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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 July, 2019

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  ☒

 

 

 


Table of Contents

Banco Santander, S.A.

TABLE OF CONTENTS

 

Item

    
1    Press Release regarding January – June 2019 Results
2    January – June 2019 Financial Report
3    January – June 2019 Earnings Presentation


Table of Contents

Item 1

 

LOGO

Santander earns €3,231 million in attributable profit for the first

half of 2019, after €814 million of charges relating primarily to

planned restructuring costs

Excluding these charges, underlying profit increased by 2% in constant euros to €4,045 million

Madrid, 23 July 2019 - PRESS RELEASE

 

In the first half of the year net interest income increased to €17,636 million, up 4% year on year (yoy) as lending and customer funds increased by 4% and 6% respectively in constant euros (i.e. applying constant exchange rates).

 

The bank attracted one million new customers in the second quarter, taking the total number of customers it serves to 142 million, more than any other bank in Europe or the Americas.

 

To support our strategy, all digital services have been consolidated under a single area – Santander Global Platform. Digital adoption continued to accelerate over the first six months of the year, with 34.8 million customers now using digital services. On average, 240 customers now access one of Santander’s mobile or digital platforms every second - an increase of 28% over the past 12 months.

 

The positive trends in credit quality also continued, with the group non-performing loan ratio falling by 11 basis points in the quarter to 3.51%, while cost of credit remained stable at 0.98%.

 

The group CET 1 ratio is now 11.30%, 50 basis points higher than 30 June 2018, while Santander remained among the most profitable and efficient banks in its peer group, with an underlying return on tangible equity (RoTE) of 11.7%, and a cost-to-income ratio of 47.4%.

 

Further to the €108 million net charges announced in the first quarter, the bank took an additional charge of €706 million in Q2, primarily relating to planned restructuring costs in Spain and UK (€626 million), and additional provisions for PPI (€80 million). This led to a fall in attributable profit in the second quarter of 18% yoy to €1,391 million.

 

Excluding these charges, underlying profit for the second quarter increased to €2,097 million, up 5% compared to the same quarter last year - the strongest underlying quarterly performance since 2011, driven by strong growth in lending in Latin America, further improvements in profitability in North America, as well as improving costs in Europe.

Banco Santander Group Executive Chairman, Ana Botín, said:

“The bank has delivered its strongest underlying quarterly performance in eight years, reflecting the progress we have made in our commercial and digital transformation.

All our businesses continue to deliver solid results, with particularly good growth in North America, which now represents 17% of Group profits (vs. 14% at 30 June 2018).

During the quarter we have taken a further step forward in our digital transformation with the creation of the Santander Global Platform area, which aligns our reporting structure with our organisation and strategy. This helps ensure that the group’s talent and scale can be leveraged fully by our high-growth digital and payments businesses, helping us offer the best services to retail customers, merchants and SMEs, while also increasing transparency around our digital investments.

 

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


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LOGO

 

We have a strong foundation on which we can continue to grow profitably, and I am confident we will achieve the targets outlined at our investor day, including reaching a RoTE of 13-15% in the medium term.”

Results Summary (H119 v. H118 unless otherwise stated)

 

     

Q219 (m)

 

  

Q219 v. Q218

 

  

Q219 v. Q218 (EX FX)

 

  

H119 (m)

 

 

H119 v. H118

 

 

H119 v. H118 (EX FX)

 

   
  Total income    €12,351    +3%    +4%    €24,436   +1%   +3%
   
  Operating expenses    (€5,829)    +2%    +3%    (€11,587)   +1%   +2%
   
  Net operating income    €6,522    +4%    +5%    €12,849   +1%   +3%
   
  Net loan-loss provisions    (€2,141)    +6%    +7%    (€4,313)   0%   +1%
   
  Profit before tax    €3,895    +3%    +4%    €7,579   +1%   +3%
   
  Tax    (€1,353)    -2%    0%    (€2,679)   +1%   +3%
   
  Underlying profit    €2,097    +5%    +7%    €4,045   0%   +2%
   
  Net capital gains and provisions    (€706)    +135%    +134%    (€814)   +171%   +171%
   
  Attributable Profit    €1,391    -18%    -16%    €3,231   -14%   -12%

The Group achieved an attributable profit of €3,231 million during the first half of 2019, down 14% year on year (yoy) after €814 million in charges relating primarily to restructuring costs incurred as part of the bank’s plans to reduce its annual cost base in Europe by 10% (€1 billion) as announced at the bank’s investor day on 3 April 2019.

The charges include: restructuring costs in Spain (€600 million) and the UK (€26 million); and a further PPI provision in the UK (€80 million), in addition to the net charge of €108 million announced in the first quarter.

Excluding these charges, underlying profit in the first half of the year increased to €4,045 million, up 2% in constant euros (i.e. excluding the impact of exchange rate movements). In the second quarter alone, underlying profit increased to €2,097 million, up 5% compared to the same quarter last year - the strongest underlying quarterly performance since 2011 (+7% in constant euros).

Santander’s commercial and digital transformation continued to improve the quality and recurrence of its revenues, with net interest income in the first half increasing by 4% year-on-year (+6% in constant euros) and lending and funds increasing by 4% and 6% respectively over the same period in constant euros.

The bank added 1 million customers in the quarter, taking the total number of customers it serves to 142 million. The number of loyal customers (customers using Santander as their primary bank) has increased by 10% since 30 June 2018 to 20.6 million.

 

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


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LOGO

 

The increase in customer revenue, coupled with strong cost control, allowed the bank to maintain a ‘best-in-class’ cost-to-income ratio of 47.4%, with operating expenses falling by 2% in real terms and constant euros due to synergies from integrations.

The rapid growth in the adoption of digital products and services continued in the quarter, with the number of digital customers now standing at 34.8 million, 22% higher than 30 June 2018. Accesses to our online or mobile platforms increased to 3,725 million in the first six months of the year, up 28% yoy, with over one billion transactions completed through digital channels in the period (+25%), not including ATM transactions.

To accelerate progress towards becoming the best open digital financial services platform, the bank has consolidated all its digital services under the new ‘Santander Global Platform’ area. That unit, which includes Openbank, Global Payments Services, and Digital Assets, generated total customer revenues of €48 million (up 18% yoy), while expenses rose to €108 million as the bank continued to invest in this area.

The Group’s scale and presence across both mature and developing markets is a key point of differentiation for Santander among its peers, with European franchises contributing 45% of group underlying profit, South America contributing 38% and North America contributing 17%. Brazil remained the largest contributor with 29% of total Group attributable profit, followed by Spain (13%), Santander Consumer Finance (13%), the UK (11%) and the US (9%).

Credit quality improved further in the quarter, with the non-performing loan ratio falling by 11 bps in the quarter to 3.51% and loan-loss provisions remaining stable at €4,313 million. Cost of credit (the rate at which the bank needs to provision when lending money) also remained broadly stable at 0.98%.

The Group continued to generate capital organically – adding 11 basis points in the quarter to its CET1 ratio which stood at 11.30% at 30 June 2019, in line with its medium-term target of 11-12%.

The Group remained one of the most profitable banks in its peer group, with an underlying return on tangible equity (RoTE) 11.7% and statutory RoTE of 10.5%. Tangible net asset value per share, a key measure of shareholder value, has increased by 5% in the past 12 months to €4.30 per share.

 

LOGO

 

1. Excluding corporate centre (-€1,108 million) and Santander Global Platform (-€51 million).

2. Uruguay and Andean Region underlying profit (€94 million).

 

 

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


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LOGO

 

Markets Summary (1H19 v. 1H18)

To better reflect the local performance of each market, the year-on-year percentage changes provided below are presented in constant exchange euros. Variations in current euros are available in the financial report.

Europe. Underlying profit in Europe amounted to €2,354 million, 3% less than in the same period of the previous year. Costs decreased 1% (-3% in real terms) reflecting the initial savings from the bank’s optimisation processes, announced at its investor day last April. As a result, RoTE was 10%. Gross loans increased by 2%, driven by growth in Santander Consumer Finance and the integration of Deutsche Bank Polska’s retail and SME business, while customer funds also increased by 5%. Digital customers grew 13% to 13.5 million, while loyal customers reached 9.7 million.

 

In Spain, underlying profit was 5% higher at €694 million. Costs were 7% lower thanks to the efficiencies resulting from the Banco Popular integration. The migration of all offices to the Santander platform was successfully completed recently. Santander Spain grew its business and increased profitability in all segments and products. New insurance premiums rose 9%, while at the same time we completed the reorganisation of this business. Lending was down 4% due to the deleveraging of large corporates and a drop in the stock of mortgages. Stock of consumer loans, however, rose by €600 million. Customer deposits increased by €13,300 million. Santander Spain’s digital customers grew 21% to 4.6 million.

 

Santander Consumer Finance first half underlying profit was €658 million, slightly lower than the same period of 2018. Costs rose slower than revenues (+2%), improving the efficiency ratio to 44.6% and resulting a RoTE of 15%. The largest profits were generated by the Nordic countries (EUR 177 million), Germany (EUR 157 million) and Spain (EUR 116 million). New lending rose 4%, underpinned by new commercial agreements and growth in Italy (+13%), France (+8%) and Spain (+7%).

 

In the UK, underlying profit in the first half stood at EUR 582 million, down 13% due to continued competitive pressure on mortgage margins, a reduction in net fee income and lower gains on financial transactions. Costs reduced by 1%, while loan-loss provisions fell by 22%, with the cost of credit at just 0.06%. Gross loans were stable and mortgage business volumes increased. Customer deposits increased by 2%, boosted by higher corporate and retail savings deposits.

 

In Portugal, underlying profit rose by 14% to €260 million, as costs declined further. Loans were still lower than a year ago, but rose slightly this year, aligned with the growth in market shares in new mortgages and loans to companies, while customer funds increased by 7%.

 

In Poland, underlying attributable profit was €150 million, down 1%, with strong growth (+26%) in gross loans, mainly due to the integration of Deutsche Bank Polska’s retail and SME business. Likewise, customer deposits increased strongly (+24%).

North America. Underlying profit in North America, which includes Mexico and the US, was €889 million, up 21%. There was good performance in total income at both units, with growth driven by both net interest income (+8%) and net fee income (+4%). Expenses grew less than revenue, resulting in an improved cost-to-income ratio of two percentage points to 42%. Gross loans increased by 10%, with similar growth rates in both units. Customer funds grew in both countries. Digital customers grew 43% to 4.5 million, while loyal customers are now 3.2 million.

 

In the US, underlying profit was €465 million, up 30%, income increased 7% and costs were broadly flat. Volumes improved in the quarter due to growth in lending in retail banking (auto) and commercial banking. A joint initiative between Santander Bank and Santander Consumer USA originated almost $3 billion in auto finance. Digital customers were 0.9 million, up 9%.

 

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


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In Mexico, underlying profit was €424 million, up 12%, and RoTE reached 20.5%. The bank introduced new functionalities to its SuperMóvil service, notably Santander Tap, a system of free instant messaging transfers for operations between our customers. Digital customers grew 57% to 3.5 million.

South America. Underlying profit in South America was €1,961 million, up 15%. Total income increased 9%, underpinned by higher volumes, good spread management and increased loyalty. As a result, RoTE was 21%. Gross loans (+9%) and customers funds (+11%) increased in all units. Digital customers grew 26% to 16.3 million, while loyal customers are now 7.5 million.

 

In Brazil, underlying profit was €1,482 million, up 18% more year-on-year. Net interest income rose by 7% and net fee income by 9%. Costs increased at a slower pace than income, which helped improve the efficiency ratio to 32.4%. As a result, RoTE was 22% in the first half of the year, versus 20% in June 2018. Gross loans grew by 9%, with profitable gains in market share, while customer deposits rose by 13%. The bank launched several initiatives which helped capture new customers and improve customer satisfaction and market share, including Santander Duo, a differentiated offer for microbusinesses; a new offer for SMEs, and a new digital investment platform. Digital customers grew by 33% to 12.7 million.

 

In Chile, underlying profit was €311 million, up 4%. Net interest income recovered in the second quarter thanks to larger volumes and greater inflation. Gross loans increased by 7%, while customer funds rose 5%.

 

In Argentina, underlying profit was €73 million, similar to underlying profit generated in the first half of 2018. Income is growing at a faster rate than inflation due to strong growth in customer revenues (+98% yoy).

 

In the rest of South America, which includes, Uruguay, Peru and Columbia, underlying profit increased to €94 million (+16%).

 

LOGO

 

Note: Loans excluding reverse repos. Customer funds: deposits excluding repos. Underlying RoTE.
(1) Adjusted for excess of capital in the US. Otherwise, 9.5%.

Banco Santander is the largest bank in the euro zone with a market capitalisation of €66,253 million at 30 June 2019. It has a strong and focused presence in ten core markets across Europe and the Americas with more than 4 million shareholders and 200,000 employees serving 142 million customers.

 

 

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


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LOGO

 

Key consolidated data (from Q2 2019 financial report)

 

BALANCE SHEET (EUR million)    Jun-19      Mar-19      %     Jun-19      Jun-18      %     Dec-18  

Total assets

     1,512,096        1,506,151        0.4       1,512,096        1,433,833        5.5       1,459,271  

Loans and advances to customers

     908,235        910,195        (0.2     908,235        862,092        5.4       882,921  

Customer deposits

     814,751        808,361        0.8       814,751        774,425        5.2       780,496  

Total funds

     1,032,769        1,019,878        1.3       1,032,769        981,363        5.2       980,562  

Total equity

     109,985        110,365        (0.3     109,985        104,445        5.3       107,361  

Note: Total funds includes customer deposits, mutual funds, pension funds and managed portfolios.

 

 

 
INCOME STATEMENT (EUR million)    Q2’19      Q1’19      %     H1’19      H1’18      %     2018  

Net interest income

     8,954        8,682        3.1       17,636        16,931        4.2       34,341  

Total income

     12,351        12,085        2.2       24,436        24,162        1.1       48,424  

Net operating income

     6,522        6,327        3.1       12,849        12,680        1.3       25,645  

Profit before tax

     2,929        3,602        (18.7     6,531        6,899        (5.3     14,201  

Attributable profit to the parent

     1,391        1,840        (24.4     3,231        3,752        (13.9     7,810  
Changes in constant euros: Q2’19/Q1’19: Nil: +3.9%; Total income: +3.0%; Net operating income: +4.0%; Attributable profit: -23.2% H1’19 / H1’18: Nll: +5.5%; Total income: +2.8%; Net operating income: +3.2%; Attributable profit: -11.7%

 

UNDERLYING INCOME

STATEMENT (1) (EUR million)

   Q2’19      Q1’19      %     H1’19      H1’18      %     2018  

Net interest income

     8,954        8,682        3.1       17,636        16,931        4.2       34,341  

Total income

     12,351        12,085        2.2       24,436        24,162        1.1       48,424  

Net operating income

     6,522        6,327        3.1       12,849        12,680        1.3       25,645  

Profit before tax

     3,895        3,684        5.7       7,579        7,480        1.3       14,776  

Attributable profit to the parent

     2,097        1,948        7.6       4,045        4,052        (0.2     8,064  

Variations in constant euros: Q2’19/Q1’19: Nll: +3.9%; Total income: +3.0%; Net operating income: +4.0%; Attributable profit: +8.7%

H1’19 / H1’18: Nll: +5.5%; Total income: +2.8%; Net operating income: +3.2%; Attributable profit: +2.1%

 

 

 

EPS, PROFITABILITY AND EFFICIENCY (%)    Q2’19      Q1’19      %     H1’19      H1’18      %     2018  

EPS (euro)

     0.076        0.104        (26.7     0.181        0.216        (16.4     0.449  

Underlying EPS (euros) (1)

     0.120        0.111        8.1       0.231        0.235        (1.6     0.465  

RoE

     7.79        7.85                7.41        8.24                8.21  

RoTE

     11.02        11.15                10.51        11.79                11.70  

Underlying RoTE (1)

     12.03        11.31                11.68        12.24                12.08  

RoA

     0.63        0.63                0.60        0.65                0.64  

RoRWA

     1.56        1.54                1.48        1.55                1.55  

Underlying RoRWA (1)

     1.67        1.56                1.62        1.60                1.59  

Efficiency ratio

     47.2        47.6                47.4        47.5                47.0  
SOLVENCY AND NPL RATIOS (%)    Jun-19      Mar-19             Jun-19      Jun-18             Dec-18  

CET1 (2)

     11.30        11.23                11.30        10.80                11.30  

Fully loaded Total ratio (2)

     14.80        14.82                14.80        14.24                14.77  

NPL ratio

     3.51        3.62                3.51        3.92                3.73  

Coverage ratio

     68        68                68        69                67  
MARKET CAPITALISATION AND SHARES    Jun-19      Mar-19      %     Jun-19      Jun-18      %     Dec-18  

Shares (millions)

     16,237        16,237              16,237        16,136        0.6       16,237  

Share price (euros)

     4.081        4.145        (1.5     4.081        4.592        (11.1     3.973  

Market capitalisation (EUR million)

     66,253        67,292        (1.5     66,253        74,097        (10.6     64,508  

Tangible book value per share (euros)

     4.30        4.30                4.30        4.10                4.19  

Price / Tangible book value per share (X)

     0.95        0.96                0.95        1.12                0.95  

P/E ratio (X)

     11.29        9.94                11.29        10.62                8.84  
OTHER DATA    Jun-19      Mar-19      %     Jun-19      Jun-18      %     Dec-18  

Number of shareholders

     4,054,208        4,089,097        (0.9     4,054,208        4,152,125        (2.4     4,131,489  

Number of employees

     201,804        202,484        (0.3     201,804        200,961        0.4       202,713  

Number of branches

     13,081        13,277        (1.5     13,081        13,482        (3.0     13,217  
(1)

In addition to financial information prepared in accordance with International Financial Reporting Standards (IFRS) and derived from our consolidated financial statements, this report contains certain financial measures that constitute alternative performance measures (APMs) as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority (ESMA) on 5 October 2015 and other non-IFRS measures, including the figures related to “underlying” results, as they are recorded in the separate line of “net capital gains and provisions”, above the line of attributable profit to the parent. Further details are provided on page 12 of this 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 IFRS, please see 2018 Annual Financial Report, published in the CNMV on 28 February 2019, our 20-F report for the year ending 31 December 2018 registered with the SEC in the United States as well as the “Alternative performance measures” section of the annex to this report.

 

(2)

2019 and 2018 data applying the IFRS 9 transitional arrangements. As indicated by the consolidating supervisor a pay-out of 50%, the maximum within the target range (40%- 50%), was applied for the calculation of the capital ratios in 2019. Previously, the average cash pay-out for the last three years was considered.

 

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


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IMPORTANT INFORMATION

Non-IFRS and alternative performance measures

In addition to the financial information prepared in accordance with International Financial Reporting Standards (“IFRS”), this press release contains certain financial measures that constitute alternative performance measures (“APMs”) as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority (ESMA) on 5 October 2015 (ESMA/2015/1415en) and other non-IFRS measures (“Non-IFRS Measures”). The financial measures contained in this press release that qualify as APMs and non-IFRS measures have been calculated using the financial information from Santander Group but are not defined or detailed in the applicable financial reporting framework and have neither been audited nor reviewed by our auditors. We use these APMs and non-IFRS measures when planning, monitoring and evaluating our performance. We consider these APMs and non-IFRS measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period. While we believe that these APMs and non-IFRS measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute of IFRS measures. In addition, other companies, including companies in our industry, may calculate or use such measures differently, which reduces their usefulness as comparative measures. For further details of the APMs and Non-IFRS Measures used, including its definition or a reconciliation between any applicable management indicators and the financial data presented in the consolidated financial statements prepared under IFRS, please see our 2018 Annual Financial Report, filed with the Comisión Nacional del Mercado de Valores (CNMV) on 28 February 2019, as well as the section “Alternative performance measures” of the annex to our 2019 2Q Financial Report, published as Relevant Fact on 23 July 2019. These documents are available on Santander’s website (www.santander.com).

The businesses included in each of our geographic segments and the accounting principles under which their results are presented here may differ from the included businesses and local applicable accounting principles of our public subsidiaries in such geographies. Accordingly, the results of operations and trends shown for our geographic segments may differ materially from those of such subsidiaries

Forward-looking statements

Santander cautions that this 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. The following important factors, in addition to those discussed elsewhere in this press release and in our annual report on Form 20-F for the year ended December 31, 2018, filed with the U.S. Securities and Exchange Commission, could affect our future results and could cause outcomes to differ materially from those anticipated in any forward-looking statement: (1) general economic or industry conditions in areas in which we have significant business activities or investments, including a worsening of the economic environment, increasing in the volatility of the capital markets, inflation or deflation, and changes in demographics, consumer spending, investment or saving habits; (2) exposure to various types of market risks, principally including interest rate risk, foreign exchange rate risk, equity price risk and risks associated with the replacement of benchmark indices; (3) potential losses associated with prepayment of our loan and investment portfolio, declines in the value of collateral securing our loan portfolio, and counterparty risk; (4) political stability in Spain, the UK, other European countries, Latin America and the US (5) changes in laws, regulations or taxes, including changes in regulatory capital and liquidity requirements, including as a result of the UK exiting the European Union and increased regulation in light of the global financial crisis; (6) our ability to integrate successfully our acquisitions and the challenges inherent in diverting management’s focus and resources from other strategic opportunities and from operational matters while we integrate these acquisitions; and (7) changes in our ability to access liquidity and funding on acceptable terms, including as a result of changes in our credit spreads or a downgrade in our credit ratings or those of our more significant subsidiaries. Numerous factors could affect the future results of Santander and could result in those results deviating materially from those anticipated in the forward-looking statements. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements.

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.

No offer

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 this press release. No investment activity should be undertaken 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.

Historical performance is not indicative of future results

Statements as to historical performance or financial accretion are not intended to mean that future performance, share price or future earnings (including earnings per share) for any period will necessarily match or exceed those of any prior period. Nothing in this press release should be construed as a profit forecast.

 

 

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


Table of Contents

Item 2

 

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FINANCIAL REPORT First half 2019


Table of Contents

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Financial report First half 2019 KEY CONSOLIDATED DATA 3 SANTANDER AIM AND CORPORATE CULTURE 4 GROUP FINANCIAL INFORMATION 6 Group performance 6 Income statement and balance sheet 8 Solvency ratios 17 Risk management 18 FINANCIAL INFORMATION BY SEGMENTS 22 Primary segments 26 Secondary segments 42 RESPONSIBLE BANKING 45 CORPORATE GOVERNANCE 47 THE SANTANDER SHARE 48 APPENDIX 50 Financial information 51 Alternative Performance Measures 72 Interim condensed consolidated financial statements 79 Glossary 82 Important information 83 can use Santander’s communication channels in All customers, shareholders and the general public all the countries in which the Bank operates. This report was approved by the Board of Directors on 21 July 2019, following a favourable report from the Audit Committee. Important information regarding this report can be found on pages 83 and 84.


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

 

Key consolidated data

 

BALANCE SHEET (EUR million)    Jun-19      Mar-19      %      Jun-19      Jun-18      %      Dec-18  

Total assets

     1,512,096        1,506,151        0.4        1,512,096        1,433,833        5.5        1,459,271  

Loans and advances to customers

     908,235        910,195        (0.2)        908,235        862,092        5.4        882,921  

Customer deposits

     814,751        808,361        0.8        814,751        774,425        5.2        780,496  

Total funds

     1,032,769        1,019,878        1.3        1,032,769        981,363        5.2        980,562  

Total equity

     109,985        110,365        (0.3)        109,985        104,445        5.3        107,361  
Note: Total funds includes customer deposits, mutual funds, pension funds and managed portfolios.

 

INCOME STATEMENT (EUR million)    Q2’19      Q1’19      %      H1’19      H1’18      %      2018  

Net interest income

     8,954        8,682        3.1        17,636        16,931        4.2        34,341  

Total income

     12,351        12,085        2.2        24,436        24,162        1.1        48,424  

Net operating income

     6,522        6,327        3.1        12,849        12,680        1.3        25,645  

Profit before tax

     2,929        3,602        (18.7)        6,531        6,899        (5.3)        14,201  

Attributable profit to the parent

     1,391        1,840        (24.4)        3,231        3,752        (13.9)        7,810  
Changes in constant euros: Q2’19 / Q1’19: NII: +3.9%; Total income: +3.0%; Net operating income: +4.0%; Attributable profit: -23.2%

 

                                               H1’19 / H1’18: NII: +5.5%; Total income: +2.8%; Net operating income: +3.2%; Attributable profit: -11.7%

 

UNDERLYING INCOME STATEMENT (1) (EUR million)    Q2’19      Q1’19      %      H1’19      H1’18      %      2018  

Net interest income

     8,954        8,682        3.1        17,636        16,931        4.2        34,341  

Total income

     12,351        12,085        2.2        24,436        24,162        1.1        48,424  

Net operating income

     6,522        6,327        3.1        12,849        12,680        1.3        25,645  

Profit before tax

     3,895        3,684        5.7        7,579        7,480        1.3        14,776  

Attributable profit to the parent

     2,097        1,948        7.6        4,045        4,052        (0.2)        8,064  
Variations in constant euros: Q2’19 / Q1’19: NII: +3.9%; Total income: +3.0%; Net operating income: +4.0%; Attributable profit: +8.7%

 

                                               H1’19 / H1’18: NII: +5.5%; Total income: +2.8%; Net operating income: +3.2%; Attributable profit: +2.1%

 

EPS, PROFITABILITY AND EFFICIENCY (%)    Q2’19      Q1’19      %      H1’19      H1’18      %      2018  

EPS (euro)

     0.076        0.104        (26.7)        0.181        0.216        (16.4)        0.449  

Underlying EPS (euros) (1)

     0.120        0.111        8.1        0.231        0.235        (1.6)        0.465  

RoE

     7.79        7.85                 7.41        8.24                 8.21  

RoTE

     11.02        11.15                 10.51        11.79                 11.70  

Underlying RoTE (1)

     12.03        11.31                 11.68        12.24                 12.08  

RoA

     0.63        0.63                 0.60        0.65                 0.64  

RoRWA

     1.56        1.54                 1.48        1.55                 1.55  

Underlying RoRWA (1)

     1.67        1.56                 1.62        1.60                 1.59  

Efficiency ratio

     47.2        47.6                 47.4        47.5                 47.0  
SOLVENCY AND NPL RATIOS (%)    Jun-19      Mar-19              Jun-19      Jun-18              Dec-18  

CET1 (2)

     11.30        11.23                 11.30        10.80                 11.30  

Fully loaded Total ratio (2)

     14.80        14.82                 14.80        14.24                 14.77  

NPL ratio

     3.51        3.62                 3.51        3.92                 3.73  

Coverage ratio

     68        68                 68        69                 67  
MARKET CAPITALISATION AND SHARES    Jun-19      Mar-19      %      Jun-19      Jun-18      %      Dec-18  

Shares (millions)

     16,237        16,237               16,237        16,136        0.6        16,237  

Share price (euros)

     4.081        4.145        (1.5)        4.081        4.592        (11.1)        3.973  

Market capitalisation (EUR million)

     66,253        67,292        (1.5)        66,253        74,097        (10.6)        64,508  

Tangible book value per share (euros)

     4.30        4.30                 4.30        4.10                 4.19  

Price / Tangible book value per share (X)

     0.95        0.96                 0.95        1.12                 0.95  

P/E ratio (X)

     11.29        9.94                 11.29        10.62                 8.84  
OTHER DATA    Jun-19      Mar-19      %      Jun-19      Jun-18      %      Dec-18  

Number of shareholders

     4,054,208        4,089,097        (0.9)        4,054,208        4,152,125        (2.4)        4,131,489  

Number of employees

     201,804        202,484        (0.3)        201,804        200,961        0.4        202,713  

Number of branches

     13,081        13,277        (1.5)        13,081        13,482        (3.0)        13,217  

(1) In addition to financial information prepared in accordance with International Financial Reporting Standards (IFRS) and derived from our consolidated financial statements, this report contains certain financial measures that constitute alternative performance measures (APMs) as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority (ESMA) on 5 October 2015 and other non-IFRS measures, including the figures related to “underlying” results, as they are recorded in the separate line of “net capital gains and provisions”, above the line of attributable profit to the parent. Further details are provided on page 12 of this 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 IFRS, please see 2018 Annual Financial Report, published in the CNMV on 28 February 2019, our 20-F report for the year ending 31 December 2018 registered with the SEC in the United States as well as the “Alternative performance measures” section of the annex to this report.

(2) 2019 and 2018 data applying the IFRS 9 transitional arrangements. As indicated by the consolidating supervisor a pay-out of 50%, the maximum within the target range (40%- 50%), was applied for the calculation of the capital ratios in 2019. Previously, the average cash pay-out for the last three years was considered.

 

January - June 2019     LOGO     3


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

 

SANTANDER VISION AND CORPORATE CULTURE

 

Our success is based on a clear purpose, aim and approach to business.   

A digital Santander.

To continue growing in a sustainable and profitable way and to accelerate execution, we will remain focused on our digital transformation.

We are building a more responsible bank

 

LOGO

Strong corporate culture.

The Santander Way is our global culture, fully aligned to our corporate strategy. It includes our purpose, our aim, and how we do business.

 

LOGO

 

 

4     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

 

Generating confidence and operating responsibly, we contribute value to all our stakeholders

 

LOGO

People At 30 June 2019 Grupo Santander had 201,804 professionals throughout the world, with an average age of 38, 55% of them women and 45% men.The aim of our human resources strategy is to be a reference employer, working on these strategic drivers: a common culture (the Santander Way), dynamic management of talent (Workday, the new central global platform for employees and their skills) and talent for the future (Strategic Workforce Planning).Significant progress is being made in various initiatives within the priorities of culture and commitment (such as Flexiworking, StarMeUp, commitment surveys); attraction and recruitment (such as remuneration plans that involve shares); retaining and developing talent (such as Young Leaders, learning platforms, succession plans, international mobility), as well as diversity and inclusion (gender salary equity, development of diversity and inclusion principles, etc.).Customers We continued to focus on improving customer loyalty and experience. Progress was reflected in the increase of 1.9 million loyal customers, greater penetration over active clients and 6.4 million digital customers in the last 12 monthsWith the creation of Santander Global Platform, we are taking a further step forward in our digital transformation, which aligns our reporting structure with our organisation and strategy We also continued to strengthen our traditional branches and develop new models (SMART, Súper Ágil and Work Café), while investing in new generation ATMs and in contact centres. Shareholders Extel recognised Banco Santander as one of the three best banks in Europe for investor relations, based on a survey of more than 14,000 investment professionals. IR Magazine awarded the Santander Investor Relations team its Best Crisis Management Prize.The Bank maintains a constant communication commitment with its investors and shareholders. In line with this strategy, analysts and investors in Spain and the UK took part in a survey to assess the rollout of the Group’s corporate culture.The Bank launched the XI edition of the Universia Foundation Scholarships, which help university students with disabilities who are Santander shareholders or relatives of shareholders.Community The Group announced new responsible banking commitments for 2019-2025. These include, among other things: make available EUR 120,000 million of green financing, eliminate single use unnecessary plastic in all the Group’s buildings, increase the consumption of renewable energy to 100% in those countries where it is possible to certify its origin and raise the number of women in senior management. Further details in page 46.Grupo Santander is classified as first in the Spanish ranking of sustainable debt issues, after acting as bookrunner in the majority of the green bond issues in Spain, according to Dealogic.Santander is also very actively involved in syndicated loans of sustainable bonds in Spain, and has a range of ESG mutual funds (Santander Sostenible) that make us the leader with a 66% market share.

 

January - June 2019     LOGO     5


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

 

GROUP PERFORMANCE

 

 

 

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“The Bank has delivered its strongest underlying quarterly performance in eight years, reflecting the progress we have made in our commercial and digital transformation.”

 

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“We are satisfied with the trends in the quarter: underlying profit increased 8%, we maintained high levels of profitability, improved credit quality and continued to generate capital organically”

LOGO

The Group’s strategy is driving growth in loyal and digital customers and is reflected in greater activity in almost all markets

Further increase in loyal customers to more than 20 million in June 2019, 1.9 million more than at the end of June 2018 (+10%), with individuals up 11% and companies 7%.

The faster pace of digitalisation is producing notable growth in digital customers, whose number increased by 6.4 million (+22%) in the 12 months since June 2018 to nearly 35 million. There was also strong growth in the number of online and mobile phone accesses in the first half to 3,725 million (+28% year-on-year) and in monetary and voluntary transactions to 1,062 million (+25%).

 

LOGO

Volumes (at constant exchange rates) increased in the second quarter both gross loans and advances to customers (excluding reverse repos), as well as customer funds (+2% and +3%, respectively).

Compared to June 2018 (at constant exchange rates), gross loans and advances to customers (excluding reverse repos) grew 4% and increased in seven of the 10 core units. Customer funds (+6% year-on-year) rose in all of them. Growth in demand and time deposits as well as mutual funds.

Solid funding structure and liquidity: net loan-to-deposit ratio of 111% (the same as in June 2018).

 

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6     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

 

GROUP PERFORMANCE

LOGO

Solid business model which enables us to generate value based on profitability, efficiency and innovation, and obtain profits on a recurring basis

The positive trends in results were maintained in the current context, with solid customer revenue. Of note, growth in net interest income, costs which reflect the first synergies in some countries and stable provisions.

Second quarter attributable profit of EUR 1,391 million, affected by EUR 706 million of net charges, mainly in restructuring costs. Excluding this impact, underlying profit was EUR 2,097 million (+8% quarter-on-quarter). Excluding the contribution to the Single Resolution Fund (SRF) underlying profit would have risen 16% (+17% in constant euros).

 

LOGO

Santander is strengthening its capital ratios and improving credit quality while maintaining a high level of profitability

The CET1 ratio stood at 11.30% after organically generating 11 basis points in the second quarter and absorbing regulatory impacts and restructuring costs (-20 bps). The CET1 ratio was 50 basis points higher year-on-year.

Tangible equity per share (TNAV) was EUR 4.30 in June 2019, 5% higher than a year earlier.

In addition, and in terms of value creation per shareholder, the recording between the two dates of the cash dividend should be taken into account. Including it, the TNAV per share increased 10% in the last 12 months.

 

 

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First half attributable profit of EUR 3,231 million, affected by net charges of EUR 814 million in ‘net capital gains and provisions’ (see page 12). Excluding them, underlying attributable profit (EUR 4,045 million) was stable in euros (+2% in constant euros), after absorbing the markets’ negative performance, higher costs for foreign currency hedging, the impact of implementing IFRS 16 and the high inflation adjustment in Argentina. Profit rose in seven of the 10 core units.

The efficiency ratio remained at around 47%, one of the best among our peers, the RoTE was 10.5% and underlying RoTE 11.7%. Lastly, RoRWA of 1.48% and underlying RoRWA of 1.62%.

Credit quality improved in the quarter and in the last 12 months. The cost of credit ended June below 1% (0.98% in June 2019) and the NPL ratio dropped for the eighth consecutive quarter (-11 bps in the second quarter and -41 bps since June 2018). Coverage remained at 68%.

 

 

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January - June 2019     LOGO     7


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

Income statement

   

 

                

   

 

   

 

 

GRUPO SANTANDER RESULTS

 

LOGO

 

Second quarter attributable profit to the Parent of EUR 1,391 million, affected by EUR -706 million of net charges that are outside the ordinary course performance of our business, mainly restructuring costs. Excluding this charge, underlying profit was 8% higher (+9% excluding exchange rates).

 

First half attributable profit was 14% lower year-on-year at EUR 3,231 million (-12% in constant euros) after recording net results that are outside the ordinary course performance of our business, amounting to EUR -814 million in 2019 and EUR -300 million in 2018. Excluding these results, the underlying attributable profit was EUR 4,045 million, very similar to that in the same period of 2018 (+2% in constant euros).

 

At the end of June 2019, the results continued to reflect a solid underlying trend. Customer revenue increased and costs began to show the synergies obtained in various units. The efficiency ratio continued to be one of the best in the sector (47.4%).

 

The cost of credit remained at very low levels (0.98%) and profitability ratios were high: RoTE of 10.5% (underlying RoTE of 11.7%) and RoRWA of 1.48% (underlying RoRWA of 1.62%).

 

Grupo Santander. Summarised income statement

 

EUR million

                   Change                    Change  
      Q2’19      Q1’19      %      % excl. FX      H1’19      H1’18      %      % excl. FX  
Net interest income      8,954        8,682        3.1        3.9        17,636        16,931        4.2        5.5  
Net fee income (commission income minus commission expense)      2,932        2,931        0.0        1.0        5,863        5,889        (0.4)        2.3  
Gains or losses on financial assets and liabilities and exchange differences (net)      234        277        (15.5)        (14.3)        511        854        (40.2)        (37.2)  
Dividend income      295        66        347.0        346.8        361        264        36.7        37.2  
Share of results of entities accounted for using the equity method      153        153               0.7        306        354        (13.6)        (11.2)  
Other operating income / expenses      (217)        (24)        804.2        905.8        (241)        (130)        85.4        131.7  
Total income      12,351        12,085        2.2        3.0        24,436        24,162        1.1        2.8  
Operating expenses      (5,829)        (5,758)        1.2        1.8        (11,587)        (11,482)        0.9        2.4  

Administrative expenses

     (5,099)        (5,011)        1.8        2.3        (10,110)        (10,265)        (1.5)        (0.0)  

Staff costs

     (3,074)        (3,006)        2.3        2.7        (6,080)        (5,960)        2.0        3.3  

Other general administrative expenses

     (2,025)        (2,005)        1.0        1.7        (4,030)        (4,305)        (6.4)        (4.7)  

Depreciation and amortisation

     (730)        (747)        (2.3)        (1.7)        (1,477)        (1,217)        21.4        23.0  
Impairment or reversal of impairment of financial assets not measured at fair value through profit or loss (net)      (2,122)        (2,246)        (5.5)        (4.8)        (4,368)        (4,352)        0.4        1.5  

o/w: net loan-loss provisions

     (2,141)        (2,172)        (1.4)        (0.7)        (4,313)        (4,297)        0.4        1.4  
Impairment on other assets (net)      (7)        (20)        (65.0)        (69.2)        (27)        (96)        (71.9)        (72.6)  
Provisions or reversal of provisions      (1,451)        (465)        212.0        214.4        (1,916)        (1,262)        51.8        54.8  
Gain or losses on non financial assets and investments, net      31        219        (85.8)        (85.8)        250        23        987.0        987.0  
Negative goodwill recognised in results                                                        
Gains or losses on non-current assets held for sale not classified as discontinued operations      (44)        (213)        (79.3)        (79.3)        (257)        (94)        173.4        173.4  
Profit or loss before tax from continuing operations      2,929        3,602        (18.7)        (17.5)        6,531        6,899        (5.3)        (3.1)  
Tax expense or income from continuing operations      (1,092)        (1,357)        (19.5)        (18.3)        (2,449)        (2,378)        3.0        6.1  
Profit from the period from continuing operations      1,837        2,245        (18.2)        (17.1)        4,082        4,521        (9.7)        (7.9)  
Profit or loss after tax from discontinued operations                                                        
Profit for the period      1,837        2,245        (18.2)        (17.1)        4,082        4,521        (9.7)        (7.9)  
Attributable profit to non-controlling interests      (446)        (405)        10.1        10.7        (851)        (769)        10.7        10.3  
Attributable profit to the parent      1,391        1,840        (24.4)        (23.2)        3,231        3,752        (13.9)        (11.7)  
EPS (euros)      0.076        0.104        (26.7)                 0.181        0.216        (16.4)           
Diluted EPS (euros)      0.076        0.104        (26.7)                 0.180        0.216        (16.4)           
Memorandum items:                        

Average total assets

     1,500,703        1,488,505        0.8                 1,492,954        1,438,444        3.8           

Average stockholders’ equity

     98,659        97,886        0.8                 98,191        94,662        3.7           

 

8     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

Income statement

   

 

                

   

 

   

 

 

LOGO First half of 2019 results compared to the first half of 2018

The underlying trends of the P&L remained solid compared to the first half of 2018, with customer revenue growing, mainly net interest income, costs beginning to reflect the synergies obtained in various units and a cost of credit still at historically low levels.

This good performance, however, is not fully reflected in the year-on-year comparison for attributable profit because of the recording of a net negative amount of EUR 814 million for charges that are outside the ordinary course performance of our business, mainly restructuring costs for ongoing integrations, as set out on page 12 of this report. In addition, the comparison is also affected by the poorer performance of gains on financial transactions, implementing IFRS 16 and the high inflation adjustment in Argentina.

This performance is explained in detail below:

LOGO  Revenue

 

Our revenue structure, where net interest income and net fee income generate more than 96% of total income in 2019, well above the average of our competitors, enables us to grow consistently and recurrently, limiting the impact that bouts of high volatility could have on our results from financial operations. Total income grew 1% (+3% without the FX impact), as follows:

 

 

Net interest income rose 4%. Excluding the FX impact, growth was 6% and due to greater lending and deposits, mainly in developing countries where, overall, they increased at double-digit rates in constant euros, and management of spreads in a low interest rate environment in mature markets and which fell in some countries in the last 12 months. There was also a negative impact of around EUR 150 million from IFRS 16 application.

 

   

All units rose in local currency terms, except the UK which was affected by the pressure of spreads in new mortgage loans and SVR balances (Standard Variable Rate), Portugal, due to low interest rates and the impact of ALCO portfolio sales, and Chile because of lower inflation. Mexico, Uruguay, Argentina and Poland increased at double digit rates and Brazil, and the US at around 7%.

 

 

Net fee income fell 0.4%. The increase without the FX impact was 2%, reflecting the greater customer loyalty combined with the growth strategy in services and higher value-added products. Of note was the growth in the most transactional businesses from cards, insurance, custody, foreign currency and cheques and transfers. On the other hand, decline in net fee income from advising operations and guarantees, affected by reduced activity in the markets.

 

 

Gains on financial transactions and other operating income (dividends, equity method income and others), which accounted for less than 4% of total income, fell 30% in euros and 29% without the FX impact because of lower activity in the first half of 2019, combined with a higher cost of foreign currency hedging compared to a very good first quarter in 2018 in the markets and higher income from the ALCO portfolio sales.

 

LOGO

LOGO

 

 

January - June 2019     LOGO     9


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

Income statement

   

 

                

   

 

   

 

 

 

LOGO  Costs

 

Costs grew 1% in euros and 2% without the FX impact, as a result of investments in transformation and digitalisation, the improvements made to the distribution networks, the slight perimeter impact from the integration of the retail and SME businesses acquired from Deutsche Bank Polska and the impact on Argentina of high inflation.

 

In real terms (excluding inflation), costs were 2% lower (excluding the FX impact). The Group’s aim is to improve our operational capacity and at the same time manage our costs more efficiently adapted to each area, via an exemplary execution of the integrations currently underway and fostering the use of shared services, mainly in Europe, where costs are beginning to reflect the first synergies of integrations, and fell 3% in real terms, underpinned by decreases in Spain (-9%), the UK (-3%) and Portugal (-5%). Of note among other countries was the US, where costs fell 2% in real terms backed by an improvement in operational leveraging, as well as Brazil and Chile whose costs were controlled despite the ongoing investment to improve the distribution capacity.

 

 

The efficiency ratio continued to be a reference in the sector at 47.4%, virtually unchanged from 47.5% in the first half of 2018.

LOGO  Impairment or reversal of impairment of financial assets not measured at fair value through profit or loss (net)

 

The impairment or reversal of impairment of financial assets not measured at fair value through profit or loss (net) amounted to EUR 4,368 million, 0.4% more year-on-year (1% without the FX impact).

 

As part of this item, loan-loss provisions were the same in euros and 1% higher without the FX impact. By units, Brazil, Portugal, SCF, Chile and the UK declined, while those that increased are linked mainly to countries with stronger growth in volumes.

 

The cost of credit inched down from 0.99% in June 2018 to 0.98% a year later. In year-on-year terms all units improved or remained stable, except for Argentina.

LOGO  Impairment on other assets (net)

 

The impairment on other assets (net) in the first half of 2019 was EUR 27 million (EUR 96 million in the same period of 2018).

 

LOGO

 

LOGO

 

 

10     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

Income statement

   

 

                

   

 

   

 

 

 

LOGO   Provisions or reversal of provisions

 

Provisions (net of reversal of provisions) amounted to EUR 1,916 million in the first half of 2019 (EUR 1,262 million in the same period of 2018). The increase was mainly due to restructuring charges in Spain, the UK and Poland, which are set out on page 12 of this report.

LOGO  Gains or losses on non-financial assets and investments (net)

 

This item reflects a profit of EUR 250 million in 2019 (EUR 23 million in the first half of 2018). The increase was mainly due to the recording of capital gains from the sale of 51% our stake in Prisma Medios de Pago S.A. and the revaluation of the rest of the stake (49%), with a positive net tax impact in the first half of EUR 150 million.

LOGO  Gains or losses on non-current assets held for sale not classified as discontinued operations

 

This item, which mainly includes the sale and deterioration of foreclosed assets recorded during the quarter, amounted to EUR -257 million in the first half (EUR -94 million in the same period of 2018).The difference was mainly due to the recording of capital losses from the sale of a portfolio of real estate to a subsidiary of Cerberus.

LOGO  Profit before tax

 

First half profit before tax was EUR 6,531 million, 5% lower year-on-year. Excluding the FX impact, the fall was 3%, largely due to the non-recurring charges already mentioned.

LOGO  Income tax

 

Income tax was EUR 2,449 million, 3% higher than in the first half of 2018.

LOGO  Attributable profit to non-controlling interests

 

This amounted to EUR 851 million, 11% more year-on-year. Excluding the FX impact, it was 10% higher, mainly due to Brazil, the US, Mexico and Santander Consumer Finance.

LOGO  Attributable profit to the parent

 

Profit attributed to the Parent was EUR 3,231 million, 14% less than in the first half of 2018. Excluding the FX impact it was 12% lower.

 

RoE was 7.4%, RoTE 10.5% and RoRWA 1.48% (8.2%, 11.8% and 1.55%, respectively, in the first half of 2018). Earnings per share were EUR 0.181 (EUR 0.216 in the first half of 2018).

 

 

 

LOGO

 

LOGO

 

 

January - June 2019     LOGO     11


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

Income statement

   

 

                

   

 

   

 

 

 

LOGO  Underlying attributable profit to the parent

 

Underlying profit attributed to the parent was affected in 2019 and 2018 by the following net results, which are outside the ordinary course performance of our business and which distort year-on-year comparisons:

First half 2019:

 

1.

Restructuring costs in Spain as part of the plan to integrate Banco Popular’s commercial networks amounting to EUR 600 million, recorded in the second quarter.

 

2.

Charges in the UK of EUR 172 million were recorded in the first half for restructuring costs related to its optimisation plan and PPI provisions (of which EUR 106 million of were charged in the second quarter).

 

3.

Net capital losses of EUR 180 million for the sale of real estate assets in the first quarter.

 

4.

We also recorded restructuring costs of EUR 12 million in the first quarter for the integration process in Poland in the first quarter.

 

5.

Lastly, capital gains from the sale of 51% of our stake in the Argentinian entity Prisma Medios de Pago S.A. and the revaluation of the remaining 49%, generating a capital gain of EUR 150 million in the first quarter.

First half 2018:

 

1.

Positive results from the integration in Portugal (EUR 20 million), recorded in the second quarter.

 

2.

Charges for restructuring costs: EUR -280 million in Spain and EUR -40 million in the Corporate Centre, both related to Popular’s integration, recorded in the second quarter.

 

 

Excluding these results from the various P&L lines where they are recorded, and incorporating them separately in the line ‘net capital gains and provisions’, adjusted profit or underlying profit attributed to the parent was EUR 4,045 million in the first half of 2019, almost the same as a year earlier and 2% higher without the FX impact.

Seven of the 10 core units increased in their local currencies, and at double digit rates in Brazil, Mexico, the US and Portugal.

Profit decreased in the UK (mainly because of competitive pressure on revenue), in Poland (impacted by the higher contribution to the Bank Guarantee Fund and Banking Tax) and in Santander Consumer Finance, the last two falling 1% each in constant euros.

As a result, the Group’s underlying RoTE was 11.7%, the underlying RoRWA 1.62% and underlying earnings per share EUR 0.231 (EUR 0.235 in the first half of 2018).

 

Summarised underlying income statement (EUR million)

 

 

                   Change                    Change  
      Q2’19      Q1’19      %      % excl. FX      H1’19      H1’18      %      % excl. FX  

Net interest income

     8,954        8,682        3.1        3.9        17,636        16,931        4.2        5.5  

Net fee income

     2,932        2,931        0.0        1.0        5,863        5,889        (0.4)        2.3  

Gains (losses) on financial transactions (1)

     234        277        (15.5)        (14.3)        511        854        (40.2)        (37.2)  

Other operating income

     231        195        18.5        16.5        426        488        (12.7)        (15.4)  

Total income

     12,351        12,085        2.2        3.0        24,436        24,162        1.1        2.8  

Administrative expenses and amortisations

     (5,829)        (5,758)        1.2        1.8        (11,587)        (11,482)        0.9        2.4  

Net operating income

     6,522        6,327        3.1        4.0        12,849        12,680        1.3        3.2  

Net loan-loss provisions

     (2,141)        (2,172)        (1.4)        (0.7)        (4,313)        (4,297)        0.4        1.4  

Other gains (losses) and provisions

     (486)        (471)        3.2        4.2        (957)        (903)        6.0        10.2  

Profit before tax

     3,895        3,684        5.7        6.8        7,579        7,480        1.3        3.4  

Tax on profit

     (1,353)        (1,326)        2.0        3.4        (2,679)        (2,659)        0.8        3.2  

Profit from continuing operations

     2,542        2,358        7.8        8.8        4,900        4,821        1.6        3.6  

Net profit from discontinued operations

                                                       

Consolidated profit

     2,542        2,358        7.8        8.8        4,900        4,821        1.6        3.6  

Non-controlling interests

     (445)        (410)        8.5        9.0        (855)        (769)        11.2        10.8  

Underlying attributable profit to the parent

     2,097        1,948        7.6        8.7        4,045        4,052        (0.2)        2.1  

Net capital gains and provisions

     (706)        (108)        553.7        536.6        (814)        (300)        171.3        171.3  

Attributable profit to the parent

     1,391        1,840        (24.4)        (23.2)        3,231        3,752        (13.9)        (11.7)  

(1) Includes exchange differences.

 

12     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

Income statement

   

 

                

   

 

   

 

 

LOGO  Second quarter results compared to the first quarter of 2019

The second quarter’s attributable profit to the parent was 24% lower than the first quarter’s in euros and 23% lower without the FX impact. This comparison is conditioned by those amounts that are outside the ordinary course performance of our business (EUR -706 million), which are explained in previous pages.

Excluding these results, underlying attributable profit to the parent was 8% higher quarter-on-quarter in euros and 9% higher without the FX impact, as follows:

Total income increased 3% due to growth in customer revenue.

 

Net interest income was 4% higher, mainly due to the good performance in Brazil, the recovery of inflation in Chile and rises at Santander Consumer Finance and the US because of larger volumes.

 

Net fee income increased 1% after absorbing the decrease derived from wholesale markets. The main increase was in Brazil.

 

Gains on financial transactions and other operating income remained virtually flat, after absorbing the contribution to the Single Resolution Fund (SRF) in the second quarter.

 

Operating expenses rose 2% driven by North America, South America (partly due to high inflation in Argentina) and Santander Global Platform (investments made in the initial phase), while Europe decreases, with falls in the UK, Spain and Portugal.

 

Loan-loss provisions decreased 1%, due to falls in Europe and the US.

 

 

LOGO

 

January - June 2019     LOGO     13


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

Balance sheet

   

 

                

   

 

   

 

 

Grupo Santander. Condensed balance sheet

 

EUR million

 

Assets    Jun-19      Jun-18      Absolute
change
     %      Dec-18  
Cash, cash balances at central banks and other demand deposits      104,104        107,687        (3,583)        (3.3)        113,663  
Financial assets held for trading      102,574        112,947        (10,373)        (9.2)        92,879  

Debt securities

     33,343        27,005        6,338        23.5        27,800  

Equity instruments

     11,133        17,670        (6,537)        (37.0)        8,938  

Loans and advances to customers

     300        5,103        (4,803)        (94.1)        202  

Loans and advances to central banks and credit institutions

            7,172        (7,172)        (100.0)         

Derivatives

     57,798        55,997        1,801        3.2        55,939  
Financial assets designated at fair value through profit or loss      78,813        53,306        25,507        47.9        68,190  

Loans and advances to customers

     23,407        20,289        3,118        15.4        23,796  

Loans and advances to central banks and credit institutions

     46,915        25,131        21,784        86.7        32,325  

Other (debt securities an equity instruments)

     8,491        7,886        605        7.7        12,069  
Financial assets at fair value through other comprehensive income      118,062        120,831        (2,769)        (2.3)        121,091  

Debt securities

     111,891        116,520        (4,629)        (4.0)        116,819  

Equity instruments

     2,789        2,766        23        0.8        2,671  

Loans and advances to customers

     3,382        1,545        1,837        118.9        1,601  

Loans and advances to central banks and credit institutions

                                  
Financial assets measured at amortised cost      981,046        922,948        58,098        6.3        946,099  

Debt securities

     39,382        39,524        (142)        (0.4)        37,696  

Loans and advances to customers

     881,146        835,155        45,991        5.5        857,322  

Loans and advances to central banks and credit institutions

     60,518        48,269        12,249        25.4        51,081  
Investments in subsidiaries, joint ventures and associates      7,788        9,262        (1,474)        (15.9)        7,588  
Tangible assets      33,755        23,461        10,294        43.9        26,157  
Intangible assets      28,794        27,893        901        3.2        28,560  

Goodwill

     25,613        25,035        578        2.3        25,466  

Other intangible assets

     3,181        2,858        323        11.3        3,094  
Other assets      57,160        55,498        1,662        3.0        55,044  
Total assets      1,512,096        1,433,833        78,263        5.5        1,459,271  
Liabilities and shareholders’ equity                                             
Financial liabilities held for trading      74,187        75,350        (1,163)        (1.5)        70,343  

Customer deposits

            5,777        (5,777)        (100.0)         

Debt securities issued

                                  

Deposits by central banks and credit institutions

            558        (558)        (100.0)         

Derivatives

     58,341        54,892        3,449        6.3        55,341  

Other

     15,846        14,123        1,723        12.2        15,002  
Financial liabilities designated at fair value through profit or loss      60,237        58,153        2,084        3.6        68,058  

Customer deposits

     37,849        31,881        5,968        18.7        39,597  

Debt securities issued

     3,117        2,309        808        35.0        2,305  

Deposits by central banks and credit institutions

     19,141        23,535        (4,394)        (18.7)        25,707  

Other

     130        428        (298)        (69.6)        449  
Financial liabilities measured at amortized cost      1,224,194        1,153,918        70,276        6.1        1,171,630  

Customer deposits

     776,902        736,767        40,135        5.4        740,899  

Debt securities issued

     251,672        224,466        27,206        12.1        244,314  

Deposits by central banks and credit institutions

     160,808        164,164        (3,356)        (2.0)        162,202  

Other

     34,812        28,521        6,291        22.1        24,215  
Liabilities under insurance contracts      731        936        (205)        (21.9)        765  
Provisions      14,571        13,758        813        5.9        13,225  
Other liabilities      28,191        27,273        918        3.4        27,889  
Total liabilities      1,402,111        1,329,388        72,723        5.5        1,351,910  
Shareholders’ equity      120,054        117,935        2,119        1.8        118,613  

Capital stock

     8,118        8,068        50        0.6        8,118  

Reserves

     108,705        107,164        1,541        1.4        104,922  

Attributable profit to the Group

     3,231        3,752        (521)        (13.9)        7,810  

Less: dividends

            (1,049)        1,049        (100.0)        (2,237)  
Other comprehensive income      (21,425)        (23,885)        2,460        (10.3)        (22,141)  
Minority interests      11,356        10,395        961        9.2        10,889  
Total equity      109,985        104,445        5,540        5.3        107,361  
Total liabilities and equity      1,512,096        1,433,833        78,263        5.5        1,459,271  

 

14     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

Balance sheet

   

 

                

   

 

   

 

 

GRUPO SANTANDER BALANCE SHEET

 

LOGO

  

Compared to June 2018, gross loans and advances to customers (excluding reverse repos) as well as customer funds increased.

 

 

Gross loans and advances to customers excluding reverse repos rose 4% year-on-year, both in euros and in constant euros, with growth in seven of the 10 core countries, particularly in developing markets (+12%).

 

 

Customer funds increased 7% year-on-year in euros. In constant euros up 6%, with rises in the 10 core units. Deposits (excluding repos) grew in all units and mutual funds in most of them, due to the better performance in recent months (+4% in constant euros in the quarter and 9% since December 2018).

LOGO   Loans and advances to customers

Gross loans and advances to customers rose to EUR 908,234 million, 5% growth year-on-year.

The Group uses gross loans and advances to customers excluding reverse repos for the purpose of analysing traditional commercial banking loans.

 

Compared to June 2018, gross loans and advances to customers excluding reverse repos and the exchange rate impact increased 4%, with the following evolution by countries:

 

 

Increase in seven of the 10 core units, particularly all developing countries, which overall grew 12%: Poland (+26%), partly because of the increased perimeter, Argentina (+14%), due to peso balances as well as the impact of the currency’s depreciation on dollar balances, Brazil (+9%), Mexico (+8%) and Chile (+7%).

 

 

As regards mature markets, notable growth in the United States (+10%, with growth in SC USA and SBNA) and Santander Consumer Finance (+7%), with rises in all countries that comprise it. The UK’s balances remained stable, as mortgage and other retail loan growth was partially offset by the reduction of commercial real estate exposure.

 

 

The only declines were in Portugal and Spain, markets that continued to deleverage and where gross loans and advances to customers excluding reverse repos fell by 1% and 4%, respectively. Portugal was affected by the sale of non-productive portfolios, and Spain was affected by lower wholesale balances and with institutions.

 

Quarter-on-quarter, gross loans and advances to customers excluding reverse repos increased 2%. Growth of 3% in Santander Consumer Finance and in the US, 2% in Poland, Mexico and Chile and around 1% in the UK and Brazil. Spain remained stable in the quarter and Argentina decreased 2%.

 

Loans and advances to customers maintained a balanced structure at the end of the semester: individuals (46%), consumer credit (17%), SMEs and companies (25%) and SCIB (12%).

 

LOGO

LOGO

 

 

January - June 2019     LOGO     15


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

Balance sheet

   

 

                

   

 

   

 

 

LOGO   Customer funds

Customer deposits amounted to EUR 814,751 million, 5% growth in the last 12 months.

The Group uses customer funds (customer deposits excluding repos, and including mutual funds) for the purpose of analysing traditional retail banking funds.

 

Compared to June 2018, customer funds increased 7%. Excluding the exchange rate impact, growth was 6%, as follows:

 

 

By units, funds rose in all of them, particularly Argentina (+40%), Poland (+22%), Brazil (+11%) and the US (+10%). More moderate growth of between 3% and 5% in Santander Consumer Finance, Spain and Chile. Balances in the UK and Mexico rose 2%.

 

 

Demand deposits increased 7%, with growth in all units except Mexico. Time deposits rose 5% mainly due to the US and South American countries, particularly Brazil, which grew 14% under its strategy of replacing letras financeiras with customer deposits in order to optimise the cost of funds. Mutual funds rose 5%, recovering growth in 2019 in most of the units after the fall in markets in 2018.

 

In the second quarter, customer funds increased 2% (+3% excluding exchange rate impacts). Deposits grew 3% and mutual funds grew 4%. By countries, and in local currency, there was an increase in the 10 core units, with the following detail by product:

 

 

As regards deposits, without repos, notable growth in Brazil (+8%), Argentina (+6%), and the US (+4%). Rises in all of them in demand as well as time deposits.

 

 

Mutual funds grew strongly in all the units.

 

Customer funds continued to be well diversified by products: 60% are demand deposits, 22% time deposits and 18% mutual funds.

As well as capturing customer deposits, Grupo Santander, for strategic reasons, maintains a selective policy of issuing securities in the international fixed income markets and strives to adapt the frequency and volume of its market operations to the structural liquidity needs of each unit, as well as to the receptiveness of each market.

• In the first half, the Group issued:

 

 

Medium- and long-term senior debt amounting to EUR 12,254 million and covered bonds placed in the market of EUR 4,511 million.

 

 

There were EUR 7,885 million of securitisations placed in the market.

 

 

Issuances to meet the TLAC (Total Loss-Absorbing Capacity) requirement amounting to EUR 1,947 million, in order to strengthen the Group’s situation (senior non-preferred: EUR 885 million, preferred: EUR 1,062 million).

 

 

Maturities of medium- and long-term debt of EUR 13,918 million.

 

The net loan-to-deposit ratio was 111% (111% in June 2018). The ratio of deposits plus medium- and long-term funding to the Group’s loans was 115%, underscoring the comfortable funding structure.

 

LOGO

 

16     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

Solvency ratios

   

 

                

   

 

   

 

 

SOLVENCY RATIOS

 

LOGO  

 

The CET1 ratio reached 11.30% following the organic generation of 11 bps in the quarter and absorbing -20 basis points of regulatory impacts and restructuring costs.

 

 

Tangible equity per share was EUR 4.30.

 

 

 

The fully loaded leverage ratio was 5.0%, almost the same quarter-on-quarter.

At the end of June 2019, the total phased-in capital ratio stood at 14.83% and the CET1 ratio (phased-in and fully loaded) at 11.30%, comfortably meeting the minimum levels required by the European Central Bank on a consolidated basis (13.187% for the total capital ratio and 9.687% for the CET1 ratio).

In the quarter, we continued to generate capital organically, +11 basis points, as a result of underlying profits and the active management of risk weighted assets. As such, the organic generation in the first half of the year was 29 basis points.

This, together with favourable market movements benefiting the held to collect and sell portfolio (due to falling interest rates), compensated the negative accounting and regulatory impacts registered in the year to date (-36 basis points, principally due to IFRS 16 application and TRIM), as well as the negative 13 basis point impact from restructuring costs, mainly in Spain.

Had the IFRS 9 transitional arrangement not been applied, the total impact on the CET1 would have been -23 basis points.

In April 2019, the European Central Bank published the aggregate result of its Supervisory Review and Evaluation Process (SREP) carried out in 2018. Santander has lower capital requirements than the average of SSM banks. This positive differential was wider in 2018 than in 2017.

 

Eligible capital. June 2019*

 

EUR million

 

      Phased-in      Fully loaded  
CET1      68,406        68,406  
Basic capital      77,915        77,096  
Eligible capital      89,782        89,640  
Risk-weighted assets      605,470        605,470  
CET1 capital ratio      11.30        11.30  
T1 capital ratio      12.87        12.73  
Total capital ratio      14.83        14.80  

LOGO

 

 

LOGO

 

January - June 2019     LOGO     17


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

Risk management

   

 

                

   

 

   

 

 

RISK MANAGEMENT

 

LOGO

 

Santander maintained its medium-low risk profile in the second quarter with an enhanced credit quality, low risk market activity focused on our customers and limited exposure to operational risk events.

 

The Group’s credit quality improved: NPL ratio decreased to 3.51% and cost of credit is still below 1%. Coverage remained stable at 68%.

 

Market risk exposure remained at low levels despite continued volatility and uncertainty.

 

The operational risk profile remained stable, with a similar distribution of losses by category in the quarter.

LOGO  Credit risk management

 

The positive trend in credit quality continued, underpinned by the good year-on-year evolution of the NPL ratios, coverage and cost of credit in the second quarter.

Non-performing loans amounted to EUR 34,421 million at the end of June 2019, 3% lower than in the first quarter. Excluding the exchange-rate impact, the volume of NPLs also decreased by 3%, with reductions in Europe, and similar levels in North and South America. Both net inflows to NPLs and charge-offs were reduced on a year-on-year basis.

The Group’s NPL ratio continued to fall (-11 bps in the quarter to 3.51% and -41 bps since June 2018). Significant reductions have been observed in Spain, Chile, Portugal and Poland, while Argentina showed an increase due to the country’s complex economic situation.

Loan-loss provisions made in the second quarter amounted to EUR 2,141 million, 1% lower than in the first quarter.

Cumulative loan-loss reserves remained stable year-on-year at EUR 4,313 million (+1% in constant euros) with improvements in most of the geographies.

The cost of credit remained below 1% (0.98%), with falls in seven of the 10 core units in the second quarter.

Credit risk

 

                          

EUR million

           
      Jun-19      Jun-18      Var. %      Dec-18  

Non-performing loans

     34,421        36,654        (6.1)        35,692  

NPL ratio (%)

     3.51        3.92                 3.73  

Loan-loss allowances

     23,432        25,148        (6.8)        24,061  

For impaired assets

     14,723        15,849        (7.1)        15,148  

For other assets

     8,709        9,298        (6.3)        8,913  

Coverage ratio (%)

     68        69                 67  

Cost of credit (%)

     0.98        0.99                 1.00  

 

Key metrics geographic performance. June 2019

        

%

           
     NPL      Change (bps)      Coverage  
      ratio      QoQ      YoY      ratio  

Spain

     7.02        (27)        (60)        43  

SCF

     2.24        (9)        (20)        106  

United Kingdom

     1.13        (4)               32  

Portugal

     5.00        (77)        (255)        53  

Poland

     4.21        (18)        (37)        70  

USA

     2.32        (9)        (59)        158  

Mexico

     2.21        9        (37)        127  

Brazil

     5.27        1        1        106  

Chile

     4.52        (15)        (34)        59  

Argentina

     3.79        29        139        126  

 

LOGO

 

 

18     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

Risk management

   

 

                

   

 

   

 

 

Total loan-loss reserves amounted to EUR 23,432 million. Coverage at the end of June 2019 was 68% for the Group. Also taking into account that in Spain and the UK, a large part of their portfolios have real estate collateral, which justifies lower coverage levels.

The Group’s coverage by IFRS 9 stages remained stable on a year-on-year basis, with no significant movements.

Coverage ratio by stage

 

                          

EUR billion

           
     Exposure*             Coverage  
      Jun-19              Jun-19      Jun-18  

Stage 1

     870                 0.5%        0.6%  

Stage 2

     53                 8.5%        8.5%  

Stage 3

     34                 42.8%        43.2%  

 

(*)

Exposure subject to impairment. Additionally, there are EUR 24 billion in loans and advances to customers not subject to impairment recorded at mark to market with changes through P&L.

 

 

 

Non-performing loans by quarter                                                                
EUR million                            
      Q1’18        Q2’18        Q3’18        Q4’18        Q1’19        Q2’19  

Balance at beginning of period

     37,596          37,407          36,654          36,332          35,692          35,590  

Net additions

     2,340          2,906          2,528          3,136          2,147          2,511  

Increase in scope of consolidation

                                177                    

Exchange rate differences and other

     361          (409)          (140)          (130)          479          (162)  

Write-offs

     (2,890)          (3,250)          (2,710)          (3,823)          (2,728)          (3,518)  

Balance at period-end

     37,407          36,654          36,332          35,692          35,590          34,421  

 

 

LOGO  Market risk

In the second quarter, the global corporate banking trading activity risk, which is mainly interest rate driven and focused on servicing our customer’s needs, measured in daily VaR terms at 99%, fluctuated around an average value of EUR 11.4 million and

reached EUR 20.4 million mainly as a result of increased volatility and the exposure to interest rate and FX risk in Brazil, and always within the established limits. These figures are low compared to the size of the Group’s balance sheet and activity. In addition, there are other positions classified for accounting purposes as trading (total VaR of EUR 16.6 million at the end of June 2019).

 

 

LOGO

 

January - June 2019     LOGO     19


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

Risk management

   

 

                

   

 

   

 

 

Trading portfolio*. VaR by geographic region

 

EUR million

                                   
     2019             2018  
Second quarter    Average      Latest              Average  
           
           

Total

     11.4        16.0                 9.5  

Europe

     5.8        5.9                 5.5  

North America

     3.6        4.9                 3.9  

South America

     8.6        10.8                 6.9  

(*) Activity performance in Santander Corporate & Investment Banking markets.

Trading portfolio*. VaR by market factor

 

EUR million            
Second quarter 2019    Min.          Avg.          Max.          Last  

Total VaR

     7.3        11.4        20.4        16.0  

Diversification effect

     (0.4)        (6.4)        (12.0)        (11.1)  

Interest rate VaR

     7.0        8.9        15.5        15.5  

Equity VaR

     1.0        1.7        3.2        3.2  

FX VaR

     1.8        3.4        7.2        4.8  

Credit spreads VaR

     2.9        3.7        4.8        3.5  

Commodities VaR

     0.0        0.0        0.1        0.0  

(*) Activity performance in Corporate & Investment Banking markets.

NOTE: In the Latin America, United States and Asia portfolios, VaR corresponding to the credit spreads factor other than sovereign risk is not relevant and is included in the interest rate factor.

 

 

LOGO  Structural and liquidity risk

 

With regards to structural exchange rate risk, Santander’s CET1 ratio coverage remained around 100% in order to protect it from foreign currency movements.

 

In structural interest rate risk, during the second quarter a positive impact was generated in the value of the structural debt portfolio that was close to EUR 800 million, given the downward pressure on interest rates due to trade disputes, greater geopolitical tensions and increased expectations of new stimuli by the ECB and the Fed, as well as implementation of the economic reforms proposed in Brazil.

 

In liquidity risk during the second quarter, the Group maintained a comfortable position, supported by a robust and diversified liquidity buffer, with ratios well above regulatory limits.

LOGO  Operational risk

 

The operational risk profile remained stable in the second quarter, although the volume of losses increased slightly due to the PPI claims in the UK, given that the deadline to present claims is approaching. Nevertheless, accumulated losses in the first half are lower than in the previous half year.

 

In relative terms, levels of losses by Basel categories were similar, mainly those derived from civil claims with customers and external fraud.

 

Specific risk-monitoring frameworks continued to improve such as those for suppliers or the most significant change management processes, as well as implementing measures to mitigate fraud in the main units (Mexico, UK and Brazil).

 

Cybersecurity, a key area for the Group, continues to improve. Progress continued to be made in the first half of 2019 in our cybersecurity transformation programme in order to strengthen the detection, response and protection mechanisms.

 

20     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

 

GENERAL BACKGROUND

Economic activity slowed in the second quarter of 2019, particularly in mature economies, as a result of trade tensions which hit exports and investment and some one-off factors. Growth was noticeably slower in EU countries. The forecast for global growth in 2019 is around 3.25% (3.6% in 2018).

Slower growth together with downside risks and inflation generally below target produced a downward change in markets’ expectations on official interest rates – reinforced by central banks – which now discount cuts in the Fed’s and ECB’s benchmark rates. Latin American central banks thus have greater leeway.

 

Country    GDP
change 1
   Economic performance

LOGO

 

Eurozone

  

+1.2%

  

Growth weakened, affected by idiosyncratic factors in some countries combined with a weakening of global trade and greater uncertainties. Inflation fell to 1.2% in June as a result of lower energy prices. The European Central Bank held its very soft monetary policy and is contemplating, if necessary, expansive measures.

 

LOGO

 

Spain

  

+2.4%

  

Economic growth remained stronger than the Eurozone’s, despite weakening a little. Job creation was still notable. The unemployment rate continued to fall. Inflation slipped to 0.4% in June.

 

LOGO

 

Poland

  

+4.7%

  

GDP growth in the first quarter was brisk and based on solid foundations. The jobless rate is close to a historic low (3.9% in the first quarter). Inflation was 2.6% in June, exceeding the 2.5% inflation target for the first time in seven years. The benchmark rate, however, remained at 1.5%.

 

LOGO

 

Portugal

  

+1.8%

  

Growth quickened slightly in the first quarter, but was not enough to keep on reducing the unemployment rate which is 6.8%, due to lower employment growth. Inflation was low at 0.4% in June. The fiscal deficit fell to 0.5% in 2018.

 

LOGO

 

United Kingdom

  

+1.8%

  

The economy grew strongly in the first quarter (+0.5% over Q4’18). Inflation was 2.0% in June, in line with the Bank of England’s target and the unemployment rate inched down to 3.8%. The base rate remained at 0.75%, pending the outcome of Brexit.

 

LOGO

 

Brazil

  

+0.5%

  

Growth slowed in the first quarter, due to weaker investment. Inflation eased to 3.4% in June, after rising in the first quarter and is expected to be below the 4.25% target. The central bank held its key rate at 6.50% (a historic low) but introduced a downward bias at its June meeting. The pension reform was passed the first vote in Congress.

 

LOGO

 

Mexico

  

+1.2%

  

The economy slowed in the first quarter. Inflation was 3.9% in June and the expectations are anchored at around 3.5%. The central bank held its key rate at 8.25%, but at its June meeting a member of the monetary committee voted to cut it by 25 bps.

 

LOGO

 

Chile

  

+1.6%

  

GDP growth decelerated in the first quarter, due to lower growth in investment and a fall in exports. The central bank cut its benchmark rate by 25 bps in June to 2.5% and left the bias neutral, suggesting stability. Inflation remained low (2.3% in June).

 

LOGO

 

Argentina

  

-5.8%

  

The economy continued its adjustment process in order to reduce inflation and the fiscal and external imbalances. Activity seems to have reached a cyclical low in the first quarter, as April’s indicators suggest. Inflation shows incipient signs of easing in the second quarter, underpinned by a stable exchange rate.

 

LOGO

 

United States

  

+3.2%

  

GDP growth gathered pace due to temporary factors in the first quarter. The unemployment rate was 3.7% in June and inflation remained below the Fed’s target (underlying rate of 1.6% in May), which kept interest rates stable at 2.25-2.5%, but gave a downward bias to its messages.

 

(1) Year-on-year change Q1’19.

 

January - June 2019     LOGO     21


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

 

DESCRIPTION OF SEGMENTS

The segment reporting is based on financial information presented to the chief operating decision maker, which excludes certain items included in the statutory results that distort year-on-year comparisons and are not considered for management reporting purposes. This financial information (underlying basis) is computed by adjusting reported results for the effects of certain gains and losses (e.g.: capital gains, write-downs, impairment of goodwill, etc.). These gains and losses are items that management and investors ordinarily identify and consider separately to better understand the underlying trends in the business.

The Group has aligned the information in this operating segment section in a manner consistent with the underlying information used internally for management reporting purposes and with that presented throughout the Group’s other public documents.

The Group executive committee has been determined to be the chief operating decision maker for the Group. The Group’s operating segments reflect the organisational and management structures. The Group executive committee reviews the internal reporting based on these segments in order to assess performance and allocate resources.

The segments are differentiated by the geographic area where profits are earned, and by type of business. The financial information of each reportable segment is prepared by aggregating the figures for the Group’s various geographic areas and business units. The information relates to both the accounting data of the units integrated in each segment and that provided by management information systems. In all cases, the same general principles as those used in the Group are applied.

The businesses included in each of the business areas in this report and the accounting principles under which their results are presented here may differ from the businesses included and accounting principles applied in the financial information separately prepared and disclosed by our subsidiaries (some of which are publicly listed) which in name or geographical description may seem to correspond to the business areas covered in this report. Accordingly, the results of operations and trends shown for our business areas in this document may differ materially from those of such subsidiaries.

At the beginning of July 2019, we announced that, starting with the financial information for the first half of 2019, we would carry out a change in our reported segments to reflect our current organisational and management structure.

This change in our reported segments aims to align the segment information to how segments and units are managed and has no impact on accounting figures at the Group level. The main changes, which have been applied to segment information for all periods included in the consolidated financial statements, are the following:

Primary segments

 

1.

Creation of the new geographic segment Europe that includes the existing units under the previous Continental Europe segment (Spain, Portugal, Poland and Santander Consumer Finance) plus the UK (that was previously a segment on its own and is now a unit under the segment Europe).

 

 

The UK is aligned with the ring-fencing structure, including products and services distributed to our retail customers and the majority of our business customers. The businesses excluded are now incorporated in the rest of Europe.

 

 

Spain now includes the Real Estate Activity Spain unit, previously included in the rest of Europe, and it excludes some treasury businesses now reported in the rest of Europe and the online bank Openbank is now incorporated in the new digital segment (Santander Global Platform).

 

 

Rest of Europe, included within the Europe segment, comprises mainly (i) CIB businesses such as Banco Santander, S.A. branches outside of Spain (including the businesses excluded from the UK as a result of ring-fencing) as well as Spain’s treasury business and (ii) Private Banking’s Wealth Management & Insurance businesses in Switzerland, mutual funds in Luxemburg and Insurance in Zurich.

 

2.

Creation of the new geographic segment North America that comprises the existing units under the previous US segment plus Mexico.

 

3.

Creation of the new geographic segment South America that comprises the existing units under the previous Latin America segment except for Mexico.

 

4.

Creation of a new reporting unit segment, Santander Global Platform, which includes our global digital services under a single unit:

 

 

Our fully digital native bank Openbank and Open Digital Services.

 

 

Global Payments Services: payments platform to better serve our customers with value propositions developed globally, including Superdigital, Pago FX and our recently launched global businesses (Global Merchant Services and Global Trade Services).

 

 

Digital Assets: common digital assets and Centres of Digital Expertise which help our banks in their digital transformation.

Secondary segments

 

5.

The Real Estate Activity Spain unit, that was previously a segment reported on its own, is now included in Retail Banking.

 

6.

The insurance business, previously included in Retail Banking, is now included in the Wealth Management segment, which was renamed Wealth Management & Insurance.

 

22     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

 

 

7.

The new digital segment (Santander Global Platform) is also incorporated as a secondary segment.

 

8.

Finally, the change in reported segments also includes adjustments of the clients of the Global Customer Relationship Model between Retail Banking and Santander Corporate & Investment Banking and between Retail Banking and Wealth Management & Insurance.

The changes in the secondary segments have no impact on the primary segments.

To allow better quarter-on-quarter and year-on-year comparability, and as was published in the Relevant Fact in July 2019, the Group has provided the quarterly 2018 and first quarter of 2019 data on a new basis, in accordance with the new structure of the Group.

After these changes, the operating business areas are structured in two levels:

Primary segments

This primary level of segmentation, which is based on the Group’s management structure, comprises five reportable segments: four operating areas plus the Corporate Centre. The operating areas are:

Europe: which comprises all the business activities carried out in the region. Detailed financial information is provided on Spain, Portugal, Poland, Santander Consumer Finance (which incorporates all the region’s business, including the three countries mentioned herewith) and the UK.

North America: which comprises all the business activities carried out in Mexico and the US, which includes the holding company (SHUSA) and the businesses of Santander Bank, Santander Consumer USA, Banco Santander Puerto Rico, the specialised unit Banco Santander International and the New York branch.

South America: includes all the financial activities carried out by the Group through its banks and subsidiary banks in the region. Detailed information is provided on Brazil, Chile, Argentina, Uruguay, Peru and Colombia.

Santander Global Platform: includes our fully digital bank Openbank and Open Digital Services, Global Payments Services (Superdigital, Pago FX, Global Merchant Services, Global Trade Services) and Digital Assets (Centres of Digital Expertise, InnoVentures and Digital Assets).

Secondary segments

At this secondary level of segment reporting, the Group is structured into Retail Banking, Santander Corporate & Investment Banking, Wealth Management & Insurance and Santander Global Platform.

Retail Banking: this covers all customer banking businesses, including consumer finance, except those of corporate banking, which are managed through Santander Corporate & Investment Banking, and asset management, private banking and insurance, which are managed by Wealth Management & Insurance. The results of the hedging positions in each country are also included, conducted within the sphere of each one’s assets and liabilities committee.

Santander Corporate & Investment Banking (SCIB): This business reflects revenue from global corporate banking, investment banking and markets worldwide including treasuries managed globally (always after the appropriate distribution with Retail Banking customers), as well as equity business.

Wealth Management & Insurance: Includes the asset management business (Santander Asset Management), the corporate unit of Private Banking and International Private Banking in Miami and Switzerland and the insurance business (Santander Insurance).

Santander Global Platform: includes our fully digital bank Openbank and Open Digital Services, Global Payments Services (Superdigital, Pago FX, Global Merchant Services, Global Trade Services) and Digital Assets (Centres of Digital Expertise, InnoVentures and Digital Assets).

In addition to these operating units, which report by geographic area and businesses, the Group continues to maintain the area of Corporate Centre, that includes the centralised activities relating to equity stakes in financial companies, financial management of the structural exchange rate position, assumed within the sphere of the Group’s assets and liabilities committee, as well as management of liquidity and of shareholders’ equity via issuances.

As the Group’s holding entity, this area manages all capital and reserves and allocations of capital and liquidity with the rest of businesses. It also incorporates amortisation of goodwill but not the costs related to the Group’s central services (charged to the areas), except for corporate and institutional expenses related to the Group’s functioning.

 

As described on the previous page, the results of our business areas presented below are provided on the basis of underlying results only and including the impact of foreign exchange rate fluctuations. However, for a better understanding of the actual changes in the performance of our business areas, we provide and discuss the year-on-year changes to our results excluding such impact.

 

On the other hand, certain figures contained in this report, including financial information, have been subject to rounding to enhance their presentation. Accordingly, in certain instances, the sum of the numbers in a column or a row in tables contained in this report may not conform exactly to the total figure given for that column or row.

 

January - June 2019     LOGO     23


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

 

First half 2019

 

Main items of the underlying income statement

EUR million

 

Primary segments    Net interest
income
     Net fee
        income
     Total
      income
     Net operating
income
     Profit
before tax
     Underlying
attributable
profit to the
parent
 

  EUROPE

     7,141        2,630        10,413        4,822        3,549        2,354  

Spain

     2,018        1,247        3,706        1,661        936        694  

Santander Consumer Finance

     1,911        415        2,321        1,286        1,117        658  

United Kingdom

     1,919        423        2,388        946        792        582  

Portugal

     429        197        712        400        379        260  

Poland

     565        230        817        467        293        150  

Other

     299        118        469        62        33        10  

  NORTH AMERICA

     4,403        901        5,672        3,286        1,594        889  

US

     2,860        479        3,734        2,154        891        465  

Mexico

     1,543        423        1,938        1,132        703        424  

  SOUTH AMERICA

     6,647            2,355        9,134        5,825        3,661        1,961  

Brazil

     4,979        1,855        6,864        4,637        2,846        1,482  

Chile

     940        200        1,255        731        560        311  

Argentina

     511        241        720        289        127        73  

Other

     217        60        295        168        128        94  

  SANTANDER GLOBAL PLATFORM

     46        2        39        (69)        (70)        (51)  

  CORPORATE CENTRE

     (600)        (27)        (822)        (1,015)        (1,155)        (1,108)  

  TOTAL GROUP

     17,636        5,863        24,436        12,849        7,579        4,045  
Secondary segments                                                

  RETAIL BANKING

     16,553        4,583        21,528        11,816        6,776        3,856  

  CORPORATE & INVESTMENT BANKING

     1,354        730        2,606        1,488        1,396        889  

  WEALTH MANAGEMENT & INSURANCE

     283        574        1,085        630        632        459  

  SANTANDER GLOBAL PLATFORM

     46        2        39        (69)        (70)        (51)  

  CORPORATE CENTRE

     (600)        (27)        (822)        (1,015)        (1,155)        (1,108)  

  TOTAL GROUP

     17,636        5,863        24,436        12,849        7,579        4,045  

 

LOGO

 

24     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

 

First half 2018

 

Main items of the underlying income statement

EUR million

 

Primary segments    Net interest
income
     Net fee
        income
     Total
      income
     Net operating
income
     Profit
before tax
     Underlying
attributable
profit to
the parent
 

  EUROPE

     7,010        2,754        10,524        4,858        3,610        2,422  

Spain

     1,995        1,340        3,746        1,540        871        661  

Santander Consumer Finance

     1,843        403        2,266        1,248        1,096        667  

United Kingdom

     2,052        459        2,590        1,150        944        665  

Portugal

     435        189        688        363        324        229  

Poland

     487        227        731        414        280        155  

Other

     198        137        504        142        95        45  

  NORTH AMERICA

     3,802        809        4,947        2,766        1,265        690  

US

     2,501        434        3,248        1,773        676        334  

Mexico

     1,301        376        1,699        993        589        357  

  SOUTH AMERICA

     6,557            2,340        9,151        5,790        3,499        1,846  

Brazil

     4,906        1,792        6,768        4,499        2,603        1,317  

Chile

     985        227        1,282        751        568        307  

Argentina

     447        263        807        381        198        136  

Other

     218        58        294        160        129        85  

  SANTANDER GLOBAL PLATFORM

     38        2        34        (28)        (29)        (23)  

  CORPORATE CENTRE

     (477)        (17)        (494)        (706)        (866)        (884)  

  TOTAL GROUP

     16,931        5,889        24,162        12,680        7,480        4,052  
Secondary segments                                                

  RETAIL BANKING

     15,972        4,502        21,029        11,302        6,430        3,677  

  CORPORATE & INVESTMENT BANKING

     1,141        819        2,561        1,523        1,360        858  

  WEALTH MANAGEMENT & INSURANCE

     256        583        1,032        589        584        424  

  SANTANDER GLOBAL PLATFORM

     38        2        34        (28)        (29)        (23)  

  CORPORATE CENTRE

     (477)        (17)        (494)        (706)        (866)        (884)  

  TOTAL GROUP

     16,931        5,889        24,162        12,680        7,480        4,052  

 

January - June 2019     LOGO     25


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

 

LOGO

 

EUROPE

 

 

LOGO

 

Highlights (changes in constant euros)

 

Given the current macroeconomic environment characterised by lower for longer interest rates, we are working on our franchise to simplify our structures and operate in a more integrated way in the medium-term.

 

In terms of volumes, growth was moderate (+2%) in gross loans and advances to customers (excluding reverse repos) and +5% customer funds.

 

Underlying attributable profit for the period amounted to EUR 2,354 million, down 3% compared to first half of 2018, due to lower gains on financial transactions (markets) and net fee income (mainly CIB). Conversely, net interest income increased and costs and provisions fell.

 

 

Strategy

Santander’s subsidiaries in Europe are managed according to their local priorities. At the same time, initiatives are being considered to enable greater integration of businesses, shared services and cost saving measures. For example:

 

 

Integration of the different technological platforms and acceleration of the bank’s digital transformation, to help improve the customer experience and expand the distribution channels for our products and services.

 

 

We also continue to work on obtaining additional synergies from the ongoing integration processes, especially in the case of Popular in Spain and the retail and SME business of Deutsche Bank Polska in Poland.

 

 

And finally, simplification of our business model, reducing the number of products to gain efficiency and agility, but maintaining a full value proposition that is capable of meeting the daily needs of our individual customers and offering tailor-made solutions for SMEs and large companies.

All of this, with the medium-term objective to obtain EUR 1 billion of additional savings, based on our global capabilities to strengthen operational efficiency in the region.

Business performance

 

 

Gross loans and advances to customers (excluding reverse repos) increased by 2%, driven by strong organic growth in SCF (France, Spain and Nordic countries) and the integration of Deutsche Bank Polska’s retail and SME business in Poland.

 

 

Customer funds increased by 5% mainly due to higher retail deposits and seasonal factors in Spain in the quarter, and the inclusion of balances from Deutsche Bank Polska in Poland.

Results

Underlying profit amounted to EUR 2,354 million, 3% less than in the same period of the previous year. By lines:

 

 

Revenue was down 1%. Net interest income increased by 2%, supported by higher volumes in SCF, the increase in Poland and the CIB business. This increase is offset by lower gains on financial transactions (markets) and net fee income (mainly CIB).

 

 

Costs decreased 1% (-3% in real terms) reflecting the first savings from our optimisation processes.

 

 

Provisions fell and cost of credit stood at 0.24%.

Compared to the previous quarter, underlying profit rose 2% due to lower provisions.

LOGO

 

LOGO

Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19         /Q1’19        H1’19      /H1’18  

Revenue

 

    

 

5,188

 

 

 

 

-1%

 

      

 

10,413

 

 

 

    

 

-1%

 

 

 

Expenses

 

    

 

-2,789

 

 

 

 

0%

 

      

 

-5,591

 

 

 

    

 

-1%

 

 

 

LLPs

 

    

 

-387

 

 

 

 

-15%

 

      

 

-844

 

 

 

    

 

-2%

 

 

 

PBT

 

    

 

1,781

 

 

 

 

+1%

 

      

 

3,549

 

 

 

    

 

-2%

 

 

 

Underlying attrib. profit

 

    

 

1,191

 

 

 

 

+2%

 

        

 

2,354

 

 

 

    

 

-3%

 

 

 

Detailed financial information on page 53

 

 

26     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

 

LOGO

 

Spain

 

 

LOGO

 

Highlights

 

The integration of Banco Popular with the migration of all offices and customers to the Santander platform was successfully completed. The process of optimising the commercial network, which will be gradually carried out over the coming months, begun.

 

Positive evolution of the levels of customer satisfaction in the migration, particularly in transparency, accompanying customers and communication.

 

We completed the reorganisation of the strategic insurance business, with the end of the agreement with Allianz and the creation of new joint ventures with Aegon and Mapfre1.

 

The first half underlying profit was 5% higher year-on-year at EUR 694 million, mainly due to lower costs.

   

(1) Transactions pending regulatory authorisation and other customary conditions.

 

Commercial activity

 

 

Sustained commercial dynamism with year-on-year growth in business combined with increased profitability in all segments and products (+15 bps). Of note by products was consumer credit with existing customers (+24% year-on-year), spurred by pre-approval and digital contraction of loans.

 

 

The main drivers of loyalty continued to grow at double digit rates in both Santander and Popular (+13% in cards turnover and +7% from point-of-sale terminals).

 

 

New insurance premium rose 9%, consolidating itself as a strategic driver, while at the same time we completed the reorganisation of this business.

 

 

Mutual funds grew more quickly to almost EUR 5 billion, producing a further gain in market share.

 

 

Launch in April 2019 of the Smith Plan in order to be the leader in the non-resident segment, via a differentiated value proposal focused mainly on covering the needs of those who are purchasing a house in Spain.

 

 

Our remote management model, Santander Personal, now includes companies, strengthening the digital transformation process.

Business performance

 

 

Gross loans and advances to customers (excluding reverse repos) were affected by the deleveraging in wholesale banking due to the market environment and the move toward a capital light model, while new mortgages do not yet offset maturities. The stock, however, rose by EUR 600 million in the first half.

 

 

Customer deposits (excluding repos) increased by EUR 13.3 billion in the year, of which EUR 6 billion were retail customer deposits, impacted by seasonality at the end of the quarter.

Results

First half attributable profit was 5% higher year-on-year at EUR 694 million. By lines:

 

 

Net interest income rose 1%, underpinned by retail banking, due to a continued improvement in the customer spread to 1.94% (+23 bps year-on-year), from the fall in the cost of deposits (-15 bps) as well as the rise in the return on loans (+8 bps).

 

 

Net fee income fell 7%, due to lower activity at SCIB.

 

 

Operating expenses continued to fall (-7%) due to the efficiencies resulting from Popular’s integration and the optimisation efforts.

 

 

Further decline in the stock of non-performing loans (-12% year-on-year) and fall in the NPL ratio to 7.02%.

Compared to the first quarter, underlying profit was 5% lower than the first quarter’s because of the SRF contribution. Excluding this impact, it would have been 7% higher.

LOGO

 

LOGO

Underlying income statement

 

 

EUR million and % change

 

     Q2’19      /Q1’19          H1’19      /H1’18  

Revenue

 

    

 

1,849

 

 

 

    

 

0%

 

 

 

      

 

3,706

 

 

 

    

 

-1%

 

 

 

Expenses

 

    

 

-1,020

 

 

 

    

 

0%

 

 

 

      

 

-2,044

 

 

 

    

 

-7%

 

 

 

LLPs

 

    

 

-228

 

 

 

    

 

-6%

 

 

 

      

 

-470

 

 

 

    

 

+8%

 

 

 

PBT

 

    

 

458

 

 

 

    

 

-4%

 

 

 

      

 

936

 

 

 

    

 

+7%

 

 

 

Underlying attrib. profit

 

    

 

338

 

 

 

    

 

-5%

 

 

 

        

 

694

 

 

 

    

 

+5%

 

 

 

Detailed financial information on page 54

 

 

January - June 2019     LOGO     27


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

LOGO

 

Santander Consumer Finance

 

 

LOGO

 

Highlights (changes in constant euros)

 

SCF continues to be the European consumer finance leader, with critical mass and among the Top 3 in its markets in Europe. Gross loans and advances to customers (excluding reverse repos) rose 7% and new lending 4% year-on-year.

 

Total income increased 3%, largely due to net interest income and net fee income, which together with cost control pushed up net operating income by 3%.

 

First half underlying attributable profit was EUR 658 million, virtually unchanged year-on-year due to the good performance of revenue, operating expenses and the cost of credit (still at low levels for this business).

 

Continued high profitability: RoTE of around 15% and RoRWA of more than 2%.

 

Commercial activity

 

 

SCF continued its growth based on its solid business model, enabling it to confront new market trends: diversification by country, scale, leadership in efficiency and risk and recovery systems that allow it to maintain a better performance than its European competitors in the key metrics.

 

 

Management continued to focus on boosting auto finance and increasing consumer finance through strengthening digital channels.

 

 

The auto business in SCF continued to grow despite the fall in car sales in Europe (-2% in the first five months), due to the good performance of the brands with which SCF operates, via more than 115 captive agreements.

 

 

The agreement with Hyundai Kia to acquire 51% of the financial entity that both companies own in Germany was completed in March 2019, bolstering our leadership in this market.

Business performance

 

 

New lending rose 4% year-on-year, underpinned by commercial agreements in several countries. Of note: Italy (+13%), France (+8%) and Spain (+7%).

 

 

Customer deposits (excluding repos) amounted to EUR 37,900 million and continued to be a factor that differentiated us from our competitors. They continued to be stable, due to various measures taken to complete the digital transformation plan.

 

 

Recourse to wholesale funding amounted to EUR 9,934 million in the first half. Customer deposits (excluding repos), issuances and securitisations covered 73% of net loans.

Results

First half underlying attributable profit of EUR 658 million, slightly lower than the same period of 2018:

 

 

Net interest income rose 4% due to higher volumes.

 

 

Costs rose more slowly (+2%), improving the efficiency ratio to 44.6%, 33 bps better year-on-year.

 

 

The cost of credit remained at low levels (0.36%), reflecting a conservative risk appetite and a solid credit management policy. The NPL ratio was 2.24%, 20 bps lower than in the first half of 2018.

 

 

The largest profits were generated by the Nordic countries (EUR 177 million), Germany (EUR 157 million) and Spain (EUR 116 million).

Compared to the first quarter of 2019, underlying attributable profit was 3% higher due to lower loan-loss provisions.

LOGO

 

LOGO

Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19      /Q1’19          H1’19      /H1’18  

Revenue

 

    

 

1,154

 

 

 

    

 

-1%

 

 

 

      

 

2,321

 

 

 

    

 

+3%

 

 

 

Expenses

 

    

 

-527

 

 

 

    

 

+4%

 

 

 

        

 

-1,035

 

 

 

    

 

+2%

 

 

 

LLPs

 

    

 

-59

 

 

 

    

 

-51%

 

 

 

      

 

-181

 

 

 

    

 

-4%

 

 

 

PBT

 

    

 

556

 

 

 

    

 

-1%

 

 

 

      

 

1,117

 

 

 

    

 

+2%

 

 

 

Underlying attrib. profit

 

    

 

334

 

 

 

    

 

+3%

 

 

 

        

 

658

 

 

 

    

 

-1%

 

 

 

Detailed financial information on page 55

 

 

28     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

LOGO

 

United Kingdom

 

 

LOGO

 

Highlights (changes in constant euros)

 

 

Business performance remained solid: switcher1 levels above market average, strong increase in digital customers and amongst the best in customer satisfaction.

 

 

In terms of volumes, growth in mortgages due to the strengthening of our activity in a competitive market. Solid trend in customer funds, especially in savings deposits, underpinned by the success of an ISA campaign.

 

Underlying attributable profit fell 13%, reflecting the continued competitive pressure on mortgage margins and SVR attrition. On the other hand, the costs and provisions trend improved.

 

Commercial activity

 

 

To better meet the needs of our customers and reflect the way customers are banking with us, in 2019 we announced changes to the branch network and the reshaping of the Corporate & Commercial Banking business.

 

 

We continued to focus on customer experience; the bank is second in retail satisfaction and top 3 for corporates. Since its launch in October 2018, we have opened 31,000 new 1|2|3 Business accounts with switcher1 levels above market average. The number of loyal customers continued to grow: Individuals +6%, SMEs and corporates +7% and loyal customers as a percentage of total active customers rose 2 percentage points to 31%.

 

 

Digital adoption continues to drive change in the organisation. We attracted more than 420,000 digital customers in the last 12 months (+8%), retained 60% of refinanced mortgage loans online (+6 pp year-on-year), and 44% of current accounts (+3 pp) and 66% of credit cards (+9 pp) were opened through digital channels.

Business performance

 

 

Gross loans and advances to customers (excluding reverse repos) were stable. Mortgages, consumer and non-CRE trading business volumes increased, while the latter continued to fall.

 

 

Customer deposits (excluding repos) increased by 2%, boosted by higher corporate and retail savings deposits, partly due to a strong ISA campaign (Individual Savings Account - savings product with tax benefits).

Results

Underlying attributable profit in the first half stood at EUR 582 million, down 13% year-on-year.

 

 

Total revenue fell 8% due to continued competitive pressure on mortgage margins and SVR (Standard Variable Rate) attrition, net fee income reduction and lower gains on financial transactions (-67%).

 

 

Costs fell 1%, though in real terms (w/o inflation) fell 3%.

 

 

Loan-loss provisions fell by 22%, with the cost of credit at just 6 basis points. The NPL ratio was stable at 1.13%, supported by prudent approach to risk management and the resilience of the UK economy.

Compared to the first quarter of 2019, underlying attributable profit improved by 29%, due to reductions in costs and provisions that more than offset the aforementioned factors affecting revenue.

 

(1)

Switcher: clients who change bank as part of the Current Account Switch Service, in which the new bank is in charge of managing the whole process, free of charge, within 7 working days.

 

LOGO

 

LOGO

Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19      /Q1’19          H1’19      /H1’18  

Revenue

 

    

 

1,183

 

 

 

    

 

-2%

 

 

 

        

 

2,388

 

 

 

    

 

-8%

 

 

 

Expenses

 

    

 

-703

 

 

 

    

 

-5%

 

 

 

      

 

-1,442

 

 

 

    

 

-1%

 

 

 

LLPs

 

    

 

-19

 

 

 

    

 

-68%

 

 

 

      

 

-80

 

 

 

    

 

-22%

 

 

 

PBT

 

    

 

435

 

 

 

    

 

+22%

 

 

 

      

 

792

 

 

 

    

 

-17%

 

 

 

Underlying attrib. profit

    

 

327

 

 

 

    

 

+29%

 

 

 

        

 

582

 

 

 

    

 

-13%

 

 

 

Detailed financial information on page 56

 

 

 

January - June 2019     LOGO     29


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

 

LOGO

 

Portugal

 

 

LOGO

 

Highlights

 

The Bank continued its commercial and digital transformation, marketing new products for companies and SMEs and making the granting of new mortgages simpler and faster.

 

Market shares in new lending to companies and mortgages reached around 20%, in a market that is still deleveraging.

 

Underlying attributable profit increased 14% year-on-year, reflecting revenue growth, lower costs from optimising the structure and a very low cost of credit.

Commercial activity

The Bank continued its strategy to tailor products and services to customers’ needs, focusing on increasing the number of customers and their loyalty:

 

 

The commercial transformation continued to renew the offer and benefits in Mundo 1|2|3 and strengthened our presence in the agrifood sector. As a result of this strategy, loyal customers already account for 45% of active customers.

 

 

The second Work Café was opened in Coimbra, expanding this new customer relationship model which is a driver for increasing attraction and loyalty.

 

 

The Bank continued its policy of local proximity and offering non-financial solutions (Santander Advance Empresas). A Box Santander Advance was held in Funchal (Madeira), with the active participation of local companies and entities in exchange of experiences, opinions and knowledge workshops.

Business performance

 

 

Gross loans and advances to customers (excluding reverse repos) were still lower than a year ago, but they rose slightly, aligned with the dynamism of market shares in new mortgages and loans to companies in the first half.

 

 

Customer funds increased 7% year-on-year, spurred by the growth in deposits and mutual funds.

Results

The first half underlying attributable profit rose 14% year-on-year to EUR 260 million. By lines:

 

 

Total income increased 3%, driven by gains on financial transactions that rose more than 50% because of ALCO portfolio sales, and net fee income which offset the fall in net interest income, which was still in line with the year-on-year dynamic of the stock of credit.

 

 

Costs declined further, enabling net operating income to rise 10% and the efficiency ratio to improve 3.3 pp to 43.8%.

 

 

Provisions were slightly positive due to greater recoveries, mainly in the first quarter. The NPL ratio fell to 5.00% from 7.55% in June 2018, and the cost of credit was only 0.03%.

Compared to the first quarter of 2019, underlying profit was lower because of reduced revenue, mainly gains on financial transactions, and higher provisions due to greater recoveries in the first quarter.

 

LOGO

 

LOGO

Underlying income statement

 

 

EUR million and % change

 

     Q2’19      /Q1’19          H1’19      /H1’18  

Revenue

 

    

 

354

 

 

 

    

 

-1%

 

 

 

      

 

712

 

 

 

    

 

+3%

 

 

 

Expenses

 

    

 

-154

 

 

 

    

 

-2%

 

 

 

        

 

-312

 

 

 

    

 

-4%

 

 

 

LLPs

     -1                 12         

PBT

 

    

 

186

 

 

 

    

 

-4%

 

 

 

      

 

379

 

 

 

    

 

+17%

 

 

 

Underlying attrib. profit

    

 

125

 

 

 

    

 

-7%

 

 

 

        

 

260

 

 

 

    

 

+14%

 

 

 

Detailed financial information on page 57

 

 

30     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

 

LOGO

 

Poland

 

 

LOGO

 

Highlights (changes in constant euros)

 

As at end of the first half of 2019, Santander is the second largest bank in Poland in terms of assets following the integration of Deutsche Bank Polska’s retail and SME business in 2018.

 

The main management priorities are increasing revenue in a competitive environment and achieving synergies from the integration.

 

In earnings, net operating income (after provisions) increased 12%, which is not reflected in underlying profit (-1%) due to the higher BFG and Banking Tax contribution, the latter adding to fiscal pressures as it is not tax deductible.

Commercial activity

 

 

Following the integration of Deutsche Bank Polska’s retail and SME business in 2018, the Bank is focused on synergy achievement and improving customer relationships.

 

 

The As I Want It account continued its strong performance, exceeding 1.5 million accounts since its launch in September 2017.

 

 

In the second quarter the new sales of cash loans increased 63% year-on-year, a record high, and exceeded PLN 2 billion.

 

 

The Bank has introduced pre-limits for selected corporate customers, improving customer relationships shortening the decision-making process and anticipating and accommodating their basic needs better.

 

 

SCIB Poland arranged the first ESG loan in Poland and Central and Eastern Europe, where part of the margin is related to the borrower’s compliance with specific social and environmental objectives.

Business performance

 

 

Strong year-on-year growth (+26%) in gross loans and advances to customers (excluding reverse repos), mainly due to the integration. In the year to end-June 2019, a period not affected by the acquisition, volumes increased by 3%.

 

 

Likewise, customer deposits (excluding repos) increased strongly year-on-year (+24%), with significant growth in corporates, individuals and SMEs. Since year-end, total customer funds have remained stable due to active management relating to liquidity and cost of deposit optimisation.

Results

Underlying attributable profit in the first half of 2019 of EUR 150 million, down 1% on the same period of 2018.

 

 

Positive top line performance, supported by the integration of Deutsche Bank Polska’s retail and SME business. Net operating income was up 15%. Costs, also impacted by acquisition, increased 12%.

 

 

Loan-loss provisions were up 25%, driven by the review of consumer finance parameters. The cost of credit improved slightly to 0.66%.

 

 

The other results line is affected by the higher Banking Tax contribution, also added to fiscal pressures as it is not tax deductible.

Compared to the previous quarter, underlying profit increased by 44%, due to the annual BFG and Banking Tax contributions in the first quarter of the year and the greater (seasonal) collection of dividends in the second quarter.

 

LOGO

 

LOGO

Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19      /Q1’19          H1’19      /H1’18  

Revenue

 

    

 

440

 

 

 

    

 

+16%

 

 

 

      

 

817

 

 

 

    

 

+14%

 

 

 

Expenses

 

    

 

-176

 

 

 

    

 

+1%

 

 

 

      

 

-349

 

 

 

    

 

+12%

 

 

 

LLPs

 

    

 

-64

 

 

 

    

 

+47%

 

 

 

        

 

-107

 

 

 

    

 

+25%

 

 

 

PBT

 

    

 

166

 

 

 

    

 

+30%

 

 

 

      

 

293

 

 

 

    

 

+6%

 

 

 

Underlying attrib. profit

    

 

89

 

 

 

    

 

+44%

 

 

 

        

 

150

 

 

 

    

 

-1%

 

 

 

Detailed financial information on page 58

 

 

January - June 2019     LOGO     31


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

 

LOGO

 

NORTH AMERICA

 

  LOGO  

Highlights (changes in constant euros)

 

In North America, the US and Mexico are managed according to their local strategic priorities, while increasing coordination and cooperation between the two units.

 

Volumes grew both in the quarter and over the past twelve months.

 

Underlying attributable profit increased 21% year-on-year, driven by total revenue and improved efficiency.

Strategy

In the United States, SBNA’s strategy focuses on improving customer satisfaction through our digital channels and branches, while being the “Lead bank” for our customers. In SC USA, the focus is to drive originations growth and improve profitability via dealers.

In Mexico, the main objectives are to improve the distribution network and develop digital channels to attract new customers and increase their loyalty.

Coordination between the units has increased. We are analysing new joint projects and initiatives, such as:

 

 

Approval of financing for SBNA customers granted by Santander México and vice versa.

 

 

Further develop the USMX trade corridor, for example, by increasing capabilities for DCM and ECM transactions.

 

 

Launch of a same-day remittance service from Santander US branches to any bank in Mexico.

Business performance

 

 

Gross loans and advances to customers (excluding reverse repos) increased by 10%, with similar growth rates in both units.

 

 

Customer funds grew in both countries, driven by time deposits, especially at SBNA and the New York branch. Demand deposits from individuals in Mexico continued their solid performance. Mutual funds increased by 6%.

Results

In the first half of the year, underlying attributable profit was EUR 889 million (17% of the Group’s total operating areas), up 21% year-on-year.

 

 

Good performance in total income at both units, with growth driven by both net interest income (+8%) and net fee income (+4%).

 

 

Expenses grew less than revenue, resulting in an improved efficiency ratio from 44% in the first half of 2018 to 42% at present. Mexico increased its costs due to the investment plan and while they were stable in the US (-2% in real terms).

 

 

Provisions were up 6% on the back of higher volumes. The cost of credit was stable at 2.95%, the NPL ratio fell to 2.29% and coverage remained around 150%.

In the quarter, the underlying attributable profit increased by 29% due to good performance in revenue and lower provisions.

 

 

LOGO

 

LOGO

Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19          /Q1’19      H1’19      /H1’18  

Revenue

 

    

 

2,918

 

 

 

        

 

+5%

 

 

 

    

 

5,672

 

 

 

    

 

+7%

 

 

 

Expenses

 

    

 

-1,214

 

 

 

      

 

+2%

 

 

 

    

 

-2,386

 

 

 

    

 

+2%

 

 

 

LLPs

 

    

 

-793

 

 

 

      

 

-3%

 

 

 

    

 

-1,597

 

 

 

    

 

+6%

 

 

 

PBT

 

    

 

881

 

 

 

      

 

+22%

 

 

 

    

 

1,594

 

 

 

    

 

+18%

 

 

 

Underlying attrib. profit

 

    

 

503

 

 

 

        

 

+29%

 

 

 

    

 

889

 

 

 

    

 

+21%

 

 

 

 

Detailed financial information on page 60

 

 

32     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

 

LOGO

 

United States

 

 

LOGO

 

Highlights (changes in constant euros)

 

The strategy is focused on improving customer satisfaction at SBNA and at SC USA on the relationship with distributors to increase originations.

 

 

Following the strong gains in the quarter, the year-on-year volume trend in both gross loans and advances to customers (excluding reverse repos) and customer deposits (excluding repos) was more pronounced.

 

 

Underlying attributable profit increased by 30% in the first half compared to the same period of 2018, due to a strong top line performance, with total revenue up 7% and costs remaining flat.

 

Commercial activity

In 2019, Santander US remains focused on the following strategic priorities:

Santander Bank: Commercial Banking’s “Lead Bank” strategy continues to show gains in primary customers. Better customer satisfaction scores are being achieved as a result of improved product offerings in both digital channels and branches. The joint initiative with SC USA in auto finance continues to generate high volumes, having originated almost USD 3 billion in the first half of the year.

Santander Consumer USA: The key levers to drive profitability remain increase in originations and management of credit risk and prices. In addition, the agreement with Fiat Chrysler was amended strengthening its partnership establishing an operating framework for the remainder of the contract, which ends in 2023. In addition, a plan has been approved to repurchase USD 1.1 billion in common stock and to increase the cash dividend to USD 0.22 from Q3 2019 to Q2 2020.

Business performance

 

 

Volumes improved in the quarter due to lending growth in retail banking (auto) and commercial banking. Originations increased 5% year-on-year in SC USA, mainly due to Chrysler loans (+25%).

 

 

Customer funds rose 10%, boosted by strong growth in time deposits at SBNA and the New York branch.

Results

Underlying attributable profit in the first half of 465 million euros, 30% more than in the same period of 2018. The year-on-year comparison of net interest income and provisions is affected by methodological changes in the accrual of TDRs made at the end of 2018, though with almost no impact on bottom line results.

 

 

Total income was up 7% (+4% ex. TDRs) due to higher loan and leasing volumes.

 

 

Costs remained under control, virtually flat compared to the same period of 2018. As a result, efficiency improved by 3 percentage points to 42%.

 

 

Loan-loss provisions increased 7%. Excluding the impact of TDRs, they fell 1% partly favoured by a provisions release related to auto finance business in SC USA. The NPL ratio improved and coverage increased to 158%. The cost of credit remained stable at 3.09%.

Compared to the previous quarter, underlying attributable profit rose 55% as a result of higher loan and leasing volumes, higher gains on financial transactions and lower provisions.

 

 

LOGO

 

 

LOGO

Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19          /Q1’19      H1’19      /H1’18  

Revenue

 

    

 

1,920

 

 

 

        

 

+5%

 

 

 

    

 

3,734

 

 

 

    

 

+7%

 

 

 

Expenses

 

    

 

-805

 

 

 

      

 

+3%

 

 

 

    

 

-1,581

 

 

 

    

 

+0%

 

 

 

LLPs

 

    

 

-568

 

 

 

      

 

-8%

 

 

 

    

 

-1,178

 

 

 

    

 

+7%

 

 

 

PBT

 

    

 

521

 

 

 

      

 

+40%

 

 

 

    

 

891

 

 

 

    

 

+23%

 

 

 

Underlying attrib. profit

 

    

 

284

 

 

 

        

 

+55%

 

 

 

    

 

465

 

 

 

    

 

+30%

 

 

 

Detailed financial information on page 61

 

 

January - June 2019     LOGO     33


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

 

LOGO

 

Mexico

 

 

LOGO

 

Highlights (changes in constant euros)

 

The strategy continued to focus on the digital and operational transformation, reflected in greater customer attraction and increased loyalty.

 

Faster growth in gross loans and advances to customers (excluding reverse repos), notably to large companies (+15%) and payroll (+15%). The rise in customer funds continued to be spurred by deposits from individuals and SMEs.

 

Underlying attributable profit was up 12%, underpinned by the good performance of net interest income, net fee income and loan-loss provisions, which more than offset the rise in costs.

Commercial activity

The commercial strategy remained focused on boosting the use of digital channels, attracting new customers and increasing their loyalty with new products and services:

 

 

As regards the distribution model, we transformed 428 branches, and the number of latest generation full function ATMs reached 921.

 

 

The Santander Plus programme has captured more than 5.7 million customers since May 2016, 53% of them new ones.

 

 

In digital strategy, SúperMóvil has new functionalities, notably Santander Tap, a system for transfers via instant messaging for sending money to customers of other banks, at any time and free of charge.

 

 

Launch of the Legacy credit card for private banking customers. Santander is the first and only bank in the country to have an alliance with American Express.

 

 

We continued to drive growth in deposits of individuals by launching promotions such as Arma tu Kit in order to reward customer loyalty and the campaign Champions to attract customer funds.

Strong year-on-year growth of digital and mobile banking customers (+68%). Penetration of loyal customers over active ones increased significantly (+5 pp).

Business performance

 

 

Gross loans and advances to customers (excluding reverse repos) increased 8% year-on-year, while maintaining the focus on profitability. Loans to individuals rose 7% with notable growth in payroll loans (+15%) and mortgages (+8%). Total corporate loans increased 9%, driven by large companies (+15%), corporates (+7%) and SMEs (+4%).

 

 

Customer funds increased slightly, backed by time deposits (+13%) which offset the fall in demand deposits, affected by the rise in interest rates. Those of individuals were up 11%.

Results

First half underlying profit of EUR 424 million was 12% higher than in the same period of 2018, as follows:

 

 

Net interest income rose 11%, driven by increased volumes and higher interest rates. Net fee income grew 6%, mainly from cards and insurance, and gains on financial transactions fell because of a weak quarter in the markets.

 

 

Operating expenses increased 7%, reflecting the ongoing investment plans.

 

 

Loan-loss provisions increased slightly, with good credit quality in all metrics.

Compared to the first quarter of 2019, profit was 5% higher due to higher net fee income and the recovery of gains on financial transactions.

 

LOGO

 

LOGO

Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19      /Q1’19           H1’19      /H1’18  

Revenue

 

    

 

999

 

 

 

    

 

+5%

 

 

 

       

 

1,938

 

 

 

    

 

+7%

 

 

 

Expenses

 

    

 

-409

 

 

 

    

 

+2%

 

 

 

       

 

-806

 

 

 

    

 

+7%

 

 

 

LLPs

 

    

 

-225

 

 

 

    

 

+15%

 

 

 

       

 

-419

 

 

 

    

 

+1%

 

 

 

PBT

 

    

 

360

 

 

 

    

 

+3%

 

 

 

       

 

703

 

 

 

    

 

+12%

 

 

 

Underlying attrib. profit

 

    

 

219

 

 

 

    

 

+5%

 

 

 

         

 

424

 

 

 

    

 

+12%

 

 

 

Detailed financial information on page 62

 

 

 

34     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

 

LOGO

 

SOUTH AMERICA

 

 

LOGO

 

Highlights (changes in constant euros)

 

In South America, the focus is to accelerate profitable growth and lead the retail financial industry. To this end, we have a strategy that seeks to strengthen a more connected regional network and facilitate the expansion of successful businesses to other countries in the region.

 

In activity, there was a volume growth in the last 12 months. Increases in all countries, where we are capturing new business opportunities.

 

Regarding results, underlying attributable profit increased by 15% year-on-year, boosted by revenue and an improvement in the cost of credit.

Strategy

The units in the region continued identifying initiatives that allow the businesses to expand, further leveraging positive experiences in other markets, for example:

 

 

In auto financing, we will use the Group’s experience and the development of this business in Brazil to boost growth in other neighbouring countries. In terms of financing goods and services, we plan to export Uruguay’s successful model to Brazil and to other major regions. We will also accelerate growth in consumer finance in Peru and Colombia.

 

 

In payment methods, where Santander is one of the largest credit card issuers and merchant acquirers in the region, we are exploring e-commerce strategies, instant domestic and international transfers in some countries and the roll-out of Getnet, our acquiring business in Brazil, to the rest of Latin America. We are also launching Superdigital in other countries (starting with Chile).

 

 

Further develop the retail franchise, in particular the mass market segment, through increased penetration of new channels. Sales through digital channels already account for a high percentage of the total in Brazil and Argentina, with a significant upside in Chile, where the Life model is being developed to provide a 100% digital service to customers. The Work Café experience developed in Chile will be accelerated in countries such as Argentina and Brazil.

Business performance

 

 

Year-on-year increase in gross loans and advances to customers (excluding reverse repos) in all units. With regard to June 2018, Brazil grew 9%, Chile 7%, Uruguay 20% and Argentina 14%. Colombia and Peru present very high growth rates but from smaller bases.

 

 

Customer funds also rose in the last 12 months and in all units. Demand deposits (+16%), time deposits (+11%) and mutual funds (+9%) increased year-on-year.

Results

Underlying attributable profit in the first half of the year amounted to EUR 1,961 million (38% of the Group’s total operating areas), up 15% year-on-year due to:

 

 

Total income increased 9%, underpinned by the sound performance by commercial revenue, driven by higher volumes, spread management and increased loyalty. Net interest income rose 9% and net fee income increased by 11%.

 

 

Costs reflect commercial transformation plans, greater digitalisation of the retail network, reviews of collective wage agreements and high inflation in Argentina.

 

 

Loan-loss provisions increased at a slower pace than credit, enabling the cost of lending to improve by 23 bps in the last twelve months to 2.87%. In credit quality, the NPL ratio was stable (4.81%) and coverage was 93%.

In the quarter, underlying attributable profit rose 15% driven by the good performance of revenue, which grew more than costs.

 

LOGO

 

 

LOGO

Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19      /Q1’19           H1’19      /H1’18  

Revenue

 

    

 

4,647

 

 

 

    

 

+6%

 

 

 

       

 

9,134

 

 

 

    

 

+9%

 

 

 

Expenses

 

    

 

-1,664

 

 

 

    

 

+4%

 

 

 

       

 

-3,309

 

 

 

    

 

+9%

 

 

 

LLPs

 

    

 

-956

 

 

 

    

 

+9%

 

 

 

       

 

-1,859

 

 

 

    

 

+2%

 

 

 

PBT

 

    

 

1,876

 

 

 

    

 

+8%

 

 

 

       

 

3,661

 

 

 

    

 

+12%

 

 

 

Underlying attrib. profit

 

    

 

1,035

 

 

 

    

 

+15%

 

 

 

         

 

1,961

 

 

 

    

 

+15%

 

 

 

Detailed financial information on page 63

 

 

January - June 2019     LOGO     35


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

 

LOGO

 

Brazil

 

 

LOGO

 

Highlights (changes in constant euros)

 

Generating results supported by a business model focused on improving customer attention and loyalty leading to profitable market share gains.

 

Strong revenue, underpinned by increased volumes, while costs remained under control thereby achieving the best efficiency among our local peers.

 

Prudent risk management produced growth in gross loans and advances (excluding reverse repos) and a controlled cost of credit.

 

Profit growing sustainably reaching EUR 1,482 million in the first half of the year (+18% year-on-year), with RoTE of 22%.

Commercial activity

We continued to progress in our strategic actions, including:

 

 

The customer base continued to expand to 24.6 million active clients.

 

 

We announced Santander Duo, a new product with a differentiated offer for small entrepreneurs, which combines accounts of legal and natural persons.

 

 

In cards, turnover continued to increase at double digit rates (+21%) and gained market share year-on-year (+86 bps).

 

 

In acquiring, launch of a new offer for SMEs and microbusinesses, where merchants are credited within two working days and charged the same rate for debit and credit cards. As a result we captured 200,000 new customers.

 

 

In consumer finance, we remained the leader (market share in vehicles loans for individuals of 25.3% in May 2019).

 

 

In our new businesses, Pi, a digital investment platform, already offers close to 180 fixed income products and began to distribute mutual funds. Ben, focused on food benefits, started to operate (77,000 cards issued and 143,000 commercial establishments accredited).

 

 

We are committed to using renewable energy in all our offices by 2021 and in administrative buildings and processing centres by 2025.

Business performance

 

 

Gross loans and advances (excluding reverse repos) grew 9% year-on-year, with profitable gains in market share. This was mainly due to business with individuals and consumer finance which increased at double digit rates.

 

 

Customer deposits (excluding repos) rose 13% year-on-year.

Results

First half underlying attributable profit of EUR 1,482 million (+18% YoY). Of note:

 

 

Net interest income rose 7%, with better net interest income from credit and liabilities, partly offset by lower market interest income.

 

 

Net fee income grew 9% year-on-year, with rises in almost all lines. Of note: cards (+13%), insurance (+17%) and securities (+32%).

 

 

Operating expenses increased 3%, which helped improve the efficiency ratio to 32.4% (-108 bps year-on-year).

 

 

Our solid risk management is reflected in stable provisions. The cost of credit dropped to 3.84%, the NPL ratio was 5.27% and coverage 106%.

Compared to the first quarter of 2019, underlying attributable profit was 9% higher, underpinned by higher customer revenue.

 

 

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Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19      /Q1’19           H1’19      /H1’18  

Revenue

 

    

 

3,453

 

 

 

    

 

+4%

 

 

 

       

 

6,864

 

 

 

    

 

+6%

 

 

 

Expenses

 

    

 

-1,102

 

 

 

    

 

+1%

 

 

 

       

 

-2,227

 

 

 

    

 

+3%

 

 

 

LLPs

 

    

 

-761

 

 

 

    

 

+10%

 

 

 

       

 

-1,471

 

 

 

    

 

-2%

 

 

 

PBT

 

    

 

1,438

 

 

 

    

 

+5%

 

 

 

       

 

2,846

 

 

 

    

 

+15%

 

 

 

Underlying attrib. profit

 

    

 

762

 

 

 

    

 

+9%

 

 

 

         

 

1,482

 

 

 

    

 

+18%

 

 

 

Detailed financial information on page 64

 

 

36     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

 

LOGO

 

Chile

 

 

LOGO

 

Highlights (changes in constant euros)

 

We continued the commercial and branch network transformation, based on technological developments in order to attract new customers and boost loyalty. Loyal customers already account for 46% of total active clients.

 

Growth in business volumes at a faster pace, mainly with individuals, companies and institutions.

 

Underlying attributable profit increased 4% year-on-year, benefiting from the performance of markets and lower provisions. Higher inflation in the second quarter spurred net interest income.

 

Commercial activity

Santander is the leading privately-owned bank in Chile in terms of assets and customers. The Group continued its strategy in the first half, focused on offering an attractive profitability in a stable and low risk country where the economy is growing:

 

 

We continued to transform the network, opening more Work Café offices in the quarter and continuing with the pilot of Work Café 2.0, with good initial results in efficiency and productivity.

 

 

We launched new products under the Santander Life programme, including a digital demand account and a new credit card associated with the Meritolife programme which also allows accumulation of Latam air miles. The Santander Life products are centred on promoting good credit performance and deepening financial education.

 

 

Launch of a new Súper Hipoteca, aimed at individuals under the age of 35.

Business performance

 

 

Gross loans and advances to customers (excluding reverse repos) rose 7% year-on-year, underpinned by mortgages (+12%), consumer finance (+12%) and large corporates (+6%). Cards increased 4% and SMEs 6%.

 

 

Customer funds rose 5%, with 10% growth in demand deposits and mutual funds. Time deposits remained stable.

Results

First half of 2019 underlying attributable profit of EUR 311 million, 4% higher year-on-year. Of note were:

 

 

Net interest income recovered in the second quarter due to larger volumes and higher inflation. Net fee income declined 9% year-on-year partly because of wholesale business. Gains on financial transactions rose due to customer treasury and the sale of ALCO portfolios.

 

 

Operating expenses rose slightly because of investments in technology and branches.

 

 

Loan-loss provisions were lower and the cost of credit was 1.10% (-8 bps). The NPL ratio decreased to around 4.5% and coverage was 59%.

Compared to the first quarter of 2019, attributable profit was 11% higher due to net interest income, which more than offset the seasonal growth in costs.

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Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19      /Q1’19      H1’19      /H1’18  

Revenue

 

    

 

656

 

 

 

    

 

+11%

 

 

 

    

 

1,255

 

 

 

    

 

+1%

 

 

 

Expenses

 

    

 

-269

 

 

 

    

 

+7%

 

 

 

    

 

-524

 

 

 

    

 

+2%

 

 

 

LLPs

 

    

 

-105

 

 

 

    

 

+4%

 

 

 

    

 

-208

 

 

 

    

 

-9%

 

 

 

PBT

 

    

 

281

 

 

 

    

 

+2%

 

 

 

    

 

560

 

 

 

    

 

+1%

 

 

 

Underlying attrib. profit

 

    

 

163

 

 

 

    

 

+11%

 

 

 

    

 

311

 

 

 

    

 

+4%

 

 

 

Detailed financial information on page 65

 

 

January - June 2019     LOGO     37


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

 

LOGO

 

Argentina

 

 

LOGO

 

Highlights (changes in constant euros)

 

The Bank announced the change of its commercial brand from Santander Río to Santander.

 

We continued to focus on our four strategic pillars: growth, risk control, efficiency and customer experience.

 

Santander is the largest privately-owned bank in Argentina by volume of business (loans + deposits + mutual funds).

 

First half underlying profit of EUR 73 million after earning EUR 63 million in the second quarter. The year-on-year comparison is impacted by the adjustment for inflation included starting from the third quarter of 2018.

 

Commercial activity

The commercial strategy during the first half focused on transactional business and customer service improvements, notably a campaign to increase direct debit sign-ups, which enabled the stock to increase 50% in a month.

We continued advance in the digital transformation of the main processes and products. Loyal customers accounted for 47% of active clients and digital ones 74% (+3% year-on-year). In individuals, new accounts and product package openings are done digitally in more than 60% of our branches.

We launched Women, a comprehensive proposal for financial and non-financial services, which focuses on female entrepreneurs, owners of SMEs and professionals.

Business performance

Gross loans and advances to customers (excluding reverse repos) was impacted by the economic recession and higher interest rates (+14% year-on-year), below inflation in this period. The peso denominated portfolio increased, driven by inflation-adjusted products (mortgages, auto finance, personal finance) and by cards, while dollar balances declined in the currency of origin.

Customer deposits (excluding repos) rose 45%, in both the portfolio in pesos (+27% in demand deposits and +41% in interest-bearing accounts and time deposits) and in foreign currency deposits (+58%; 8% in dollars). The excess liquidity is placed in Central Bank treasury bonds.

Results

First half underlying profit stable at EUR 73 million, including a negative EUR 74 million impact from the high inflation adjustment.

As regards the main income statement lines:

 

 

Revenue rose 67%, growing above inflation, driven by customer revenue (+98%). Net interest income rose 113%, underpinned by the larger position in public securities and higher interest rates, while net fee income increased 71% driven by greater foreign currency transactions and income from accounts and cash deposits.

 

 

Costs surged 89%, hit by the inflationary environment and the peso’s depreciation.

 

 

Loan-loss provisions stood at EUR 143 million, with an NPL ratio of 3.79% and a coverage ratio of 126%.

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Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19      /Q1’19      H1’19      /H1’18  

Revenue

 

    

 

389

 

 

 

    

 

+22%

 

 

 

    

 

720

 

 

 

    

 

+67%

 

 

 

Expenses

 

    

 

-229

 

 

 

    

 

+17%

 

 

 

    

 

-431

 

 

 

    

 

+89%

 

 

 

LLPs

 

    

 

-70

 

 

 

    

 

+1%

 

 

 

    

 

-143

 

 

 

    

 

+114%

 

 

 

PBT

 

    

 

94

 

 

 

    

 

 

 

 

    

 

127

 

 

 

    

 

+20%

 

 

 

Underlying attrib. profit

 

    

 

63

 

 

 

    

 

 

 

 

    

 

73

 

 

 

    

 

0%

 

 

 

Detailed financial information on page 66

 

 

38     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

 

LOGO

  

 

Highlights (changes in constant euros)

 

The Group is the country’s leading privately-owned bank, doing business with all segments and with a strategy focused on retail banking, improving efficiency and enhancing the quality of service.

 

Underlying attributable profit rose 13%, spurred by the good performance of customer revenue and improved efficiency.

Commercial activity and business performance

 

 

Santander continued to focus on improving customer satisfaction and increasing loyalty. Loyal customers rose 19% and now account for 24% of active clients.

 

 

We continued to advance in our digital transformation strategy and in modernising channels. The number of digital customers increased 9% (digital penetration of 48%, up from 45% in June 2018) while transactions via digital channels rose 36% year-on-year.

 

 

The Group’s consumer finance companies now lead the local market, with a market share of more than 22%. Commercial activity continued to grow briskly, with significant growth in the customer base. In line with our strategy of innovation and contributing to people’s progress, we launched Prosperá, which provides microcredits to small businesses.

 

 

Gross loans and advances to customer (excluding reverse repos) grew in target segments, products and currencies: +14% in consumer credit and cards and +19% in the national currency portfolio. Customer deposits (excluding repos) in pesos grew 11% and foreign currency deposits increased 4% year-on-year.

Results

First half of 2019 underlying attributable profit of EUR 71 million, 13% higher year-on-year.

 

 

Gross income rose 15%, driven by customer revenue, with increases in both net interest income and net fee income.

 

 

Operating expenses rose at a slower pace than total income, improving the efficiency ratio to 43% (-63 bps year-on-year).

 

 

Loan-loss provisions increased 9%, however the NPL ratio remained at a low level (3.46%), coverage was high (109%) and the cost of credit was 2.60%.

 

 

Peru Highlights (changes in constant euros)

 

 

The strategy remained focused on the corporate segment, the country’s large companies and the Group’s global customers.

 

 

The auto loan financial entity continued to expand its business within the Group’s strategy of increasing its presence in this business.

 

 

First half underlying attributable profit of EUR 19 million (+8% year-on-year). Total income rose 23% underpinned by higher net interest income, net fee income and gains on financial transactions. Operating expenses increased 12% and the efficiency ratio was 33.3% (-3.3 pp year-on-year).

 

 

The NPL ratio was 0.81%, coverage was very high and the cost of credit only 0.30%.

 

 

Colombia Highlights (changes in constant euros)

 

 

Activity in Colombia remained focused on SCIB clients, large companies and corporates, contributing solutions in treasury, risk hedging, foreign trade, confirming, custody and development of investment banking products supporting the country’s infrastructure plan.

 

 

Auto finance is also increasing. The origination share reached 2.3% (+60 bps in 12 months), in line with the strategy to attain the critical mass needed to consolidate ourselves in this market. We signed an alliance with Chekar.co, a fully digital platform for buying and selling vehicles. We will begin to grant consumer loans in the coming quarters.

 

 

Gross loans and advances to customers (excluding reverse repos) more than doubled, with growth in all business segments. Of note was the fivefold rise in auto finance. Customer deposits (excluding repos) rose 75%.

 

 

The first half underlying attributable profit was EUR 5 million (EUR 2 million in the same period of 2018). Total income grew 66%, underpinned by net interest income and net fee income, thanks to greater commercial activity.

 

January - June 2019     LOGO     39


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

LOGO

 

SANTANDER GLOBAL PLATFORM (SGP)

 

 

LOGO

 

Highlights

 

With the creation of Santander Global Platform, we are taking a further step forward in our digital transformation, which aligns our reporting structure with our organisation and strategy.

 

Our goal is to extend the benefits of the talent and scale of the Group to the payment and digital businesses with higher growth, building platforms only once for all of our banks which allow us to offer the best digital services aimed at retail customers, merchants and SMEs.

 

In making our Santander Global Platform results public, we are improving the transparency around our digital investments and accelerate the execution of our initiatives.

 

Strategy

In 2019, the unit is focused on the following priorities:

 

 

Openbank and Open Digital Services (ODS):

 

 

Openbank, our digital bank in Spain, has a large base of 1.2 million customers and is increasing strongly the number of transactions (29%) and volumes. All of this with high levels of transactionality and productivity per customer and employee.

 

 

Open Digital Services (ODS) is creating a new banking platform with a complete range of products for individuals. This platform will be used for Openbank’s international expansion. In a first phase, it will be available in Germany, Portugal, the Netherlands, Argentina and Mexico.

 

 

Global Payments Services:

 

 

Superdigital: is aimed at the unbanked population. In a first phase, it is expected to be rolled out in Mexico and Chile, leveraging the experience in Brazil. We currently have more than 500,000 active users.

 

 

Pago FX: aims to create an app for the open market, with low cost, transparent, same day or next day international transfers. The first phase is expected to be launched in three European countries.

 

 

Global Merchant Services is developing a global acquiring solution, a segment that already has more than one million active customers. Taking advantage of Getnet’s capabilities, it will be installed in a first phase in Mexico and followed by the rest of Latin America.

 

 

At Global Trade Services, we want to continue being the partner for our more than 200,000 companies that are growing and doing international business with us. The aim is to develop the platform in 2019 and an initial roll-out in the UK, Spain, Brazil and Chile. In the future, we hope to capture business in the rest of Santander geographies and the open market.

 

 

Digital Assets:

 

 

The Centres of Digital Expertise continue leveraging the Group’s scale and ensuring all countries have access to the most innovative technologies.

 

 

InnoVentures, our venture capital investments in the fintech ecosystem, had approximately USD 100 million invested in 24 companies in June.

 

 

Finally, in the rest of Digital Assets, we continued to advance in Globile, our shared mobile phone platform, with more than 20 components implemented in six countries. We also progressed in Open Platform, a new cloud based technological platform used to develop corporate projects.

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LOGO

 

LOGO

 

LOGO

Detailed financial information on page 68

 

 

40     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Primary segments

   

 

   

 

 

 

LOGO

  CORPORATE CENTRE
 

LOGO

 

Highlights

 

The Corporate Centre’s objective is to aid the operating units by contributing value and carrying out the corporate function of oversight and control. It also carries out functions related to financial and capital management.

 

The underlying attributable loss was higher compared to the first half of 2018, mainly due to higher costs related to foreign currency hedging and increased stock of issuances.

 

Strategy and functions

The Corporate Centre contributes value to the Group in various ways:

 

 

It makes the Group’s governance more solid, through global control frameworks and supervision.

 

 

Fostering the exchange of best practices in management of costs and generating economies of scale. This enables us to be one of the most efficient banks.

 

 

The Corporate Centre contributes to the Group’s revenue growth, by sharing the best commercial practices, launching global commercial initiatives and accelerating the digital transformation simultaneously in all countries.

It also coordinates the relationship with European regulators and develops functions related to financial and capital management, as follows:

 

 

Financial Management functions

 

 

Structural management of liquidity risk associated with funding the Group’s recurring activity, stakes of a financial nature and management of net liquidity related to the needs of some business units.

 

 

This activity is carried out by the different funding sources (issuances and other), always maintaining an adequate profile in volumes, maturities and costs. The price at which these operations are made with other Group units is the market rate (Euribor or mid-swap) plus the premium, which in liquidity terms, the Group supports by immobilising funds during the term of the operation.

 

 

Interest rate risk is also actively managed in order to soften the impact of interest rate changes on net interest income, conducted via high credit quality, very liquid and low capital consumption derivatives.

 

 

Strategic management of the exposure to exchange rates in equity and dynamic in the countervalue of the units’ annual results in euros. Net investments in equity are currently covered by EUR 24,990 million (mainly Brazil, the UK, Mexico, Chile, the US, Poland and Norway) with different instruments (spot, fx, forwards).

 

 

Management of total capital and reserves: capital allocated to each of the units.

Results

First half underlying attributable loss of EUR 1,108 million, 25% higher than in the same period of 2018, largely because of three factors: the higher costs related to foreign currency hedging, the higher stock of issuances and, to a lesser extent, IFRS 16.

Operating expenses were 9% lower driven by ongoing streamlining and simplification measures.

Corporate Centre

 

EUR million

 

      Q2’19    Q1’19    Chg.    H1’19    H1’18    Chg.

Gross income

   -423    -399    +6%    -822    -494    +66%

Net operating income

   -519    -497    +4%    -1,015    -706    +44%

PBT

   -595    -559    +6%    -1,155    -866    +33%

Underlying attrib. profit

   -592    -517    +15%    -1,108    -884    +25%

Detailed financial information on page 69

 

 

January - June 2019     LOGO     41


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Secondary segments

   

 

   

 

 

 

LOGO

  RETAIL BANKING
 

LOGO

 

Highlights (changes in constant euros)

 

The Group continued to focus on customer loyalty, with new products and services that cover the current needs of our customers. At end of June 2019, the Group had 142 million customers, more than 20 million of whom are loyal.

 

Underlying attributable profit of EUR 3,856 million in the first half, 6% higher than in the same period of 2018 due to the positive customer revenue dynamics and controlled costs.

 

Santander was named the Best Bank in Latin America and the Best SME Bank in Western Europe by Euromoney.

Commercial activity

The Group had 142 million customers at the end of June 2019 (including 24 million consumer finance customers), almost all of whom are from the retail banking segment. In 2019, the focus remains on customer loyalty, already exceeding 20 million loyal customers, equivalent to 30% of active ones.

Santander wants to be the reference bank for customers of all income levels, offering them the services and products that best meet their needs. Furthermore, we are fostering entrepreneurship, helping SMEs and other companies via loans and non-financial support such as training and access to our networks.

As a universal bank, we continued to reinforce our business with new products and services. Of note in the second quarter were:

 

In Spain, launch of Cuenta Mundo for non-residents, via a differential value proposition with a package of innovative products and services. We also extended Santander Personal, the remote management model, for individuals and companies.

 

In Poland, we launched a new commercial website. Santander’s online service is now also available in more languages.

 

In Portugal, the commercial transformation continued with the renewal of the offer and benefits in Mundo 1|2|3 and a stronger presence in the agrifood sector.

 

In Mexico, SuperMóvil incorporates new functionalities, notably Santander Tap, a transfer system by instant message for operations between customers and for sending money to customer of other banks, at any time and with no fees.

 

In Brazil, Santander Duo was announced for small entrepreneurs, which combines accounts of a legal and natural person and has a single customer service manager.

 

In Chile, launch of the Súper Hipoteca for those under the age of 35 and new Santander Life products. Branches continued to be opened based on the Work Café model.

All of these measures helped to boost the number of loyal customers (+11% individuals and +7% companies year-on-year).

Results    

The first half underlying attributable profit rose 6%, driven by the good dynamics in customer revenue (+5%) and controlled costs. Of note was the performance of North America and South America.

 

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Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19      /Q1’19      H1’19      /H1’18  

Revenue

 

    

 

10,881

 

 

 

    

 

+3%

 

 

 

    

 

21,528

 

 

 

    

 

+4%

 

 

 

Expenses

 

    

 

-4,882

 

 

 

    

 

+2%

 

 

 

    

 

-9,712

 

 

 

    

 

+2%

 

 

 

LLPs

 

    

 

-2,090

 

 

 

    

 

-3%

 

 

 

    

 

-4,251

 

 

 

    

 

+5%

 

 

 

PBT

 

    

 

3,512

 

 

 

    

 

+9%

 

 

 

    

 

6,776

 

 

 

    

 

+7%

 

 

 

Underlying attrib. profit

 

    

 

2,053

 

 

 

    

 

+15%

 

 

 

    

 

3,856

 

 

 

    

 

+6%

 

 

 

Detailed financial information on page 70

 

 

42     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Secondary segments

   

 

   

 

 

 

 

LOGO

 

CORPORATE & INVESTMENT BANKING

 

 

LOGO

 

Highlights (changes in constant euros)

 

Santander is among the leaders in Latin America and Europe, particularly in export & agency finance, and structured financing.

 

In capital markets, we are one of the main bookrunners of green bonds in Spain and Europe.

 

We continued to advance in our mission to help our global customers in their capital issuances, providing them with financing solutions and transaction services. We also continued to adapt our offer of products to the Bank’s digital transformation.

 

Underlying attributable profit was 10% higher year-on-year, driven by growth in revenue and lower loan-loss provisions.

Commercial activity

 

 

Cash management: we consolidated our leadership in our main countries, particularly in Latin America. We also grew strongly in the US, the result of strengthening our product capacities.

 

 

Trade & Working Capital Solutions: strong growth in all products, particularly in receivables finance, structured trade and trade funding. Of note was the positive evolution in the US where we secured growth with our local clients and in Latin America.

 

 

Corporate Finance: Notable participation in the re-IPO of CPFL Energía, the largest operation this year in Brazil, where Santander was the main global coordinator, thereby strengthening our position in the Brazilian market. We maintained our leadership in Spain, Portugal, Mexico and Poland.

 

 

Debt Capital Markets: Santander continued to be the leader in Latin America and was among the Top 5 in European corporate issuances. Also noteworthy was our increased participation in dollar issues and the focus on activities linked to sustainable finance, making us one of the leading bookrunners of green bonds in Spain and Europe.

 

 

Syndicated Corporate Loans: Santander continued to play a key role in corporate financing, although the volumes of financing acquisitions were very affected by the lack of M&A activity. In line with our responsible banking strategy, Santander is increasing its range of sustainable finance products via green loans and/or linked to sustainable indices such as that of Merlín, Spain’s largest syndicated real estate loan so far, or Goldwind which launched the first syndicated green loan in Asia.

 

 

Structured Financing: the Group held its global leadership position in Project Bonds, having issued more globally than any other bank. In structured loans, Santander is the leader by volume in Latin America and the third in Europe.

 

 

The contribution from markets’ activity remained stable: the positive evolution of markets in the Americas offset the reduced activity in Europe. Good sales performance in Brazil, Chile, and Argentina, as well as management of books in the UK, US, Argentina and Chile.

Results

The first half underlying attributable profit was 10% higher at EUR 889 million, underpinned by the good results of Global Transaction Banking and maintaining operations in Global Markets, which offset the lower activity in Global Debt Finance.

Revenue growth and lower provisions absorbed the higher costs in transformational projects.

 

LOGO

 

LOGO

Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19     /Q1’19        H1’19      /H1’18  

Revenue

 

    

 

1,313

 

 

 

 

+2%

 

      

 

2,606

 

 

 

    

 

+5%

 

 

 

Expenses

 

    

 

-559

 

 

 

 

0%

 

      

 

-1,119

 

 

 

    

 

+9%

 

 

 

LLPs

 

    

 

-46

 

 

 

 

+375%

 

      

 

-55

 

 

 

    

 

-56%

 

 

 

PBT

 

    

 

693

 

 

 

 

0%

 

      

 

1,396

 

 

 

    

 

+8%

 

 

 

Underlying attrib. profit

 

    

 

434

 

 

 

 

-3%

 

        

 

889

 

 

 

    

 

+10%

 

 

 

Detailed financial information on page 70

 

 

January - June 2019     LOGO     43


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

Secondary segments

   

 

   

 

 

 

 

LOGO

 

WEALTH MANAGEMENT & INSURANCE

 

 

LOGO

 

Highlights (changes in constant euros)

 

Insurance business was incorporated into this Division during the second quarter, having restated previous periods for comparison purposes.

 

The first half underlying attributable profit was 10% higher than in the same period of 2018.

 

Total contribution (net profit + fee income) amounted to EUR 1,227 million, 8% more than in the first half of 2018.

 

Assets under management amounted to EUR 377,000 million, +3% year-on-year.

Commercial activity

 

 

We continued to progress in our strategy to make us the best wealth manager in Europe and Latin America:

 

 

Santander Asset Management (SAM): is developing its own rating methodology in order to make the alignment of all our funds with the market’s ESG criteria transparent. In Spain, we are the leaders with 66% share of ESG mutual funds and in Latin America we continue to develop the offering.

 

 

In Private Banking: we are developing a global platform. The SPB Desk will provide customer attention and service offering across geographies to our global clients. Our digital tools for clients (Virginia) and bankers (SPiRIT) were recognised for providing the best solutions in Latin America in the Financial Times 2019 Wealth Tech Awards.

 

 

In Insurance, we are completing our value proposition with the aim to become the leaders in bancassurance in all our markets. Of note is the creation of a joint company with MAPFRE to provide car insurance and specific products for SMEs in Spain, and the alliance with HDI in car business in Brazil.

Business performance

 

 

Total assets under management at the end of June 2019 amounted to EUR 377 billion (+3% year-on-year), with increases in Private Banking as well as in SAM:

 

 

In 2019, SAM increased its market share in almost all countries, notably in Spain and Chile.

 

 

Of note in Private Banking grew in Brazil (+13%) and Chile (+10%). Loans and advances to customers grew 9%.

 

 

In Insurance, in the first half of 2019, premium volumes grew 10% compared to the same period last year. Of note was the growth in Spain, Mexico and Brazil.

Results

The first half underlying attributable profit was EUR 459 million, 10% more year-on-year:

 

 

Higher revenue, from growth in net interest income, in line with greater lending, as well as the larger contribution from insurance.

 

 

Flat operating expenses, due to optimisation measures which offset investments in platforms.

 

 

Recovery of provisions from reduced doubtful loan positions, mainly in Spain.

When the total fee income generated by this business is added to net profit, the total contribution to the Group was EUR 1,227 million, 8% more year-on-year.

The total fee income generated, including those transferred to the commercial network, represents 30% of the Group’s total and rose 4%.

 

LOGO

 

 

LOGO

 

LOGO

Underlying income statement

 

 

EUR million and % change in constant euros

 

     Q2’19     /Q1’19        H1’19      /H1’18  

Revenue

 

    

 

560

 

 

 

 

+7%

 

      

 

1,085

 

 

 

    

 

+6%

 

 

 

Expenses

 

    

 

-226

 

 

 

 

-2%

 

      

 

-455

 

 

 

    

 

+2%

 

 

 

LLPs

 

    

 

0

 

 

 

 

 

      

 

7

 

 

 

    

 

 

 

 

PBT

 

    

 

332

 

 

 

 

+12%

 

      

 

632

 

 

 

    

 

+10%

 

 

 

Underlying attrib. profit

    

 

241

 

 

 

 

+11%

 

        

 

459

 

 

 

    

 

+10%

 

 

 

 

Detailed financial information on page 71

 

 

44     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

Responsible banking

   

 

 

 

RESPONSIBLE BANKING

In 2018, the responsible banking, sustainability & culture committee (RBSCC) was created to ensure that, wherever we operate, our manage teams are aware of the need to be responsible in all that we do and in the management of the challenges we face. We have identified two challenges: adapt to the new business environment and support inclusive and sustainable growth.

 

LOGO  

Santander is helping to address today’s main global challenges

 

  Our activity and investments help us to address a number of the United Nations’ Sustainable Development Goals, and support the Paris Agreement’s aim to combat climate change and adapt to its effects. We are:

 

LOGO

 

 

Promoting the UNEP FI Principles for Responsible Banking, embedding sustainability across all its business areas and contributing to develop methods to align with the Paris Agreement.

 

 

Incorporating the UN Global Compact principles into our policies and procedures, fulfilling our fundamental responsibilities in the areas of human rights, labour, environment and anticorruption.

 

 

Supporting the Task Force for Climate-related Financial Disclosure (TCFD) recommendations, identifying and assessing risk and opportunities developing a forward looking climate strategy and disclosing to stakeholders.

 

 

Included in various sustainability indices, providing non-financial information to markets, investors and analysts on ESG:

 

LOGO

 

LOGO  

 Two key challenges have been identified and we have recently published our commitments regarding these challenges:

 

LOGO    

Challenge 1: Adapt to the new business environment:

 

 

Our commitments:

 

-

Be one of the top 10 companies to work for in at least 6 of the core geographies where we operate by 2021.

 

-

Have 40% - 60% of women members on our Group Board by 2021; and have at least 30% of women in senior leadership positions by 2025.

 

-

Achieve gender pay equality by 2025.

LOGO    

Challenge 2: Support inclusive and sustainable growth:

 

 

Our commitments:

 

-

Financial empowerment of more than 10 million people from 2019 to 2025.

 

-

Mobilisation of EUR 120 billion from 2019 to 2025, and EUR 220 bn from 2019 to 2030 in green finance to help tackle climate change.

 

-

Eliminate unnecessary single use plastic in our branches and corporate buildings by 2021 and by 2025 have 100% of our electricity from renewable sources.

 

-

Fund 200,000 scholarships, internships and entrepreneurs programmes from 2019 to 2021.

 

-

Help 4 million people through our community programmes from 2019 to 2021.

 

 

January - June 2019     LOGO     45


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

 

 

 

LOGO

 

1.

According to a well-known external source in each country (Great Place to Work, Top Employer, Merco, etc.).

2.

Senior positions represent 1% of total workforce.

3.

Calculation of equal pay gap compares employees of the same job, level and function.

4.

Financially empowered people (mostly unbanked and underbanked), through products and services and social investment initiatives, to get access to the financial system, receive tailored finance and increase their knowledge and resilience through financial education.

5.

Includes Santander overall contribution to green finance: project finance, syndicated loans, green bonds, capital finance, export finance, advisory, structuring and other products to help our clients in the transition to a low carbon economy. Commitment from 2019 to 2030 is EUR 220 billion.

6.

In those countries where it is possible to certify renewable sourced electricity for the properties occupied by the Group.

7.

People supported through Santander Universities initiative (students who will receive a Santander scholarship, will achieve an internship in an SME or participate in entrepreneurship programmes supported by the bank).

8.

People helped through our community investment programmes (excluded Santander Universities and financial education initiatives).

 

First half 2019 highlights

LOGO

LOGO

 

SCIB financed Acciona’s first ESG loan in the Chilean market in May 2019 for USD 30 million. In Spain, Santander is classified as first in the Spanish ranking of sustainable debt issues according to Dealogic, after participating as a joint bookrunner in Telefónica, Iberdrola, Adif, ICO and the Basque Country government.

LOGO

 

Santander Wealth Management & Insurance has a range of ESG mutual funds (Santander Sostenible) that make us the leader with a 66% market share.

 

46     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

Corporate governance

   

 

 

CORPORATE GOVERNANCE

 

A responsible bank has a solid governance model with well-defined functions; it manages risks and opportunities prudently and defines its long-term strategy watching out for the interests of all its stakeholders and society in general

LOGO

 

 

LOGO  

Extraordinary General Meeting of Shareholders

An extraordinary general meeting was called on 21 June for 23 July 2019 (second call) in order to submit for shareholders’ approval the capital increases needed to carry out the offer to acquire all the share capital of Banco Santander México, S.A., Institución de Banca Multiple, Grupo Financiero Santander México, which are not owned by Grupo Santander, as announced on 12 April 2019.

In order to facilitate the informed participation of shareholders at this meeting, all the proposed agreements, relevant administrator reports and the necessary legal documentation were published on the Group’s website (www.santander.com) when the meeting was called. The contents of our website are not incorporated into this report.

 

LOGO  

Changes in the board in the second quarter

As of 1 May 2019, Mr. Rodrigo Echenique Gordillo no longer exercises his executive functions in the Group and ceases to be a deputy chairman of the board and a member of its executive committee. As such, he becomes a non-executive director (neither proprietary nor independent).

On 19 June 2019, authorisation was received from the European Central Bank to appoint Mr. Henrique de Castro as a director of the Bank, who will join the Board on 17 July 2019.

 

LOGO  

Changes to the composition of the board’s committees in the second quarter

As of 1 May 2019, Mr. Rodrigo Echenique Gordillo is a member of the appointments committee.

On 23 July 2019, Mr. Henrique de Castro will join the innovation and technology committee.

 

LOGO  

Changes to the Group’s senior management in the second quarter

Ms. Mónica López-Monis Gallego was appointed on 7 May 2019 the new head of supervisory and regulatory relations.

SIGNIFICANT EVENTS SINCE QUARTER END

From 1 July 2019 until the approval date of the interim financial statements for the six-month period ended 30 June 2019, no significant events other than those indicated in the interim financial statements have occurred.

 

January - June 2019     LOGO     47


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

Santander share

   

 

 

 

SANTANDER SHARE

 

LOGO  Shareholder remuneration

The fourth dividend of EUR 0.065 per share charged to 2018’s earnings was paid in cash in May 2019.

This brought the total shareholder remuneration for 2018 to EUR 0.23 per share, 4.5% more than in 2017.

This remuneration represents a return on the average share price in 2019 of 5.5%.

In order to align us with the current practices of our peers in Europe, the board’s target is to maintain in the medium term a pay-out ratio of 40%-50%, up from the previous 30%-40% target, and, as announced at the 2018 annual general meeting, make two payments charged to 2019’s earnings. The board expects to announce the interim 2019 dividend after its meeting in September 2019.

LOGO  Share price performance

The Santander share is listed in five markets, in Spain, Mexico and Poland as an ordinary share, in the UK as a CDI and in the US as an ADR.

In Spain, the main market where the Bank is listed, the share price ended June 2019 at EUR 4.081, 2.7% higher than at the end of 2018. This performance was below that of the Ibex 35 benchmark Spanish index, which rose 7.7%, and that of the DJ Stoxx 50 and MSCI World Banks (+15.2% and +9.5%, respectively), but above DJ Stoxx Banks, the main European banking index (+0.9%).

In terms of total return, the Santander share increased 5.8% in the first half, better than the DJ Stoxx Banks (+5.0%).

LOGO

 

LOGO

 

 

LOGO

 

48     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

Santander share

   

 

 

 

SANTANDER SHARE

 

LOGO Market capitalisation and trading

By 28 June 2019, Santander was the largest bank in the Eurozone by market capitalisation and the 19th in the world among financial entities (EUR 66,253 million).

The share’s weighting in the DJ Stoxx 50 at the end of June 2019 was 1.8%, 8.1% in the DJ Stoxx Banks and 13.9% in the Ibex 35.

A total of 10,262 million Santander shares were traded in the first half for an effective value of EUR 43,668 million, the largest figure among the shares that comprise the EuroStoxx (liquidity ratio of 63%).

The daily trading volume was 82 million shares with an effective value of EUR 349 million.

 

LOGO

 

The Santander share

        

June 2019

  

  Shares and trading data

        

  Shares (number)

     16,236,573,942  

  Average daily turnover (number of shares)

     82,094,277  

  Share liquidity (%)

     63  

  (Number of shares traded during the year / number of shares)

 

  Stock market indicators

        

  Price / Tangible book value (X)

     0.95  

  P/E ratio (X)

     11.29  

  Free float (%)

     99.98  
 

 

LOGO Shareholder base

The total number of Santander shareholders on 30 June 2019 was 4,054,208 of which 3,809,676 were European (77.1% of the capital stock) and 228,225 from the Americas (21.9%).

Excluding the board, which holds 1.1% of the Bank’s capital stock, retail shareholders account for 39.5% and institutional shareholders 59.4%.

LOGO

 

 

LOGO

 

January - June 2019     LOGO     49


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

 

 

LOGO

 

50     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Group financial information

 

 

Net fee income. Consolidated

                                                     

EUR million

                 
      Q2’19      Q1’19      Chg. %      H1’19      H1’18      Chg. %  

Fees from services

     1,734        1,779        (2.5)        3,513        3,603        (2.5)  

Wealth management and marketing of customer funds

     962        936        2.8        1,898        1,840        3.2  

Securities and custody

     236        216        9.3        452        446        1.3  

Net fee income

     2,932        2,931        0.0        5,863        5,889        (0.4)  

Operating expenses. Consolidated

                                                     

EUR million

                 
      Q2’19      Q1’19      Chg. %      H1’19      H1’18      Chg. %  

Staff costs

     3,074        3,006        2.3        6,080        5,960        2.0  

Other general administrative expenses

     2,025        2,005        1.0        4,030        4,305        (6.4)  

Information technology

     562        551        2.0        1,113        763        46.0  

Communications

     132        132               264        262        0.9  

Advertising

     168        157        7.0        325        310        4.8  

Buildings and premises

     218        211        3.3        429        927        (53.7)  

Printed and office material

     31        32        (3.1)        63        62        2.3  

Taxes (other than tax on profits)

     138        126        9.5        264        287        (7.9)  

Other expenses

     776        796        (2.5)        1,572        1,695        (7.3)  

Administrative expenses

     5,099        5,011        1.8        10,110        10,265        (1.5)  

Depreciation and amortisation

     730        747        (2.3)        1,477        1,217        21.4  

Operating expenses

     5,829        5,758        1.2        11,587        11,482        0.9  

(1) In H1’19, impact of the IFRS 16 application.

 

Operating means. Consolidated

                                                              
     Employees                    Branches  
      Jun-19      Jun-18      Var.              Jun-19      Jun-18      Var.  

Europe

     91,488        92,521        (1,033)                 6,427        6,912        (485)  

Spain

     30,682        31,393        (711)                 4,247        4,468        (221)  

Santander Consumer Finance

     14,494        15,083        (589)                 424        442        (18)  

United Kingdom

     25,761        25,829        (68)                 659        779        (120)  

Portugal

     6,736        6,940        (204)                 553        672        (119)  

Poland

     11,488        11,494        (6)                 532        540        (8)  

Other

     2,327        1,782        545                 12        11        1  

North America

     36,917        36,270        647                 2,062        2,072        (10)  

US

     17,381        17,191        190                 646        670        (24)  

Mexico

     19,536        19,079        457                 1,416        1,402        14  

South America

     71,158        69,997        1,161                 4,591        4,497        94  

Brazil

     48,118        46,672        1,446                 3,643        3,490        153  

Chile

     11,797        12,023        (226)                 380        420        (40)  

Argentina

     9,183        9,222        (39)                 469        482        (13)  

Other

     2,060        2,080        (20)                 99        105        (6)  

Santander Global Platform

     597        427        170                 1        1         

Corporate Centre

     1,644        1,746        (102)                                      

Total Group

     201,804        200,961        843                 13,081        13,482        (401)  

 

Impairment or reversal of impairment of financial assets not measured at fair value through profit or loss (net)

 

EUR million

                 
      Q2’19      Q1’19      Chg. %      H1’19      H1’18      Chg. %  

Net loan-loss provisions

     2,141        2,172        (1.4)        4,313        4,297        0.4  

Non-performing loans

     2,637        2,515        4.9        5,152        5,112        0.8  

Country-risk

     (2)        1               (1)        9         

Recovery of written-off assets

     (494)        (344)        43.6        (838)        (823)        1.8  

Other impairment

     (19)        74        (125.7)        55        55        (134.8)  

Total

     2,122        2,246        (5.5)        4,368        4,352        (51.2)  

 

January - June 2019     LOGO     51


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Group financial information

 

 

 

Loans and advances to customers. Consolidated

                                            

EUR million

              
                   Change         
      Jun-19      Jun-18      Absolute      %      Dec-18  

Commercial bills

     34,275        30,301        3,974        13.1        33,301  

Secured loans

     495,091        475,428        19,663        4.1        478,068  

Other term loans

     270,244        261,538        8,706        3.3        265,696  

Finance leases

     34,534        29,804        4,730        15.9        30,758  

Receivable on demand

     8,689        9,936        (1,247)        (12.6)        8,794  

Credit cards receivable

     23,031        20,728        2,303        11.1        23,083  

Impaired assets

     33,045        35,150        (2,105)        (6.0)        34,218  

Gross loans and advances to customers (excl. reverse repos)

     898,909        862,885        36,024        4.2        873,918  

Reverse repos

     32,049        23,523        8,526        36.2        32,310  

Gross loans and advances to customers

     930,958        886,408        44,550        5.0        906,228  

Loan-loss allowances

     22,723        24,316        (1,593)        (6.6)        23,307  

Loans and advances to customers

     908,235        862,092        46,143        5.4        882,921  

Total funds. Consolidated

                                            

EUR million

              
                   Change         
      Jun-19      Jun-18      Absolute      %      Dec-18  

Demand deposits

     573,079        535,084        37,995        7.1        548,711  

Time deposits

     206,431        196,154        10,277        5.2        199,025  

Mutual funds

     174,294        163,790        10,504        6.4        157,888  

Customer funds

     953,804        895,028        58,776        6.6        905,624  

Pension funds

     15,602        15,900        (298)        (1.9)        15,393  

Managed portfolios

     28,122        27,248        874        3.2        26,785  

Repos

     35,241        43,187        (7,946)        (18.4)        32,760  

Total funds

     1,032,769        981,363        51,406        5.2        980,562  

Eligible capital (fully loaded)

                                            

EUR million

              
                   Change         
      Jun-19*      Jun-18      Absolute      %      Dec-18  

Capital stock and reserves

     117,699        116,371        1,327        1.1        114,147  

Attributable profit

     3,231        3,752        (521)        (13.9)        7,810  

Dividends

     (1,615)        (1,635)        19        (1.2)        (3,292)  

Other retained earnings

     (22,937)        (25,341)        2,404        (9.5)        (23,606)  

Minority interests

     6,893        6,567        325        5.0        6,981  

Goodwill and intangible assets

     (28,810)        (28,726)        (84)        0.3        (28,644)  

Other deductions

     (6,054)        (6,741)        687        (10.2)        (6,492)  

Core CET1

     68,406        64,248        4,158        6.5        66,904  

Preferred shares and other eligible T1

     8,690        8,824        (134)        (1.5)        8,934  

Tier 1

     77,096        73,072        4,024        5.5        75,838  

Generic funds and eligible T2 instruments

     12,544        11,646        897        7.7        11,669  

Eligible capital

     89,640        84,718        4,921        5.8        87,506  

Risk-weighted assets

     605,470        594,754        10,716        1.8        592,319  

    

                                            

CET1 capital ratio

     11.30        10.80        0.50                 11.30  

T1 capital ratio

     12.73        12.29        0.44                 12.80  

Total capital ratio

     14.80        14.24        0.56                 14.77  

(*) Applying a 50% pay-out in the calculation of the capital ratios.

 

52     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

EUROPE

                                                  LOGO  

EUR million

                 
            / Q1’19             / H1’18  
Underlying income statement    Q2’19      %      % excl. FX      H1’19      %      % excl. FX  

Net interest income

     3,580        0.5        0.5        7,141        1.9        1.8  

Net fee income

     1,304        (1.7)        (1.8)        2,630        (4.5)        (4.6)  

Gains (losses) on financial transactions (1)

     146        (21.1)        (21.3)        332        (31.1)        (31.3)  

Other operating income

     158        4.1        4.2        310        11.5        11.3  

Total income

     5,188        (0.7)        (0.7)        10,413        (1.1)        (1.1)  

Administrative expenses and amortisations

     (2,789)        (0.5)        (0.5)        (5,591)        (1.3)        (1.5)  

Net operating income

     2,399        (1.0)        (1.0)        4,822        (0.7)        (0.7)  

Net loan-loss provisions

     (387)        (15.3)        (15.4)        (844)        (1.8)        (1.7)  

Other gains (losses) and provisions

     (231)        17.0        17.0        (429)        10.5        10.5  

Profit before tax

     1,781        0.7        0.7        3,549        (1.7)        (1.7)  

Tax on profit

     (475)        (3.5)        (3.5)        (967)        (0.9)        (0.9)  

Profit from continuing operations

     1,306        2.3        2.3        2,583        (2.0)        (2.0)  

Net profit from discontinued operations

                                         

Consolidated profit

     1,306        2.3        2.3        2,583        (2.0)        (2.0)  

Non-controlling interests

     (116)        2.1        1.9        (229)        7.4        8.0  

Underlying attributable profit to the parent

     1,191        2.4        2.4        2,354        (2.8)        (2.8)  
Balance sheet                                                

Loans and advances to customers

     650,061        (0.9)        0.9        650,061        2.4        2.8  

Cash, central banks and credit institutions

     200,873        10.6        12.5        200,873        13.2        13.7  

Debt instruments

     113,844        (1.8)        (0.4)        113,844        (2.7)        (2.5)  

Other financial assets

     51,503        (5.4)        (2.6)        51,503        (11.3)        (10.7)  

Other asset accounts

     42,961        (4.1)        (3.1)        42,961        (8.1)        (8.0)  

Total assets

     1,059,243        0.6        2.4        1,059,243        2.4        2.8  

Customer deposits

     589,590        0.4        2.0        589,590        3.3        3.6  

Central banks and credit institutions

     204,741        1.4        3.3        204,741        0.1        0.4  

Marketable debt securities

     129,654        0.4        2.7        129,654        4.9        5.6  

Other financial liabilities

     63,161        4.8        7.3        63,161        3.4        4.4  

Other liabilities accounts

     17,466        (5.2)        (4.2)        17,466        (15.1)        (15.0)  

Total liabilities

     1,004,613        0.7        2.6        1,004,613        2.4        2.9  

Total equity

     54,629        (1.8)        (0.5)        54,629        2.1        2.2  

Memorandum items:

                 

Gross loans and advances to customers (2)

     638,237        (0.2)        1.5        638,237        2.0        2.3  

Customer funds

     658,498        0.9        2.3        658,498        4.7        5.0  

Customer deposits (3)

     573,618        0.7        2.2        573,618        5.1        5.4  

Mutual funds

     84,880        2.6        3.0        84,880        2.6        2.6  
Ratios (%) and operating means                                                

Underlying RoTE

     9.80        0.19                 9.72        (0.76)           

Efficiency ratio

     53.7        0.1                 53.7        (0.2)           

NPL ratio

     3.48        (0.13)                 3.48        (0.49)           

NPL coverage

     49.9        0.4                 49.9        (3.0)           

Number of employees

     91,488        (1.7)                 91,488        (1.1)           

Number of branches

     6,427        (4.0)                 6,427        (7.0)           

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

January - June 2019     LOGO     53


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

Spain

                                LOGO  

EUR million

           
            / Q1’19               s/ H1’18  
Underlying income statement    Q2’19      %      H1’19      %  

Net interest income

     1,009        (0.0)        2,018        1.1  

Net fee income

     624        0.1        1,247        (6.9)  

Gains (losses) on financial transactions (1)

     214        79.1        333        22.8  

Other operating income

     2        (97.6)        107        (23.0)  

Total income

     1,849        (0.4)        3,706        (1.1)  

Administrative expenses and amortisations

     (1,020)        (0.5)        (2,044)        (7.3)  

Net operating income

     829        (0.3)        1,661        7.9  

Net loan-loss provisions

     (228)        (6.0)        (470)        7.7  

Other gains (losses) and provisions

     (143)        28.1        (255)        9.7  

Profit before tax

     458        (4.1)        936        7.4  

Tax on profit

     (120)        (0.9)        (242)        15.4  

Profit from continuing operations

     338        (5.2)        694        4.9  

Net profit from discontinued operations

                           

Consolidated profit

     338        (5.2)        694        4.9  

Non-controlling interests

     0        110.6        0         

Underlying attributable profit to the parent

     338        (5.1)        694        5.0  
Balance sheet                                

Loans and advances to customers

     194,417        0.1        194,417        (3.9)  

Cash, central banks and credit institutions

     87,193        8.3        87,193        14.7  

Debt instruments

     39,289        (6.3)        39,289        (24.2)  

Other financial assets

     1,469        (23.7)        1,469        (53.6)  

Other asset accounts

     22,464        (9.1)        22,464        (14.8)  

Total assets

     344,831        0.4        344,831        (4.1)  

Customer deposits

     252,057        3.9        252,057        5.8  

Central banks and credit institutions

     38,002        (18.6)        38,002        (41.5)  

Marketable debt securities

     24,841        6.2        24,841        2.7  

Other financial liabilities

     8,842        10.2        8,842        19.2  

Other liabilities accounts

     6,090        (18.7)        6,090        (38.7)  

Total liabilities

     329,833        0.5        329,833        (4.3)  

Total equity

     14,999        (1.5)        14,999        0.3  

Memorandum items:

           

Gross loans and advances to customers (2)

     201,058        (0.1)        201,058        (4.5)  

Customer funds

     317,169        3.4        317,169        4.8  

Customer deposits (3)

     251,170        3.8        251,170        5.7  

Mutual funds

     65,999        1.7        65,999        1.6  
Ratios (%) and operating means                                

Underlying RoTE

     8.99        (0.62)        9.31        0.66  

Efficiency ratio

     55.2        (0.0)        55.2        (3.7)  

NPL ratio

     7.02        (0.27)        7.02        (0.60)  

NPL coverage

     42.9        (0.4)        42.9        (4.6)  

Number of employees

     30,682        (2.1)        30,682        (2.3)  

Number of branches

     4,247        (2.7)        4,247        (4.9)  

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

54     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

Santander Consumer Finance

                                                  LOGO  

EUR million

                 
            / Q1’19             / H1’18  
Underlying income statement    Q2’19      %      % excl. FX      H1’19      %      % excl. FX  

Net interest income

     971        3.1        3.0        1,911        3.7        4.1  

Net fee income

     201        (6.1)        (6.1)        415        2.9        3.0  

Gains (losses) on financial transactions (1)

     (1)                      1        (95.1)        (95.1)  

Other operating income

     (17)                      (6)                

Total income

     1,154        (1.2)        (1.3)        2,321        2.4        2.8  

Administrative expenses and amortisations

     (527)        3.6        3.5        (1,035)        1.7        2.0  

Net operating income

     627        (4.9)        (4.9)        1,286        3.0        3.4  

Net loan-loss provisions

     (59)        (51.3)        (51.4)        (181)        (4.3)        (4.3)  

Other gains (losses) and provisions

     (12)                      12        (68.4)        (68.5)  

Profit before tax

     556        (1.0)        (1.1)        1,117        1.9        2.3  

Tax on profit

     (155)        (2.7)        (2.7)        (314)        5.5        5.9  

Profit from continuing operations

     401        (0.3)        (0.4)        803        0.6        1.0  

Net profit from discontinued operations

                                         

Consolidated profit

     401        (0.3)        (0.4)        803        0.6        1.0  

Non-controlling interests

     (67)        (14.0)        (14.0)        (145)        10.6        10.8  

Underlying attributable profit to the parent

     334        3.0        2.9        658        (1.4)        (1.0)  
Balance sheet                                                

Loans and advances to customers

     98,395        2.7        2.7        98,395        7.1        7.3  

Cash, central banks and credit institutions

     6,799        7.9        8.0        6,799        30.8        31.3  

Debt instruments

     3,288        (4.5)        (4.6)        3,288        2.0        1.8  

Other financial assets

     38        14.2        14.3        38        78.1        78.6  

Other asset accounts

     4,102        10.0        10.1        4,102        14.6        14.7  

Total assets

     112,622        3.1        3.1        112,622        8.4        8.6  

Customer deposits

     37,896        2.7        2.7        37,896        3.1        3.2  

Central banks and credit institutions

     25,104        1.4        1.4        25,104        (0.3)        (0.2)  

Marketable debt securities

     33,946        5.8        5.9        33,946        24.2        24.4  

Other financial liabilities

     1,395        16.8        16.8        1,395        40.3        40.0  

Other liabilities accounts

     3,905        4.0        4.0        3,905        5.9        6.0  

Total liabilities

     102,247        3.6        3.6        102,247        8.8        8.9  

Total equity

     10,375        (2.1)        (2.2)        10,375        4.8        4.9  

Memorandum items:

                 

Gross loans and advances to customers (2)

     100,752        2.7        2.7        100,752        6.8        7.0  

Customer funds

     37,896        2.8        2.8        37,896        3.2        3.3  

Customer deposits (3)

     37,896        2.8        2.8        37,896        3.2        3.3  

Mutual funds

                                 (100.0)        (100.0)  
Ratios (%) and operating means                                                

Underlying RoTE

     15.83        0.98                 15.36        (1.64)           

Efficiency ratio

     45.6        2.1                 44.6        (0.3)           

NPL ratio

     2.24        (0.09)                 2.24        (0.20)           

NPL coverage

     105.9        0.6                 105.9        (1.8)           

Number of employees

     14,494        (2.0)                 14,494        (3.9)           

Number of branches

     424        (2.1)                 424        (4.1)           

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

January - June 2019     LOGO     55


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information
by segments

 

 

United Kingdom

                                                  LOGO  

EUR million

                 
        / Q1’19           / H1’18  
Underlying income statement    Q2’19      %          % excl. FX      H1’19      %          % excl. FX  

Net interest income

     944        (3.2)        (2.9)        1,919        (6.5)        (7.2)  

Net fee income

     207        (4.3)        (4.0)        423        (7.7)        (8.4)  

Gains (losses) on financial transactions (1)

     20        —          —          20        (66.3)        (66.6)  

Other operating income

     12        (16.4)        (16.2)        26        36.7        35.7  

Total income

     1,183        (1.9)        (1.7)        2,388        (7.8)        (8.4)  

Administrative expenses and amortisations

     (703)        (4.8)        (4.5)        (1,442)        0.1        (0.6)  

Net operating income

     479        2.6        2.8        946        (17.7)        (18.3)  

Net loan-loss provisions

     (19)        (67.9)        (67.7)        (80)        (21.7)        (22.3)  

Other gains (losses) and provisions

     (25)        (50.2)        (50.0)        (75)        (27.4)        (27.9)  

Profit before tax

     435        21.9        22.2        792        (16.2)        (16.8)  

Tax on profit

     (102)        5.2        5.5        (199)        (25.2)        (25.8)  

Profit from continuing operations

     333        28.2        28.4        593        (12.6)        (13.3)  

Net profit from discontinued operations

     —          —          —          —          —          —    

Consolidated profit

     333        28.2        28.4        593        (12.6)        (13.3)  

Non-controlling interests

     (5)        2.5        2.7        (11)        (20.6)        (21.2)  

Underlying attributable profit to the parent

     327        28.7        29.0        582        (12.5)        (13.1)  
Balance sheet                                                

Loans and advances to customers

     251,543        (4.6)        (0.3)        251,543        1.0        2.2  

Cash, central banks and credit institutions

     40,536        7.3        12.1        40,536        (23.8)        (22.9)  

Debt instruments

     23,609        (0.4)        4.0        23,609        (10.8)        (9.7)  

Other financial assets

     1,092        44.9        51.3        1,092        (84.7)        (84.6)  

Other asset accounts

     10,328        0.7        5.1        10,328        1.7        2.9  

Total assets

     327,109        (2.7)        1.7        327,109        (5.5)        (4.3)  

Customer deposits

     211,025        (2.7)        1.7        211,025        (3.6)        (2.5)  

Central banks and credit institutions

     24,521        (2.9)        1.5        24,521        2.0        3.2  

Marketable debt securities

     65,236        (3.4)        0.9        65,236        (2.0)        (0.8)  

Other financial liabilities

     4,875        10.3        15.2        4,875        (68.7)        (68.4)  

Other liabilities accounts

     4,470        (2.2)        2.1        4,470        4.4        5.7  

Total liabilities

     310,128        (2.7)        1.7        310,128        (5.9)        (4.8)  

Total equity

     16,981        (2.6)        1.8        16,981        2.7        4.0  

Memorandum items:

                 

Gross loans and advances to customers (2)

     232,150        (3.4)        0.9        232,150        (0.9)        0.3  

Customer funds

     205,064        (2.3)        2.1        205,064        0.5        1.7  

Customer deposits (3)

     196,925        (2.3)        2.1        196,925        0.6        1.8  

Mutual funds

     8,139        (1.7)        2.7        8,139        (3.0)        (1.9)  
Ratios (%) and operating means                                                

Underlying RoTE

     8.68        1.76                 7.81        (2.12)           

Efficiency ratio

     59.5        (1.8)                 60.4        4.8           

NPL ratio

     1.13        (0.04)                 1.13        —             

NPL coverage

     31.9        1.0                 31.9        (1.9)           

Number of employees

     25,761        1.1                 25,761        (0.3)           

Number of branches

     659        (12.6)                 659        (15.4)           

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

56     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

Portugal

                                LOGO  

EUR million

           
                / Q1’19                   s/ H1’18  
Underlying income statement    Q2’19      %      H1’19      %  

Net interest income

     213        (1.2)        429        (1.4)  

Net fee income

     99        0.8        197        4.1  

Gains (losses) on financial transactions (1)

     42        (15.4)        91        58.6  

Other operating income

     0               (6)         

Total income

     354        (0.9)        712        3.5  

Administrative expenses and amortisations

     (154)        (1.9)        (312)        (3.8)  

Net operating income

     200        (0.1)        400        10.0  

Net loan-loss provisions

     (1)               12         

Other gains (losses) and provisions

     (13)        (34.9)        (33)        6.1  

Profit before tax

     186        (3.9)        379        16.9  

Tax on profit

     (60)        3.4        (118)        25.9  

Profit from continuing operations

     126        (7.0)        261        13.3  

Net profit from discontinued operations

                           

Consolidated profit

     126        (7.0)        261        13.3  

Non-controlling interests

     (1)        17.2        (1)        (24.6)  

Underlying attributable profit to the parent

     125        (7.1)        260        13.5  
Balance sheet                                

Loans and advances to customers

     35,734        0.9        35,734        0.5  

Cash, central banks and credit institutions

     4,025        (4.0)        4,025        (7.7)  

Debt instruments

     13,238        0.3        13,238        12.2  

Other financial assets

     1,809        (1.7)        1,809        (6.5)  

Other asset accounts

     1,941        (1.6)        1,941        (20.9)  

Total assets

     56,747        0.2        56,747        1.1  

Customer deposits

     38,975        1.9        38,975        5.1  

Central banks and credit institutions

     8,064        (1.1)        8,064        (10.8)  

Marketable debt securities

     3,426        (19.0)        3,426        (20.9)  

Other financial liabilities

     326        14.1        326        24.2  

Other liabilities accounts

     1,701        20.0        1,701        14.3  

Total liabilities

     52,491        0.3        52,491        0.6  

Total equity

     4,256        (0.7)        4,256        8.4  

Memorandum items:

           

Gross loans and advances to customers (2)

     36,691        0.6        36,691        (1.0)  

Customer funds

     41,784        3.8        41,784        6.6  

Customer deposits (3)

     38,975        1.9        38,975        5.1  

Mutual funds

     2,809        40.5        2,809        32.0  
Ratios (%) and operating means                                

Underlying RoTE

     11.96        (1.09)        12.54        0.98  

Efficiency ratio

     43.6        (0.4)        43.8        (3.3)  

NPL ratio

     5.00        (0.77)        5.00        (2.55)  

NPL coverage

     52.9        2.2        52.9        0.2  

Number of employees

     6,736        0.0        6,736        (2.9)  

Number of branches

     553        (1.4)        553        (17.7)  

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

January - June 2019     LOGO     57


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

Poland

                                                  LOGO  

EUR million

                 
        / Q1’19           / H1’18  
Underlying income statement    Q2’19      %      % excl. FX      H1’19      %      % excl. FX  

Net interest income

     284        1.0        0.6        565        16.0        18.0  

Net fee income

     117        2.7        2.3        230        1.5        3.2  

Gains (losses) on financial transactions (1)

     21        12.1        11.6        39        102.7        106.2  

Other operating income

     18                      (18)        756.6        771.2  

Total income

     440        16.6        16.1        817        11.7        13.6  

Administrative expenses and amortisations

     (176)        1.8        1.3        (349)        10.2        12.0  

Net operating income

     263        29.2        28.7        467        12.9        14.8  

Net loan-loss provisions

     (64)        47.1        46.5        (107)        23.0        25.1  

Other gains (losses) and provisions

     (34)        1.4        0.9        (68)        42.7        45.1  

Profit before tax

     166        30.6        30.0        293        4.7        6.5  

Tax on profit

     (36)        (3.8)        (4.3)        (73)        23.3        25.4  

Profit from continuing operations

     130        44.9        44.4        219        (0.4)        1.3  

Net profit from discontinued operations

                                         

Consolidated profit

     130        44.9        44.4        219        (0.4)        1.3  

Non-controlling interests

     (41)        46.2        45.7        (69)        6.2        8.0  

Underlying attributable profit to the parent

     89        44.3        43.8        150        (3.1)        (1.5)  
Balance sheet                                                

Loans and advances to customers

     29,345        3.3        2.0        29,345        29.9        26.3  

Cash, central banks and credit institutions

     2,987        11.8        10.5        2,987        84.7        79.5  

Debt instruments

     10,367        (8.0)        (9.0)        10,367        23.4        19.9  

Other financial assets

     565        3.9        2.7        565        0.9        (1.9)  

Other asset accounts

     1,326        1.3        0.1        1,326        29.6        26.0  

Total assets

     44,591        0.9        (0.3)        44,591        30.4        26.7  

Customer deposits

     32,758        1.0        (0.2)        32,758        27.6        24.0  

Central banks and credit institutions

     3,243        (3.2)        (4.3)        3,243        89.7        84.3  

Marketable debt securities

     2,091        16.6        15.2        2,091        107.0        101.2  

Other financial liabilities

     814        8.6        7.3        814        90.3        84.9  

Other liabilities accounts

     894        9.1        7.8        894        16.6        13.3  

Total liabilities

     39,800        1.7        0.5        39,800        34.5        30.7  

Total equity

     4,791        (5.3)        (6.4)        4,791        4.0        1.1  

Memorandum items:

                 

Gross loans and advances to customers (2)

     30,278        3.3        2.0        30,278        29.5        25.8  

Customer funds

     36,060        2.5        1.3        36,060        25.4        21.9  

Customer deposits (3)

     31,867        2.4        1.2        31,867        27.5        23.9  

Mutual funds

     4,193        3.1        1.8        4,193        11.6        8.4  
Ratios (%) and operating means                                                

Underlying RoTE

     11.44        3.68                 9.61        (1.32)           

Efficiency ratio

     40.1        (5.8)                 42.8        (0.6)           

NPL ratio

     4.21        (0.18)                 4.21        (0.37)           

NPL coverage

     69.7        2.1                 69.7        (2.4)           

Number of employees

     11,488        (8.5)                 11,488        (0.1)           

Number of branches

     532        (6.8)                 532        (1.5)           

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

58     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

 

 

 

Other Europe

                                                     

EUR million

                 
        / Q1’19           / H1’18  
Underlying income statement    Q2’19      %      % w/o FX      H1’19      %      % w/o FX  

Net interest income

     159        14.4        14.3        299        50.8        49.0  

Net fee income

     56        (8.6)        (8.9)        118        (13.7)        (15.4)  

Gains (losses) on financial transactions (1)

     (149)                      (153)                

Other operating income

     142        122.8        122.7        205        79.0        78.4  

Total income

     209        (20.1)        (20.3)        469        (6.8)        (8.2)  

Administrative expenses and amortisations

     (208)        4.2        4.0        (408)        12.8        11.1  

Net operating income

     0        (99.2)        (99.3)        62        (56.7)        (57.3)  

Net loan-loss provisions

     (16)        612.4        612.5        (18)        (50.5)        (50.7)  

Other gains (losses) and provisions

     (4)        (37.5)        (37.5)        (11)        (5.1)        (8.3)  

Profit before tax

     (19)                      33        (65.1)        (65.6)  

Tax on profit

     (2)        (91.9)        (91.9)        (20)        (58.1)        (58.5)  

Profit from continuing operations

     (21)                      13        (72.5)        (73.1)  

Net profit from discontinued operations

                                         

Consolidated profit

     (21)                      13        (72.5)        (73.1)  

Non-controlling interests

     (1)        12.7        11.9        (3)        141.0        127.1  

Underlying attributable profit to the parent

     (22)                      10        (78.1)        (78.5)  
Balance sheet                                                

Loans and advances to customers

     40,627        5.6        7.5        40,627        21.5        21.8  

Cash, central banks and credit institutions

     59,334        18.2        21.9        59,334        60.0        60.8  

Debt instruments

     24,053        7.3        11.1        24,053        57.5        59.0  

Other financial assets

     46,529        (5.7)        (2.7)        46,529        2.9        3.7  

Other asset accounts

     2,801        (0.2)        0.6        2,801        (12.1)        (13.0)  

Total assets

     173,344        6.2        9.2        173,344        29.1        29.9  

Customer deposits

     16,880        (17.1)        (15.3)        16,880        19.5        19.9  

Central banks and credit institutions

     105,808        12.8        16.3        105,808        33.0        33.5  

Marketable debt securities

     114        11.0        11.9        114        (16.2)        (17.9)  

Other financial liabilities

     46,909        2.9        5.8        46,909        29.0        30.4  

Other liabilities accounts

     405        8.1        9.9        405        (3.0)        (3.0)  

Total liabilities

     170,116        6.2        9.2        170,116        30.2        31.0  

Total equity

     3,228        6.5        8.1        3,228        (10.5)        (11.1)  

Memorandum items:

                 

Gross loans and advances to customers (2)

     37,309        10.2        11.8        37,309        40.3        40.3  

Customer funds

     20,525        (12.7)        (11.2)        20,525        18.2        18.5  

Customer deposits (3)

     16,785        (16.3)        (14.5)        16,785        20.8        21.2  

Mutual funds

     3,739        7.8        7.8        3,739        7.8        7.8  
Resources                                                

Number of employees

     2,327        7.3                 2,327        30.6           

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

January - June 2019     LOGO     59


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

NORTH AMERICA

                                                  LOGO  

EUR million

                 
            / Q1’19             / H1’18  
Underlying income statement    Q2’19      %      % excl. FX      H1’19      %      % excl. FX  

Net interest income

     2,230        2.6        1.4        4,403        15.8        8.3  

Net fee income

     463        5.5        4.3        901        11.4        4.2  

Gains (losses) on financial transactions (1)

     50        312.8        310.4        62        (44.4)        (47.9)  

Other operating income

     176        35.5        34.4        306        36.9        27.7  

Total income

     2,918        6.0        4.8        5,672        14.7        7.2  

Administrative expenses and amortisations

     (1,214)        3.5        2.3        (2,386)        9.4        2.3  

Net operating income

     1,705        7.8        6.6        3,286        18.8        11.1  

Net loan-loss provisions

     (793)        (1.4)        (2.5)        (1,597)        13.0        5.7  

Other gains (losses) and provisions

     (31)        (51.5)        (52.3)        (95)        7.8        0.8  

Profit before tax

     881        23.5        22.1        1,594        26.0        17.9  

Tax on profit

     (217)        15.7        14.4        (405)        21.4        13.5  

Profit from continuing operations

     664        26.2        24.8        1,189        27.6        19.4  

Net profit from discontinued operations

                                         

Consolidated profit

     664        26.2        24.8        1,189        27.6        19.4  

Non-controlling interests

     (161)        15.4        14.0        (300)        24.1        16.1  

Underlying attributable profit to the parent

     503        30.1        28.7        889        28.8        20.6  
Balance sheet                                                

Loans and advances to customers

     126,478        1.7        2.8        126,478        20.9        17.3  

Cash, central banks and credit institutions

     25,352        (22.5)        (21.8)        25,352        1.5        (2.1)  

Debt instruments

     26,739        8.8        9.9        26,739        0.3        (3.2)  

Other financial assets

     9,483        12.0        13.0        9,483        (9.6)        (13.0)  

Other asset accounts

     21,451        6.1        7.4        21,451        33.5        29.8  

Total assets

     209,503        (0.4)        0.7        209,503        14.6        11.0  

Customer deposits

     98,362        (2.2)        (1.1)        98,362        12.7        9.0  

Central banks and credit institutions

     28,072        20.1        21.3        28,072        28.8        24.6  

Marketable debt securities

     41,825        (10.4)        (9.3)        41,825        21.4        18.0  

Other financial liabilities

     11,912        9.2        10.1        11,912        (0.5)        (4.4)  

Other liabilities accounts

     5,884        4.5        5.6        5,884        1.5        (1.8)  

Total liabilities

     186,055        (0.6)        0.5        186,055        15.3        11.6  

Total equity

     23,447        0.9        2.0        23,447        9.1        5.9  

Memorandum items:

                 

Gross loans and advances to customers (2)

     122,869        1.9        3.0        122,869        13.0        9.6  

Customer funds

     111,544        1.8        2.8        111,544        10.2        6.6  

Customer deposits (3)

     90,533        1.4        2.5        90,533        10.1        6.6  

Mutual funds

     21,011        3.5        4.4        21,011        10.4        6.4  
Ratios (%) and operating means                                                

Underlying RoTE

     10.56        2.11                 9.54        1.28           

Efficiency ratio

     41.6        (1.0)                 42.1        (2.0)           

NPL ratio

     2.29        (0.04)                 2.29        (0.53)           

NPL coverage

     150.3        (3.1)                 150.3        3.8           

Number of employees

     36,917        (0.6)                 36,917        1.8           

Number of branches

     2,062        (0.4)                 2,062        (0.5)           

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

60     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

 

United States

                                                     

EUR million

                 
            / Q1’19             / H1’18  
Underlying income statement    Q2’19      %      % excl. FX      H1’19      %      % excl. FX  

Net interest income

     1,453        3.3        2.2        2,860        14.3        6.8  

Net fee income

     244        4.4        3.3        479        10.4        3.1  

Gains (losses) on financial transactions (1)

     23        46.8        45.5        39        (0.0)        (6.7)  

Other operating income

     199        26.3        25.1        357        30.3        21.7  

Total income

     1,920        5.8        4.7        3,734        15.0        7.4  

Administrative expenses and amortisations

     (805)        3.8        2.7        (1,581)        7.2        0.1  

Net operating income

     1,115        7.3        6.2        2,154        21.5        13.4  

Net loan-loss provisions

     (568)        (7.1)        (8.1)        (1,178)        15.0        7.4  

Other gains (losses) and provisions

     (26)        (55.3)        (56.1)        (84)        15.7        8.0  

Profit before tax

     521        40.8        39.6        891        31.9        23.1  

Tax on profit

     (138)        24.9        23.7        (248)        21.1        13.1  

Profit from continuing operations

     383        47.7        46.3        643        36.5        27.5  

Net profit from discontinued operations

                                         

Consolidated profit

     383        47.7        46.3        643        36.5        27.5  

Non-controlling interests

     (99)        27.2        26.0        (178)        29.6        21.0  

Underlying attributable profit to the parent

     284        56.4        55.1        465        39.4        30.2  
Balance sheet                                                

Loans and advances to customers

     93,133        2.0        3.3        93,133        22.2        19.3  

Cash, central banks and credit institutions

     13,790        (23.7)        (22.7)        13,790        18.3        15.4  

Debt instruments

     13,849        3.1        4.4        13,849        (3.5)        (5.8)  

Other financial assets

     3,913        10.3        11.8        3,913        (9.3)        (11.5)  

Other asset accounts

     17,888        5.5        6.9        17,888        34.4        31.2  

Total assets

     142,572        (0.5)        0.8        142,572        19.0        16.2  

Customer deposits

     64,373        (0.7)        0.5        64,373        19.2        16.4  

Central banks and credit institutions

     17,495        34.1        35.8        17,495        31.0        27.9  

Marketable debt securities

     35,261        (13.6)        (12.5)        35,261        23.6        20.7  

Other financial liabilities

     4,277        17.4        18.9        4,277        8.1        5.5  

Other liabilities accounts

     3,722        0.9        2.2        3,722        2.5        0.1  

Total liabilities

     125,129        (0.7)        0.5        125,129        20.9        18.1  

Total equity

     17,443        1.1        2.4        17,443        6.7        4.1  

Memorandum items:

                 

Gross loans and advances to customers (2)

     89,636        2.1        3.5        89,636        12.7        10.0  

Customer funds

     69,967        2.9        4.3        69,967        12.5        9.8  

Customer deposits (3)

     60,470        2.7        4.0        60,470        12.5        9.8  

Mutual funds

     9,497        4.4        5.8        9,497        12.6        9.9  
Ratios (%) and operating means                                                

Underlying RoTE

     7.65        2.58                 6.38        1.27           

Efficiency ratio

     41.9        (0.8)                 42.3        (3.1)           

NPL ratio

     2.32        (0.09)                 2.32        (0.59)           

NPL coverage

     158.4        (2.6)                 158.4        1.5           

Number of employees

     17,381        0.6                 17,381        1.1           

Number of branches

     646        (2.0)                 646        (3.6)           

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

January - June 2019     LOGO     61


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

Mexico

                                                  LOGO  

EUR million

                 
            / Q1’19             / H1’18  
Underlying income statement    Q2’19      %      % excl. FX      H1’19      %      % excl. FX  

Net interest income

     777        1.4        (0.1)        1,543        18.6        11.2  

Net fee income

     218        6.9        5.4        423        12.5        5.6  

Gains (losses) on financial transactions (1)

     27                      23        (68.4)        (70.4)  

Other operating income

     (23)        (17.2)        (18.5)        (51)        1.1        (5.1)  

Total income

     999        6.4        4.9        1,938        14.0        7.0  

Administrative expenses and amortisations

     (409)        3.0        1.5        (806)        14.1        7.1  

Net operating income

     590        8.8        7.3        1,132        14.0        6.9  

Net loan-loss provisions

     (225)        16.7        15.2        (419)        7.7        1.1  

Other gains (losses) and provisions

     (5)        (11.2)        (12.6)        (10)        (30.3)        (34.6)  

Profit before tax

     360        4.7        3.3        703        19.2        11.9  

Tax on profit

     (79)        2.7        1.2        (156)        21.7        14.2  

Profit from continuing operations

     280        5.3        3.9        547        18.5        11.2  

Net profit from discontinued operations

                                         

Consolidated profit

     280        5.3        3.9        547        18.5        11.2  

Non-controlling interests

     (61)        0.2        (1.3)        (122)        17.0        9.8  

Underlying attributable profit to the parent

     219        6.9        5.4        424        19.0        11.6  
Balance sheet                                                

Loans and advances to customers

     33,345        0.9        1.5        33,345        17.3        11.8  

Cash, central banks and credit institutions

     11,563        (21.1)        (20.6)        11,563        (13.2)        (17.2)  

Debt instruments

     12,890        15.7        16.4        12,890        4.7        (0.2)  

Other financial assets

     5,570        13.3        13.9        5,570        (9.8)        (14.0)  

Other asset accounts

     3,563        9.1        9.7        3,563        29.0        23.0  

Total assets

     66,930        (0.2)        0.4        66,930        6.2        1.3  

Customer deposits

     33,989        (4.8)        (4.2)        33,989        2.0        (2.7)  

Central banks and credit institutions

     10,576        2.4        3.0        10,576        25.4        19.6  

Marketable debt securities

     6,565        12.5        13.2        6,565        10.7        5.5  

Other financial liabilities

     7,635        5.1        5.7        7,635        (4.7)        (9.2)  

Other liabilities accounts

     2,161        11.3        12.0        2,161        (0.3)        (4.9)  

Total liabilities

     60,927        (0.2)        0.4        60,927        5.3        0.4  

Total equity

     6,004        0.4        1.0        6,004        16.8        11.4  

Memorandum items:

                 

Gross loans and advances to customers (2)

     33,234        1.1        1.7        33,234        13.8        8.5  

Customer funds

     41,577        (0.1)        0.5        41,577        6.5        1.6  

Customer deposits (3)

     30,063        (1.2)        (0.6)        30,063        5.7        0.8  

Mutual funds

     11,514        2.7        3.3        11,514        8.8        3.7  
Ratios (%) and operating means                                                

Underlying RoTE

     20.71        0.60                 20.47        0.60           

Efficiency ratio

     40.9        (1.3)                 41.6        0.0           

NPL ratio

     2.21        0.09                 2.21        (0.37)           

NPL coverage

     126.9        (3.2)                 126.9        10.8           

Number of employees

     19,536        (1.7)                 19,536        2.4           

Number of branches

     1,416        0.3                 1,416        1.0           

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

62     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

 

SOUTH AMERICA

                                                     

EUR million

                 
            / Q1’19             / H1’18  
Underlying income statement    Q2’19      %      % excl. FX      H1’19      %      % excl. FX  

Net interest income

     3,425        6.3        9.2        6,647        1.4        9.4  

Net fee income

     1,178        (0.0)        2.9        2,355        0.6        10.9  

Gains (losses) on financial transactions (1)

     130        (18.8)        (16.5)        289        13.1        40.7  

Other operating income

     (85)        18.1        21.7        (157)                

Total income

     4,647        3.6        6.5        9,134        (0.2)        8.7  

Administrative expenses and amortisations

     (1,664)        1.1        4.0        (3,309)        (1.6)        9.1  

Net operating income

     2,984        5.0        7.9        5,825        0.6        8.5  

Net loan-loss provisions

     (956)        5.9        8.8        (1,859)        (5.1)        2.4  

Other gains (losses) and provisions

     (151)        (1.7)        1.8        (306)        (8.2)        4.6  

Profit before tax

     1,876        5.1        8.0        3,661        4.6        12.3  

Tax on profit

     (672)        (2.9)        (0.1)        (1,363)        1.9        8.9  

Profit from continuing operations

     1,205        10.2        13.0        2,297        6.3        14.4  

Net profit from discontinued operations

                                         

Consolidated profit

     1,205        10.2        13.0        2,297        6.3        14.4  

Non-controlling interests

     (169)        1.3        3.7        (336)        7.0        11.5  

Underlying attributable profit to the parent

     1,035        11.8        14.7        1,961        6.2        14.9  
Balance sheet                                                

Loans and advances to customers

     124,950        1.3        1.4        124,950        8.3        9.5  

Cash, central banks and credit institutions

     49,995        12.5        12.2        49,995        12.4        13.0  

Debt instruments

     48,204        4.8        4.2        48,204        9.5        7.7  

Other financial assets

     11,508        28.4        28.3        11,508        36.2        34.6  

Other asset accounts

     16,456        4.5        4.1        16,456        16.9        15.8  

Total assets

     251,113        5.3        5.1        251,113        10.9        11.2  

Customer deposits

     116,739        4.7        4.7        116,739        7.6        9.2  

Central banks and credit institutions

     37,872        (2.4)        (2.8)        37,872        (0.7)        (2.0)  

Marketable debt securities

     31,983        3.2        3.0        31,983        12.9        12.1  

Other financial liabilities

     31,372        21.1        20.5        31,372        34.9        33.5  

Other liabilities accounts

     10,320        15.8        15.3        10,320        34.0        32.4  

Total liabilities

     228,286        5.6        5.4        228,286        10.8        11.2  

Total equity

     22,827        2.3        2.1        22,827        11.7        11.4  

Memorandum items:

                 

Gross loans and advances to customers (2)

     130,953        1.5        1.5        130,953        8.4        9.5  

Customer funds

     173,298        5.7        5.4        173,298        10.6        11.4  

Customer deposits (3)

     105,299        5.8        5.8        105,299        10.5        12.9  

Mutual funds

     67,999        5.5        4.9        67,999        10.7        9.2  
Ratios (%) and operating means                                                

Underlying RoTE

     21.98        2.40                 20.76        0.95           

Efficiency ratio

     35.8        (0.9)                 36.2        (0.5)           

NPL ratio

     4.81        (0.02)                 4.81        (0.01)           

NPL coverage

     93.0        (1.1)                 93.0        (1.4)           

Number of employees

     71,158        1.7                 71,158        1.7           

Number of branches

     4,591        1.8                 4,591        2.1           

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

January - June 2019     LOGO     63


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

Brazil

                                                  LOGO  
EUR million                  
            / Q1’19             / H1’18  
Underlying income statement    Q2’19      %      % excl. FX      H1’19      %      % excl. FX  

Net interest income

     2,520        2.5        5.5        4,979        1.5        6.6  

Net fee income

     924        (0.7)        2.3        1,855        3.5        8.7  

Gains (losses) on financial transactions (1)

     45        (22.0)        (19.4)        103        24.0        30.2  

Other operating income

     (36)        (2.0)        1.0        (72)        456.3        484.2  

Total income

     3,453        1.2        4.2        6,864        1.4        6.5  

Administrative expenses and amortisations

     (1,102)        (2.0)        1.0        (2,227)        (1.8)        3.1  

Net operating income

     2,351        2.8        5.9        4,637        3.1        8.2  

Net loan-loss provisions

     (761)        7.1        10.2        (1,471)        (6.4)        (1.7)  

Other gains (losses) and provisions

     (153)        (8.8)        (6.0)        (320)        (1.4)        3.6  

Profit before tax

     1,438        2.1        5.1        2,846        9.3        14.8  

Tax on profit

     (581)        (1.9)        1.1        (1,173)        4.8        10.1  

Profit from continuing operations

     856        4.9        8.0        1,673        12.7        18.3  

Net profit from discontinued operations

                                         

Consolidated profit

     856        4.9        8.0        1,673        12.7        18.3  

Non-controlling interests

     (94)        (1.4)        1.6        (190)        14.0        19.7  

Underlying attributable profit to the parent

     762        5.7        8.8        1,482        12.6        18.2  
Balance sheet                                                

Loans and advances to customers

     73,175        2.0        1.2        73,175        12.1        8.7  

Cash, central banks and credit institutions

     37,661        13.0        12.1        37,661        8.8        5.5  

Debt instruments

     42,738        4.1        3.3        42,738        11.9        8.5  

Other financial assets

     6,822        20.3        19.3        6,822        24.5        20.7  

Other asset accounts

     12,474        5.2        4.4        12,474        9.1        5.8  

Total assets

     172,869        5.6        4.8        172,869        11.5        8.1  

Customer deposits

     74,698        6.3        5.5        74,698        10.7        7.3  

Central banks and credit institutions

     28,908        (2.6)        (3.4)        28,908        (5.7)        (8.5)  

Marketable debt securities

     20,584        2.9        2.1        20,584        15.5        12.0  

Other financial liabilities

     24,148        13.5        12.6        24,148        30.5        26.5  

Other liabilities accounts

     8,620        19.2        18.2        8,620        36.3        32.2  

Total liabilities

     156,958        5.7        4.9        156,958        11.5        8.1  

Total equity

     15,912        4.7        3.9        15,912        12.2        8.8  

Memorandum items:

                 

Gross loans and advances to customers (2)

     77,835        2.0        1.1        77,835        12.0        8.6  

Customer funds

     121,485        6.8        5.9        121,485        14.5        11.0  

Customer deposits (3)

     63,417        8.6        7.8        63,417        16.7        13.1  

Mutual funds

     58,069        4.8        4.0        58,069        12.2        8.7  
Ratios (%) and operating means                                                

Underlying RoTE

     22.40        1.42                 21.65        1.76           

Efficiency ratio

     31.9        (1.0)                 32.4        (1.1)           

NPL ratio

     5.27        0.01                 5.27        0.01           

NPL coverage

     105.5        (2.2)                 105.5        (3.2)           

Number of employees

     48,118        2.8                 48,118        3.1           

Number of branches

     3,643        2.3                 3,643        4.4           

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

64     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

 

 

Chile                                        

EUR million

                 
            / Q1’19             / H1’18  
Underlying income statement    Q2’19      %      % excl. FX      H1’19      %      % excl. FX  

Net interest income

     500        13.5        15.0        940        (4.6)        (1.7)  

Net fee income

     97        (5.9)        (4.5)        200        (12.1)        (9.4)  

Gains (losses) on financial transactions (1)

     59        7.9        9.4        113        96.0        101.9  

Other operating income

     0        (82.6)        (81.7)        2        (80.7)        (80.1)  

Total income

     656        9.4        10.8        1,255        (2.1)        0.9  

Administrative expenses and amortisations

     (269)        5.4        6.8        (524)        (1.3)        1.7  

Net operating income

     387        12.3        13.8        731        (2.6)        0.3  

Net loan-loss provisions

     (105)        2.8        4.2        (208)        (12.0)        (9.4)  

Other gains (losses) and provisions

     (1)                      37        (31.8)        (29.8)  

Profit before tax

     281        0.5        1.9        560        (1.5)        1.5  

Tax on profit

     (43)        (28.0)        (26.8)        (103)        (10.0)        (7.3)  

Profit from continuing operations

     237        8.3        9.8        456        0.7        3.7  

Net profit from discontinued operations

                                         

Consolidated profit

     237        8.3        9.8        456        0.7        3.7  

Non-controlling interests

     (74)        4.9        6.3        (145)        (0.7)        2.3  

Underlying attributable profit to the parent

     163        9.9        11.4        311        1.3        4.4  
Balance sheet                                                

Loans and advances to customers

     40,081        1.1        2.3        40,081        4.8        7.0  

Cash, central banks and credit institutions

     4,742        18.4        19.8        4,742        21.8        24.4  

Debt instruments

     3,949        4.4        5.7        3,949        (5.8)        (3.8)  

Other financial assets

     4,551        43.7        45.5        4,551        55.1        58.4  

Other asset accounts

     2,880        (0.9)        0.3        2,880        57.4        60.8  

Total assets

     56,203        5.0        6.3        56,203        10.0        12.4  

Customer deposits

     27,122        1.4        2.7        27,122        2.2        4.4  

Central banks and credit institutions

     5,586        (6.6)        (5.5)        5,586        6.6        8.8  

Marketable debt securities

     11,076        3.5        4.8        11,076        11.5        13.9  

Other financial liabilities

     6,417        72.0        74.2        6,417        64.7        68.2  

Other liabilities accounts

     1,025        (3.3)        (2.1)        1,025        13.7        16.1  

Total liabilities

     51,226        6.2        7.5        51,226        10.2        12.5  

Total equity

     4,977        (6.0)        (4.9)        4,977        8.6        10.9  

Memorandum items:

                 

Gross loans and advances to customers (2)

     41,182        0.9        2.2        41,182        4.5        6.8  

Customer funds

     35,215        3.1        4.3        35,215        3.2        5.4  

Customer deposits (3)

     26,964        1.1        2.3        26,964        1.8        3.9  

Mutual funds

     8,251        10.3        11.6        8,251        8.1        10.3  
Ratios (%) and operating means                                                

Underlying RoTE

     18.75        2.41                 17.63        (0.56)           

Efficiency ratio

     41.0        (1.6)                 41.8        0.3           

NPL ratio

     4.52        (0.15)                 4.52        (0.34)           

NPL coverage

     59.1        (0.6)                 59.1        (0.9)           

Number of employees

     11,797        (0.8)                 11,797        (1.9)           

Number of branches

     380                        380        (9.5)           

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

January - June 2019     LOGO     65


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

Argentina                                    LOGO  
EUR million                                   
            / Q1’19             / H1’18  
Underlying income statement    Q2’19      %      % excl. FX      H1’19      %      % excl. FX  

Net interest income

     298        39.6        43.8        511        14.2        113.4  

Net fee income

     125        8.1        11.8        241        (8.4)        71.3  

Gains (losses) on financial transactions (1)

     14        (61.9)        (59.5)        52        (44.8)        3.3  

Other operating income

     (47)        34.1        38.2        (83)                

Total income

     389        17.7        21.5        720        (10.7)        66.9  

Administrative expenses and amortisations

     (229)        13.0        16.7        (431)        1.1        89.0  

Net operating income

     161        25.1        29.0        289        (24.0)        42.1  

Net loan-loss provisions

     (70)        (2.9)        0.5        (143)        14.7        114.5  

Other gains (losses) and provisions

     3                      (19)        (66.4)        (37.1)  

Profit before tax

     94        178.5        185.1        127        (35.9)        19.7  

Tax on profit

     (30)        31.7        35.7        (54)        (12.3)        64.0  

Profit from continuing operations

     63        502.8        515.0        74        (46.5)        0.1  

Net profit from discontinued operations

                                         

Consolidated profit

     63        502.8        515.0        74        (46.5)        0.1  

Non-controlling interests

     (0)        84.1        89.1        (0)        (60.1)        (25.4)  

Underlying attributable profit to the parent

     63        508.4        520.8        73        (46.4)        0.3  
Balance sheet                                                

Loans and advances to customers

     5,755        (5.2)        (6.0)        5,755        (23.8)        9.8  

Cash, central banks and credit institutions

     5,198        7.9        7.1        5,198        42.5        105.3  

Debt instruments

     917        114.3        112.7        917        (2.6)        40.4  

Other financial assets

     125        10.2        9.4        125        411.2        636.6  

Other asset accounts

     909        12.1        11.3        909        58.5        128.4  

Total assets

     12,903        5.4        4.6        12,903        1.3        46.0  

Customer deposits

     9,384        6.4        5.6        9,384        0.5        44.8  

Central banks and credit institutions

     992        2.9        2.2        992        (0.5)        43.4  

Marketable debt securities

     257        4.2        3.5        257        (52.1)        (31.0)  

Other financial liabilities

     762        (10.6)        (11.3)        762        (6.9)        34.1  

Other liabilities accounts

     415        4.9        4.1        415        74.5        151.5  

Total liabilities

     11,809        4.7        4.0        11,809        (1.0)        42.7  

Total equity

     1,094        12.9        12.0        1,094        35.4        95.1  

Memorandum items:

                 

Gross loans and advances to customers (2)

     5,858        (0.8)        (1.6)        5,858        (21.0)        13.8  

Customer funds

     11,030        6.2        5.4        11,030        (2.6)        40.3  

Customer deposits (3)

     9,384        6.4        5.6        9,384        0.5        44.8  

Mutual funds

     1,646        5.0        4.2        1,646        (17.2)        19.3  
Ratios (%) and operating means                                                

Underlying RoTE

     27.09        22.01                 16.95        (13.90)           

Efficiency ratio

     58.7        (2.4)                 59.8        7.0           

NPL ratio

     3.79        0.29                 3.79        1.39           

NPL coverage

     126.4        7.8                 126.4        4.9           

Number of employees

     9,183        (0.9)                 9,183        (0.4)           

Number of branches

     469        0.2                 469        (2.7)           

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

66     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

 

Other South America                                        

EUR million

                 
            / Q1’19             / H1’18  
Underlying income statement    Q2’19      %      % w/o FX      H1’19      %      % w/o FX  

Net interest income

     108        (1.3)        2.4        217        (0.4)        4.5  

Net fee income

     32        10.8        14.8        60        3.2        9.2  

Gains (losses) on financial transactions (1)

     12        14.3        17.2        22        0.9        5.6  

Other operating income

     (2)        4.2        8.8        (5)        22.3        32.6  

Total income

     149        2.0        5.8        295        0.2        5.2  

Administrative expenses and amortisations

     (64)        1.1        5.0        (127)        (6.1)        (1.3)  

Net operating income

     85        2.7        6.4        168        5.4        10.7  

Net loan-loss provisions

     (20)        9.5        13.5        (38)        45.4        59.1  

Other gains (losses) and provisions

     (1)        (31.2)        (27.0)        (3)        (40.6)        (37.5)  

Profit before tax

     64        1.7        5.2        128        (1.0)        3.1  

Tax on profit

     (17)        1.9        5.2        (33)        (23.2)        (21.6)  

Profit from continuing operations

     48        1.6        5.2        95        10.1        15.9  

Net profit from discontinued operations

                                         

Consolidated profit

     48        1.6        5.2        95        10.1        15.9  

Non-controlling interests

     (0)        (2.5)        (3.7)        (1)        30.3        24.4  

Underlying attributable profit to the parent

     47        1.6        5.3        94        10.0        15.8  
Balance sheet                                                

Loans and advances to customers

     5,939        1.4        4.8        5,939        37.2        44.6  

Cash, central banks and credit institutions

     2,395        5.4        10.7        2,395        2.8        9.2  

Debt instruments

     601        (18.3)        (14.3)        601        (12.4)        (4.9)  

Other financial assets

     10        9.9        12.7        10        5.2        12.2  

Other asset accounts

     193        6.9        11.7        193        (18.9)        (15.2)  

Total assets

     9,137        0.9        4.9        9,137        20.4        27.5  

Customer deposits

     5,535        (2.5)        2.3        5,535        7.5        15.1  

Central banks and credit institutions

     2,386        8.8        10.3        2,386        90.6        94.6  

Marketable debt securities

     67        12.5        12.9        67        30.8        28.2  

Other financial liabilities

     46        (3.9)        0.7        46        23.8        34.5  

Other liabilities accounts

     260        17.0        22.6        260        9.1        15.9  

Total liabilities

     8,293        1.2        5.2        8,293        23.3        30.7  

Total equity

     844        (1.8)        2.4        844        (2.7)        2.5  

Memorandum items:

                 

Gross loans and advances to customers (2)

     6,079        1.3        4.8        6,079        36.1        43.4  

Customer funds

     5,567        (2.4)        2.4        5,567        7.6        15.1  

Customer deposits (3)

     5,535        (2.5)        2.3        5,535        7.5        15.1  

Mutual funds

     32        (1.5)        5.0        32        10.4        20.9  
Resources                                                

Number of employees

     2,060        1.9                 2,060        (1.0)           

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

January - June 2019     LOGO     67


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

SANTANDER GLOBAL PLATFORM                                            LOGO  

EUR million

                 
Underlying income statement    Q2’19      Q1’19      %      H1’19      H1’18      %  

Net interest income

     23        22        5.3        46        38        19.4  

Net fee income

     1        2        (52.0)        2        2        (0.4)  

Gains (losses) on financial transactions (1)

     (0)        (1)        (67.6)        (2)        0         

Other operating income

     (4)        (4)        (4.4)        (7)        (7)        6.8  

Total income

     20        19        7.6        39        34        14.5  

Administrative expenses and amortisations

     (67)        (41)        62.4        (108)        (62)        75.0  

Net operating income

     (47)        (22)        108.3        (69)        (28)        149.2  

Net loan-loss provisions

     (0)        (0)        114.6        (0)        0         

Other gains (losses) and provisions

     (0)        (1)        (56.8)        (1)        (1)        (21.1)  

Profit before tax

     (47)        (23)        103.8        (70)        (29)        145.0  

Tax on profit

     7        12        (41.9)        19        6        216.8  

Profit from continuing operations

     (40)        (11)        266.6        (51)        (23)        125.6  

Net profit from discontinued operations

                                         

Consolidated profit

     (40)        (11)        266.6        (51)        (23)        125.6  

Non-controlling interests

                                         

Underlying attributable profit to the parent

     (40)        (11)        266.6        (51)        (23)        125.6  
Balance sheet                                                

Loans and advances to customers

     515        417        23.5        515        193        166.8  

Cash, central banks and credit institutions

     8,938        8,673        3.1        8,938        7,567        18.1  

Debt instruments

                                         

Other financial assets

     147        152        (3.0)        147        139        5.7  

Other asset accounts

     132        129        2.6        132        91        45.7  

Total assets

     9,732        9,370        3.9        9,732        7,990        21.8  

Customer deposits

     9,106        8,804        3.4        9,106        7,477        21.8  

Central banks and credit institutions

     130        75        73.2        130        83        57.6  

Marketable debt securities

                                         

Other financial liabilities

     67        41        65.0        67        45        48.0  

Other liabilities accounts

     81        60        34.1        81        131        (38.0)  

Total liabilities

     9,384        8,980        4.5        9,384        7,736        21.3  

Total equity

     348        390        (10.9)        348        254        36.8  

Memorandum items:

                 

Gross loans and advances to customers (2)

     518        420        23.4        518        196        164.4  

Customer funds

     9,500        9,183        3.5        9,500        8,082        17.5  

Customer deposits (3)

     9,106        8,804        3.4        9,106        7,477        21.8  

Mutual funds

     394        379        3.9        394        605        (34.9)  
Resources                                                

Number of employees

     597        545        9.5        597        427        39.8  

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

68     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

CORPORATE CENTRE

                                                  LOGO  

EUR million

                 
Underlying income statement    Q2’19      Q1’19      %      H1’19      H1’18      %  

Net interest income

     (304)        (296)        2.9        (600)        (477)        25.8  

Net fee income

     (13)        (14)        (6.1)        (27)        (17)        53.8  

Gains (losses) on financial transactions (1)

     (92)        (79)        15.7        (171)        5         

Other operating income

     (14)        (11)        31.8        (25)        (5)        422.9  

Total income

     (423)        (399)        5.9        (822)        (494)        66.4  

Administrative expenses and amortisations

     (96)        (97)        (1.5)        (193)        (212)        (9.1)  

Net operating income

     (519)        (497)        4.4        (1,015)        (706)        43.7  

Net loan-loss provisions

     (5)        (8)        (38.8)        (13)        (67)        (81.1)  

Other gains (losses) and provisions

     (72)        (55)        31.4        (127)        (93)        36.5  

Profit before tax

     (595)        (559)        6.5        (1,155)        (866)        33.3  

Tax on profit

     3        33        (90.1)        36        (18)         

Profit from continuing operations

     (592)        (526)        12.5        (1,118)        (884)        26.5  

Net profit from discontinued operations

                                         

Consolidated profit

     (592)        (526)        12.5        (1,118)        (884)        26.5  

Non-controlling interests

     1        10        (94.1)        10        0         

Underlying attributable profit to the parent

     (592)        (517)        14.5        (1,108)        (884)        25.4  
Balance sheet                                                

Loans and advances to customers

     6,231        6,138        1.5        6,231        7,012        (11.1)  

Cash, central banks and credit institutions

     31,895        26,755        19.2        31,895        39,060        (18.3)  

Debt instruments

     952        954        (0.2)        952        351        171.4  

Other financial assets

     2,446        2,207        10.9        2,446        2,240        9.2  

Other asset accounts

     132,086        132,551        (0.4)        132,086        120,821        9.3  

Total assets

     173,610        168,605        3.0        173,610        169,484        2.4  

Customer deposits

     953        163        485.9        953        231        311.9  

Central banks and credit institutions

     14,650        16,920        (13.4)        14,650        29,012        (49.5)  

Marketable debt securities

     51,326        43,441        18.2        51,326        40,421        27.0  

Other financial liabilities

     2,617        2,321        12.8        2,617        1,622        61.3  

Other liabilities accounts

     9,743        8,356        16.6        9,743        7,763        25.5  

Total liabilities

     79,290        71,201        11.4        79,290        79,050        0.3  

Total equity

     94,320        97,404        (3.2)        94,320        90,433        4.3  

Memorandum items:

                 

Gross loans and advances to customers (2)

     6,331        6,414        (1.3)        6,331        7,134        (11.3)  

Customer funds

     964        176        449.3        964        238        304.7  

Customer deposits (3)

     953        163        485.9        953        231        311.9  

Mutual funds

     11        13        (15.8)        11        7        59.2  
Resources                                                

Number of employees

     1,644        1,757        (6.4)        1,644        1,746        (5.8)  

(1) Includes exchange differences.

(2) Excluding reverse repos.

(3) Excluding repos.

 

January - June 2019     LOGO     69


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

RETAIL BANKING

                                                           LOGO  

EUR million

                    
            / Q1’19                    / H1’18  
Underlying income statement    Q2’19      %      % excl. FX      H1’19              %      % excl. FX  

Net interest income

     8,390        2.8        3.5        16,553                 3.6        4.8  

Net fee income

     2,269        (2.0)        (0.9)        4,583                 1.8        5.2  

Gains (losses) on financial transactions (1)

     180        91.8        89.3        273                 (9.9)        (8.1)  

Other operating income

     42        (44.8)        (48.8)        118                 (53.0)        (56.4)  

Total income

     10,881        2.2        2.9        21,528                 2.4        3.9  

Administrative expenses and amortisations

     (4,882)        1.1        1.7        (9,712)                 (0.2)        1.5  

Net operating income

     5,999        3.1        4.0        11,816                 4.5        5.9  

Net loan-loss provisions

     (2,090)        (3.3)        (2.6)        (4,251)                 3.6        4.7  

Other gains (losses) and provisions

     (397)        1.3        2.4        (789)                 2.8        7.6  

Profit before tax

     3,512        7.6        8.5        6,776                 5.4        6.5  

Tax on profit

     (1,073)        (1.9)        (0.6)        (2,166)                 3.6        5.4  

Profit from continuing operations

     2,439        12.4        13.1        4,610                 6.2        7.1  

Net profit from discontinued operations

                                                  

Consolidated profit

     2,439        12.4        13.1        4,610                 6.2        7.1  

Non-controlling interests

     (386)        5.1        5.4        (754)                 13.6        12.7  

Underlying attributable profit to the parent

     2,053        13.9        14.7        3,856                 4.9        6.0  

(1) Includes exchange differences.

 

CORPORATE & INVESTMENT BANKING

                                                           LOGO  

EUR million

                    
            / Q1’19                    / H1’18  
Underlying income statement    Q2’19      %      % excl. FX      H1’19              %      % excl. FX  

Net interest income

     701        7.3        8.0        1,354                 18.6        22.5  

Net fee income

     377        6.8        7.6        730                 (10.9)        (9.3)  

Gains (losses) on financial transactions (1)

     113        (51.0)        (49.4)        343                 (31.6)        (26.6)  

Other operating income

     123        115.7        115.7        180                 80.5        83.4  

Total income

     1,313        1.6        2.5        2,606                 1.8        5.3  

Administrative expenses and amortisations

     (559)        (0.1)        0.3        (1,119)                 7.8        9.1  

Net operating income

     754        2.9        4.2        1,488                 (2.3)        2.6  

Net loan-loss provisions

     (46)        379.0        375.1        (55)                 (56.2)        (55.7)  

Other gains (losses) and provisions

     (16)        (25.5)        (25.1)        (36)                 (1.8)        (1.8)  

Profit before tax

     693        (1.4)        (0.1)        1,396                 2.6        8.4  

Tax on profit

     (212)        2.0        3.5        (420)                 (0.6)        5.4  

Profit from continuing operations

     481        (2.8)        (1.5)        976                 4.1        9.7  

Net profit from discontinued operations

                                                  

Consolidated profit

     481        (2.8)        (1.5)        976                 4.1        9.7  

Non-controlling interests

     (47)        15.5        16.9        (87)                 9.2        11.3  

Underlying attributable profit to the parent

     434        (4.4)        (3.2)        889                 3.6        9.5  

(1) Includes exchange differences.

 

70     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Financial information

by segments

 

 

WEALTH MANAGEMENT & INSURANCE                                            LOGO  

EUR million

                 
            / Q1’19             / H1’18  
Underlying income statement    Q2’19      %      % excl. FX      H1’19      %      % excl. FX  

Net interest income

     144        3.1        3.4        283        10.6        10.7  

Net fee income

     298        8.1        8.5        574        (1.5)        (0.8)  

Gains (losses) on financial transactions (1)

     34        (0.0)        0.5        67        51.1        53.4  

Other operating income

     84        9.8        10.7        160        8.2        10.2  

Total income

     560        6.5        6.9        1,085        5.2        5.9  

Administrative expenses and amortisations

     (226)        (1.7)        (1.7)        (455)        2.8        2.3  

Net operating income

     334        12.9        13.7        630        6.9        8.7  

Net loan-loss provisions

     (0)                      7                

Other gains (losses) and provisions

     (1)        (55.6)        (54.7)        (4)        (7.2)        (8.0)  

Profit before tax

     332        10.9        11.6        632        8.2        10.1  

Tax on profit

     (79)        11.9        12.7        (149)        10.7        12.6  

Profit from continuing operations

     254        10.5        11.3        483        7.4        9.3  

Net profit from discontinued operations

                                         

Consolidated profit

     254        10.5        11.3        483        7.4        9.3  

Non-controlling interests

     (13)        9.5        11.6        (24)        (6.3)        (3.1)  

Underlying attributable profit to the parent

     241        10.6        11.3        459        8.3        10.1  

(1) Includes exchange differences.

 

January - June 2019     LOGO     71


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Alternative

performance measures

 

 

ALTERNATIVE PERFORMANCE MEASURES (APM)

 

In addition to the financial information prepared under IFRS, this consolidated directors’ report contains financial measures that constitute alternative performance measures (‘APMs’) to comply with the guidelines on alternative performance measures issued by the European Securities and Markets Authority on 5 October 2015 and non-IFRS measures.

The financial measures contained in this consolidated directors’ report that qualify as APMs and non-IFRS measures have been calculated using the financial information from Santander but are not defined or detailed in the applicable financial information framework or under IFRS and have neither been audited nor reviewed by our auditors.

We use these APMs and non-IFRS measures when planning, monitoring and evaluating our performance. We consider these APMs and non-IFRS financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period. While we believe that these APMs and non-IFRS financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute of IFRS measures.

 

In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces their usefulness as comparative measures.

The APMs and non-IFRS measures we use in this document can be categorised as follows:

Underlying results

In addition to IFRS results measures, we present some results measures which are non-IFRS measures and which we refer to as underlying measures. These underlying measures allow in our view a better year-on-year comparability as they exclude items outside the ordinary course performance of our business which are grouped in the non-IFRS line management adjustments and are further detailed on page 12 of this report.

In addition, the results by business areas in the ‘Geographic businesses’ section are presented only on an underlying basis in accordance with IFRS 8, and reconciled on an aggregate basis to our IFRS consolidated results to the consolidated financial statements.

 

 

Reconciliation of underlying results to statutory results

 

EUR million

     First half 2019  
      Underlying
results
     Adjustments      Statutory
results
 

Net interest income

     17,636               17,636  

Net fee income

     5,863               5,863  

Gains (losses) on financial transactions (1)

     511               511  

Other operating income

     426               426  

Total income

     24,436               24,436  

Administrative expenses and amortisations

     (11,587)               (11,587)  

Net operating income

     12,849               12,849  

Net loan-loss provisions

     (4,313)               (4,313)  

Other gains (losses) and provisions

     (957)        (1,048)        (2,005)  

Profit before tax

     7,579        (1,048)        6,531  

Tax on profit

     (2,679)        230        (2,449)  

Profit from continuing operations

     4,900        (818)        4,082  

Net profit from discontinued operations

                    

Consolidated profit

     4,900        (818)        4,082  

Non-controlling interests

     (855)        4        (851)  

Attributable profit to the parent

     4,045        (814)        3,231  

 

(1)

Includes exchange differences.

Explanation of adjustments:

Net capital gains from the sale of our stake in Prisma of EUR 150 million, net capital losses of EUR 180 million for the sale of real estate assets, restructuring costs in the United Kingdom, Poland and Spain for a net impact of EUR 704 million and PPI provisions for a net amount of EUR 80 million.

 

72     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Alternative

performance measures

 

 

Reconciliation of underlying results to statutory results

 

EUR million         
     First half 2018  
      Underlying
results
     Adjustments      Statutory
results
 

Net interest income

     16,931               16,931  

Net fee income

     5,889               5,889  

Gains (losses) on financial transactions (1)

     854               854  

Other operating income

     488               488  

Total income

     24,162               24,162  

Administrative expenses and amortisations

     (11,482)               (11,482)  

Net operating income

     12,680               12,680  

Net loan-loss provisions

     (4,297)               (4,297)  

Other gains (losses) and provisions

     (903)        (581)        (1,484)  

Profit before tax

     7,480        (581)        6,899  

Tax on profit

     (2,659)        281        (2,378)  

Profit from continuing operations

     4,821        (300)        4,521  

Net profit from discontinued operations

                    

Consolidated profit

     4,821        (300)        4,521  

Non-controlling interests

     (769)               (769)  

Attributable profit to the parent

     4,052        (300)        3,752  

(1) Includes exchange differences.

        

Explanation of adjustments:

Restructuring costs: The net impact of EUR -300 million on profit relates to restructuring costs in connection with the integration of Grupo Banco Popular, as follows EUR -280 million in Spain, EUR -40 million in Corporate Centre and EUR 20 million in Portugal.

Profitability and efficiency ratios

The purpose of the profitability and efficiency ratios is to measure the ratio of profit to capital, to tangible capital, to assets and to risk weighted assets, while the efficiency ratio measures how much general administrative expenses (personnel and other) and amortisation costs are needed to generate revenue.

 

     

Ratio

  

Formula

  

Relevance of the metric

RoE

(Return on equity)

  

Attributable profit to the parent

Average stockholders’ equity (1) (excl. minority interests)

  

This ratio measures the return that shareholders obtain on the funds invested in the entity and as such measures the company’s ability to pay shareholders.

RoTE

(Return on tangible equity)

  

Attributable profit to the parent

Average stockholders’ equity (1) (excl. minority interests) - intangible assets

  

This is a very common indicator, used to evaluate the profitability of the company as a percentage of its tangible equity. It’s measured as the return that shareholders receive as a percentage of the funds invested in the entity less intangible assets.

Underlying RoTE

  

Attributable profit to the parent

Average stockholders’ equity(1) (excl. minority interests) - intangible assets

  

This indicator measures the profitability of the tangible equity of a company arising from ordinary activities, i.e. excluding results from non-recurring operations.

RoA

(Return on assets)

  

Consolidated profit

Average total assets

  

This metric, commonly used by analysts, measures the profitability of a company as a percentage of its total assets. It is an indicator that reflects the efficiency of the company’s total funds in generating profit over a given period.

RoRWA

(Return on risk weighted assets)

  

Consolidated profit

Average risk weighted assets

  

The return adjusted for risk is an derivative of the RoA metric. The difference is that RoRWA measures profit in relation to the bank’s risk weighted assets.

Underlying RoRWA

  

Underlying consolidated profit

Average risk weighted assets

  

This relates the underlying profit (excluding non-recurring results) to the bank’s risk weighted assets.

Efficiency ratio

  

Operating expenses (2)

Total income

  

One of the most commonly used indicators when comparing productivity of different financial entities. It measures the amount of funds used to generate the bank’s total income.

 

(1)

Stockholders’ equity = Capital and Reserves + Accumulated other comprehensive income + Attributable profit to the parent + Dividends.

(2)

Operating expenses = Administrative expenses + amortisations.

 

January - June 2019     LOGO     73


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Alternative

performance measures

 

 

Profitability and efficiency (1) (2) (3) (4)    Q2’19     Q1’19     H1’19     H1’18  

RoE

     7.79     7.85     7.41     8.24

Attributable profit to the parent

     7,681       7,684       7,276       7,804  

Average stockholders’ equity (excluding minority interests)

     98,659       97,886       98,191       94,662  

RoTE

     11.02     11.15     10.51     11.79

Attributable profit to the parent

     7,681       7,684       7,276       7,804  

Average stockholders’ equity (excluding minority interests)

     98,659       97,886       98,191       94,662  

(-) Average intangible assets

     28,965       28,978       28,952       28,472  

Average stockholders’ equity (excl. minority interests) - intangible assets

     69,694       68,908       69,239       66,190  

Underlying RoTE

     12.03     11.31     11.68     12.24

Attributable profit to the parent

     7,681       7,684       7,276       7,804  

(-) Management adjustments

     (706)       (108)       (814)       (300)  

Underlying attributable profit to the parent

     8,388       7,792       8,090       8,104  

Average stockholders’ equity (excl. minority interests) - intangible assets

     69,694       68,908       69,239       66,190  

RoA

     0.63     0.63     0.60     0.65

Consolidated profit

     9,464       9,318       8,981       9,342  

Average total assets

     1,500,703       1,488,505       1,492,954       1,438,444  

RoRWA

     1.56     1.54     1.48     1.55

Consolidated profit

     9,464       9,318       8,986       9,342  

Average risk weighted assets

     608,697       603,340       605,979       603,424  

Underlying RoRWA

     1.67     1.56     1.62     1.60

Consolidated profit

     9,464       9,318       8,986       9,342  

(-) Management adjustments

     (701)       (113)       (814)       (300)  

Underlying consolidated profit

     10,169       9,431       9,800       9,642  

Average risk weighted assets

     608,697       603,340       605,979       603,424  

Efficiency ratio

     47.2     47.6     47.4     47.5

Underlying operating expenses

     5,829       5,758       11,587       11,482  

Operating expenses

     5,829       5,758       11,587       11,482  

Management adjustments impact in operating expenses

                        

Underlying total income

     12,351       12,085       24,436       24,162  

Total income

     12,351       12,085       24,436       24,162  

Management adjustments impact in total income

                        
(1)

Averages included in the RoE, RoTE, RoA and RoRWA denominators are calculated using 4 months’ worth of data in the case of quarterly figures (from March to June in Q2 and December to March in Q1) and 7 months in the case of H1 data (from December to June).

 

(2)

For periods less than one year, and if there are results in the net capital gains and provisions line, the profit used to calculate RoE and RoTE is the annualised underlying attributable profit to which said results are added without annualising.

 

(3)

For periods less than one year, and if there are results in the net capital gains and provisions line, the profit used to calculate RoA and RoRWA is the annualised underlying consolidated profit, to which said results are added without annualising.

 

(4)

The risk weighted assets included in the denominator of the RoRWA metric are calculated in line with the criteria laid out in the CRR (Capital Requirements Regulation).

 

Efficiency ratio

 

    

H1’19

    

H1’18

 
      %      Total
income
     Operating
expenses
     %      Total
income
     Operating
expenses
 

Europe

     53.7        10,413        5,591        53.8        10,524        5,666  

Spain

     55.2        3,706        2,044        58.9        3,746        2,205  

Santander Consumer Finance

     44.6        2,321        1,035        44.9        2,266        1,018  

United Kingdom

     60.4        2,388        1,442        55.6        2,590        1,440  

Portugal

     43.8        712        312        47.2        688        324  

Poland

     42.8        817        349        43.4        731        317  

North America

     42.1        5,672        2,386        44.1        4,947        2,181  

US

     42.3        3,734        1,581        45.4        3,248        1,475  

Mexico

     41.6        1,938        806        41.6        1,699        706  

South America

     36.2        9,134        3,309        36.7        9,151        3,361  

Brazil

     32.4        6,864        2,227        33.5        6,768        2,269  

Chile

     41.8        1,255        524        41.5        1,282        531  

Argentina

     59.8        720        431        52.8        807        426  

 

74     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Alternative

performance measures

 

 

Underlying RoTE

 

    

H1’19

    

H1’18

 
      %      Underlying
attributable
profit to the
parent
    

Average
stockholders’
equity (excl.

minority

interests) -
intangible
assets

     %      Underlying
attributable
profit to the
parent
    

Average
stockholders’
equity (excl.

minority

interests) -
intangible
assets

 

Europe

     9.72        4,707        48,442        10.48        4,844        46,225  

Spain

     9.31        1,388        14,915        8.65        1,322        15,288  

Santander Consumer Finance

     15.36        1,316        8,565        17.00        1,335        7,851  

United Kingdom

     7.81        1,164        14,901        9.93        1,330        13,390  

Portugal

     12.54        520        4,150        11.56        459        3,967  

Poland

     9.61        300        3,119        10.93        309        2,831  

North America

     9.54        1,779        18,637        8.26        1,381        16,713  

US

     6.38        930        14,578        5.11        667        13,054  

Mexico

     20.47        849        4,145        19.87        713        3,589  

South America

     20.76        3,922        18,894        19.81        3,693        18,643  

Brazil

     21.65        2,965        13,696        19.89        2,634        13,247  

Chile

     17.63        623        3,532        18.19        615        3,379  

Argentina

     16.95        146        863        30.86        273        884  

Credit risk indicators

The credit risk indicators measure the quality of the credit portfolio and the percentage of non-performing loans covered by provisions.

 

     

Ratio

 

Formula

  

Relevance of the metric

NPL ratio

(Non-performing loans)

 

Non-performing loans and advances

to customers, customer guarantees and

customer commitments granted

Total Risk (1)

  

The NPL ratio is an important variable regarding financial institutions’ activity since it gives an indication of the level of risk the entities are exposed to. It calculates risks that are, in accounting terms, declared to be non-performing as a percentage of the total outstanding amount of customer credit and contingent liabilities.

Coverage ratio

 

Provisions to cover impairment losses on loans and

advances to customers, customer guarantees and

customer commitments granted

Non-performing loans and advances to customers,

customer guarantees and customer commitments granted

  

The coverage ratio is a fundamental metric in the financial sector. It reflects the level of provisions as a percentage of the non-performing assets (credit risk). Therefore it is a good indicator of the entity’s solvency against client defaults both present and future.

Cost of Credit

 

Allowances for loan-loss provisions over the last 12 months

Average loans and advances to customers over the last 12 months

  

This ratio quantifies loan-loss provisions arising from credit risk over a defined period of time for a given loan portfolio. As such, it acts as an indicator of credit quality.

 

(1)

Total risk = Total loans and advances and guarantees to customers (performing and non-performing) + non-performing contingent liabilities.

 

Credit risk    Jun-19     Mar-19     Jun-19     Jun-18  

NPL ratio

     3.51     3.62     3.51     3.92

Non-performing loans and advances to customers customer guarantees and customer commitments granted

     34,421       35,590       34,421       36,654  

Total risk

     980,885       983,790       980,885       934,388  

Coverage ratio

     68     68     68     69

Provisions to cover impairment losses on loans and advances to customers, customer guarantees and customer commitments granted

     23,432       24,129       23,432       25,148  

Non-performing loans and advances to customers customer guarantees and customer commitments granted

     34,421       35,590       34,421       36,654  

Cost of credit

     0.98     0.97     0.98     0.99

Allowances for loan-loss provisions over the last 12 months

     8,889       8,762       8,889       8,729  

Average loans and advances to customers over the last 12 months

     910,753       899,201       910,753       880,329  

 

January - June 2019     LOGO     75


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Alternative

performance measures

 

 

NPL ratio                                                      
    

Jun-19

    

Jun-18

 
      %      Non-
performing
loans and
advances to
customers
customer
guarantees
and customer
commitments
granted
     Total risk      %      Non-
performing
loans and
advances to
customers
customer
guarantees
and customer
commitments
granted
     Total risk  

Europe

     3.48        24,156        694,083        3.97        27,042        681,565  

Spain

     7.02        15,619        222,449        7.62        17,778        233,356  

Santander Consumer Finance

     2.24        2,263        100,974        2.44        2,307        94,473  

United Kingdom

     1.13        2,863        253,953        1.13        2,842        252,124  

Portugal

     5.00        1,916        38,362        7.55        2,938        38,907  

Poland

     4.21        1,353        32,129        4.58        1,129        24,631  

North America

     2.29        3,120        136,013        2.82        3,183        112,858  

US

     2.32        2,317        99,660        2.91        2,375        81,551  

Mexico

     2.21        803        36,353        2.58        808        31,307  

South America

     4.81        6,909        143,638        4.82        6,399        132,635  

Brazil

     5.27        4,571        86,736        5.26        4,093        77,797  

Chile

     4.52        1,969        43,537        4.86        2,024        41,659  

Argentina

     3.79        231        6,102        2.40        188        7,853  
Coverage ratio                                                
    

Jun-19

    

Jun-18

 
      %     

Provisions

to cover
impairment
losses on
loans and
advances to
customers,
customer
guarantees
and customer
commitments
granted

     Non-
performing
loans and
advances to
customers
customer
guarantees
and customer
commitments
granted
     %     

Provisions

to cover
impairment
losses on loans

and advances

to customers,
customer
guarantees
and customer
commitments
granted

     Non-
performing
loans and
advances to
customers
customer
guarantees
and customer
commitments
granted
 

Europe

     49.9        12,047        24,156        52.9        14,318        27,042  

Spain

     42.9        6,699        15,619        47.5        8,450        17,778  

Santander Consumer Finance

     105.9        2,397        2,263        107.7        2,484        2,307  

United Kingdom

     31.9        914        2,863        33.8        962        2,842  

Portugal

     52.9        1,015        1,916        52.7        1,550        2,938  

Poland

     69.7        942        1,353        72.1        815        1,129  

North America

     150.3        4,689        3,120        146.5        4,665        3,183  

US

     158.4        3,670        2,317        156.9        3,727        2,375  

Mexico

     126.9        1,019        803        116.1        938        808  

South America

     93.0        6,429        6,909        94.4        6,039        6,399  

Brazil

     105.5        4,821        4,571        108.7        4,449        4,093  

Chile

     59.1        1,165        1,969        60.0        1,215        2,024  

Argentina

     126.4        292        231        121.5        229        188  

 

76     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Alternative

performance measures

 

Other indicators

 

The market capitalisation indicator provides information on the volume of tangible equity per share. The loan-to-deposit ratio (LTD) identifies the relationship between net customer loans and advances and customer deposits, assessing the proportion of loans and advances granted by the Group that are funded by customer deposits.

The Group also uses gross customer loan magnitudes excluding reverse repurchase agreements (repos) and customer deposits excluding repos. In order to analyse the evolution of the traditional commercial banking business of granting loans and capturing deposits, repos and reverse repos are excluded, as they are mainly treasury business products and highly volatile.

 

 

Ratio

   Formula    Relevance of the metric

 

  

 

  

 

TNAV per share

(Tangible equity net asset value per share)

  

Tangible book value (1)

Number of shares excluding treasury stock

   This is a very commonly used ratio used to measure the company’s accounting value per share having deducted the intangible assets. It is useful in evaluating the amount each shareholder would receive if the company were to enter into liquidation and had to sell all the company’s tangible assets.
Price / tangible book value per share (X)   

Share price

TNAV per share

   Is one of the most commonly used ratios by market participants for the valuation of listed companies both in absolute terms and relative to other entities. This ratio measures the relationship between the price paid for a company and its accounting equity value.
LTD ratio (Loan-to-deposit)   

Net loans and advances to customers

Customer deposits

   This is an indicator of the bank’s liquidity. It measures the total (net) loans and advances to customers as a percentage of customer funds.
Loans and advances (excl. reverse repos)    Gross loans and advances to customers excluding reverse repos    In order to aid analysis of the commercial banking activity, reverse repos are excluded as they are highly volatile treasury products.
Deposits (excl. repos)    Customer deposits excluding repos    In order to aid analysis of the commercial banking activity, repos are excluded as they are highly volatile treasury products.
PAT + After tax fees paid to SAN (in Wealth Management & Insurance)    Net profit + fees paid from Santander Asset Management to Santander, net of taxes, excluding Private Banking customers    Metric to assess Wealth Management & Insurance’s total contribution to Grupo Santander profit.

 

(1)

Tangible book value = Stockholders’ equity - intangible assets

 

Others    Jun-19     Mar-19     Jun-19     Jun-18  

TNAV (tangible book value) per share

     4.30       4.30       4.30       4.10  

Tangible book value

     69,835       69,731       69,835       66,157  

Number of shares excl. treasury stock (million)

     16,233       16,235       16,233       16,125  

Price / Tangible book value per share (X)

     0.95       0.96       0.95       1.12  

Share price (euros)

     4.08       4.14       4.08       4.59  

TNAV (tangible book value) per share

     4.30       4.30       4.30       4.10  

Loan-to-deposit ratio

     111     113     111     111

Net loans and advances to customers

     908,235       910,195       908,235       862,092  

Customer deposits

     814,751       808,361       814,751       774,425  
      Q2’19     Q1’19     H1’19     H1’18  

PAT + After tax fees paid to SAN (in WM&I) (Constant EUR million)

     628       599       1,227       1,136  

Profit after tax

     254       229       483       442  

Net fee income net of tax

     374       370       744       694  

 

January - June 2019     LOGO     77


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Alternative

performance measures

 

 

 

Local currency measures

We make use of certain financial measures in local currency to help in the assessment of our ongoing operating performance. These non-IFRS financial measures include the results of operations of our subsidiary banks located outside the Eurozone, excluding the impact of foreign exchange. Because changes in foreign currency exchange rates do not have an operating impact on the results, we believe that evaluating their performance on a local currency basis provides an additional and meaningful assessment of performance to both management and the company’s investors.

The Group presents, at both the Group level as well as the business unit level, the real changes in the income statement as well as the changes excluding the exchange rate effect, as it considers the latter facilitates analysis, since it enables businesses movements to be identified without taking into account the impact of converting each local currency into euros.

Said variations, excluding the impact of exchange rate movements, are calculated by converting P&L lines for the different business units comprising the Group into our presentation currency, the euro, applying the average exchange rate for the first half of 2019 to all periods contemplated in the analysis.

The Group presents, at both the Group level as well as the business unit level, the changes in euros in the balance sheet as well as the changes excluding the exchange rate effect for loans and advances to customers excluding reverse repos and customer funds (which comprise deposits and mutual funds) excluding repos. As with the income statement, the reason is to facilitate analysis by isolating the changes in the balance sheet that are not caused by converting each local currency into euros.

These changes excluding the impact of exchange rate movements are calculated by converting loans and advances to customers excluding reverse repos and customer funds excluding repos, into our presentation currency, the euro, applying the closing exchange rate on the last working day of the first half of 2019 to all periods contemplated in the analysis.

The average and period-end exchange rates for the main currencies in which the Group operates are set out in the table below.

 

 

Exchange rates: 1 euro / currency parity                                                
     Average (Income statement)             Period-end (balance sheet)  
      H1’19      H1’18              Jun-19      Mar-19      Jun-18  

US dollar

     1.130        1.210                 1.138        1.124        1.166  

Pound sterling

     0.873        0.880                 0.897        0.858        0.886  

Brazilian real

     4.341        4.134                 4.351        4.387        4.488  

Mexican peso

     21.647        23.073                 21.820        21.691        22.882  

Chilean peso

     762.804        740.383                 773.897        764.435        757.828  

Argentine peso

     46.643        25.832                 48.291        48.659        33.517  

Polish zloty

     4.292        4.220                 4.250        4.301        4.373  

 

78     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Interim condensed consolidated

financial statements

 

 

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

LOGO CONSOLIDATED BALANCE SHEET

LOGO CONSOLIDATED INCOME STATEMENT

 

NOTE:

The financial information for the first half 2019 and 2018 (attached herewith) corresponds to that included in the interim condensed consolidated financial statements at these dates, prepared in accordance with the International Accounting Standards (IAS) 34, Interim Financial Information. The accounting policies and methods used are those established by the International Financial Reporting Standards adopted by the European Union (IFRS-EU), Circular 4/2017 of the Bank of Spain, and subsequent modifications, and the International Financial Reporting Standards issued by the International Accounting Standards Board (IFRS-IASB).

Interim condensed consolidated balance sheet

 

EUR million

 

Assets    Jun-19      Dec-18      Jun-18  

Cash, cash balances at central banks and other deposits on demand

     104,104        113,663        107,687  

Financial assets held for trading

     102,574        92,879        112,947  

Memorandum items: lent or delivered as guarantee with disposal or pledge rights

     28,424        23,495        30,793  

Non-trading financial assets mandatorily at fair value through profit or loss

     5,393        10,730        5,263  

Memorandum items: lent or delivered as guarantee with disposal or pledge rights

                    

Financial assets designated at fair value through profit or loss

     73,420        57,460        48,043  

Memorandum items: lent or delivered as guarantee with disposal or pledge rights

     8,221        6,477        5,831  

Financial assets at fair value through other comprehensive income

     118,062        121,091        120,831  

Memorandum items: lent or delivered as guarantee with disposal or pledge rights

     26,458        35,558        32,499  

Financial assets at amortised cost

     981,046        946,099        922,948  

Memorandum items: lent or delivered as guarantee with disposal or pledge rights

     20,466        18,271        23,176  

Hedging derivatives

     8,451        8,607        8,348  

Changes in the fair value of hedged items in portfolio hedges of interest risk

     1,621        1,088        1,143  

Investments

     7,788        7,588        9,262  

Joint ventures companies

     962        979        2,047  

Associated entities

     6,826        6,609        7,215  

Assets under insurance or reinsurance contracts

     311        324        345  

Tangible assets

     33,755        26,157        23,461  

Property, plant and equipment

     32,651        24,594        21,792  

For own-use

     14,522        8,150        7,787  

Leased out under an operating lease

     18,129        16,444        14,005  

Investment property

     1,104        1,563        1,669  

Of which: Leased out under an operating lease

     794        1,195        1,272  

Memorandum items: acquired in financial lease

     6,608        98        96  

Intangible assets

     28,794        28,560        27,893  

Goodwill

     25,613        25,466        25,035  

Other intangible assets

     3,181        3,094        2,858  

Tax assets

     30,102        30,251        30,051  

Current tax assets

     6,502        6,993        6,403  

Deferred tax assets

     23,600        23,258        23,648  

Other assets

     12,140        9,348        10,068  

Insurance contracts linked to pensions

     207        210        223  

Inventories

     5        147        164  

Other

     11,928        8,991        9,681  

Non-current assets held for sale

     4,535        5,426        5,543  

TOTAL ASSETS

     1,512,096        1,459,271        1,433,833  

 

January - June 2019     LOGO     79


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Interim condensed consolidated

financial statements

 

 

Interim condensed consolidated balance sheet

 

EUR million

 

Liabilities    Jun-19      Dec-18      Jun-18  

Financial liabilities held for trading

     74,187        70,343        75,350  

Financial liabilities designated at fair value through profit or loss

     60,237        68,058        58,153  

Memorandum items: subordinated liabilities

                    

Financial liabilities at amortised cost

     1,224,194        1,171,630        1,153,918  

Memorandum items: subordinated liabilities

     21,419        23,820        23,939  

Hedging derivatives

     7,267        6,363        6,728  

Changes in the fair value of hedged items in portfolio hedges of interest rate risk

     296        303        317  

Liabilities under insurance or reinsurance contracts

     731        765        936  

Provisions

     14,571        13,225        13,758  

Pensions and other post-retirement obligations

     6,216        5,558        5,465  

Other long term employee benefits

     1,708        1,239        1,525  

Taxes and other legal contingencies

     3,153        3,174        3,084  

Contingent liabilities and commitments

     728        779        855  

Other provisions

     2,766        2,475        2,829  

Tax liabilities

     9,838        8,135        7,659  

Current tax liabilities

     3,230        2,567        2,481  

Deferred tax liabilities

     6,608        5,568        5,178  

Other liabilities

     10,790        13,088        12,569  

Liabilities associated with non-current assets held for sale

                    

TOTAL LIABILITIES

     1,402,111        1,351,910        1,329,388  

EQUITY

                    

Shareholders’ equity

     120,054        118,613        117,935  

Capital

     8,118        8,118        8,068  

Called up paid capital

     8,118        8,118        8,068  

Unpaid capital which has been called up

                    

Share premium

     50,993        50,993        51,053  

Equity instruments issued other than capital

     581        565        542  

Equity component of the compound financial instrument

                    

Other equity instruments issued

     581        565        542  

Other equity

     155        234        215  

Accumulated retained earnings

     61,049        56,756        56,967  

Revaluation reserves

                    

Other reserves

     (4,061)        (3,567)        (1,552)  

(-) Own shares

     (12)        (59)        (61)  

Profit attributable to shareholders of the parent

     3,231        7,810        3,752  

(-) Interim dividends

            (2,237)        (1,049)  

Other comprehensive income

     (21,425)        (22,141)        (23,885)  

Items not reclassified to profit or loss

     (3,625)        (2,936)        (2,751)  

Items that may be reclassified to profit or loss

     (17,800)        (19,205)        (21,134)  

Non-controlling interest

     11,356        10,889        10,395  

Other comprehensive income

     (1,149)        (1,292)        (1,377)  

Other elements

     12,505        12,181        11,772  

TOTAL EQUITY

     109,985        107,361        104,445  

TOTAL LIABILITIES AND EQUITY

     1,512,096        1,459,271        1,433,833  

MEMORANDUM ITEMS

        

Loans commitment granted

     223,954        218,083        210,977  

Financial guarantees granted

     12,077        11,723        13,247  

Other commitments granted

     94,785        74,389        73,061  

 

80     LOGO     January - June 2019


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Interim condensed consolidated

financial statements

 

 

Interim condensed consolidated income statement

 

EUR million

 

      H1’19      H1’18  

Interest income

     28,669        26,904  

Financial assets at fair value through other comprehensive income

     2,020        2,548  

Financial assets at amortised cost

     24,396        23,011  

Other interest income

     2,253        1,345  

Interest expense

     (11,033)        (9,973)  

Net interest income

     17,636        16,931  

Dividend income

     361        264  

Share of results of entities accounted for using the equity method

     306        354  

Commission income

     7,502        7,475  

Commission expense

     (1,639)        (1,586)  

Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net

     350        326  

Financial assets at amortised cost

     105        16  

Other financial assets and liabilities

     245        310  

Gain or losses on financial assets and liabilities held for trading, net

     (12)        1,197  

Reclassification of financial assets at fair value through other comprehensive income

             

Reclassification of financial assets at amortised cost

             

Other gains (losses)

     (12)        1,197  

Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss

     215        56  

Reclassification of financial assets at fair value through other comprehensive income

             

Reclassification of financial assets at amortised cost

             

Other gains (losses)

     215        56  

Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net

     (207)        132  

Gain or losses from hedge accounting, net

     (26)        33  

Exchange differences, net

     191        (890)  

Other operating income

     855        813  

Other operating expenses

     (1,136)        (979)  

Income from assets under insurance and reinsurance contracts

     1,630        1,756  

Expenses from liabilities under insurance and reinsurance contracts

     (1,590)        (1,720)  

Total income

     24,436        24,162  

Administrative expenses

     (10,110)        (10,265)  

Staff costs

     (6,080)        (5,960)  

Other general administrative expenses

     (4,030)        (4,305)  

Depreciation and amortisation cost

     (1,477)        (1,217)  

Provisions or reversal of provisions, net

     (1,916)        (1,262)  

Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss, net

     (4,368)        (4,352)  

Financial assets at fair value with changes in other comprehensive income

     (6)        (1)  

Financial assets at amortised cost

     (4,362)        (4,351)  

Impairment of investments in subsidiaries, joint ventures and associates, net

             

Impairment on non-financial assets, net

     (27)        (96)  

Tangible assets

     (19)        (33)  

Intangible assets

     (2)        (64)  

Others

     (6)        1  

Gain or losses on non financial assets and investments, net

     250        23  

Negative goodwill recognised in results

             

Gains or losses on non-current assets held for sale not classified as discontinued operations

     (257)        (94)  

Profit or loss before tax from continuing operations

     6,531        6,899  

Tax expense or income from continuing operations

     (2,449)        (2,378)  

Profit for the period from continuing operations

     4,082        4,521  

Profit or loss after tax from discontinued operations

             

Profit for the period

     4,082        4,521  

Profit attributable to non-controlling interests

     851        769  

Profit attributable to the parent

     3,231        3,752  

Earnings per share

     

Basic

     0.181        0.216  

Diluted

     0.180        0.216  

 

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Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Glossary

 

GLOSSARY

 

   

Active customer: Those customers who comply with balance, income and/or transactionality demanded minima defined according to the business area

 

   

ALCO: Assets and Liabilities Committee

 

   

APM: Alternative Performance Measures

 

   

Banco Popular/Popular: Banco Popular Español, S.A., a bank whose share capital was acquired by Banco Santander, S.A. on 7 June 2017 and was merged into Santander in September 2018

 

   

bps: basis points

 

   

CAGR: Compound annual growth rate

 

   

CEO: Chief Executive Officer

 

   

CET1: Core equity tier 1

 

   

CFO: Chief Financial Officer

 

   

CNMV: Spanish National Securities Market Commission (Comisión Nacional del Mercado de Valores)

 

   

Digital customers: Every consumer of a commercial bank’s services who has logged on to their personal online banking and/or mobile banking in the last 30 days

 

   

ECB: European Central Bank

 

   

EIB: European Investment Bank

 

   

ESG: Environmental, Social and Governance

 

   

EPS: Earnings Per Share

 

   

ESMA: European Securities and Markets Authority

 

   

Fed: Federal Reserve

 

   

FX: Foreign Exchange

 

   

GDP: Gross Domestic Product

 

   

GRI: Global Reporting Initiative

 

   

IFRS 9: International Financial Reporting Standard 9, regarding financial instruments

 

   

IFRS 16: International Financial Reporting Standard 16, regarding leases

 

   

IT&O: Information technology and operations

 

   

LCR: Liquidity Coverage Ratio

 

   

Loyal customers: Active customers who receive most of their financial services from the Group according to the commercial segment that they belong to. Various engaged customer levels have been defined taking profitability into account.

   

NPLs: Non-performing loans

 

   

P/E ratio: Price / earnings per share ratio

 

   

pp: percentage points

 

   

Repos: Repurchase agreements

 

   

RoA: Return on assets

 

   

RoE: Return on equity

 

   

RoRAC: Return on risk adjusted capital

 

   

RoRWA: Return on risk weighted assets

 

   

RoTE: Return on tangible equity

 

   

RWAs: Risk weighted assets

 

   

SAM: Santander Asset Management

 

   

SBNA: Santander Bank N.A.

 

   

SCF: Santander Consumer Finance

 

   

SCIB: Santander Corporate & Investment Banking

 

   

SC USA: Santander Consumer USA

 

   

SEC: Securities and Exchanges Commission

 

   

SRF: Single Resolution Fund

 

   

SGP: Santander Global Platform

 

   

SHUSA: Santander Holdings USA, Inc.

 

   

SMEs: Small or medium enterprises

 

   

SPB: Santander Private Banking

 

   

SPF: Simple, Personal and Fair

 

   

SSM: Single Supervisory Mechanism, the system of banking supervision in Europe. It comprises the ECB and the national supervisory authorities of the participating countries

 

   

T1: Tier 1

 

   

TLAC: The total loss absorption capacity requirement which is required to be met under the CRD V package

 

   

TNAV: Tangible net asset value

 

   

TRIM: Targeted review of internal models

 

   

UK: United Kingdom

 

   

US: United States of America

 

   

VaR: Value at Risk

 

   

WM&I: Wealth Management & Insurance

 

 

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Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Important information

 

 

LOGO

  Important information   

Non-IFRS and alternative performance measures

In addition to the financial information prepared in accordance with International Financial Reporting Standards (“IFRS”), this report contains certain financial measures that constitute alternative performance measures (“APMs”) as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority (ESMA) on 5 October 2015 (ESMA/2015/1415en) and other non-IFRS measures (“Non-IFRS Measures”). The financial measures contained in this report that qualify as APMs and non-IFRS measures have been calculated using the financial information from Santander Group but are not defined or detailed in the applicable financial reporting framework and have neither been audited nor reviewed by our auditors. We use these APMs and non-IFRS measures when planning, monitoring and evaluating our performance. We consider these APMs and non-IFRS measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period. While we believe that these APMs and non-IFRS measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute of IFRS measures. In addition, other companies, including companies in our industry, may calculate or use such measures differently, which reduces their usefulness as comparative measures. For further details of the APMs and non-IFRS Measures used, including its definition or a reconciliation between any applicable management indicators and the financial data presented in the consolidated financial statements prepared under IFRS, please see 2018 Annual Financial Report, published in the CNMV on 28 February 2019, our 20-F report for the year ending 31 December 2018 registered with the SEC in the United States as well as the section “Alternative performance measures” of the annex to this report.

The businesses included in each of our geographic segments and the accounting principles under which their results are presented here may differ from the included businesses and local applicable accounting principles of our public subsidiaries in such geographies. Accordingly, the results of operations and trends shown for our geographic segments may differ materially from those of such subsidiaries.

Forward-looking statements

Santander cautions that this report 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 report and include, without limitation, statements concerning our future business development and economic performance and our shareholder remuneration policy. While these forward-looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. The following important factors, in addition to those discussed elsewhere in this report, and in our annual report on Form 20-F for the year ended December 31, 2018, filed with the U.S. Securities and Exchange Commission, could affect our future results and could cause outcomes to differ materially from those anticipated in any forward-looking statement: (1) general economic or industry conditions in areas in which we have significant business activities or investments, including a worsening of the economic environment, increasing in the volatility of the capital markets, inflation or deflation, and changes in demographics, consumer spending, investment or saving habits; (2) exposure to various types of market risks, principally including interest rate risk, foreign exchange rate risk, equity price risk and risks associated with the replacement of benchmark indices; (3) potential losses associated with prepayment of our loan and investment portfolio, declines in the value of collateral securing our loan portfolio, and counterparty risk; (4) political stability in Spain, the UK, other European countries, Latin America and the US (5) changes in laws, regulations or taxes, including changes in regulatory capital and liquidity requirements, including as a result of the UK exiting the European Union and increased regulation in light of the global financial crisis; (6) our ability to integrate successfully our acquisitions and the challenges inherent in diverting management’s focus and resources from other strategic opportunities and from operational matters while we integrate these acquisitions; and (7) changes in our ability to access liquidity and funding on acceptable terms, including as a result of changes in our credit spreads or a downgrade in our credit ratings or those of our more significant subsidiaries. Numerous factors could affect the future results of Santander and could result in those results deviating materially from those anticipated in the forward-looking statements. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements.

 

January - June 2019     LOGO     83


Table of Contents
           

Responsible banking

   

Santander vision and

   

Group financial

   

Financial information

   

Corporate governance

   

corporate culture

 

  

 

information

 

  

 

by segments

 

  

 

Santander share

 

  

 

Appendix

 

   

 

   

 

                

   

 

   

 

Important information

 

Forward-looking statements speak only as of the date of this report and are based on the knowledge, information available and views taken on such date; such knowledge, information and views may change at any time. Santander does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

No offer

The information contained in this report is subject to, and must be read in conjunction with, all other publicly available information, including, where relevant any fuller disclosure document published by Santander. Any person at any time acquiring securities must do so only on the basis of such person’s own judgment as to the merits or the suitability of the securities for its purpose and only on such information as is contained in such public information having taken all such professional or other advice as it considers necessary or appropriate in the circumstances and not in reliance on the information contained in this report. No investment activity should be undertaken on the basis of the information contained in this report. In making this report 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 report 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 report is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotion in the U.K. Financial Services and Markets Act 2000.

Historical performance is not indicative of future results

Statements as to historical performance or financial accretion are not intended to mean that future performance, share price or future earnings (including earnings per share) for any period will necessarily match or exceed those of any prior period. Nothing in this report should be construed as a profit forecast.

 

   
  

This document is a translation of a document originally issued in Spanish. Should there be any discrepancies between the English and the Spanish versions, only the original Spanish version should be binding.

 

       

 

84     LOGO     January - June 2019


Table of Contents
        
  

Investor Relations

 

Ciudad Grupo Santander

Edificio Pereda, 2nd floor

Avda de Cantabria s/n

28660 Boadilla del Monte

Madrid (Spain)

Tel: +34 91 259 65 14 / +34 91 259 65 20

Fax: +34 91 257 02 45

e-mail: [email protected]

 

Legal Head Office:

Paseo Pereda 9-12, Santander (Spain)

Tel: +34 (942) 20 61 00

     
  

Operational Head Office:

Ciudad Grupo Santander

Avda. de Cantabria s/n

28660 Boadilla del Monte, Madrid (Spain)

 

     

 

LOGO

 

www.santander.com LOGO

  


Table of Contents

Item 3

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23 July 2019 H1’19 Earnings Presentation Here to help you prosper


Table of Contents

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Important Information Non-IFRS and alternative performance measures In addition to the financial information prepared in accordance with International Financial Reporting Standards (“IFRS”) and derived from our financial statements, this document contains certain financial measures that constitute alternative performance measures (“APMs”) as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority (ESMA) on 5 October 2015 (ESMA/2015/1415en) and other non-IFRS measures (“Non-IFRS Measures”). The financial measures contained in this document that qualify as APMs and non-IFRS measures have been calculated using the financial information from Santander Group but are not defined or detailed in the applicable financial reporting framework and have neither been audited nor reviewed by our auditors. We use these APMs and non-IFRS measures when planning, monitoring and evaluating our performance. We consider these APMs and non-IFRS measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period. While we believe that these APMs and non-IFRS measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute of IFRS measures. In addition, other companies, including companies in our industry, may calculate or use such measures differently, which reduces their usefulness as comparative measures. For further details of the APMs and Non-IFRS Measures used, including its definition or a reconciliation between any applicable management indicators and the financial data presented in the consolidated financial statements prepared under IFRS, please see 2019 2Q Financial Report, published as Relevant Fact on 23 July 2019 and 2018 Annual Financial Report, filed with the Comisión Nacional del Mercado de Valores of Spain (CNMV) on 28 February 2019. These documents are available on Santander’s website (www.santander.com). The businesses included in each of our geographic segments and the accounting principles under which their results are presented here may differ from the included businesses and local applicable accounting principles of our public subsidiaries in such geographies. Accordingly, the results of operations and trends shown for our geographic segments may differ materially from those of such subsidiaries Forward-looking statements Santander cautions that this document 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 document and include, without limitation, statements concerning our future business development and economic performance and our shareholder remuneration policy. While these forward-looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. The following important factors, in addition to those discussed elsewhere in this document, could affect our future results and could cause outcomes to differ materially from those anticipated in any forward-looking statement: (1) general economic or industry conditions in areas in which we have significant business activities or investments, including a worsening of the economic environment, increasing in the volatility of the capital markets, inflation or deflation, and changes in demographics, consumer spending, investment or saving habits; (2) exposure to various types of market risks, principally including interest rate risk, foreign exchange rate risk, equity price risk and risks associated with the replacement of benchmark indices; (3) potential losses associated with prepayment of our loan and investment portfolio, declines in the value of collateral securing our loan portfolio, and counterparty risk; (4) political stability in Spain, the UK, other European countries, Latin America and the US (5) changes in laws, regulations or taxes, including changes in regulatory capital and liquidity requirements, including as a result of the UK exiting the European Union and increased regulation in light of the global financial crisis; (6) our ability to integrate successfully our acquisitions and the challenges inherent in diverting management’s focus and resources from other strategic opportunities and from operational matters while we integrate these acquisitions; and (7) changes in our ability to access liquidity and funding on acceptable terms, including as a result of changes in our credit spreads or a downgrade in our credit ratings or those of our more significant subsidiaries. Numerous factors could affect the future results of Santander and could result in those results deviating materially from those anticipated in the forward-looking statements. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements.
2


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Important Information Forward-looking statements speak only as of the date of this document and are based on the knowledge, information available and views taken on such date; such knowledge, information and views may change at any time. Santander does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. No offer The information contained in this document is subject to, and must be read in conjunction with, all other publicly available information, including, where relevant any fuller disclosure document published by Santander. Any person at any time acquiring securities must do so only on the basis of such person’s own judgment as to the merits or the suitability of the securities for its purpose and only on such information as is contained in such public information having taken all such professional or other advice as it considers necessary or appropriate in the circumstances and not in reliance on the information contained in this document. No investment activity should be undertaken on the basis of the information contained in this document. In making this document 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 document 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 document is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotion in the U.K. Financial Services and Markets Act 2000. Historical performance is not indicative of future results Statements as to historical performance or financial accretion are not intended to mean that future performance, share price or future earnings (including earnings per share) for any period will necessarily match or exceed those of any prior period. Nothing in this document should be construed as a profit forecast.


Table of Contents

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Index Highlights Group performance H1’19 Business areas performance H1’19 Concluding remarks Appendix Glossary


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Group performance H1’19 01


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Highlights QoQ strong growth in volumes (+2% loans ; +3% customer funds), underlying profit (+8%) and continued generation of capital organically (+11 bps) Our loyal and digital customer base continues double digit growth, increasing digital activity Activity Volumes increased1: loans (+2% QoQ; +4% YoY) and customer funds (+3% QoQ; +6% YoY) Q2’19 attributable profit: EUR 1,391 mn impacted by a EUR 706 mn charge, mainly restructuring costs Results Q2’19 underlying profit of EUR 2,097 mn up 8% QoQ. Excluding the SRF contribution: +16% H1’19 underlying profit: EUR 4,045 mn backed by higher customer revenue, cost control and lower cost of credit We continued to generate capital organically in Q2: +11 bps (+29 bps YTD) Profitability CET1 Jun-19: 11.30% impacted by regulatory effects and restructuring costs (-20 bps in Q2; -49 bps YTD) and solvency High profitability: 11.7% underlying RoTE A new, simplified organisational structure into 3 regions to accelerate the execution of our strategy New reporting UK aligned with ring-fencing structure and Spain with the local customer related business structure With the creation of Santander Global Platform (SGP), we are taking a further step forward in our digital transformation (1) QoQ and YoY volume changes in constant euros


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Highlights Growth Profitability Strength Loyal: +10% Customer revenue: +5% CET1: 11.30% (+50 bps) Customers Results Solvency Digital: +22% Underlying att. profit: +2% TNAVps: 4.30 (+5%) Loans: +4% RoTE: 11.7% NPL: 3.51% (-41 bps) Profitability Credit Volumes Customer funds: +6% ratios1 RoRWA: 1.62% quality Cost of credit: 0.98% (-1 bp) Note: YoY changes. Results and volume changes in constant euros. Loans excluding reverse repos. Customer funds: deposits excluding repos + marketed mutual funds (1) Underlying


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Business activity


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Our successful commercial and digital transformation strategy is reflected in a larger customer base, increased loyalty ratio…


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…as well as in an increased number of digital customers and activity Note: YoY changes. (1) Data as of 30 June. Every natural or legal person that, being part of a commercial bank, has logged in to their personal area of internet banking or mobile phone (or both) in the last 30 days. Digital customers in the last 90 days: 38.4 mn. 10 Private accesses. Logins of bank’s customers on Santander internet banking or apps. ATM accesses by mobile are not includ ed. Customer interaction through mobile or internet banking which resulted in a change of balance (monetary and voluntary). ATM transactions are not included.


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Continued widespread growth: loans (+2% QoQ; +4% YoY) and customer funds (+3% QoQ; +6% YoY), boosted by developing markets


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Results, profitability and solvency


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H1’19 underlying P&L YoY performance H1’19 H1’18 % vs. H1’18 EUR million Constant Euros euros Higher customer revenue due to Net interest income 17,636 16,931 4 6 increased business volumes and spread management Net fee income 5,863 5,889 0 2 Lower market revenue and Gains on fin. trans. and other 937 1,342 -30 -29 higher cost of FX hedging Total income 24,436 24,162 1 3 Operating expenses -11,587 -11,482 1 2 Cost control with an individualised and targeted cost management across the board Net operating income 12,849 12,680 1 3 Loan-loss provisions -4,313 -4,297 0 1 Good credit quality evolution, Other results -957 -903 6 10 with low cost of credit and better NPL ratio Underlying PBT 7,579 7,480 1 3 Taxes -2,679 -2,659 1 3 Minority interests -855 -769 11 11 Underlying attributable profit 4,045 4,052 0 2 Net capital gains and provisions1 -814 -300 171 171 Mainly restructuring costs Attributable profit 3,231 3,752 -14 -12 (1) Details on the next page 13


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Net capital gains and provisions EUR million


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Q2 underlying profit strongest since 2011 Group underlying attributable profit Constant EUR million 1,983 1,977 2,096 2,021 1,938 2,107 9% growth QoQ (in constant euros) despite the annual SRF contribution in Q2’19 Excluding this effect, 17% QoQ (in constant euros) Q1’18 Q2 Q3 Q4 Q1’19 Q2 Note: Contribution to the SRF (net of tax) recorded in Q2’18 (EUR -187 mn) and Q2’19 (EUR -162 mn) 15


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Customer revenue growth QoQ (+3%) and YoY (+6%) driven by stronger YoY growth due to higher volumes and spread management, with improvements in 7 of our 10 core markets QoQ increase backed by South America and North America, particularly Brazil, Chile, the US and Argentina YoY increase in the majority of our main markets QoQ improvement boosted by Brazil and Mexico H1’19 vs H1’18 affected by lower ALCO portfolio sales and FX hedges Q2’19 recorded the annual SRF contribution Very low weight as a percentage of total income (<4%) Note: Constant euros (1) Other revenue includes gains/losses on financial transactions, income from the equity accounted method, dividends and other operating results.Contribution to the SRF recorded in Q2’18 and Q2’19. Contribution to the DGF in Spain recorded in Q4’18


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Higher NII due to increased business volumes and wider spreads in mature markets Note: YoY change in constant euros. Average volumes 17


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Higher net fee income driven by Retail Banking and WM&I contribution. SCIB still affected by markets (1) YoY change in constant euros (2) Considering the total fee generated by insurance and asset management, including those transferred to the commercial network (Retail Banking) 18


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Costs (-1.8% YoY in real terms) reflect the first integration synergies, maintaining a best-in-class cost-to-income ratio and high quality customer service Cost evolution H1’19 vs. H1’18, % Nominal In real terms1 Targeted cost management by geographies: -7.3 -8.8 Europe: -3.2% cost reduction in real terms, enhancing SCF 2.0 0.3 operating efficiency -0.6 -2.8 Better operational leverage in the US, while we are 12.0 10.32 investing to update distribution capacity in Mexico -3.8 -4.7 Costs under control in the South American markets 0.1 -2.0 SGP up EUR 46 mn due to the higher ongoing 7.1 2.6 investments in its initial stage 3.1 -1.2 1.7 -0.8 Costs in real terms Cost-to-income 89.0 41.3 -1.8% YoY 47.4% in H1’19 -9.1 -10.6 Note: Constant euros(1) Excluding inflation (2) Impacted by DB Polska integration. Poland efficiency ratio improved 0.6 pp


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The positive trend in credit quality continued, underpinned by the good evolution of the NPL ratio, coverage and cost of credit ratios Note: Exposure and coverage ratio by stage in appendix, page 64 20


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Continued to generate capital organically (+11 bps QoQ; +29 bps YTD) CET1 ratio impacted by regulatory effects and restructuring costs. CET1 ratio YoY % Jun-19 change 11.30 +0.29 +0.15 11.30 10.80 10.94 FL Total capital ratio 14.80% +56 bps -0.08 -0.36 FL Tier 1 capital ratio 12.73% +44 bps Leverage ratio 5.0% -9 bps Santander currently complies with MREL requirement3 Jun-18 Dec-18 Regulatory Organic Perimeter and Market Jun-19 impacts1 generation restructuring and others costs2 (1) IFRS 16 (-19 bps); models and TRIM (-15 bps); Other (-2 bps) (2) Restructuring costs (-13 bps); Prisma (+2 bps); Other (+3 bps) (3) Parent bank. Preliminary data 21 2019 data applying the IFRS 9 transitional arrangements.As indicated by the consolidating supervisor a pay-out of 50%, the maximum within the target range (40%-50%), was applied for the calculation of the capital ratios in 2019. Previously, the average cash pay-out for the last three years was considered.


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Creating shareholder value whilst maintaining high profitability TNAV per share Profitability ratios EUR Underlying RoTE1 Underlying RoRWA1 4.30 12.1% 11.7% 1.59% 1.62% 4.19 Dec-18 Jun-19 2018 H1’19 2018 H1’19 (1) Statutory RoTE 2018 11.7% and H1’19 10.5%. Statutory RoRWA 2018 1.55% and H1’19 1.48% Notes: The averages for the H1 RoTE and RoRWA denominators are calculated on the basis of 7 months from December to June. For periods of less than a year, and in the event of non-recurring results existing, the profit used to calculate the statutory RoTE is the annualised underlying attributable profit (excluding non-recurring results), to which are added non-recurring results without annualising them. 22 For periods of less than a year, and in the event of non-recurring results existing, the profit used to calculate the statutory RoRWA is the annualised underlying consolidated result (excluding non-recurring results), to which is added non-recurring results without annualising them.


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New reporting aligned with our organisational structure


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Adapting our reporting to the new organisational structure and according to IFRS 8 requirements 3 regions: Europe, North America and South America Converging the business model, the IT&Ops and shared services UK aligned with ring-fencing structure and Spain with the local customer related business To accelerate progress towards being the best open financial services platform Our digital services are consolidated under a single unit: Note: Digital Services definitions on page 48 24


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1 A new, simplified management structure Total customers Loans Customer funds Underlying profit RoTE (EUR million) (EUR billion) (EUR billion) (EUR billion) (%) (1) Adjusted for excess of capital in the US. Otherwise 9.5% .


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A SGP—Openbank and Open Digital Services (ODS) Openbank One of the largest full service digital banks in Europe, with best in class UX and a profitable business model Open Digital Services (ODS) – BaaS model A technology company developing a “Banking as a Service” state-of-the-art platform to be used … Large customer ï­ Total customers: 1.2 mn base in Spain … ï­ # products per loyal customer: 4.6 … by Openbank in its international expansion … … reflected in transactionality … ï­ # transactions1: +29% YoY From to in the first phase3: … and high growth ï­ Loans: +164%; Deposits: +22% YoY and productivity ï­ Business2: EUR 36,200 per loyal customer Attract, engage and retain customers … and become the leading “Banking as without a branch network, a Service” platform to serve third parties best user experience and profitability BaaS = Banking as a Service UX = user experience 26 (1) Monetary total transactions through all channels, including ATMs (2) Per month (3) Tentative agenda


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B SGP—Global Payments Services—Global value propositions Payments platform to better serve existing and new customers with best-in-class value propositions developed globally


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C SGP—Digital Assets—Common solutions (“built once, used by many”) Our common digital assets and Centres of Digital Expertise help our banks in their digital transformation Centres of Digital Expertise - Global capabilities Digital Assets - Technology projects & solutions1 Main centres Globile -mobile platform. All countries and business collaborating Programmes Markets to develop and reuse global App components (agile projects) Contact Centre 33 9 >20 components implemented across 6 countries Conversion Rate Optimisation >30 9 Open Platform - common services Machine Learning 21 9 Modern cloud-native, mobile first technology infrastructure Continue leveraging the Group’s scale and ensuring all countries have access to the most innovative technology Santander InnoVentures - Investments in fintech c. USD 100 mn invested in 24 companies from 7 countries (1) Software as a Service (SaaS)


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Business areas Performance H1’19 02


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Increased weight of the Americas (55%) in Group profit H1’19 Underlying attributable profit1 H1’19 Underlying attributable profit in core markets EUR mn and % change vs. H1’18 in constant euros


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Brazil: YoY double-digit profit growth, higher RoTE (22%) and better customer service and satisfaction. QoQ strong customer revenue growth P&L* Q2’19 % Q1’19 H1’19 % H1’18 NII 2,520 5.5 4,979 6.6 22% +33% Net fee income 924 2.3 1,855 8.7 Loyal/active Digital Total income 3,453 4.2 6,864 6.5 customers customers Operating expenses -1,102 1.0 -2,227 3.1 LLPs -761 10.2 -1,471 -1.7 PBT 1,438 5.1 2,846 14.8 Underlying att. profit 762 8.8 1,482 18.2 3.84% 5.27% (-46 bps) (*) EUR mn and % change in constant euros (+1 bp) Cost of NPL ratio credit ACTIVITY Volumes in EUR bn and % change in constant euros


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Spain: revenue affected by lower fee income (CIB) and IFRS 16 impact. Cost improvement reflects first integration synergies. QoQ evolution impacted by the SRF contribution P&L* Q2’19 % Q1’19 H1’19 % H1’18 NII 1,009 0.0 2,018 1.1 +4% 31% +21% Net fee income 1 624 0.1 1,247 -6.9 Loyal/active Digital customers customers Total income 1,849 -0.4 3,706 -1.1 Operating expenses -1,020 -0.5 -2,044 -7.3 -6% LLPs -228 -6.0 -470 7.7 PBT 458 -4.1 936 7.4 Underlying att. profit 338 -5.1 694 5.0 +8% 0.41% 7.02% (+5 bps) (*) EUR mn Changes excluding IFRS 16 impact (-60 bps) Cost of NPL ratio credit ACTIVITY Volumes in EUR bn 317 201 2.00% 2.03% 2.05% 2.06% 2.08% +3% Yield on loans 55.2% 0% QoQ 9% 1.70% 1.92% Efficiency QoQ 1.94% ratio RoTE +5% -4% Cost of deposits YoY 0.29% YoY 0.22% 0.19% 0.14% 0.14% Q2’18 Q3 Q4 Q1’19 Q2 Loans Funds Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds 32 Customers and credit quality ratios YoY change. Underlying RoTE


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SCF: leadership in Europe with best-in-class profitability (RoRWA: 2.3%) and efficiency. Historically low NPL ratio and cost of credit (Q2 portfolio sales) P&L* Q2’19 % Q1’19 H1’19 % H1’18 NII 971 3.0 1,911 4.1 19.2 mn 44.6% Net fee income 201 -6.1 415 3.0 Total Efficiency customers ratio Total income 1,154 -1.3 2,321 2.8 Operating expenses -527 3.5 -1,035 2.0 LLPs -59 -51.4 -181 -4.3 PBT 556 -1.1 1,117 2.3 Underlying att. profit 334 2.9 658 -1.0 0.36% 2.24% (-1 bp) (*) EUR mn and % change in constant euros Cost of (-20 bps) credit NPL ratio ACTIVITY Volumes in EUR bn and % change in constant euros


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UK: results reflect continued competitive pressure on revenue. Cost improvement and resilient credit quality performance P&L* Q2’19 % Q1’19 H1’19 % H1’18 NII 944 -2.9 1,919 -7.2 31% +8% Net fee income 207 -4.0 423 -8.4 Loyal/active Digital Total income 1,183 -1.7 2,388 -8.4 customers customers Operating expenses -703 -4.5 -1,442 -0.6 LLPs -19 -67.7 -80 -22.3 PBT 435 22.2 792 -16.8 Underlying att. profit 327 29.0 582 -13.1 0.06% 1.13% (-4 bps) (*) EUR mn and % change in constant euros (0 bps) Cost of NPL ratio credit ACTIVITY Volumes in EUR bn and % change in constant euros


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Note: Volumes in EUR bn; % change YoY in constant euros. Underlying RoTE 35 (1) Adjusted RoTE for excess capital. Otherwise 6%


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EUR QoQ strong NII growth favoured by higher inflation (UF) and faster volume growth. YoY profit increased 311 mn 18% driven by good market results and lower provisions, while the NII was affected by lower inflation +4% Profit virtually unchanged in constant euros, as the high inflation adjustment of EUR -74 million was EUR offset by a rise in revenue higher than inflation 73 mn 17% Customer revenue boosted by NII (public securities, higher interest rates and BCRA2 is now 0% considered an equivalent supervisor) and fees (foreign currency transactions and cash deposits) Note: % change YoY in constant euros. Underlying RoTE 36 Adjusted RoTE for excess capital. Otherwise 10% BCRA: Banco Central de la República Argentina


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Corporate Centre P&L* H1’19 H1’18 NII -600 -477 Gains/Losses on FT -171 5 Operating expenses -193 -212 Provisions and other income -139 -160 Tax and minority interests 46 -18 Underlying att. profit -1,108 -884 (*) EUR mn Higher loss in NII due to higher stock of issuances and IFRS 16 impact FX hedging cost reflected in results from financial transactions Operating expenses reflect the streamlining and simplification measures 37


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Concluding remarks 03


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Santander Group continued to deliver good results in a challenging market Larger customer base, increased loyalty ratio, the number of digital customers and their activity Volumes growth higher than in 2018, especially in customer funds Revenue up (+3% with NII +6%), costs reflecting the first synergies (in real terms Group: -2%; Europe -3%) and low levels of cost of credit (<1%) Continued to generate capital organically in Q2, creating shareholder value with a TNAVps +5% YoY, whilst maintaining high profitability A new, simplified organisational structure in 3 regions to accelerate the execution of our strategy With the creation of Santander Global Platform, we are furthering our digital transformation, extending the Group’s talent and scale to high growth payments and digital businesses, targeting retail customers, merchants and SMEs. 39


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New geographical areas. Key metrics H1’19 and mid-term targets Key metrics Europe North America Medium-term Medium-term Medium-term Commercial H1’19 targets H1’19 targets H1’19 targets Loyal / Active 35% 40% 29% 31% 26% 31% customers Digital customers 13 mn c.16 mn 4 mn c.7 mn 16 mn c.20 mn # of countries top3 2 All (4) 1* 1* 3 All (4) in CSAT Financial C/I 54% 47-49% 42% 39-41% 36% 33-35% RoTE2 10% 12-14% 10%1 14-16%1 21% 20-22% RoRWA2 1.5% c.2% 2.2% c.2% 3.4% c.3.5% Targets published in the Investor Day adapted to the new geographic areas only. Group targets without any change. (*) US (SBNA) medium-term target: average peers. In H1’19: 7th (In H2’18: 9th) (1) Adjusted for excess of capital in the US. Otherwise 9.5% in H1’19. 40 (2) Underlying


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RoTE H1’19 and medium-term target by countries -RoTE (%) H1’19-Medium-term targets 22%->20% 9%-14-16% 15%-14-15% 8%-9-11% 20%-19-21% 11%1-11-13%1 18%-19-20% 13%-13-15% 17%2-14-16%2 Note: underlying RoTE (1) Adjusted for excess of capital. Otherwise, RoTE in H1’19 at 6% 41 (2) Adjusted for excess of capital. Otherwise, RoTE in H1’19 at 10% and medium-term goal 12-14%


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We confirm our medium-term goals for the Group Medium-term goals RoTE1 FL CET1 13-15% 11-12% Dividend Efficiency pay-out ratio 42-45% 40-50%


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Appendix 04


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Appendix Primary segments Secondary segments Other countries Liquidity NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements


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Europe: in a low interest rate and low growth environment, results reflect revenue pressure, cost control and good credit quality. Working to simplify and integrate our structure


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North America: double digit profit improvement in the US and Mexico, while increasing coordination between both countries P&L* Q2’19 % Q1’19 H1’19 % H1’18 NII 2,230 1.4 4,403 8.3 29% +43% Net fee income 463 4.3 901 4.2 Loyal/active Digital customers customers Total income 2,918 4.8 5,672 7.2 Operating expenses -1,214 2.3 -2,386 2.3 LLPs -793 -2.5 -1,597 5.7 PBT 881 22.1 1,594 17.9 Underlying att. profit 503 28.7 889 20.6 2.95% 2.29% (-1 bp) (*) EUR mn and % change in constant euros (-53 bps) Cost of NPL ratio credit ACTIVITY EUR bn and % change in constant euros 123 112 +3% 42.1% 1 +3% 10% QoQ QoQ Efficiency RoTE +10% ratio YoY +7% YoY Loans Funds Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds 46 Customers and credit quality ratios YoY change. (1) Adjusted for excess of capital in the US. Otherwise 9.5%


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South America: strong growth in profit and volumes. Focus on accelerating profitable growth, strengthening a more connected regional network P&L* Q2’19 % Q1’19 H1’19 % H1’18 NII 3,425 9.2 6,647 9.4 26% +26% Net fee income 1,178 2.9 2,355 10.9 Loyal/active Digital customers customers Total income 4,647 6.5 9,134 8.7 Operating expenses -1,664 4.0 -3,309 9.1 LLPs -956 8.8 -1,859 2.4 PBT 1,876 8.0 3,661 12.3 2.87% Underlying att. profit 1,035 14.7 1,961 14.9 (-23 bps) 4.81% (*) EUR mn and % change in constant euros (-1 bp) Cost of NPL ratio credit ACTIVITY EUR bn and % change in constant euros 173 131 +2% +5% 36.2% 21% QoQ QoQ Efficiency RoTE ratio +9% +11% YoY YoY Loans Funds Note: Loans excluding reverse repos. Funds: deposits excluding repos + marketed mutual funds 47 Customers and credit quality ratios YoY change. Underlying RoTE


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One of the largest full service digital bank in Europe, with best in class UX and a profitable business model To attract, engage and retain customers without a branch network, best user experience and profitability Global Payments Services Superdigital—“Banking without a bank”—platform that allows customers to open a digital payments account Pago FX- App for the open market with low cost, transparent, same day or next day international transfers Global Merchant Services—Create a single global merchant services (acquiring) business platform across our footprint. It will also serve multinational merchants as a single point of interaction and potentially non-group entities Global Trade Services—Strategic initiative to leverage Santander’s strength in trade and cross-border services, to develop a leading service platform in international business (Trade Finance, Supply chain, FX payments products…) A technology company developing a new banking platform to be used by Openbank in its international expansion. In addition, to become the leading “Banking as a Service” platform to serve third parties Digital Assets Centres of Digital Expertise—Global capabilities to drive digital transformation: Contact Centre, Conversion Rate Optimisation and Machine Learning Santander InnoVentures—Our venture capital investments in the fintech ecosystem, positioning Santander as an innovative bank and benchmark for the sector and leveraging digital capabilities for our customers Digital Assets—Group-wide technology projects and solutions for our banks and third parties under a Software as a Service (SaaS) model. Globile and Open Platform as examples 48


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Appendix Primary segments Secondary segments Other countries Liquidity NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements 49


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Retail Banking: continued focus on customer loyalty and digital transformation. We continued to launch new products and services that cover the needs of our customers P&L* Q2’19 % Q1’19 H1’19 % H1’18 ACTIVITY NII 8,390 3.5 16,553 4.8 EUR bn and % change in constant euros Net fee income 2,269 -0.9 4,583 5.2 769 700 Total income 10,881 2.9 21,528 3.9 +1% +4% Operating expenses -4,882 1.7 -9,712 1.5 QoQ QoQ LLPs -2,090 -2.6 -4,251 4.7 +3% +7% PBT 3,512 8.5 6,776 6.5 YoY YoY Underlying att. profit 2,053 14.7 3,856 6.0 Loans Funds (*) EUR mn and % change in constant euros 74% +10% +22% 45.1% Weight of profit Loyal Digital Efficiency / operating customers customers areas YoY YoY ratio 50


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Corporate & Investment Banking: profit growth YoY with good evolution of value-added businesses, offset by reduced activity in markets P&L* Q2’19 % Q1’19 H1’19 % H1’18 NII 701 8.0 1,354 22.5 Net fee income 377 7.6 730 -9.3 Total income 1,313 2.5 2,606 5.3 Operating expenses -559 0.3 -1,119 9.1 LLPs -46 375.1 -55 -55.7 PBT 693 -0.1 1,396 8.4 Underlying att. profit 434 -3.2 889 9.5 (*) EUR mn and % change in constant euros 17% +17% Weight of profit / operating Collaboration areas revenue (1) YoY changes in constant euros 1.9% 42.9% RoRWA Efficiency ratio 51


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Wealth Management & Insurance: strategic initiatives focused on the development of Private Banking’s global and digital platform and strengthening SAM and Insurance’s value proposition ACTIVITY P&L* Q2’19 % Q1’19 H1’19 % H1’18 EUR bn and % change YoY in constant euros NII 144 3.4 283 10.7 Total AUM 377 +3% Net fee income 298 8.5 574 -0.8(**) Funds and investments* 233 +3% Total income 560 6.9 1,085 5.9 Operating expenses -226 -1.7 -455 2.3 - SAM 195 +3% LLPs 0 — 7 — - Private Banking 64 +2% PBT 332 11.6 632 10.1 Custody of customer funds 89 +1% Underlying att. profit 241 11.3 459 10.1 (*) EUR mn and % change in constant euros Customer deposits 55 +7% (**) Including total fee income generated by asset management and insurance transferred to the commercial network: +4% YoY Customer loans 15 +9% (*) Total adjusted for funds from private banking customers managed by SAM Note: Total assets marketed and/or managed in 2019 and 2018


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Appendix Primary segments Secondary segments Other countries Liquidity NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements


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USA: another positive quarter for Santander US, with strong business volumes and profit growth. YoY NII and LLP comparison impacted by reclassification of TDRs P&L* Q2’19 % Q1’19 H1’19 % H1’18 NII 1,453 2.2 2,860 6.8 19% +9% Net fee income 244 3.3 479 3.1 Loyal/active Digital customers customers Total income 1,920 4.7 3,734 7.4 Operating expenses -805 2.7 -1,581 0.1 LLPs -568 -8.1 -1,178 7.4 PBT 521 39.6 891 23.1 Underlying att. profit 284 55.1 465 30.2 3.09% 2.32% (+7 bps) (-59 bps) (*) EUR mn and % change in constant euros Cost of NPL ratio credit ACTIVITY Volumes in EUR bn and % change in constant euros


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Mexico: continued to increase customer base, volumes and profitability. Double-digit profit growth due to higher customer revenue and lower cost of credit P&L* Q2’19 % Q1’19 H1’19 % H1’18 NII 777 -0.1 1,543 11.2 31% +57% Net fee income 218 5.4 423 5.6 Loyal/active Digital Total income 999 4.9 1,938 7.0 customers customers Operating expenses -409 1.5 -806 7.1 LLPs -225 15.2 -419 1.1 PBT 360 3.3 703 11.9 Underlying att. profit 219 5.4 424 11.6 2.61% 2.21% (-17 bps) (*) EUR mn and % change in constant euros (-37 bps) Cost of NPL ratio credit ACTIVITY Volumes in EUR bn and % change in constant euros


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Chile: QoQ strong NII growth favoured by higher inflation (UF) and faster volume growth. YoY profit increased driven by good market results and lower provisions. NII affected by lower inflation P&L* Q2’19 % Q1’19 H1’19 % H1’18 NII 500 15.0 940 -1.7 46% +12% Net fee income 97 -4.5 200 -9.4 Loyal/active Digital Total income 656 10.8 1,255 0.9 customers customers Operating expenses -269 6.8 -524 1.7 LLPs -105 4.2 -208 -9.4 PBT 281 1.9 560 1.5 Underlying att. profit 163 11.4 311 4.4 1.10% 4.52% (-8 bps) (*) EUR mn and % change in constant euros (-34 bps) Cost of NPL ratio credit ACTIVITY Volumes in EUR bn and % change in constant euros


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Portugal: Profit growth thanks to ALCO portfolio sales, lower costs due to integration synergies and LLP releases (strong improvement in credit quality) P&L* Q2’19 % Q1’19 H1’19 % H1’18 NII 213 -1.2 429 -1.4 45% +13% Net fee income 99 0.8 197 4.1 Loyal/active Digital customers customers Total income 354 -0.9 712 3.5 Operating expenses -154 -1.9 -312 -3.8 LLPs -1 — 12 — PBT 186 -3.9 379 16.9 Underlying att. profit 125 -7.1 260 13.5 0.03% 5.00% (-7 bps) (*) EUR mn (-255 bps) Cost of NPL ratio credit ACTIVITY Volumes in EUR bn 42 37


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Poland: strong top line growth not reflected in underlying profit due to higher BFG and Banking Tax contribution. QoQ growth from dividend income and the non-repeat of BFG and Banking Tax P&L* Q2’19 % Q1’19 H1’19 % H1’18 NII 284 0.6 565 18.0 52% +13% Net fee income 117 2.3 230 3.2 Loyal/active Digital customers customers Total income 440 16.1 817 13.6 Operating expenses -176 1.3 -349 12.0 LLPs -64 46.5 -107 25.1 PBT 166 30.0 293 6.5 Underlying att. profit 89 43.8 150 -1.5 0.66% 4.21% (-5 bps) (*) EUR mn and % change in constant euros (-37 bps) Cost of NPL ratio credit ACTIVITY Volumes in EUR bn and % change in constant euros BFG: Bank Guarantee Fund. FY2019 paid in Q1’19. Higher contribution to BFG and Banking Tax YoY due to DBP integration Adjusted for excess capital. Otherwise, 10%


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Argentina: profit virtually unchanged in constant euros, as the high inflation adjustment of EUR -74 million was offset by a rise in revenue higher than inflation


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Uruguay and Andean Region. Underlying attributable profit 29% 18% 7% RoTE RoTE RoTE Note: Constant EUR mn and underlying RoTE 60


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Appendix Primary segments Secondary segments Other countries Liquidity NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements 61


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Well-funded, prudent and highly liquid balance sheet with high contribution from customer deposits and diversified wholesale instruments Financial assets 206 Fixed assets & other 100 12 month average, provisional UK Ring-fenced bank. Spain Parent bank


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Appendix Primary segments Secondary segments Other countries Liquidity NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements


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Appendix Coverage ratio by stage Exposure1 Coverage EUR bn Jun-19 Jun-19 Jun-18 Stage 1 870 0.5% 0.6% Stage 2 53 8.5% 8.5% Stage 3 34 42.8% 43.2% (1) Exposure subject to impairment expressed in EUR bn. Additionally, there are EUR 24 bn in customer loans not subject to impairment recorded at mark to market 64 with changes through P&L


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Appendix NPL ratio % Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 EUROPE 4.08 3.97 3.90 3.67 3.61 3.48 Spain 7.74 7.62 7.55 7.32 7.29 7.02 Santander Consumer Finance 2.48 2.44 2.45 2.29 2.33 2.24 United Kingdom 1.17 1.13 1.12 1.08 1.17 1.13 Portugal 8.29 7.55 7.43 5.94 5.77 5.00 Poland 4.77 4.58 4.23 4.28 4.39 4.21 NORTH AMERICA 2.80 2.82 2.83 2.79 2.33 2.29 US 2.86 2.91 3.00 2.92 2.41 2.32 Mexico 2.68 2.58 2.41 2.43 2.12 2.21 SOUTH AMERICA 4.83 4.82 4.83 4.81 4.83 4.81 Brazil 5.26 5.26 5.26 5.25 5.26 5.27 Chile 5.00 4.86 4.78 4.66 4.67 4.52 Argentina 2.54 2.40 2.47 3.17 3.50 3.79 TOTAL GROUP 4.02 3.92 3.87 3.73 3.62 3.51 65


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Appendix Coverage ratio % Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 EUROPE 54.4 52.9 52.1 50.1 49.5 49.9 Spain 49.8 47.5 46.4 43.7 43.3 42.9 Santander Consumer Finance 107.2 107.7 106.4 106.4 105.3 105.9 United Kingdom 34.4 33.8 33.0 32.9 30.9 31.9 Portugal 53.9 52.7 53.4 50.5 50.7 52.9 Poland 72.0 72.1 71.6 67.1 67.6 69.7 NORTH AMERICA 153.5 146.5 139.4 137.4 153.4 150.3 US 169.1 156.9 145.5 142.8 161.0 158.4 Mexico 113.5 116.1 120.5 119.7 130.1 126.9 SOUTH AMERICA 96.5 94.4 94.1 94.6 94.1 93.0 Brazil 110.4 108.7 109.1 106.9 107.7 105.5 Chile 61.0 60.0 59.6 60.6 59.7 59.1 Argentina 121.3 121.5 124.0 135.0 118.6 126.4 TOTAL GROUP 70.0 68.6 67.9 67.4 67.8 68.1


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Appendix Non-performing loans and loan-loss allowances. June 2019 Non-performing loans Loan-loss allowances 100%: EUR 34,185 million 100%: EUR 23,165 million Percentage over Group’s total 67


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Appendix Cost of credit % Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 EUROPE 0.24 0.25 0.26 0.24 0.24 0.24 Spain 0.35 0.36 0.41 0.38 0.40 0.41 Santander Consumer Finance 0.36 0.37 0.40 0.38 0.38 0.36 United Kingdom 0.11 0.10 0.09 0.07 0.07 0.06 Portugal 0.08 0.10 0.03 0.09 0.03 0.03 Poland 0.69 0.71 0.69 0.65 0.61 0.66 NORTH AMERICA 3.22 2.96 2.92 3.12 2.97 2.95 US 3.29 3.02 3.00 3.27 3.11 3.09 Mexico 2.95 2.78 2.72 2.75 2.62 2.61 SOUTH AMERICA 3.15 3.10 3.00 2.99 2.89 2.87 Brazil 4.35 4.30 4.17 4.06 3.88 3.84 Chile 1.22 1.18 1.18 1.19 1.13 1.10 Argentina 2.06 2.47 2.92 3.45 4.02 4.33 TOTAL GROUP 1.04 0.99 0.98 1.00 0.97 0.98


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Appendix Primary segments Secondary segments Other countries Liquidity NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements


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Santander Responsible Banking Adapting to the new business environment We are facing a new business environment that requires a motivated, skilled workforce that can deliver what customers need and harness the power of new technology while we face new regulations and laws Our task is to exceed our stakeholders’ expectations, and do the basics brilliantly, every day. Key to this is having a strong culture—a business in which all we do is Simple, Personal and Fair We will continue supporting inclusive and sustainable growth Inclusive: meeting all our customers’ needs; helping companies to create jobs; helping people to be financially empowered, and get the education and skills they need. Sustainable: supporting the transition to a low carbon economy; and helping financing renewable energy, smart and sustainable infrastructures, while taking into account social and environmental risks and opportunities Our activity helps us to address a number of the United Nations’ Sustainable Development Goals, and support the Paris Agreement’s aim to combat climate change and adapt to its effects. We are: …embedding sustainability-UNEP FI across business areas and-contributing to develop-Principles for methods to align with the-Responsible Paris Agreement and-Banking contribute to the SDGs.-…fulfilling our fundamental- responsibilities in the-UN Global areas of human rights,-Compact labour, environment and-principles anticorruption.-…identifying and-assessing risk and-Task Force for opportunities developing a-Climate-related forward looking climate-Financial strategy and disclosing to-Disclosure stakeholders.-


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(1) According to a well-known external source in each country (e.g. Great Place to Work, Merco); (2) Senior positions represent 1% of total workforce; (3) Compares employees of the same job, level and function; (4) Mostly unbanked and underbanked, empowered through products, services and social investment initiatives – to get access to the financial system, receive tailored finance and increase knowledge and resilience through financial 71 education; (5) Includes SAN overall contribution to green finance: project finance, syndicated loans, green bonds, capital finance, export finance, advisory, structuring and other products to help our clients transition to a low carbon economy. Commitment from 2019 to 2030 is 220Bn; (6) For countries where it is possible to certify the source of the electricity for the Group’s properties; (7) Supported through SAN Universities (students who receive a Santander scholarship, are interns in an SME or participate in entrepreneurship programmes supported by SAN); (8) Excluding people helped through SAN Universities and financial education initiatives


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Appendix Primary segments Secondary segments Other countries Liquidity NPL and coverage ratios and cost of credit Responsible Banking Quarterly income statements


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Appendix GRUPO SANTANDER EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 8,454 8,477 8,349 9,061 8,682 8,954 16,931 17,636 Net fee income 2,955 2,934 2,640 2,956 2,931 2,932 5,889 5,863 Gains (losses) on financial transactions and other 742 600 731 525 472 465 1,342 937 Total income 12,151 12,011 11,720 12,542 12,085 12,351 24,162 24,436 Operating expenses (5,764) (5,718) (5,361) (5,936) (5,758) (5,829) (11,482) (11,587) Net operating income 6,387 6,293 6,359 6,606 6,327 6,522 12,680 12,849 Net loan-loss provisions (2,282) (2,015) (2,121) (2,455) (2,172) (2,141) (4,297) (4,313) Other gains (losses) and provisions (416) (487) (488) (605) (471) (486) (903) (957) Underlying profit before tax 3,689 3,791 3,750 3,546 3,684 3,895 7,480 7,579 Underlying consolidated profit 2,409 2,412 2,356 2,369 2,358 2,542 4,821 4,900 Underlying attributable profit 2,054 1,998 1,990 2,022 1,948 2,097 4,052 4,045 Net capital gains and provisions* — (300) — 46 (108) (706) (300) (814) Attributable profit 2,054 1,698 1,990 2,068 1,840 1,391 3,752 3,231 (*) Including: in Q2’18, costs associated to integrations (mainly restructuring costs), net of tax impacts, in Spain, Corporate Centre and P ortugal in Q4’18, badwill in Poland for the integration of Deutsche Bank Polska’s retail and SMEs businesses 73 in Q1’19, capital gains from Prisma, capital losses due to property sales and restructuring costs in Q2’19, restructuring costs in Spain and UK and PPI


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Appendix GRUPO SANTANDER Constant EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 8,278 8,438 8,722 8,987 8,650 8,986 16,716 17,636 Net fee income 2,843 2,886 2,802 2,883 2,917 2,946 5,729 5,863 Gains (losses) on financial transactions and other 735 582 782 534 472 465 1,317 937 Total income 11,855 11,906 12,307 12,404 12,039 12,397 23,762 24,436 Operating expenses (5,641) (5,671) (5,626) (5,827) (5,742) (5,845) (11,312) (11,587) Net operating income 6,214 6,235 6,681 6,577 6,297 6,552 12,449 12,849 Net loan-loss provisions (2,249) (2,004) (2,237) (2,444) (2,164) (2,149) (4,253) (4,313) Other gains (losses) and provisions (398) (470) (522) (600) (469) (488) (868) (957) Underlying profit before tax 3,567 3,761 3,922 3,533 3,664 3,915 7,328 7,579 Underlying consolidated profit 2,336 2,396 2,470 2,371 2,347 2,553 4,732 4,900 Underlying attributable profit 1,983 1,977 2,096 2,021 1,938 2,107 3,960 4,045 Net capital gains and provisions* — (300) — 46 (111) (703) (300) (814) Attributable profit 1,983 1,677 2,096 2,067 1,827 1,404 3,660 3,231 (*) Including: in Q2’18, costs associated to integrations (mainly restructuring costs), net of tax impacts, in Spain, Corporate Centre and P ortugal in Q4’18, badwill in Poland for the integration of Deutsche Bank Polska’s retail and SMEs businesses 74 in Q1’19, capital gains from Prisma, capital losses due to property sales and restructuring costs in Q2’19, restructuring costs in Spain and UK and PPI


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Appendix EUROPE EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 3,502 3,508 3,562 3,631 3,561 3,580 7,010 7,141 Net fee income 1,372 1,382 1,354 1,327 1,327 1,304 2,754 2,630 Gains (losses) on financial transactions and other 477 282 503 355 337 304 759 642 Total income 5,352 5,173 5,419 5,314 5,225 5,188 10,524 10,413 Operating expenses (2,841) (2,825) (2,735) (2,764) (2,802) (2,789) (5,666) (5,591) Net operating income 2,510 2,348 2,684 2,550 2,423 2,399 4,858 4,822 Net loan-loss provisions (457) (403) (406) (306) (457) (387) (859) (844) Other gains (losses) and provisions (195) (194) (205) (435) (198) (231) (388) (429) Underlying profit before tax 1,859 1,751 2,072 1,809 1,768 1,781 3,610 3,549 Underlying consolidated profit 1,359 1,276 1,498 1,339 1,276 1,306 2,635 2,583 Underlying attributable profit 1,260 1,162 1,384 1,242 1,163 1,191 2,422 2,354 75


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Appendix EUROPE Constant EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 3,506 3,507 3,583 3,646 3,561 3,580 7,013 7,141 Net fee income 1,373 1,383 1,359 1,331 1,327 1,304 2,756 2,630 Gains (losses) on financial transactions and other 480 282 505 356 337 304 762 642 Total income 5,359 5,172 5,448 5,333 5,225 5,188 10,531 10,413 Operating expenses (2,847) (2,827) (2,752) (2,775) (2,802) (2,789) (5,674) (5,591) Net operating income 2,511 2,345 2,696 2,558 2,423 2,399 4,857 4,822 Net loan-loss provisions (456) (403) (407) (308) (457) (387) (859) (844) Other gains (losses) and provisions (195) (193) (206) (436) (198) (231) (389) (429) Underlying profit before tax 1,860 1,750 2,083 1,814 1,768 1,781 3,610 3,549 Underlying consolidated profit 1,360 1,274 1,506 1,343 1,276 1,306 2,634 2,583 Underlying attributable profit 1,261 1,161 1,391 1,246 1,163 1,191 2,422 2,354 76


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Appendix Spain EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 969 1,026 1,044 1,054 1,009 1,009 1,995 2,018 Net fee income 669 671 651 633 623 624 1,340 1,247 Gains (losses) on financial transactions and other 247 163 370 117 224 216 411 440 Total income 1,885 1,860 2,065 1,804 1,857 1,849 3,746 3,706 Operating expenses (1,112) (1,093) (1,065) (1,068) (1,025) (1,020) (2,205) (2,044) Net operating income 773 767 1,000 737 832 829 1,540 1,661 Net loan-loss provisions (217) (220) (213) (140) (242) (228) (437) (470) Other gains (losses) and provisions (131) (102) (132) (60) (112) (143) (233) (255) Underlying profit before tax 425 446 655 537 478 458 871 936 Underlying consolidated profit 326 335 486 408 356 338 661 694 Underlying attributable profit 326 335 486 408 356 338 661 694


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Appendix Santander Consumer Finance EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 915 928 937 943 941 971 1,843 1,911 Net fee income 215 188 206 189 214 201 403 415 Gains (losses) on financial transactions and other 10 10 13 56 13 (18) 21 (5) Total income 1,140 1,126 1,157 1,187 1,167 1,154 2,266 2,321 Operating expenses (510) (508) (476) (495) (508) (527) (1,018) (1,035) Net operating income 630 618 681 692 659 627 1,248 1,286 Net loan-loss provisions (120) (69) (124) (47) (122) (59) (189) (181) Other gains (losses) and provisions 24 13 5 (166) 24 (12) 36 12 Underlying profit before tax 534 562 561 479 561 556 1,096 1,117 Underlying consolidated profit 388 411 405 357 402 401 799 803 Underlying attributable profit 322 345 331 295 324 334 667 658


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Appendix Santander Consumer Finance Constant EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 912 925 935 942 941 970 1,836 1,911 Net fee income 214 188 206 189 214 201 402 415 Gains (losses) on financial transactions and other 11 10 14 56 13 (18) 21 (5) Total income 1,136 1,123 1,155 1,186 1,168 1,153 2,259 2,321 Operating expenses (508) (507) (475) (495) (508) (526) (1,015) (1,035) Net operating income 628 616 680 691 659 627 1,244 1,286 Net loan-loss provisions (120) (69) (124) (47) (122) (59) (189) (181) Other gains (losses) and provisions 24 13 5 (166) 24 (12) 37 12 Underlying profit before tax 532 560 561 478 561 555 1,092 1,117 Underlying consolidated profit 386 409 404 357 402 401 796 803 Underlying attributable profit 321 344 331 294 324 334 664 658


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Appendix United Kingdom EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 1,023 1,029 1,016 1,011 975 944 2,052 1,919 Net fee income 219 240 230 224 216 207 459 423 Gains (losses) on financial transactions and other 29 50 55 8 15 32 79 46 Total income 1,270 1,319 1,300 1,242 1,206 1,183 2,590 2,388 Operating expenses (725) (715) (697) (700) (739) (703) (1,440) (1,442) Net operating income 545 605 603 542 467 479 1,150 946 Net loan-loss provisions (66) (36) (26) (43) (61) (19) (102) (80) Other gains (losses) and provisions (59) (44) (63) (155) (50) (25) (103) (75) Underlying profit before tax 420 524 514 344 357 435 944 792 Underlying consolidated profit 297 382 364 254 260 333 678 593 Underlying attributable profit 290 375 358 249 254 327 665 582


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Appendix United Kingdom GBP million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 904 901 907 896 850 825 1,805 1,676 Net fee income 193 210 205 198 189 181 404 370 Gains (losses) on financial transactions and other 25 44 49 7 13 28 69 40 Total income 1,122 1,156 1,160 1,101 1,052 1,034 2,278 2,086 Operating expenses (641) (626) (622) (620) (644) (615) (1,267) (1,259) Net operating income 481 530 538 481 407 419 1,011 826 Net loan-loss provisions (58) (32) (24) (38) (53) (17) (90) (70) Other gains (losses) and provisions (52) (39) (56) (137) (43) (22) (91) (65) Underlying profit before tax 371 460 458 306 311 380 831 691 Underlying consolidated profit 262 335 325 225 227 291 597 518 Underlying attributable profit 257 328 319 221 222 286 585 508 81


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Appendix Portugal EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 222 213 211 211 216 213 435 429 Net fee income 98 91 92 96 98 99 189 197 Gains (losses) on financial transactions and other 22 42 20 26 44 42 63 86 Total income 341 346 323 334 357 354 688 712 Operating expenses (159) (165) (157) (162) (157) (154) (324) (312) Net operating income 182 181 165 171 200 200 363 400 Net loan-loss provisions (8) (0) (11) (12) 13 (1) (8) 12 Other gains (losses) and provisions (9) (22) 13 36 (20) (13) (31) (33) Underlying profit before tax 166 159 166 195 193 186 324 379 Underlying consolidated profit 127 103 115 136 135 126 231 261 Underlying attributable profit 127 103 114 136 135 125 229 260


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Appendix Poland EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 247 240 243 265 281 284 487 565 Net fee income 112 114 111 115 113 117 227 230 Gains (losses) on financial transactions and other (26) 44 13 10 (18) 39 17 22 Total income 333 398 367 390 377 440 731 817 Operating expenses (154) (163) (157) (165) (173) (176) (317) (349) Net operating income 178 236 210 224 204 263 414 467 Net loan-loss provisions (46) (41) (33) (41) (43) (64) (87) (107) Other gains (losses) and provisions (13) (34) (26) (61) (34) (34) (48) (68) Underlying profit before tax 119 160 151 122 127 166 280 293 Underlying consolidated profit 89 131 114 88 89 130 220 219 Underlying attributable profit 63 92 80 61 61 89 155 150


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Appendix Poland PLN million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 1,031 1,025 1,047 1,139 1,209 1,216 2,055 2,425 Net fee income 469 487 478 493 488 499 957 987 Gains (losses) on financial transactions and other (110) 183 54 41 (76) 168 73 92 Total income 1,390 1,695 1,579 1,674 1,622 1,883 3,085 3,505 Operating expenses (646) (693) (676) (710) (745) (755) (1,339) (1,500) Net operating income 745 1,002 904 963 877 1,128 1,746 2,005 Net loan-loss provisions (191) (175) (143) (177) (186) (272) (366) (458) Other gains (losses) and provisions (55) (146) (113) (261) (145) (146) (201) (291) Underlying profit before tax 499 681 648 525 546 710 1,180 1,256 Underlying consolidated profit 371 557 489 379 385 556 928 941 Underlying attributable profit 262 391 344 263 264 379 653 643


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Appendix Other Europe EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 127 71 111 147 139 159 198 299 Net fee income 60 77 64 71 62 56 137 118 Gains (losses) on financial transactions and other 196 (27) 32 139 60 (7) 169 53 Total income 382 122 207 357 261 209 504 469 Operating expenses (181) (181) (182) (174) (200) (208) (361) (408) Net operating income 202 (59) 24 183 61 0 142 62 Net loan-loss provisions 0 (36) 1 (24) (2) (16) (36) (18) Other gains (losses) and provisions (7) (4) (0) (28) (7) (4) (11) (11) Underlying profit before tax 194 (99) 25 131 52 (19) 95 33 Underlying consolidated profit 132 (86) 15 96 33 (21) 46 13 Underlying attributable profit 132 (87) 15 94 32 (22) 45 10


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Appendix Other Europe Constant EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 129 72 111 147 139 159 200 299 Net fee income 61 78 65 71 62 56 140 118 Gains (losses) on financial transactions and other 197 (26) 33 139 60 (7) 171 53 Total income 387 124 208 358 261 208 511 469 Operating expenses (184) (183) (184) (174) (200) (208) (367) (408) Net operating income 203 (59) 25 183 61 0 144 62 Net loan-loss provisions (0) (36) 1 (24) (2) (16) (36) (18) Other gains (losses) and provisions (8) (4) (0) (28) (7) (4) (12) (11) Underlying profit before tax 196 (99) 25 131 53 (19) 96 33 Underlying consolidated profit 133 (86) 15 96 34 (21) 47 13 Underlying attributable profit 133 (87) 16 94 32 (22) 46 10


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Appendix NORTH AMERICA EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 1,869 1,933 2,065 2,286 2,173 2,230 3,802 4,403 Net fee income 402 408 407 399 439 463 809 901 Gains (losses) on financial transactions and other 138 197 194 178 142 226 335 368 Total income 2,409 2,538 2,666 2,863 2,753 2,918 4,947 5,672 Operating expenses (1,078) (1,103) (1,134) (1,173) (1,172) (1,214) (2,181) (2,386) Net operating income 1,331 1,435 1,532 1,690 1,581 1,705 2,766 3,286 Net loan-loss provisions (779) (634) (876) (1,159) (804) (793) (1,413) (1,597) Other gains (losses) and provisions (26) (62) (74) (40) (64) (31) (88) (95) Underlying profit before tax 526 739 581 491 713 881 1,265 1,594 Underlying consolidated profit 397 535 423 383 526 664 932 1,189 Underlying attributable profit 298 393 318 296 386 503 690 889 87


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Appendix NORTH AMERICA Constant EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 2,018 2,047 2,120 2,341 2,186 2,217 4,066 4,403 Net fee income 432 432 416 409 441 460 865 901 Gains (losses) on financial transactions and other 151 208 200 180 143 225 359 368 Total income 2,601 2,688 2,735 2,930 2,770 2,902 5,289 5,672 Operating expenses (1,165) (1,167) (1,162) (1,198) (1,179) (1,207) (2,332) (2,386) Net operating income 1,437 1,521 1,573 1,732 1,590 1,695 2,957 3,286 Net loan-loss provisions (843) (669) (903) (1,191) (809) (788) (1,511) (1,597) Other gains (losses) and provisions (28) (66) (77) (40) (64) (31) (94) (95) Underlying profit before tax 566 786 592 501 718 876 1,352 1,594 Underlying consolidated profit 427 569 431 392 529 660 996 1,189 Underlying attributable profit 320 418 324 303 389 500 737 889


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Appendix United States EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 1,221 1,281 1,337 1,553 1,407 1,453 2,501 2,860 Net fee income 214 219 208 217 234 244 434 479 Gains (losses) on financial transactions and other 143 170 190 196 174 222 313 396 Total income 1,578 1,670 1,735 1,967 1,815 1,920 3,248 3,734 Operating expenses (736) (738) (749) (796) (775) (805) (1,475) (1,581) Net operating income 842 931 986 1,171 1,039 1,115 1,773 2,154 Net loan-loss provisions (579) (445) (649) (945) (611) (568) (1,024) (1,178) Other gains (losses) and provisions (23) (50) (69) (57) (58) (26) (73) (84) Underlying profit before tax 240 436 268 169 370 521 676 891 Underlying consolidated profit 173 297 174 122 260 383 471 643 Underlying attributable profit 124 209 124 91 181 284 334 465


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Appendix United States USD million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 1,500 1,526 1,555 1,780 1,598 1,633 3,026 3,231 Net fee income 263 261 241 248 266 275 525 541 Gains (losses) on financial transactions and other 176 203 222 225 197 250 379 447 Total income 1,940 1,990 2,018 2,252 2,061 2,158 3,929 4,219 Operating expenses (905) (879) (869) (908) (881) (905) (1,784) (1,786) Net operating income 1,035 1,111 1,148 1,344 1,180 1,253 2,145 2,433 Net loan-loss provisions (712) (528) (758) (1,092) (694) (637) (1,239) (1,331) Other gains (losses) and provisions (28) (60) (81) (65) (66) (29) (88) (95) Underlying profit before tax 295 523 308 187 420 586 818 1,007 Underlying consolidated profit 213 356 200 135 295 431 570 726 Underlying attributable profit 153 251 143 101 206 319 404 525


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Appendix Mexico EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 649 653 728 733 766 777 1,301 1,543 Net fee income 187 188 199 181 204 218 376 423 Gains (losses) on financial transactions and other (5) 27 3 (18) (32) 4 22 (28) Total income 831 868 931 897 939 999 1,699 1,938 Operating expenses (342) (364) (385) (378) (397) (409) (706) (806) Net operating income 489 504 546 519 542 590 993 1,132 Net loan-loss provisions (200) (189) (227) (215) (193) (225) (389) (419) Other gains (losses) and provisions (3) (12) (5) 17 (6) (5) (15) (10) Underlying profit before tax 286 303 313 321 343 360 589 703 Underlying consolidated profit 224 237 249 261 266 280 461 547 Underlying attributable profit 173 183 194 205 205 219 357 424


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AppendixMexicoMXN millionQ1’18Q2’18Q3’18Q4’18Q1’19Q2’19H1’18H1’19Net interest income14,94515,08016,08616,57316,70316,69430,02633,397Net fee income4,3124,3554,3904,0984,4554,6958,6669,149Gains (losses) on financial transactions and other(114)62371(407)(687)83509(604)Total income19,14320,05820,54620,26420,47121,47139,20141,942Operating expenses(7,870)(8,418)(8,504)(8,534)(8,655)(8,786)(16,289)(17,441)Net operating income11,27311,64012,04311,73011,81612,68522,91324,501Net loan-loss provisions(4,610)(4,357)(5,020)(4,853)(4,211)(4,850)(8,967)(9,062)Other gains (losses) and provisions(72)(272)(115)383(120)(105)(344)(225)Underlying profit before tax6,5917,0116,9087,2597,4857,72913,60115,214Underlying consolidated profit 5,1555,4845,4915,8925,8046,02810,63911,832Underlying attributable profit 3,9954,2334,2814,6264,4724,7138,2289,185


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AppendixSOUTH AMERICAEUR millionQ1’18Q2’18Q3’18Q4’18Q1’19Q2’19H1’18H1’19Net interest income3,2983,2592,9523,3823,2223,4256,5576,647Net fee income1,1891,1519031,2541,1781,1782,3402,355Gains (losses) on financial transactions and other1231312848845254132Total income4,6104,5413,8834,6404,4874,6479,1519,134Operating expenses(1,716)(1,645)(1,353)(1,843)(1,645)(1,664)(3,361)(3,309)Net operating income2,8942,8962,5302,7972,8422,9845,7905,825Net loan-loss provisions(1,010)(948)(810)(968)(903)(956)(1,958)(1,859)Other gains (losses) and provisions(152)(181)(153)(177)(154)(151)(333)(306)Underlying profit before tax1,7321,7671,5661,6521,7851,8763,4993,661Underlying consolidated profit 1,0771,0848951,0201,0931,2052,1612,297Underlying attributable profit 9209267478589261,0351,8461,961


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AppendixSOUTH AMERICAConstant EUR millionQ1’18Q2’18Q3’18Q4’18Q1’19Q2’19H1’18H1’19Net interest income2,9693,1073,2503,2393,1773,4706,0766,647Net fee income1,0451,0781,0501,1681,1611,1952,1232,355Gains (losses) on financial transactions and other10110271108745203132Total income4,1154,2874,3724,4174,4244,7108,4029,134Operating expenses(1,501)(1,532)(1,574)(1,699)(1,622)(1,687)(3,033)(3,309)Net operating income2,6142,7552,7982,7182,8023,0235,3695,825Net loan-loss provisions(914)(902)(899)(925)(890)(969)(1,816)(1,859)Other gains (losses) and provisions(132)(161)(183)(170)(151)(154)(292)(306)Underlying profit before tax1,5691,6921,7161,6241,7601,9003,2613,661Underlying consolidated profit 9741,0359931,0091,0781,2192,0092,297Underlying attributable profit 8268818408469131,0481,7071,961


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AppendixBrazilEUR millionQ1’18Q2’18Q3’18Q4’18Q1’19Q2’19H1’18H1’19Net interest income2,4822,4242,3772,4752,4592,5204,9064,979Net fee income9208727769299319241,7921,855Gains (losses) on financial transactions and other422727(8)2197030Total income3,4453,3233,1803,3963,4113,4536,7686,864Operating expenses(1,169)(1,100)(1,036)(1,196)(1,125)(1,102)(2,269)(2,227)Net operating income2,2762,2242,1452,2012,2862,3514,4994,637Net loan-loss provisions(822)(750)(665)(726)(710)(761)(1,571)(1,471)Other gains (losses) and provisions(154)(170)(174)(198)(167)(153)(325)(320)Underlying profit before tax1,3001,3031,3061,2761,4091,4382,6032,846Underlying consolidated profit 7587266957498168561,4841,673Underlying attributable profit 6746436156597217621,3171,482


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AppendixBrazilBRL millionQ1’18Q2’18Q3’18Q4’18Q1’19Q2’19H1’18H1’19Net interest income9,89810,38310,87410,74710,51611,09520,28221,611Net fee income3,6703,7383,5774,0323,9804,0707,4088,050Gains (losses) on financial transactions and other169119128(32)9141288132Total income13,73714,24114,57914,74714,58715,20627,97829,793Operating expenses(4,662)(4,716)(4,756)(5,188)(4,810)(4,857)(9,378)(9,666)Net operating income9,0759,5259,8239,5599,77710,35018,59920,127Net loan-loss provisions(3,276)(3,220)(3,070)(3,155)(3,037)(3,347)(6,496)(6,384)Other gains (losses) and provisions(615)(727)(793)(859)(716)(673)(1,342)(1,390)Underlying profit before tax5,1845,5785,9605,5456,0246,33010,76212,354Underlying consolidated profit 3,0213,1143,1853,2503,4913,7696,1357,261Underlying attributable profit 2,6872,7582,8222,8633,0823,3535,4456,435


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AppendixChileEUR millionQ1’18Q2’18Q3’18Q4’18Q1’19Q2’19H1’18H1’19Net interest income490495481477440500985940Net fee income1111171019510397227200Gains (losses) on financial transactions and other40304949565970115Total income6406426326226006561,2821,255Operating expenses(259)(273)(257)(259)(255)(269)(531)(524)Net operating income381369374363344387751731Net loan-loss provisions(121)(115)(117)(120)(102)(105)(236)(208)Other gains (losses) and provisions2232193137(1)5437Underlying profit before tax282287276274279281568560Underlying consolidated profit 222231220226219237453456Underlying attributable profit 150157152153148163307311


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AppendixChileCLP millionQ1’18Q2’18Q3’18Q4’18Q1’19Q2’19H1’18H1’19Net interest income362,502366,847370,827370,410333,439383,545729,349716,985Net fee income81,75886,55678,31873,95978,01074,473168,315152,483Gains (losses) on financial transactions and other29,30422,19337,69938,13142,71345,38751,49688,100Total income473,564475,595486,844482,500454,162503,405949,159957,567Operating expenses(191,398)(202,047)(198,556)(200,524)(193,440)(206,641)(393,445)(400,081)Net operating income282,166273,549288,288281,976260,722296,763555,715557,485Net loan-loss provisions(89,852)(84,920)(90,252)(93,034)(77,584)(80,828)(174,772)(158,412)Other gains (losses) and provisions16,03423,79014,61723,61428,393(417)39,82427,976Underlying profit before tax208,348212,419212,652212,555211,531215,518420,767427,049Underlying consolidated profit 164,447171,185169,725174,910165,949182,169335,632348,119Underlying attributable profit 111,006116,570117,196118,562112,355125,176227,576237,531


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AppendixArgentinaEUR millionQ1’18Q2’18Q3’18Q4’18Q1’19Q2’19H1’18H1’19Net interest income214234(6)327213298447511Net fee income129133(6)192116125263241Gains (losses) on financial transactions and other3463(58)(46)2(33)97(31)Total income377430(70)472331389807720Operating expenses(219)(208)(1)(324)(202)(229)(426)(431)Net operating income158222(71)148129161381289Net loan-loss provisions(49)(75)(7)(99)(73)(70)(125)(143)Other gains (losses) and provisions(17)(41)49(22)3(58)(19)Underlying profit before tax92107(73)583494198127Underlying consolidated profit 6671(71)17106313774Underlying attributable profit 6671(71)17106313673


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AppendixArgentinaARS millionQ1’18Q2’18Q3’18Q4’18Q1’19Q2’19H1’18H1’19Net interest income5,1726,3857,8208,50710,11714,54811,55724,665Net fee income3,1213,6604,4725,0225,4866,1316,78111,616Gains (losses) on financial transactions and other8241,683(799)(1,972)102(1,596)2,507(1,494)Total income9,11711,72911,49211,55715,70419,08320,84634,787Operating expenses(5,291)(5,722)(7,738)(8,523)(9,602)(11,210)(11,014)(20,812)Net operating income3,8266,0063,7553,0346,1027,8729,83213,975Net loan-loss provisions(1,196)(2,021)(2,546)(2,615)(3,441)(3,459)(3,218)(6,900)Other gains (losses) and provisions(411)(1,077)(849)721(1,067)131(1,488)(936)Underlying profit before tax2,2182,9083601,1401,5944,5445,1266,138Underlying consolidated profit 1,6001,950(644)994973,0563,5503,553Underlying attributable profit 1,5891,935(649)1074903,0433,5253,534


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Appendix Other South America (Uruguay and Andean Region) EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 112 106 100 103 109 108 218 217 Net fee income 29 29 31 38 29 32 58 60 Gains (losses) on financial transactions and other 7 11 9 8 8 9 18 17 Total income 148 146 141 150 146 149 294 295 Operating expenses (70) (65) (59) (65) (63) (64) (135) (127) Net operating income 78 81 81 84 83 85 160 168 Net loan-loss provisions (17) (9) (22) (22) (18) (20) (26) (38) Other gains (losses) and provisions (3) (2) (2) (18) (2) (1) (5) (3) Underlying profit before tax 59 71 58 44 63 64 129 128 Underlying consolidated profit 31 55 51 29 47 48 86 95 Underlying attributable profit 31 55 51 29 47 47 85 94


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Appendix Other South America (Uruguay and Andean Region) Constant EUR million Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 H1’18 H1’19 Net interest income 106 101 97 101 107 110 208 217 Net fee income 27 28 31 38 28 32 55 60 Gains (losses) on financial transactions and other 7 11 9 8 8 9 17 17 Total income 140 140 137 147 143 152 280 295 Operating expenses (66) (62) (57) (64) (62) (65) (128) (127) Net operating income 74 78 79 83 82 87 152 168 Net loan-loss provisions (16) (7) (21) (22) (18) (20) (24) (38) Other gains (losses) and provisions (2) (2) (2) (18) (2) (1) (4) (3) Underlying profit before tax 56 68 57 44 62 66 124 128 Underlying consolidated profit 29 53 50 29 46 49 82 95 Underlying attributable profit 29 53 50 28 46 48 81 94


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AppendixSANTANDER GLOBAL PLATFORMEUR millionQ1’18Q2’18Q3’18Q4’18Q1’19Q2’19H1’18H1’19Net interest income1820202022233846Net fee income11142122Gains (losses) on financial transactions and other(4)(3)(3)(2)(5)(4)(7)(9)Total income1618192119203439Operating expenses(23)(39)(32)(49)(41)(67)(62)(108)Net operating income(7)(21)(13)(28)(22)(47)(28)(69)Net loan-loss provisions0(0)(0)(0)(0)(0)0(0)Other gains (losses) and provisions(1)(0)(1)(0)(1)(0)(1)(1)Underlying profit before tax(7)(21)(13)(28)(23)(47)(29)(70)Underlying consolidated profit (9)(14)(10)(22)(11)(40)(23)(51)Underlying attributable profit (9)(14)(10)(22)(11)(40)(23)(51)


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AppendixCORPORATE CENTREEUR millionQ1’18Q2’18Q3’18Q4’18Q1’19Q2’19H1’18H1’19Net interest income(234)(243)(251)(259)(296)(304)(477)(600)Net fee income(9)(9)(24)(28)(14)(13)(17)(27)Gains (losses) on financial transactions and other7(7)9(10)(90)(106)(0)(196)Total income(236)(258)(266)(297)(399)(423)(494)(822)Operating expenses(105)(107)(107)(106)(97)(96)(212)(193)Net operating income(341)(365)(373)(403)(497)(519)(706)(1,015)Net loan-loss provisions(37)(30)(28)(21)(8)(5)(67)(13)Other gains (losses) and provisions(43)(50)(55)47(55)(72)(93)(127)Underlying profit before tax(420)(446)(456)(377)(559)(595)(866)(1,155)Underlying consolidated profit (416)(468)(450)(351)(526)(592)(884)(1,118)Underlying attributable profit (415)(469)(450)(352)(517)(592)(884)(1,108)


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Glossary


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Glossary -Acronyms 05 AFS: Available for sale AuM: Assets under Management bn: Billion CET1: Common equity tier 1 C&I: Commercial and Industrial CIB: Corporate & Investment Bank DGF: Deposit guarantee fund GDP: Gross domestic product FL: Fully-loaded FX: Foreign exchange EPS: Earning per share ESG: Environmental, social and governance LTV: Loan to Value LLPs: Loan-loss provisions M/LT: Medium- and long-term mn: million MXN: Mexican Pesos n.a.: Not available NII: Net interest income NIM: Net interest margin n.m.: Not meaningful NPL: Non-performing loans PBT: Profit before tax P&L: Profit and loss PPP: Pre-provision profit QoQ: Quarter-on-Quarter RE: Real Estate Repos: Repurchase agreements ROF: Gains on financial transactions RoRWA: Return on risk-weighted assets RoTE: Return on tangible equity RWA: Risk-weighted assets SBNA: Santander Bank NA SCF: Santander Consumer Finance SC USA: Santander Consumer USA SME: Small and Medium Enterprises SRF: Single Resolution Fund ST: Short term SVR: Standard variable rate TDR: Troubled debt restructuring TLAC: Total loss absorbing capacity TNAV: Tangible net asset value UF: Unidad de fomento (Chile) YoY: Year-on-Year UX: User experience 106


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Glossary – definitions PROFITABILITY AND EFFICIENCY RoTE: Return on tangible capital: Group attributable profit / average of: net equity (excluding minority interests) – intangible assets (including goodwill) RoRWA: Return on risk-weighted assets: consolidated profit / average risk-weighted assets Efficiency: Operating expenses / gross income. Operating expenses defined as general administrative expenses + amortisations CREDIT RISK NPL ratio: Non-performing loans and customer advances, customer guarantees and contingent liabilities / total risk. Total risk is defined as: normal and non-performing balances of customer loans and advances, customer guarantees and contingent liabilities NPL coverage ratio: Provisions to cover losses due to impairment of customer loans and advances, customer guarantees and contingent liabilities / non-performing balances of customer loans and advances, customer guarantees and contingent liabilities Cost of credit: Provisions to cover losses due to impairment of loans in the last 12 months / average customer loans and advances of the last 12 months CAPITALISATION Tangible net asset value per share – TNAVps: Tangible stockholders’ equity / number of shares (excluding treasury shares). Tangible stockholders’ equity calculated as shareholders equity + accumulated other comprehensive income—intangible assets Notes: 1) The averages for the RoTE and RoRWA denominators are calculated on the basis of 7 months from December to June. 2) For periods of less than a year, and in the event of non-recurring results existing, the profit used to calculate the RoTE is the annualised underlying attributable profit (excluding non-recurring results), to which are added non-recurring results without annualising them. 3) For periods of less than a year, and in the event of non-recurring results existing, the profit used to calculate the RoRWA is the annualised underlying consolidated result (excluding non-recurring results), to which is added non-recurring results without annualising them. 4) The risk-weighted assets included in the RoRWA denominator are calculated in accordance with the criteria defined by the Capital Requirements Regulation (CRR).


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Thank you. Our purpose is to help people and business prosper. Our culture is based on believing that everything we do should be


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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Banco Santander, S.A.
Date: July 24, 2019   By:  

/s/ José García Cantera

      Name:   José García Cantera
      Title:   Chief Financial Officer