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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of October, 2017

Commission File Number: 001-12518

Banco Santander, S.A.

(Exact name of registrant as specified in its charter)

Ciudad Grupo Santander

28660 Boadilla del Monte (Madrid) Spain

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F   ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes  ☐            No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes  ☐            No  ☒

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Banco Santander, S.A.

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Santander attributable profit for first nine months of 2017 reaches €5,077 million - up 10% after €515 million of one-off items

Underlying profit before tax was €10,175 million - up 19% in constant euros

Madrid, 26 October 2017 - PRESS RELEASE

Banco Santander Group Executive Chairman, Ana Botín, said:

“Our business has delivered another solid quarter of results – with positive trends and further improvements in earnings quality across all of the markets in which we operate.

Our Latin American franchises continue to perform extremely well, with excellent growth in customer numbers and lending, and further improvements in credit quality. And in Europe our business is also performing strongly, despite market challenges.

We have made good progress since acquiring Banco Popular in June 2017 – successfully raising the required capital, reaching an agreement to dispose of the real estate assets, while regaining more than €10 billion in customer deposits.

Looking forward, our focus will remain on earning customer loyalty while continuing to invest in technology to deliver the best possible customer experience. We see significant potential for further profitable growth across our business and remain confident that we will meet all commercial and financial targets, including delivering double digit EPS growth by 2018.”

Corporate Communications		1
Ciudad Grupo Santander, edificio Arrecife, pl. 2
28660 Boadilla del Monte (Madrid) Tel.: +34 91 2895211
[email protected]
www.santander.com - Twitter: @bancosantander

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Summary Income Statement – Including Popular

Results Summary

Banco Santander earned an attributable profit of €5,077 million during the first nine months of 2017, an increase of 10% compared to the same period last year after €515 million of one-off items. This was driven by further improvements in the quality and recurrence of the Group’s revenues, combined with good cost control and ongoing improvements in credit quality.

The Group continued to see positive trends across all businesses, with revenues increasing in eight of its ten core markets. Gross income increased by 12% to €36,330 million, +10% in constant euros (e.g. excluding the impact of exchange rate movements), with net interest income and fee income increasing by 12% and 15% respectively (+10% and +12% in constant euros).

During the third quarter the Group incurred a number of one-off charges, including a €300 million charge relating to the Popular integration (announced at the time of the acquisition), a €85 million charge relating to the integration of the retail and consumer franchises in Germany, and a €130 million charge relating to equity stakes, intangible assets and other items. Excluding these extraordinary items underlying profit increased by 14% in constant euros to €5,592 million.

Santander continued to help people and businesses prosper, with the number of loyal customers (people who see Santander as their main bank) growing by 1.7 million since 30 September 2016 to 16.5 million (excl. Popular). Lending and customer funds were up by 1% and 8% respectively in constant euros over the same period.

The number of customers using digital services increased by more than 4 million over the last 12 months to 24.2 million (excl. Popular). This progression in digital transformation, combined with strong cost discipline, allowed Santander to maintain its position as one of the most efficient banks in the world. The Group’s cost/income ratio, a key measure of efficiency, remained stable at 46.3% (excl. Popular).

Corporate Communications		2
Ciudad Grupo Santander, edificio Arrecife, pl. 2
28660 Boadilla del Monte (Madrid) Tel.: +34 91 2895211
[email protected]
www.santander.com - Twitter: @bancosantander

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A balanced presence across both mature and emerging markets remains one of Santander’s key strengths, with underlying profit increasing in nine of the Group’s ten core markets. In the first nine months of 2017 Europe contributed 52% of Group profit and the Americas 48%. The lending book also remains well diversified across business segments and geographies.

Credit quality continued to improve with non-performing loans (NPL) reducing to 4.24%, down from 5.37% at 30 June 2017, due mainly to the agreement to sell the €30 billion Popular real estate asset portfolio. Excluding Popular the NPL ratio reduced to 3.51%.

The Group delivered strong growth across all key shareholder measures. Over the last 12 months underlying return on tangible equity, a key measure of profitability, has increased by 90 basis points to 11.8% incl. Popular, among the best of our peers. Tangible net asset value per share increased by 2% to €4.20, and earnings per share increased by 6% to €0.316 (+11% on an underlying basis).

Santander continued to grow capital organically during the period with the fully loaded CET1 ratio increasing to 10.80%, up 8 basis points since 30 June 2017. This is significantly higher than the expected minimum regulatory capital requirement for 2019 (9.5%). Excluding one-off items the CET1 ratio would have increased to 10.86%.

Country Summary (9M’17 v 9M’16)

In Brazil attributable profit increased by 49% to €1,902 million (+34% in constant euros), with ongoing investment in the customer experience driving an increase in lending volume (+9% year-on-year) and customers funds (+26% year-on-year). During the quarter loan loss provisions remained stable while the cost of credit improved, helping further strengthen the Bank’s profitability relative to peers.

In the UK attributable profit was €1,201 million, in line with the same period last year (+8% in constant euros) excluding the extraordinary gains made from the disposal of the stake in Visa Europe in Q2’16. Revenues increased year-on-year by 8.4% in constant euros as the number of 1|2|3 customers continued to grow as well as retail current account balances and loans and deposits to UK companies. Credit quality remains strong.

Corporate Communications		3
Ciudad Grupo Santander, edificio Arrecife, pl. 2
28660 Boadilla del Monte (Madrid) Tel.: +34 91 2895211
[email protected]
www.santander.com - Twitter: @bancosantander

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Santander Consumer Finance continues to be a market leader in Europe, with business growing above its peers. Growth in net interest income, coupled with an NPL ratio which remains at record lows, resulted in underlying profit increasing by 14% in constant euros, to €943 million. Including the one-off item registered in the third quarter, attributable profit stood at €858 million.

In Spain, excluding Popular, attributable profit increased by 61% to €914 million after 2016 was impacted by a net charge of €216 million. Excluding this charge profit increased by 16% as the 1|2|3 strategy continued to attract new customers and drive an increase in transactions. The business delivered solid growth in new lending, with a 30% increase in mortgages and 14% increase in consumer lending. Non-performing loans have decreased over the past 12 months by 83bps to 4.99% of total loans.

Banco Popular generated an attributable loss of €122 million due to a charge of €300 million taken in the third quarter of 2017 to cover integration costs. During the quarter the Group achieved a number of important milestones to support the acquisition of Popular: completing the €7,072 million capital raise; agreeing to sell 51% of Popular’s real estate business to Blackstone; rebranding the branch network and making Santander’s ATM network available to Popular customers. The Banco Popular loyalty bond for customers who acquired Popular shares between May 26th and June 21st, 2016, has now been accepted by more than 60% of the maximum possible issuance amount.

In Mexico attributable profit increased by 16% to €532 million (+19% in constant euros) fuelled by higher interest rates and growth in loans and demand deposits. A focus on strategic commercial initiatives, including Santander Plus, coupled with significant investment in systems and infrastructure helped increase loyal customers while also improving efficiency.

In Chile attributable profit increased by 17% to €440 million (+12% in constant euros) as revenues increased and loan loss provisions fell. During the quarter the business launched the first 100% digital on-boarding system in Chile.

In the US (excluding Popular), attributable profit fell by 12% to €337 million (also -12% in constant euros) due, in part, to the impact of the hurricanes in Dallas, Florida and Puerto Rico. Santander Bank continued to make progress in improving its profitability, with the net interest margin increasing by 49bps to 2.6% and further improvements in operating efficiency. Santander Consumer USA maintained good profitability with a ROTE of 15%, despite the shift in business mix toward a lower risk profile, which is temporarily affecting revenues and volumes.

In Portugal (excluding Popular) attributable profit increased by 15% to €336 million as the commercial transformation programme continued to drive an increase in loyal customers (up 24% year-on-year). Active loan portfolio management helped improve the cost of credit and reduce the non-performing loan ratio to 6.93%, down from a 10.46% peak following the integration of Banif. During the quarter Santander became the first bank to issue a 10-year covered bond in Portugal since 2010.

In Argentina attributable profit increased by 5% to €263 million (+17% in constant euros) due to an increase in customer revenues as the business gained lending market share, and ongoing cost control discipline. The integration of Citibank’s retail business completed in August, as scheduled.

Corporate Communications		4
Ciudad Grupo Santander, edificio Arrecife, pl. 2
28660 Boadilla del Monte (Madrid) Tel.: +34 91 2895211
[email protected]
www.santander.com - Twitter: @bancosantander

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In Poland attributable profit fell 8% to €219 million (-10% in constant euros) due to gains made during 2016 relating to the sale of the stake in Visa Europe and the negative regulatory impacts. Profit before tax increased by 11% (+9% in constant euros) fuelled by good growth in commercial revenues, better efficiency and lower provisions.

About Banco Santander

Banco Santander is the largest bank in the Eurozone with a market capitalisation of €94,752 million at 29 September 2017. It has a strong and focused presence in 10 core markets across Europe and the Americas with more than 4 million shareholders and 200,000 employees serving 132 million customers.

Corporate Communications		5
Ciudad Grupo Santander, edificio Arrecife, pl. 2
28660 Boadilla del Monte (Madrid) Tel.: +34 91 2895211
[email protected]
www.santander.com - Twitter: @bancosantander

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KEY CONSOLIDATED DATA – INCLUDING BANCO POPULAR

Balance sheet (€ million)		Sep’17				Jun’17				%				Sep’17				Sep’16				%				Dec’16
Total assets			1,468,030				1,445,260				1.6				1,468,030				1,329,538				10.4				1,339,125
Net customer loans			854,686				861,221				(0.8	)			854,686				773,290				10.5				790,470
Customer deposits			778,852				764,336				1.9				778,852				667,439				16.7				691,111
Total Customer funds			988,386				969,778				1.9				988,386				846,488				16.8				873,618
Total equity			108,723				100,955				7.7				108,723				101,122				7.5				102,699
Note: Total customer funds included customer deposits, mutual funds, pension funds, managed portfolios and insurance premiums.
Income statement (€ million)		3Q’17				2Q’17				%				9M’17				9M’16				%				2016
Net interest income			8,681				8,606				0.9				25,689				22,992				11.7				31,089
Gross income			12,252				12,049				1.7				36,330				32,565				11.6				43,853
Net operating income			6,486				6,401				1.3				19,373				16,931				14.4				22,766
Underlying profit before taxes*			3,591				3,273				9.7				10,175				8,451				20.4				11,288
Underlying attributable profit to the Group*			1,976				1,749				13.0				5,592				4,855				15.2				6,621
Attributable profit to the Group			1,461				1,749				(16.4	)			5,077				4,606				10.2				6,204
Changes w/o FX: Quarterly: NIl: +4.9%; Gross income: +5.7%; Net operating income: +5.6%; Underlying attributable profit: +18.0%; Attributable profit: -11.7% Year-on-year: NIl: +9.7%; Gross income: +9.6%; Net operating income: +11.7%; Underlying attributable profit: +14.2%; Attributable profit: +9.4%
EPS**, profitability and efficiency (%)		3Q’17				2Q’17				%				9M’17				9M’16				%				2016
Underlying EPS (euro) *			0.118				0.112				5.6				0.350				0.315				11.2				0.429
EPS (euro)			0.084				0.112				(24.7	)			0.316				0.298				6.1				0.401
RoE			7.87				7.74								7.54				7.05								6.99
Underlying RoTE*			12.10				11.46								11.80				10.92								11.08
RoTE			11.31				11.46								10.99				10.50								10.38
RoA			0.61				0.63								0.59				0.56								0.56
Underlying RoRWA*			1.50				1.43								1.47				1.34								1.36
RoRWA			1.42				1.43								1.39				1.30								1.29
Efficiency ratio (with amortisations)			47.1				46.9								46.7				48.0								48.1
Solvency and NPL ratios (%)		Sep’17				Jun’17				%				Sep’17				Sep’16				%				Dec’16
CETl fully-loaded			10.80				9.58								10.80				10.47								10.55
CETl phase-in			12.18				10.98								12.18				12.44								12.53
NPL ratio			4.24				5.37								4.24				4.15								3.93
Coverage ratio			65.8				67.7								65.8				72.7								73.8
Market capitalisation and shares		Sep’17				Jun’17				%				Sep’17				Sep’16				%				Dec’16
Shares (millions)			16,041				14,582				10.0				16,041				14,434				11.1				14,582
Share price (euros)**			5.907				5.697				3.7				5.907				3.882				52.2				4.877
Market capitalisation (€ million)			94,752				84,461				12.2				94,752				56,973				66.3				72,314
Tangible book value per share (euro)**			4.20				4.11								4.20				4.11								4.15
Price / Tangible book value (X)**			1.41				1.40								1.41				0.94								1.17
P/E ratio (X)**			12.77				12.28								12.77				9.78								12.18
Other data		Sep’17				Jun’17				%				Sep’17				Sep’16				%				Dec’16
Number of shareholders			4,070,187				4,019,706				1.3				4,070,187				3,920,700				3.8				3,928,950
Number of employees			200,949				201,596				(0.3	)			200,949				189,675				5.9				188,492
Number of branches			13,704				13,825				(0.9	)			13,704				12,391				10.6				12,235

Note: The financial information in this report has been approved by the Bank’s Board of Directors following a favourable report from the Audit Committee.

The financial information in this report includes alternative performance measures (APM). Detailled information on these measures is included at the end of the Q3’17 financial report.

Corporate Communications		6
Ciudad Grupo Santander, edificio Arrecife, pl. 2
28660 Boadilla del Monte (Madrid) Tel.: +34 91 2895211
[email protected]
www.santander.com - Twitter: @bancosantander

Table of Contents

Important Information:

In addition to the financial information prepared under International Financial Reporting Standards (“IFRS”), this press release includes certain alternative performance measures as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority on 5 October 2015 (ESMA/2015/1415es) as well as Non-IFRS measures. The APMs and Non-IFRS Measures are performance measures that have been calculated using the financial information from the Santander Group but that are not defined or detailed in the applicable financial information framework and therefore have neither been audited nor are capable of being completely audited. These APMs and Non-IFRS Measures are been used to allow for a better understanding of the financial performance of the Santander Group but should be considered only as additional information and in no case as a replacement of the financial information prepared under IFRS. Moreover, the way the Santander Group defines and calculates these APMs and Non-IFRS Measures may differ to the way these are calculated by other companies that use similar measures, and therefore they may not be comparable. Please refer to the quarterly financial Report 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 IFR, see Section 26 of the Documento de Registro de Acciones for Banco Santander filed with the CNMV on July 4, 2017 (available on the Web page of the CNMV -www.cnmv.es- and at Banco Santander -www.santander.com) and Item 3A of the Annual Report on Form 20-F for the year ended December 31, 2016, filed with the U.S. Securities and Exchange Commission on March 31, 2017 (the “Form 20-F”). For a discussion of the accounting principles used in translation of foreign currency-denominated assets and liabilities to euros, see note 2(a) to our consolidated financial statements on Form 20-F and to our consolidated financial statements available on the CNMV’s website (www.cnmv.es) and on Banco 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.

Banco Santander, S.A. (“Santander”) cautions that this press release 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 press release 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. These factors include, but are not limited to: (1) general market, macro-economic, industry, governmental and regulatory trends; (2) movements in local and international securities markets, currency exchange rates and interest rates; (3) competitive pressures; (4) technological developments; and (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties. Numerous factors, including those reflected in the Annual Report on Form 20-F filed with the Securities and Exchange Commission of the United States of America (the “Form 20-F” and the “SEC”, respectively) on March 31, 2017 and the Periodic Report on Form 6-K for the six months ended June 30, 2017 filed with the SEC on October 5, 2017 (the “Form 6-K”) –under “Key Information-Risk Factors”- and in the Documento de Registro de Acciones filed with the Spanish Securities Market Commission (the “CNMV”) –under “Factores de Riesgo”- could affect the future results of Santander and could result in other 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.

Forward-looking statements speak only as of the date of this press release 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

The information contained in this press release 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 the press release. No investment activity should be undertaken only on the basis of the information contained in this press release. In making this press release 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 press release 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 press release 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.

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 year. Nothing in this press release should be construed as a profit forecast.

Corporate Communications		7
Ciudad Grupo Santander, edificio Arrecife, pl. 2
28660 Boadilla del Monte (Madrid) Tel.: +34 91 2895211
[email protected]
www.santander.com - Twitter: @bancosantander

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Item 2

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JANUARY - SEPTEMBER    » Key consolidated data

KEY CONSOLIDATED DATA

(including Banco Popular)

Balance sheet (€ million)				Sep’17				Jun’17				%				Sep’17				Sep’16				%				Dec’16
Total assets					1,468,030				1,445,260				1.6				1,468,030				1,329,538				10.4				1,339,125
Net customer loans					854,686				861,221				(0.8)				854,686				773,290				10.5				790,470
Customer deposits					778,852				764,336				1.9				778,852				667,439				16.7				691,111
Total Customer funds					988,386				969,778				1.9				988,386				846,488				16.8				873,618
Total equity					108,723				100,955				7.7				108,723				101,122				7.5				102,699
Note: Total customer funds included customer deposits, mutual funds, pension funds, managed portfolios and insurance premiums.
Income statement (€ million)				3Q’17				2Q’17				%				9M’17				9M’16				%				2016
Net interest income					8,681				8,606				0.9				25,689				22,992				11.7				31,089
Gross income					12,252				12,049				1.7				36,330				32,565				11.6				43,853
Net operating income					6,486				6,401				1.3				19,373				16,931				14.4				22,766
Underlying profit before taxes*					3,591				3,273				9.7				10,175				8,451				20.4				11,288
Underlying attributable profit to the Group*					1,976				1,749				13.0				5,592				4,855				15.2				6,621
Attributable profit to the Group					1,461				1,749				(16.4)				5,077				4,606				10.2				6,204

EPS**, profitability and efficiency (%)				3Q’17				2Q’17				%				9M’17				9M’16				%				2016
Underlying EPS (euro)*					0.118				0.112				5.6				0.350				0.315				11.2				0.429
EPS (euro)					0.084				0.112				(24.7)				0.316				0.298				6.1				0.401
RoE					7.87				7.74								7.54				7.05								6.99
Underlying RoTE*					12.10				11.46								11.80				10.92								11.08
RoTE					11.31				11.46								10.99				10.50								10.38
RoA					0.61				0.63								0.59				0.56								0.56
Underlying RoRWA*					1.50				1.43								1.47				1.34								1.36
RoRWA					1.42				1.43								1.39				1.30								1.29
Efficiency ratio (with amortisations)					47.1				46.9								46.7				48.0								48.1
Solvency and NPL ratios (%)				Sep’17				Jun’17				%				Sep’17				Sep’16				%				Dec’16
Fully-loaded CET1					10.80				9.58								10.80				10.47								10.55
Phase-in CET1					12.18				10.98								12.18				12.44								12.53
NPL ratio					4.24				5.37								4.24				4.15								3.93
Coverage ratio					65.8				67.7								65.8				72.7								73.8
Market capitalisation and shares				Sep’17				Jun’17				%				Sep’17				Sep’16				%				Dec’16
Shares (million)					16,041				14,582				10.0				16,041				14,434				11.1				14,582
Share price (euros)**					5.907				5.697				3.7				5.907				3.882				52.2				4.877
Market capitalisation (€ million)					94,752				84,461				12.2				94,752				56,973				66.3				72,314
Tangible book value per share (euro)**					4.20				4.11								4.20				4.11								4.15
Price / Tangible book value (X)**					1.41				1.40								1.41				0.94								1.17
P/E ratio (X)**					12.77				12.28								12.77				9.78								12.18
Other data				Sep’17				Jun’17				%				Sep’17				Sep’16				%				Dec’16
Number of shareholders					4,070,187				4,019,706				1.3				4,070,187				3,920,700				3.8				3,928,950
Number of employees					200,949				201,596				(0.3)				200,949				189,675				5.9				188,492
Number of branches					13,704				13,825				(0.9)				13,704				12,391				10.6				12,235

(*),- Excluding non-recurring net capital gains and provisions

(**).- Data adjusted for the capital increase in July 2017.

FINANCIAL REPORT 2017		3

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JANUARY - SEPTEMBER    » Highlights of the period

HIGHLIGHTS OF THE PERIOD

		Capital increase

The €7,072 million capital increase carried out in July, in order to strengthen and optimise the structure of the Bank’s equity and adequately cover the acquisition of 100% of the capital of Banco Popular, was fully subscribed.

		Launch of a commercial action for retail customers

Banco Santander and Banco Popular launched a joint commercial action (Fidelity Action) to repair the loyalty of those retail customers affected by the resolution of Banco Popular, who fulfil certain conditions.

		Santander begins to integrate Popular in Spain with benefits  for its customers

Popular’s customers already have a network of more than 7,500 ATMs to withdraw cash free of charge.

Meanwhile, individual customers and the self-employed can make euro transactions between the two banks also cost free.

		Reduction in Banco Popular’s real estate exposure

Once the European Commission authorised Banco Santander’s acquisition of Banco Popular without imposing any restrictions as regards competition rights, contracts were drawn up with the fund Blackstone to sell 51% of Banco Popular’s real estate business.

		Sale of Banco Popular’s Portuguese subsidiaries to Santander  Totta

Banco Popular’s board agreed to sell some of the Portuguese subsidiaries to Santander Totta. They are intragroup operations and so have no impact on results. They are subject to the usual suspensive conditions and administrative authorisations in these cases.

Income statement 9M’17. € million
		Popular
Gross income			774
Operating expenses			(484)
Net operating income			290
Net loan-loss provisions			(46)
Underlying profit before taxes			231
Underlying attributable profit to the Group			178
Net capital gains and provisions*			(300)
Attributable profit to the Group			(122)

(*) Integration costs

Banco Popular and its subsidiaries were integrated by global consolidation as of the acquisition date ( June 7, 2017)

Balance sheet September’17. € million
		Popular
Net customer loans			75,751
Customer deposits			69,842
Customer funds			9,731
Pension funds and other off-balance sheet funds			7,123
NPL ratio (%)			11.17
Coverage ratio (%)			46.7

 

Note:

Loans including repos

Deposits including repos

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Table of Contents

JANUARY - SEPTEMBER    » Highlights of the period

HIGHLIGHTS OF THE PERIOD

To provide better service to Grupo Santander’s private banking customers and foster growth in the asset management business, building on our competitive advantage in 10 core markets, we announced the creation of a new global division which will integrate the private banking and asset management businesses.

The new division will create a new model of service for its existing 170.000 private banking clients worldwide, taking advantage of the scale and technological capabilities of Grupo Santander, and offering them a new digital platform to manage their financial needs with the experience, advice and closeness of an extensive network of branches and managers around the world.

Santander Private Banking manages more than 160.000 million euros in customer funds, some of which are included in the more than 180.000 million euros of assets under management in Santander Asset Management.

This new division will be integrated by:

•  A new Private Banking business.

•  Santander Asset Management.

•  International Private Banking in Miami and Switzerland.

•  The Crown Dependencies of the United Kingdom*.

(*) Pending the required regulatory authorisations

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JANUARY - SEPTEMBER    » Highlights of the period

HIGHLIGHTS OF THE PERIOD

In order to maintain our commitment to transparency and improve communication with the market, Santander held its second Group Strategy Update on October 10.

The management team, both of the corporation as well as the main commercial units, explained the changes that have taken place over the last 12 months, the progress made in 2017 toward meeting the targets, and gave details of the strategy and measures to be taken to achieve the goals in 2018.

		We are advancing toward meeting our targets for  2017

At the end of September, double-digit year-on-year growth in loyal and digital customers, with rises in all countries.

Fee income, a key variable in a low interest rate environment, registered double-digit growth year-on-year.

The efficiency ratio improved, in line with our target.

The cost of credit is in line with the target set for the next three years.

Underlying RoTE remained at more than 11% in September, among the best of our peers.

Earnings per share (EPS) increased 6% in the first nine months, in line with the goal of rising more by the end of the year. We also announced a plan to increase the cash dividend per share in 2017 by around 9%.

Lastly, our CET1 has been increasing quarter after quarter in order to surpass 11% in 2018.

		Main objectives in 2018

We have raised the RoTE objective from the 11% indicated last year to 11.5%, while we reaffirmed the additional goals for our shareholders, which include: increase the EPS in 2016/17 and double-digit rise in 2018, efficiency ratio of between 45% and 47%, attain a FL CET1 of 11% and boost the dividend per share.

We are sticking to the objectives set at last year’s Group Strategy Update for customers, employees and society.

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JANUARY - SEPTEMBER    » Santander aim

SANTANDER AIM

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JANUARY - SEPTEMBER    » Santander aim

SANTANDER AIM

		Simple  |  Personal  |   Fair
		We made further progress in implementing MyContribution, the new corporate model of performance management that strengthens the Bank’s culture as the driver of transformation. In September, we launched the 360º assessment in which executives are evaluated by their peers, direct reports and by their line manager on adopting the eight corporate behaviours in their day to day work.     The global survey of commitment was launched throughout the Group. This gauges the level of the team’s commitment and the support for it, as well as identifying where Santander has improved and where it has to keep on focusing in order to be Simple, Personal and Fair.     Leading by example, a training programme that will help leaders to define the role they must perform in order to instil the culture of Santander Way and carry out the transformation, was launched.         The commercial transformation programme started in 2015 continues to drive growth in the number of customers (+1.7 million loyal ones and +4.1 million digital ones in the last 12 months).     Of note in mobile payments was Super Wallet in Mexico, an app that allows customers to manage their cards on a centralised basis, and in Spain, Openbank launched Samsung Pay, which allows its customers agile, easy and secure payments via their mobile phones.     We continue to move forward in our digital transformation, with the launch of Digilosofía in Spain and in Brazil: Santander One, a digital channel that offers tailored financial advice; Consignado 100% digital a mobile app; and Web Casas, a digital platform to apply for real estate loans.     In Spain, the good reception of the 1l2l3 Smart, a 100% digital account aimed at millennials, continues. In Poland, launch of As I Want it Account, which allows customers to decide what they need and how to pay for the products and services offered.           All shareholders were informed about the capital increase carried out in July through various channels, particularly online ones in line with the Bank’s digitalisation.     Shareholders were informed about the second dividend charged to 2017’s earnings, which will be paid via the Santander Dividend Elección (scrip dividend) programme.     Santander held in New York on October 10 a Group Strategy Update at which senior management gave details of the Bank’s strategy to analysts and investors and of the progress made in achieving the objectives.     Banco Santander and the Universia Foundation concluded the ninth edition of the Becas Capacitas for shareholders and their family members with disabilities. The aim of this support programme is to contribute to the academic and professional progress of university students with disabilities.
		Banco Santander renewed its presence in the Dow Jones Sustainability Index (DSJI), where it has been present continuously since 2000.     The latest edition of Brain Chile, an entrepreneurial contest for university students, was held and awarded CLP 47 million to the 12 winning projects out of 200 business ideas presented.     Santander Universities and the Universia Foundation opened the door to internet of things (IoT) thanks to the recent alliance with MIOTI, the only 100% IoT institute in Spain.     Banco Santander presented Santander X, a project of Santander Universities that aims to become, via universities throughout the world, the largest university entrepreneurial eco system in a digital environment.

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JANUARY - SEPTEMBER    » Group evolution

GROUP EVOLUTION

Activity and P&L performance

The number of loyal customers increased by 1.7 million in the last 12 months, with individuals as well as companies rising 12%.

 

The number of digital customers rose by 4 million over the same period of 2016, underscoring the strength of our multi channel strategy.

 

Digital banking logins increased 25% and monetary transactions 34% in the last 12 months.

Note: Excluding Popular

The third quarter profit was impacted by one-off costs of €515 million.

 

Excluding this impact, the underlying profit in the quarter (including Popular) stood at €1,976 million, 18% higher than the second quarter’,s excluding the forex impact.

 

The first nine months underlying profit amounted to €5,592 million, 14% more, excluding the forex impact.

 

On a like-for-like basis, that is, excluding Banco Popular, underlying profit rose 9% more than in the second quarter and 11% year-on-year (both excluding the forex impact). The latter due to:

 

•

Increase in commercial revenues (net interest income, +7%; fee income, +10%),

 

•

Operating expenses were stable in real terms, the fruit of efficiency plans developed in 2016.

 

•

Loan-loss provisions were lower than in the same period of 2016, backed by improved credit quality.

Excluding Banco Popular for a like-for-like picture of business activity in the last twelve months:

 

•

Lending growth in the main segments and in seven of our 10 core units.

 

•

Funds focus on demand deposits and mutual funds. They rose in nine of the 10 core units.

 

Solid funding and liquidity structure. The net loan-to-deposit ratio was 110% (116% in September 2016).

(*) Page 61 includes Banco Popular income statement and balance sheet.

FINANCIAL REPORT 2017		9

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JANUARY - SEPTEMBER    » Group evolution

GROUP EVOLUTION

Non-performing loans, excluding Banco Popular were 1% lower in the quarter and 15% in the last 12 months.

 

The NPL ratio dropped again in the quarter (-4 b.p. excluding Popular) and it is now at its lowest since the end of 2010, with all units performing well for the last 12 months.

 

Cost of credit of 1.15% excluding Popular (1.19% in September 2016) and below the target announced at the Investor Day.

 

Including Banco Popular, the NPL ratio was 4.24%, improving sharply in the quarter due to the disposal of Popular’s1 real estate loans following the agreement with Blackstone. The cost of credit improved to 1.12%.

 

(1)	Following the agreement with Blackstone, the loans to be transferred are being recorded, until their effective disposal, under non-current assets held for sale in accordance with IFRS 5.

Both the RoTE as well as the RoRWA are the best among our peers, higher in both cases than in the first nine months of 2016.

 

Earnings per share (EPS) were 6% higher (+11% the underlying EPS), in both cases over the adjusted2 figure for the first nine months of 2016.

 

The envisaged total dividend per share to be charged to 2017’s earnings is €0.223. The first dividend was paid on August 4. The Santander Dividendo Elección (scrip dividend) programme will be applied to the second dividend.

 

2)	The EPS of previous periods have been adjusted for the capital increase carried out in July 2017, in accordance with IFRS 33.

 

3)	Total dividends charged to 2017’s earnings are subject to the Board and AGM approval. The Board approved the first interim dividend for €0.06 to be paid on 4 August and to apply the Santander Dividendo Elección (scrip dividend) programme in the second interim dividend.

The CET1 fully loaded was 10.80%, 8 b.p. higher without taking into account the capital increase in July 2017 and 14 b.p. excluding one-off items.

 

Fully loaded total capital ratio of 14.38%, 21 b.p. more than in June 2017, also in like-for-like terms. The fully loaded leverage ratio stood at 5.0%.

 

Tangible capital per share is €4.20, up 2% year-on-year.

Note: Including Banco Popular.

10		FINANCIAL REPORT 2017

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JANUARY - SEPTEMBER    » Group evolution

MAIN BUSINESS AREAS PERFORMANCE

(Changes in constant euros)

FINANCIAL REPORT 2017		11

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JANUARY - SEPTEMBER    » General background

» GENERAL BACKGROUND

Grupo Santander developed its business in an economic environment that continued to strengthen. The outlook for global growth this year is 3.7%, higher than in recent years. The mature economies where the Bank conducts its activity are more dynamic, particularly the euro zone, while among the developing ones Brazil and Argentina are recovering and Mexico is growing faster.

US interest rates were held in the third quarter and Brazil’s continued to decline. The rest of central banks stuck to their benchmark rates.

Lastly, the euro strengthened in the third quarter against the currencies of the main countries where the Group operates.

(*) Year-on-year change 1H’17

 Exchange rates: 1 euro / currency parity

12		FINANCIAL REPORT 2017

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JANUARY - SEPTEMBER    » Consolidated financial report

GRUPO SANTANDER RESULTS. (INCLUDING BANCO POPULAR)

Third quarter attributable profit of €1,461 million impacted by one-off charges. Excluding them, underlying profit was 13% higher (+18% in constant euros) than the second quarter at €1,976 million.

The first nine months attributable profit was €5,077 million and underlying profit stood at €5,592 million, 15% higher year-on-year and 14% in constant euros.

On an underlying basis, RoTE was 11.80% and RoRWA 1.47%, both better than in September 2016.

Total earnings per share (EPS) of €0.316, 6% higher than in the same period of 2016 (underlying EPS of €0.350, +11% year-on-year).

Grupo Santander Income statement (including Banco Popular)

    € million