portugal 3t 2020 - santander · 2020. 11. 16. · santander has been named as one the 25...

27 October 2020

Portugal

9M’20

Earnings Presentation

2

Important InformationNon-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 certainfinancial 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 measureshave 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 byour 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 formanagement and investors to facilitate operating performance comparisons from period to period, as these measures exclude items outside the ordinary course performance of our business, which aregrouped in the “management adjustment” line and are further detailed in Section 3.2 of the Economic and Financial Review in our Directors’ Report included in our Annual Report on Form 20-F for the yearended 31 December 2019. 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 notmeant 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 comparativemeasures. 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 theconsolidated financial statements prepared under IFRS, please see the 2019 Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on 6 March 2020, as well as the section“Alternative performance measures” of the annex to the Banco Santander, S.A. (“Santander”) Q3 2020 Financial Report, published as Inside Information on 27 October 2020. These documents areavailable on Santander’s website (www.santander.com). Underlying measures, which are included in this presentation, are non-IFRS measures.

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 applicableaccounting 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 suchsubsidiaries

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 futurebusiness development and economic performance and our shareholder remuneration policy. While these forward-looking statements represent our judgment and future expectations concerning thedevelopment 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 importantfactors, 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-lookingstatement: (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 thevolatility of the capital markets, inflation or deflation, changes in demographics, consumer spending, investment or saving habits, and the effects of the COVID-19 pandemic in the global economy; (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) potentiallosses 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, otherEuropean 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 theEuropean 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 andresources 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.

http://www.santander.com/

3

Important Information

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 orunpredictable factors could cause actual results to differ materially from those in the forward-looking statements.

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 viewsmay 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 documentpublished 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 andonly 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 onthe 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 availableSantander 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 UnitedStates 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 orinducement 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 willnecessarily match or exceed those of any prior period. Nothing in this presentation should be construed as a profit forecast.

Third Party Information

In particular, regarding the data provided by third parties, neither Santander, nor any of its administrators, directors or employees, either explicitly or implicitly, guarantees that these contents are exact, accurate, comprehensive or complete, nor are they obliged to keep them updated, nor to correct them in the case that any deficiency, error or omission were to be detected. Moreover, in reproducing these contents by any means, Santander may introduce any changes it deems suitable, may omit partially or completely any of the elements of this document, and in case of any deviation between such a version and this one, Santander assumes no liability for any discrepancy.

4

Index

1

Financial system

2

Strategy and business

3

Results

4

Concluding remarks

5

Appendix

5

Financial system

Credit dynamics reflect COVID-19 measures: loans with state guarantees and moratoria

Total loans (EUR bn)

YoY (%)

214.6212.3

213.9

217.6 218.6

-1.8-1.3

-0.3

0.8

1.7

Sep-19 Dec-19 Mar-20 Jun-20 Jul-20

Total deposits (EUR bn)

YoY (%)

236.0 236.6 240.5247.8 249.7

3.0 3.43.7

4.95.8

Sep-19 Dec-19 Mar-20 Jun-20 Jul-20

Loans have increased given the support measures adopted to mitigate the COVID-19 effects: (i) around EUR 7 bn of credit lines with state guarantees for the corporate sector; and (ii) moratoria on loans to households and corporates

Deposits accelerated, reflecting (i) lower spending by households, due to precautionary saving and less spending on leisure activities; and (ii) higher deposits from corporates, associated with credit lines

Source: Statistics Portugal, Ministry of Finance, Santander Portugal forecasts and estimates.

6

Index

1

Financial system

2


3

Results

4

Concluding remarks

5

Appendix

7


Santander Totta is the largest privately-owned bank in Portugal by assets and loans

KEY DATA* 9M’20 YoY Var.

Customer loans1 EUR 38.6 bn

Customer funds2 EUR 43.2 bn

Underlying att. profit EUR 243 mn

Underlying RoTE 8.5% -3.7 pp

Efficiency ratio 45.1% +32 bps

Loans market share3 17.9% +15 bps

Deposits market share3 15.4% -32 bps

Loyal customers 800 k

Digital customers 903 k

Branches 499

Employees 6,431

+16.8%

-9.1%

-3.7%

+5.8%

+2.4%

+3.3%

-36.9%

STRATEGIC PRIORITIES

Deepen the digital and commercial transformation of the Bank to make it simpler, agile and closer to customers

Maintain an appropriate risk policy, with enhanced follow-up procedures, to keep the cost of credit under control

Remain focused on gaining profitable market share, improving our position as leading private sector bank and leveraging our position in the corporate sector, especially in SMEs

Improve efficiency, leveraging the digital capabilityto betterserve customers

Maintain a solid capital and liquidity position, inthe currentchallenging environment

(1) Excluding reverse repos.(2) Excluding repos.(3) As at Jun-20.

8


Reinforced focus on digital customers is supporting the increase in customer loyalty

Loyal (k)

775800

Sep-19 Sep-20

Loyal / Active: 47% (+2 pp YoY)

Digital customers (k)

773

903

Sep-19 Sep-20

Digital sales / total: 39% (+5 pp YoY)

3%

17%

The customer oriented strategy continues to support the sustained growth in the number of loyal customers, both at the level of individuals (+3% YoY)…

… and also in the corporate segment (+7% YoY), where the increase in loyal customers is aligned with the market shares in new lending

The extensive offer of digital functionalities allowed the Bank to continue to provide its support to individual and corporate customers, during the pandemic

The number of digital customers has accelerated its growth, to 903 k (+17% YoY) by the end of Q3, while digital sales represented 39% of total sales

Mobile customers were up 30% YoY

9


Retail and digital services

Awards

Santander has been named as one the 25 “World’s Best Workplace 2020”Santander Portugal is the Best Bank to Work for in Portugal

Individuals

Santander customers can open their 1|2|3 Account online, and request a debit card

Corporates

Santander Portugal provides its customers the Santander Financiamentocom Garantia – Linha FEI AGRI, to provide an additional credit line to support investments in the Agriculture sector

Digital Payments

Santander Portugal’s customers can make their payments securely using Apple Pay.

Insurance

Santander Portugal and MAPFRE constitute a joint-venture to reinforce the offer of non-life insurance to Santander’s customers, including auto and solutions for SMEs

Responsible banking

The Santander NOVA Collaborative Research Programme rewards projects related to the post-COVID-19 rehabilitation of patients and to Artificial Intelligence

Euromoney named Santander as “Best Bank in the World for SMEs” and for “Diversity and Inclusion”

University students can also open an account online, using videocall or “digital mobile key”, and request their #Global U debit card

Apple Pay is available for contactless payments using the iPhone or the Apple Watch.

Customers can also pay for online shopping with iPhones, iPads and Macs.

Santander Portugal’s customers can subscribe online the SafeCare SaúdeViva Mais health insurance, which provides additional coverage in case of serious illness.

Santander launched the first online programme of the “Bolsas Emerging Leaders”, to support Women Excellence and Leadership

10


We continue doing business in a more responsible and sustainable way

CultureGreat Place to Work

➢ Best Bank to Work in Portugal for the 4th consecutive year & Top 3 of the Best Large Companies, by the Great Place to Work Institute.

➢ Santander Portugal has renewed its certification as an EmpresaFamiliarmente Responsável (Family-friendly Company) by the MásFamíliaFoundation.

➢ 24% Women in senior leadership positions

➢ 86% of employees proud to work for Santander

Green finance & Env. footprint

➢ 100% Electricity used from renewable energy sources

➢ Launched Green Mortgages. Reduction in mortgage spreads for houses which have the best environmental ratings

➢ Biodegradable bank cards with the CarbonNeutral® quality seal

➢ Santander Portugal promotes sustainable mobility: minibuses for employees as well as parking space for bicycles

Communities - COVID-19 initiatives➢ Santander Portugal has supported over 120 NGOs

➢ 37,000 people helped through our community programmes (9M’20)

➢ Since the beginning of the COVID-19 crisis, Santander Portugal has tripled its budget in CSR, namely regarding the donations to social institutions

➢ Launched 800 social grants - Bolsas Santander Futuro - aimed at helping University students affected by the Coronavirus Crisis

➢ Santander Women Emerging Leaders Grant, a programme focused on networking and developing negotiation skills as part of the leadership trajectory

Financial inclusion

➢ 157,613 people financially empowered (2019-H1’20)

➢ Launch of a financial literacy blog with articles on savings and investment

11


Higher loans, especially to SMEs, supported by the guaranteed credit lines

Total customer loans1 (EUR bn)

36.5 36.3

37.338.1

38.6

Sep-19 Dec-19 Mar-20 Jun-20 Sep-20

Sep-20 Sep-19 YoY (%) QoQ (%)

Individuals2 22.7 21.8 4.1 1.7

o/w Mortgages 20.1 19.2 4.7 1.8

SMEs 6.2 5.3 15.1 3.5

Corporates & Institutions 3.6 3.9 -6.9 0.5

CIB 2.8 2.6 4.7 -1.5

Other 3.4 2.9 19.3 -0.1

Total customer loans 38.6 36.5 5.8 1.4

Commercial Paper (CP) 4.0 4.0 0.9 -3.5

Customer loans + CP 42.7 40.5 5.3 1.0

Group criteria(1) Excludes reverse repos(2) Includes Private Banking

12


Growth in the deposit base, in the context of higher savings

Total customer funds (EUR bn)

42.2 42.341.6

42.9 43.2

Sep-19 Dec-19 Mar-20 Jun-20 Sep-20

Sep-20 Sep-19 YoY (%) QoQ (%)

Demand 21.6 17.9 20.8 1.4

Time1 18.5 21.1 -12.3 -0.8

Total deposits 40.2 39.0 2.9 0.4

Mutual Funds 3.0 3.1 -4.4 3.4

Total customer funds 43.2 42.2 2.4 0.6

Additionally, the Bank also includes Securities placed (EUR 3.3 bn, -4.0% YoY) and other managed funds2 (EUR 4.7 bn, -1.2% YoY) in its management of customer funds.

Group criteria.(1) Includes financial insurance(2) Mutual funds, pension funds and managed portfolios

of which:

Financial Insurance 3.9 4.2 -5.7 0.5

Deposits ex-Fin. Insurance 36.3 34.9 3.9 0.3

13

Index

1

Financial system

2


3

Results

4

Concluding remarks

5

Appendix

14

Results

Lower NII, given lower Euribor rates and narrower spreads

Net interest income (EUR mn)

214 213202 197 193

Q3'19 Q4'19 Q1'20 Q2'20 Q3'20

NIM1

1.50% 1.51% 1.46% 1.37% 1.29%

Central Bank interest rate

0.00% 0.00% 0.00% 0.00% 0.00%

Yields and costs (%)

Yield on loans

Cost of deposits

1.71% 1.64% 1.63% 1.56% 1.57%

0.10% 0.10% 0.08% 0.06% 0.05%

Q3'19 Q4'19 Q1'20 Q2'20 Q3'20

Differential

160 bps 155 bps 154 bps 150 bps 153 bps

(1) Group criteria. NIM is calculated as Net Interest Income / Total Average Assets.

15

Results

Net fee income improved in Q3’20 as economic activity began to recover

Net fee income (EUR mn)

9698

101

9094

Q3'19 Q4'19 Q1'20 Q2'20 Q3'20

9M'20 9M'19 YoY (%) QoQ (%)

Transactional fees 196 206 -4.9 12.2

Payment methods 66 74 -10.3 29.8

Account admin. and

maintenance50 41 22.9 17.7

Exchange and commercial

bills61 55 10.9 -6.7

Other transactional 19 37 -48.7 0.5

Investment and pension

funds26 21 20.3 3.3

Insurance 78 78 -0.3 1.1

Securitites and custody

services6 6 0.0 -21.1

Other (20) (19) 6.1 63.4

Total net fee income 285 292 -2.5 4.6

16

Results

Total income declined YoY due to impact of the pandemic in NII and net fee income, although customer revenue stabilised in Q3’20

Total income (EUR mn)

331 332

350

317 312

Q3'19 Q4'19 Q1'20 Q2'20 Q3'20

9M'20 9M'19 YoY (%) QoQ (%)

Net interest income 592 643 -7.9 -2.4

Net fee income 285 292 -2.5 4.6

Customer revenue 877 935 -6.2 -0.2

Other1 102 108 -5.2 -15.8

Total income 979 1,043 -6.1 -1.7

(1) Other includes gains/losses on financial transactions and other operating income.

17

Results

Costs dropped 5% driven by the ongoing transformation process

Operating expenses (EUR mn)

155 156

151

145 146

Q3'19 Q4'19 Q1'20 Q2'20 Q3'20

9M'20 9M'19 YoY (%) QoQ (%)

Operating Expenses 442 467 -5.4 0.7

Branches (#) 499 549 -9.1 -5.0

Employees (#) 6,431 6,678 -3.7 -1.2

18

Results

Lower net operating income, reflecting the impact of the pandemic on total income

Net operating income (EUR mn)

9M'20 9M'19 YoY (%) QoQ (%)

Total income 979 1,043 -6.1 -1.7

Operating Expenses (442) (467) -5.4 0.7

Net operating income 538 576 -6.6 -3.6

Efficiency ratio 45.1% 44.8% 32 bps

176 175199

172 166

Q3'19 Q4'19 Q1'20 Q2'20 Q3'20

19

Results

Continued preemptive reinforcement of LLPs, despite the lower NPL ratio

Net LLPs (EUR mn)

9M'20 9M'19 YoY (%) QoQ (%)

Net operating income 538 576 -6.6 -3.6

Loan-loss provisions (152) 12 - 95.3

Net operating income after

provisions386 588 -34.3 -19.7

NPL ratio 4.25% 4.90% -65 bps -18 bps

Cost of credit1 0.42% 0.00% 42 bps 12 bps

Coverage ratio 64% 52% 12.8 pp 3.4 pp

(1) Cost of credit based on 12 month loan-loss provisions divided by average customer loans.

20

Results

Underlying attributable profit declined 37% YoY, reflecting COVID-19 related impacts on revenue and provisions

Underlying Attributable Profit (EUR mn)

125140

68

9283

Q3'19 Q4'19 Q1'20 Q2'20 Q3'20

9M'20 9M'19 YoY (%) QoQ (%)

PBT 350 557 -37.2 -9.4

Tax on profit (107) (171) -37.5 -10.0

Consolidated profit 243 386 -37.0 -9.1

Minority interests (0) (1) -66.9 -

Underlying attributable

profit243 385 -36.9 -9.2

Effective tax rate 30.5% 30.7% -0.2 pp -0.2 pp

21

Index

1

Financial system

2


3

Results

4

Concluding remarks

5

Appendix

22

Concluding remarks

Resilient results and higher business volumes, despite the challenging environment

Financial System

Economic activity is recovering at a gradual pace, with Q3 GDP showing improvement, but still differentiated between sectors. Europe has approved a relevant support package, but it expected be operational only in 2021-22.

Loan volumes and asset quality short term dynamics positively influenced by the moratoria.

Strategy &

Business

Santander Totta maintained its strong position as the largest privately-owned bank in Portugal, with its market share in new lending to corporates and mortgages around 20%.

Santander Totta remains focused on its digital transformation process, including continuous deliveries on digital channels and simplification of internal processes and commercial offering.

Sound capital and liquidity bases, which allows us to better tackle the current uncertainty and challenges and to continue supporting our customers. In addition, we maintained the best risk ratings by the rating agencies, aligned with or above the sovereign’s.

Growth in loans and deposits, boosted by the sustained growth in individuals and companies loans and demand deposits.

Results

Lower total income due to adverse effects from the pandemic, partly offset by lower costs.

Preemptive increase of LLPs, while the NPL ratio continued to decline.

Underlying attributable profit declined 37%, impacted by lower NII and higher LLPs.

23

Index

1

Financial system

2


3

Results

4

Concluding remarks

5

Appendix

24

Appendix

Balance sheet

EUR million Variation

Sep-20 Sep-19 Amount %

Loans and advances to customers 37,604 35,631 1,973 5.5

Cash, central banks and credit institutions 6,803 4,257 2,547 59.8

Debt instruments 11,673 13,236 (1,563) (11.8)

Other financial assets 1,491 1,781 (290) (16.3)

Other asset accounts 1,732 1,934 (202) (10.4)

Total assets 59,302 56,838 2,464 4.3

Customer deposits 40,179 39,048 1,131 2.9

Central banks and credit institutions 9,734 7,816 1,918 24.5

Marketable debt securities 3,274 3,411 (137) (4.0)

Other financial liabilities 265 302 (37) (12.1)

Other liabilities accounts 1,820 1,848 (28) (1.5)

Total liabilities 55,271 52,425 2,846 5.4

Total equity 4,031 4,413 (382) (8.7)

Other managed customer funds 4,741 4,799 (58) (1.2)

Mutual funds 2,982 3,119 (137) (4.4)

Pension funds 1,308 1,192 116 9.8

Managed portfolios 451 488 (37) (7.5)

25

Appendix

Income statement

EUR million Variation

9M'20 9M'19 Amount %

Net interest income 592 643 (51) (7.9)

Net fee income 285 292 (7) (2.5)

Gains (losses) on financial transactions 106 101 5 4.7

Other operating income (3) 7 (10) —

Total income 979 1,043 (64) (6.1)

Operating expenses (442) (467) 25 (5.4)

Net operating income 538 576 (38) (6.6)

Net loan-loss provisions (152) 12 (163) —

Other gains (losses) and provisions (36) (30) (6) 18.4

Underlying profit before tax 350 557 (207) (37.2)

Tax on profit (107) (171) 64 (37.5)

Underlying profit from continuing operations 243 386 (143) (37.0)

Net profit from discontinued operations — — — —

Underlying consolidated profit 243 386 (143) (37.0)

Non-controlling interests (0) (1) 1 (66.9)

Underlying attributable profit to the parent 243 385 (142) (36.9)

26

Appendix

Quarterly income statements

EUR million Q3'20 / Q2'20

Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20

Net interest income 216 213 214 213 202 197 193

Net fee income 98 99 96 98 101 90 94

Gains (losses) on financial transactions 50 42 9 10 56 35 15

Other operating income (6) 0 13 10 (9) (5) 10

Total income 357 354 331 332 350 317 312

Operating expenses (157) (154) (155) (156) (151) (145) (146)

Net operating income 200 200 176 175 199 172 166

Net loan-loss provisions 13 (1) (0) (4) (80) (24) (47)

Other gains (losses) and provisions (20) (13) 2 21 (21) (16) 1

Underlying profit before tax 193 186 178 192 98 132 120

Tax on profit (58) (60) (53) (52) (30) (41) (37)

Underlying profit from continuing operations 135 126 125 140 68 92 83

Net profit from discontinued operations — — — — — — —

Underlying consolidated profit 135 126 125 140 68 92 83

Non-controlling interests (0) (1) (0) (1) (0) (0) (0)

Underlying attributable profit to the parent 135 125 125 140 68 92 83

Thank You.

Our purpose is to help people and businesses prosper.

Our culture is based on believing that everything we do should be:

Marcadores de estructura27 October 27 October 27 October 27 October 2020

PortugalPortugalPortugal

Figure9M’209M’209M’20

Earnings PresentationEarnings Presentation

FigureFigure

2222

Important InformationImportant InformationImportant Information

NonNonNon-IFRSandalternativeperformancemeasures

InInadditiontothefinancialinformationpreparedinaccordancewithInternationalFinancialReportingStandards(“IFRS”)andderivedfromourfinancialstatements,thispresentationcontainscertainfinancialmeasuresthatconstitutealternativeperformancemeasures(“APMs”)asdefinedintheGuidelinesonAlternativePerformanceMeasuresissuedbytheEuropeanSecuritiesandMarketsAuthority(ESMA)on5October2015(ESMA/2015/1415en)andothernon-IFRSmeasures(“Non-IFRSMeasures”).ThefinancialmeasurescontainedinthispresentationthatqualifyasAPMsandnon-IFRSmeasureshavebeencalculatedusingthefinancialinformationfromSantanderGroupbutarenotdefinedordetailedintheapplicablefinancialreportingframeworkandhaveneitherbeenauditednorreviewedbyourauditors.WeusetheseAPMsandnon-IFRSmeasureswhenplanning,monitoringandevaluatingourperformance.WeconsidertheseAPMsandnon-IFRSmeasurestobeusefulmetricsformanagementandinvestorstofacilitateoperatingperformancecomparisonsfromperiodtoperiod,asthesemeasuresexcludeitemsoutsidetheordinarycourseperformanceofourbusiness,whicharegroupedinthe“managementadjustment”lineandarefurtherdetailedinSection3.2oftheEconomicandFinancialReviewinourDirectors’ReportincludedinourAnnualReportonForm20-Ffortheyearended31December2019.WhilewebelievethattheseAPMsandnon-IFRSmeasuresareusefulinevaluatingourbusiness,thisinformationshouldbeconsideredassupplementalinnatureandisnotmeantasasubstituteofIFRSmeasures.Inaddition,othercompanies,includingcompaniesinourindustry,maycalculateorusesuchmeasuresdifferently,whichreducestheirusefulnessascomparativemeasures.ForfurtherdetailsoftheAPMsandNon-IFRSMeasuresused,includingitsdefinitionorareconciliationbetweenanyapplicablemanagementindicatorsandthefinancialdatapresentedintheconsolidatedfinancialstatementspreparedunderIFRS,pleaseseethe2019AnnualReportonForm20-FfiledwiththeU.S.SecuritiesandExchangeCommissionon6March2020,aswellasthesection“Alternativeperformancemeasures”oftheannextotheBancoSantander,S.A.(“Santander”)Q32020FinancialReport,publishedasInsideInformationon27October2020.ThesedocumentsareavailableonSantander’swebsite(wwwwwwSpan.santander.com

).Underlyingmeasures,whichareincludedinthispresentation,arenon-IFRSmeasures.

TheThebusinessesincludedineachofourgeographicsegmentsandtheaccountingprinciplesunderwhichtheirresultsarepresentedheremaydifferfromtheincludedbusinessesandlocalapplicableaccountingprinciplesofourpublicsubsidiariesinsuchgeographies.Accordingly,theresultsofoperationsandtrendsshownforourgeographicsegmentsmaydiffermateriallyfromthoseofsuchsubsidiaries

ForwardForward-lookingstatements

SantanderSantandercautionsthatthispresentationcontainsstatementsthatconstitute“forward-lookingstatements”withinthemeaningoftheU.S.PrivateSecuritiesLitigationReformActof1995.Forward-lookingstatementsmaybeidentifiedbywordssuchas“expect”,“project”,“anticipate”,“should”,“intend”,“probability”,“risk”,“VaR”,“RoRAC”,“RoRWA”,“TNAV”,“target”,“goal”,“objective”,“estimate”,“future”andsimilarexpressions.Theseforward-lookingstatementsarefoundinvariousplacesthroughoutthispresentationandinclude,withoutlimitation,statementsconcerningourfuturebusinessdevelopmentandeconomicperformanceandourshareholderremunerationpolicy.Whiletheseforward-lookingstatementsrepresentourjudgmentandfutureexpectationsconcerningthedevelopmentofourbusiness,anumberofrisks,uncertaintiesandotherimportantfactorscouldcauseactualdevelopmentsandresultstodiffermateriallyfromourexpectations.Thefollowingimportantfactors,inadditiontothosediscussedelsewhereinthispresentation,couldaffectourfutureresultsandcouldcauseoutcomestodiffermateriallyfromthoseanticipatedinanyforward-lookingstatement:(1)generaleconomicorindustryconditionsinareasinwhichwehavesignificantbusinessactivitiesorinvestments,includingaworseningoftheeconomicenvironment,increasinginthevolatilityofthecapitalmarkets,inflationordeflation,changesindemographics,consumerspending,investmentorsavinghabits,andtheeffectsoftheCOVID-19pandemicintheglobaleconomy;(2)exposuretovarioustypesofmarketrisks,principallyincludinginterestraterisk,foreignexchangeraterisk,equitypriceriskandrisksassociatedwiththereplacementofbenchmarkindices;(3)potentiallossesassociatedwithprepaymentofourloanandinvestmentportfolio,declinesinthevalueofcollateralsecuringourloanportfolio,andcounterpartyrisk;(4)politicalstabilityinSpain,theUK,otherEuropeancountries,LatinAmericaandtheUS(5)changesinlaws,regulationsortaxes,includingchangesinregulatorycapitalandliquidityrequirements,includingasaresultoftheUKexitingtheEuropeanUnionandincreasedregulationinlightoftheglobalfinancialcrisis;(6)ourabilitytointegratesuccessfullyouracquisitionsandthechallengesinherentindivertingmanagement’sfocusandresourcesfromotherstrategicopportunitiesandfromoperationalmatterswhileweintegratetheseacquisitions;and(7)changesinourabilitytoaccessliquidityandfundingonacceptableterms,includingasaresultofchangesinourcreditspreadsoradowngradeinourcreditratingsorthoseofourmoresignificantsubsidiaries.

3333

FigureImportant Information Important Information Important Information

NumerousNumerousNumerousfactorscouldaffectthefutureresultsofSantanderandcouldresultinthoseresultsdeviatingmateriallyfromthoseanticipatedintheforward-lookingstatements.Otherunknownorunpredictablefactorscouldcauseactualresultstodiffermateriallyfromthoseintheforward-lookingstatements.

ForwardForward-lookingstatementsspeakonlyasofthedateofthispresentationandarebasedontheknowledge,informationavailableandviewstakenonsuchdate;suchknowledge,informationandviewsmaychangeatanytime.Santanderdoesnotundertakeanyobligationtoupdateorreviseanyforward-lookingstatement,whetherasaresultofnewinformation,futureeventsorotherwise.

NoNooffer

TheTheinformationcontainedinthispresentationissubjectto,andmustbereadinconjunctionwith,allotherpubliclyavailableinformation,including,whererelevantanyfullerdisclosuredocumentpublishedbySantander.Anypersonatanytimeacquiringsecuritiesmustdosoonlyonthebasisofsuchperson’sownjudgmentastothemeritsorthesuitabilityofthesecuritiesforitspurposeandonlyonsuchinformationasiscontainedinsuchpublicinformationhavingtakenallsuchprofessionalorotheradviceasitconsidersnecessaryorappropriateinthecircumstancesandnotinrelianceontheinformationcontainedinthispresentation.Noinvestmentactivityshouldbeundertakenonthebasisoftheinformationcontainedinthispresentation.InmakingthispresentationavailableSantandergivesnoadviceandmakesnorecommendationtobuy,sellorotherwisedealinsharesinSantanderorinanyothersecuritiesorinvestmentswhatsoever.

NeitherNeitherthispresentationnoranyoftheinformationcontainedthereinconstitutesanoffertosellorthesolicitationofanoffertobuyanysecurities.NoofferingofsecuritiesshallbemadeintheUnitedStatesexceptpursuanttoregistrationundertheU.S.SecuritiesActof1933,asamended,oranexemptiontherefrom.NothingcontainedinthispresentationisintendedtoconstituteaninvitationorinducementtoengageininvestmentactivityforthepurposesoftheprohibitiononfinancialpromotionintheU.K.FinancialServicesandMarketsAct2000.

HistoricalHistoricalperformanceisnotindicativeoffutureresults

StatementsStatementsastohistoricalperformanceorfinancialaccretionarenotintendedtomeanthatfutureperformance,sharepriceorfutureearnings(includingearningspershare)foranyperiodwillnecessarilymatchorexceedthoseofanypriorperiod.Nothinginthispresentationshouldbeconstruedasaprofitforecast.

ThirdThirdPartyInformation

In particular, regarding the data provided by third parties, neither Santander, nor any of its administrators, directors or eIn particular, regarding the data provided by third parties, neither Santander, nor any of its administrators, directors or employees, either explicitly or implicitly, guarantees that these contents are exact, accurate,comprehensive or complete, nor are they obliged to keep them updated, nor to correct them in the case that any deficiency, erroror omission were to be detected. Moreover, in reproducing these contents by any means,Santandermay introduce any changes it deems suitable, may omit partially or completely any of the elements of this document, and in caseof any deviation between such a version and this one, Santander assumes noliabilityfor anydiscrepancy.

4444

FigureIndexIndexIndex

FigureSpan111

Financial Financial Financial system

FigureSpan222

Strategy and Strategy and Strategy and business

FigureSpan333

ResultsResultsResults

FigureSpan444

Concluding Concluding Concluding remarks

FigureSpan555

AppendixAppendixAppendix

FigureFigureFigureFigure

5555

Financial systemFinancial systemFinancial system

Credit dynamics reflect COVIDCredit dynamics reflect COVIDCredit dynamics reflect COVID-19 measures: loans with state guarantees and moratoria

FigureTotal loans Total loans Total loans (EUR bn)

FigureFigureYoY YoY YoY (%)

ChartSpan214.6214.6214.6

212.3212.3212.3

213.9213.9213.9

217.6217.6217.6

218.6218.6218.6

---1.8

---1.3

---0.3

0.80.80.8

1.71.71.7

Sep-19Sep-19Sep-19

Dec-19Dec-19Dec-19

Mar-20Mar-20Mar-20

Jun-20Jun-20Jun-20

Jul-20Jul-20Jul-20

Total deposits Total deposits Total deposits (EUR bn)

FigureFigureYoY YoY YoY (%)

ChartSpan236.0236.0236.0

236.6236.6236.6

240.5240.5240.5

247.8247.8247.8

249.7249.7249.7

3.03.03.0

3.43.43.4

3.73.73.7

4.94.94.9

5.85.85.8

Sep-19Sep-19Sep-19

Dec-19Dec-19Dec-19

Mar-20Mar-20Mar-20

Jun-20Jun-20Jun-20

Jul-20Jul-20Jul-20

Loans have increased given the support measures adopted to mitigate the COVID-19 effects: (i) around EUR 7 bn of credit lines with state guarantees for the corporate sector; and (ii) moratoria on loans to households and corporates

Deposits accelerated, reflecting (i) lower spending by households, due to precautionary saving and less spending on leisure activities; and (ii) higher deposits from corporates, associated with credit lines

Source: Statistics Portugal, Ministry of Finance, Santander Portugal forecasts and estimates.Source: Statistics Portugal, Ministry of Finance, Santander Portugal forecasts and estimates.Source: Statistics Portugal, Ministry of Finance, Santander Portugal forecasts and estimates.

6666


FigureSpan111


FigureSpan222


FigureSpan333


FigureSpan444


FigureSpan555



7777

Strategy and businessStrategy and businessStrategy and business

Santander Santander Santander Tottais the largest privately-owned bank in Portugal by assets and loans

KEY DATA* 9M’20 YoY Var.KEY DATA* 9M’20 YoY Var.KEY DATA* 9M’20 YoY Var.

FigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureFigureSTRATEGIC PRIORITIESSTRATEGIC PRIORITIESSTRATEGIC PRIORITIES

Deepen the digital and commercial Deepen the digital and commercial Deepen the digital and commercial transformation of the Bank to make it simpler, agile and closer to customers

Maintain an appropriate risk policy, with Maintain an appropriate risk policy, with Maintain an appropriate risk policy, with enhanced follow-up procedures, to keep the cost of credit under control

Remain focused on Remain focused on Remain focused on gaining profitable market share, improving our position as leading private sector bank and leveraging our position in the corporate sector, especially in SMEs

ImproveImproveImproveefficiency,leveragingthedigitalcapabilitytobetterservecustomers

MaintainMaintainMaintainasolidcapitalandliquidityposition,inthecurrentchallengingenvironment

FigureFigureFigureFigureFigureFigureFigureFigureFigure(1)(1)(1)(1)(1)Excluding reverse repos.

(2)(2)(2)Excluding repos.

(3)(3)(3)As at Jun-20.

8888


Reinforced focus on digital customers is supporting the increase in customer loyaltyReinforced focus on digital customers is supporting the increase in customer loyaltyReinforced focus on digital customers is supporting the increase in customer loyalty

FigureLoyal Loyal Loyal (k)

FigureFigureSpanLoyal / Active: Loyal / Active: Loyal / Active: 47% (+2 pp YoY)

Digital customers Digital customers Digital customers (k)

FigureFigureSpanDigital sales / totalDigital sales / totalDigital sales / total: 39% (+5 pp YoY)

FigureFigureFigureThe customer oriented strategy continues to support the sustained growth in the number of loyal customers, both at the level of individuals (+3% YoY)…

… and also in the corporate segment (+7% YoY), where the increase in loyal customers is aligned with the market shares in new lending

The extensive offer of digital functionalities allowed the Bank to continue to provide its support to individual and corporate customers, during the pandemic

The number of digital customers has accelerated its growth, to 903 k (+17% YoY) by the end of Q3, while digital sales represented 39% of total sales

Mobile customers were up 30% YoY

FigureFigure

9999


Retail and digital servicesRetail and digital servicesRetail and digital services

FigureAwardsAwardsAwards

Santander has been named as one the Santander has been named as one the Santander has been named as one the 25 “World’s Best Workplace 2020”

Santander Portugal is the Best Bank to Santander Portugal is the Best Bank to Work for in Portugal

Individuals Individuals Individuals

Santander customers Santander customers Santander customers can open their 1|2|3 Accountonline, and request a debit card

CorporatesCorporatesCorporates

Santander Portugal Santander Portugal Santander Portugal provides its customers the Santander Financiamentocom Garantia–LinhaFEI AGRI, to provide an additional credit line to support investments in the Agriculture sector

Digital PaymentsDigital PaymentsDigital Payments

Santander Portugal’s Santander Portugal’s Santander Portugal’s customers can make their payments securely using Apple Pay.

InsuranceInsuranceInsurance

Santander Portugal and MAPFRE constitute a jointSantander Portugal and MAPFRE constitute a jointSantander Portugal and MAPFRE constitute a joint-venture to reinforce the offer of non-life insurance to Santander’s customers, including auto and solutions for SMEs

Responsible bankingResponsible bankingResponsible banking

The Santander NOVA Collaborative Research Programme The Santander NOVA Collaborative Research Programme The Santander NOVA Collaborative Research Programme rewards projects related to the post-COVID-19 rehabilitation of patients and to Artificial Intelligence

Euromoney named Santander as “Best Bank in the World Euromoney named Santander as “Best Bank in the World Euromoney named Santander as “Best Bank in the World for SMEs” and for “Diversity and Inclusion”

University students University students University students can also open an account online, using videocall or “digital mobile key”, and request their #Global U debit card

FigureFigureFigureFigureApple Pay is available for contactless payments using Apple Pay is available for contactless payments using Apple Pay is available for contactless payments using the iPhone or the Apple Watch.

Customers can also pay for online shopping with Customers can also pay for online shopping with iPhones, iPads and Macs.

FigureSantander Portugal’s Santander Portugal’s Santander Portugal’s customers can subscribe online the SafeCareSaúdeViva Maishealth insurance, which provides additional coverage in case of serious illness.

FigureSantander launched the first Santander launched the first Santander launched the first online programme of the “BolsasEmerging Leaders”, to support Women Excellence and Leadership

10101010

FigureStrategy and businessStrategy and businessStrategy and business

We continue doing business in a more responsible and sustainable wayWe continue doing business in a more responsible and sustainable wayWe continue doing business in a more responsible and sustainable way

FigureFigureSpanCultureCultureCulture

Great Place to WorkGreat Place to WorkGreat Place to Work

➢➢➢➢Best Bank to Work in Portugal for the 4thconsecutive year & Top 3 of the Best Large Companies, by theGreat Place to Work Institute.

➢➢➢Santander Portugal has renewed its certification as anEmpresaFamiliarmenteResponsável(Family-friendly Company) by the MásFamíliaFoundation.

➢➢➢24% Women in senior leadership positions

➢➢➢86% of employees proud to work for Santander

Green finance & Env. footprintGreen finance & Env. footprintGreen finance & Env. footprint

➢➢➢➢➢100% Electricity used from renewable energy sources

➢➢➢Launched Green Mortgages. Reduction in mortgage spreads for houses which have the best environmental ratings

➢➢➢Biodegradable bank cards with the CarbonNeutral® quality seal

➢➢➢Santander Portugal promotes sustainable mobility:minibuses for employees as well as parking space for bicycles

Communities Communities Communities -COVID-19 initiatives

➢➢➢➢➢Santander Portugal has supported over 120 NGOs

➢➢➢37,000 people helped through our community programmes(9M’20)

➢➢➢Since the beginning of the COVID-19 crisis, Santander Portugal has tripled its budget in CSR, namely regarding the donations to social institutions

➢➢➢Launched 800 social grants -BolsasSantander Futuro-aimed at helping University students affected by the Coronavirus Crisis

➢➢➢Santander Women Emerging Leaders Grant, a programme focused on networking and developing negotiation skills as part of the leadership trajectory

FigureSpanFinancial inclusionFinancial inclusionFinancial inclusion

➢➢➢➢➢157,613 people financially empowered (2019-H1’20)

➢➢➢Launch of a financial literacy blog with articles on savings and investment

FigureFigureFigure

11111111


Higher loans, especially to SMEs, supported by the guaranteed credit linesHigher loans, especially to SMEs, supported by the guaranteed credit linesHigher loans, especially to SMEs, supported by the guaranteed credit lines

FigureTotal customer loansTotal customer loansTotal customer loans1(EUR bn)

FigureFigureFigureFigureGroup criteriaGroup criteriaGroup criteria

(1)(1)(1)(1)Excludes reverse repos

(2)(2)(2)Includes Private Banking

12121212


Growth in the deposit base, in the context of higher savingsGrowth in the deposit base, in the context of higher savingsGrowth in the deposit base, in the context of higher savings

FigureTotal customer fundsTotal customer fundsTotal customer funds(EUR bn)

FigureFigureFigureFigureAdditionally, the Bank also includes Securities placed (EUR 3.3 bn, Additionally, the Bank also includes Securities placed (EUR 3.3 bn, Additionally, the Bank also includes Securities placed (EUR 3.3 bn, -4.0% YoY) and other managed funds2(EUR 4.7 bn, -1.2% YoY) in its management of customer funds.

Group criteria.Group criteria.Group criteria.

(1)(1)(1)(1)Includes financial insurance

(2)(2)(2)Mutual funds, pension funds and managed portfolios

Figure

13131313


FigureSpan111


FigureSpan222


FigureSpan333


FigureSpan444


FigureSpan555



14141414


Lower NII, given lower Euribor rates and narrower spreadsLower NII, given lower Euribor rates and narrower spreadsLower NII, given lower Euribor rates and narrower spreads

FigureNet interest income Net interest income Net interest income (EUR mn)

FigureFigureFigureFigureYields and costs Yields and costs Yields and costs (%)

FigureFigureYield on loansYield on loansYield on loans

Cost of depositsCost of depositsCost of deposits

FigureFigure(1) Group criteria. (1) Group criteria. (1) Group criteria. NIM is calculated as Net Interest Income / Total Average Assets.

15151515


Net fee income improved in Q3’20 as economic activity began to recoverNet fee income improved in Q3’20 as economic activity began to recoverNet fee income improved in Q3’20 as economic activity began to recover

FigureNet fee income Net fee income Net fee income (EUR mn)


16161616


Total income declined YoY due to impact of the pandemic in NII and net fee income, Total income declined YoY due to impact of the pandemic in NII and net fee income, Total income declined YoY due to impact of the pandemic in NII and net fee income, although customer revenue stabilisedin Q3’20

FigureTotal income Total income Total income (EUR mn)

FigureFigureFigureFigure(1)(1)(1)(1)(1)Other includes gains/losses on financial transactions and other operating income.

17171717


Costs dropped 5% driven by the ongoing transformation processCosts dropped 5% driven by the ongoing transformation processCosts dropped 5% driven by the ongoing transformation process

FigureOperating expenses Operating expenses Operating expenses (EURmn)


18181818


Lower net operating income, reflecting the impact of the pandemic on total incomeLower net operating income, reflecting the impact of the pandemic on total incomeLower net operating income, reflecting the impact of the pandemic on total income

FigureNet operating income Net operating income Net operating income (EURmn)


19191919


Continued preemptive reinforcement of LLPs, despite the lower NPL ratioContinued preemptive reinforcement of LLPs, despite the lower NPL ratioContinued preemptive reinforcement of LLPs, despite the lower NPL ratio

FigureNet LLPs Net LLPs Net LLPs (EUR mn)

FigureFigureFigure(1)(1)(1)(1)(1)Cost of credit based on 12 month loan-loss provisions divided by average customer loans.

Figure

20202020


Underlying attributable profit declined 37% YoY, reflecting COVIDUnderlying attributable profit declined 37% YoY, reflecting COVIDUnderlying attributable profit declined 37% YoY, reflecting COVID-19 related impacts on revenue and provisions

FigureUnderlying Attributable Profit Underlying Attributable Profit Underlying Attributable Profit (EUR mn)


21212121

FigureIndex Index Index

FigureSpan111


FigureSpan222


FigureSpan333


FigureSpan444


FigureSpan555



22222222

Concluding remarksConcluding remarksConcluding remarks

Resilient results and higher business volumes, despite the challenging environmentResilient results and higher business volumes, despite the challenging environmentResilient results and higher business volumes, despite the challenging environment

FigureFigureSpanFinancial SystemFinancial SystemFinancial System

Economic activity is recovering at a gradual pace, with Q3 GDP showing improvement, but still differentiated between sectors. Europe has approved a relevant support package, but it expected be operational only in 2021-22.

Loan volumes and asset quality short term dynamics positively influenced by the moratoria.

FigureSpanStrategy Strategy Strategy & Business

Santander Tottamaintained its strong position as the largest privately-owned bank in Portugal, with its market share in new lending to corporates and mortgages around 20%.

Santander Totta remains focused on its digital transformation process, including continuous deliveries on digital channels and simplification of internal processes and commercial offering.

Sound capital and liquidity bases, which allows us to better tackle the current uncertainty and challenges and to continue supporting our customers. In addition, we maintained the best risk ratings by the rating agencies, aligned with or above the sovereign’s.

Growth in loans and deposits, boosted by the sustained growth in individuals and companies loans and demand deposits.

FigureSpanResultsResultsResults

Lower total income due to adverse effects from the pandemic, partly offset by lower costs.

Preemptive increase of LLPs, while the NPL ratio continued to decline.

Underlying attributable profit declined 37%, impacted by lower NII and higher LLPs.

FigureFigure

23232323


FigureSpan111


FigureSpan222


FigureSpan333


FigureSpan444


FigureSpan555



24242424


Balance sheetBalance sheetBalance sheet

FigureFigure

25252525


Income statementIncome statementIncome statement

FigureFigure

26262626


Quarterly income statementsQuarterly income statementsQuarterly income statements

FigureFigure

ThankThankThankThankYou.

Our purpose is to help people and Our purpose is to help people and Our purpose is to help people and businesses prosper.

Our culture is based on believing Our culture is based on believing that everything we do should be:

portugal 3t 2020 - santander · 2020. 11. 16. · santander has been named as one the 25...

Documents