Strategic and Financial Analysis. Financial Division Institutional Presentation H1’20
Index 1 Our business model and strategy 2 Group structure and businesses H1’20 results & activity and key takeaways 3 4 Links to Grupo Santander public materials 2
1. Our business model and strategy
Santander, a leading financial group H1’20 Highlights Our strategy is built around a virtuous circle based on loyalty Total assets (EUR billion) 1,573 … more motivated and ... make our customers more Customer loans (EUR billion excluding reverse repos) 909 engaged employees ... satisfied and loyal ... Customer deposits + mutual funds (EUR billion excluding repos) 958 Branches 11,847 People Customers H1’20 Net operating income (pre -provision profit) (EUR million) 11,865 H1’20 Underlying attributable profit (EUR million) 1,908 Market capitalisation (EUR billion; 30-06-20) 36 People (headcount) 194,284 Communities Shareholders ... resulting in higher investment ... which drives profitability Customers (millions) 146 in the community … and sustainable growth ... Shareholders (millions) 4.1 Simple Personal Fair Communities in 2019 (million people financially empowered) 2.0 4 Note: H1 ’ 20 attributable profit of EUR -10,798 million
The Santander Way We continue to do business in a more responsible and sustainable way OUR PURPOSE To help people and businesses prosper To be the best open financial services platform , by acting OUR AIM responsibly and earning the lasting loyalty of our people, AS A BANK customers, shareholders and communities Everything we do should be OUR HOW Simple Personal Fair 5
Santander business model Our business model drives predictable and profitable growth 1 SCOPE Local scale and global reach 2 Unique personal banking relationships CUSTOMER FOCUS strengthen customer loyalty 3 Our geographic and business diversification DIVERSIFICATION make us more resilient under adverse circumstances 6
Scope 1 Local scale based on three geographic regions with global reach backed by our global businesses Europe Market shares 3% 10% Loans Loans 12% North America 3% 8% Loans Deposits Deposits 11% Top 7 in retail 18% Deposits Global businesses (SCIB and WM&I) Loans auto lending Top 3 13% 15% auto Loans Deposits finance 14% 18% Deposits Loans 19% South America Deposits 11% Loans Santander Global Platform 18% 11% Loans Deposits 17% Deposits 10% Loans 11% SGP Deposits We maintain a leadership position Enabling greater collaboration across the Group in our 10 core markets to generate higher revenue and efficiencies 7 Market share data: as at Mar-20 and the US, Argentina, Spain and SCF latest available. The UK: includes London Branch. Poland: including SCF business in Poland. The US: in all states where Santander Bank operates. Brazil: deposits including debenture, LCA (agribusiness notes), LCI (real estate credit notes), financial bills ( letras financeiras ) and COE ( certificates of structured operations )
Customer focus 2 Customer satisfaction is essential to build loyalty Customers by market , Jun-20 Argentina 3% Others 2% Spain 9% Chile 2% SCF 13% Top 3 in NPS 1 in Brazil 32% 5 countries UK 17% Poland 3% Mexico 13% Portugal 2% US 4% 146 million customers, The trust and loyalty of in markets with a total population our customers are the most important of more than one billion assets for Santander 8 (1) NPS = Net Promoter Score. Customer Satisfaction internal benchmark of active customers audited by Stiga / Deloitte (2) Active customer who receive most of their financial services from the Group according to the commercial segment to which they belong. Various engaged customer levels have been defined taking profitability into account
Customer focus 2 Unique personal banking relationships with over 100,000 people talking to our customers every day in our branches and other customer support services Customer support 31% services 21.5 mn (+4%) Loyal/active Loyal customers customers Available anytime, Collaborative spaces and anywhere, anyhow increased digital capabilities Branches: c.12,000 The largest branch network in the international banking world 1 19.7 mn (+4%) 1.8 mn (+4%) Santander Smart and Ágil branches Individuals Companies 9 Note: data as of Jun-20 and year-on-year changes (1) Excluding Chinese banks and Sberbank of Russia
Customer focus 2 Digital adoption has accelerated resulting in increased mobile customer base and digital sales penetration 39.9 mn 32.2 mn Digital technology boosting financial access (+15%) (+22%) Digital customers 1 Mobile customers Traditional banking Digital banking Branches, ATMs, Internet, mobiles, tablets, retail agents, … smartphones and smartwatches… 47% +27% YoY +23% YoY Guaranteeing access for all segments Digital sales 2 # Accesses 3 # Transactions 4 Sparsely populated communities Low-income communities as % of total sales (online & mobile) (monetary & voluntary) Most vulnerable groups University students Note: data as of Jun-20 and year-on-year changes 10 (1) Every physical or legal person, that, being part of a commercial bank, has logged in its personal area of internet banking or mobile phone or both in the last 30 days (2) Percentage of new contracts executed through digital channels during Q2’20 (3) Private accesses. Logins of bank’s customers on Santander internet banking or apps. ATM accesses by mobile are not included (4) Customer interaction through mobile or internet banking which resulted in a change of balance. ATM transactions are not included
Diversification 3 Geographic diversification in three regions, with a good balance between mature and developing markets Jun- 20 Group’s contribution 3 by regions Contribution to H1’20 underlying attributable profit 1 Spain; 8% Braz il; 32% Customer loans Customer funds S CF; 15% South Eur ope South South America 35 % America America 45% 16% 13% UK; 5% SGP 1% N orth Europe North America Europe North Portugal; 5% America Chile; 6% America 20% 70% 73% 13% 14% Poland; 2% Argentina; 4% US; 7% Other South Mexico; 13% America; 3% 2 Well-balanced profit distribution Higher exposure in Europe, greater between Europe and the Americas. opportunity to grow in the Americas S CIB and WM&I contribution: 44% 11 (1) As a % of operating areas, excluding Corporate Centre and Santander Global Platform (2) Uruguay, Peru and Colombia (3) As a percentage of operating areas Note: customer loans excluding reverse repos. Customer funds: customer deposits excluding repos + marketed mutual funds
Diversification 3 Business diversification among customer segments (individuals, SMEs, corporates and large corporates) Customer loans by business, Jun-20 Customer funds by business, Jun-20 Other individuals, 10% Home mortgages, Indivi duals demand 35% de posits, 38% SCIB, 11% SCIB, 13% Corporates, 14% Loa ns Customer fun ds Corporates, 13% Individuals time deposits, 9% SMEs, 12 % SMEs, 12% Consumer, 17% Individuals mutual Consumer, 4% funds, 12% 12 Note: customer loans excluding reverse repos. Customer funds: customer deposits excluding repos + marketed mutual funds
The strength of our model drives resilient and stable growth Recurring pre-provision profit with the lowest earnings per share volatility Pre-provision profit, EUR bn EPS volatility calculated using quarterly data from Jan- 99 to Q1’20 1 26 26 25 24 24 24 24 23 23 23 20 18 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Pre-provision profit / loans 3.03% 3.28% 3.26% 3.25% 3.06% 2.94% 3.04% 2.90% 2.83% 2.97% 2.89% 2.80% Net profit increase 1999-2019 Cost of credit 2.44% 1.69% 1.43% 1.25% 1.18% 1.07% 1.00% 1.00% 1.02%1.36% 1.40% 1.65% 13 (1) Source: Bloomberg, with GAAP criteria. Standard deviation of the quarterly EPS starting from the first available data since Jan-99
The Group’s medium -term strategy is based on three main pillars to drive profitable growth in a responsible way Improve operating Optimise capital Accelerate performance allocation digitalisation Continue building a more Responsible Bank 14
Improving operational performance: Further leveraging our diversification and scale and adding value via our global businesses and shared capabilities Global capabilities to enhance operating Accelerating growth efficiency across the Group with sustainable profitability Europe North America Building the leading European bank in customer Medium-term efficiency expected, experience and profitability, mainly in Europe: leveraging our scale & digital South America IT & Operations A region with structural Shared services & Others growth and high profitability 15
Continuing to improve capital allocation: Ongoing capital allocation optimisation to improve profitability Rebalancing to Improved pricing, Active management more profitable processes and and senior team regions and governance alignment businesses Strong profitability improvement leading to higher capital generation capacity 16
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