issuances distributed by call date
AT1 issuances outstanding at Jun-19
Nominal Reset
EUR mn Currency EUR Coupon Structure Call date Spread
Santander S.A. EUR 1,500 5.48% PNC5 12-Sep-19 541 bps
Santander S.A. EUR 1,500 6.25% PBC7 11-Sep-21 564 bps
Santander S.A. EUR 750 6.75% PNC5 25-Apr-22 680.3 bps
Santander S.A. EUR 1,000 5.25% PNC6 29-Sep-23 499.9 bps
Santander S.A. EUR 1,500 4.75% PNC7 19-Mar-25 409.7 bps
Santander S.A. USD 1,048 7.50% PNC5 8-Feb-24 498.9 bps
1,500 1,500 Call date 1,500
1,000 1,048
750
2019 2021 2022 2023 2024 2025
39Capital
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
11.30%1 rates on equity and dynamic on the countervalue of the
units’ annual results in euros
Mitigate impact of FX volatility
Corporate Centre assumes all hedging costs
Managed to mitigate FX volatility in our
CET1 ratio
Based on Group regulatory capital and
RWAs
1. Data calculated using the IFRS 9 transitional arrangements. 40Capital
… and interest rate risk hedging
Mostly positive interest rate sensitivity ALCO portfolios reflect our geographic diversification
Net interest income sensitivity to a +100 bp parallel shift Distribution of ALCO portfolios by country
EUR mn, Jun-19 %, Jun-19
Chile
4%
+1,1671 Brazil Spain
22% 24%
+55
+297 EUR 86 bn
Mexico
o/w HTC&S EUR 66 bn
5%
+1362 UK
19%
USA
12%
-66
Portugal Poland
5% 9%
1. Parent bank 41
2. SBNAAsset Quality
04Asset Quality
Continued credit quality improvement on a YoY and QoQ basis…
%
0.99 0.97 0.98
Cost of credit ratio flat YoY, maintaining
Cost of credit
low levels in H1’19
3.92
3.62 3.51
NPL ratio NPL ratio fell YoY in most markets
69 68 68
High level of allowances to total loans:
Coverage strong first line of defense
ratio
Jun-18 Mar-19 Jun-19
43Asset Quality
…to levels well below previous years, supported by generalised improvements
across geographies
Credit quality ratios NPL ratios by country
% %
Q2 2018 Q2 2019
Spain 7.62 7.02
4.08% 4.02% SCF 2.44 2.24
3.93% 3.92% 3.87%
UK 1.13 1.13
3.73%
3.62% Poland 4.58 4.21
NPL ratio 3.51% Portugal 7.55 5.00
US 2.91 2.32
Mexico 2.58 2.21
Brazil 5.26 5.27
1
2016 2017 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Chile 4.86 4.52
Argentina 2.40 3.79
Cost of credit ratios by country
1.18% %
Q2 2018 Q2 2019
1.07% Spain 0.36 0.41
1.04%
Cost of credit 0.99% 0.98% 1.00% 0.97% 0.98% SCF 0.37 0.36
UK 0.10 0.06
Poland 0.71 0.66
Portugal 0.10 0.03
USA 3.02 3.09
1
2016 2017 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Mexico 2.78 2.61
Brazil 4.30 3.84
Chile 1.18 1.10
1. Acquisition of Banco Popular in 2017
Argentina 2.47 4.33 44Liquidity and
Funding
05Liquidity 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-18
Santander S.A.1
Santander
Consumer Santander
Finance1 Holdings
USA Banco
Santander
UK Group Santander
Holdings Brasil
Santander Grupo
Bank Financiero
Banco Polska Mexico Banco
Santander Santander
Totta Chile Banco
SGPS, SA
Santander
Río
Legal autonomy: There are no legal commitments that entail financial support
Financial autonomy: Financial interconnections are limited and at market prices
Operational autonomy: Shared services are limited and carried out through autonomous factories. Access to FMIs through other
Group entities is very limited
1. Spain Resolution Group headed by Santander S.A. includes, among others, SCF 46Liquidity and Funding
… divided into different resolution groups that can be resolved separately
though multiple entry points
MPE resolution strategy
Dec-18, EUR bn
Banking Union European Union 3rd Countries
Spain1 Poland Brazil Mexico
Resolution Group PE PE PE PE
PE Point of Entry Portugal UK Chile Argentina
PE PE PE PE
USA
PE
Size of Resolution Groups (Total assets by geography)
163 118
709 Brazil USA
324
52 48 61 49 12
Spain1 Portugal United Kingdom Poland Mexico Chile Argentina
We have defined the Resolution Groups (RGs) mirroring the model of autonomous financial groups so that all entities have
been assigned to one RG
Each RG comprises the entity identified as the entry point in resolution and the entities that belong to it
1. Spain Resolution Group headed by Santander S.A. Includes, among others, SCF 47Liquidity and Funding
Santander follows an autonomous capital and liquidity model
Capital ratios by country
Jun-19, %, local figures (phased-in)
USA
UK
17.75
16.27 20.87
17.07
15.04
13.83
Portugal
20.11
Brazil 19.78
Poland
16.19
16.58 16.26
Mexico 15.11
14.45
16.50 14.02
13.16 Santander 14.45
S.A.
11.89
21.89
Argentina 19.75
Chile Total
13.93
13.13 17.55 T1
11.42
10.42
10.78 CET1
10.42
SCF: Total Capital Ratio: 14.75%; T1 13.96% and CET 1 12.37% 48Liquidity and Funding
Santander’s liquidity management is based on the following principles
Decentralised 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 of the balance sheet
Diversification of wholesale funding sources by instruments/investors, markets/currencies and maturities
Limited recourse to wholesale short-term funding
Availability of sufficient liquidity reserves, including the discount window / standing facility in central banks to be
used in adverse situations
Compliance with regulatory liquidity requirements both at Group and subsidiary level, as a new conditioning
management factor
49Liquidity and Funding
Conservative and decentralised liquidity and funding model
EUR 19 bn1 issued in public markets in 2019 YTD Very manageable maturity profile
EUR bn, Jun-19 EUR bn, Jun-19
40.4
6.9 9.1 7.8
6.3
San S.A. 1.6 3.4
5.4
4.3 5.8 4.6
SCF 1.2 3.0 2.4 3.1
3.1
4.7 2.4 18.4
2019 2020 2021
12.4 2022 2023 2023+
1.0 11.9
1.1
UK 3.0 3.0 4.8
0.9 2.3
2.1
1.5
0.7 0.2 2019 2020 2021 2022 2023 2023+
Spain UK SCF USA Other Brazil 4.4
1.1 1.2 0.2 0.0 0.0
2019 2020 2021 2022 2023 2023+
Other public market issuances in Brazil and Chile
USA 0.7 1.2 0.9 1.6 0.9 2.9
2019
2019 2020
2020 2021
2021 2022
2022 2023
2023 2023+
2023+
50
1. Data include public issuances from all units with period-average exchange rates. Excludes securitisationsLiquidity and Funding
Santander S.A. funding plan
Santander S.A. meets current MREL
2018 2019 2019
requirement1 and Group capital
EUR bn issued issued YtD issuance plan 2
buffers (AT1: 1.5%; T2: 2%)
Covered bonds 1.6 1.5 3-5
Senior preferred 0.5 4.3 3-5
Senior non-preferred 6.1 0.0 --
Hybrids 2.8 1.1
3
1.5* During the last 2 years Santander
S.A.’s Funding Plan was focused on
TOTAL 10.9 6.9 7.5 - 11.5 TLAC-eligible instruments…
o/w Subordinated 8.9 1.1 1.5
… and in 2019 the Funding Plan is
expected to cover debt maturities,
and manage our funding structure
1. Santander’s understanding of current policy under the existing recovery and resolution rules
2. Issuance plan subject to, amongst other considerations, market conditions and regulatory requirements 51
3. EUR 1.1 bn AT1 issued in February 2019 however EUR 1.3bn AT1 amortised in Q2 2019
* Net issuance. Includes AT1 (EUR 500 mn) and T2 (EUR 1 bn)Liquidity and Funding
Issuances show diversification across instruments and entities
Debt outstanding by type Debt outstanding by issuer entity
EUR bn and %, Jun-19 EUR bn and %, Jun-19
Preference shares; Other;
9.6; 6% 6.8; 4%
USA; 8.2; 5%
Sub debt;
12.8; 7% Brazil; 7.0; 4%
Chile; 10.8; 6%
Senior non-
Senior; San S.A.;
preferred; SCF;
68.6; 39% 68.5; 39%
35.2; 20% 20.1; 11%
Covered bonds; UK; 53.4;
48.6; 28% 31%
52Liquidity and Funding
Well-funded, prudent and highly liquid balance sheet with high contribution from
customer deposits and diversified wholesale instruments
Liquidity Balance Sheet
EUR bn, Jun-19 1,215 1,215 Liquidity Coverage Net Stable Funding
Ratio (LCR) 1 Ratio (NSFR)
Jun-19 Mar-19
Loans and Customer
advances to 815 deposits 155% 113%
908
customers
Group
2
54 Securitisations and others 158% 122%
175 M/LT debt issuances
Financial assets 206
33 ST Funding
Fixed assets & other 100 138 Equity and other liabilities
Assets Liabilities 153% 109%
HQLAs3
EUR bn, Jun-19 HQLAs Level 1 189.8 2
156% 104%
HQLAs Level 2 15.0
Level 2A 7.3
Level 2B 7.7
Note: Liquidity balance sheet for management purposes (net of trading derivatives and interbank balances)
1. Provisional data 53
2. Spain: Parent bank, UK: Ring-fenced bank
3. 12 month average, provisionalLiquidity and Funding
The main metrics show the strength and stability the Group’s liquidity position
Evolution of key liquidity metrics1 LTD and MLT funding metrics by geography
Jun-19
(Deposits + M/LT
2015 2016 2017 2018 Jun-19 LTD Ratio funding) / Loans 2
2
Loans / net assets 75% 75% 75% 76% 75% Spain 77% 165%
2
SCF 260% 66%
Loan-to-deposit ratio (LTD) 116% 114% 109% 113% 111% UK 119% 108%
Customer deposits and medium- Poland 90% 117%
2 114% 114% 115% 114% 115%
and long-term funding / loans Portugal 92% 119%
Short-term wholesale funding / USA 145% 109%
2% 3% 2% 2% 3%
net liabilities Mexico 98% 110%
Structural liquidity surplus / net Brazil 98% 125%
14% 14% 15% 13% 14%
liabilities Chile 148% 95%
3
Encumbrance 26% 25% 28% 25% 25% Argentina 61% 167%
GROUP 111% 115%
1. Balance sheet for liquidity management purposes 54
2. Loans and advances to customers
3. Latest data Mar-19Liquidity and Funding
Banco Santander S.A. ratings
Moody's S&P Fitch
Date last Direction Date last Direction Date last Direction
Rating Rating Rating
change last change change last change change last change
Covered Bonds Aa1 17/04/2018 ↑ - - - AA 15/01/2019 ↑
Senior Debt (P) A2 17/04/2018 ↑ A 05/04/2018 ↑ A 17/07/2018 ↑
Senior Non-preferred Baa1 27/09/2017 ↑ A- 04/06/2018 ↑ A- 09/02/2017 Initial
Subordinated (P) Baa2 04/03/2014 ↑ BBB+ 04/06/2018 ↑ BBB+ 29/05/2014 ↑
AT1 Ba1 17/07/2014 ↑ - - - BB 29/05/2014 ↑
Short Term Debt P-1 17/04/2018 ↑ A-1 06/04/2018 ↑ F2 11/06/2012 ↓
55Liquidity 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 06/04/2018 ↑ STABLE A 17/07/2018 ↑ STABLE
San UK PLC Aa3 21/12/2016 ↑ POSITIVE A 09/06/2015 ↑ STABLE A+*- 01/03/2019 ↓ -
San UK Group Holding PLC Baa1 16/09/2015 ↑ POSITIVE BBB 10/04/2015 ↑ STABLE A*- 01/03/2019 ↓ -
Santander Consumer Finance SA A2 17/04/2018 ↑ STABLE A- 06/04/2018 ↑ STABLE A- 29/05/2014 ↑ STABLE
Banco Santander Totta SA Baa3 16/10/2018 ↑ STABLE BBB 18/03/2019 ↑ STABLE BBB+ 21/12/2017 ↑ STABLE
Santander Holding US Baa3 18/10/2016 ↓ STABLE BBB+ 06/04/2018 ↑ STABLE BBB+ 17/11/2017 ↑ STABLE
Banco Santander Mexico A3 14/06/2016 ↑ STABLE - - - - BBB+ 13/06/2012 ↓ STABLE
Banco Santander Chile A1 27/07/2018 ↓ STABLE A 04/08/2017 ↑ STABLE A 17/08/2017 ↓ STABLE
Santander Bank Polska A3 03/06/2019 ↑ STABLE - - - BBB+ 18/09/2018 Initial STABLE
Banco Santander Brasil Ba1 25/02/2016 ↓ STABLE BB- 12/01/2018 ↓ STABLE - - -
Kingdom of Spain* Baa1 13/04/2018 ↑ STABLE A-u 23/03/2018 ↑ POSITIVE A- 19/01/2018 ↑ STABLE
Note: Santander Mexico decided to withdraw the S&P ratings 56Concluding
Remarks
06Concluding 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 market
positions in areas where it operates and independent subsidiary model in terms of capital and liquidity
The Group is above the regulatory capital requirement with significant payment capacity from available distributable
items, while maintaining comfortable margins to conversion and MDA triggers
Santander S.A. already meets with its MREL requirements1 and Group capital buffers
Comfortable liquidity position: Compliance with regulatory liquidity requirements established at Group and
subsidiary levels ahead of schedule, with high availability of liquidity reserves
1. Parent bank, preliminary data 58Appendix
07Appendix: H1’19 P&L
H1’19 underlying P&L YoY performance
H1’19 H1’18 % vs. H1’18
EUR million Constant
Euros
euros Higher customer revenue due to
Net interest income 17,636 16,931 4 6 increased business volumes and
spread management
Net fee income 5,863 5,889 0 2
Lower market revenue and
Gains on fin. trans. and other 937 1,342 -30 -29 higher cost of FX hedging
Total income 24,436 24,162 1 3
Operating expenses -11,587 -11,482 1 2 Cost control with an individualised and
targeted cost management across the board
Net operating income 12,849 12,680 1 3
Loan-loss provisions -4,313 -4,297 0 1 Good credit quality evolution,
Other results -957 -903 6 10 with low cost of credit and better NPL ratio
Underlying PBT 7,579 7,480 1 3
Taxes -2,679 -2,659 1 3
Minority interests -855 -769 11 11
Underlying attributable profit 4,045 4,052 0 2
Net capital gains and provisions1 -814 -300 171 171 XXXXXX
Mainly restructuring costs
Attributable profit 3,231 3,752 -14 -12
60Appendix: Costs
Costs (-1.8% YoY in real terms) reflect the first integration synergies, maintaining a
best-in-class cost-to-income ratio and high quality customer service
Cost evolution
H1’19 vs. H1’18, % Nominal In real terms1 Targeted cost management by geographies:
-7.3 -8.8
Europe: -3.2% cost reduction in real terms, enhancing
SCF 2.0 0.3 operating efficiency
-0.6 -2.8 Better operational leverage in the US, while we are
2
12.0 10.3 investing to update distribution capacity in Mexico
-3.8 -4.7 Costs under control in the South American markets
0.1 -2.0 SGP up EUR 46 mn due to the higher ongoing
7.1 2.6 investments in its initial stage
3.1 -1.2
1.7 -0.8
Costs in real terms Cost-to-income
89.0 41.3 -1.8% YoY 47.4% in H1’19
-9.1 -10.6
Note: Constant euros 1. Excluding inflation 2. Impacted by DB Polska integration. Efficiency ratio improved 0.6 pp 61Appendix: Profitability
Creating shareholder value whilst maintaining high profitability
TNAV per share Profitability ratios
EUR
Underlying RoTE1 Underlying RoRWA1
4.30 12.1% 11.7% 1.59% 1.62%
4.19
4.10
Jun-18 Dec-18 Jun-19 2018 H1'19 2018 H1'19
1. Statutory RoTE 2018 11.7% and H1’19 10.5%. Statutory RoRWA 2018 1.55% and H1’19 1.48%
Notes: : The averages for the H1 RoTE and RoRWA denominators are calculated on the basis of 7 months from December to June.
For periods of less than a year, and in the event of non-recurring results existing, the profit used to calculate the statutory RoTE is the annualised underlying attributable profit
(excluding non-recurring results), to which are added non-recurring results without annualising them. 62
For periods of less than a year, and in the event of non-recurring results existing, the profit used to calculate the statutory RoRWA is the annualised underlying consolidated result
(excluding non-recurring results), to which is added non-recurring results without annualising them.Appendix: Balance sheet size and profits by geography
Total assets and profit generation by geography
Total assets by geography Profitability by geography
Constant EUR bn, Jun-19 Underlying attributable profit in constant EUR mn, Underlying RoTE in %, H1’19
YoY Change ex. FX YoY Change ex. FX
Total abs. % Total abs. % RoTE
Spain 344,831 -14,861 -4.1 Spain 694 33 5.0 9.3
SCF 112,622 8,875 8.6 SCF 658 -9 -1.4 15.4
UK 327,109 -14,863 -4.3 UK 582 -83 -12.5 7.8
Poland 44,591 9,409 26.7 Poland 1 150 -5 -3.1 9.6
Portugal 56,747 634 1.1 Portugal 260 31 13.5 12.5
USA 142,572 19,824 16.2 USA 2 465 131 39.4 6.4
Mexico 66,930 867 1.3 Mexico 424 68 19.0 20.5
Brazil 1,482 165 12.6 21.6
Brazil 172,869 13,027 8.1
Chile 311 4 1.3 17.6
Chile 56,203 6,179 12.4
Argentina 73 -63 -46.4 17.0
Argentina 12,903 4,065 46.0
1. Adjusted RoTE for 11.30% CET1, 17% 2. Adjusted RoTE for 11.30% CET1, 11% 63Appendix: UK loan portfolio: Mortgage and Corporate RE
Credit quality remains very strong, supported by our prudent approach to risk
Credit impairment losses and cost of risk Prudent mortgage lending criteria
Cost of risk (%)
Dec-18 H1 2019
0.10 Average LTV on new lending 63% 64%
0.08 0.07 > 85% LTV 17% 21%
0.02 > London 58% 60%
Stock 42% 42%
Credit impairment losses (GBP million) Mortgage loan loss allowance and gross write-offs (GBP million)
9x1 10x 13x
Gross write-offs
279 Loan loss allowance
225 237
214
203
153
67 69
33 22 18 6
Dec-16 Dec-17 Dec-18 H1 2019 2016 2017 2018 H1 2019
1. Illustrates how many times the current value of write-offs would be covered by the current stock of mortgage impairment loan loss allowances, crystallised during the year. 64Appendix: UK loan portfolio: Mortgage and Corporate RE
Prime residential mortgage book of GBP 159.4 billion
Residential mortgage portfolio of GBP 159.4 bn Geographical distribution
(stock %, Jun-19) (stock %, Jun-19)
10
31
Fixed rate 15
25
Product 14 13
Variable rate 11
profile 75 4 2
Standard Variable Rate
South East London North Midlands South West, Scotland Northern
and East Wales and Ireland
Anglia Other
Prime London Lending
6
Home movers Central Prime Prime Prime
18 Fringe Central
Remortgagers Asset (£bn) 39.8 1.85 1.10 0.27
Borrower
profile 43
First time buyers Ave Loan 203k 288k 325k 411k
Buy to Let (BTL) Volume 196k 6.42k 3.40k 661
33
% >75LTV 11% 10% 6% 8%
% >90LTV 1% 1% 1% 3%
65Appendix: Glossary
Glossary and Acronyms
ADIs: Available distributable items MPE: Multiple Point of Entry
bn: Billion MREL: Minimum Required Eligible Liabilities
bps: Basis points NII: Net interest income
BTL: Buy-to-Let NPL: Non-performing loans
CCoB: Capital Conservation Buffer PBT: Profit before tax
CCyB: Countercyclical buffer P&L: Profit and loss
CET1: Common equity tier 1 PPP: Pre-Provision Profit
CIB: Corporate & Investment Banking QoQ: Quarter-on-Quarter
DGF: Deposit Guarantee Fund RoRWA: Return on risk-weighted assets
DPS: Dividend per share RWA: Risk-weighted assets
EPS: Earning per share RoTE: Return on tangible equity
FL: Fully loaded SCF: Santander Consumer Finance
G-SIBs: Global Systemically Important Banks SMEs: Small and Medium Enterprises
HTC: Held to collect portfolio SRF: Single Resolution Fund
HTC&S: Held to collect & sell portfolio ST: Short term
k: thousands SVR: Standard variable rate
LTV: Loan-to-Value TDR: Troubled Debt Restructuring
LLPs: Loan-loss provisions TLAC: Total Loss-Absorbing Capacity
MDA: Maximum distributable amount TNAV: Tangible net asset value
M/LT: Medium- and long-term YoY: Year-on-Year
mn: Million
66Thank you. Our purpose is to help people and business prosper. Our culture is based on believing that everything we do should be
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