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2 2 Disclaimer
Santander UK Group Holdings plc (“Santander UK Group Holdings”) is a subsidiary of Banco Santander, S.A. (“Santander”).
Santander UK Group Holdings and Santander both caution that this presentation may contain forward-looking statements. Such forward-looking statements are found in various places
throughout this presentation. Words such as “believes”, “anticipates”, “expects”, “intends”, “aims” and “plans” and other similar expressions are intended to identify forward-looking
statements, but they are not the exclusive means of identifying such statements. Forward-looking statements include, without limitation, statements concerning our future business
development and economic performance. Forward-looking statements involve known and unknown risks and uncertainties, they are based on management’s current expectations,
estimates and projections and both Santander UK Group Holdings and Santander caution that these statements are not guarantees of future performance. We also caution readers that a
number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements.
We have identified certain of these factors on pages 321 to 340 of the Santander UK Group Holdings Annual Report for 2014. Investors and others should carefully consider the foregoing
factors and other uncertainties and events. Undue reliance should not be placed on forward-looking statements when making decisions with respect to Santander UK, Santander and/or
their securities. The information in this presentation, including any forward-looking statements, speak only as of the date on which they are made, and we do not undertake any obligation
to update or revise any of them, whether as a result of new information, future events or otherwise. Statements as to historical performance, historical share price or financial accretion are
not intended to mean that future performance, future share price or future earnings for any period will necessarily match or exceed those of any prior quarter. Nothing in this presentation
should be construed as a profit forecast.
No representation or warranty of any kind is made with respect to the accuracy, reliability or completeness of any information, opinion or forward-looking statement, any assumptions
underlying them, the description of future operations or the amount of any future income or loss contained in this presentation or in any other written or oral information made or to be made
available to any interested party or its advisers by Santander UK Group Holdings or Santander’s advisers, officers, employees or agents. It does not purport to be comprehensive and has
not been independently verified. Any prospective investor should conduct their own due diligence on the accuracy of the information contained in this presentation.
This presentation does not constitute an offer to sell, or a solicitation of an offer to subscribe for, any securities, it does not constitute advice or a recommendation to buy, sell or otherwise
deal in any securities of Santander UK Group Holdings or Santander or any other securities and should not be relied on for the purposes of an investment decision. This presentation has
not been filed, reviewed or approved by any regulator, governmental regulatory body or securities exchange in any jurisdiction or territory.
To the fullest extent permitted by law, neither Santander UK Group Holdings nor Santander accept any liability whatsoever for any direct or consequential loss arising from any use of or
reliance on this presentation.
By attending / reading the presentation you agree to be bound by these provisions.
Note: The results information contained in this presentation has been prepared according to Spanish accounting criteria, regulation and Banco Santander group policy in a manner
applicable to all subsidiaries of the Banco Santander Group. As a result it may differ from that disclosed locally by Santander UK. The results information in this presentation includes all of
the Banco Santander group operations in the UK even if they are in Santander UK consolidated Group.
Source: Santander UK Group Holdings Q1 2015 results “Quarterly Management Statement for the three months ended 31 March 2015” or Santander UK Group Holdings Management
(‘MI’), unless otherwise stated. Santander has a standard listing of its ordinary shares on the London Stock Exchange and Santander UK continues to have its preference shares listed on
the London Stock Exchange. Further information in relation to Santander UK can be found at: www.santander.co.uk/uk/about-santander-uk. Neither the content of Santander UK’s website
nor any website accessible by hyperlinks on Santander UK’s website is incorporated in, or forms part of, this presentation.
Santander UK Group Holdings plc. Registered Office: 2 Triton Square, Regent's Place, London, NW1 3AN, United Kingdom. Registered Number 8700698. Registered in England.
www.santander.co.uk. Telephone 0870 607 6000. Calls may be recorded or monitored. Santander UK Group Holdings plc. and its subsidiaries operate primarily in the UK, are regulated by
the UK Prudential Regulation Authority (‘PRA’) and the Financial Conduct Authority (‘FCA’) and are part of the Banco Santander, S.A. group (the ‘Banco Santander group’). Santander UK
plc’s Financial Services Register number is 106054. Santander UK plc. is also licensed by the Financial Supervision Commission of the Isle of Man for its branch in the Isle of Man.
Deposits held with the Isle of Man branch are covered by the Isle of Man Depositors’ Compensation Scheme as set out in the Is le of Man Depositors’ Compensation Scheme Regulations
2010.In the Isle of Man, Santander UK plc’s principal place of business is at 19/21 Prospect Hill, Douglas, Isle of Man, IM1 1ET. Santander and the flame logo are registered trademarks.
Banco Santander S.A. London Branch is regulated by the Financial Conduct Authority.
3 3
Agenda
■ Macro-economic environment and financial system
■ Strategy and business
■ Results
■ Appendix
4 4 Macro-economic environment
Relatively strong growth of UK economy. Falling oil prices leading to lower inflation
Source: Office for National Statistics and Bank of England. Estimates by Santander UK Economics (April 2015)
1 GDP growth was revised up to 0.6% q/q and 3.0% y/y in 2014 Q4 (31st March – Quarterly National Accounts). GDP growth was also marked up from 2.6% to 2.8% for 2014 as a whole.
2 Bank of England base rate
3 Consumer Price Index
Annual GDP growth (%, real)1 Interest rates (%, year end)2
Annual CPI inflation rate (%, annual average) 3 GBP/Euro exchange rates (year end)
0.7
1.7
2.8 2.6 2.5
2012 2013 2014 2015 (e) 2016 (e)
2.8 2.6
1.5
0.4
1.9
2012 2013 2014 2015 (e) 2016 (e)
1.231.20
1.28
1.38 1.38
2012 2013 2014 2015 (e) 2016 (e)
0.50 0.50 0.50 0.50
1.00
2012 2013 2014 2015 (e) 2016 (e)
5 5 Macro-economic environment
Unemployment expected to fall further. Signs of a slowing housing market
House prices (%, year end)
Property transactions (sa, 000s)
Average weekly earnings (annual, % inc. bonuses)
Unemployment rate (ILO, year end) 1
Source: Her Majesty’s Revenue & Customs, Office for National Statistics and Lloyds Banking Group . Estimates by Santander UK Economics (April 2015)
1 International Labour Organisation definition
7.8 7.2 5.7 5.3 5.2
2012 2013 2014 (e) 2015 (e) 2016 (e)
9321,067
1,222 1,230 1,250
2012 2013 2014 2015 (e) 2016 (e)
1.4 1.2 1.2
2.6 2.8
2012 2013 2014 (e) 2015 (e) 2016 (e)
(0.2)
7.5 7.8
4.0 3.0
2012 2013 2014 2015 (e) 2016 (e)
6 6 Financial system: loan and deposit growth
Loan growth remains modest. Steady deposit growth
YoY (%)
GBPbn.
Mortgage growth of 1.5% in 2015
Corporate loan stock continued to reduce in the year
Growth in total loans of 1.3% at end 2014, expected to continue in 2015
YoY (%)
Deposit growth has continued but is easing. This reflects continuing balance sheet adjustments
Some indication that the personal savings ratio is moderating
Corporate deposit growth still strong. Some evidence of stronger investment intentions
Total loans1
Total deposits2
1 Total loans stock and annual % change include household borrowing and PNFC sterling borrowing from banks 2 Total deposits include household deposits (with banks and NS&I) and PNFC deposits, excluding cash holdings
Source: Bank of England. Bankstats (Monetary and Financial Statistics) March 2015 (February data)
Annual growth is calculated using growth of net lending on existing stock
1,826 1,834 1,842 1,839 1,843
0.8
1.5 1.5 1.3 1.5
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
1,526 1,548 1,565 1,590 1,606
4.4 4.3 4.7 5.1 5.0
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
7 7
Agenda
■ Macro-economic environment and financial system
■ Strategy and business
■ Results
■ Appendix
8 8
Santander UK is a well established UK market player
Santander UK’s branches
1 Active customers hold at least one active product. For current accounts, savings accounts or credit cards an active product must be open and have a balance of more than £50 or at least one
transaction in the last month 2 Local criteria includes branches and universities and excludes agencies
3 Calculated as Customer Loans and Credits divided by Customer Deposits on the face of the balance sheet. Excluding the impact of the PSA joint venture, the LDR was 125%. 4 RoTE of 12.1% is adjusted for the FSCS and UK Bank levy phasing. Statutory RoTE was 13.7% 5 Excluding PSA joint venture, the CET 1 capital ratio was 11.8%.
Our franchise
Mar'15 Var. YoY
Business and Results
Loans £194.2 bn. 4%
Deposits £154.6 bn. 5%
Total customer funds £161.4 bn. 4%
Attributable profit £355 mn. 14%
Network and Customers
Clients - active customers1
14 mn. n.a.
Branches2
917 (8%)
ATMs 2,326 (1%)
Other Key Metrics
Loan-to-Deposit ratio (LDR)3
127% 7 p.p.
Return on Risk Weighted Assets (RoRWA) 1.75% 14 b.p.s.
Return on Tangible Equity (RoTE)4
12.1% 30 b.p.s.
CET1 ratio5
11.6% 0 b.p.s.
9 9
Current accounts (£bn.)
Sustained balance growth from relationship customers;
improving the quality of liabilities
Corporate loans (£bn.)
Lending to corporates grew 9% year-on-year despite a
subdued market; roll out of enhanced capability
‘Bank of Choice’ for UK
companies
1|2|3 World customers (mn.)
1|2|3 World transforming our profile and improving
customer satisfaction
Loyal and satisfied retail
customers
Commercial focus / strategy (1)
Dec'13 Dec'14 Mar'15
27.9
41.1 44.3
Dec'13 Dec'14 Mar'15
2.4
3.64.0
Dec'13 Dec'14 Mar'15
22.1
23.9
25.0
10 10
CET11 2
1 CRD IV end point Common Equity Tier 1 Capital is calculated in accordance with the PRA CRD IV implementation rules (Policy Statement PS7/13) 2 CET 1 capital ratio and the LDR were impacted by the completion of the PSA joint venture. Excluding the impact of the PSA joint venture, the CET 1 capital ratio was 11.8% and LDR 125%.
Strong capital position
Loan-to-Deposit Ratio (LDR)2
Underlying funding position broadly stable
Consistent profitability and
a strong balance sheet
Commercial focus / strategy (2)
Dec'13 Dec'14 Mar'15
11.6%
11.9%
11.6%
Dec'13 Dec'14 Mar'15
123%124%
127%
11 11 Loans performance
Total loans
Growth in consumer credit1. Strong corporate loan growth
GBPbn.
1 Consumer credit impacted by the completion of the PSA joint venture. 2 Mortgages refers to residential retail mortgages only and excludes social housing and commercial mortgage assets
187.0188.5
190.4 190.7
194.2
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
3.8%
1.8%
Mar'15 YoY QoQ
Individuals 161.0 4% 2%
Mortgages2
149.7 1% (0%)
Consumer credit 11.3 47% 35%
Companies 25.0 9% 5%
SMEs 12.8 10% 2%
Corporates 6.6 12% 8%
Large corporates 5.6 4% 8%
Non core 8.2 (8%) (1%)
Total 194.2 4% 2%
12 12 Total customer funds performance
Total deposits
Further growth in retail relationship balances. Managing down rate sensitive deposits
GBPbn.
1 Third-party off-balance sheet assets originated by Santander Asset Management in the United Kingdom
Mar'15 YoY QoQ
Demand 54.8 35% 6%
Savings 62.4 1% (1%)
Time 37.5 (18%) (0%)
Total 154.6 5% 1%
Funds distributed1
6.8 (6%) 1%
Total Customer Funds 161.4 4% 1%
147.6
150.7 150.9
152.4
154.6
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
4.7%
1.4%
13 13
Agenda
■ Macro-economic environment and financial system
■ Strategy and business
■ Results
■ Appendix
14 14
Banking NIM (%)1
Net interest income and spreads
Net Interest Income
Improved NII and Banking NIM driven by improved deposit spreads
Loans spread (%)
Deposits spread (%)
GBPmn.
1 ‘Banking NIM’ is calculated as annualised statutory net interest income divided by average customer loans
819
844
864
885 887
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
8.3%
0.2%
1.79% 1.81% 1.82% 1.85% 1.87%
1.39%1.35% 1.36%
1.33% 1.33%
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
Total Loans Spread
0.76%0.82%
0.89%0.92% 0.92%
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
Total Deposits Spread
15 15 Net fees
Net Fees
Regulatory and competitive pressures impacting fee income
GBPmn.
205201
206
216213
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
(1.4%)
4.0% 3M'15 3M'14 YoY QoQ
Banking 72 84 (14%) 4%
Credit Cards 21 15 38% 1%
Investments 16 16 (1%) 1%
Mortgages 4 7 (41%) (51%)
Global Banking & Markets 49 41 19% (16%)
Other 51 42 23% 18%
Total 213 205 4% (1%)
16 16 Gross income
Gross Income
Gross income rising, driven by net interest income momentum
GBPmn.
1,100 1,105
1,124
1,136
1,152
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
4.7%
1.4%
3M'15 3M'14 YoY QoQ
Net Interest Income 887 819 8% 0%
Net Fees 213 205 4% (1%)
Subtotal 1,100 1,023 7% (0%)
Gains/Losses on
Financial Transactions45 65 (31%) 64%
Other Operating
Income7 12 (39%) (1%)
Gross income 1,152 1,100 5% 1%
17 17
Operating expenses
Operating Expenses
Operational efficiency well managed, absorbing on-going investment costs
GBPmn.
1 Local criteria, includes branches and universities but excludes agencies
574 571579
604 605
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
5.4%
0.1%
3M'15 3M'14 YoY QoQ
General and admin.
expenses517 479 8% 1%
Depreciation and
amortisation88 95 (7%) (6%)
Operating expenses 605 574 5% 0%
Efficiency ratio
(including depreciation)52.5% 52.2% 0.4 p.p. (0.7) p.p.
Number of branches 1
917 999 (8%) (0%)
Number of employees 26,209 25,642 2% 2%
18 18 Net operating income after loan-loss provisions (‘LLPs’)
Loan portfolios performing well in a benign credit environment
Cost of credit
Net LLPs
LLPs and Cost of Credit
GBPmn.
1 Cost of credit based on rolling 12-month period
1
99
71 70
27
56
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
0.23% 0.22%0.19%
0.14% 0.11%
3M'15 3M'14 YoY QoQ
Net operating income 547 526 4% 3%
LLPs (56) (99) (43%) 105%
Net op. income after
LLPs490 427 15% (3%)
NPL Coverage Ratio 41% 43% (2) p.p. (1) p.p.
NPL Ratio 1.75% 1.88% (13) b.p.s (5) b.p.s
19 19
3M'15 3M'14 YoY QoQ
Profit before taxes 449 388 16% 13%
Tax on profit (89) (77) 15% 0%
Attributable profit 1
355 311 14% 15%
Effective tax rate 20% 20% 0 p.p. (3) p.p.
Attributable profit
Strategic transformation underpinning continued improvement in profitability
Attributable Profit
GBPmn.
1
311 325 326 308355
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
14.0%
15.2%
1 Attributable profit is post non-controlling interests of £6m
20 20
The UK economy continues to be supportive of our business. Full year 2015 GDP growth forecast of +2.6%
UK housing market remains strong, and volumes and house prices are higher than a year ago, but with evidence of a slow down. We maintain a conservative risk discipline, with a 65% LTV on new mortgages
Market loan growth driven by residential mortgages and unsecured personal lending; corporate loan stock to be broadly steady for 2015
Market Environment
and Financial System
Strategy and
Business
Results
Conclusions
1I2I3 World, with 4.0 million customers, is transforming the quality and of our customer base while reducing funding costs
Retail customer satisfaction improved further and we continue to be the leading choice for customers switching their current account provider
The new corporate platform is delivering business growth. Loans increased 9% over the year, despite a subdued market
Profit after tax (1) rose 14% to £355mn vs 3M’14. Banking NIM of 1.87% for 3M’15 was the highest for thirteen quarters.
Operational efficiency continued to be strong and well managed. We continue to invest in growing the business and improving our capabilities
Balance sheet strength: CET 1 ratio of 11.6%; Leverage ratio 3.7%
Strong performance for 3M’15 and with a supportive outlook
1 Attributable profit is post non-controlling interests of £6m
21 21
Agenda
■ Macro-economic environment and financial system
■ Strategy and business
■ Results
■ Appendix
22 22 Balance sheet GBPbn.
* Includes all stock of concept classified in the balance sheet
** Capital + reserves + retained profit + valuation adjustments
31.03.15 31.03.14 Amount %
Loans and credits* 203.2 193.7 9.4 4.9
Trading portfolio (w/o loans) 31.2 26.1 5.1 19.5
Available-for-sale financial assets 9.4 6.9 2.5 35.9
Due from credit institutions* 14.5 14.7 (0.3) (1.7)
Intangible assets and property and equipment 2.3 2.1 0.2 8.3
Other assets 25.3 36.7 (11.4) (31.2)
Total assets/liabilities & shareholders' equity 285.7 280.3 5.5 1.9
Customer deposits* 160.5 161.4 (0.9) (0.6)
Marketable debt securities* 57.1 55.0 2.2 4.0
Subordinated debt 4.2 4.8 (0.6) (12.6)
Insurance liabilities 0.0 0.0 0.0 -
Due to credit institutions* 19.1 24.0 (4.9) (20.5)
Other liabilities 33.2 23.8 9.4 39.4
Shareholders' equity** 11.5 11.2 0.3 3.1
Off-balance-sheet funds 7.6 8.0 (0.4) (4.5)
Mutual funds 7.5 7.9 (0.4) (4.6)
Pension funds 0.0 0.0 0.0 -
Managed portfolios 0.1 0.1 (0.0) --
Customer funds under management 229.5 229.2 0.3 0.1
Commercial loans included above 194.2 187.0 7.1 3.8
Commercial deposits included above 154.6 147.6 7.0 4.7
Variance
23 23 Income statement GBPmn.
** Including dividends, income from equity-accounted method and other operating income/expenses
Variation
1Q 15 1Q 14 Amount %
Net interest income 887 819 68 8.3
Net fees 213 205 8 4.0
Gains (losses) on financial transactions 45 65 (20) (31.1)
Other operating income** 7 12 (5) (38.6)
Gross income 1,152 1,100 52 4.7
Operating expenses (605) (574) (31) 5.4
General administrative expenses (517) (479) (38) 7.9
Personnel (339) (314) (25) 7.9
Other general administrative expenses (178) (165) (13) 7.9
Depreciation and amortisation (88) (95) 7 (7.2)
Net operating income 547 526 21 3.9
Net loan-loss provisions (56) (99) 43 (43.4)
Other income (41) (38) (3) 7.5
Profit before taxes 449 388 61 15.7
Tax on profit (89) (77) (12) 15.1
Profit from continuing operations 360 311 49 15.9
Net profit from discontinued operations — — — —
Consolidated profit 360 311 49 15.9
Minority interests 6 — 6 —
Attributable profit to the Group 355 311 43 14.0
24 24 Quarterly statements of income GBPmn.
** Including dividends, income from equity-accounted method and other operating income/expenses
1Q 14 2Q 14 3Q 14 4Q 14 1Q 15
Net interest income 819 844 864 885 887
Net fees 205 201 206 216 213
Gains (losses) on financial transactions 65 56 46 27 45
Other operating income** 12 3 7 7 7
Gross income 1,100 1,105 1,124 1,136 1,152
Operating expenses (574) (571) (579) (604) (605)
General administrative expenses (479) (485) (505) (511) (517)
Personnel (314) (315) (337) (333) (339)
Other general administrative expenses (165) (170) (168) (178) (178)
Depreciation and amortisation (95) (86) (74) (93) (88)
Net operating income 526 533 545 532 547
Net loan-loss provisions (99) (71) (70) (27) (56)
Other income (38) (51) (58) (108) (41)
Profit before taxes 388 411 417 396 449
Tax on profit (77) (86) (91) (88) (89)
Profit from continuing operations 311 325 326 308 360
Net profit from discontinued operations — — — — —
Consolidated profit 311 325 326 308 360
Minority interests — — — — 6
Attributable profit to the Group 311 325 326 308 355