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 November, 2018
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 |
X |
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 |
|
Banco Santander, S.A.
Item |
|
1 |
This Form 6‑K is incorporated by reference into Banco Santander, S.A.’s Registration Statements on Form F‑3 (File No. 333‑207389) (File No. 333‑217116) filed with the Securities and Exchange Commission. |
Banco Santander, S.A. and Companies composing Santander Group |
||
Interim Condensed Consolidated Financial Statements for the nine-month period ended September 30, 2018 |
||
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails. |
||
The interim consolidated financial statements included herein have not been audited or reviewed in accordance with Public Company Accounting Oversight Board (PCAOB) standards of the United States. |
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS AS AT SEPTEMBER 30, 2018 AND DECEMBER 31, 2017
(Millions of euros)
ASSETS (*) |
|
|
Note |
|
|
09‑30‑2018 |
|
|
12‑31‑2017 (**) |
|
|
|
|
|
|
|
|
|
|
|
|
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEPOSITS ON DEMAND |
|
|
|
|
|
111,704 |
|
|
110,995 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ASSETS HELD FOR TRADING |
|
|
5 |
|
|
98,448 |
|
|
125,458 |
|
|
|
|
|
|
|
|
|
|
|
|
NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS |
|
|
5 |
|
|
6,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS |
|
|
5 |
|
|
63,821 |
|
|
34,782 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME |
|
|
5 |
|
|
116,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ASSETS AVAILABLE-FOR-SALE |
|
|
5 |
|
|
|
|
|
133,271 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ASSETS AT AMORTISED COST |
|
|
5 |
|
|
931,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOANS AND RECEIVABLES |
|
|
5 |
|
|
|
|
|
903,013 |
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENTS HELD-TO-MATURITY |
|
|
5 |
|
|
|
|
|
13,491 |
|
|
|
|
|
|
|
|
|
|
|
|
HEDGING DERIVATIVES |
|
|
|
|
|
7,912 |
|
|
8,537 |
|
|
|
|
|
|
|
|
|
|
|
|
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK |
|
|
|
|
|
929 |
|
|
1,287 |
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENTS |
|
|
|
|
|
9,371 |
|
|
6,184 |
|
Joint ventures |
|
|
|
|
|
2,052 |
|
|
1,987 |
|
Associated entities |
|
|
|
|
|
7,319 |
|
|
4,197 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS UNDER INSURANCE OR REINSURANCE CONTRACTS |
|
|
|
|
|
342 |
|
|
341 |
|
|
|
|
|
|
|
|
|
|
|
|
TANGIBLE ASSETS |
|
|
7 |
|
|
24,727 |
|
|
22,974 |
|
Property, plant and equipment |
|
|
|
|
|
23,102 |
|
|
20,650 |
|
For own-use |
|
|
|
|
|
7,777 |
|
|
8,279 |
|
Leased out under an operating lease |
|
|
|
|
|
15,325 |
|
|
12,371 |
|
Investment property |
|
|
|
|
|
1,625 |
|
|
2,324 |
|
Of which: Leased out under an operating lease |
|
|
|
|
|
1,237 |
|
|
1,332 |
|
|
|
|
|
|
|
|
|
|
|
|
INTANGIBLE ASSETS |
|
|
8 |
|
|
27,855 |
|
|
28,683 |
|
Goodwill |
|
|
|
|
|
24,956 |
|
|
25,769 |
|
Other intangible assets |
|
|
|
|
|
2,899 |
|
|
2,914 |
|
|
|
|
|
|
|
|
|
|
|
|
TAX ASSETS |
|
|
|
|
|
29,901 |
|
|
30,243 |
|
Current tax assets |
|
|
|
|
|
6,386 |
|
|
7,033 |
|
Deferred tax assets |
|
|
|
|
|
23,515 |
|
|
23,210 |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
|
|
|
9,713 |
|
|
9,766 |
|
Insurance contracts linked to pensions |
|
|
|
|
|
218 |
|
|
239 |
|
Inventories |
|
|
|
|
|
153 |
|
|
1,964 |
|
Other |
|
|
|
|
|
9,342 |
|
|
7,563 |
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS HELD FOR SALE |
|
|
6 |
|
|
5,445 |
|
|
15,280 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
|
|
|
1,444,687 |
|
|
1,444,305 |
|
(*)See reconciliation of IAS 39 December 31, 2017 to IFRS 9 January 1, 2018 (Note 1.b).
(**)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated balance sheet as at September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS AS AT SEPTEMBER 30, 2018 AND DECEMBER 31, 2017
(Millions of euros)
|
|
Note |
|
|
09‑30‑2018 |
|
|
12‑31‑2017 (**) |
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL LIABILITIES HELD FOR TRADING |
|
|
9 |
|
|
66,805 |
|
|
107,624 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS |
|
|
9 |
|
|
92,182 |
|
|
59,616 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL LIABILITIES AT AMORTISED COST |
|
|
9 |
|
|
1,139,066 |
|
|
1,126,069 |
|
|
|
|
|
|
|
|
|
|
|
|
HEDGING DERIVATIVES |
|
|
|
|
|
6,110 |
|
|
8,044 |
|
|
|
|
|
|
|
|
|
|
|
|
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK |
|
|
|
|
|
311 |
|
|
330 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES UNDER INSURANCE OR REINSURANCE CONTRACTS |
|
|
|
|
|
810 |
|
|
1,117 |
|
|
|
|
|
|
|
|
|
|
|
|
PROVISIONS |
|
|
|
|
|
13,269 |
|
|
14,489 |
|
Pensions and other post-retirement obligations |
|
|
10 |
|
|
5,394 |
|
|
6,345 |
|
Other long term employee benefits |
|
|
10 |
|
|
1,417 |
|
|
1,686 |
|
Taxes and other legal contingencies |
|
|
10 |
|
|
3,032 |
|
|
3,181 |
|
Contingent liabilities and commitments |
|
|
|
|
|
828 |
|
|
617 |
|
Other provisions |
|
|
10 |
|
|
2,598 |
|
|
2,660 |
|
|
|
|
|
|
|
|
|
|
|
|
TAX LIABILITIES |
|
|
|
|
|
7,953 |
|
|
7,592 |
|
Current tax liabilities |
|
|
|
|
|
2,655 |
|
|
2,755 |
|
Deferred tax liabilities |
|
|
|
|
|
5,298 |
|
|
4,837 |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER LIABILITIES |
|
|
|
|
|
12,513 |
|
|
12,591 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
|
|
|
1,339,019 |
|
|
1,337,472 |
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS´ EQUITY |
|
|
|
|
|
119,793 |
|
|
116,265 |
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL |
|
|
11 |
|
|
8,068 |
|
|
8,068 |
|
Called up paid capital |
|
|
|
|
|
8,068 |
|
|
8,068 |
|
Unpaid capital which has been called up |
|
|
|
|
|
- |
|
|
- |
|
SHARE PREMIUM |
|
|
|
|
|
51,053 |
|
|
51,053 |
|
EQUITY INSTRUMENTS ISSUED OTHER THAN CAPITAL |
|
|
|
|
|
549 |
|
|
525 |
|
Equity component of compound financial instruments |
|
|
|
|
|
- |
|
|
- |
|
Other equity instruments |
|
|
|
|
|
549 |
|
|
525 |
|
OTHER EQUITY |
|
|
|
|
|
217 |
|
|
216 |
|
ACCUMULATED RETAINED EARNINGS |
|
|
|
|
|
56,965 |
|
|
53,437 |
|
REVALUATION RESERVES |
|
|
|
|
|
- |
|
|
- |
|
OTHER RESERVES |
|
|
|
|
|
(1,696) |
|
|
(1,602) |
|
(-) OWN SHARES |
|
|
|
|
|
(56) |
|
|
(22) |
|
PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT |
|
|
|
|
|
5,742 |
|
|
6,619 |
|
(-) INTERIM DIVIDENS |
|
|
3 |
|
|
(1,049) |
|
|
(2,029) |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME |
|
|
|
|
|
(24,816) |
|
|
(21,776) |
|
|
|
|
|
|
|
|
|
|
|
|
ITEMS NOT RECLASSIFIED TO PROFIT OR LOSS |
|
|
11 |
|
|
(2,668) |
|
|
(4,034) |
|
|
|
|
|
|
|
|
|
|
|
|
ITEMS THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS |
|
|
11 |
|
|
(22,148) |
|
|
(17,742) |
|
|
|
|
|
|
|
|
|
|
|
|
NON-CONTROLLING INTEREST |
|
|
|
|
|
10,691 |
|
|
12,344 |
|
Other comprehensive income |
|
|
|
|
|
(1,335) |
|
|
(1,436) |
|
Other elements |
|
|
|
|
|
12,026 |
|
|
13,780 |
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY (*) |
|
|
|
|
|
105,668 |
|
|
106,833 |
|
TOTAL EQUITY AND LIABILITIES |
|
|
|
|
|
1,444,687 |
|
|
1,444,305 |
|
MEMORANDUM ITEMS |
|
|
14 |
|
|
|
|
|
|
|
Loans commitment granted |
|
|
|
|
|
212,115 |
|
|
207,671 |
|
Financial guarantees granted |
|
|
|
|
|
12,634 |
|
|
14,499 |
|
Other commitments granted |
|
|
|
|
|
73,433 |
|
|
64,917 |
|
(*)See reconciliation of IAS 39 December 31, 2017 to IFRS 9 January 1, 2018 (Note 1.b).
(**)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated balance sheet as at September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS AS AT SEPTEMBER 30, 2018 AND DECEMBER 31, 2017
(Millions of reais)
ASSETS (*) |
|
|
Note |
|
|
09‑30‑2018 |
|
|
12‑31‑2017 (**) |
|
|
|
|
|
|
|
|
|
|
|
|
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEPOSITS ON DEMAND |
|
|
|
|
|
519,815 |
|
|
440,972 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ASSETS HELD FOR TRADING |
|
|
5 |
|
|
458,130 |
|
|
498,432 |
|
NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS |
|
|
5 |
|
|
31,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS |
|
|
5 |
|
|
296,990 |
|
|
138,180 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME |
|
|
5 |
|
|
541,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ASSETS AVAILABLE-FOR-SALE |
|
|
5 |
|
|
|
|
|
529,474 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ASSETS AT AMORTISED COST |
|
|
5 |
|
|
4,334,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOANS AND RECEIVABLES |
|
|
5 |
|
|
|
|
|
3,587,580 |
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENTS HELD-TO-MATURITY |
|
|
5 |
|
|
|
|
|
53,599 |
|
|
|
|
|
|
|
|
|
|
|
|
HEDGING DERIVATIVES |
|
|
|
|
|
36,816 |
|
|
33,915 |
|
|
|
|
|
|
|
|
|
|
|
|
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK |
|
|
|
|
|
4,323 |
|
|
5,112 |
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENTS |
|
|
|
|
|
43,611 |
|
|
24,567 |
|
Joint ventures |
|
|
|
|
|
9,550 |
|
|
7,894 |
|
Associated entities |
|
|
|
|
|
34,061 |
|
|
16,673 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS UNDER INSURANCE OR REINSURANCE CONTRACTS |
|
|
|
|
|
1,589 |
|
|
1,356 |
|
|
|
|
|
|
|
|
|
|
|
|
TANGIBLE ASSETS |
|
|
7 |
|
|
115,070 |
|
|
91,277 |
|
Property, plant and equipment |
|
|
|
|
|
107,508 |
|
|
82,042 |
|
For own-use |
|
|
|
|
|
36,192 |
|
|
32,893 |
|
Leased out under an operating lease |
|
|
|
|
|
71,316 |
|
|
49,149 |
|
Investment property |
|
|
|
|
|
7,562 |
|
|
9,235 |
|
Of which: Leased out under an operating lease |
|
|
|
|
|
5,757 |
|
|
5,292 |
|
|
|
|
|
|
|
|
|
|
|
|
INTANGIBLE ASSETS |
|
|
8 |
|
|
129,625 |
|
|
113,955 |
|
Goodwill |
|
|
|
|
|
116,134 |
|
|
102,376 |
|
Other intangible assets |
|
|
|
|
|
13,491 |
|
|
11,579 |
|
|
|
|
|
|
|
|
|
|
|
|
TAX ASSETS |
|
|
|
|
|
139,142 |
|
|
120,154 |
|
Current tax assets |
|
|
|
|
|
29,716 |
|
|
27,944 |
|
Deferred tax assets |
|
|
|
|
|
109,426 |
|
|
92,210 |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
|
|
|
45,195 |
|
|
38,792 |
|
Insurance contracts linked to pensions |
|
|
|
|
|
1,012 |
|
|
948 |
|
Inventories |
|
|
|
|
|
712 |
|
|
7,804 |
|
Other |
|
|
|
|
|
43,471 |
|
|
30,040 |
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS HELD FOR SALE |
|
|
6 |
|
|
25,341 |
|
|
60,707 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
|
|
|
6,722,853 |
|
|
5,738,072 |
|
(*)See reconciliation of IAS 39 December 31, 2017 to IFRS 9 January 1, 2018 (Note 1.b).
(**)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated balance sheet as at September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS AS AT SEPTEMBER 30, 2018 AND DECEMBER 31, 2017
(Millions of reais)
LIABILITIES (*) |
|
|
Note |
|
|
09‑30‑2018 |
|
|
12‑31‑2017 (**) |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL LIABILITIES HELD FOR TRADING |
|
|
9 |
|
|
310,879 |
|
|
427,578 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS |
|
|
9 |
|
|
428,971 |
|
|
236,851 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL LIABILITIES AT AMORTISED COST |
|
|
9 |
|
|
5,300,640 |
|
|
4,473,759 |
|
|
|
|
|
|
|
|
|
|
|
|
HEDGING DERIVATIVES |
|
|
|
|
|
28,433 |
|
|
31,956 |
|
|
|
|
|
|
|
|
|
|
|
|
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK |
|
|
|
|
|
1,446 |
|
|
1,311 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES UNDER INSURANCE OR REINSURANCE CONTRACTS |
|
|
|
|
|
3,769 |
|
|
4,439 |
|
|
|
|
|
|
|
|
|
|
|
|
PROVISIONS |
|
|
|
|
|
61,745 |
|
|
57,566 |
|
Pensions and other post-retirement obligations |
|
|
10 |
|
|
25,102 |
|
|
25,208 |
|
Other long term employee benefits |
|
|
10 |
|
|
6,596 |
|
|
6,700 |
|
Taxes and other legal contingencies |
|
|
10 |
|
|
14,108 |
|
|
12,640 |
|
Contingent liabilities and commitments |
|
|
|
|
|
3,853 |
|
|
2,449 |
|
Other provisions |
|
|
10 |
|
|
12,086 |
|
|
10,569 |
|
|
|
|
|
|
|
|
|
|
|
|
TAX LIABILITIES |
|
|
|
|
|
37,012 |
|
|
30,161 |
|
Current tax liabilities |
|
|
|
|
|
12,356 |
|
|
10,946 |
|
Deferred tax liabilities |
|
|
|
|
|
24,656 |
|
|
19,215 |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER LIABILITIES |
|
|
|
|
|
58,229 |
|
|
50,022 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE |
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
|
|
|
6,231,124 |
|
|
5,313,643 |
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS´ EQUITY |
|
|
|
|
|
326,419 |
|
|
310,634 |
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL |
|
|
11 |
|
|
21,195 |
|
|
21,195 |
|
Called up paid capital |
|
|
|
|
|
21,195 |
|
|
21,195 |
|
Unpaid capital which has been called up |
|
|
|
|
|
- |
|
|
- |
|
SHARE PREMIUM |
|
|
|
|
|
129,805 |
|
|
129,805 |
|
EQUITY INSTRUMENTS ISSUED OTHER THAN CAPITAL |
|
|
|
|
|
2,193 |
|
|
2,085 |
|
Equity component of compound financial instruments |
|
|
|
|
|
- |
|
|
- |
|
Other equity instruments |
|
|
|
|
|
2,193 |
|
|
2,085 |
|
OTHER EQUITY |
|
|
|
|
|
665 |
|
|
641 |
|
ACCUMULATED RETAINED EARNINGS |
|
|
|
|
|
158,002 |
|
|
145,308 |
|
REVALUATION RESERVES |
|
|
|
|
|
- |
|
|
- |
|
OTHER RESERVES |
|
|
|
|
|
(5,406) |
|
|
(4,808) |
|
(-) OWN SHARES |
|
|
|
|
|
(259) |
|
|
(87) |
|
PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT |
|
|
|
|
|
24,560 |
|
|
23,789 |
|
(-) INTERIM DIVIDENS |
|
|
3 |
|
|
(4,336) |
|
|
(7,294) |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME |
|
|
|
|
|
115,557 |
|
|
64,754 |
|
|
|
|
|
|
|
|
|
|
|
|
ITEMS NOT RECLASSIFIED TO PROFIT OR LOSS |
|
|
11 |
|
|
(12,422) |
|
|
(16,029) |
|
|
|
|
|
|
|
|
|
|
|
|
ITEMS THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS |
|
|
11 |
|
|
127,979 |
|
|
80,783 |
|
|
|
|
|
|
|
|
|
|
|
|
NON-CONTROLLING INTEREST |
|
|
|
|
|
49,753 |
|
|
49,041 |
|
Other comprehensive income |
|
|
|
|
|
19,333 |
|
|
11,610 |
|
Other elements |
|
|
|
|
|
30,420 |
|
|
37,431 |
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY (*) |
|
|
|
|
|
491,729 |
|
|
424,429 |
|
TOTAL EQUITY AND LIABILITIES |
|
|
|
|
|
6,722,853 |
|
|
5,738,072 |
|
MEMORANDUM ITEMS |
|
|
14 |
|
|
|
|
|
|
|
Loans commitment granted |
|
|
|
|
|
987,077 |
|
|
825,057 |
|
Financial guarantees granted |
|
|
|
|
|
58,792 |
|
|
57,602 |
|
Other commitments granted |
|
|
|
|
|
341,721 |
|
|
257,910 |
|
(*)See reconciliation of IAS 39 December 31, 2017 to IFRS 9 January 1, 2018 (Note 1.b).
(**)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated balance sheet as at September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(Millions of euros)
|
|
|
|
|
|
(Debit) Credit |
|
|||||||||
(*) |
|
|
Note |
|
|
07‑01‑2018 to |
|
|
07‑01‑2017 to |
|
|
01‑01‑2018 to |
|
|
01‑01‑2017 to |
|
Interest income and other similar income |
|
|
|
|
|
12,998 |
|
|
13,856 |
|
|
39,902 |
|
|
42,488 |
|
Interest expense |
|
|
|
|
|
(4,649) |
|
|
(5,175) |
|
|
(14,622) |
|
|
(16,799) |
|
Net interest income |
|
|
|
|
|
8,349 |
|
|
8,681 |
|
|
25,280 |
|
|
25,689 |
|
Dividend income |
|
|
|
|
|
28 |
|
|
30 |
|
|
292 |
|
|
309 |
|
Share of results of entities accounted for using the equity method |
|
|
|
|
|
178 |
|
|
187 |
|
|
532 |
|
|
480 |
|
Commission income |
|
|
|
|
|
3,359 |
|
|
3,614 |
|
|
10,834 |
|
|
10,875 |
|
Commission expense |
|
|
|
|
|
(719) |
|
|
(726) |
|
|
(2,305) |
|
|
(2,227) |
|
Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net |
|
|
|
|
|
250 |
|
|
77 |
|
|
576 |
|
|
353 |
|
Gain or losses on financial assets and liabilities held for trading, net |
|
|
|
|
|
335 |
|
|
(19) |
|
|
1,532 |
|
|
1,036 |
|
Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss |
|
|
|
|
|
53 |
|
|
|
|
|
109 |
|
|
|
|
Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net |
|
|
|
|
|
14 |
|
|
(38) |
|
|
146 |
|
|
(85) |
|
Gain or losses from hedge accounting, net |
|
|
|
|
|
(28) |
|
|
(27) |
|
|
5 |
|
|
(35) |
|
Exchange differences, net |
|
|
|
|
|
(119) |
|
|
429 |
|
|
(1,009) |
|
|
13 |
|
Other operating income |
|
|
|
|
|
366 |
|
|
381 |
|
|
1,179 |
|
|
1,188 |
|
Other operating expenses |
|
|
|
|
|
(368) |
|
|
(371) |
|
|
(1,347) |
|
|
(1,315) |
|
Income from assets under insurance or reinsurance contracts |
|
|
|
|
|
639 |
|
|
491 |
|
|
2,395 |
|
|
1,869 |
|
Expenses from liabilities under insurance or reinsurance contracts |
|
|
|
|
|
(617) |
|
|
(459) |
|
|
(2,337) |
|
|
(1,820) |
|
Gross income |
|
|
|
|
|
11,720 |
|
|
12,250 |
|
|
35,882 |
|
|
36,330 |
|
Administrative expenses |
|
|
|
|
|
(4,804) |
|
|
(5,162) |
|
|
(15,069) |
|
|
(15,059) |
|
Staff costs |
|
|
|
|
|
(2,837) |
|
|
(3,001) |
|
|
(8,797) |
|
|
(8,856) |
|
Other general administrative expenses |
|
|
|
|
|
(1,967) |
|
|
(2,161) |
|
|
(6,272) |
|
|
(6,203) |
|
Depreciation and amortization cost |
|
|
|
|
|
(557) |
|
|
(605) |
|
|
(1,774) |
|
|
(1,899) |
|
Provisions or reversal of provisions, net |
|
|
|
|
|
(463) |
|
|
(1,245) |
|
|
(1,725) |
|
|
(2,622) |
|
Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss, net |
|
|
|
|
|
(2,121) |
|
|
(2,260) |
|
|
(6,473) |
|
|
(6,973) |
|
Financial assets at fair value through other comprehensive income |
|
|
|
|
|
(3) |
|
|
|
|
|
(4) |
|
|
|
|
Financial assets at amortized cost |
|
|
5 |
|
|
(2,118) |
|
|
|
|
|
(6,469) |
|
|
|
|
Financial assets measured at cost |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
(7) |
|
Financial assets available-for-sale |
|
|
|
|
|
|
|
|
(3) |
|
|
|
|
|
(3) |
|
Loans and receivables |
|
|
5 |
|
|
|
|
|
(2,257) |
|
|
|
|
|
(6,963) |
|
Held-to-maturity investments |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
- |
|
Impairment of investments in subsidiaries, joint ventures and associates, net |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Impairment on non-financial assets, net |
|
|
|
|
|
(25) |
|
|
(44) |
|
|
(121) |
|
|
(141) |
|
Tangible assets |
|
|
|
|
|
(12) |
|
|
(16) |
|
|
(45) |
|
|
(44) |
|
Intangible assets |
|
|
|
|
|
(13) |
|
|
(1) |
|
|
(77) |
|
|
(41) |
|
Others |
|
|
|
|
|
- |
|
|
(27) |
|
|
1 |
|
|
(56) |
|
Gain or losses on non-financial assets and investments, net |
|
|
|
|
|
1 |
|
|
45 |
|
|
24 |
|
|
71 |
|
Negative goodwill recognized in results |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Gains or losses on non-current assets held for sale not classified as discontinued operations |
|
|
6 |
|
|
(64) |
|
|
(68) |
|
|
(158) |
|
|
(211) |
|
Profit or loss before tax from continuing operations |
|
|
|
|
|
3,687 |
|
|
2,911 |
|
|
10,586 |
|
|
9,496 |
|
Tax expense or income from continuing operations |
|
|
|
|
|
(1,331) |
|
|
(1,078) |
|
|
(3,709) |
|
|
(3,332) |
|
Profit for the period from continuing operations |
|
|
|
|
|
2,356 |
|
|
1,833 |
|
|
6,877 |
|
|
6,164 |
|
Profit or loss after tax from discontinued operations |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Profit for the period |
|
|
|
|
|
2,356 |
|
|
1,833 |
|
|
6,877 |
|
|
6,164 |
|
Profit attributable to non-controlling interests |
|
|
|
|
|
366 |
|
|
372 |
|
|
1,135 |
|
|
1,087 |
|
Profit attributable to the parent |
|
|
|
|
|
1,990 |
|
|
1,461 |
|
|
5,742 |
|
|
5,077 |
|
Earnings per share: |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
0.11 |
|
|
0.09 |
|
|
0.33 |
|
|
0.32 |
|
Diluted |
|
|
|
|
|
0.11 |
|
|
0.09 |
|
|
0.33 |
|
|
0.32 |
|
(*)See further detail regarding the impacts of the entry into force of IFRS 9 as at January 1, 2018 (Note 1.b).
(**)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated income statement for the nine-month period ended September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(Millions of reais)
|
|
|
|
|
(Debit) Credit |
|
||||||||||
(*) |
|
|
Note |
|
|
07‑01‑2018 to |
|
|
07‑01‑2017 to |
|
|
01‑01‑2018 to |
|
|
01‑01‑2017 to |
|
Interest income and other similar income |
|
|
|
|
|
59,473 |
|
|
51,394 |
|
|
170,686 |
|
|
149,771 |
|
Interest expense |
|
|
|
|
|
(21,322) |
|
|
(19,279) |
|
|
(62,546) |
|
|
(59,218) |
|
Net interest income |
|
|
|
|
|
38,151 |
|
|
32,115 |
|
|
108,140 |
|
|
90,553 |
|
Dividend income |
|
|
|
|
|
158 |
|
|
133 |
|
|
1,250 |
|
|
1,090 |
|
Share of results of entities accounted for using the equity method |
|
|
|
|
|
811 |
|
|
687 |
|
|
2,276 |
|
|
1,693 |
|
Commission income |
|
|
|
|
|
15,444 |
|
|
13,389 |
|
|
46,345 |
|
|
38,336 |
|
Commission expense |
|
|
|
|
|
(3,302) |
|
|
(2,695) |
|
|
(9,860) |
|
|
(7,851) |
|
Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net |
|
|
|
|
|
1,121 |
|
|
297 |
|
|
2,465 |
|
|
1,244 |
|
Gain or losses on financial assets and liabilities held for trading, net |
|
|
|
|
|
1,600 |
|
|
29 |
|
|
6,548 |
|
|
3,652 |
|
Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss |
|
|
|
|
|
234 |
|
|
|
|
|
467 |
|
|
|
|
Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net |
|
|
|
|
|
78 |
|
|
(138) |
|
|
625 |
|
|
(300) |
|
Gain or losses from hedge accounting, net |
|
|
|
|
|
(113) |
|
|
(95) |
|
|
22 |
|
|
(123) |
|
Exchange differences, net |
|
|
|
|
|
(639) |
|
|
1,473 |
|
|
(4,317) |
|
|
45 |
|
Other operating income |
|
|
|
|
|
1,682 |
|
|
1,416 |
|
|
5,044 |
|
|
4,188 |
|
Other operating expenses |
|
|
|
|
|
(1,714) |
|
|
(1,393) |
|
|
(5,763) |
|
|
(4,636) |
|
Income from assets under insurance or reinsurance contracts |
|
|
|
|
|
2,986 |
|
|
1,853 |
|
|
10,244 |
|
|
6,589 |
|
Expenses from liabilities under insurance or reinsurance contracts |
|
|
|
|
|
(2,885) |
|
|
(1,739) |
|
|
(9,996) |
|
|
(6,417) |
|
Gross income |
|
|
|
|
|
53,612 |
|
|
45,332 |
|
|
153,490 |
|
|
128,063 |
|
Administrative expenses |
|
|
|
|
|
(22,025) |
|
|
(19,074) |
|
|
(64,458) |
|
|
(53,081) |
|
Staff costs |
|
|
|
|
|
(12,991) |
|
|
(11,098) |
|
|
(37,629) |
|
|
(31,217) |
|
Other general administrative expenses |
|
|
|
|
|
(9,034) |
|
|
(7,976) |
|
|
(26,829) |
|
|
(21,864) |
|
Depreciation and amortization cost |
|
|
|
|
|
(2,560) |
|
|
(2,249) |
|
|
(7,589) |
|
|
(6,694) |
|
Provisions or reversal of provisions, net |
|
|
|
|
|
(2,161) |
|
|
(4,513) |
|
|
(7,378) |
|
|
(9,244) |
|
Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss, net |
|
|
|
|
|
(9,698) |
|
|
(8,386) |
|
|
(27,689) |
|
|
(24,581) |
|
Financial assets at fair value through other comprehensive income |
|
|
|
|
|
(12) |
|
|
|
|
|
(18) |
|
|
|
|
Financial assets at amortized cost |
|
|
5 |
|
|
(9,686) |
|
|
|
|
|
(27,671) |
|
|
|
|
Financial assets measured at cost |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
(26) |
|
Financial assets available-for-sale |
|
|
|
|
|
|
|
|
(10) |
|
|
|
|
|
(9) |
|
Loans and receivables |
|
|
5 |
|
|
|
|
|
(8,376) |
|
|
|
|
|
(24,546) |
|
Held-to-maturity investments |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
- |
|
Impairment of investments in subsidiaries, joint ventures and associates, net |
|
|
|
|
|
- |
|
|
2 |
|
|
- |
|
|
2 |
|
Impairment on non-financial assets, net |
|
|
|
|
|
(120) |
|
|
(165) |
|
|
(517) |
|
|
(499) |
|
Tangible assets |
|
|
|
|
|
(56) |
|
|
(58) |
|
|
(193) |
|
|
(154) |
|
Intangible assets |
|
|
|
|
|
(64) |
|
|
(8) |
|
|
(329) |
|
|
(146) |
|
Others |
|
|
|
|
|
- |
|
|
(99) |
|
|
5 |
|
|
(199) |
|
Gain or losses on non-financial assets and investments, net |
|
|
|
|
|
9 |
|
|
155 |
|
|
104 |
|
|
249 |
|
Negative goodwill recognized in results |
|
|
|
|
|
- |
|
|
(2) |
|
|
- |
|
|
(2) |
|
Gains or losses on non-current assets held for sale not classified as discontinued operations |
|
|
6 |
|
|
(287) |
|
|
(254) |
|
|
(675) |
|
|
(744) |
|
Profit or loss before tax from continuing operations |
|
|
|
|
|
16,770 |
|
|
10,846 |
|
|
45,288 |
|
|
33,469 |
|
Tax expense or income from continuing operations |
|
|
|
|
|
(6,039) |
|
|
(4,002) |
|
|
(15,868) |
|
|
(11,746) |
|
Profit for the period from continuing operations |
|
|
|
|
|
10,731 |
|
|
6,844 |
|
|
29,420 |
|
|
21,723 |
|
Profit or loss after tax from discontinued operations |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Profit for the period |
|
|
|
|
|
10,731 |
|
|
6,844 |
|
|
29,420 |
|
|
21,723 |
|
Profit attributable to non-controlling interests |
|
|
|
|
|
1,681 |
|
|
1,371 |
|
|
4,860 |
|
|
3,826 |
|
Profit attributable to the parent |
|
|
|
|
|
9,050 |
|
|
5,473 |
|
|
24,560 |
|
|
17,897 |
|
Earnings per share: |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
0.52 |
|
|
0.32 |
|
|
1.41 |
|
|
1.11 |
|
Diluted |
|
|
|
|
|
0.52 |
|
|
0.32 |
|
|
1.41 |
|
|
1.11 |
|
(*)See further detail regarding the impacts of the entry into force of IFRS 9 as at January 1, 2018 (Note 1.b).
(**)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated income statement for the nine-month period ended September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE
FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(Millions of euros)
(*) |
|
|
Note |
|
|
07‑01‑2018 to |
|
|
07‑01‑2017 to |
|
|
01‑01‑2018 to |
|
|
01‑01‑2017 to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED PROFIT FOR THE PERIOD |
|
|
|
|
|
2,356 |
|
|
1,833 |
|
|
6,877 |
|
|
6,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER RECOGNISED INCOME AND EXPENSE |
|
|
|
|
|
(889) |
|
|
(1,163) |
|
|
(2,889) |
|
|
(5,181) |
|
Items that will not be reclassified to profit or loss |
|
|
|
|
|
87 |
|
|
28 |
|
|
625 |
|
|
102 |
|
Actuarial gains and losses on defined benefit pension plans |
|
|
11 |
|
|
25 |
|
|
33 |
|
|
1,006 |
|
|
68 |
|
Non-current assets held for sale |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other recognized income and expense of investments in subsidiaries, joint ventures and associates |
|
|
|
|
|
1 |
|
|
- |
|
|
1 |
|
|
- |
|
Changes in the fair value of equity instruments measured at fair value through other comprehensive income |
|
|
|
|
|
74 |
|
|
|
|
|
(62) |
|
|
|
|
Gains or losses resulting from the accounting for hedges of equity instruments measured at fair value through other comprehensive income, net |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (hedged item) |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (hedging instrument) |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Changes in the fair value of financial liabilities at fair value through profit or loss attributable to changes in credit risk |
|
|
|
|
|
(2) |
|
|
|
|
|
(35) |
|
|
|
|
Income tax relating to items that will not be reclassified to profit or loss |
|
|
|
|
|
(11) |
|
|
(5) |
|
|
(285) |
|
|
34 |
|
Items that may be reclassified to profit or loss |
|
|
|
|
|
(976) |
|
|
(1,191) |
|
|
(3,514) |
|
|
(5,283) |
|
Hedges of net investments in foreign operations (Effective portion) |
|
|
11 |
|
|
(107) |
|
|
(74) |
|
|
186 |
|
|
236 |
|
Revaluation gains (losses) |
|
|
|
|
|
(107) |
|
|
(74) |
|
|
186 |
|
|
236 |
|
Amounts transferred to income statement |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other reclassifications |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Exchanges differences |
|
|
11 |
|
|
(176) |
|
|
(1,304) |
|
|
(2,613) |
|
|
(5,930) |
|
Revaluation gains (losses) |
|
|
|
|
|
(176) |
|
|
(1,304) |
|
|
(2,613) |
|
|
(5,930) |
|
Amounts transferred to income statement |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other reclassifications |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Cash flow hedges (Effective portion) |
|
|
|
|
|
(298) |
|
|
(87) |
|
|
(436) |
|
|
(408) |
|
Revaluation gains (losses) |
|
|
|
|
|
(11) |
|
|
207 |
|
|
(655) |
|
|
560 |
|
Amounts transferred to income statement |
|
|
|
|
|
(287) |
|
|
(294) |
|
|
219 |
|
|
(968) |
|
Transferred to initial carrying amount of hedged items |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other reclassifications |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financial assets available-for-sale |
|
|
11 |
|
|
|
|
|
390 |
|
|
|
|
|
1,121 |
|
Revaluation gains (losses) |
|
|
|
|
|
|
|
|
487 |
|
|
|
|
|
1,528 |
|
Amounts transferred to income statement |
|
|
|
|
|
|
|
|
(97) |
|
|
|
|
|
(407) |
|
Other reclassifications |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
- |
|
Hedging instruments (items not designated) |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Revaluation gains (losses) |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Amounts transferred to income statement |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Other reclassifications |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Debt instruments at fair value with changes in other comprehensive income |
|
|
|
|
|
(532) |
|
|
|
|
|
(1,081) |
|
|
|
|
Revaluation gains (losses) |
|
|
|
|
|
(326) |
|
|
|
|
|
(595) |
|
|
|
|
Amounts transferred to income statement |
|
|
|
|
|
(206) |
|
|
|
|
|
(486) |
|
|
|
|
Other reclassifications |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets held for sale |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Revaluation gains (losses) |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Amounts transferred to income statement |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other reclassifications |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Share of other recognized income and expense of investments |
|
|
|
|
|
(23) |
|
|
(10) |
|
|
(108) |
|
|
(52) |
|
Income tax relating to items that may be reclassified to profit or loss |
|
|
|
|
|
160 |
|
|
(106) |
|
|
538 |
|
|
(250) |
|
Total recognized income and expenses |
|
|
|
|
|
1,467 |
|
|
670 |
|
|
3,988 |
|
|
983 |
|
Attributable to non-controlling interests |
|
|
|
|
|
408 |
|
|
235 |
|
|
995 |
|
|
690 |
|
Attributable to the parent |
|
|
|
|
|
1,059 |
|
|
435 |
|
|
2,993 |
|
|
293 |
|
(*)See further detail regarding the impacts of the entry into force of IFRS 9 as at January 1, 2018 (Note 1.b).
(**)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of recognized income and expense for the nine-month period ended September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE
FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(Millions of reais)
(*) |
|
|
Note |
|
|
07‑01‑2018 to |
|
|
07‑01‑2017 to |
|
|
01‑01‑2018 to |
|
|
01‑01‑2017 to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED PROFIT FOR THE PERIOD |
|
|
|
|
|
10,731 |
|
|
6,844 |
|
|
29,420 |
|
|
21,723 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER RECOGNISED INCOME AND EXPENSE |
|
|
|
|
|
13,390 |
|
|
(3,733) |
|
|
58,726 |
|
|
15,865 |
|
Items that will not be reclassified to profit or loss |
|
|
|
|
|
449 |
|
|
106 |
|
|
2,673 |
|
|
360 |
|
Actuarial gains and losses on defined benefit pension plans |
|
|
11 |
|
|
248 |
|
|
120 |
|
|
4,303 |
|
|
240 |
|
Non-current assets held for sale |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other recognized income and expense of investments in subsidiaries, joint ventures and associates |
|
|
|
|
|
4 |
|
|
- |
|
|
4 |
|
|
- |
|
Changes in the fair value of equity instruments measured at fair value through other comprehensive income |
|
|
|
|
|
297 |
|
|
|
|
|
(265) |
|
|
|
|
Gains or losses resulting from the accounting for hedges of equity instruments measured at fair value through other comprehensive income, net |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (hedged item) |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (hedging instrument) |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Changes in the fair value of financial liabilities at fair value through profit or loss attributable to changes in credit risk |
|
|
|
|
|
(14) |
|
|
|
|
|
(150) |
|
|
|
|
Income tax relating to items that will not be reclassified to profit or loss |
|
|
|
|
|
(86) |
|
|
(14) |
|
|
(1,219) |
|
|
120 |
|
Items that may be reclassified to profit or loss |
|
|
|
|
|
12,941 |
|
|
(3,839) |
|
|
56,053 |
|
|
15,505 |
|
Hedges of net investments in foreign operations (Effective portion) |
|
|
11 |
|
|
(415) |
|
|
(233) |
|
|
796 |
|
|
832 |
|
Revaluation gains (losses) |
|
|
|
|
|
(415) |
|
|
(233) |
|
|
796 |
|
|
832 |
|
Amounts transferred to income statement |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other reclassifications |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Exchanges differences |
|
|
11 |
|
|
16,379 |
|
|
(4,286) |
|
|
59,907 |
|
|
13,223 |
|
Revaluation gains (losses) |
|
|
|
|
|
16,379 |
|
|
(4,286) |
|
|
59,907 |
|
|
13,223 |
|
Amounts transferred to income statement |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other reclassifications |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Cash flow hedges (Effective portion) |
|
|
|
|
|
(1,295) |
|
|
(335) |
|
|
(1,865) |
|
|
(1,438) |
|
Revaluation gains (losses) |
|
|
|
|
|
(140) |
|
|
761 |
|
|
(2,802) |
|
|
1,974 |
|
Amounts transferred to income statement |
|
|
|
|
|
(1,155) |
|
|
(1,096) |
|
|
937 |
|
|
(3,412) |
|
Transferred to initial carrying amount of hedged items |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other reclassifications |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financial assets available-for-sale |
|
|
11 |
|
|
|
|
|
1,440 |
|
|
|
|
|
3,952 |
|
Revaluation gains (losses) |
|
|
|
|
|
|
|
|
1,810 |
|
|
|
|
|
5,386 |
|
Amounts transferred to income statement |
|
|
|
|
|
|
|
|
(370) |
|
|
|
|
|
(1,435) |
|
Other reclassifications |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
- |
|
Hedging instruments (items not designated) |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Revaluation gains (losses) |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Amounts transferred to income statement |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Other reclassifications |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Debt instruments at fair value with changes in other comprehensive income |
|
|
|
|
|
(2,355) |
|
|
|
|
|
(4,624) |
|
|
|
|
Revaluation gains (losses) |
|
|
|
|
|
(1,433) |
|
|
|
|
|
(2,545) |
|
|
|
|
Amounts transferred to income statement |
|
|
|
|
|
(922) |
|
|
|
|
|
(2,079) |
|
|
|
|
Other reclassifications |
|
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
Non-current assets held for sale |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Revaluation gains (losses) |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Amounts transferred to income statement |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other reclassifications |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Share of other recognized income and expense of investments |
|
|
|
|
|
(111) |
|
|
(39) |
|
|
(462) |
|
|
(183) |
|
Income tax relating to items that may be reclassified to profit or loss |
|
|
|
|
|
738 |
|
|
(386) |
|
|
2,301 |
|
|
(881) |
|
Total recognized income and expenses |
|
|
|
|
|
24,121 |
|
|
3,111 |
|
|
88,146 |
|
|
37,588 |
|
Attributable to non-controlling interests |
|
|
|
|
|
3,571 |
|
|
940 |
|
|
11,624 |
|
|
6,415 |
|
Attributable to the parent |
|
|
|
|
|
20,550 |
|
|
2,171 |
|
|
76,522 |
|
|
31,173 |
|
(*)See further detail regarding the impacts of the entry into force of IFRS 9 as at January 1, 2018 (Note 1.b).
(**)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of recognized income and expense for the nine-month period ended September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(Millions of euros)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling interest |
|
|
|
|
|||
(*) |
|
|
Capital |
|
|
Share |
|
|
Other equity |
|
|
Other equity |
|
|
Accumulated |
|
|
Revaluation |
|
|
Other |
|
|
(‑) Own |
|
|
Profit Attributable |
|
|
(‑) Interim |
|
|
Other |
|
|
Other |
|
|
Other |
|
|
Total |
|
Balance as at 12‑31‑2017 (**) |
|
|
8,068 |
|
|
51,053 |
|
|
525 |
|
|
216 |
|
|
53,437 |
|
|
- |
|
|
(1,602) |
|
|
(22) |
|
|
6,619 |
|
|
(2,029) |
|
|
(21,776) |
|
|
(1,436) |
|
|
13,780 |
|
|
106,833 |
|
Adjustments due to errors |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Adjustments due to changes in accounting policies |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
112 |
|
|
- |
|
|
- |
|
|
- |
|
|
(291) |
|
|
241 |
|
|
(1,533) |
|
|
(1,471) |
|
Opening balance as at 01‑01‑2018 (**) |
|
|
8,068 |
|
|
51,053 |
|
|
525 |
|
|
216 |
|
|
53,437 |
|
|
- |
|
|
(1,490) |
|
|
(22) |
|
|
6,619 |
|
|
(2,029) |
|
|
(22,067) |
|
|
(1,195) |
|
|
12,247 |
|
|
105,362 |
|
Total recognized income and expense |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
5,742 |
|
|
- |
|
|
(2,749) |
|
|
(140) |
|
|
1,135 |
|
|
3,988 |
|
Other changes in equity |
|
|
- |
|
|
- |
|
|
24 |
|
|
1 |
|
|
3,528 |
|
|
- |
|
|
(206) |
|
|
(34) |
|
|
(6,619) |
|
|
980 |
|
|
- |
|
|
- |
|
|
(1,356) |
|
|
(3,682) |
|
Issuance of ordinary shares |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Issuance of preferred shares |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Issuance of other financial instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Maturity of other financial instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Conversion of financial liabilities into equity |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Capital reduction |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Dividends |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(968) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,049) |
|
|
- |
|
|
- |
|
|
(482) |
|
|
(2,499) |
|
Purchase of equity instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(822) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(822) |
|
Disposal of equity instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1 |
|
|
788 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
789 |
|
Transfer from equity to liabilities |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Transfer from liabilities to equity |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Transfers between equity items |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
4,496 |
|
|
- |
|
|
94 |
|
|
- |
|
|
(6,619) |
|
|
2,029 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Increases (decreases) due to business combinations |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(823) |
|
|
(823) |
|
Share-based payment |
|
|
- |
|
|
- |
|
|
- |
|
|
(69) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
17 |
|
|
(52) |
|
Others increases or (-) decreases of the equity |
|
|
- |
|
|
- |
|
|
24 |
|
|
70 |
|
|
- |
|
|
- |
|
|
(301) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(68) |
|
|
(275) |
|
Balance as at 09‑30‑2018 |
|
|
8,068 |
|
|
51,053 |
|
|
549 |
|
|
217 |
|
|
56,965 |
|
|
- |
|
|
(1,696) |
|
|
(56) |
|
|
5,742 |
|
|
(1,049) |
|
|
(24,816) |
|
|
(1,335) |
|
|
12,026 |
|
|
105,668 |
|
(*)See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
(**)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of changes in total equity for the nine-month period ended September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(Millions of reais)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling interest |
|
|
|
|
|||
(*) |
|
|
Capital |
|
|
Share |
|
|
Other equity |
|
|
Other equity |
|
|
Accumulated |
|
|
Revaluation |
|
|
Other |
|
|
(‑) Own |
|
|
Profit Attributable |
|
|
(‑) Interim |
|
|
Other |
|
|
Other |
|
|
Other |
|
|
Total |
|
Balance as at 12-31-2017 (**) |
|
|
21,195 |
|
|
129,805 |
|
|
2,085 |
|
|
641 |
|
|
145,308 |
|
|
- |
|
|
(4,808) |
|
|
(87) |
|
|
23,789 |
|
|
(7,294) |
|
|
64,754 |
|
|
11,610 |
|
|
37,431 |
|
|
424,429 |
|
Adjustments due to errors |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Adjustments due to changes in accounting policies |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
448 |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,159) |
|
|
959 |
|
|
(6,091) |
|
|
(5,843) |
|
Opening balance as at 01-01-2018 (**) |
|
|
21,195 |
|
|
129,805 |
|
|
2,085 |
|
|
641 |
|
|
145,308 |
|
|
- |
|
|
(4,360) |
|
|
(87) |
|
|
23,789 |
|
|
(7,294) |
|
|
63,595 |
|
|
12,569 |
|
|
31,340 |
|
|
418,586 |
|
Total recognized income and expense |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
24,560 |
|
|
- |
|
|
51,962 |
|
|
6,764 |
|
|
4,860 |
|
|
88,146 |
|
Other changes in equity |
|
|
- |
|
|
- |
|
|
108 |
|
|
24 |
|
|
12,694 |
|
|
- |
|
|
(1,046) |
|
|
(172) |
|
|
(23,789) |
|
|
2,958 |
|
|
- |
|
|
- |
|
|
(5,780) |
|
|
(15,003) |
|
Issuance of ordinary shares |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Issuance of preferred shares |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Issuance of other financial instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Maturity of other financial instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Conversion of financial liabilities into equity |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Capital reduction |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Dividends |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(3,480) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(4,336) |
|
|
- |
|
|
- |
|
|
(2,062) |
|
|
(9,878) |
|
Purchase of equity instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(3,515) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(3,515) |
|
Disposal of equity instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2 |
|
|
3,343 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
3,345 |
|
Transfer from equity to liabilities |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Transfer from liabilities to equity |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Transfers between equity items |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
16,174 |
|
|
- |
|
|
321 |
|
|
- |
|
|
(23,789) |
|
|
7,294 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Increases (decreases) due to business combinations |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(2,165) |
|
|
(2,165) |
|
Share-based payment |
|
|
- |
|
|
- |
|
|
- |
|
|
(319) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
80 |
|
|
(239) |
|
Others increases or (-) decreases of the equity |
|
|
- |
|
|
- |
|
|
108 |
|
|
343 |
|
|
- |
|
|
- |
|
|
(1,369) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,633) |
|
|
(2,551) |
|
Balance as at 09-30-2018 |
|
|
21,195 |
|
|
129,805 |
|
|
2,193 |
|
|
665 |
|
|
158,002 |
|
|
- |
|
|
(5,406) |
|
|
(259) |
|
|
24,560 |
|
|
(4,336) |
|
|
115,557 |
|
|
19,333 |
|
|
30,420 |
|
|
491,729 |
|
(*)See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
(**)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of changes in total equity for the nine-month period ended September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(Millions of euros)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling interest |
|
|
|
|
||||
|
|
|
Capital |
|
|
Share |
|
|
Other equity |
|
|
Other equity |
|
|
Accumulated |
|
|
Revaluation |
|
|
Other |
|
|
(‑) Own |
|
|
Profit Attributable |
|
|
(‑) Interim |
|
|
Other |
|
|
Other |
|
|
Other |
|
|
Total |
|
Balance as at 12‑31‑2016 (*) |
|
|
7,291 |
|
|
44,912 |
|
|
- |
|
|
240 |
|
|
49,953 |
|
|
- |
|
|
(949) |
|
|
(7) |
|
|
6,204 |
|
|
(1,667) |
|
|
(15,039) |
|
|
(853) |
|
|
12,614 |
|
|
102,699 |
|
Adjustments due to errors |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Adjustments due to changes in accounting policies |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Opening balance as at 01‑01‑2017 (*) |
|
|
7,291 |
|
|
44,912 |
|
|
- |
|
|
240 |
|
|
49,953 |
|
|
- |
|
|
(949) |
|
|
(7) |
|
|
6,204 |
|
|
(1,667) |
|
|
(15,039) |
|
|
(853) |
|
|
12,614 |
|
|
102,699 |
|
Total recognized income and expense |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
5,077 |
|
|
- |
|
|
(4,784) |
|
|
(397) |
|
|
1,087 |
|
|
983 |
|
Other changes in equity |
|
|
729 |
|
|
6,198 |
|
|
- |
|
|
(32) |
|
|
3,596 |
|
|
- |
|
|
(266) |
|
|
(57) |
|
|
(6,204) |
|
|
705 |
|
|
- |
|
|
- |
|
|
373 |
|
|
5,042 |
|
Issuance of ordinary shares |
|
|
729 |
|
|
6,198 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(3) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
531 |
|
|
7,455 |
|
Issuance of preferred shares |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Issuance of other financial instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
592 |
|
|
592 |
|
Maturity of other financial instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Conversion of financial liabilities into equity |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Capital reduction |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(10) |
|
|
(10) |
|
Dividends |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(802) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(962) |
|
|
- |
|
|
- |
|
|
(441) |
|
|
(2,205) |
|
Purchase of equity instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,148) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,148) |
|
Disposal of equity instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
25 |
|
|
1,091 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,116 |
|
Transfer from equity to liabilities |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Transfer from liabilities to equity |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Transfers between equity items |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
4,398 |
|
|
- |
|
|
139 |
|
|
- |
|
|
(6,204) |
|
|
1,667 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Increases (decreases) due to business combinations |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(19) |
|
|
(19) |
|
Share-based payment |
|
|
- |
|
|
- |
|
|
- |
|
|
(69) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
24 |
|
|
(45) |
|
Others increases or (-) decreases of the equity |
|
|
- |
|
|
- |
|
|
- |
|
|
37 |
|
|
- |
|
|
- |
|
|
(427) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(304) |
|
|
(694) |
|
Balance as at 09‑30‑2017 (*) |
|
|
8,020 |
|
|
51,110 |
|
|
- |
|
|
208 |
|
|
53,549 |
|
|
- |
|
|
(1,215) |
|
|
(64) |
|
|
5,077 |
|
|
(962) |
|
|
(19,823) |
|
|
(1,250) |
|
|
14,074 |
|
|
108,724 |
|
(*)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of changes in total equity for the nine-month period ended September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(Millions of reais)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling interest |
|
|
|
|
|||
|
|
|
Capital |
|
|
Share |
|
|
Other equity |
|
|
Other equity |
|
|
Accumulated |
|
|
Revaluation |
|
|
Other |
|
|
(‑) Own |
|
|
Profit Attributable |
|
|
(‑) Interim |
|
|
Other |
|
|
Other |
|
|
Other |
|
|
Total |
|
Balance as at 12‑31‑2016 (*) |
|
|
18,277 |
|
|
106,783 |
|
|
- |
|
|
630 |
|
|
131,976 |
|
|
- |
|
|
(2,446) |
|
|
(23) |
|
|
23,767 |
|
|
(6,384) |
|
|
39,378 |
|
|
7,026 |
|
|
33,319 |
|
|
352,303 |
|
Adjustments due to errors |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Adjustments due to changes in accounting policies |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Opening balance as at 01‑01‑2017 (*) |
|
|
18,277 |
|
|
106,783 |
|
|
- |
|
|
630 |
|
|
131,976 |
|
|
- |
|
|
(2,446) |
|
|
(23) |
|
|
23,767 |
|
|
(6,384) |
|
|
39,378 |
|
|
7,026 |
|
|
33,319 |
|
|
352,303 |
|
Total recognized income and expense |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
17,897 |
|
|
- |
|
|
13,276 |
|
|
2,589 |
|
|
3,826 |
|
|
37,588 |
|
Other changes in equity |
|
|
2,734 |
|
|
23,242 |
|
|
- |
|
|
(23) |
|
|
13,780 |
|
|
- |
|
|
(868) |
|
|
(217) |
|
|
(23,767) |
|
|
2,991 |
|
|
- |
|
|
- |
|
|
1,503 |
|
|
19,375 |
|
Issuance of ordinary shares |
|
|
2,734 |
|
|
23,242 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(11) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,000 |
|
|
27,965 |
|
Issuance of preferred shares |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Issuance of other financial instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,055 |
|
|
2,055 |
|
Maturity of other financial instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Conversion of financial liabilities into equity |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Capital reduction |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(33) |
|
|
(33) |
|
Dividends |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(3,074) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(3,393) |
|
|
- |
|
|
- |
|
|
(1,514) |
|
|
(7,981) |
|
Purchase of equity instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(4,048) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(4,048) |
|
Disposal of equity instruments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
88 |
|
|
3,846 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
3,934 |
|
Transfer from equity to liabilities |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Transfer from liabilities to equity |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Transfers between equity items |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
16,854 |
|
|
- |
|
|
529 |
|
|
- |
|
|
(23,767) |
|
|
6,384 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Increases (decreases) due to business combinations |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(71) |
|
|
(71) |
|
Share-based payment |
|
|
- |
|
|
- |
|
|
- |
|
|
(236) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
82 |
|
|
(154) |
|
Others increases or (-) decreases of the equity |
|
|
- |
|
|
- |
|
|
- |
|
|
213 |
|
|
- |
|
|
- |
|
|
(1,474) |
|
|
(15) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,016) |
|
|
(2,292) |
|
Balance as at 09‑30‑2017 (*) |
|
|
21,011 |
|
|
130,025 |
|
|
- |
|
|
607 |
|
|
145,756 |
|
|
- |
|
|
(3,314) |
|
|
(240) |
|
|
17,897 |
|
|
(3,393) |
|
|
52,654 |
|
|
9,615 |
|
|
38,648 |
|
|
409,266 |
|
(*)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of changes in total equity for the nine-month period ended September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(Millions of euros)
(*) |
|
|
Note |
|
|
09‑30‑2018 |
|
|
09‑30‑2017 (**) |
|
|
|
|
|
|
|
|
|
|
|
|
A. CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
236 |
|
|
46,591 |
|
Profit for the period |
|
|
|
|
|
6,877 |
|
|
6,164 |
|
Adjustments made to obtain the cash flows from operating activities |
|
|
|
|
|
17,323 |
|
|
18,128 |
|
Depreciation and amortization cost |
|
|
|
|
|
1,774 |
|
|
1,899 |
|
Other adjustments |
|
|
|
|
|
15,549 |
|
|
16,229 |
|
Net increase/(decrease) in operating assets |
|
|
|
|
|
46,405 |
|
|
8,697 |
|
Financial assets held-for-trading |
|
|
|
|
|
(26,147) |
|
|
(20,676) |
|
Non-trading financial assets mandatorily at fair value through profit or loss |
|
|
|
|
|
2,118 |
|
|
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
22,930 |
|
|
6,193 |
|
Financial assets at fair value through other comprehensive income |
|
|
|
|
|
(5,662) |
|
|
|
|
Financial assets available-for-sale |
|
|
|
|
|
|
|
|
7,556 |
|
Financial assets at amortized cost |
|
|
|
|
|
48,733 |
|
|
|
|
Loans and receivables |
|
|
|
|
|
|
|
|
17,091 |
|
Other operating assets |
|
|
|
|
|
4,433 |
|
|
(1,467) |
|
Net increase/(decrease) in operating liabilities |
|
|
|
|
|
24,145 |
|
|
33,677 |
|
Liabilities held-for-trading financial |
|
|
|
|
|
(39,784) |
|
|
2,480 |
|
Financial liabilities designated at fair value through profit or loss |
|
|
|
|
|
32,010 |
|
|
14,815 |
|
Financial liabilities at amortized cost |
|
|
|
|
|
36,861 |
|
|
19,619 |
|
Other operating liabilities |
|
|
|
|
|
(4,942) |
|
|
(3,237) |
|
Income tax recovered/(paid) |
|
|
|
|
|
(1,704) |
|
|
(2,681) |
|
B. CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
4,146 |
|
|
(3,150) |
|
Payments |
|
|
|
|
|
8,692 |
|
|
7,467 |
|
Tangible assets |
|
|
7 |
|
|
7,739 |
|
|
5,991 |
|
Intangible assets |
|
|
|
|
|
942 |
|
|
1,134 |
|
Investments |
|
|
|
|
|
11 |
|
|
4 |
|
Subsidiaries and other business units |
|
|
2 |
|
|
- |
|
|
294 |
|
Non-current assets held for sale and associated liabilities |
|
|
|
|
|
- |
|
|
- |
|
Held-to-maturity investments |
|
|
|
|
|
|
|
|
44 |
|
Other payments related to investing activities |
|
|
|
|
|
- |
|
|
- |
|
Proceeds |
|
|
|
|
|
12,838 |
|
|
4,317 |
|
Tangible assets |
|
|
7 |
|
|
2,953 |
|
|
2,898 |
|
Intangible assets |
|
|
|
|
|
- |
|
|
- |
|
Investments |
|
|
|
|
|
595 |
|
|
137 |
|
Subsidiaries and other business units |
|
|
|
|
|
431 |
|
|
187 |
|
Non-current assets held for sale and associated liabilities |
|
|
6 |
|
|
8,859 |
|
|
962 |
|
Held-to-maturity investments |
|
|
|
|
|
|
|
|
133 |
|
Other proceeds related to investing activities |
|
|
|
|
|
- |
|
|
- |
|
C. CASH FLOW FROM FINANCING ACTIVITIES |
|
|
|
|
|
(2,325) |
|
|
6,472 |
|
Payments |
|
|
|
|
|
6,099 |
|
|
5,213 |
|
Dividends |
|
|
3 |
|
|
2,985 |
|
|
2,566 |
|
Subordinated liabilities |
|
|
|
|
|
1,684 |
|
|
770 |
|
Redemption of own equity instruments |
|
|
|
|
|
- |
|
|
- |
|
Acquisition of own equity instruments |
|
|
|
|
|
822 |
|
|
1,148 |
|
Other payments related to financing activities |
|
|
|
|
|
608 |
|
|
729 |
|
Proceeds |
|
|
|
|
|
3,774 |
|
|
11,685 |
|
Subordinated liabilities |
|
|
|
|
|
2,985 |
|
|
2,894 |
|
Issuance of own equity instruments |
|
|
11 |
|
|
- |
|
|
7,072 |
|
Disposal of own equity instruments |
|
|
|
|
|
789 |
|
|
1,127 |
|
Other proceeds related to financing activities |
|
|
|
|
|
- |
|
|
592 |
|
D. EFFECT OF FOREIGN EXCHANGE RATE DIFFERENCES |
|
|
|
|
|
(1,348) |
|
|
(4,312) |
|
E. NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
709 |
|
|
45,601 |
|
F. CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
|
|
|
|
110,995 |
|
|
76,454 |
|
G. CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
|
|
|
|
111,704 |
|
|
122,055 |
|
COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
|
|
|
6,752 |
|
|
7,097 |
|
Cash equivalents at central banks |
|
|
|
|
|
90,612 |
|
|
101,529 |
|
Other financial assets |
|
|
|
|
|
14,340 |
|
|
13,429 |
|
Less: Bank overdrafts refundable on demand |
|
|
|
|
|
- |
|
|
- |
|
TOTAL CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
|
|
|
|
111,704 |
|
|
122,055 |
|
In which: restricted cash |
|
|
|
|
|
- |
|
|
- |
|
(*)See further detail regarding the impacts of the entry into force of IFRS 9 as at January 1, 2018 (Note 1.b).
(**)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of cash flows for the nine-month period ended September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017
(Millions of reais)
(*) |
|
|
Note |
|
|
09‑30‑2018 |
|
|
09‑30‑2017 (**) |
|
|
|
|
|
|
|
|
|
|
|
|
A. CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
1,013 |
|
|
164,235 |
|
Profit for the period |
|
|
|
|
|
29,420 |
|
|
21,723 |
|
Adjustments made to obtain the cash flows from operating activities |
|
|
|
|
|
74,102 |
|
|
63,902 |
|
Depreciation and amortization cost |
|
|
|
|
|
7,589 |
|
|
6,694 |
|
Other adjustments |
|
|
|
|
|
66,513 |
|
|
57,208 |
|
Net increase/(decrease) in operating assets |
|
|
|
|
|
198,504 |
|
|
30,655 |
|
Financial assets held-for-trading |
|
|
|
|
|
(111,848) |
|
|
(72,882) |
|
Non-trading financial assets mandatorily at fair value through profit or loss |
|
|
|
|
|
9,060 |
|
|
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
98,086 |
|
|
21,832 |
|
Financial assets at fair value through other comprehensive income |
|
|
|
|
|
(24,220) |
|
|
|
|
Financial assets available-for-sale |
|
|
|
|
|
|
|
|
26,636 |
|
Financial assets at amortized cost |
|
|
|
|
|
208,463 |
|
|
|
|
Loans and receivables |
|
|
|
|
|
|
|
|
60,246 |
|
Other operating assets |
|
|
|
|
|
18,963 |
|
|
(5,177) |
|
Net increase/(decrease) in operating liabilities |
|
|
|
|
|
103,284 |
|
|
118,717 |
|
Liabilities held-for-trading financial |
|
|
|
|
|
(170,182) |
|
|
8,743 |
|
Financial liabilities designated at fair value through profit or loss |
|
|
|
|
|
136,928 |
|
|
52,223 |
|
Financial liabilities at amortized cost |
|
|
|
|
|
157,678 |
|
|
69,159 |
|
Other operating liabilities |
|
|
|
|
|
(21,140) |
|
|
(11,408) |
|
Income tax recovered/(paid) |
|
|
|
|
|
(7,289) |
|
|
(9,452) |
|
B. CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
17,735 |
|
|
(11,104) |
|
Payments |
|
|
|
|
|
37,183 |
|
|
26,318 |
|
Tangible assets |
|
|
7 |
|
|
33,106 |
|
|
21,118 |
|
Intangible assets |
|
|
|
|
|
4,030 |
|
|
3,998 |
|
Investments |
|
|
|
|
|
47 |
|
|
13 |
|
Subsidiaries and other business units |
|
|
2 |
|
|
- |
|
|
1,035 |
|
Non-current assets held for sale and associated liabilities |
|
|
|
|
|
- |
|
|
- |
|
Held-to-maturity investments |
|
|
|
|
|
|
|
|
154 |
|
Other payments related to investing activities |
|
|
|
|
|
- |
|
|
- |
|
Proceeds |
|
|
|
|
|
54,918 |
|
|
15,214 |
|
Tangible assets |
|
|
7 |
|
|
12,633 |
|
|
10,214 |
|
Intangible assets |
|
|
|
|
|
- |
|
|
- |
|
Investments |
|
|
|
|
|
2,545 |
|
|
482 |
|
Subsidiaries and other business units |
|
|
|
|
|
1,844 |
|
|
661 |
|
Non-current assets held for sale and associated liabilities |
|
|
6 |
|
|
37,896 |
|
|
3,390 |
|
Held-to-maturity investments |
|
|
|
|
|
|
|
|
467 |
|
Other proceeds related to investing activities |
|
|
|
|
|
- |
|
|
- |
|
C. CASH FLOW FROM FINANCING ACTIVITIES |
|
|
|
|
|
(9,271) |
|
|
23,466 |
|
Payments |
|
|
|
|
|
25,386 |
|
|
17,723 |
|
Dividends |
|
|
3 |
|
|
12,470 |
|
|
9,012 |
|
Subordinated liabilities |
|
|
|
|
|
7,241 |
|
|
2,735 |
|
Redemption of own equity instruments |
|
|
|
|
|
- |
|
|
- |
|
Acquisition of own equity instruments |
|
|
|
|
|
3,515 |
|
|
4,048 |
|
Other payments related to financing activities |
|
|
|
|
|
2,160 |
|
|
1,928 |
|
Proceeds |
|
|
|
|
|
16,115 |
|
|
41,189 |
|
Subordinated liabilities |
|
|
|
|
|
12,769 |
|
|
10,201 |
|
Issuance of own equity instruments |
|
|
11 |
|
|
- |
|
|
24,930 |
|
Disposal of own equity instruments |
|
|
|
|
|
3,346 |
|
|
3,972 |
|
Other proceeds related to financing activities |
|
|
|
|
|
- |
|
|
2,086 |
|
D. EFFECT OF FOREIGN EXCHANGE RATE DIFFERENCES |
|
|
|
|
|
69,366 |
|
|
20,483 |
|
E. NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
78,843 |
|
|
197,080 |
|
F. CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
|
|
|
|
440,972 |
|
|
262,275 |
|
G. CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
|
|
|
|
519,815 |
|
|
459,355 |
|
COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
|
|
|
31,420 |
|
|
26,710 |
|
Cash equivalents at central banks |
|
|
|
|
|
421,664 |
|
|
382,104 |
|
Other financial assets |
|
|
|
|
|
66,731 |
|
|
50,541 |
|
Less: Bank overdrafts refundable on demand |
|
|
|
|
|
- |
|
|
- |
|
TOTAL CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
|
|
|
|
519,815 |
|
|
459,355 |
|
In which: restricted cash |
|
|
|
|
|
- |
|
|
- |
|
(*)See further detail regarding the impacts of the entry into force of IFRS 9 as at January 1, 2018 (Note 1.b).
(**)Presented for comparison purposes only (Note 1.e).
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of cash flows for the nine -month period ended September 30, 2018.
Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
Banco Santander, S.A. and Companies composing Santander Group
Explanatory notes to the interim condensed consolidated financial statements for the nine-month period ended September 30, 2018
1.Introduction, basis of presentation of the interim condensed consolidated financial statements and other information
a) |
Introduction |
Banco Santander, S.A. (“the Bank” or “Banco Santander”) is a private-law entity subject to the rules and regulations applicable to banks operating in Spain. The Bylaws and other public information of the Bank can be consulted in the Bank´s website (www.santander.com) and at its registered office at Paseo de Pereda 9‑12, Santander.
In addition to the operations carried on directly by it, the Bank is the head of a group of subsidiaries that engage in various business activities and which compose, together with it, Santander Group (“the Group” or “Santander Group”).
The Group’s interim condensed consolidated financial statements for the nine-month period ended September 30, 2018 (“interim financial statements”) were prepared and authorized by the Group’s directors at the board meeting held on October 30, 2018. The Group’s consolidated financial statements for year 2017 were approved by the shareholders at the Bank’s annual general meeting on March 23, 2018.
b) |
Basis of presentation of the interim financial statements |
Under Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of July 19, 2002, all companies governed by the law of an EU Member State and whose securities are admitted to trading on a regulated market of any Member State must prepare their consolidated financial statements for the years beginning on or after January 1, 2005 in accordance with the International Financial Reporting Standards (“IFRSs”) as previously adopted by the European Union (“EU-IFRSs”). In order to adapt the accounting system of Spanish credit institutions to these standards, the Bank of Spain issued Circular 4/2004, of December 22, on Public and Confidential Financial Reporting Rules and Formats, which was repealed on January 1, 2018 by Bank of Spain Circular 4/2017, of November 27, 2017.
The Group’s consolidated financial statements for 2017 prepared in accordance with the requirements and specific provisions of CVM Instruction no. 480/2009 of the Securities and Exchange Commission of Brazil were prepared by the Bank (and approved at the board of directors meeting on February 13, 2018) in compliance with International Financial Reporting Standards as adopted by the European Union, taking into account Bank of Spain Circular 4/2004, and the International Financial Reporting Standards issued by the International Accounting Standards Board (IASB-IFRSs), using the basis of consolidation, accounting policies and measurement bases described in Note 2 to the aforementioned consolidated financial statements and, accordingly, they presented fairly the Group’s consolidated equity and consolidated financial position at December 31, 2017 and the consolidated results of its operations, the consolidated recognized income and expense, the changes in consolidated equity and the consolidated cash flows in 2017.
These interim financial statements were prepared and are presented in accordance with International Accounting Standard (IAS 34), Interim Financial Reporting, for the preparation of interim condensed
1
financial statements and contain disclosures relating to the quarter and the nine-month period ended September 30, 2018.
In accordance with IAS 34, the interim financial report is intended only to provide an update on the content of the latest annual consolidated financial statements authorized for issue, focusing on new activities, events and circumstances occurring during the third quarter, and does not duplicate information previously reported in the latest annual consolidated financial statements. Consequently, these interim financial statements do not include all the information that would be required for a complete set of consolidated financial statements prepared in accordance with IFRSs and, accordingly, for a proper comprehension of the information included in these interim financial statements, they should be read together with the Group’s consolidated financial statements for the year ended December 31, 2017.
Santander Group policies include presenting the interim financial statements for its use in the different markets using the Euro as its presentation currency. These interim financial statements have been prepared in order to comply with the specific requirements and provisions established in the Instruction nº480/2009 of the CVM, as a result of the negotiation of securities in regulated markets in Brazil, which requires the disclosure of the interim financial statements prepared in compliance with the IAS 34 issued by the IASB, in Brazilian reais and Portuguese. For this reason, the presented interim financial statements may not be adequate for other purposes.
Consequently, given that the functional currency of the Bank as well as its management is defined based on the Euro, the amounts presented in Brazilian reais are exclusively included in order to comply with the requirements of the Instruction nº 480/2009 of the Brazilian Securities Market Commission (CVM) and its subsequent amendments, may not be representative of the equity evolution of the Group in a situation of significant changes between the euro and reais.
The balances have been converted to reais in accordance with the criteria set out in Note 2.a of the Group’s consolidated financial statements relating to the year 2017 prepared to meet the specific requirements and provisions contained in the instruction 480/2009 of the Brazilian Securities Commission. As indicated in that note, for practical reasons, the balance sheet amount has been converted to the closing exchange rate, the equity to the historical type, and the income and expenses have been converted by applying the average exchange rate of the period; the application of such exchange rate or that corresponding to the date of each transaction does not lead to significant differences in the interim financial statements of the Group.
The accounting policies and methods used in preparing these interim financial statements are the same as those applied in the consolidated financial statements for 2017, taking into account the standards and interpretations which came into force for the Group in the nine-month period ended September 30, 2018, which are detailed below, and taking into consideration the Circular 4/2017, of November 27 of the Bank of Spain:
- IFRS 9 Financial Instruments – Classification and measurement, hedging and impairment
On January 1, 2018, IFRS 9 Financial instruments entered into force. IFRS 9 establishes the requirements for recognition and measurement of both financial instruments and certain types of non-financial-purchase contracts. The aforementioned requirements should be applied retrospectively, adjusting the opening balance at January 1, 2018, not requiring restatement of the comparative financial statements.
The adoption of IFRS 9 has resulted in changes in the Groups’ accounting policies for the recognition, classification and measurement of financial assets and liabilities and financial assets impairment. IFRS 9 also significantly modifies other standards related to financial instruments such as IFRS 7 "Financial instruments: disclosure”.
2
The main aspects contained in the new regulation are:
a) |
Classification of financial instruments: the classification criteria for financial assets depends on the business model for their management and the characteristics of their contractual flows. Depending on these factors, the asset can be measured at amortized cost, at fair value with changes reported in other comprehensive income, or at fair value with changes reported through profit and loss for the period. IFRS 9 also establishes an option to designate an instrument at fair value with changes in profit or loss, under certain conditions. Santander Group uses the following criteria for the classification of financial debt instruments: |
- Amortized cost: financial instruments under a business model whose objective is to collect principal and interest cash flows, over those where no significant unjustified sales exist and fair value is not a key factor in managing these financial assets. In this way, unjustified sales are those that are different from sales related with an increase in the asset´s credit risk, unanticipated funding needs (stress case scenario), even if such sales are significant in value, or from sales of assets that no longer met the credit criteria specified in the entity´s investment policy. Additionally, the contractual cash flow characteristics substantially represent a “basic financing agreement”.
- Fair value with changes recognized through other comprehensive income: financial instruments held in a business model whose objective is to collect principal and interest cash flows and the sale of these assets, where fair value is a key factor in their management. Additionally, the contractual cash flow characteristics substantially represent a “basic financing agreement”.
- Fair value with changes recognized through profit or loss: financial instruments included in a business model whose objective is not obtained through the above mentioned models, where fair value is a key factor in managing of these assets, and financial instruments whose contractual cash flow characteristics do not substantially represent a “basic financing agreement”.
Santander Group’s main activity revolves around retail and commercial banking operations, and its exposure does not focus on complex financial products. The main objective of the Group is to achieve consistent classification of financial instruments in the portfolios as established under IFRS 9. To this end, it has developed guidelines containing criteria to ensure consistent classification across all of its units. Additionally, the Group has analyzed its portfolios under these criteria, in order to assign its financial instruments to the appropriate portfolio under IFRS 9. (See table of classification and measurement of financial instruments).
Equity instruments will be classified at fair value under IFRS 9, with changes recognized through profit or loss, unless the Group decides, for non-trading assets, to classify them at fair value with changes recognized through other comprehensive income (irrevocably).
IAS 39 financial liabilities classification and measurement criteria remains substantially unchanged under IFRS 9. Nevertheless, in most cases, the changes in the fair value of financial liabilities designated at fair value with changes recognized through profit or loss for the year, due to the entity credit risk, are classified under other comprehensive income.
b) |
Credit risk impairment model: the most important new development compared with the previous model is that the new accounting standard introduces the concept of expected loss, whereas the previous model (IAS 39) is based on incurred loss: |
- Scope of application: the IFRS 9 impairment model applies to financial assets valued at amortized cost, debt instruments valued at fair value with changes reported in other comprehensive income, lease receivables, and commitments and guarantees given not valued at fair value.
- Use of practical expedients: IFRS 9 includes a number of practical expedients that may be implemented by entities to facilitate implementation. However, in order to achieve full and high quality
3
implementation of the standard, considering industry best practices, these practical expedients will not be widely used:
- Rebuttable presumption that the credit risk has increased significantly when payments are more than 30 days past due: this threshold is used as an additional – but not primary - indicator of significant risk increase. Additionally, there may be cases in the Group where its use has been rebutted as a result of studies that show a low correlation of the significant risk increase with this past due threshold.
- Assets with low credit risk at the reporting date: in general, the Group assesses the existence of significant risk increase in all its financial instruments.
- Impairment estimation methodology: the portfolio of financial instruments subject to impairment is divided into three categories, based on the stage of each instrument with regard to its level of credit risk:
- Stage 1: financial instruments for which no significant increase in risk is identified since its initial recognition. In this case, the impairment provision reflects expected credit losses arising from defaults over the following 12 months from the reporting date.
- Stage 2: if there has been a significant increase in risk since the date of initial recognition, but the impairment event has not materialized the financial instrument is classified as Stage 2. In this case, the impairment provision reflects the expected losses from defaults over the residual life of the financial instrument.
- Stage 3: a financial instrument is catalogued in this stage when shows effective signs of impairment as a result of one or more events that have already occurred resulting in a loss. In this case, the amount of the impairment provision reflects the expected losses for credit risk over the expected residual life of the financial instrument.
Additionally, on the reporting date, the Group will only recognize the cumulative changes in expected credit losses over the life of the asset from the initial recognition as a value correction for losses for financial assets with credit impairment originated or purchased.
The methodology required for the quantification of expected loss due to credit events will be based on an unbiased and weighted consideration of the occurrence of up to five possible future scenarios that could impact the collection of contractual cash flows, taking into account the time-value of money, all available information relevant to past events, and current conditions and projections of macroeconomic factors deemed relevant to the estimation of this amount (e.g. Gross Domestic Product (GDP), house pricing, unemployment rate, etc.).
The estimation of expected losses requires a high component of expert judgement and it must be supported by past, present and future information. Therefore, these expected loss estimates take into consideration multiple macroeconomic scenarios for which the probability is measured considering past events, current situation and future trends and macroeconomic indicators, such as GDP or unemployment rate.
The Group already uses forward looking information in internal management and regulatory processes, considering several scenarios. In this sense, the Group has leveraged its experience in the management of such information, maintaining consistency with the information used in the other processes.
In estimating the parameters used for impairment provisions calculation (EAD (Exposure at Default), PD (Probability of Default), LGD (Loss Given Default) and discount rate), the Group leveraged on its experience developing internal models for calculating parameters for regulatory and management purposes. The Group is aware of the differences between such models and IFRS 9 requirements for impairment purposes.
4
As a result, it has focused on adapting to such requirements to the development of its IFRS 9 impairment provision models.
- Determination of significant increase in risk: with the purpose of determine whether a financial instrument has increased its credit risk since initial recognition, proceeding with its classification into Stage 2, the Group considers the following criteria:
Quantitative criteria |
Changes in the risk of a default occurring through the expected life of the financial instrument are analyzed and quantified with respect to its credit level in its initial recognition. With the purpose of determining if such changes are considered as significant, with the consequent classification into Stage 2, each Group unit has defined the quantitative thresholds to consider in each of its portfolios taking into account corporate guidelines ensuring a consistent interpretation in all geographies. |
Qualitative criteria |
In addition to the quantitative criteria mentioned above, the Group considers several indicators that are aligned with those used in ordinary credit risk management (e.g.: over 30 days past due, forbearances, etc.). Each unit has defined these qualitative criteria for each of its portfolios, according to its particularities and with the policies currently in force. The use of these qualitative criteria is complemented with the use of an expert judgement. |
- Default definition: the definition considered for impairment provisioning purposes is consistent with that used in the development of advanced models for regulatory capital requirements calculations.
- Expected life of the financial instrument: with the purpose of its estimation all the contractual terms have been taken into account (e.g. prepayments, duration, purchase options, etc.), being the contractual period (including extension options) the maximum period considered to measure the expected credit losses. In the case of financial instruments with an uncertain maturity period and a component of undrawn commitment (e.g.: credit cards), expected life is estimated considering the period for which the entity is exposed to credit risk and the effectiveness of management practices mitigates such exposure.
- Impairment recognition: the main change with respect to the current standard related to assets measured at fair value with changes recognized through other comprehensive income. The portion of the changes in fair value due to expected credit losses will be recorded at the current profit and loss account while the rest will be recorded in other comprehensive income.
c) |
Hedge accounting: IFRS 9 includes new hedge accounting requirements which have a twofold objective: to simplify current requirements, and to bring hedge accounting in line with risk management, allowing to be a greater variety of derivative financial instruments which may be considered to be hedging instruments. Furthermore, additional breakdowns are required providing useful information regarding the effect which hedge accounting has on financial statements and also on the entity’s risk management strategy. The treatment of macro-hedges is being developed as a separate project under IFRS 9. Entities have the option of continuing to apply IAS 39 with respect to accounting hedges until the project has been completed. According to the analysis performed until now, the Group will continue to apply IAS 39 in hedge accounting. |
For breakdowns of the notes, the amendments relating to IFRS 7 have only been applied to the current period. The breakdowns of the comparative information period notes maintain the breakdowns made in the previous period.
5
The following breakdowns relate to the impact of the adoption of IFRS 9 in the Group:
a)Classification and measurement of financial instruments
IAS 39 |
IFRS 9 |
|||
Balance |
Portfolio |
Book value |
Portfolio |
Book value |
Equity instruments |
Financial assets available for sale |
2,154 |
Non-trading financial assets mandatorily at fair value through profit or loss |
1,651 |
(including those that were valued at cost at December) |
Financial assets at fair value through other comprehensive income |
533 |
||
Loans and receivables |
1,537 |
Non-trading financial assets mandatorily at fair value through profit or loss |
1,497 |
|
457 |
Financial assets at fair value through other comprehensive income |
486 |
||
96 |
Non-trading financial assets mandatorily at fair value through profit or loss |
96 |
||
Debt instruments |
Financial assets available for sale |
6,589 |
Financial assets at amortized cost |
6,704 |
203 |
Financial assets held for trading |
203 |
||
Financial assets at fair value through profit or loss |
199 |
Non-trading financial assets mandatorily at fair value through profit or loss |
199 |
|
Investments held-to-maturity |
13,491 |
Financial assets at amortized cost |
13,491 |
|
Loans and receivables |
9,864 |
Non-trading financial assets mandatorily at fair value through profit or loss |
296 |
|
Financial assets at fair value through profit or loss |
9,577 |
|||
Loans and advances |
Loans and receivables |
1,069 |
Financial assets at fair value through other comprehensive income |
1,107 |
Financial assets held for trading |
43 |
|||
Financial assets at fair value through profit or loss |
1,152 |
Financial assets at amortized cost |
1,102 |
|
Derivatives |
Derivatives – hedging accounting (Liabilities) |
10 |
Derivatives - Financial liabilities held for trading |
10 |
The following table shows a comparison between IAS 39 as of December 31, 2017 and IFRS 9 as of January 1, 2018 of the reclassified financial instruments in accordance with the new requirements of IFRS 9 regarding classification and measurement (without impairment), as well as its book value:
IAS 39 |
IFRS 9 |
|||
Balance |
Portfolio |
Book value |
Portfolio |
Book value |
Equity instruments |
Financial assets available for sale |
8,558 |
Non-trading financial assets mandatorily at fair value through profit or loss |
6,561 |
(including those that were valued at cost at December) |
Financial assets at fair value through other comprehensive income |
2,119 |
||
Loans and receivables |
6,107 |
Non-trading financial assets mandatorily at fair value through profit or loss |
5,951 |
|
1,814 |
Financial assets at fair value through other comprehensive income |
1,931 |
||
380 |
Non-trading financial assets mandatorily at fair value through profit or loss |
380 |
||
Debt instruments |
Financial assets available for sale |
26,180 |
Financial assets at amortized cost |
26,636 |
805 |
Financial assets held for trading |
805 |
||
Financial assets at fair value through profit or loss |
790 |
Non-trading financial assets mandatorily at fair value through profit or loss |
790 |
|
Investments held-to-maturity |
53,599 |
Financial assets at amortized cost |
53,599 |
|
Loans and receivables |
39,190 |
Non-trading financial assets mandatorily at fair value through profit or loss |
1,176 |
|
Financial assets at fair value through profit or loss |
38,052 |
|||
Loans and advances |
Loans and receivables |
4,244 |
Financial assets at fair value through other comprehensive income |
4,396 |
Financial assets held for trading |
172 |
|||
Financial assets at fair value through profit or loss |
4,578 |
Financial assets at amortized cost |
4,380 |
|
Derivatives |
Derivatives – hedging accounting (Liabilities) |
41 |
Derivatives - Financial liabilities held for trading |
41 |
6
b)Reconciliation of impairment provisions from IAS 39 to IFRS 9
The following table shows a comparison between IAS 39 as of December 31, 2017 and IFRS 9 as of January 1, 2018 of the impairment provisions of the financial instruments in accordance with the new requirements of IFRS 9:
|
|
|
Millions of euros |
|
||||||
|
|
|
IAS 39 |
|
|
Impairment impact |
|
|
IFRS 9 |
|
Financial assets at amortized cost |
|
|
24,682 |
|
|
1,974 |
|
|
26,656 |
|
Loans and advances |
|
|
23,952 |
|
|
2,002 |
|
|
25,954 |
|
Debt instruments |
|
|
730 |
|
|
(28) |
|
|
702 |
|
Financial assets at fair value through other comprehensive income |
|
|
- |
|
|
2 |
|
|
2 |
|
Debt instruments |
|
|
- |
|
|
2 |
|
|
2 |
|
Commitments and guarantees granted |
|
|
617 |
|
|
197 |
|
|
814 |
|
Total |
|
|
25,299 |
|
|
2,173 |
|
|
27,472 |
|
Additionally, there is an impairment impact on Investments in joint ventures and associates of EUR 34 million.
|
|
|
Millions of reais |
|
||||||
|
|
|
IAS 39 |
|
|
Impairment impact |
|
|
IFRS 9 |
|
Financial assets at amortized cost |
|
|
98,060 |
|
|
7,843 |
|
|
105,903 |
|
Loans and advances |
|
|
95,159 |
|
|
7,955 |
|
|
103,114 |
|
Debt instruments |
|
|
2,901 |
|
|
(112) |
|
|
2,789 |
|
Financial assets at fair value through other comprehensive income |
|
|
- |
|
|
6 |
|
|
6 |
|
Debt instruments |
|
|
- |
|
|
6 |
|
|
6 |
|
Commitments and guarantees granted |
|
|
2,449 |
|
|
784 |
|
|
3,233 |
|
Total |
|
|
100,509 |
|
|
8,633 |
|
|
109,142 |
|
Additionally, there is an impairment impact on Investments in joint ventures and associates of 134 million of reais.
7
c)Balance sheet reconciliation from IAS 39 to IFRS 9
The following table shows in detail the reconciliation the consolidated balance sheet under IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 distinguishing between the impacts due to classification and measurement and due to impairment once adopted IFRS 9:
ASSETS (millions of euros) |
|
|
IAS 39 |
|
|
Naming modifications (*) |
|
|
Classification and |
|
|
Impairment |
|
|
IFRS 9 |
|
Cash, cash balances at central banks and other deposits on demand |
|
|
110,995 |
|
|
- |
|
|
- |
|
|
- |
|
|
110,995 |
|
Financial assets held for trading |
|
|
125,458 |
|
|
- |
|
|
160 |
|
|
- |
|
|
125,618 |
|
Derivatives |
|
|
57,243 |
|
|
- |
|
|
- |
|
|
- |
|
|
57,243 |
|
Equity instruments |
|
|
21,353 |
|
|
- |
|
|
- |
|
|
- |
|
|
21,353 |
|
Debt instruments |
|
|
36,351 |
|
|
- |
|
|
203 |
|
|
- |
|
|
36,554 |
|
Loans and advances |
|
|
10,511 |
|
|
- |
|
|
(43) |
|
|
- |
|
|
10,468 |
|
Non-trading financial assets mandatorily at fair value through profit or loss |
|
|
|
|
|
933 |
|
|
3,739 |
(c) |
|
- |
|
|
4,672 |
|
Equity instruments |
|
|
|
|
|
933 |
|
|
1,651 |
|
|
- |
|
|
2,584 |
|
Debt instruments |
|
|
|
|
|
- |
|
|
1,792 |
|
|
- |
|
|
1,792 |
|
Loans and advances |
|
|
|
|
|
- |
|
|
296 |
|
|
- |
|
|
296 |
|
Financial assets designated at fair value through profit or loss |
|
|
34,782 |
|
|
(933) |
|
|
8,226 |
|
|
- |
|
|
42,075 |
|
Equity instruments |
|
|
933 |
|
|
(933) |
|
|
- |
|
|
- |
|
|
|
|
Debt instruments |
|
|
3,485 |
|
|
- |
|
|
(199) |
|
|
- |
|
|
3,286 |
|
Loans and advances |
|
|
30,364 |
|
|
- |
|
|
8,425 |
(a) |
|
- |
|
|
38,789 |
|
Financial assets at fair value through other comprehensive income |
|
|
|
|
|
124,229 |
|
|
2,126 |
|
|
(2) |
|
|
126,353 |
|
Equity instruments |
|
|
|
|
|
2,636 |
|
|
533 |
|
|
- |
|
|
3,169 |
|
Debt instruments |
|
|
|
|
|
121,593 |
|
|
486 |
|
|
(2) |
|
|
122,077 |
|
Loans and advances |
|
|
|
|
|
- |
|
|
1,107 |
|
|
- |
|
|
1,107 |
|
Financial assets available-for-sale |
|
|
133,271 |
|
|
(124,229) |
|
|
(9,042) |
|
|
- |
|
|
|
|
Equity instruments |
|
|
4,790 |
|
|
(2,636) |
|
|
(2,154) |
(c) |
|
- |
|
|
|
|
Debt instruments |
|
|
128,481 |
|
|
(121,593) |
|
|
(6,888) |
|
|
- |
|
|
|
|
Financial assets at amortized cost |
|
|
|
|
|
890,094 |
(a) |
|
21,297 |
|
|
(1,982) |
(d) |
|
909,409 |
|
Debt instruments |
|
|
|
|
|
15,557 |
(b) |
|
20,195 |
(b) |
|
20 |
|
|
35,772 |
|
Loans and advances |
|
|
|
|
|
874,537 |
|
|
1,102 |
|
|
(2,002) |
|
|
873,637 |
|
Loans and receivables |
|
|
903,013 |
|
|
(890,094) |
(a) |
|
(12,927) |
|
|
8 |
|
|
|
|
Debt instruments |
|
|
17,543 |
|
|
(15,557) |
|
|
(1,994) |
(c) |
|
8 |
|
|
|
|
Loans and advances |
|
|
885,470 |
|
|
(874,537) |
|
|
(10,933) |
(a) |
|
- |
|
|
|
|
Investments held to maturity |
|
|
13,491 |
|
|
- |
|
|
(13,491) |
(b) |
|
- |
|
|
- |
|
Investments |
|
|
6,184 |
|
|
- |
|
|
- |
|
|
(34) |
|
|
6,150 |
|
Other assets (**) |
|
|
117,111 |
|
|
- |
|
|
6 |
|
|
680 |
(e) |
|
117,797 |
|
TOTAL ASSETS |
|
|
1,444,305 |
|
|
- |
|
|
94 |
|
|
(1,330) |
|
|
1,443,069 |
|
(*) Due to the entry into force of Bank of Spain Circular 4/2017.
(**) Includes Hedging derivatives, Changes in the fair value of hedged items in portfolio hedges of interest risk, Reinsurance assets, Tangible assets, Intangible assets, Tax assets, Other assets and Non-current assets held for sale.
a) |
The amount of the item ‘Loans and receivables’ at December 31, 2017 is reclassified into ‘Financial assets at amortized cost’. Nevertheless, the Group maintained a portfolio of loans and receivables for an approximate amount of 8,600 million of euros, which relate mainly to Brazil, which was designated at amortized cost; as a result of the initial implementation of IFRS 9 this portfolio has been designated as fair value and finally it has been reclassified as ‘Financial assets designated at fair value through profit or loss’. |
b) |
Instruments classified as ‘Investments held to maturity’ at December 31, 2017 have been reclassified into ‘Financial assets available-for-sale’ because of the initial implementation of IFRS 9. Additionally, after the review of the business model of cash flow portfolio in different locations, the group has identified certain groups of assets classified at December 31, 2017 as ‘Financial assets available-for-sale’, which relate mainly to Mexico, Brazil and Consumer Finance business, whose management is orientated towards the maintenance of financial instruments in a portfolio until maturity end; because of that, this asset group has been reclassified as ‘Financial assets at amortized cost’. |
c) |
The Group has reclassified in ‘Non-trading financial assets mandatory at fair value through profit or loss’ those financial instruments which have not comply with the SPPI test (only principal payment and interests) classified at December 31, 2017 mainly in ‘Loans and receivables’ and ‘Financial assets available for sale’, which relate mainly to UK and Spain. |
d) |
It corresponds to the increase in provisions for impairment of the value of the assets included in the item ‘Financial assets at amortized cost’ derived from the change in accounting policy. |
e) |
This corresponds with increase on provisions for the tax effect referred in section d. |
8
LIABILITIES (millions of euros) |
|
|
IAS 39 |
|
|
Naming modifications |
|
|
Classification and |
|
|
Impairment |
|
|
IFRS 9 |
|
Financial liabilities held for trading |
|
|
107,624 |
|
|
- |
|
|
10 |
|
|
- |
|
|
107,634 |
|
Derivatives |
|
|
57,892 |
|
|
- |
|
|
10 |
|
|
- |
|
|
57,902 |
|
Short positions |
|
|
20,979 |
|
|
- |
|
|
- |
|
|
- |
|
|
20,979 |
|
Deposits |
|
|
28,753 |
|
|
- |
|
|
- |
|
|
- |
|
|
28,753 |
|
Debt instruments issued |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other financial liabilities |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financial liabilities designated at fair value through profit or loss |
|
|
59,616 |
|
|
- |
|
|
- |
|
|
- |
|
|
59,616 |
|
Deposits |
|
|
55,971 |
|
|
- |
|
|
- |
|
|
- |
|
|
55,971 |
|
Debt instruments issued |
|
|
3,056 |
|
|
- |
|
|
- |
|
|
- |
|
|
3,056 |
|
Other financial liabilities |
|
|
589 |
|
|
- |
|
|
- |
|
|
- |
|
|
589 |
|
Financial liabilities at amortized cost |
|
|
1,126,069 |
|
|
- |
|
|
- |
|
|
- |
|
|
1,126,069 |
|
Deposits |
|
|
883,320 |
|
|
- |
|
|
- |
|
|
- |
|
|
883,320 |
|
Debt instruments issued |
|
|
214,910 |
|
|
- |
|
|
- |
|
|
- |
|
|
214,910 |
|
Other financial liabilities |
|
|
27,839 |
|
|
- |
|
|
- |
|
|
- |
|
|
27,839 |
|
Hedging derivatives |
|
|
8,044 |
|
|
- |
|
|
(10) |
|
|
- |
|
|
8,034 |
|
Changes in the fair value of hedged items in portfolio hedges of interest rate risk |
|
|
330 |
|
|
- |
|
|
- |
|
|
- |
|
|
330 |
|
Provisions |
|
|
14,489 |
|
|
- |
|
|
- |
|
|
197 |
|
|
14,686 |
|
Commitments and guarantees given |
|
|
617 |
|
|
- |
|
|
- |
|
|
197 |
|
|
814 |
|
Other provisions (*) |
|
|
13,872 |
|
|
- |
|
|
- |
|
|
- |
|
|
13,872 |
|
Rest of liabilities (**) |
|
|
21,300 |
|
|
- |
|
|
41 |
|
|
(3) |
|
|
21,338 |
|
TOTAL LIABILITIES |
|
|
1,337,472 |
|
|
- |
|
|
41 |
|
|
194 |
|
|
1,337,707 |
|
(*) Includes Pensions and other post-retirements obligations, Other long-term employee benefits, Taxes and other legal contingencies, Contingent liabilities and commitments and Other provisions (including endorsements and other contingent liabilities).
(**) Includes Liabilities under insurance or reinsurance contracts, Tax liabilities, Other liabilities and Liabilities associated with non current assets held for sale.
EQUITY (millions of euros) |
|
|
IAS 39 |
|
|
Naming modifications |
|
|
Classification and |
|
|
Impairment |
|
|
IFRS 9 |
|
Shareholders’ equity |
|
|
116,265 |
|
|
- |
|
|
91 |
|
|
(1,401) |
|
|
114,955 |
|
Capital |
|
|
8,068 |
|
|
- |
|
|
- |
|
|
- |
|
|
8,068 |
|
Share premium |
|
|
51,053 |
|
|
- |
|
|
- |
|
|
- |
|
|
51,053 |
|
Equity instruments issued other than capital |
|
|
525 |
|
|
- |
|
|
- |
|
|
- |
|
|
525 |
|
Other equity |
|
|
216 |
|
|
- |
|
|
- |
|
|
- |
|
|
216 |
|
Accumulated retained earnings |
|
|
53,437 |
|
|
- |
|
|
- |
|
|
- |
|
|
53,437 |
|
Revaluation reserves |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other reserves |
|
|
(1,602) |
|
|
- |
|
|
91 |
|
|
(1,401) |
|
|
(2,912) |
|
(-) Own shares |
|
|
(22) |
|
|
- |
|
|
- |
|
|
- |
|
|
(22) |
|
Profit attributable to shareholders’ of the parent |
|
|
6,619 |
|
|
- |
|
|
- |
|
|
- |
|
|
6,619 |
|
(-) Interim dividends |
|
|
(2,029) |
|
|
- |
|
|
- |
|
|
- |
|
|
(2,029) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
(21,776) |
|
|
- |
|
|
(53) |
|
|
- |
|
|
(21,829) |
|
Items not reclassified to profit or loss |
|
|
(4,034) |
|
|
919 |
|
|
(152) |
|
|
- |
|
|
(3,267) |
|
Actuarial gains or losses on defined benefit pension plans |
|
|
(4,033) |
|
|
- |
|
|
- |
|
|
- |
|
|
(4,033) |
|
Non-current assets and disposable groups of items that have been classified as held for sale |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Share in other recognized income and expenses of investments in joint ventures and associates |
|
|
(1) |
|
|
5 |
|
|
(5) |
|
|
- |
|
|
(1) |
|
Other valuation adjustments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income |
|
|
|
|
|
914 |
|
|
(141) |
|
|
- |
|
|
773 |
|
Inefficacy of fair value hedges of equity instruments measured at fair value with changes in other comprehensive income |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Changes in the fair value of financial liabilities at fair value through profit or loss attributable to changes in credit risk |
|
|
|
|
|
- |
|
|
(6) |
|
|
- |
|
|
(6) |
|
Items that may be reclassified to profit or loss |
|
|
(17,742) |
|
|
(919) |
|
|
99 |
|
|
- |
|
|
(18,562) |
|
Hedge of net investment in foreign operations (effective part) |
|
|
(4,311) |
|
|
- |
|
|
- |
|
|
- |
|
|
(4,311) |
|
Exchange differences |
|
|
(15,430) |
|
|
- |
|
|
- |
|
|
- |
|
|
(15,430) |
|
Hedging derivatives. Cash flow hedges (effective part) |
|
|
152 |
|
|
- |
|
|
- |
|
|
- |
|
|
152 |
|
Changes in the fair value of debt instruments measured at fair value with changes in other comprehensive income |
|
|
|
|
|
1,154 |
|
|
99 |
|
|
- |
|
|
1,253 |
|
Hedging instruments (items not designated) |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financial assets available for sale |
|
|
2,068 |
|
|
(2,068) |
|
|
- |
|
|
- |
|
|
|
|
Debt instruments |
|
|
1,154 |
|
|
(1,154) |
|
|
- |
|
|
- |
|
|
|
|
Equity instruments |
|
|
914 |
|
|
(914) |
|
|
- |
|
|
- |
|
|
|
|
Non-current assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Share in other income and expenses recognized in investments in joint ventures and associates |
|
|
(221) |
|
|
(5) |
|
|
- |
|
|
- |
|
|
(226) |
|
Non-controlling interests |
|
|
12,344 |
|
|
- |
|
|
15 |
|
|
(123) |
|
|
12,236 |
|
Other comprehensive income |
|
|
(1,436) |
|
|
- |
|
|
3 |
|
|
- |
|
|
(1,433) |
|
Other elements |
|
|
13,780 |
|
|
- |
|
|
12 |
|
|
(123) |
|
|
13,669 |
|
EQUITY |
|
|
106,833 |
|
|
- |
|
|
53 |
|
|
(1,524) |
|
|
105,362 |
|
TOTAL EQUITY AND LIABILITIES |
|
|
1,444,305 |
|
|
- |
|
|
94 |
|
|
(1,330) |
|
|
1,443,069 |
|
(*) Due to the entry into force of Bank of Spain Circular 4/2017.
9
|
|
|
IAS 39 |
|
|
Naming modifications |
|
|
Classification and |
|
|
Impairment |
|
|
IFRS 9 |
|
Cash, cash balances at central banks and other deposits on demand |
|
|
440,972 |
|
|
- |
|
|
- |
|
|
(2) |
|
|
440,970 |
|
Financial assets held for trading |
|
|
498,432 |
|
|
- |
|
|
633 |
|
|
- |
|
|
499,065 |
|
Derivatives |
|
|
227,421 |
|
|
- |
|
|
- |
|
|
- |
|
|
227,421 |
|
Equity instruments |
|
|
84,832 |
|
|
- |
|
|
- |
|
|
- |
|
|
84,832 |
|
Debt instruments |
|
|
144,419 |
|
|
- |
|
|
805 |
|
|
- |
|
|
145,224 |
|
Loans and advances |
|
|
41,760 |
|
|
- |
|
|
(172) |
|
|
- |
|
|
41,588 |
|
Non-trading financial assets mandatorily at fair value through profit or loss |
|
|
|
|
|
3,705 |
|
|
14,858 |
(c) |
|
- |
|
|
18,563 |
|
Equity instruments |
|
|
|
|
|
3,705 |
|
|
6,561 |
|
|
- |
|
|
10.266 |
|
Debt instruments |
|
|
|
|
|
- |
|
|
7,121 |
|
|
- |
|
|
7,121 |
|
Loans and advances |
|
|
|
|
|
- |
|
|
1,176 |
|
|
- |
|
|
1,176 |
|
Financial assets designated at fair value through profit or loss |
|
|
138,180 |
|
|
(3,705) |
|
|
32.684 |
|
|
- |
|
|
167.159 |
|
Equity instruments |
|
|
3,705 |
|
|
(3,705) |
|
|
- |
|
|
- |
|
|
|
|
Debt instruments |
|
|
13,844 |
|
|
- |
|
|
(790) |
|
|
- |
|
|
13.054 |
|
Loans and advances |
|
|
120,631 |
|
|
- |
|
|
33.474 (a) |
|
|
- |
|
|
154.105 |
|
Financial assets at fair value through other comprehensive income |
|
|
|
|
|
493,551 |
|
|
8,446 |
|
|
(6) |
|
|
501,991 |
|
Equity instruments |
|
|
|
|
|
10,473 |
|
|
2,119 |
|
|
- |
|
|
12,592 |
|
Debt instruments |
|
|
|
|
|
483,078 |
|
|
1,931 |
|
|
(6) |
|
|
485,003 |
|
Loans and advances |
|
|
|
|
|
- |
|
|
4,396 |
|
|
- |
|
|
4,396 |
|
Financial assets available-for-sale |
|
|
529,474 |
|
|
(493,551) |
|
|
(35,923) |
|
|
- |
|
|
|
|
Equity instruments |
|
|
19,031 |
|
|
(10,473) |
|
|
(8,558) |
(c) |
|
- |
|
|
|
|
Debt instruments |
|
|
510,443 |
|
|
(483,078) |
|
|
(27,365) |
(b) |
|
- |
|
|
|
|
Financial assets at amortized cost |
|
|
|
|
|
3,536,258 |
(a) |
|
84,615 |
|
|
(7,876) |
(d) |
|
3,612,997 |
|
Debt instruments |
|
|
|
|
|
61,808 |
(b) |
|
80,235 |
(b) |
|
79 |
|
|
142,122 |
|
Loans and advances |
|
|
|
|
|
3,474,450 |
|
|
4,380 |
|
|
(7,955) |
|
|
3,470,875 |
|
Loans and receivables |
|
|
3,587,580 |
|
|
(3,536,258) |
(a) |
|
(51,355) |
|
|
33 |
|
|
|
|
Debt instruments |
|
|
69,696 |
|
|
(61,808) |
|
|
(7,921) |
(c) |
|
33 |
|
|
|
|
Loans and advances |
|
|
3,517,884 |
|
|
(3,474,450) |
|
|
(43,434) |
(a) |
|
- |
|
|
|
|
Investments held to maturity |
|
|
53,599 |
|
|
- |
|
|
(53,599) |
(b) |
|
- |
|
|
- |
|
Investments |
|
|
24,567 |
|
|
- |
|
|
- |
|
|
(134) |
|
|
24,433 |
|
Other assets (**) |
|
|
465,268 |
|
|
- |
|
|
21 |
|
|
2,705 |
(e) |
|
467,994 |
|
TOTAL ASSETS |
|
|
5,738,072 |
|
|
- |
|
|
380 |
|
|
(5,280) |
|
|
5,733,172 |
|
(*) Due to the entry into force of Bank of Spain Circular 4/2017.
(**) Includes Hedging derivatives, Changes in the fair value of hedged items in portfolio hedges of interest risk, Reinsurance assets, Tangible assets, Intangible assets, Tax assets, Other assets and Non-current assets held for sale.
a) |
The amount of the item ‘Loans and receivables’ at December 31, 2017 is reclassified into ‘Financial assets at amortized cost’. Nevertheless, the Group maintained a portfolio of loans and receivables for an approximate amount of 35,207 million of reais, which relate mainly to Brazil, which was designated at amortized cost; as a result of the initial implementation of IFRS 9 this portfolio has been designated as fair value and finally it has been reclassified as ‘Financial assets designated at fair value through profit or loss’. |
b) |
Instruments classified as ‘Investments held to maturity’ at December 31, 2017 have been reclassified into ‘Financial assets available-for-sale’ because of the initial implementation of IFRS 9. Additionally, after the review of the business model of cash flow portfolio in different locations, the group has identified certain groups of assets classified at December 31 as ‘Financial assets available-for-sale’, which relate mainly to Mexico, Brazil and Consumer business, whose management is orientated towards the maintenance of financial instruments in a portfolio until maturity end; because of that, this asset group has been reclassified as ‘Financial assets at amortized cost’. |
c) |
The group has reclassified in ‘Non-trading financial assets mandatory at fair value through profit or loss’ those financial instruments which have not comply with the SPPI test (only principal payment and interests) classified at December 31, 2017 mainly in ‘Loans and receivables’ and ‘Financial assets available for sale’, which relate mainly to UK and Spain |
d) |
It corresponds to the increase in provisions for impairment of the value of the assets included in the item ‘Financial assets at amortized cost’ derived from the change in accounting policy. |
e) |
This corresponds with increase on provisions for the tax effect referred in section d. |
10
LIABILITIES (millions of reais) |
|
|
IAS 39 |
|
|
Naming modifications |
|
|
Classification and |
|
|
Impairment |
|
|
IFRS 9 |
|
Financial liabilities held for trading |
|
|
427,578 |
|
|
- |
|
|
41 |
|
|
- |
|
|
427,619 |
|
Derivatives |
|
|
230,000 |
|
|
- |
|
|
41 |
|
|
- |
|
|
230,041 |
|
Short positions |
|
|
83,348 |
|
|
- |
|
|
- |
|
|
- |
|
|
83,348 |
|
Deposits |
|
|
114,230 |
|
|
- |
|
|
- |
|
|
- |
|
|
114,230 |
|
Debt instruments issued |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other financial liabilities |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financial liabilities designated at fair value through profit or loss |
|
|
236,851 |
|
|
- |
|
|
- |
|
|
- |
|
|
236,851 |
|
Deposits |
|
|
222,369 |
|
|
- |
|
|
- |
|
|
- |
|
|
222,369 |
|
Debt instruments issued |
|
|
12,143 |
|
|
- |
|
|
- |
|
|
- |
|
|
12,143 |
|
Other financial liabilities |
|
|
2,339 |
|
|
- |
|
|
- |
|
|
- |
|
|
2,339 |
|
Financial liabilities at amortized cost |
|
|
4,473,759 |
|
|
- |
|
|
- |
|
|
- |
|
|
4,473,759 |
|
Deposits |
|
|
3,509,343 |
|
|
- |
|
|
- |
|
|
- |
|
|
3,509,343 |
|
Debt instruments issued |
|
|
853,816 |
|
|
- |
|
|
- |
|
|
- |
|
|
853,816 |
|
Other financial liabilities |
|
|
110,600 |
|
|
- |
|
|
- |
|
|
- |
|
|
110,600 |
|
Hedging derivatives |
|
|
31,956 |
|
|
- |
|
|
(41) |
|
|
- |
|
|
31,915 |
|
Changes in the fair value of hedged items in portfolio hedges of interest rate risk |
|
|
1,311 |
|
|
- |
|
|
- |
|
|
- |
|
|
1,311 |
|
Provisions |
|
|
57,566 |
|
|
- |
|
|
- |
|
|
784 |
|
|
58,350 |
|
Commitments and guarantees given |
|
|
2,449 |
|
|
- |
|
|
- |
|
|
784 |
|
|
3,233 |
|
Other provisions (*) |
|
|
55,117 |
|
|
- |
|
|
- |
|
|
- |
|
|
55,117 |
|
Rest of liabilities (**) |
|
|
84,622 |
|
|
- |
|
|
170 |
|
|
(11) |
|
|
84,781 |
|
TOTAL LIABILITIES |
|
|
5,313,643 |
|
|
- |
|
|
170 |
|
|
773 |
|
|
5,314,586 |
|
(*) Includes Pensions and other post-retirements obligations, Other long-term employee benefits, Taxes and other legal contingencies, Contingent liabilities and commitments and Other provisions (including endorsements and other contingent liabilities)
(**) Includes Liabilities under insurance or reinsurance contracts, Tax liabilities, Other liabilities and Liabilities associated with non current assets held for sale.
EQUITY (millions of reais) |
|
|
IAS 39 |
|
|
Naming modifications |
|
|
Classification and |
|
|
Impairment |
|
|
IFRS 9 |
|
Shareholders’ equity |
|
|
310.634 |
|
|
- |
|
|
365 |
|
|
(5.568) |
|
|
305.431 |
|
Capital |
|
|
21.195 |
|
|
- |
|
|
- |
|
|
- |
|
|
21.195 |
|
Share premium |
|
|
129.805 |
|
|
- |
|
|
- |
|
|
- |
|
|
129.805 |
|
Equity instruments issued other than capital |
|
|
2.085 |
|
|
- |
|
|
- |
|
|
- |
|
|
2.085 |
|
Other equity |
|
|
641 |
|
|
- |
|
|
- |
|
|
- |
|
|
641 |
|
Accumulated retained earnings |
|
|
145.308 |
|
|
- |
|
|
- |
|
|
- |
|
|
145.308 |
|
Revaluation reserves |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other reserves |
|
|
(4.808) |
|
|
- |
|
|
365 |
|
|
(5.568) |
|
|
(10.011) |
|
(-) Own shares |
|
|
(87) |
|
|
- |
|
|
- |
|
|
- |
|
|
(87) |
|
Profit attributable to shareholders’ of the parent |
|
|
23.789 |
|
|
- |
|
|
- |
|
|
- |
|
|
23.789 |
|
(-)Interim dividends |
|
|
(7.294) |
|
|
- |
|
|
- |
|
|
- |
|
|
(7.294) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
64.754 |
|
|
- |
|
|
(214) |
|
|
2 |
|
|
64.542 |
|
Items not reclassified to profit or loss |
|
|
(16.029) |
|
|
3.649 |
|
|
(608) |
|
|
- |
|
|
(12.988) |
|
Actuarial gains or losses on defined benefit pension plans |
|
|
(16.023) |
|
|
- |
|
|
- |
|
|
- |
|
|
(16.023) |
|
Non-current assets and disposable groups of items that have been classified as held for sale |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Share in other recognized income and expenses of investments in joint ventures and associates |
|
|
(6) |
|
|
19 |
|
|
(16) |
|
|
- |
|
|
(3) |
|
Other valuation adjustments |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income |
|
|
|
|
|
3,630 |
|
|
(568) |
|
|
- |
|
|
3,062 |
|
Inefficacy of fair value hedges of equity instruments measured at fair value with changes in other comprehensive income |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Changes in the fair value of financial liabilities at fair value through profit or loss attributable to changes in credit risk |
|
|
|
|
|
- |
|
|
(24) |
|
|
- |
|
|
(24) |
|
Items that may be reclassified to profit or loss |
|
|
80,783 |
|
|
(3,649) |
|
|
394 |
|
|
2 |
|
|
77,530 |
|
Hedge of net investment in foreign operations (effective part) |
|
|
(17,127) |
|
|
- |
|
|
- |
|
|
- |
|
|
(17,127) |
|
Exchange differences |
|
|
89,971 |
|
|
- |
|
|
- |
|
|
- |
|
|
89,971 |
|
Hedging derivatives. Cash flow hedges (effective part) |
|
|
604 |
|
|
- |
|
|
- |
|
|
- |
|
|
604 |
|
Changes in the fair value of debt instruments measured at fair value with changes in other comprehensive income |
|
|
|
|
|
4,583 |
|
|
394 |
|
|
2 |
|
|
4,979 |
|
Hedging instruments (items not designated) |
|
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financial assets available for sale |
|
|
8,213 |
|
|
(8,213) |
|
|
- |
|
|
- |
|
|
|
|
Debt instruments |
|
|
4,583 |
|
|
(4,583) |
|
|
- |
|
|
- |
|
|
|
|
Equity instruments |
|
|
3,630 |
|
|
(3,630) |
|
|
- |
|
|
- |
|
|
|
|
Non-current assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Share in other income and expenses recognized in investments in joint ventures and associates |
|
|
(878) |
|
|
(19) |
|
|
- |
|
|
- |
|
|
(897) |
|
Non controlling interests |
|
|
49,041 |
|
|
- |
|
|
59 |
|
|
(487) |
|
|
48,613 |
|
Other comprehensive income |
|
|
11,610 |
|
|
- |
|
|
12 |
|
|
- |
|
|
11,622 |
|
Other elements |
|
|
37,431 |
|
|
- |
|
|
47 |
|
|
(487) |
|
|
36,991 |
|
EQUITY |
|
|
424,429 |
|
|
- |
|
|
210 |
|
|
(6,053) |
|
|
418,586 |
|
TOTAL EQUITY AND LIABILITIES |
|
|
5,738,072 |
|
|
- |
|
|
380 |
|
|
(5,280) |
|
|
5,733,172 |
|
(*) Due to the entry into force of Bank of Spain Circular 4/2017.
11
- IFRS 15 Revenue from Contracts with Customers (effective for annual reporting periods beginning on or after January 1, 2018) - the new standard on the recognition of revenue from contracts with customers. It supersedes the following standards and interpretations previous in force: IAS 18, Revenue; IAS 11, Construction Contracts; IFRIC 13, Customer Loyalty Programs; IFRIC 15, Agreements for the Construction of Real Estate; IFRIC 18, Transfers of Assets from Customers; and SIC‑31, Revenue-Barter Transactions Involving Advertising Services. Under IFRS 15, an entity recognizes revenue in accordance with the core principle of the standard by applying the following five steps: identify the contract(s) with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations identified in the contract; and recognize revenue when as the entity satisfies a performance obligation.
- Clarifications to IFRS 15 income coming from contracts with clients.
The application of the aforementioned accounting Standard and its Clarifications do not have any material effects on the Group’s interim financial statements.
- Modification to IFRS 4 `Insurance contracts´ applying IFRS 9 "Financial Instruments" (effective for annual reporting periods beginning on or after January 1, 2018). The purpose of the amendment is to give all companies that issue insurance contracts the option to recognize in other comprehensive income, instead of profit or loss, the volatility that could arise when applying IFRS 9, for new contracts before the adoption of the insurance standard and give companies whose activities are mostly insurance-related an optional temporary exemption from the application of IFRS 9 until the year 2021. Entities that defer the application of IFRS 9 will continue to apply the existing norm of Financial Instruments IAS 39.
The deferral of the aforementioned standard does not apply as the required conditions for this deferral are not met.
- Modification to the IFRS 2 Classification and measurement of share-based payment transactions – The amendments address the following areas: (a) Accounting for the effects that the requirements for the consolidation of the grant have in cash–settled share-based payment transactions, (b) Classification of share–based payment transactions with net settlement features for the tax withholding obligations; and (c) Accounting for modifications of share-based payment transactions terms and conditions from cash-settled to equity-settled payment transactions.
- Modification of IAS 40 Transfers of investment properties; Changes are made to the existing requirements or provide with some additional guidance on the implementation of such requirements.
- Improvements to IFRS Cycle 2014‑2016 - introduce minor amendments to IFRS 1, referring to the elimination of short-term exemptions for entities that adopt IFRS for the first time, and IAS 28, on the valuation of an investment in an associated or a joint venture at fair value.
- Modification to the IFRS 9 Financial Instruments - a clarification has been published on the treatment of certain prepayment options in relation to the assessment of contractual cash flows of principal and interest on financial instruments.
- New interpretation to IFRIC 22 on Foreign currency transactions and advance considerations – When an entity reports a payment of advance consideration in order to recognize the profits associated to the income statement, it shall recognize both the consideration received as a non-monetary liability (deferred income or contract liabilities) in the statement of financial position at the exchange rate obtained according to the IAS 21 The Effects of changes in foreign exchange rates. When the deferred incomes are subsequently recognized in the income statement as incomes, the issue is raised on whether its measurement should reflect: the amount at which the deferred income was originally recognized, namely, when the consideration was originally received; or the consideration amount received is translated to the existing exchange rate on the date when the non-monetary element is generated as income in the income
12
statement, generating an exchange gain or loss that reflects the difference between the amount of the consideration translated (i) to the exchange rate in force in the moment of its receipt and (ii) to the exchange rate in force when it is recognized in the income statement as a profit or loss.
The application of the aforementioned modifications and amendments to the accounting standards do not have any material effects on the Group’s consolidated financial statements.
Other standards
IFRS 16 (date of entry into force is for annual periods beginning on or after January 1, 2019, with the option of early adoption that the Group has not made use of) establishes the principles for the recognition, valuation, presentation and disclosure of the leases, in order to ensure that both tenant and landlord provide relevant information that presents a true image of these operations. IFRS 16 provides for a single accounting model for the lessee, according to which the lessee must recognize a right-of-use asset and a corresponding financial liability on the balance sheet for all leases, unless the term of the lease is 12 months or less or the value of the underlying asset is low.
The Group is carrying out a global and multidisciplinary project, whose objective is to identify the entire casuistry of lease contracts in the different countries, defining the different criteria to be considered in the transition, and evaluating the calculation of the possible impacts of first application.
The Group is also evaluating the requirements and implications of the new standard in relation to accounting policies, financial reporting, systems, processes, and internal control, assuring a homogeneous implementation in all Group units. While the analysis of the first impact application has not finished, it is expected that the most relevant impact will correspond to real estate lease contracts.
c) |
Use of critical estimates |
The consolidated results and the determination of the consolidated equity are sensitive to the accounting principles and policies, valuation criteria and estimates used by the directors of the Bank in preparing the interim financial statements. The main accounting principles and policies and valuation criteria are indicated in Note 2 of the consolidated financial statements of the year 2017, except for those indicated in these interim financial statements due to the rules that have come into effect during the first nine months of the year 2018.
The interim financial statements contain estimates made by the senior management of the Bank and of the consolidated entities in order to quantify certain of the assets, liabilities, income, expenses and obligations reported herein. These estimates, which were made on the basis of the best information available, relate basically to the following:
1. |
The income tax expense, which, in accordance with IAS 34, is recognized in interim periods based on the best estimate of the weighted average tax rate expected by the Group for the full financial year; |
2. |
The impairment losses on certain assets – Financial assets at fair value through other comprehensive income, financial assets at amortized cost, non-current assets held for sale, investments in subsidiaries, joint ventures and associates, tangible assets and intangible assets; |
3. |
The assumptions used in the calculation of the post-employment benefit liabilities and commitments and other obligations; |
4. |
The useful life of the tangible and intangible assets; |
5. |
The measurement of goodwill arising on consolidation; |
13
6. |
The calculation of provisions and the consideration of contingent liabilities; |
7. |
The fair value of certain unquoted assets and liabilities; |
8. |
The recoverability of deferred tax assets; and |
9. |
The fair value of the identifiable assets acquired and the liabilities assumed in business combinations in accordance with IFRS 3. |
In the nine-month period ended September 30, 2018 there were no significant changes in the estimates made at the 2017 year-end other than those indicated in these interim financial statements.
d) |
Contingent assets and liabilities |
Note 2.o to the Group’s consolidated financial statements for the year ended December 31, 2017 includes information on the contingent assets and liabilities at that date. There were no significant changes in the Group’s contingent assets and liabilities from December 31, 2017 to the date of formal preparation of these interim financial statements different, except for those indicated in these interim financial statements.
e) |
Comparative information |
In July 2014, the IASB published IFRS 9, which was adopted with the subsequent amendments by the Group on January 1, 2018. As permitted by the regulation itself, the Group has chosen not to re-classify the comparative financial statements without having re-classified under these criteria the information relating to the nine-month period ended September 30, 2017 and to the year ended December 31, 2017 so that it is not comparative. However, Note 1.b includes a reconciliation of balances as of December 31, 2017 under IAS 39 and the corresponding balances as of January 1, 2018 under IFRS 9.
Similarly, to adapt the accounting system of Spanish credit institutions to the changes related to IFRS 15 and IFRS 9, on December 6, 2017, Circular 4/2017, of November 27, of the Bank of Spain, was published, which repeals Circular 4/2004, of December 22, for those years beginning as at January 1, 2018. The adoption of this Circular has modified the breakdown and presentation of certain headings in the financial statements, to adapt them to the aforementioned IFRS 9. Information corresponding to the nine-month period ended September 30, 2017 and the year ended December 31, 2017, has not been restated under this Circular.
During the nine-month period ended September 30, 2018, the Group changed the accounting policy for recognition of non-controlling interests in equity stake reduction transactions without loss of control. In accordance with international financial reporting standards, the goodwill associated with these transactions must be kept on balance. The non-controlling interests resulting from the equity stake reduction can be accounted for by their participation in the identifiable net assets or by attributing the goodwill associated with the participation sold. In this sense, the Group has chosen to account for the non-controlling interests by its participation in net assets. The application of the accounting policy change, without impact on net equity, was made on January 1, 2018.
Therefore, the information for the year 2017 contained in these interim financial statements is only presented for comparison purposes with the information relating to the nine-month period ended September 30, 2018 except what was mentioned above (Note 1.b. in relation to the application of IFRS 9).
Lastly, in order to interpret the changes in the balances with respect to December 31, 2017, it is necessary to take into consideration the exchange rate effect arising from the volume of foreign currency balances held by the Group in view of its geographic diversity (Note 51.b to the consolidated financial statements for the year ended December 31, 2017) and the impact of the appreciation/depreciation of the various currencies against the euro in the first nine months of 2018: Mexican peso (8.64%), US dollar (3.60%),
14
Brazilian real (‑14.63%), Argentine peso (‑52.48%), Pound sterling (‑0.01%), Chilean peso (‑3.71%) and Polish zloty (‑2.35%); as well as the evolution of the average exchange rates between comparable periods: Mexican peso (‑7.69%), US dollar (‑6,86%), Brazilian real (‑17.59%), Argentine peso (‑37.19%), Pound sterling (‑1.29%), Chilean peso (‑3.13%) and Polish zloty (0.39%).
f) |
Seasonality of the Group’s transactions |
The business activities carried on by the Group entities, and their transactions are not cyclical or seasonal in nature. Therefore, no specific disclosures are included in these explanatory notes to the condensed consolidated financial statements for the nine-month period ended September 30, 2018.
g) |
Materiality |
In determining the note disclosures to be made on the various items in the financial statements or other matters, the Group, in accordance with IAS 34, took into account their materiality in relation to the financial statements for the nine-month period ended September 30, 2018.
h) |
Events after the reporting period |
From October 1, 2018 to the date on which the interim financial statements were authorized for issue the following significant event occurred at:
On October 18, the Judgment of October 16, 2018 of Section 2 of the Contentious Chamber of the Supreme Court, which annuls article 68.2 of the Regulations of the Tax on Capital Transfers and Documented Legal Acts, approved by Royal Decree 828/1995, of December 25, was published on the Judicial Branch website. Subsequently, on October 19 and 22, two informative notes were published indicating that the Plenary of the Chamber has decided to take cognizance of any of the pending appeals in order to decide whether or not the criteria of this Judgment should be confirmed and that the Plenary will take place on November 5. At the date of issuance of these interim financial statements, the aforementioned Judgment has not been published in the Official State Gazette. With the information available at the date of preparation of these interim financial statements, it is not possible to evaluate the potential impact derived from such judgment at this time.
i) |
Condensed consolidated statements of cash flows |
The following terms are used in the condensed consolidated statements of cash flows with the meanings specified:
- Cash flows: inflows and outflows of cash and cash equivalents, which are short-term, highly liquid investments that are subject to an insignificant risk of changes in value.
- The Group classifies as cash and cash equivalents the balances recognized under Cash, cash and balances with central banks and other deposits on demand without restrictions in the condensed consolidated balance sheet.
- Operating activities: the principal revenue-producing activities of credit institutions and other activities that are not investing or financing activities.
- Investing activities: the acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents.
- Financing activities: activities that result in changes in the size and composition of the equity and liabilities that are not operating activities.
15
j) |
Other information |
The economic situation in Argentina in recent years, which led to the signing of an agreement with the International Monetary Fund for the granting of a loan of $ 57,000 million, has had an impact on the country’s main economic indicators, especially inflation data. In this sense, the Group has reviewed the macroeconomic indicators that affect Argentina’s economy and from this review has concluded the need to apply to these interim financial statements the accounting standard IAS 29 for hyperinflationary economies to its activity in Argentina. The impact on results and CET1 is immaterial for the Group.
2. |
Santander Group |
Appendices I, II and III to the consolidated financial statements for the year ended December 31, 2017 provide relevant information on the Group companies at that date and on the companies accounted for under the equity method.
Also, Note 3 to the aforementioned consolidated financial statements includes a description of the most significant acquisitions and disposals of companies performed by the Group in 2017, 2016 and 2015.
The most significant transactions performed or pending at September 30, 2018 are as follows:
i. Acquisition of Banco Popular Español, S.A.U.
Regarding the estimation of the purchase adjustments of Banco Popular Español, S.A. (“Banco Popular”) and its subsidiaries by the Parent Company, in accordance with IFRS 3, the Group has finished its assessment exercise of the identifiable assets acquired and liabilities assumed at fair value, without any modification with respect to what was recorded in 2017.
ii. Sale agreement of Banco Popular, S.A.U.’s real estate business
In relation with Banco Popular’s real estate business, on August 8, 2017, the Group announced the transaction with the Blackstone Fund for the acquisition by the fund of 51% of, and hence the assignment of control over, part of Banco Popular’s real estate business (the “Business”), which comprises a portfolio of foreclosed properties, real estate companies, non-performing loans relating to the real estate sector and other assets related to these activities owned by Banco Popular and its affiliates (including deferred tax assets allocated to specific real estate companies which are part of the transferred portfolio) registered on certain specified dates (March 31, 2017 or April 30, 2017).
The agreements were entered following the European Commission’s unconditional authorization of the acquisition of Banco Popular by Banco Santander for the purposes of competition law.
The transaction closed on March 22, 2018 following receipt of the required regulatory authorizations and other usual conditions in this type of transactions. The transaction has consisted of the creation of various companies, being the parent company Project Quasar Investments 2017, S.L., in which Banco Popular maintains 49% of the share capital and Blackstone the remaining 51%, and to which Banco Popular and some subsidiaries has transferred the business constituted by the indicated assets, and its participation in the capital of Aliseda Real Estate Management Services, S.L. The price attributed to the contributed assets is approximately 10,000 million euros, of which approximately 70% was financed with third party bank debt. After the contribution to the vehicle by its shareholders of the necessary liquidity for the operation of the business, the 49% stake in the capital of the vehicles was recorded in the consolidated balance sheet of the Group for EUR 1,701 million in the "Investments in joint ventures and associates - entities" section, without significant impact in the Group´s income statement.
16
iii. Sale of the 49% stake in Wizink
On March 26, 2018 the Group reported that its subsidiaries Banco Popular and Banco Santander Totta, S.A. (“Santander Totta”) had reached an agreement with entities managed by Värde Partners, Inc. ("Varde") and with WiZink Bank, S.A. ("WiZink") under which:
i. |
Banco Popular will sell Varde its 49% stake in WiZink and, |
ii. |
Banco Popular and Santander Totta will acquire the business of credit and debit cards marketed by Popular in Spain and Portugal that WiZink had acquired in 2014 and 2016, respectively, from Banco Popular. |
With these operations, Santander Group resumes Banco Popular’s debit and credit card business, which improves the commercial strategy and facilitates Banco Popular’s integration process.
Once all the pertinent regulatory authorizations have been obtained (the last one dated October 25, 2018), the closing of the two operations do not have a significant impact on the Group’s income statement.
iv. Merger by absorption of Banco Santander with Banco Popular, S.A.U.
On April 24, 2018 the boards of directors of Banco Santander and Banco Popular agreed to approve and sign the merger project by absorption of Banco Popular by Banco Santander.
On September 28, 2018 the merger certificate of Banco Popular by Banco Santander was registered in the Mercantile Registry of Cantabria. After the merger, Banco Santander has acquired, by universal succession, all the rights and obligations of Banco Popular, including those that have been acquired from Banco Pastor and Popular Banca Privada, by virtue of the merger of Banco Pastor and Popular Banca Privada with Banco Popular that was also approved on April 24, 2018 by the respective board of directors. This transaction has no impact on the Group’s income statement.
v. Acquisition of the retail banking and private banking business of Deutsche Bank Polska, S.A.
On December 14, 2017, the Group announced that its subsidiary Santander Bank Polska, S.A. (former Bank Zachodni WBK S.A.), together with Banco Santander, S.A., had reached an agreement with Deutsche Bank, A.G. for the acquisition (through a carve out) of the retail banking and private banking business of Deutsche Bank Polska, S.A., excluding the portfolio of mortgages in foreign currency and the business of CIB (Corporate & Investment Banking), and including the asset management company named DB Securities, S.A. (Poland), for an estimated amount of EUR 305 million that will be paid in cash and shares of Santander Bank Polska, S.A. (former Bank Zachodni WBK S.A.) of new issuance, by acquiring approximately 10% of the shares of Deutsche Bank Polska, S.A. and the partial split of Deutsche Bank Polska, S.A in Santander Bank Polska, S.A. (former Bank Zachodni WBK S.A.) and consequent capital increase in Santander Bank Polska, S.A. (former Bank Zachodni WBK S.A.) to be subscribed by Deutsche Bank, A.G.
The transaction was authorized on March 2, 2018 by the Polish competition regulator and it has been approved at the General Shareholders’ Meetings of Santander Bank Polska, S.A. (former Bank Zachodni WBK S.A.) and Deutsche Bank Polska, S.A., as well as by the Polish banking regulator. The acquisition is pending execution according to its terms, which are expected to take place in the fourth quarter of 2018. It is not estimated that this operation will have a significant impact on the Group’s income statement.
vi. Agreement with Aegeon Group as business partner for several insurance services
On July 3, 2018, the Group announced that it had reached an agreement with the Aegon Group, pursuant to which it will be the insurance partner in Spain for the life-insurance business and several branches of general insurance. Given such agreement, and the perimeter under which it will be materialized, are subject
17
to various conditions including the termination of the current alliance between Banco Popular and its current partner, it is not possible to estimate when these transactions will be closed. These transactions are not expected to have a significant impact on the Group’s income statement.
3. |
Shareholder remuneration system and earnings per share |
a)Shareholder remuneration system
The cash remuneration paid by the Bank to its shareholders in the first nine months of 2018 and 2017 was as follows:
|
|
|
09-30-2018 |
|
|
09-30-2017 |
|
||||||||||||
|
|
|
% of par |
|
|
Euros per |
|
|
Amount |
|
|
% of par |
|
|
Euros per |
|
|
Amount |
|
Dividend paid out of profit |
|
|
25.00 |
% |
|
0.1250 |
|
|
2,017 |
|
|
23.00 |
% |
|
0.1150 |
|
|
1,764 |
|
Dividend paid with a charge to reserves or share premium |
|
|
12.00 |
% |
|
0.0600 |
|
|
968 |
|
|
11.00 |
% |
|
0.0550 |
|
|
802 |
|
Dividend in kind |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Total remuneration paid |
|
|
37.00 |
% |
|
0.1850 |
|
|
2,985 |
|
|
34.00 |
% |
|
0.1700 |
|
|
2,566 |
|
|
|
|
09-30-2018 |
|
|
09-30-2017 |
|
||||||||||||
|
|
|
% of par |
|
|
Reais per |
|
|
Amount |
|
|
% of par |
|
|
Reais per |
|
|
Amount |
|
Dividend paid out of profit |
|
|
25.00 |
% |
|
0.5190 |
|
|
8,375 |
|
|
23.00 |
% |
|
0.4050 |
|
|
6,228 |
|
Dividend paid with a charge to reserves or share premium |
|
|
12.00 |
% |
|
0.2538 |
|
|
4,095 |
|
|
11.00 |
% |
|
0.1909 |
|
|
2,784 |
|
Dividend in kind |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Total remuneration paid |
|
|
37.00 |
% |
|
0.7728 |
|
|
12,470 |
|
|
34.00 |
% |
|
0.5959 |
|
|
9,012 |
|
b)Earnings per share from continuing and discontinued operations
i. Basic earnings per share
Basic earnings per share for the period are calculated by dividing the net profit attributable to the Group for the nine-month period adjusted by the after-tax amount relating to the remuneration of contingently convertible preference shares recognized in equity and the capital perpetual preference shares, if applicable, by the weighted average number of ordinary shares outstanding during the period, excluding the average number of treasury shares held in the period.
18
Accordingly:
|
|
|
09-30-2018 |
|
|
09-30-2017 |
|
Profit attributable to the Parent (millions of euros) |
|
|
5,742 |
|
|
5,077 |
|
Remuneration of contingently convertible preference shares (millions of euros) |
|
|
(408) |
|
|
(280) |
|
|
|
|
5,334 |
|
|
4,797 |
|
Of which: |
|
|
|
|
|
|
|
Profit or Loss from discontinued operations (non controlling interest net) (millions of euros) |
|
|
- |
|
|
- |
|
Profit or Loss from continuing operations (non controlling interest and PPCC retributions net) (millions of euros) |
|
|
5,334 |
|
|
4,797 |
|
Weighted average number of shares outstanding |
|
|
16,127,700,585 |
|
|
15,184,117,348 |
|
Basic earnings per share (euros) |
|
|
0.33 |
|
|
0.32 |
|
Of which: from discontinued operations (euros) |
|
|
- |
|
|
- |
|
from continuing operations (euros) |
|
|
0.33 |
|
|
0.32 |
|
|
|
|
09-30-2018 |
|
|
09-30-2017 |
|
Profit attributable to the Parent (millions of reais) |
|
|
24,560 |
|
|
17,897 |
|
Remuneration of contingently convertible preference shares (millions of reais) |
|
|
(1,797) |
|
|
(1,015) |
|
|
|
|
22,763 |
|
|
16,882 |
|
Of which: |
|
|
|
|
|
|
|
Profit or Loss from discontinued operations (non controlling interest net) (millions of reais) |
|
|
- |
|
|
- |
|
Profit or Loss from continuing operations (non controlling interest and PPCC retributions net) (millions of reais) |
|
|
22,763 |
|
|
16,882 |
|
Weighted average number of shares outstanding |
|
|
16,127,700,585 |
|
|
15,184,117,348 |
|
Basic earnings per share (reais) |
|
|
1.41 |
|
|
1.11 |
|
Of which: from discontinued operations (reais) |
|
|
- |
|
|
- |
|
from continuing operations (reais) |
|
|
1.41 |
|
|
1.11 |
|
ii.Diluted earnings per share
Diluted earnings per share for the period are calculated by dividing the net profit attributable to the Group for the nine-month period adjusted by the after-tax amount relating to the remuneration of contingently convertible preference shares recognized in equity and the capital perpetual preference shares, if applicable, by the weighted average number of ordinary shares outstanding during the period, excluding the average number of treasury shares and adjusted for all the dilutive effects inherent to potential ordinary shares (share options, warrants and convertible debt instruments).
19
Accordingly, diluted earnings per share were determined as follows:
|
|
|
09-30-2018 |
|
|
09/30-2017 |
|
|
|
|
|
|
|
|
|
Profit attributable to the Parent (millions of euros) |
|
|
5,742 |
|
|
5,077 |
|
Remuneration of contingently convertible preference shares (millions of euros) |
|
|
(408) |
|
|
(280) |
|
Dilutive effect of changes in profit for the period arising from potential conversion of ordinary shares |
|
|
- |
|
|
- |
|
|
|
|
5,334 |
|
|
4,797 |
|
Of which: |
|
|
|
|
|
|
|
Profit or Loss from discontinued operations (non controlling interest net) (millions of euros) |
|
|
- |
|
|
- |
|
Profit or Loss from continuing operations (non controlling interest and PPCC retributions net) (millions of euros) |
|
|
5,334 |
|
|
4,797 |
|
Weighted average number of shares outstanding |
|
|
16,127,700,585 |
|
|
15,184,117,348 |
|
Dilutive effect of: |
|
|
|
|
|
|
|
Options/ receipt of shares |
|
|
44,561,157 |
|
|
41,591,182 |
|
Adjusted number of shares |
|
|
16,172,261,742 |
|
|
15,225,708,530 |
|
Diluted earnings per share (euros) |
|
|
0.33 |
|
|
0.32 |
|
Of which: from discontinued operations (euros) |
|
|
- |
|
|
- |
|
from continuing operations (euros) |
|
|
0.33 |
|
|
0.32 |
|
|
|
|
09-30-2018 |
|
|
09-30-2017 |
|
|
|
|
|
|
|
|
|
Profit attributable to the Parent (millions of reais) |
|
|
24,560 |
|
|
17,897 |
|
Remuneration of contingently convertible preference shares (millions of reais) |
|
|
(1,797) |
|
|
(1,015) |
|
Dilutive effect of changes in profit for the period arising from potential conversion of ordinary shares |
|
|
- |
|
|
- |
|
|
|
|
22,763 |
|
|
16,882 |
|
Of which: |
|
|
|
|
|
|
|
Profit or Loss from discontinued operations (non controlling interest net) (millions of reais) |
|
|
- |
|
|
- |
|
Profit or Loss from continuing operations (non controlling interest and PPCC retributions net) (millions of reais) |
|
|
22,763 |
|
|
16,882 |
|
Weighted average number of shares outstanding |
|
|
16,127,700,585 |
|
|
15,184,117,348 |
|
Dilutive effect of: |
|
|
|
|
|
|
|
Options/ receipt of shares |
|
|
44,561,157 |
|
|
41,591,182 |
|
Adjusted number of shares |
|
|
16,172,261,742 |
|
|
15,225,708,530 |
|
Diluted earnings per share (reais) |
|
|
1.41 |
|
|
1.11 |
|
Of which: from discontinued operations (reais) |
|
|
- |
|
|
- |
|
from continuing operations (reais) |
|
|
1.41 |
|
|
1.11 |
|
20
4. |
Remuneration and other benefits paid to the Bank’s directors and senior managers |
Note 5 to the Group’s consolidated financial statements for the year ended December 31, 2017 includes the detail of the remuneration and other benefits paid to the Bank’s directors and senior managers in 2017 and 2016.
The main data relating to the aforementioned remuneration and benefits for the nine-month periods ended September 30, 2018 and 2017 are summarized as follows:
Remuneration of members of the board of directors (1)
|
|
|
Thousands of euros |
|
|||
|
|
|
09-30-2018 |
|
|
09-30-2017 |
|
|
|
|
|
|
|
|
|
Remuneration from supervision responsibilities and collegiate decisions: |
|
|
|
|
|
|
|
Directors fees |
|
|
660 |
|
|
741 |
|
Bylaw-stipulated emoluments (annual emolument) |
|
|
2,762 |
|
|
2,799 |
|
Sub-total |
|
|
3,422 |
|
|
3,540 |
|
|
|
|
|
|
|
|
|
Remuneration for executive functions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed salary remuneration of executive directors |
|
|
5,483 |
|
|
5,597 |
|
Variable salary remuneration of executive directors |
|
|
- |
|
|
- |
|
Life insurance premiums |
|
|
862 |
|
|
579 |
|
Other (except insurance premiums) |
|
|
1,404 |
|
|
589 |
|
Sub-total |
|
|
7,749 |
|
|
6,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with shares and/or other financial instruments |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
Pension funds and plans: endowments and/or contributions (2) |
|
|
1,812 |
|
|
3,873 |
|
|
|
|
|
|
|
|
|
|
|
|
12,983 |
|
|
14,178 |
|
|
|
|
Thousands of reais |
|
|||
|
|
|
09-30-2018 |
|
|
09-30-2017 |
|
|
|
|
|
|
|
|
|
Remuneration from supervision responsibilities and collegiate decisions: |
|
|
|
|
|
|
|
Directors fees |
|
|
2,821 |
|
|
2,612 |
|
Bylaw-stipulated emoluments (annual emolument) |
|
|
11,813 |
|
|
9,868 |
|
Sub-total |
|
|
14,634 |
|
|
12,480 |
|
|
|
|
|
|
|
|
|
Remuneration for executive functions: |
|
|
|
|
|
|
|
Fixed salary remuneration of executive directors |
|
|
23,454 |
|
|
19,730 |
|
Variable salary remuneration of executive directors |
|
|
- |
|
|
- |
|
Life insurance premiums |
|
|
3,687 |
|
|
2,041 |
|
Other (except insurance premiums) |
|
|
6,006 |
|
|
2,076 |
|
Sub-total |
|
|
33,147 |
|
|
23,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with shares and/or other financial instruments |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
Pension funds and plans: endowments and/or contributions (2) |
|
|
7,751 |
|
|
13,651 |
|
|
|
|
|
|
|
|
|
|
|
|
55,532 |
|
|
49,978 |
|
(1) |
The notes to the annual consolidated financial statements for 2018 will contain detailed and complete information on the remuneration paid to all the directors, including executive directors. |
(2) |
Corresponds to the endowments and/or contributions made during the first nine months of 2018 and 2017 for retirement pensions and supplementary benefits of surviving spouse, child benefits, and permanent disability. |
21
Other benefits of members of the board of directors
|
|
|
Thousands of euros |
|
|||
|
|
|
09-30-2018 |
|
|
09-30-2017 |
|
|
|
|
|
|
|
|
|
Members of the board of directors: |
|
|
|
|
|
|
|
Advances |
|
|
- |
|
|
- |
|
Loans granted |
|
|
114 |
|
|
121 |
|
Pension funds and plans: Accumulated rights (1) (2) |
|
|
77,270 |
|
|
123,776 |
|
Guarantees provided for directors |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of reais |
|
|||
|
|
|
09-30-2018 |
|
|
09-30-2017 |
|
|
|
|
|
|
|
|
|
Members of the board of directors: |
|
|
|
|
|
|
|
Advances |
|
|
- |
|
|
- |
|
Loans granted |
|
|
532 |
|
|
457 |
|
Pension funds and plans: Accumulated rights (1) (2) |
|
|
359,576 |
|
|
436,313 |
|
Guarantees provided for directors |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
(1) |
Corresponds to the rights accrued by the directors in pension matters. It also includes for informational purposes the rights accumulated by Mr. Rodrigo Echenique Gordillo, although these rights corresponded to Mr. Echenique before his appointment as executive director. Additionally, former members of the board had at September 30, 2018 and September 30, 2017 rights accrued for this concept for EUR 79,687 thousand (370,824 thousand of reais) and EUR 82,064 thousand (289,277 thousand of reais), respectively. |
(2) |
The payments made during the first nine months of the financial year 2018 to the members of the Board entitled to post-employment benefits amounted to 909 thousand euros (3,886 thousand of reais). |
Remuneration of senior management
The table below includes the corresponding amounts related to remunerations of senior management for the nine months periods ended September 30, 2018 and 2017, excluding the executive directors:
|
|
|
Thousands of euros |
|
|||
|
|
|
09-30-2018 |
|
|
09-30-2017 |
|
|
|
|
|
|
|
|
|
Senior management (1): |
|
|
|
|
|
|
|
Total remuneration of senior management (2) |
|
|
21,816 |
|
|
17,234 |
|
Pension funds: Endowments and/or contributions (3) |
|
|
4,519 |
|
|
10,156 |
|
|
|
|
|
|
|
|
|
|
|
|
26,335 |
|
|
27,390 |
|
|
|
|
Thousands of reais |
|
|||
|
|
|
09-30-2018 |
|
|
09-30-2017 |
|
|
|
|
|
|
|
|
|
Senior management (1): |
|
|
|
|
|
|
|
Total remuneration of senior management (2) |
|
|
93,322 |
|
|
60,750 |
|
Pension funds: Endowments and/or contributions (3) |
|
|
19,329 |
|
|
35,800 |
|
|
|
|
|
|
|
|
|
|
|
|
112,651 |
|
|
96,550 |
|
(1) |
The number of senior managers of the Bank, excluding executive directors, amounts to 18 on September 30, 2018 and amounts to 20 on September 30, 2017. |
(2) |
Remunerations regarding to members of senior management who, during the nine month period ended September 30, 2018, had ceased their duties amount to EUR 1,861 thousand (7,959 thousands of reais) and EUR 457 thousand (1,611 thousand of reais) on September 30, 2017. |
(3) |
Corresponds to the endowments and/or contributions made during the first nine months of 2018 and 2017 for retirement pensions. |
22
The annual variable remunerations (or bonuses) for 2017 paid to the directors and the other members of senior management was disclosed in the information on remuneration set forth in the financial statements for that year. Similarly, the variable remunerations allocable to 2018 profit or loss, which will be submitted for approval by the board of directors, will be disclosed in the financial statements for 2018.
Funds and pension plans of senior management
|
|
|
Thousands of euros |
|
|||
|
|
|
09-30-2018 |
|
|
09-30-2017 |
|
|
|
|
|
|
|
|
|
Senior management: |
|
|
|
|
|
|
|
Pension funds: Endowments and / or contributions (1) |
|
|
66,383 |
|
|
65,576 |
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of reais |
|
|||
|
|
|
09-30-2018 |
|
|
09-30-2017 |
|
|
|
|
|
|
|
|
|
Senior management: |
|
|
|
|
|
|
|
Pension funds: Endowments and / or contributions (1) |
|
|
308,913 |
|
|
231,157 |
|
|
|
|
|
|
|
|
|
(1) |
Corresponds to the rights accrued by members of senior management in the area of pensions. In addition, former members of senior management had at September 30, 2018 and September 30, 2017 rights accumulated for this same concept for EUR 209,548 thousand (975,113 thousand of reais) and EUR 173,768 thousand (612,535 thousand of reais), respectively. |
5.Financial assets
a)Breakdown
The detail, by nature and category for measurement purposes, of the Group’s financial assets, other than the balances relating to Cash, cash balances at central banks and other deposits on demand and Hedging derivatives, at September 30, 2018 (IFRS 9) and December 31, 2017 (IAS 39) is as follows, presented by the nature and categories for valuation purposes:
|
|
|
Millions of euros |
|
||||||||||||
|
|
|
09-30-18 (*) |
|
||||||||||||
|
|
|
Financial assets |
|
|
Non-trading financial |
|
|
Financial assets |
|
|
Financial assets at |
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives |
|
|
52,677 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Equity instruments |
|
|
17,239 |
|
|
3,165 |
|
|
- |
|
|
2,771 |
|
|
- |
|
Debt instruments |
|
|
28,230 |
|
|
2,957 |
|
|
2,732 |
|
|
112,288 |
|
|
40,089 |
|
Loans and advances |
|
|
302 |
|
|
630 |
|
|
61,089 |
|
|
1,297 |
|
|
891,322 |
|
Central Banks |
|
|
- |
|
|
- |
|
|
8,870 |
|
|
- |
|
|
15,163 |
|
Credit institutions |
|
|
63 |
|
|
- |
|
|
28,531 |
|
|
- |
|
|
35,786 |
|
Customers |
|
|
239 |
|
|
630 |
|
|
23,688 |
|
|
1,297 |
|
|
840,373 |
|
Total |
|
|
98,448 |
|
|
6,752 |
|
|
63,821 |
|
|
116,356 |
|
|
931,411 |
|
23
|
|
|
Millions of reais |
|
||||||||||||
|
|
|
09-30-18 (*) |
|
||||||||||||
|
|
|
Financial assets |
|
|
Non-trading financial |
|
|
Financial assets |
|
|
Financial assets at |
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives |
|
|
245,132 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Equity instruments |
|
|
80,223 |
|
|
14,728 |
|
|
- |
|
|
12,897 |
|
|
- |
|
Debt instruments |
|
|
131,368 |
|
|
13,763 |
|
|
12,711 |
|
|
522,532 |
|
|
186,556 |
|
Loans and advances |
|
|
1,407 |
|
|
2,933 |
|
|
284,279 |
|
|
6,034 |
|
|
4,147,763 |
|
Central Banks |
|
|
- |
|
|
- |
|
|
41,276 |
|
|
- |
|
|
70,559 |
|
Credit institutions |
|
|
295 |
|
|
- |
|
|
132,771 |
|
|
- |
|
|
166,530 |
|
Customers |
|
|
1,112 |
|
|
2,933 |
|
|
110,232 |
|
|
6,034 |
|
|
3,910,674 |
|
Total |
|
|
458,130 |
|
|
31,424 |
|
|
296,990 |
|
|
541,463 |
|
|
4,334,319 |
|
(*)See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
|
|
|
Millions of euros |
|
||||||||||||
|
|
|
12‑31‑17 |
|
||||||||||||
|
|
|
Financial assets |
|
|
Financial assets |
|
|
Financial assets |
|
|
Loans and |
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives |
|
|
57,243 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Equity instruments |
|
|
21,353 |
|
|
933 |
|
|
4,790 |
|
|
- |
|
|
- |
|
Debt instruments |
|
|
36,351 |
|
|
3,485 |
|
|
128,481 |
|
|
17,543 |
|
|
13,491 |
|
Loans and advances |
|
|
10,511 |
|
|
30,364 |
|
|
- |
|
|
885,470 |
|
|
- |
|
Central Banks |
|
|
- |
|
|
- |
|
|
- |
|
|
26,278 |
|
|
- |
|
Credit institutions |
|
|
1,696 |
|
|
9,889 |
|
|
- |
|
|
39,567 |
|
|
- |
|
Customers |
|
|
8,815 |
|
|
20,475 |
|
|
- |
|
|
819,625 |
|
|
- |
|
Total |
|
|
125,458 |
|
|
34,782 |
|
|
133,271 |
|
|
903,013 |
|
|
13,491 |
|
|
|
|
Millions of reais |
|
||||||||||||
|
|
|
12‑31‑17 |
|
||||||||||||
|
|
|
Financial assets |
|
|
Financial assets |
|
|
Financial assets |
|
|
Loans and |
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives |
|
|
227,421 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Equity instruments |
|
|
84,832 |
|
|
3,705 |
|
|
19,031 |
|
|
- |
|
|
- |
|
Debt instruments |
|
|
144,419 |
|
|
13,844 |
|
|
510,443 |
|
|
69,696 |
|
|
53,599 |
|
Loans and advances |
|
|
41,760 |
|
|
120,631 |
|
|
- |
|
|
3,517,884 |
|
|
- |
|
Central Banks |
|
|
- |
|
|
- |
|
|
- |
|
|
104,401 |
|
|
- |
|
Credit institutions |
|
|
6,740 |
|
|
39,288 |
|
|
- |
|
|
157,195 |
|
|
- |
|
Customers |
|
|
35,020 |
|
|
81,343 |
|
|
- |
|
|
3,256,288 |
|
|
- |
|
Total |
|
|
498,432 |
|
|
138,180 |
|
|
529,474 |
|
|
3,587,580 |
|
|
53,599 |
|
The total of the interest income non-calculated in accordance with the effective interest rate method is 1,650 and 1,962 million euros (7,059 and 6,915 million of reais) in the first nine months of 2018 and 2017, respectively.
24
The gross exposure of the financial assets by stages of impairment as of September 30, 2018 (IFRS 9) are included below:
|
|
|
Millions of euros |
|
|||||||||
|
|
|
09-30-18 |
|
|||||||||
|
|
|
Gross value |
|
|||||||||
|
|
|
Stage 1 |
|
|
Stage 2 |
|
|
Stage 3 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through other comprehensive income |
|
|
113,588 |
|
|
6 |
|
|
- |
|
|
113,594 |
|
Debt instruments |
|
|
112,296 |
|
|
- |
|
|
- |
|
|
112,296 |
|
Loans and advances |
|
|
1,292 |
|
|
6 |
|
|
- |
|
|
1,298 |
|
Central Banks |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Credit institutions |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Customers |
|
|
1,292 |
|
|
6 |
|
|
- |
|
|
1,298 |
|
Financial assets at amortized cost |
|
|
866,708 |
|
|
53,508 |
|
|
35,692 |
|
|
955,908 |
|
Debt instruments |
|
|
39,949 |
|
|
17 |
|
|
725 |
|
|
40,691 |
|
Loans and advances |
|
|
826,759 |
|
|
53,491 |
|
|
34,967 |
|
|
915,217 |
|
Central Banks |
|
|
15,163 |
|
|
- |
|
|
- |
|
|
15,163 |
|
Credit institutions |
|
|
35,797 |
|
|
- |
|
|
4 |
|
|
35,801 |
|
Customers |
|
|
775,799 |
|
|
53,491 |
|
|
34,963 |
|
|
864,253 |
|
Total |
|
|
980,296 |
|
|
53,514 |
|
|
35,692 |
|
|
1,069,502 |
|
|
|
|
Millions of reais |
|
|||||||||
|
|
|
09-30-18 |
|
|||||||||
|
|
|
Gross value |
|
|||||||||
|
|
|
Stage 1 |
|
|
Stage 2 |
|
|
Stage 3 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through other comprehensive income |
|
|
528,580 |
|
|
28 |
|
|
- |
|
|
528,608 |
|
Debt instruments |
|
|
522,569 |
|
|
- |
|
|
- |
|
|
522,569 |
|
Loans and advances |
|
|
6,011 |
|
|
28 |
|
|
- |
|
|
6,039 |
|
Central Banks |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Credit institutions |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Customers |
|
|
6,011 |
|
|
28 |
|
|
- |
|
|
6,039 |
|
Financial assets at amortized cost |
|
|
4,033,222 |
|
|
248,999 |
|
|
166,093 |
|
|
4,448,314 |
|
Debt instruments |
|
|
185,904 |
|
|
79 |
|
|
3,374 |
|
|
189,357 |
|
Loans and advances |
|
|
3,847,318 |
|
|
248,920 |
|
|
162,719 |
|
|
4,258,957 |
|
Central Banks |
|
|
70,559 |
|
|
- |
|
|
- |
|
|
70,559 |
|
Credit institutions |
|
|
166,581 |
|
|
- |
|
|
19 |
|
|
166,600 |
|
Customers |
|
|
3,610,178 |
|
|
248,920 |
|
|
162,700 |
|
|
4,021,798 |
|
Total |
|
|
4,561,802 |
|
|
249,027 |
|
|
166,093 |
|
|
4,976,922 |
|
25
Additionally, the group has recorded EUR 298,182 million (1,387,590 million of reais) in provisions for commitments and financial guarantees granted subject to impairment under IFRS 9, of which EUR 291,328 million (1,355,692 million of reais) are in stage 1, EUR 5,495 million (25,571 million of reais) in stage 2 and EUR 1,359 million (6,327 million of reais) in stage 3.
b)Valuation adjustments for impairment of financial assets at amortized cost portfolio
The following is the movement that has taken place, during the nine-month periods ended September 30, 2018 (IFRS 9) and 2017 (IAS 39), in the balance of provisions that cover losses due to impairment of assets which comprise the heading balance of the financial assets at amortized cost:
|
|
|
Millions of euros |
|
|||
|
|
|
09-30-18 (*) |
|
|
09-30-17 |
|
Balance as at beginning of period |
|
|
26,656 |
|
|
24,899 |
|
|
|
|
|
|
|
|
|
Impairment losses charged to income for the period |
|
|
7,567 |
|
|
8,225 |
|
Of which: |
|
|
|
|
|
|
|
Impairment losses charged to income |
|
|
12,980 |
|
|
13,605 |
|
Impairment losses reversed with a credit to income |
|
|
(5,413) |
|
|
(5,380) |
|
Write-off of impaired balances against recorded impairment allowance |
|
|
(8,850) |
|
|
(10,103) |
|
Exchange differences and other changes (**) |
|
|
(876) |
|
|
3,059 |
|
|
|
|
|
|
|
|
|
Balance as at end of period |
|
|
24,497 |
|
|
26,080 |
|
|
|
|
|
|
|
|
|
By status of the assets |
|
|
|
|
|
|
|
Impaired assets |
|
|
15,822 |
|
|
17,355 |
|
Other assets |
|
|
8,675 |
|
|
8,725 |
|
|
|
|
|
|
|
|
|
Of which: |
|
|
|
|
|
|
|
Individually calculated |
|
|
5,959 |
|
|
6,137 |
|
Collectively calculated |
|
|
18,538 |
|
|
19,943 |
|
|
|
|
Millions of reais |
|
|||
|
|
|
09-30-18 (*) |
|
|
09-30-17 |
|
Balance as at beginning of period |
|
|
105,903 |
|
|
85,417 |
|
|
|
|
|
|
|
|
|
Impairment losses charged to income for the period |
|
|
32,369 |
|
|
28,995 |
|
Of which: |
|
|
|
|
|
|
|
Impairment losses charged to income |
|
|
55,526 |
|
|
47,960 |
|
Impairment losses reversed with a credit to income |
|
|
(23,157) |
|
|
(18,965) |
|
Write-off of impaired balances against recorded impairment allowance |
|
|
(37,857) |
|
|
(35,613) |
|
Exchange differences and other changes (**) |
|
|
13,580 |
|
|
19,352 |
|
|
|
|
|
|
|
|
|
Balance as at end of period |
|
|
113,995 |
|
|
98,151 |
|
|
|
|
|
|
|
|
|
By status of the assets |
|
|
|
|
|
|
|
Impaired assets |
|
|
73,626 |
|
|
65,316 |
|
Other assets |
|
|
40,369 |
|
|
32,835 |
|
|
|
|
|
|
|
|
|
Of which: |
|
|
|
|
|
|
|
Individually calculated |
|
|
27,729 |
|
|
23,096 |
|
Collectively calculated |
|
|
86,266 |
|
|
75,055 |
|
26
(*) See reconciliation of IAS 39 December 31, 2017 to IFRS 9 January 1, 2018 (Note 1.b).
(**) In 2017 it mainly includes Banco Popular acquisition balances.
Previously written-off assets recovered in the first nine months of 2018 and 2017 amounted to EUR 1,098 million and EUR 1,262 million (4,698 and 4,449 million of reais), respectively. Considering these amounts, the recorded impairment of financial assets at amortized cost amounted to EUR 6,469 million and EUR 6,963 million (27,671 and 24,546 million of reais) in the first nine months of 2018 and 2017, respectively.
The provision of the financial assets by stages of impairment as of September 30, 2018 (IFRS 9) are included below:
|
|
|
Millions of euros |
|
|||||||||
|
|
|
09-30-18 |
|
|||||||||
|
|
|
Impairment value correction |
|
|||||||||
|
|
|
Stage 1 |
|
|
Stage 2 |
|
|
Stage 3 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through other comprehensive income |
|
|
9 |
|
|
- |
|
|
- |
|
|
9 |
|
Debt instruments |
|
|
8 |
|
|
- |
|
|
- |
|
|
8 |
|
Loans and advances |
|
|
1 |
|
|
- |
|
|
- |
|
|
1 |
|
Central Banks |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Credit institutions |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Customers |
|
|
1 |
|
|
- |
|
|
- |
|
|
1 |
|
Financial assets at amortized cost |
|
|
3,943 |
|
|
4,732 |
|
|
15,822 |
|
|
24,497 |
|
Debt instruments |
|
|
26 |
|
|
17 |
|
|
559 |
|
|
602 |
|
Loans and advances |
|
|
3,917 |
|
|
4,715 |
|
|
15,263 |
|
|
23,895 |
|
Central Banks |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Credit institutions |
|
|
6 |
|
|
- |
|
|
9 |
|
|
15 |
|
Customers |
|
|
3,911 |
|
|
4,715 |
|
|
15,254 |
|
|
23,880 |
|
Total |
|
|
3,952 |
|
|
4,732 |
|
|
15,822 |
|
|
24,506 |
|
|
|
|
Millions of reais |
|
|||||||||
|
|
|
09-30-18 |
|
|||||||||
|
|
|
Impairment value correction |
|
|||||||||
|
|
|
Stage 1 |
|
|
Stage 2 |
|
|
Stage 3 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through other comprehensive income |
|
|
42 |
|
|
- |
|
|
- |
|
|
42 |
|
Debt instruments |
|
|
37 |
|
|
- |
|
|
- |
|
|
37 |
|
Loans and advances |
|
|
5 |
|
|
- |
|
|
- |
|
|
5 |
|
Central Banks |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Credit institutions |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Customers |
|
|
5 |
|
|
- |
|
|
- |
|
|
5 |
|
Financial assets at amortized cost |
|
|
18,349 |
|
|
22,020 |
|
|
73,626 |
|
|
113,995 |
|
Debt instruments |
|
|
121 |
|
|
79 |
|
|
2,601 |
|
|
2,801 |
|
Loans and advances |
|
|
18,228 |
|
|
21,941 |
|
|
71,025 |
|
|
111,194 |
|
Central Banks |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Credit institutions |
|
|
28 |
|
|
- |
|
|
42 |
|
|
70 |
|
Customers |
|
|
18,200 |
|
|
21,941 |
|
|
70,983 |
|
|
111,124 |
|
Total |
|
|
18,391 |
|
|
22,020 |
|
|
73,626 |
|
|
114,037 |
|
27
Additionally, the Group has recorded EUR 828 million (3,853 million of reais) in provisions for commitments and financial guarantees granted subject to impairment under IFRS 9, of which EUR 401 million (1,866 million of reais) are in stage 1, EUR 144 million (670 million of reais) in stage 2 and EUR 283 million (1,317 million of reais) in stage 3.
c)Impaired assets of financial assets at amortized cost portfolio
The movement produced, during the nine-month periods ended September 30, 2018 (IFRS 9) and 2017 (IAS 39) in the balance of financial assets classified as amortized cost and considered doubtful by reason for the credit risk is as follows:
|
|
|
Millions of euros |
|
|||
|
|
|
09-30-18 |
|
|
09-30-17 |
|
|
|
|
|
|
|
|
|
Balance as at beginning of period |
|
|
37,275 |
|
|
33,350 |
|
Net additions |
|
|
7,686 |
|
|
6,572 |
|
Written-off assets |
|
|
(8,850) |
|
|
(10,103) |
|
Changes in scope of consolidation (*) |
|
|
- |
|
|
9,618 |
|
Exchange differences and other |
|
|
(419) |
|
|
(529) |
|
Balance as at end of period |
|
|
35,692 |
|
|
38,908 |
|
|
|
|
Millions of reais |
|
|||
|
|
|
09-30-18 |
|
|
09-30-17 |
|
|
|
|
|
|
|
|
|
Balance as at beginning of period |
|
|
148,091 |
|
|
114,408 |
|
Net additions |
|
|
32,878 |
|
|
23,166 |
|
Written-off assets |
|
|
(37,857) |
|
|
(35,613) |
|
Changes in scope of consolidation (*) |
|
|
- |
|
|
36,156 |
|
Exchange differences and other |
|
|
22,981 |
|
|
8,314 |
|
Balance as at end of period |
|
|
166,093 |
|
|
146,431 |
|
(*)In 2017 it mainly includes balances from Banco Popular acquisition.
This amount, after deducting the related allowances, represents the Group’s best estimate of the discounted value of the flows that are expected to be recovered from the impaired assets.
d)Fair value of financial assets not measured at fair value
Following is a comparison of the carrying amounts of the Group’s financial assets measured at other than fair value and their respective fair values at September 30, 2018 (IFRS 9) and December 31, 2017 (IAS 39):
|
|
|
Millions of euros |
|
|
|
|
|
Millions of euros |
|
||||||
|
|
|
09-30-18 (*) |
|
|
|
|
|
12‑31‑17 |
|
||||||
|
|
|
Carrying |
|
|
Fair value |
|
|
|
|
|
Carrying |
|
|
Fair value |
|
Financial assets at amortized cost |
|
|
|
|
|
|
|
|
Loans and receivables |
|
|
|
|
|
|
|
Loans and advances |
|
|
891,322 |
|
|
896,089 |
|
|
Loans and advances |
|
|
885,470 |
|
|
895,645 |
|
Central banks |
|
|
15,163 |
|
|
15,168 |
|
|
Central banks |
|
|
26,278 |
|
|
26,301 |
|
Loans and advances to credit institutions |
|
|
35,786 |
|
|
36,056 |
|
|
Loans and advances to credit institutions |
|
|
39,567 |
|
|
39,887 |
|
Loans and advances to customers |
|
|
840,373 |
|
|
844,865 |
|
|
Loans and advances to customers |
|
|
819,625 |
|
|
829,457 |
|
Debt instruments |
|
|
40,089 |
|
|
39,635 |
|
|
Debt instruments |
|
|
31,034 |
|
|
31,094 |
|
ASSETS |
|
|
931,411 |
|
|
935,724 |
|
|
ASSETS |
|
|
916,504 |
|
|
926,739 |
|
28
|
|
|
Millions of reais |
|
|
|
|
|
Millions of reais |
|
||||||
|
|
|
09-30-18 (*) |
|
|
|
|
|
12‑31‑17 |
|
||||||
|
|
|
Carrying |
|
|
Fair value |
|
|
|
|
|
Carrying |
|
|
Fair value |
|
Financial assets at amortized cost |
|
|
|
|
|
|
|
|
Loans and receivables |
|
|
|
|
|
|
|
Loans and advances |
|
|
4,147,763 |
|
|
4,169,950 |
|
|
Loans and advances |
|
|
3,517,884 |
|
|
3,558,308 |
|
Central banks |
|
|
70,559 |
|
|
70,584 |
|
|
Central banks |
|
|
104,401 |
|
|
104,491 |
|
Loans and advances to credit institutions |
|
|
166,530 |
|
|
167,787 |
|
|
Loans and advances to credit institutions |
|
|
157,195 |
|
|
158,467 |
|
Loans and advances to customers |
|
|
3,910,674 |
|
|
3,931,579 |
|
|
Loans and advances to customers |
|
|
3,256,288 |
|
|
3,295,350 |
|
Debt instruments |
|
|
186,556 |
|
|
184,441 |
|
|
Debt instruments |
|
|
123,295 |
|
|
123,533 |
|
ASSETS |
|
|
4,334,319 |
|
|
4,354,391 |
|
|
ASSETS |
|
|
3,641,179 |
|
|
3,681,841 |
|
(*)See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
The main valuation methods and inputs used in the estimation of the fair value of the financial assets of the previous table are detailed in Note 51.c of the consolidated financial statements for the year 2017, taking into account IFRS 9 that has come into force on January 1, 2018 (Note 1.b).
6.Non-current assets held for sale
The detail, by nature, of the Group’s non-current assets held for sale at September 30, 2018 and December 31, 2017 is as follows:
|
|
|
Millions of euros |
|
|||
|
|
|
09-30-18 |
|
|
12-31-17 |
|
|
|
|
|
|
|
|
|
Tangible assets |
|
|
5,443 |
|
|
11,661 |
|
Of which: |
|
|
|
|
|
|
|
Foreclosed assets |
|
|
5,353 |
|
|
11,566 |
|
Of which: Property assets in Spain (*) |
|
|
4,447 |
|
|
10,533 |
|
Other tangible assets held for sale |
|
|
90 |
|
|
95 |
|
Other assets |
|
|
2 |
|
|
3,619 |
|
|
|
|
5,445 |
|
|
15,280 |
|
|
|
|
Millions of reais |
|
|||
|
|
|
09-30-18 |
|
|
12-31-17 |
|
|
|
|
|
|
|
|
|
Tangible assets |
|
|
25,333 |
|
|
46,325 |
|
Of which: |
|
|
|
|
|
|
|
Foreclosed assets |
|
|
24,913 |
|
|
45,949 |
|
Of which: Property assets in Spain (*) |
|
|
20,694 |
|
|
41,847 |
|
Other tangible assets held for sale |
|
|
420 |
|
|
376 |
|
Other assets |
|
|
8 |
|
|
14,382 |
|
|
|
|
25,341 |
|
|
60,707 |
|
(*)On March, 2018, the agreement for the operation of the real estate business of Popular with Blackstone was materialized (Note 2).
As September 30, 2018, the hedges constituted for the total of non-current assets for sale represent 50% (50% as of December 31, 2017, without considering the assets of the popular real estate business sold in March 2018). The provisions made during the first nine months of these years amounted to EUR 252 million and EUR 296 million (1,071 and 1,043 million of reais), respectively, and the recoveries made during that year amounted to EUR 20 million and EUR 29 million (83 and 103 million of reais), respectively.
Without considering the aforementioned agreement (Note 2), during the first nine months of 2018, the Group sold, for a net total of approximately EUR 808 million (3,456 million of reais), foreclosed properties with a gross carrying amount of EUR 1,417 million (6,061 million of reais), for which provisions totaling EUR 674 million (2,883 million of reais) had been recognized. These sales gave rise to gains of EUR 65 million (278 million of reais).
29
In addition, other tangible assets were sold for EUR 90 million (381 million of reais), giving rise to a gain of EUR 9 million (35 million of reais).
7.Tangible assets
a)Changes in the period
In the first nine months of 2018 and 2017, tangible assets were acquired for EUR 7,739 million and EUR 5,991 million (33,106 and 21,118 million of reais), respectively.
Also, in the first nine months of 2018 and 2017 tangible asset items were disposed of with a carrying amount of EUR 2,926 million and EUR 2,837 million (12,518 and 9,999 million of reais) respectively, giving rise to a net gain of EUR 27 million and EUR 61 million (115 and 215 million of reais), in both periods.
b)Impairment losses
In the first nine months of 2018 and 2017, there were impairment losses on elements of tangible assets (mainly assets leased out under operating leases) amounting to EUR 45 million and EUR 44 million (193 and 154 million of reais), which were recognized under Impairment on non-financial assets (net) in the condensed consolidated income statement.
c)Property, plant and equipment purchase commitments
At September 30, 2018 and 2017, the Group did not have any significant commitments to purchase property, plant and equipment items.
8.Intangible assets
a)Goodwill
The detail of Intangible Assets - Goodwill at September 30, 2018 and December 31, 2017, based on the cash-generating units giving rise thereto, is as follows:
|
|
|
Millions of euros |
|
|||
|
|
|
09-30-18 |
|
|
12‑31‑17 |
|
|
|
|
|
|
|
|
|
Santander UK |
|
|
8,375 |
|
|
8,375 |
|
Banco Santander (Brazil), S.A. |
|
|
4,258 |
|
|
4,988 |
|
Santander Bank Polska, S.A. (former Bank Zachodni WBK S.A.) |
|
|
2,415 |
|
|
2,473 |
|
Santander Consumer USA Holdings Inc. |
|
|
2,079 |
|
|
2,007 |
|
Santander Bank, National Association |
|
|
1,774 |
|
|
1,712 |
|
Santander Consumer Germany |
|
|
1,217 |
|
|
1,217 |
|
Santander Asset Management |
|
|
1,173 |
|
|
1,173 |
|
Banco Santander Totta, S.A. |
|
|
1,040 |
|
|
1,040 |
|
Banco Santander (Chile) |
|
|
651 |
|
|
676 |
|
Santander Consumer Bank (Nordics) |
|
|
505 |
|
|
518 |
|
Grupo Financiero Santander (México) |
|
|
449 |
|
|
413 |
|
Other entities (*) |
|
|
1,020 |
|
|
1,177 |
|
|
|
|
24,956 |
|
|
25,769 |
|
30
|
|
|
Millions of reais |
|
|||
|
|
|
09-30-18 |
|
|
12‑31‑17 |
|
|
|
|
|
|
|
|
|
Santander UK |
|
|
38,972 |
|
|
33,275 |
|
Banco Santander (Brazil), S.A. |
|
|
19,816 |
|
|
19,816 |
|
Santander Bank Polska, S.A. (former Bank Zachodni WBK S.A.) |
|
|
11,239 |
|
|
9,826 |
|
Santander Consumer USA Holdings Inc. |
|
|
9,677 |
|
|
7,974 |
|
Santander Bank, National Association |
|
|
8,255 |
|
|
6,802 |
|
Santander Consumer Germany |
|
|
5,661 |
|
|
4,833 |
|
Santander Asset Management |
|
|
5,459 |
|
|
4,660 |
|
Banco Santander Totta, S.A. |
|
|
4,840 |
|
|
4,132 |
|
Banco Santander (Chile) |
|
|
3,028 |
|
|
2,685 |
|
Santander Consumer Bank (Nordics) |
|
|
2,350 |
|
|
2,057 |
|
Grupo Financiero Santander (México) |
|
|
2,088 |
|
|
1,641 |
|
Other entities (*) |
|
|
4,749 |
|
|
4,675 |
|
|
|
|
116,134 |
|
|
102,376 |
|
(*)As of September 30, 2018 and December 31, 2017 includes EUR 248 million of Banco Popular Español, S.A.U. (1,154 and 933 million of reais, respectively)
In the first nine months of 2018, goodwill decreased by EUR 682 million (increased by 14,329 million of reais) due to exchange differences, which pursuant to current regulations, were recognized with a debit to Other comprehensive income – items that may be reclassified to profit or loss - Exchange differences in equity through the condensed consolidated statement of recognized income and expense (Note 11).
Note 17 to the consolidated financial statements for the year ended December 31, 2017 includes detailed information on the procedures followed by the Group to analyze the potential impairment of the goodwill recognized with respect to its recoverable amount and to recognize the related impairment losses, where appropriate.
Accordingly, based on the analysis performed of the available information on the performance of the various cash-generating units which might evidence the existence of indications of impairment, the Group’s directors concluded that in the first nine months of 2018 there were no impairment losses which required recognition.
b)Other intangible assets
During the first nine months of 2018, impairment losses amounting EUR 77 million (329 million of reais) were recorded under "Impairment of other non financial assets, net" in the consolidated income statement.
31
9.Financial liabilities
a) |
Breakdown |
The detail, by nature and category for valuation purposes, of the Group’s financial liabilities, other than hedging derivatives, at September 30, 2018 (IFRS 9) and December 31, 2017 (IAS 39) is as follows:
|
|
|
Millions of euros |
|
|
Millions of euros |
|
||||||||||||
|
|
|
09-30-18 (*) |
|
|
12-31-17 |
|
||||||||||||
|
|
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives |
|
|
51,775 |
|
|
- |
|
|
- |
|
|
57,892 |
|
|
- |
|
|
- |
|
Short Positions |
|
|
15,030 |
|
|
- |
|
|
- |
|
|
20,979 |
|
|
- |
|
|
- |
|
Deposits |
|
|
- |
|
|
89,447 |
|
|
879,043 |
|
|
28,753 |
|
|
55,971 |
|
|
883,320 |
|
Central banks |
|
|
- |
|
|
12,073 |
|
|
72,610 |
|
|
282 |
|
|
8,860 |
|
|
71,414 |
|
Credit institutions |
|
|
- |
|
|
22,220 |
|
|
82,836 |
|
|
292 |
|
|
18,166 |
|
|
91,300 |
|
Customer |
|
|
- |
|
|
55,154 |
|
|
723,597 |
|
|
28,179 |
|
|
28,945 |
|
|
720,606 |
|
Debt securities |
|
|
- |
|
|
2,323 |
|
|
231,708 |
|
|
- |
|
|
3,056 |
|
|
214,910 |
|
Other financial liabilities |
|
|
- |
|
|
412 |
|
|
28,315 |
|
|
- |
|
|
589 |
|
|
27,839 |
|
Total |
|
|
66,805 |
|
|
92,182 |
|
|
1,139,066 |
|
|
107,624 |
|
|
59,616 |
|
|
1,126,069 |
|
|
|
|
Millions of reais |
|
|
Millions of reais |
|
||||||||||||
|
|
|
09-30-18 (*) |
|
|
12-31-17 |
|
||||||||||||
|
|
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives |
|
|
240,936 |
|
|
- |
|
|
- |
|
|
230,000 |
|
|
- |
|
|
- |
|
Short Positions |
|
|
69,943 |
|
|
- |
|
|
- |
|
|
83,348 |
|
|
- |
|
|
- |
|
Deposits |
|
|
- |
|
|
416,241 |
|
|
4,090,625 |
|
|
114,230 |
|
|
222,369 |
|
|
3,509,343 |
|
Central banks |
|
|
- |
|
|
56,180 |
|
|
337,889 |
|
|
1,120 |
|
|
35,201 |
|
|
283,721 |
|
Credit institutions |
|
|
- |
|
|
103,401 |
|
|
385,478 |
|
|
1,158 |
|
|
72,172 |
|
|
362,725 |
|
Customer |
|
|
- |
|
|
256,660 |
|
|
3,367,258 |
|
|
111,952 |
|
|
114,996 |
|
|
2,862,897 |
|
Debt securities |
|
|
- |
|
|
10,811 |
|
|
1,078,253 |
|
|
- |
|
|
12,143 |
|
|
853,816 |
|
Other financial liabilities |
|
|
- |
|
|
1,919 |
|
|
131,762 |
|
|
- |
|
|
2,339 |
|
|
110,600 |
|
Total |
|
|
310,879 |
|
|
428,971 |
|
|
5,300,640 |
|
|
427,578 |
|
|
236,851 |
|
|
4,473,759 |
|
(*)See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
b) |
Information on issues, repurchases or redemptions of debt instruments issued |
The detail of the balance of debt instruments issued according to their nature is:
|
|
|
Millions of euros |
|
|||
|
|
|
09-30-18 |
|
|
12‑31‑17 |
|
|
|
|
|
|
|
|
|
Bonds and debentures outstanding |
|
|
185,923 |
|
|
176,719 |
|
Subordinated |
|
|
23,809 |
|
|
21,382 |
|
Promissory notes and other securities |
|
|
24,299 |
|
|
19,865 |
|
Total debt instruments issued |
|
|
234,031 |
|
|
217,966 |
|
|
|
|
Millions of reais |
|
|||
|
|
|
09-30-18 |
|
|
12‑31‑17 |
|
|
|
|
|
|
|
|
|
Bonds and debentures outstanding |
|
|
865,191 |
|
|
702,086 |
|
Subordinated |
|
|
110,795 |
|
|
84,951 |
|
Promissory notes and other securities |
|
|
113,078 |
|
|
78,922 |
|
Total debt instruments issued |
|
|
1,089,064 |
|
|
865,959 |
|
The detail, at September 30, 2018 and 2017, of the outstanding balance of the debt instruments, excluding promissory notes, which at these dates had been issued by the Bank or any other Group
32
entity is disclosed below. Also included is the detail of the changes in this balance in the first nine months of 2018 and 2017:
|
|
|
Millions of euros |
|
|||||||||||||||
|
|
|
09-30-18 |
|
|||||||||||||||
|
|
|
Outstanding beginning |
|
|
Perimeter |
|
|
Issues |
|
|
Repurchases or |
|
|
Exchange rate and |
|
|
Outstanding ending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds and debentures outstanding |
|
|
176,719 |
|
|
- |
|
|
51,101 |
|
|
(40,861) |
|
|
(1,036) |
|
|
185,923 |
|
Subordinated |
|
|
21,382 |
|
|
- |
|
|
2,985 |
|
|
(791) |
|
|
233 |
|
|
23,809 |
|
Bonds and debentures outstanding and subordinated liabilities issued |
|
|
198,101 |
|
|
- |
|
|
54,086 |
|
|
(41,652) |
|
|
(803) |
|
|
209,732 |
|
|
|
|
Millions of reais |
|
|||||||||||||||
|
|
|
09-30-18 |
|
|||||||||||||||
|
|
|
Outstanding beginning |
|
|
Perimeter |
|
|
Issues |
|
|
Repurchases or |
|
|
Exchange rate and |
|
|
Outstanding ending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds and debentures outstanding |
|
|
702,086 |
|
|
- |
|
|
218,592 |
|
|
(174,789) |
|
|
119,302 |
|
|
865,191 |
|
Subordinated |
|
|
84,951 |
|
|
- |
|
|
12,769 |
|
|
(3,384) |
|
|
16,459 |
|
|
110,795 |
|
Bonds and debentures outstanding and subordinated liabilities issued |
|
|
787,037 |
|
|
- |
|
|
231,361 |
|
|
(178,173) |
|
|
135,761 |
|
|
975,986 |
|
|
|
|
Millions of euros |
|
|||||||||||||||
|
|
|
09-30-17 |
|
|||||||||||||||
|
|
|
Outstanding beginning |
|
|
Perimeter |
|
|
Issues |
|
|
Repurchases or |
|
|
Exchange rate and |
|
|
Outstanding ending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds and debentures outstanding |
|
|
183,278 |
|
|
11,426 |
|
|
42,591 |
|
|
(54,374) |
|
|
(9,970) |
|
|
172,951 |
|
Subordinated |
|
|
19,873 |
|
|
11 |
|
|
2,894 |
|
|
(144) |
|
|
(795) |
|
|
21,839 |
|
Bonds and debentures outstanding and subordinated liabilities issued |
|
|
203,151 |
|
|
11,437 |
|
|
45,485 |
|
|
(54,518) |
|
|
(10,765) |
|
|
194,790 |
|
|
|
|
Millions of reais |
|
|||||||||||||||
|
|
|
09-30-17 |
|
|||||||||||||||
|
|
|
Outstanding beginning |
|
|
Perimeter |
|
|
Issues |
|
|
Repurchases or |
|
|
Exchange rate and |
|
|
Outstanding ending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds and debentures outstanding |
|
|
628,733 |
|
|
40,277 |
|
|
150,134 |
|
|
(191,669) |
|
|
23,424 |
|
|
650,899 |
|
Subordinated |
|
|
68,176 |
|
|
39 |
|
|
10,201 |
|
|
(508) |
|
|
4,285 |
|
|
82,193 |
|
Bonds and debentures outstanding and subordinated liabilities issued |
|
|
696,909 |
|
|
40,316 |
|
|
160,335 |
|
|
(192,177) |
|
|
27,709 |
|
|
733,092 |
|
In March 2018, Banco Santander, S.A. communicated that the placement of preference shares contingently convertible into newly issued ordinary shares of the Bank carried out, excluding the right of preferential subscription of its shareholders and for a nominal amount of EUR 1,500 million (the "Issuance" and the CCPSs").
The Issuance was made at pair and the remuneration of the CCPSs, whose payment is subject to certain conditions and is also discretionary, fixed at an annual 4.75% for the first seven years, being
33
revised thereafter every five years applying a margin of 409.7 basis-point over the Mid-Swap Rate in five-year euros (5‑year Euro Mid-Swap Rate).
c) |
Other issues guaranteed by the Group |
At September 30, 2018 and 2017, there were no debt instruments issued by associates or non-Group third parties that had been guaranteed by the Bank or any other Group entity.
d) |
Fair value of financial liabilities not measured at fair value |
Following is a comparison of the carrying amounts of the Group’s financial liabilities measured at other than fair value and their corresponding fair value at September 30, 2018 and December 31, 2017:
|
|
|
Millions of euros |
|
|||||||||
|
|
|
09-30-18 |
|
|
12-31-17 |
|
||||||
|
|
|
Carrying amount |
|
|
Fair value |
|
|
Carrying amount |
|
|
Fair value |
|
Deposits |
|
|
879,043 |
|
|
878,668 |
|
|
883,320 |
|
|
883,880 |
|
Central banks |
|
|
72,610 |
|
|
72,330 |
|
|
71,414 |
|
|
70,713 |
|
Credit institutions |
|
|
82,836 |
|
|
82,819 |
|
|
91,300 |
|
|
91,767 |
|
Customer |
|
|
723,597 |
|
|
723,519 |
|
|
720,606 |
|
|
721,400 |
|
Debt securities |
|
|
231,708 |
|
|
234,687 |
|
|
214,910 |
|
|
221,276 |
|
Other financial liabilities |
|
|
28,315 |
|
|
28,427 |
|
|
27,839 |
|
|
27,615 |
|
LIABILITIES |
|
|
1,139,066 |
|
|
1,141,782 |
|
|
1,126,069 |
|
|
1,132,771 |
|
|
|
|
Millions of reais |
|
|||||||||
|
|
|
09-30-18 |
|
|
12-31-17 |
|
||||||
|
|
|
Carrying amount |
|
|
Fair value |
|
|
Carrying amount |
|
|
Fair value |
|
Deposits |
|
|
4,090,625 |
|
|
4,088,882 |
|
|
3,509,343 |
|
|
3,511,567 |
|
Central banks |
|
|
337,889 |
|
|
336,588 |
|
|
283,721 |
|
|
280,936 |
|
Credit institutions |
|
|
385,478 |
|
|
385,398 |
|
|
362,725 |
|
|
364,581 |
|
Customer |
|
|
3,367,258 |
|
|
3,366,896 |
|
|
2,862,897 |
|
|
2,866,050 |
|
Debt securities |
|
|
1,078,253 |
|
|
1,092,116 |
|
|
853,816 |
|
|
879,107 |
|
Other financial liabilities |
|
|
131,762 |
|
|
132,285 |
|
|
110,600 |
|
|
109,712 |
|
LIABILITIES |
|
|
5,300,640 |
|
|
5,313,283 |
|
|
4,473,759 |
|
|
4,500,386 |
|
The main valuation methods and inputs used in the estimation of the fair value of the financial liabilities in the previous table, other than those mentioned in these interim financial statements, are detailed in Note 51.c of the consolidated financial statements for 2017.
10.Provisions
a) |
Provisions for Pensions and other post-retirements obligations and Other long term employee benefits |
The variation experienced by the balance of the Pensions and other post-retirements obligations and other long term employee benefits from December 31, 2017 to September 30, 2018, is mainly due to lower actuarial losses in the nine-month period as a result of changes in actuarial assumptions (Note 11.c), as well as benefit allowances, which are partially offset by early retirement provisions amounting to EUR 165 million (706 million of reais).
34
b) |
Provisions for taxes and other legal contingencies and Other provisions |
Set forth below is the detail, by type of provision, of the balances at September 30, 2018 and at December 31, 2017 of Provisions for taxes and other legal contingencies and Other provisions. The types of provision were determined by grouping together items of a similar nature:
|
|
|
Millions of euros |
|
|||
|
|
|
09-30-18 |
|
|
12‑31‑17 |
|
|
|
|
|
|
|
|
|
Provisions for taxes |
|
|
848 |
|
|
1,006 |
|
Provisions for employment-related proceedings (Brazil) |
|
|
854 |
|
|
868 |
|
Provisions for other legal proceedings |
|
|
1,330 |
|
|
1,307 |
|
Provision for customer remediation |
|
|
661 |
|
|
885 |
|
Regulatory framework-related provisions |
|
|
35 |
|
|
101 |
|
Provision for restructuring |
|
|
522 |
|
|
360 |
|
Other |
|
|
1,380 |
|
|
1,314 |
|
|
|
|
5,630 |
|
|
5,841 |
|
|
|
|
Millions of reais |
|
|||
|
|
|
09-30-18 |
|
|
12‑31‑17 |
|
|
|
|
|
|
|
|
|
Provisions for taxes |
|
|
3,946 |
|
|
3,997 |
|
Provisions for employment-related proceedings (Brazil) |
|
|
3,974 |
|
|
3,448 |
|
Provisions for other legal proceedings |
|
|
6,188 |
|
|
5,195 |
|
Provision for customer remediation |
|
|
3,076 |
|
|
3,517 |
|
Regulatory framework-related provisions |
|
|
163 |
|
|
401 |
|
Provision for restructuring |
|
|
2,429 |
|
|
1,431 |
|
Other |
|
|
6,418 |
|
|
5,220 |
|
|
|
|
26,194 |
|
|
23,209 |
|
Relevant information is set forth below in relation to each type of provision shown in the preceding table.
The provisions for taxes include provisions for tax-related proceedings.
The provisions for employment-related proceedings (Brazil) relate to claims filed by trade unions, associations, the prosecutor’s office and ex-employees claiming employment rights to which, in their view, they are entitled, particularly the payment of overtime and other employment rights, including litigation concerning retirement benefits. The number and nature of these proceedings, which are common for banks in Brazil, justify the classification of these provisions in a separate category or as a separate type from the rest. The Group calculates the provisions associated with these claims in accordance with past experience of payments made in relation to claims for similar items. When claims do not fall within these categories, a case-by-case assessment is performed and the amount of the provision is calculated in accordance with the status of each proceeding and the risk assessment carried out by the legal advisers.
The provisions for other legal proceedings include provisions for court, arbitration or administrative proceedings (other than those included in other categories or types of provisions disclosed separately) brought against Santander Group companies.
The provisions for customer remediation include the estimated cost of payments to remedy errors relating to the sale of certain products in the UK and the estimated cost of the Banco Popular floor clauses. To calculate the provision for customer remediation, the best estimate of the provision made by management is used, which is based on the estimated number of claims to be received and, of these, the number that will be accepted, as well as the estimated average payment per case.
35
The regulatory framework-related provisions include mainly the provisions for the extraordinary contribution to FSCS (Financial Services Compensation Scheme) and the Bank Levy in the UK, and those relating to Banking Tax in Poland.
The provisions for restructuring include only the direct costs arising from restructuring processes carried out by the various Group companies.
Qualitative information on the main litigation is provided in Note 10.c.
Our general policy is to record provisions for tax and legal proceedings in which we assess the chances of loss to be probable and we do not record provisions when the chances of loss are possible or remote. We determine the amounts to be provided for as our best estimate of the expenditure required to settle the corresponding claim based, among other factors, on a case-by-case analysis of the facts and the legal opinion of internal and external counsel or by considering the historical average amount of the loss incurred in claims of the same nature. The definitive date of the outflow of resources embodying economic benefits for the Group depends on each obligation. In certain cases, the obligations do not have a fixed settlement term and, in others, they depend on legal proceedings in progress.
The main movements during the first nine months of the breakdown provisions are shown below:
Regarding the provisions arising from civil contingencies and legal nature, Brazil provides in the period EUR 195 million (834 million of reais) due to civil contingencies and EUR 283 million (1,211 million of reais) arising from employment related claims. This increase was partially offset by the use of available provisions of which EUR 221 million (945 million of reais) were related to payments of employment-related claims and EUR 132 million (565 million of reais) due to civil contingencies.
Regarding the provisions arising for customer remediation, EUR 16 million (68 million of reais) are released, and EUR 95 million (406 million of reais) are used in United Kingdom. On the other hand, in Popular, an amount of EUR 100 million (428 million of reais) has been used in the year from floor clauses.
Regarding the provisions constituted by regulatory framework, EUR 5 million (21 million of reais) are released and EUR 60 million (257 million of reais) are used in the nine-month period in United Kingdom (Bank Levy and FSCS). In addition, EUR 71 million (330 million of reais) have been provisioned and paid in Poland.
Regarding the provisions for restructuring process, a further provision of EUR 236 million (1,010 million of reais) was registered in Spain. This increase was partially offset by the use of EUR 164 million (702 million of reais).
c)Litigation and other matters
i.Tax-related litigation
At September 30, 2018 the main tax-related proceedings concerning the Group were as follows:
- Legal actions filed by Banco Santander (Brasil) S.A. and certain Group companies in Brazil challenging the increase in the rate of Brazilian social contribution tax on net income from 9% to 15% stipulated by Interim Measure 413/2008, ratified by Law 11,727/2008, a provision having been recognized for the amount of the estimated loss.
- Legal actions filed by Banco Santander, S.A. (currently Banco Santander (Brasil) S.A.) and other Group entities claiming their right to pay the Brazilian PIS and COFINS social contributions only on the income from the provision of services. In the case of Banco Santander, S.A., the legal action was
36
declared unwarranted and an appeal was filed at the Federal Regional Court. In September 2007 the Federal Regional Court found in favor of Banco Santander, S.A., but the Brazilian authorities appealed against the judgment at the Federal Supreme Court. On April 23, 2015, the Federal Supreme Court issued a decision granting leave for the extraordinary appeal filed by the Brazilian authorities with regard to the PIS contribution to proceed, and dismissing the extraordinary appeal lodged by the Brazilian Public Prosecutor’s Office in relation to the COFINS contribution. The Federal Supreme Court has not yet handed down its decision on the PIS contribution and, with regard to the COFINS contribution, on May 28, 2015, the Federal Supreme Court in plenary session unanimously rejected the extraordinary appeal filed by the Brazilian Public Prosecutor’s Office, and the petition for clarification ("embargos de declaraçao") subsequently filed by the Brazilian Public Prosecutor’s Office, which on September 3, 2015 admitted that no further appeals may be filed. In the case of Banco ABN AMRO Real, S.A. (currently Banco Santander (Brasil) S.A.), in March 2007 the court found in its favor, but the Brazilian authorities appealed against the judgment at the Federal Regional Court, which handed down a decision partly upholding the appeal in September 2009. Banco Santander (Brasil) S.A. filed an appeal at the Federal Supreme Court. Law 12,865/2013 established a program of payments or deferrals of certain tax and social security debts, under which any entities that availed themselves of the program and withdrew the legal actions brought by them were exempted from paying late-payment interest. In November 2013 Banco Santander (Brasil) S.A. partially availed itself of this program but only with respect to the legal actions brought by the former Banco ABN AMRO Real, S.A. in relation to the period from September 2006 to April 2009, and with respect to other minor actions brought by other entities in its Group. However, the legal actions brought by Banco Santander, S.A. and those of Banco ABN AMRO Real, S.A. relating to the periods prior to September 2006, for which a provision for the estimated loss was recognized, still persist.
- Banco Santander (Brasil) S.A. and other Group companies in Brazil have appealed against the assessments issued by the Brazilian tax authorities questioning the deduction of loan losses in their income tax returns (IRPJ and CSLL) on the ground that the relevant requirements under the applicable legislation were not met. No provision was recognized in connection with the amount considered to be a contingent liability. In August 2017, the Bank and other entities of the Group have adhered to the program of fractioning and payment of tax debts provided for in Provisional Measure 783/2017 in relation to different administrative processes of the years 1999 to 2005.
- Banco Santander (Brasil) S.A. and other Group companies in Brazil are involved in administrative and legal proceedings against several municipalities that demand payment of the Service Tax on certain items of income from transactions not classified as provisions of services. No provision was recognized in connection with the amount considered to be a contingent liability.
- In addition, Banco Santander (Brasil) S.A. and other Group companies in Brazil are involved in administrative and legal proceedings against the tax authorities in connection with the taxation for social security purposes of certain items which are not considered to be employee remuneration. A provision was recognized in connection with the amount of the estimated loss.
- In December 2008 the Brazilian tax authorities issued an infringement notice against Banco Santander (Brasil) S.A. in relation to income tax (IRPJ and CSLL) for 2002 to 2004. The tax authorities took the view that Banco Santander (Brasil) S.A. did not meet the necessary legal requirements to be able to deduct the goodwill arising on the acquisition of Banco Santander Banespa, S.A. (currently Banco Santander (Brasil) S.A.). Banco Santander (Brasil) S.A. filed an appeal against the infringement notice at Conselho Administrativo de Recursos Fiscais (the Brazilian Tax Appeal Administrative Council, CARF), which on October 21, 2011 unanimously decided to render the infringement notice null and void. The tax authorities appealed against this decision at a higher administrative level. On May 11, 2017, the Superior Chamber of Tax Appeals of the Administrative Council of Tax Appeals, in a split decision, reverted the previous unanimous decision reached by the Brazilian Tax Appeal Administrative Council and issued a judgment in favor of the Brazilian taxing authorities. This decision has been subject to clarification action which has been dismissed, as such,
37
the decision has been appealed. However, the processing of this appeal has been recessed as a result of the estimation of a popular action that has resulted in the annulment of the CARF decision of October 21, 2011, and this body must issue a new resolution on these years. In June 2010 the Brazilian tax authorities issued infringement notices in relation to this same matter for 2005 to 2007. Banco Santander (Brasil) S.A. filed an appeal against these procedures at CARF, which was partially upheld on October 8, 2013. This decision has been appealed. On July 4, 2017 and November 8, 2017, the CARF ruled in favor of the Brazilian taxing authorities with regards to the annual periods for the years ended 2005, 2006 and 2007, being these rulings subject to a clarification action and subsequent appeal before the Courts. In relation to year 2007, an appeal was also filed challenging the voting process of the decision. In December 2013 the Brazilian tax authorities issued the infringement notice relating to 2008, the last year for amortization of the goodwill. Banco Santander (Brasil) S.A. appealed against this infringement notice and the court found in its favor. The Brazilian tax authorities appealed against this decision at CARF. Based on the advice of its external legal counsel, the Group considers that the stance taken by the Brazilian tax authorities is incorrect and that there are sound defense arguments to appeal against the infringement notices. Accordingly, the risk of incurring a loss is remote. Consequently, no provisions were recognized in connection with these proceedings because this matter should not affect the interim financial statements.
- In May 2003 the Brazilian tax authorities issued separate infringement notices against Santander Distribuidora de Títulos e Valores Mobiliarios Ltda. (DTVM, currently Produban Serviços de Informática S.A.) and Banco Santander (Brasil) S.A. (currently Banco Santander (Brasil) S.A.) in relation to the Provisional Tax on Financial Movements (CPMF) with respect to certain transactions carried out by DTVM in the management of its customers’ funds and for the clearing services provided by Banco Santander (Brasil) S.A. to DTVM in 2000, 2001 and the first two months of 2002. The two entities appealed against the infringement notices at CARF, with DTVM obtaining a favorable decision and Banco Santander (Brasil) S.A. an unfavorable decision. Both decisions were appealed by the losing parties at the High Chamber of CARF, and unfavorable decisions were obtained by Banco Santander (Brasil) S.A. and DTVM on June 12 and 19, 2015, respectively. Both cases were appealed at court in a single proceeding and a provision was recognized for the estimated loss.
- In December 2010 the Brazilian tax authorities issued an infringement notice against Santander Seguros S.A. (Brazil), current Zurich Santander Brasil Seguros e Previdência S.A., as the successor by merger to ABN AMRO Brazil Dois Participações, S.A., in relation to income tax (IRPJ and CSLL) for 2005. The tax authorities questioned the tax treatment applied to a sale of shares of Real Seguros, S.A. made in that year. The bank filed an appeal for reconsideration against this infringement notice and subsequently appealed before the CARF, whose resolution partly in favor has been appealed by the Unión Federal and Zurich Santander Brasil Seguros e Previdência S.A. As the former parent of Santander Seguros S.A. (Brasil), Banco Santander (Brasil) S.A. is liable in the event of any adverse outcome of this proceeding. No provision was recognized in connection with this proceeding as it was considered to be a contingent liability.
- In June 2013, the Brazilian tax authorities issued an infringement order against Banco Santander (Brasil) S.A. as the party responsible for the capital gains tax allegedly obtained in Brazil by the non-resident entity in Brazil, Sterrebeeck BV, on the occasion of the operation of ‘incorporation of ações’ carried out in August 2008. As a result of the aforementioned operation, Banco Santander (Brasil) SA acquired all the shares of Banco ABN AMRO Real SA and ABN AMRO Brasil Dois Participações SA through the delivery to the shareholders of these newly issued share entities of Banco Santander (Brasil) SA, issued in a capital increase carried out for this purpose. The Brazilian tax authorities take the view that in the aforementioned transaction Sterrebeeck B.V. obtained income subject to tax in Brazil consisting of the difference between the issue value of the shares of Banco Santander (Brasil) S.A. that were received and the acquisition cost of the shares delivered in the exchange. After the appeal for reconsideration lodged at the Federal Tax Office was dismissed by the Delegacia da Receita Federal, the Group, in December 2014, appealed against the infringement notice at CARF, which, in March 2018, in a split decision settled by the casting vote of the Chairman, has dismissed
38
the appeal filed by the Group. This decision will be subject to clarification action and further appeal at the CARF. Based on the advice of its external legal counsel, the Group considers that the stance taken by the Brazilian tax authorities is incorrect and that there are sound defense arguments to appeal against the infringement notice. Accordingly, the risk of incurring a loss is remote. Consequently, the Group has not recognized any provisions in connection with these proceedings because this matter should not affect the interim financial statements.
- In November 2014 the Brazilian tax authorities issued an infringement notice against Banco Santander (Brasil) S.A. in relation to income tax (IRPJ and CSLL) for 2009 questioning the tax-deductibility of the amortization of the goodwill of Banco ABN AMRO Real S.A. performed prior to the absorption of this bank by Banco Santander (Brasil) S.A., but accepting the amortization performed after the merger. On the advice of its external legal counsel, Banco Santander (Brasil) S.A. lodged an appeal against this decision at the Federal Tax Office and obtained a favorable decision in July 2015. Such decision was appealed by the Brazilian tax authorities before the CARF, which ruled in their favor. Consequently, in November 2016 the Bank lodged an appeal before the Higher Chamber of Tax Appeals. No provision was recognized in connection with this proceeding as it was considered to be a contingent liability.
- Banco Santander (Brasil) S.A. has also appealed against infringement notices issued by the tax authorities questioning the tax deductibility of the amortization of the goodwill arising on the acquisition of Banco Comercial e de Investimento Sudameris S.A. No provision was recognized in connection with this matter as it was considered to be a contingent liability.
- Banco Santander (Brazil) S.A. and other companies of the Group in Brazil are undergoing administrative and judicial procedures against Brazilian tax authorities for not admitting tax compensation with credits derived from other tax concepts, not having registered a provision for such amount since it is considered to be a contingent liability.
- Legal action brought by Sovereign Bancorp, Inc. (currently Santander Holdings USA, Inc.) claiming its right to take a foreign tax credit for taxes paid outside the United States in fiscal years 2003 to 2005 in connection with a Trust created by Santander Holdings USA, Inc. in relation to financing transactions carried out with an international bank. Santander Holdings USA, Inc. considered that, in accordance with applicable tax legislation, it was entitled to recognize the aforementioned tax credits as well as the related issuance and financing costs. After an initial ruling at the District Court level in favor of Santander Holdings USA, Inc., the US Government appealed to the Court of Appeals, where the District Court’s decision was reversed. On June 26, 2017, the U.S. Supreme Court denied Santander Holdings USA, Inc.´s petition to hear its appeal and referred the case to the District Court as ordered by the U.S. Court of Appeals for the First Circuit. On July 17, 2018, the District Court finally ruled against Santander Holdings USA, Inc. Final resolution is anticipated within the coming months, with no effect on income.
- In 2007 the European Commission opened an investigation into illegal state aid to the Kingdom of Spain in connection with Article 12.5 of the former Consolidated Text of the Corporate Tax Law. The Commission issued the Decision 2011/5/CE of October 28, 2009, on acquisitions of subsidiaries resident in the EU and decision 2011/282/UE of January 12, 2011, on the acquisition of subsidiaries not resident in the EU, ruling that the deduction regulated pursuant to Article 12.5 constituted illegal State aid. These decisions were subject to appeal by Banco Santander and other companies before the European Union General Court. In November 2014, the General Court delivered judgment annulling the prior decisions, and that judgment was appealed before the European Court of Justice by the Commission. In December 2016 the European Court of Justice delivered judgment setting aside the appeal and remanded the file to the General Court, which shall deliver a new judgment assessing the other annulment pleas raised by the petitioners, which, in turn, may be subject to an appeal before the Court of Justice. The Group, in accordance with the advice from its external lawyers, has not recognized provisions for these suits since they are considered to be a contingent liability.
39
At the date of approval of these interim financial statements certain other less significant tax-related proceedings were also in progress.
ii.Non-tax-related proceedings
At September 30, 2018, the main non-tax-related proceedings concerning the Group were as follows:
- Compensation to customers (customer remediation): claims associated with the sale of certain financial products (mainly payment protection insurance - PPI) by Santander UK to its customers.
As of September 30, 2018, the provision for this concept amounts to 274 million pounds (EUR 309 million and 1,438 million of reais) and 356 million pounds (EUR 401 million and 1,593 million of reais) as of December 31, 2017. The provision registered is deemed appropriate given the current situation. This provision will be subject to continuous review on the basis of the amount of claims received and the inquiry raised by the FCA on July 4, 2018 (CP 18/18: Guidance on regular premium PPI complaints and recurring non-disclosure of commission).
- Delforca: This dispute arose from equity swaps entered into by Gaesco (now Delforca 2008, S.A.) on shares of Inmobiliaria Colonial, S.A. An initial arbitration ruled in favor of the Bank, but this ruling was anulled due to issues regarding the president of the tribunal and one of the items of evidence presented by Delforca. Faced with a second arbitration initiated by the Bank, and after the latter had obtained a preventive attachment in its favor (currently waived), Delforca declared bankruptcy. Prior to this, Delforca and its parent, Mobiliaria Monesa, S.A., launched other lawsuits claiming damages due to the Bank’s actions before civil courts in Madrid, which were later dropped, and in Santander, currently stayed due to preliminary civil rulings.
During the insolvency proceeding, Barcelona Commercial court no. 10 ordered the stay of the arbitration proceeding, the termination of the arbitration agreement, the lack of recognition of the contingent claim and a breach by the Bank, and dismissed the Bank’s request to conclude the proceeding due to the non-existence of insolvency. Following the appeals filed by the Bank, the Barcelona Provincial Appellate Court revoked all these decisions, except the decision to reject the conclusion of the proceeding. Such decision reinitiated the arbitration process, in which the Partial Award was issued and which rejected the procedural exceptions raised by Delforca. Delforca appealed the decisions rejecting the resolution of the arbitration agreement and the recognition of the contingent claim in favor of the Bank. Furthermore, Delforca and its parent have requested from the judge of the insolvency case the repayment of the security deposit executed by the Bank to settle the swaps, given that these were ongoing processes. On May 18, 2018, an award was issued which fully upheld the Bank’s claim amounting to EUR 66 million. On July 26, 2018, the Supreme Court of Madrid has rejected the Partial Award estimating the procedural exceptions raised by Delforca. The Bank has not recognized any provisions connected to this case.
- Former employees of Banco do Estado de São Paulo S.A., Santander Banespa, Cia. de Arrendamiento Mercantil: a claim was filed in 1998 by the association of retired Banespa employees (AFABESP) on behalf of its members, requesting the payment of a half-yearly bonus initially envisaged in the entity’s Bylaws in the event that the entity obtained a profit and that the distribution of this profit were approved by the Board of Directors. The bonus was not paid in 1994 and 1995 since the bank did not make a profit and partial payments were made from 1996 to 2000, as agreed by the Board of Directors, and the relevant clause was eliminated in 2001. The Regional Employment Court ordered the bank to pay this half-yearly bonus in September 2005 and the bank filed an appeal against the decision at the High Employment Court (“TST”) and, subsequently, at the Federal Supreme Court (“STF”). The TST confirmed the judgment against the bank, whereas the STF rejected the extraordinary appeal filed by the bank in a decision adopted by only one of the Court members, thereby also upholding the order issued to the bank. This decision was appealed by the bank and the association. Only the appeal lodged by the bank has been given leave to proceed and will be decided upon by the STF in plenary session. The STF recently handed
40
down a decision on a matter relating to a third party that upholds one of the main arguments put forward by the Bank. The Bank has not recognized any provisions in this connection.
- ‘Planos económicos’: Like the rest of the banking system, Santander Brazil has been the subject of claims from customers, mostly depositors, and of civil class actions brought for a common reason, arising from a series of legislative changes relating to the calculation of inflation (‘planos económicos’). The claimants considered that their vested rights had been impaired due to the immediate application of these adjustments. In April 2010, the High Court of Justice (STJ) set the limitation period for these class actions at five years, as claimed by the banks, rather than 20 years, as sought by the claimants, which will probably significantly reduce the number of actions brought and the amounts claimed in this connection. As regards the substance of the matter, the decisions issued to date have been adverse for the banks, although two proceedings have been brought at the STJ and the Federal Supreme Court (STF) with which the matter is expected to be definitively settled. In August 2010, the STJ handed down a decision finding for the plaintiffs in terms of substance, but excluding one of the “planos” from the claim, thereby reducing the amount thereof, and once again confirming the five-year statute-of-limitations period. Shortly thereafter, the STF issued an injunctive relief order whereby the proceedings in progress were stayed until this court issues a final decision on the matter. Various appeals to the STF are currently being considered in which various matters relating to this case are discussed.
At the end of 2017, the Advocacia Geral da União (AGU), Bacen, Instituto de Defesa do Consumidor (Idec), the Frente Brasileira dos Poupadores (Febrapo) and Federação Brasileira dos Bancos (Febraban) signed an agreement with the aim of terminating the judicial disputes related to economic situation. Discussions have focused on specifying the amount to be paid to each affected customer according to the balance in their notebook at the time of the Plan. Finally, the total value of the payments will depend on the amount of endorsements that there have been and the number of savers who have showed the existence of the account and its balance on the date on which the indexes were changed. The terms of the agreement signed by the parties have already been homologated by the Supreme Federal Court (STF), to whom the final word on the viability of the agreement corresponds. Provisions registered in order to hedge risks that may derive from the “economic plans”, including those derived from the homologation of the agreement pending approval by the STF, are deemed sufficient.
- The intervention, on the grounds of alleged fraud, of Bernard L. Madoff Investment Securities LLC (“Madoff Securities”) by the US Securities and Exchange Commission (“SEC”) took place in December 2008. The exposure of customers of the Group through the Optimal Strategic US Equity (“Optimal Strategic”) subfund was 2,330 million euros, of which 2,010 million euros related to institutional investors and international private banking customers, and the remaining 320 million euros made up the investment portfolios of the Group’s private banking customers in Spain, who were qualifying investors.
At the date of these interim financial statements, certain claims exist against component of the Group in relation to this matter. The Group considers that it behaved at all times with due diligence and that the sale of these products was always transparent and adjusted to the applicable regulations and procedures. Accordingly, the risk of loss is considered to be remote or immaterial.
- In April 2016, the Competition Directorate of the Spanish “Comisión Nacional de los Mercados y la Competencia” (CNMC) commenced an administrative investigation on several financial entities, including Banco Santander in relation to possible collusive practices or price-fixing agreements, as well as exchange of commercially sensitive information in relation to financial derivative instruments used as hedge of interest rate risk for syndicated loans. In accordance with the Competition Directorate this conduct could constitute a breach of article 1 of Competition Directorate Law 15/2007, of July 3, as well as article 101 of Treaty on the Functioning of the European Union (TFEU). On February 13, 2018, the CNMC published its decision, by which it fined Santander, Sabadell, BBVA and Caixabank with EUR 91 million (EUR 23.9 million for Santander) for offering interest rate derivatives in breach of Articles 1 of the Spanish Act 15/2007 on Defense of Competition and 101 of the Treaty of Functioning of the European Union (Case S/DC/0579/16 Derivados Financieros). According to the CNMC, there is evidence that there
41
was coordination between the hedging banks/lenders to coordinate the price of the derivatives and offer clients, in each case, a price different from the “market price”. This decision has been appealed before the Spanish National Court.
- Floor clauses: as a consequence of the acquisition of Banco Popular Español S.A.U., the Group is exposed to material transactions with floor clauses. The so-called "floor clauses" or minimum clauses are those under which the borrower accepts a minimum interest rate to be paid to the lender, regardless of the applicable reference interest rate. Banco Popular Español S.A.U., includes "floor clauses" in certain asset transactions with customers. In relation to this type of clauses, Banco Popular’s situation is described below:
On December 21, 2016, the Court of Justice of the European Union declared contrary to European Union law the doctrine established by the Judgment of the 1st Chamber of the Supreme Court of May 9, 2013, pursuant to which it limited the retroactive effect of the nullity of the floor clauses, so that only the amounts collected in application of these clauses were returned as of May 9, 2013. Subsequently, the Judgment of the 1st Chamber of the Supreme Court of February 24, 2017, resolving an appeal by another entity, adapted its jurisprudence on the matter to the Judgment of the Court of Justice of the European Union of December 21, 2016 and, in particular, considered that its ruling of May 9 of 2013, issued within the framework of a collective action, did not cause a res judicata effect with respect to the individual claims that could be raised by consumers in this regard.
These legal rulings and the social impact of the floor clauses led the Spanish government to establish, through Spanish Royal Decree-Law 1/2017, of January 20, urgent measures to protect consumers against floor clauses, a voluntary and extrajudicial process whereby consumers who consider themselves affected by the potential nullity of a floor clause can claim reimbursement. This ruling establishes an extrajudicial channel for conflict resolution but adds nothing that affects the criteria describing the validity of the clauses.
In 2015 and 2016, Banco Popular made extraordinary provisions that, following the Judgment of the European Union’s Court of Justice on December 21, 2016, were updated in order to cover the effect of the potential return of the excess interest charged for the application of the floor clauses between the contract date of the corresponding mortgage loans and May 2013. As of September 30, 2018, the amount of the Group’s provisions in relation to this matter amounts to EUR 123 million (572 million of reais). For this matter, after the purchase of Banco Popular, EUR 338 million (1,446 million of reais) provisions have been used by the Group mainly for refunds as a result of the extrajudicial process mentioned above.
- Other aspects: taking into account the declaration in resolution of Banco Popular, S.A.U., the amortization and conversion of its capital instruments and the subsequent transmission to Banco Santander of the shares resulting from the aforementioned conversion in exercise of the resolution instrument for the sale of the business of the entity, all under the rules of the single resolution framework, is unprecedented in Spain or in any other Member State of the European Union, appeals have been filed against the decision of the Single Resolution Board, against the decision of the FROB, agreed upon in execution of the previous one, as well as claims against Banco Popular Español, S.A.U., Banco Santander and other Santander Group entities derived from or related to the acquisition of Banco Popular. Since the acquisition of Banco Popular by Banco Santander, various investors, advisers or financial operators have announced their intention to analyze and, as the case may be, confirmed, the filing of claims of various kinds in relation to the aforementioned acquisition. Regarding possible remedies or claims, it is not possible to anticipate all the specific claims that would be asserted, nor their economic implications (particularly when it is possible that the possible claims do not quantify their claims, claim new legal interpretations, or involve a very high number of parts).
In this context, it must be considered that the outcome of court proceedings is uncertain, particularly in the case of claims for indeterminate amounts, those based on legal issues for which there are no precedents, those that affect a large number of parties or those at a very preliminary stage.
42
- Lastly, the Cologne Public Prosecution Offices has opened an investigation against Banco Santander S.A. and other group entities and three former employees in relation to the certain type of German tax dividend linked transactions known as cum-ex transactions. Banco Santander S.A. is cooperating with the German authorities. As the investigations are at preliminary stage, the results and the effects for the Group cannot be anticipated.
The Bank and the other Group companies are subject to claims and, therefore, are party to certain legal proceedings incidental to the normal course of their business including those in connection with lending activities, relationships with employees and other commercial or tax matters.
With the information available to it, the Group considers that, at September 30, 2018, it had reliably estimated the obligations associated with each proceeding and had recognized, where necessary, sufficient provisions to cover reasonably any liabilities that may arise as a result of these tax and legal situations. It also believes that any liability arising from such claims and proceedings will not have, overall, a material adverse effect on the Group’s business, financial position or results of operations.
11. |
Equity |
In the nine-month periods ended September 30, 2018 and 2017 there were no quantitative or qualitative changes in the Group’s equity other than those indicated in the condensed consolidated statements of changes in total equity.
a) |
Capital |
As a result of the acquisition of Banco Popular mentioned in Note 2, and in order to strengthen and optimize the Bank’s equity structure to provide adequate coverage of the acquisition, the Group, on July 3, 2017, reported on the agreement of the executive committee of Banco Santander to increase the capital of the Bank by EUR 729 million (2,734 million of reais) by issuing and putting into circulation 1,458,232,745 new ordinary shares of the same class and series as the shares currently in circulation and with preferential subscription rights for the shareholders. The corresponding public deed of capital increase was granted on July 7, 2017.
The issue of new shares was carried out at a nominal value of fifty euro cents (EUR 0.50) plus a premium of EUR 4.35 per share, so the total issue rate of the new shares was EUR 4.85 per share and the total effective amount of the capital increase (including nominal and premium) of EUR 7,072 million (26,520 million of reais).
Each outstanding share had been granted a preferential subscription right during the preferential subscription period that took place from July 6 to 20, 2017, where 10 preferential subscription rights were required to subscribe 1 new share.
By public deed dated November 7, 2017, a capital increase was released in the amount of 48 million euros (184 million of reais), through which the Santander Dividendo Elección program was implemented, through the issuance of 95,580,136 shares (0.6 % of the share capital).
As of December 31, 2017 and September 30, 2018, the Bank’s capital stock was represented by 16,136,153,582 shares, with a nominal amount of EUR 8,068 million (21,195 million of reais), in both cases.
43
b) |
Breakdown of other comprehensive income - Items not reclassified to profit or loss and Items that may be reclassified to profit or loss |
|
|
Millions of euros |
|
||||
|
|
|
09‑30‑2018 |
|
|
12‑31‑2017 |
|
Other comprehensive income accumulated |
|
|
(24,816) |
|
|
(21,776) |
|
Items not reclassified to profit or loss |
|
|
(2,668) |
|
|
(4,034) |
|
Actuarial gains or losses on defined benefit pension plans |
|
|
(3,353) |
|
|
(4,033) |
|
Non-current assets and disposable groups of items that have been classified as held for sale |
|
|
- |
|
|
- |
|
Share in other recognized income and expenses of investments in joint ventures and associates |
|
|
- |
|
|
(1) |
|
Other valuation adjustments |
|
|
- |
|
|
- |
|
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income |
|
|
717 |
|
|
|
|
Inefficacy of fair value hedges of equity instruments measured at fair value with changes in other comprehensive income |
|
|
- |
|
|
|
|
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income [item hedged] |
|
|
- |
|
|
|
|
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income [hedging instrument] |
|
|
- |
|
|
|
|
Changes in the fair value of financial liabilities at fair value through profit or loss attributable to changes in credit risk |
|
|
(32) |
|
|
|
|
Items that may be reclassified to profit or loss |
|
|
(22,148) |
|
|
(17,742) |
|
Hedge of net investments in foreign operations (effective portion) |
|
|
(4,125) |
|
|
(4,311) |
|
Exchange differences |
|
|
(18,154) |
|
|
(15,430) |
|
Hedging derivatives. Cash flow hedges (effective portion) |
|
|
(133) |
|
|
152 |
|
Changes in the fair value of debt instruments measured at fair value with changes in other comprehensive income |
|
|
598 |
|
|
|
|
Coverage instruments (items not designated) |
|
|
- |
|
|
|
|
Financial assets available for sale |
|
|
|
|
|
2,068 |
|
Debt instruments |
|
|
|
|
|
1,154 |
|
Equity instruments |
|
|
|
|
|
914 |
|
Non-current assets held for sale |
|
|
|
|
|
- |
|
Share in other income and expenses recognized in investments in joint ventures and associates |
|
|
(334) |
|
|
(221) |
|
44
|
|
|
Millions of reais |
|
|||
|
|
|
09‑30‑2018 |
|
|
12‑31‑2017 |
|
Other comprehensive income accumulated |
|
|
115,557 |
|
|
64,754 |
|
|
|
|
|
|
|
|
|
Items not reclassified to profit or loss |
|
|
(12,422) |
|
|
(16,029) |
|
|
|
|
|
|
|
|
|
Actuarial gains or losses on defined benefit pension plans |
|
|
(15,604) |
|
|
(16,023) |
|
Non-current assets and disposable groups of items that have been classified as held for sale |
|
|
- |
|
|
- |
|
Share in other recognized income and expenses of investments in joint ventures and associates |
|
|
- |
|
|
(6) |
|
Other valuation adjustments |
|
|
- |
|
|
- |
|
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income |
|
|
3,331 |
|
|
|
|
Inefficacy of fair value hedges of equity instruments measured at fair value with changes in other comprehensive income |
|
|
- |
|
|
|
|
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income [item hedged] |
|
|
- |
|
|
|
|
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income [hedging instrument] |
|
|
- |
|
|
|
|
Changes in the fair value of financial liabilities at fair value through profit or loss attributable to changes in credit risk |
|
|
(149) |
|
|
|
|
|
|
|
|
|
|
|
|
Items that may be reclassified to profit or loss |
|
|
127,979 |
|
|
80,783 |
|
|
|
|
|
|
|
|
|
Hedge of net investments in foreign operations (effective portion) |
|
|
(19,195) |
|
|
(17,127) |
|
Exchange differences |
|
|
146,559 |
|
|
89,971 |
|
Hedging derivatives. Cash flow hedges (effective portion) |
|
|
(621) |
|
|
604 |
|
Changes in the fair value of debt instruments measured at fair value with changes in other comprehensive income |
|
|
2,789 |
|
|
|
|
Coverage instruments (items not designated) |
|
|
- |
|
|
|
|
Financial assets available for sale |
|
|
|
|
|
8,213 |
|
Debt instruments |
|
|
|
|
|
4,583 |
|
Equity instruments |
|
|
|
|
|
3,630 |
|
Non-current assets held for sale |
|
|
- |
|
|
- |
|
Share in other income and expenses recognized in investments in joint ventures and associates |
|
|
(1,553) |
|
|
(878) |
|
(*)See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
c) |
Other comprehensive income - Items not reclassified to profit or loss - Actuarial gains or losses on defined benefit pension plans |
The changes in the balance of Other comprehensive income - Items not reclassified to profit or loss - Actuarial gains or losses on defined benefit pension plans include the actuarial gains or losses generated in the period and the return on plan assets, less the administrative expenses and taxes inherent to the plan, and any change in the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability (asset). Its variation is shown in the condensed consolidated statement of recognized income and expense.
During the first nine months of 2018 actuarial gains on defined benefit pension plans amounts to EUR 1,006 million (4,303 million of reais), which main impacts are:
- |
Decrease of EUR 576 million (2,464 million of reais) in the accumulated actuarial losses corresponding to the Group’s business in United Kingdom, mainly due to the gains because of the variation of the discount rate (increase from 2.49 % to 2.90 %), likewise the evolution of the inflation (decrease from 3.15 % to 3.25 %). |
- |
Decrease of EUR 153 million (654 million of reais) in the accumulated actuarial losses corresponding to the Group’s business in Brazil, mainly due to the variation of the discount rate (increase from 9.53 % to 10.12 % for the pension plans and from 9.65 % to 10.17 % for the health insurance). |
45
- |
Decrease of EUR 126 million (539 million of reais) in the accumulated actuarial losses corresponding to the Group’s business in Spain, mainly due to the variation of the discount rate (increase from 1.40% to 1.75%). |
Likewise, the differences in the cumulative actuarial gains and losses account for a losses decrease of EUR 151 million (646 million of reais) as a consequence of the evolution of exchange rates and other effects, mainly in Brazil (depreciation of the real).
d) |
Other comprehensive income - Items not reclassified to profit or loss – Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income |
Includes the net amount of unrealized fair value changes in equity instruments at fair value with changes in other comprehensive income.
Below is a breakdown of the composition of the balance as of September 30, 2018 (IFRS 9) under "Other comprehensive income" - Items that cannot be reclassified to profit or loss - Changes in the fair value of debt equity measured at fair value with changes in other comprehensive income depending on the geographical origin of the issuer:
|
|
|
Millions of euros |
|
|||||||||
|
|
|
09-30-18 (*) |
|
|||||||||
|
|
|
Revaluation gains |
|
|
Revaluation losses |
|
|
Net revaluation |
|
|
Fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
|
|
|
|
|
|
|
|
|
|
|
Spain |
|
|
22 |
|
|
(211) |
|
|
(189) |
|
|
459 |
|
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of Europe |
|
|
148 |
|
|
(77) |
|
|
71 |
|
|
561 |
|
United States |
|
|
16 |
|
|
- |
|
|
16 |
|
|
80 |
|
Latin America and rest |
|
|
822 |
|
|
(3) |
|
|
819 |
|
|
1,671 |
|
|
|
|
1,008 |
|
|
(291) |
|
|
717 |
|
|
2,771 |
|
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Listed |
|
|
921 |
|
|
(19) |
|
|
902 |
|
|
2,063 |
|
Unlisted |
|
|
87 |
|
|
(272) |
|
|
(185) |
|
|
708 |
|
|
|
|
Millions of reais |
|
|||||||||
|
|
|
09-30-18 (*) |
|
|||||||||
|
|
|
Revaluation gains |
|
|
Revaluation losses |
|
|
Net revaluation |
|
|
Fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
|
|
|
|
|
|
|
|
|
|
|
Spain |
|
|
102 |
|
|
(982) |
|
|
(880) |
|
|
2,136 |
|
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of Europe |
|
|
689 |
|
|
(358) |
|
|
331 |
|
|
2,611 |
|
United States |
|
|
74 |
|
|
- |
|
|
74 |
|
|
372 |
|
Latin America and rest |
|
|
3,820 |
|
|
(14) |
|
|
3,806 |
|
|
7,778 |
|
|
|
|
4,685 |
|
|
(1,354) |
|
|
3,331 |
|
|
12,897 |
|
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Listed |
|
|
4,280 |
|
|
(88) |
|
|
4,192 |
|
|
9,602 |
|
Unlisted |
|
|
405 |
|
|
(1,266) |
|
|
(861) |
|
|
3,295 |
|
(*)See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
46
e) |
Other comprehensive income – Items that may be reclassified to profit or loss – Hedges of net investments in foreign operations (effective portion) and exchange differences |
Other comprehensive income - Items that may be reclassified to profit or loss - Hedges of net investments in foreign operations (effective portion) includes the net amount of the changes in value of hedging instruments in hedges of net investments in foreign operations, in respect of the portion of these changes considered to be effective hedges.
Other comprehensive income - Items that may be reclassified to profit or loss - Exchange differences includes the net amount of exchange differences arising on non-monetary items whose fair value is adjusted against equity and the differences arising on the translation to euros of the balances of the consolidated entities whose functional currency is not the euro.
The net variation of both headings recognized during the first nine months of 2018, recorded in the condensed consolidated statement of recognized income and expenses, reflects the effect generated by the recognized depreciation of the currencies, mainly from Brazilian reais and Argentine peso. From this variation, an approximate loss of EUR 682 million corresponds to the valuation at the closing exchange rate of goodwill of the nine-months period ended September 30, 2018 (Note 8).
f) |
Other comprehensive income – Items that may be reclassified to profit or loss – Changes in the fair value of debt instruments measured at fair value through other comprehensive income |
Includes the net amount of unrealized fair value changes in debt instruments at fair value through other comprehensive income.
Below is a breakdown of the composition of the balance as of September 30, 2018 (IFRS 9) and December 31, 2017 (IAS 39) under "Other comprehensive income" - Items that can be reclassified to profit or loss - Changes in the fair value of debt instruments measured at fair value through other comprehensive income depending on the type of instrument and the geographical origin of the issuer:
|
|
|
Millions of euros |
|
|||||||||||||||||||||
|
|
|
09-30-18 (*) |
|
|
12-31-17 |
|
||||||||||||||||||
|
|
|
Revaluation |
|
|
Revaluation |
|
|
Net |
|
|
Fair value |
|
|
Revaluation |
|
|
Revaluation |
|
|
Net |
|
|
Fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and central banks debt instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spain |
|
|
554 |
|
|
(104) |
|
|
450 |
|
|
1,541 |
|
|
660 |
|
|
(25) |
|
|
635 |
|
|
48,217 |
|
Rest of Europe |
|
|
332 |
|
|
(23) |
|
|
309 |
|
|
8,899 |
|
|
306 |
|
|
(24) |
|
|
282 |
|
|
20,244 |
|
Latin America and rest of the world |
|
|
263 |
|
|
(265) |
|
|
(2) |
|
|
7,765 |
|
|
404 |
|
|
(129) |
|
|
275 |
|
|
39,132 |
|
Private-sector debt instruments |
|
|
77 |
|
|
(236) |
|
|
(159) |
|
|
95,380 |
|
|
90 |
|
|
(128) |
|
|
(38) |
|
|
20,888 |
|
|
|
|
1,226 |
|
|
(628) |
|
|
598 |
|
|
113,585 |
|
|
1,460 |
|
|
(306) |
|
|
1,154 |
|
|
128,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Spain |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
(2) |
|
|
3 |
|
|
1,373 |
|
International |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of Europe |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
166 |
|
|
(2) |
|
|
164 |
|
|
979 |
|
United States |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
14 |
|
|
(5) |
|
|
9 |
|
|
560 |
|
Latin America and rest |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
744 |
|
|
(6) |
|
|
738 |
|
|
1,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
929 |
|
|
(15) |
|
|
914 |
|
|
4,790 |
|
Of which: |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Listed |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
828 |
|
|
(5) |
|
|
823 |
|
|
2,900 |
|
Unlisted |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
101 |
|
|
(10) |
|
|
91 |
|
|
1,890 |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,389 |
|
|
(321) |
|
|
2,068 |
|
|
133,271 |
|
47
|
|
|
Millions of reais |
|
|||||||||||||||||||||
|
|
|
09-30-18 (*) |
|
|
12-31-17 |
|
||||||||||||||||||
|
|
|
Revaluation |
|
|
Revaluation |
|
|
Net |
|
|
Fair value |
|
|
Revaluation |
|
|
Revaluation |
|
|
Net |
|
|
Fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and central banks debt instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spain |
|
|
2,578 |
|
|
(484) |
|
|
2,094 |
|
|
7,170 |
|
|
2,622 |
|
|
(99) |
|
|
2,523 |
|
|
191,561 |
|
Rest of Europe |
|
|
1,545 |
|
|
(107) |
|
|
1,438 |
|
|
41,411 |
|
|
1,216 |
|
|
(95) |
|
|
1,121 |
|
|
80,427 |
|
Latin America and rest of the world |
|
|
1,224 |
|
|
(1,227) |
|
|
(3) |
|
|
36,134 |
|
|
1,605 |
|
|
(513) |
|
|
1,092 |
|
|
155,468 |
|
Private-sector debt instruments |
|
|
358 |
|
|
(1,098) |
|
|
(740) |
|
|
443,851 |
|
|
356 |
|
|
(509) |
|
|
(153) |
|
|
82,987 |
|
|
|
|
5,705 |
|
|
(2,916) |
|
|
2,789 |
|
|
528,566 |
|
|
5,799 |
|
|
(1,216) |
|
|
4,583 |
|
|
510,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Spain |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 |
|
|
(8) |
|
|
12 |
|
|
5,455 |
|
International |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of Europe |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
660 |
|
|
(8) |
|
|
652 |
|
|
3,889 |
|
United States |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
55 |
|
|
(20) |
|
|
35 |
|
|
2,226 |
|
Latin America and rest |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,955 |
|
|
(24) |
|
|
2,931 |
|
|
7,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,690 |
|
|
(60) |
|
|
3,630 |
|
|
19,031 |
|
Of which: |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Listed |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
3,290 |
|
|
(20) |
|
|
3,270 |
|
|
11,521 |
|
Unlisted |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
400 |
|
|
(40) |
|
|
360 |
|
|
7,510 |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
9.489 |
|
|
(1.276) |
|
|
8.213 |
|
|
529.474 |
|
(*)See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
12. |
Segment information |
For Group management purposes, the primary level of segmentation, by geographical area, comprises five segments: four operating areas plus Corporate Activities. The operating areas, which include all the business activities carried on therein by the Group, are Continental Europe, the United Kingdom, Latin America and the United States, based on the location of the Group’s assets.
Following is the breakdown of revenue by the geographical segments used by the Group. For the purposes of the table below, revenue is deemed to be that recognized under Interest income, Dividend income, Commission income, Gain on financial assets and liabilities not measured at fair value through profit or loss, net; Gain or losses on financial assets and liabilities held for trading, net; Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net; Gain or losses from hedge accounting; net and Other operating income in the accompanying consolidated income statements for the nine-month period ended September 30, 2018 and 2017:
|
|
|
Revenue (Millions of euros) |
|
|||||||||||||||
|
|
|
Revenue from external customers |
|
|
Inter-segment revenue |
|
|
Total revenue |
|
|||||||||
Segment |
|
|
09-30-18 |
|
|
09-30-17 |
|
|
09-30-18 |
|
|
09-30-17 |
|
|
09-30-18 |
|
|
09-30-17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continental Europe |
|
|
14,193 |
|
|
13,529 |
|
|
986 |
|
|
869 |
|
|
15,179 |
|
|
14,398 |
|
United Kingdom |
|
|
7,014 |
|
|
6,759 |
|
|
(184) |
|
|
(131) |
|
|
6,830 |
|
|
6,628 |
|
Latin America |
|
|
26,688 |
|
|
29,371 |
|
|
(196) |
|
|
(284) |
|
|
26,492 |
|
|
29,087 |
|
United States |
|
|
6,258 |
|
|
6,737 |
|
|
186 |
|
|
101 |
|
|
6,444 |
|
|
6,838 |
|
Corporate Activities |
|
|
422 |
|
|
(267) |
|
|
2,490 |
|
|
2,601 |
|
|
2,912 |
|
|
2,334 |
|
Inter-segment revenue adjustments and eliminations |
|
|
- |
|
|
- |
|
|
(3,282) |
|
|
(3,156) |
|
|
(3,282) |
|
|
(3,156) |
|
Total |
|
|
54,575 |
|
|
56,129 |
|
|
- |
|
|
- |
|
|
54,575 |
|
|
56,129 |
|
48
|
|
|
Revenue (Millions of reais) |
|
|||||||||||||||
|
|
|
Revenue from external customers |
|
|
Inter-segment revenue |
|
|
Total revenue |
|
|||||||||
Segment |
|
|
09-30-18 |
|
|
09-30-17 |
|
|
09-30-18 |
|
|
09-30-17 |
|
|
09-30-18 |
|
|
09-30-17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continental Europe |
|
|
60,713 |
|
|
47,691 |
|
|
4,218 |
|
|
3,063 |
|
|
64,931 |
|
|
50,754 |
|
United Kingdom |
|
|
30,003 |
|
|
23,825 |
|
|
(787) |
|
|
(462) |
|
|
29,216 |
|
|
23,363 |
|
Latin America |
|
|
114,162 |
|
|
103,534 |
|
|
(838) |
|
|
(1,000) |
|
|
113,324 |
|
|
102,534 |
|
United States |
|
|
26,770 |
|
|
23,749 |
|
|
796 |
|
|
357 |
|
|
27,566 |
|
|
24,106 |
|
Corporate Activities |
|
|
1,804 |
|
|
(941) |
|
|
10,651 |
|
|
9,169 |
|
|
12,455 |
|
|
8,228 |
|
Inter-segment revenue adjustments and eliminations |
|
|
- |
|
|
- |
|
|
(14,040) |
|
|
(11,127) |
|
|
(14,040) |
|
|
(11,127) |
|
Total |
|
|
233,452 |
|
|
197,858 |
|
|
- |
|
|
- |
|
|
233,452 |
|
|
197,858 |
|
Also, following is the reconciliation of the Group’s consolidated profit after tax for the nine-month period ended September 30, 2018 and 2017, broken down by business segment, to the profit before tax per the condensed consolidated income statements for these periods:
|
|
|
Consolidated profit |
|
|||
Segment |
|
|
09-30-18 |
|
|
09-30-17 |
|
|
|
|
|
|
|
|
|
Continental Europe |
|
|
2,743 |
|
|
2,292 |
|
United Kingdom |
|
|
1,096 |
|
|
1,219 |
|
Latin America |
|
|
3,781 |
|
|
3,767 |
|
United States |
|
|
647 |
|
|
527 |
|
Corporate Activities |
|
|
(1,390) |
|
|
(1,641) |
|
Total profit of the segments reported |
|
|
6,877 |
|
|
6,164 |
|
(+/-) Unallocated profit/loss |
|
|
- |
|
|
- |
|
(+/-) Elimination of inter-segment profit/loss |
|
|
- |
|
|
- |
|
(+/-) Other profit/loss |
|
|
- |
|
|
- |
|
(+/-) Income tax and/or profit from discontinued operations |
|
|
3,709 |
|
|
3,332 |
|
Profit before tax |
|
|
10,586 |
|
|
9,496 |
|
|
|
|
Consolidated profit |
|
|||
Segment |
|
|
09-30-18 |
|
|
09-30-17 |
|
|
|
|
|
|
|
|
|
Continental Europe |
|
|
11,734 |
|
|
8,081 |
|
United Kingdom |
|
|
4,688 |
|
|
4,298 |
|
Latin America |
|
|
16,174 |
|
|
13,279 |
|
United States |
|
|
2,768 |
|
|
1,857 |
|
Corporate Activities |
|
|
(5,944) |
|
|
(5,792) |
|
Total profit of the segments reported |
|
|
29,420 |
|
|
21,723 |
|
(+/-) Unallocated profit/loss |
|
|
- |
|
|
- |
|
(+/-) Elimination of inter-segment profit/loss |
|
|
- |
|
|
- |
|
(+/-) Other profit/loss |
|
|
- |
|
|
- |
|
(+/-) Income tax and/or profit from discontinued operations |
|
|
15,868 |
|
|
11,746 |
|
Profit before tax |
|
|
45,288 |
|
|
33,469 |
|
13. |
Related parties |
The parties related to the Group are deemed to include, in addition to its subsidiaries, associates and jointly controlled entities, the Bank’s key management personnel (the members of its board of directors and the executive vice presidents, together with their close family members) and the entities over which the key management personnel may exercise significant influence or control.
49
Following is a detail of the transactions performed by the Group with its related parties in the first nine months of 2018 and 2017, distinguishing between significant shareholders, members of the Bank’s board of directors, the Bank’s executive vice presidents, Group entities and other related parties. Related party transactions were made on terms equivalent to those that prevail in arm’s-length transactions or, when this was not the case, the related compensation in kind was recognized:
|
|
|
Millions of euros |
|
||||||||||||
|
|
|
09-30-18 |
|
||||||||||||
Expenses and income |
|
|
Significant |
|
|
Directors and |
|
|
Group companies |
|
|
Other related |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
- |
|
|
- |
|
|
2 |
|
|
1 |
|
|
3 |
|
Management or cooperation agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
R&D transfers and licensing agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Leases |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Services received |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Purchases of goods (finished or in progress) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Valuation adjustments for uncollectible or doubtful debts |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Losses on derecognition or disposal of assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other expenses |
|
|
- |
|
|
- |
|
|
48 |
|
|
- |
|
|
48 |
|
|
|
|
- |
|
|
- |
|
|
50 |
|
|
1 |
|
|
51 |
|
Income |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
- |
|
|
- |
|
|
53 |
|
|
8 |
|
|
61 |
|
Management or cooperation agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
R&D transfers and licensing agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Dividends received |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Leases |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Services rendered |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Sale of goods (finished or in progress) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Gains on derecognition or disposal of assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other income |
|
|
- |
|
|
- |
|
|
683 |
|
|
16 |
|
|
699 |
|
|
|
|
- |
|
|
- |
|
|
736 |
|
|
24 |
|
|
760 |
|
|
|
|
Millions of reais |
|
||||||||||||
|
|
|
09-30-18 |
|
||||||||||||
Expenses and income |
|
|
Significant |
|
|
Directors and |
|
|
Group companies |
|
|
Other related |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
- |
|
|
- |
|
|
9 |
|
|
4 |
|
|
13 |
|
Management or cooperation agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
R&D transfers and licensing agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Leases |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Services received |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Purchases of goods (finished or in progress) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Valuation adjustments for uncollectible or doubtful debts |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Losses on derecognition or disposal of assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other expenses |
|
|
- |
|
|
- |
|
|
205 |
|
|
- |
|
|
205 |
|
|
|
|
- |
|
|
- |
|
|
214 |
|
|
4 |
|
|
218 |
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
- |
|
|
- |
|
|
227 |
|
|
34 |
|
|
261 |
|
Management or cooperation agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
R&D transfers and licensing agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Dividends received |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Leases |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Services rendered |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Sale of goods (finished or in progress) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Gains on derecognition or disposal of assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other income |
|
|
- |
|
|
- |
|
|
2,922 |
|
|
68 |
|
|
2,990 |
|
|
|
|
- |
|
|
- |
|
|
3,149 |
|
|
102 |
|
|
3,251 |
|
50
|
|
|
Millions of euros |
|
||||||||||||
|
|
|
09-30-18 |
|
||||||||||||
Other transactions |
|
|
Significant |
|
|
Directors and |
|
|
Group companies |
|
|
Other related |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of tangible, intangible or other assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financing agreements: loans and capital contributions (lender) |
|
|
- |
|
|
1 |
|
|
1,622 |
|
|
65 |
|
|
1,688 |
|
Finance leases (lessor) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Repayment or termination of loans and leases (lessor) |
|
|
- |
|
|
1 |
|
|
623 |
|
|
220 |
|
|
844 |
|
Sales of tangible, intangible or other assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financing agreements: loans and capital contributions (borrower) |
|
|
- |
|
|
5 |
|
|
1,252 |
|
|
518 |
|
|
1,775 |
|
Finance leases (lessee) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Repayment or termination of loans and leases (lessee) |
|
|
- |
|
|
4 |
|
|
526 |
|
|
12 |
|
|
542 |
|
Guarantees provided |
|
|
- |
|
|
- |
|
|
21 |
|
|
44 |
|
|
65 |
|
Guarantees received |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Commitments acquired |
|
|
- |
|
|
- |
|
|
355 |
|
|
10 |
|
|
365 |
|
Commitments/guarantees cancelled |
|
|
- |
|
|
- |
|
|
321 |
|
|
- |
|
|
321 |
|
Dividends and other distributed profit |
|
|
- |
|
|
7 |
|
|
- |
|
|
28 |
|
|
35 |
|
Other transactions |
|
|
- |
|
|
- |
|
|
39 |
|
|
- |
|
|
39 |
|
|
|
|
Millions of reais |
|
||||||||||||
|
|
|
09-30-18 |
|
||||||||||||
Other transactions |
|
|
Significant |
|
|
Directors and |
|
|
Group companies |
|
|
Other related |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of tangible, intangible or other assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financing agreements: loans and capital contributions (lender) |
|
|
- |
|
|
5 |
|
|
7,548 |
|
|
302 |
|
|
7,855 |
|
Finance leases (lessor) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Repayment or termination of loans and leases (lessor) |
|
|
- |
|
|
5 |
|
|
2,899 |
|
|
1,024 |
|
|
3,928 |
|
Sales of tangible, intangible or other assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financing agreements: loans and capital contributions (borrower) |
|
|
- |
|
|
23 |
|
|
5,826 |
|
|
2,411 |
|
|
8,260 |
|
Finance leases (lessee) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Repayment or termination of loans and leases (lessee) |
|
|
- |
|
|
19 |
|
|
2,448 |
|
|
56 |
|
|
2,523 |
|
Guarantees provided |
|
|
- |
|
|
- |
|
|
98 |
|
|
205 |
|
|
303 |
|
Guarantees received |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Commitments acquired |
|
|
- |
|
|
- |
|
|
1,652 |
|
|
47 |
|
|
1,699 |
|
Commitments/guarantees cancelled |
|
|
- |
|
|
- |
|
|
1,494 |
|
|
- |
|
|
1,494 |
|
Dividends and other distributed profit |
|
|
- |
|
|
33 |
|
|
- |
|
|
130 |
|
|
163 |
|
Other transactions |
|
|
- |
|
|
- |
|
|
181 |
|
|
- |
|
|
181 |
|
51
|
|
|
Millions of euros |
|
||||||||||||
|
|
|
09-30-17 |
|
||||||||||||
Expenses and income |
|
|
Significant |
|
|
Directors and |
|
|
Group companies |
|
|
Other related |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
- |
|
|
- |
|
|
4 |
|
|
- |
|
|
4 |
|
Management or cooperation agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
R&D transfers and licensing agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Leases |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Services received |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Purchases of goods (finished or in progress) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Valuation adjustments for uncollectible or doubtful debts |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Losses on derecognition or disposal of assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other expenses |
|
|
- |
|
|
- |
|
|
14 |
|
|
- |
|
|
14 |
|
|
|
|
- |
|
|
- |
|
|
18 |
|
|
- |
|
|
18 |
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
- |
|
|
- |
|
|
39 |
|
|
6 |
|
|
45 |
|
Management or cooperation agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
R&D transfers and licensing agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Dividends received |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Leases |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Services rendered |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Sale of goods (finished or in progress) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Gains on derecognition or disposal of assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other income |
|
|
- |
|
|
- |
|
|
480 |
|
|
5 |
|
|
485 |
|
|
|
|
- |
|
|
- |
|
|
519 |
|
|
11 |
|
|
530 |
|
|
|
|
Millions of reais |
|
||||||||||||
|
|
|
09-30-17 |
|
||||||||||||
Expenses and income |
|
|
Significant |
|
|
Directors and |
|
|
Group companies |
|
|
Other related |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
- |
|
|
- |
|
|
14 |
|
|
- |
|
|
14 |
|
Management or cooperation agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
R&D transfers and licensing agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Leases |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Services received |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Purchases of goods (finished or in progress) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Valuation adjustments for uncollectible or doubtful debts |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Losses on derecognition or disposal of assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other expenses |
|
|
- |
|
|
- |
|
|
49 |
|
|
- |
|
|
49 |
|
|
|
|
- |
|
|
- |
|
|
63 |
|
|
- |
|
|
63 |
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
- |
|
|
- |
|
|
137 |
|
|
21 |
|
|
158 |
|
Management or cooperation agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
R&D transfers and licensing agreements |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Dividends received |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Leases |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Services rendered |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Sale of goods (finished or in progress) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Gains on derecognition or disposal of assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other income |
|
|
- |
|
|
- |
|
|
1,692 |
|
|
18 |
|
|
1,710 |
|
|
|
|
- |
|
|
- |
|
|
1,829 |
|
|
39 |
|
|
1,868 |
|
52
|
|
|
Millions of euros |
|
||||||||||||
|
|
|
09-30-17 |
|
||||||||||||
Other transactions |
|
|
Significant |
|
|
Directors and |
|
|
Group companies |
|
|
Other related |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of tangible, intangible or other assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financing agreements: loans and capital contributions (lender) |
|
|
- |
|
|
- |
|
|
724 |
|
|
86 |
|
|
810 |
|
Finance leases (lessor) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Repayment or termination of loans and leases (lessor) |
|
|
- |
|
|
2 |
|
|
212 |
|
|
36 |
|
|
250 |
|
Sales of tangible, intangible or other assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financing agreements: loans and capital contributions (borrower) |
|
|
- |
|
|
6 |
|
|
327 |
|
|
34 |
|
|
367 |
|
Finance leases (lessee) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Repayment or termination of loans and leases (lessee) |
|
|
- |
|
|
2 |
|
|
454 |
|
|
54 |
|
|
510 |
|
Guarantees provided |
|
|
- |
|
|
- |
|
|
- |
|
|
169 |
|
|
169 |
|
Guarantees received |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Commitments acquired |
|
|
- |
|
|
- |
|
|
14 |
|
|
19 |
|
|
33 |
|
Commitments/guarantees cancelled |
|
|
- |
|
|
1 |
|
|
15 |
|
|
8 |
|
|
24 |
|
Dividends and other distributed profit |
|
|
- |
|
|
6 |
|
|
- |
|
|
25 |
|
|
31 |
|
Other transactions |
|
|
- |
|
|
- |
|
|
58 |
|
|
5 |
|
|
63 |
|
|
|
|
Millions of reais |
|
||||||||||||
|
|
|
09-30-17 |
|
||||||||||||
Other transactions |
|
|
Significant |
|
|
Directors and |
|
|
Group companies |
|
|
Other related |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of tangible, intangible or other assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financing agreements: loans and capital contributions (lender) |
|
|
- |
|
|
- |
|
|
2,622 |
|
|
311 |
|
|
2,933 |
|
Finance leases (lessor) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Repayment or termination of loans and leases (lessor) |
|
|
- |
|
|
7 |
|
|
768 |
|
|
130 |
|
|
905 |
|
Sales of tangible, intangible or other assets |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Financing agreements: loans and capital contributions (borrower) |
|
|
- |
|
|
22 |
|
|
1,184 |
|
|
123 |
|
|
1,329 |
|
Finance leases (lessee) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Repayment or termination of loans and leases (lessee) |
|
|
- |
|
|
7 |
|
|
1,644 |
|
|
196 |
|
|
1,847 |
|
Guarantees provided |
|
|
- |
|
|
- |
|
|
- |
|
|
612 |
|
|
612 |
|
Guarantees received |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Commitments acquired |
|
|
- |
|
|
- |
|
|
51 |
|
|
69 |
|
|
120 |
|
Commitments/guarantees cancelled |
|
|
- |
|
|
4 |
|
|
54 |
|
|
29 |
|
|
87 |
|
Dividends and other distributed profit |
|
|
- |
|
|
22 |
|
|
- |
|
|
91 |
|
|
113 |
|
Other transactions |
|
|
- |
|
|
- |
|
|
210 |
|
|
18 |
|
|
228 |
|
In addition to the detail provided above, there were insurance contracts linked to pensions amounting to EUR 218 million (1,012 million of reais) at September 30, 2018 (September 30, 2017: EUR 417 million (1,568 million of reais)).
14. |
Off-balance-sheet exposures |
The off-balance-sheet exposures related to balances representing loans commitments, financial guarantees and other commitments granted, both revocables and non revocables.
Financial guarantees granted include financial guarantees contracts such as financial bank guarantees, credit derivatives, and risks arising from derivatives granted to third parties; non-financial guarantees include other guarantees and irrevocable documentary credits.
53
Loan and other commitments granted include all off-balance-sheet exposures, which are not classified as guarantees provided, including loans commitment granted.
|
|
|
Millions of euros |
|
|||
|
|
|
09-30-18 |
|
|
12-31-17 |
|
Loans commitment granted |
|
|
212,115 |
|
|
207,671 |
|
Of which doubtful |
|
|
136 |
|
|
81 |
|
Financial guarantees granted |
|
|
12,634 |
|
|
14,499 |
|
Doubtful |
|
|
259 |
|
|
254 |
|
Bank sureties |
|
|
12,198 |
|
|
14,033 |
|
Credit derivatives sold |
|
|
177 |
|
|
212 |
|
Other commitments granted |
|
|
73,433 |
|
|
64,917 |
|
Other granted guarantees |
|
|
40,638 |
|
|
37,947 |
|
Of which doubtful |
|
|
958 |
|
|
991 |
|
Other |
|
|
32,795 |
|
|
26,970 |
|
Of which doubtful |
|
|
6 |
|
|
– |
|
|
|
|
Millions of reais |
|
|||
|
|
|
09-30-18 |
|
|
12-31-17 |
|
Loans commitment granted |
|
|
987,077 |
|
|
825,057 |
|
Of which doubtful |
|
|
634 |
|
|
323 |
|
Financial guarantees granted |
|
|
58,792 |
|
|
57,602 |
|
Doubtful |
|
|
1,205 |
|
|
1,009 |
|
Bank sureties |
|
|
56,766 |
|
|
55,750 |
|
Credit derivatives sold |
|
|
821 |
|
|
843 |
|
Other commitments granted |
|
|
341,721 |
|
|
257,910 |
|
Other granted guarantees |
|
|
189,109 |
|
|
150,761 |
|
Of which doubtful |
|
|
4,460 |
|
|
3,938 |
|
Other |
|
|
152,612 |
|
|
107,149 |
|
Of which doubtful |
|
|
28 |
|
|
– |
|
At September 30, 2018 the Group had registered provisions for guarantees and commitments amounting EUR 828 million (3,853 million of reais) and EUR 617 million (2,449 million of reais) at December 31, 2017.
15. |
Average headcount and number of offices |
The average number of employees at and at the Bank and the Group, by gender, in the nine-month periods ended September 30, 2018 and 2017 is as follows:
|
|
|
Bank |
|
|
Group |
|
||||||
Average headcount |
|
|
09-30-18 |
|
|
09-30-17 |
|
|
09-30-18 |
|
|
09-30-17 |
|
Men |
|
|
15,490 |
|
|
11,639 |
|
|
90,330 |
|
|
86,533 |
|
Women |
|
|
14,951 |
|
|
9,779 |
|
|
111,280 |
|
|
107,363 |
|
|
|
|
30,441 |
|
|
21,418 |
|
|
201,610 |
|
|
193,896 |
|
The number of offices at September 30, 2018 and December 31, 2017 is as follow:
|
|
|
Group |
|
|||
Number of offices |
|
|
09-30-18 |
|
|
12-31-17 |
|
Spain |
|
|
4,459 |
|
|
4,546 |
|
Group |
|
|
8,955 |
|
|
9,151 |
|
|
|
|
13,414 |
|
|
13,697 |
|
54
16. |
Other disclosures |
a) |
Valuation techniques for financial assets and liabilities |
The following table shows a summary of the fair values, at September 30, 2018 (IFRS 9) and December 31, 2017 (IAS 39), of the financial assets and liabilities indicated below, classified on the basis of the various measurement methods used by the Group to determine their fair value:
|
|
|
Millions of euros |
|
|||||||||||||||
|
|
|
09-30-18 (*) |
|
|
12-31-17 |
|
||||||||||||
|
|
|
Published |
|
|
Internal |
|
|
Total |
|
|
Published |
|
|
Internal |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets held for trading |
|
|
45,432 |
|
|
53,016 |
|
|
98,448 |
|
|
58,215 |
|
|
67,243 |
|
|
125,458 |
|
Non-trading financial assets mandatorily at fair value through profit or loss |
|
|
3,559 |
|
|
3,193 |
|
|
6,752 |
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through profit and loss |
|
|
2,717 |
|
|
61,104 |
|
|
63,821 |
|
|
3,823 |
|
|
30,959 |
|
|
34,782 |
|
Financial assets at fair value through other comprehensive income |
|
|
99,458 |
|
|
16,898 |
|
|
116,356 |
|
|
|
|
|
|
|
|
|
|
Financial assets available-for-sale (1) |
|
|
|
|
|
|
|
|
|
|
|
113,258 |
|
|
18,802 |
|
|
132,060 |
|
Hedging derivatives (assets) |
|
|
– |
|
|
7,912 |
|
|
7,912 |
|
|
– |
|
|
8,537 |
|
|
8,537 |
|
Financial liabilities held for trading |
|
|
16,030 |
|
|
50,775 |
|
|
66,805 |
|
|
21,828 |
|
|
85,796 |
|
|
107,624 |
|
Financial liabilities designated at fair value through profit or loss |
|
|
863 |
|
|
91,319 |
|
|
92,182 |
|
|
769 |
|
|
58,847 |
|
|
59,616 |
|
Hedging derivatives (liabilities) |
|
|
3 |
|
|
6,107 |
|
|
6,110 |
|
|
8 |
|
|
8,036 |
|
|
8,044 |
|
Liabilities under insurance contracts |
|
|
– |
|
|
810 |
|
|
810 |
|
|
– |
|
|
1,117 |
|
|
1,117 |
|
|
|
|
Millions of reais |
|
|||||||||||||||
|
|
|
09-30-18 (*) |
|
|
12-31-17 |
|
||||||||||||
|
|
|
Published |
|
|
Internal |
|
|
Total |
|
|
Published |
|
|
Internal |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets held for trading |
|
|
211,420 |
|
|
246,710 |
|
|
458,130 |
|
|
231,282 |
|
|
267,150 |
|
|
498,432 |
|
Non-trading financial assets mandatorily at fair value through profit or loss |
|
|
16,565 |
|
|
14,859 |
|
|
31,424 |
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through profit and loss |
|
|
12,643 |
|
|
284,347 |
|
|
296,990 |
|
|
15,183 |
|
|
122,997 |
|
|
138,180 |
|
Financial assets at fair value through other comprehensive income |
|
|
462,828 |
|
|
78,635 |
|
|
541,463 |
|
|
|
|
|
|
|
|
|
|
Financial assets available-for-sale (1) |
|
|
|
|
|
|
|
|
|
|
|
449,965 |
|
|
74,698 |
|
|
524,663 |
|
Hedging derivatives (assets) |
|
|
– |
|
|
36,816 |
|
|
36,816 |
|
|
– |
|
|
33,915 |
|
|
33,915 |
|
Financial liabilities held for trading |
|
|
74,598 |
|
|
236,281 |
|
|
310,879 |
|
|
86,719 |
|
|
340,859 |
|
|
427,578 |
|
Financial liabilities designated at fair value through profit or loss |
|
|
4,018 |
|
|
424,953 |
|
|
428,971 |
|
|
3,058 |
|
|
233,793 |
|
|
236,851 |
|
Hedging derivatives (liabilities) |
|
|
14 |
|
|
28,419 |
|
|
28,433 |
|
|
30 |
|
|
31,926 |
|
|
31,956 |
|
Liabilities under insurance contracts |
|
|
– |
|
|
3,769 |
|
|
3,769 |
|
|
– |
|
|
4,439 |
|
|
4,439 |
|
(*)See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
(1)As of December 31, 2017, there were equity instruments registered in the portfolio of financial assets available for sale, valued at their cost in the amount of EUR 1,211 million (4,811 million of reais).
Financial instruments at fair value, determined on the basis of published price quotations in active markets (Level 1), include government debt securities, private-sector debt securities, derivatives traded in organized markets, securitized assets, shares, short positions and fixed-income securities issued.
In cases where price quotations cannot be observed, management makes its best estimate of the price that the market would set, using its own internal models. In most cases, these internal models use data
55
based on observable market parameters as significant inputs (Level 2) and, in very specific cases, they use significant inputs not observable in market data (Level 3).
In order to make these estimates, various techniques are employed, including the extrapolation of observable market data. The best evidence of the fair value of a financial instrument on initial recognition is the transaction price, unless the fair value of the instrument can be obtained from other market transactions performed with the same or similar instruments or can be measured by using a valuation technique in which the variables used include only observable market data, mainly interest rates.
The Group did not make any material transfers of financial instruments between measurement levels other than the transfers included in the level 3 table for the nine-month periods ended on the September 30, 2018. In this respect, the Group has reclassified to level 3 the market value of certain operations of bonds, long-term repos and derivatives for an approximate amount of EUR 1,200 million with respect of December 31, 2017. The reason for this classification has been mainly due to lack of liquidity in certain significant inputs in the fair value of the aforementioned financial instruments.
The Group has developed a formal process for the systematic valuation and management of financial instruments, which has been implemented worldwide across all the Group’s units. The governance scheme for this process distributes responsibilities between two independent divisions: Treasury (development, marketing and daily management of financial products and market data) and Risk (on a periodic basis, validation of pricing models and market data, computation of risk metrics, new transaction approval policies, management of market risk and implementation of fair value adjustment policies). The approval of new products follows a sequence of steps (request, development, validation, integration in corporate systems and quality assurance) before the product is brought into production. This process ensures that pricing systems have been properly reviewed and are stable before they are used.
The most important products and families of derivatives, and the related valuation techniques and inputs, by asset class, are detailed in the consolidated financial statements as at December 31, 2017.
As of September 30, 2018, the CVA (Credit Valuation Adjustment) accounted for was EUR 278 million (1,432 million of reais) (‑13.7% from December 31, 2017) and adjustments of DVA (Debt Valuation Adjustment) was EUR 220 million (1,260 million of reais) (‑0.3% compared to December 31, 2017). The variations are mainly due to the requirements of local regulations in the United Kingdom, which led to the separation of activities between the Banking Book and the Trading Book, together with the evolution of calculation models and diversification effects. In the DVA, this effect was offset by the significant increase in credit spreads.
56
Set forth below are the financial instruments at fair value whose measurement was based on internal models (Levels 2 and 3) at September 30, 2018 (IFRS 9) and December 31, 2017 (IAS 39):
|
|
Millions of euros |
Millions of euros |
|
|
|
|
|
|
||||||||||
|
|
Fair values calculated using |
Fair values calculated using |
|
|
|
|
|
|
||||||||||
|
|
internal models at 09‑30‑18 (*) |
internal models at 12‑31‑17 |
|
|
|
|
|
|
||||||||||
|
|
|
Level 2 |
|
|
Level 3 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Valuation techniques |
|
|
Main inputs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
137,387 |
|
|
4,736 |
|
|
124,178 |
|
|
1,363 |
|
|
|
|
|
|
|
Financial assets held for trading |
|
|
52,420 |
|
|
596 |
|
|
66,806 |
|
|
437 |
|
|
|
|
|
|
|
Credit institutions |
|
|
63 |
|
|
- |
|
|
1,696 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Customers (a) |
|
|
239 |
|
|
- |
|
|
8,815 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Debt instruments and equity instruments |
|
|
814 |
|
|
100 |
|
|
335 |
|
|
32 |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Derivatives |
|
|
51,304 |
|
|
496 |
|
|
55,960 |
|
|
405 |
|
|
|
|
|
|
|
Swaps |
|
|
40,469 |
|
|
157 |
|
|
44,766 |
|
|
189 |
|
|
Present Value Method, Gaussian Copula (b) |
|
|
Interest rates curves, FX market prices, HPI, Basis, Liquidity |
|
Exchange rate options |
|
|
896 |
|
|
2 |
|
|
463 |
|
|
5 |
|
|
Black-Scholes Model |
|
|
Interest rates curves, Volatility surfaces, FX market prices and liquidity |
|
Interest rate options |
|
|
3,724 |
|
|
130 |
|
|
4,747 |
|
|
162 |
|
|
Black's Model, advanced multi factor interest rates models |
|
|
Interest rates curves, Volatility surfaces, FX market prices and liquidity |
|
Interest rate futures |
|
|
3 |
|
|
- |
|
|
2 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Index and securities options |
|
|
1,201 |
|
|
98 |
|
|
1,257 |
|
|
5 |
|
|
Black's Model, advanced multi factor interest rates models |
|
|
Interest rates curves, Volatility surfaces, FX market and equity, Dividends, Correlation, Liquidity, HPI |
|
Other |
|
|
5,011 |
|
|
109 |
|
|
4,725 |
|
|
44 |
|
|
Advanced and local stochastic volatility models and other |
|
|
Interest rates curves, Volatility surfaces, FX Market prices and Liquidity |
|
Hedging derivatives |
|
|
7,895 |
|
|
17 |
|
|
8,519 |
|
|
18 |
|
|
|
|
|
|
|
Swaps |
|
|
6,911 |
|
|
17 |
|
|
7,896 |
|
|
18 |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices, Basis FX market prices, Interest rate curves, Volatility surfaces |
|
Interest rate options |
|
|
20 |
|
|
- |
|
|
13 |
|
|
- |
|
|
Black Model |
|
|
|
|
Other |
|
|
964 |
|
|
- |
|
|
610 |
|
|
- |
|
|
Present Value Method, advanced and local stochastic volatility models and other |
|
|
Interest rate curves, Volatility surfaces, FX market prices and EQ, Dividends, Correlation, HPI, Credit, Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-trading financial assets mandatorily at fair value through profit or loss |
|
|
1,861 |
|
|
1,332 |
|
|
|
|
|
|
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices y EQ, Dividends, Other |
|
Equity instruments |
|
|
808 |
|
|
494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt instruments |
|
|
749 |
|
|
512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and receivables |
|
|
304 |
|
|
326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets designated at fair value through profit or loss |
|
|
60,385 |
|
|
719 |
|
|
30,677- |
|
|
282 |
|
|
|
|
|
|
|
Central banks |
|
|
8,870 |
|
|
- |
|
|
- |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Credit institutions |
|
|
28,332 |
|
|
200 |
|
|
9,889 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Customers (c) |
|
|
23,169 |
|
|
519 |
|
|
20,403 |
|
|
72 |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices, HPI |
|
Debt instruments and equity instruments |
|
|
14 |
|
|
- |
|
|
385 |
|
|
210 |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Financial assets at fair value through other comprehensive income |
|
|
14,826 |
|
|
2,072 |
|
|
|
|
|
|
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices and EQ, Dividends, Credit, Others |
|
Equity instruments |
|
|
353 |
|
|
678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt instruments |
|
|
14,425 |
|
|
146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and receivables |
|
|
48 |
|
|
1,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets available for sale |
|
|
18,176 |
|
|
626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt instruments and equity instruments |
|
|
18,176 |
|
|
626 |
|
|
|
|
|
|
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
LIABILITIES |
|
|
148,765 |
|
|
246 |
|
|
153,600 |
|
|
196 |
|
|
|
|
|
|
|
Financial liabilities held for trading |
|
|
50,543 |
|
|
232 |
|
|
85,614 |
|
|
182 |
|
|
|
|
|
|
|
Central banks |
|
|
- |
|
|
- |
|
|
282 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Credit institutions |
|
|
- |
|
|
- |
|
|
292 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Customers |
|
|
- |
|
|
- |
|
|
28,179 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Derivatives |
|
|
50,543 |
|
|
232 |
|
|
56,860 |
|
|
182 |
|
|
|
|
|
|
|
Swaps |
|
|
38,658 |
|
|
91 |
|
|
45,041 |
|
|
100 |
|
|
Present Value Method Gaussian Copula (b) |
|
|
Interest rates curves, FX market prices, Basis, Liquidity, HPI |
|
Exchange rate options |
|
|
827 |
|
|
13 |
|
|
497 |
|
|
9 |
|
|
Black-Scholes Model |
|
|
Interest rates curves, Volatility surfaces, FX Market prices, Liquidity |
|
Interest rate options |
|
|
4,355 |
|
|
22 |
|
|
5,402 |
|
|
19 |
|
|
Black's Model, advanced multi factor interest rates models |
|
|
Interest rates curves, Volatility surfaces, FX Market prices, Liquidity |
|
Index and securities options |
|
|
1,496 |
|
|
105 |
|
|
1,527 |
|
|
41 |
|
|
Black-Scholes Model |
|
|
Interest rates curves, FX market prices |
|
Interest rate and equity futures |
|
|
1 |
|
|
- |
|
|
1 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, Volatility surfaces, FX Market prices and EQ, Dividends, Correlation, Liquidity, HPI |
|
Other |
|
|
5,206 |
|
|
1 |
|
|
4,392 |
|
|
13 |
|
|
Present Value Method, advanced and local stochastic volatility models and other |
|
|
Interest rates curves, Volatility surfaces, FX Market prices and EQ, Dividends, Correlation, HPI, Credit, Other |
|
Short positions |
|
|
- |
|
|
- |
|
|
1 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices and equity |
|
Hedging derivatives |
|
|
6,100 |
|
|
7 |
|
|
8,029 |
|
|
7 |
|
|
|
|
|
|
|
Swaps |
|
|
5,687 |
|
|
7 |
|
|
7,573 |
|
|
7 |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices, Basis |
|
Interest rate options |
|
|
146 |
|
|
- |
|
|
287 |
|
|
- |
|
|
Black's Model |
|
|
Interest rates curves, Volatility surfaces, FX market prices and liquidity |
|
Other |
|
|
267 |
|
|
- |
|
|
169 |
|
|
- |
|
|
Present Value Method, advanced and local stochastic volatility models and other |
|
|
Interest rates curves, volatility surfaces, FX market prices, Credit, Liquidity, Other |
|
Financial liabilities designated at fair value through profit or loss |
|
|
91,312 |
|
|
7 |
|
|
58,840 |
|
|
7 |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Liabilities under insurance contracts |
|
|
810 |
|
|
- |
|
|
1,117 |
|
|
- |
|
|
|
|
|
|
|
57
|
|
Millions of reais |
Millions of reais |
|
|
|
|
|
|
||||||||||
|
|
Fair values calculated using |
Fair values calculated using |
|
|
|
|
|
|
||||||||||
|
|
|
Level 2 |
|
|
Level 3 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Valuation techniques |
|
|
Main inputs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
639,328 |
|
|
22,039 |
|
|
493,339 |
|
|
5,421 |
|
|
|
|
|
|
|
Financial assets held for trading |
|
|
243,937 |
|
|
2,773 |
|
|
265,413 |
|
|
1,737 |
|
|
|
|
|
|
|
Credit institutions |
|
|
293 |
|
|
- |
|
|
6,738 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Customers (a) |
|
|
1,112 |
|
|
- |
|
|
35,021 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Debt instruments and equity instruments |
|
|
3,788 |
|
|
465 |
|
|
1,331 |
|
|
127 |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Derivatives |
|
|
238,744 |
|
|
2,308 |
|
|
222,323 |
|
|
1,610 |
|
|
|
|
|
|
|
Swaps |
|
|
188,322 |
|
|
731 |
|
|
177,851 |
|
|
751 |
|
|
Present Value Method, Gaussian Copula (b) |
|
|
Interest rates curves, FX market prices, HPI, Basis, Liquidity |
|
Exchange rate options |
|
|
4,170 |
|
|
9 |
|
|
1,839 |
|
|
20 |
|
|
Black-Scholes Model |
|
|
Interest rates curves, Volatility surfaces, FX market prices and liquidity |
|
Interest rate options |
|
|
17,330 |
|
|
605 |
|
|
18,859 |
|
|
644 |
|
|
Black's Model, advanced multi factor interest rates models |
|
|
Interest rates curves, Volatility surfaces, FX market prices and liquidity |
|
Interest rate futures |
|
|
14 |
|
|
- |
|
|
8 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Index and securities options |
|
|
5,589 |
|
|
456 |
|
|
4,994 |
|
|
20 |
|
|
Black's Model, advanced multi factor interest rates models |
|
|
Interest rates curves, Volatility surfaces, FX market and equity, Dividends, Correlation, Liquidity, HPI |
|
Other |
|
|
23,319 |
|
|
507 |
|
|
18,772 |
|
|
175 |
|
|
Advanced and local stochastic volatility models and other |
|
|
Interest rates curves, Volatility surfaces, FX Market prices and Liquidity |
|
Hedging derivatives |
|
|
36,737 |
|
|
79 |
|
|
33,843 |
|
|
72 |
|
|
|
|
|
|
|
Swaps |
|
|
32,158 |
|
|
79 |
|
|
31,370 |
|
|
72 |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices , Basis FX market prices, Interest rate curves, Volatility surfaces |
|
Interest rate options |
|
|
93 |
|
|
- |
|
|
52 |
|
|
- |
|
|
Black Model |
|
|
|
|
Other |
|
|
4,486 |
|
|
- |
|
|
2,421 |
|
|
- |
|
|
Present Value Method, advanced and local stochastic volatility models and other |
|
|
Interest rate curves, Volatility surfaces, FX market prices and EQ, Dividends, Correlation, HPI, Credit, Other |
|
Non-trading financial assets mandatorily at fair value through profit or loss |
|
|
8,660 |
|
|
6,199 |
|
|
|
|
|
|
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices y EQ, Dividends, Other |
|
Equity instruments |
|
|
3,760 |
|
|
2,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt instruments |
|
|
3,485 |
|
|
2,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and receivables |
|
|
1,415 |
|
|
1,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets designated at fair value through profit or loss |
|
|
281,001 |
|
|
3,346 |
|
|
121,872 |
|
|
1,125 |
|
|
|
|
|
|
|
Central banks |
|
|
41,276 |
|
|
- |
|
|
|
|
|
|
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Credit institutions |
|
|
131,843 |
|
|
931 |
|
|
39,288 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Customers (c) |
|
|
107,817 |
|
|
2,415 |
|
|
81,054 |
|
|
290 |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices, HPI |
|
Debt instruments and equity instruments |
|
|
65 |
|
|
- |
|
|
1,530 |
|
|
835 |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Financial assets at fair value through other comprehensive income |
|
|
68,993 |
|
|
9,642 |
|
|
|
|
|
|
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices and EQ, Dividends, Credit, Others |
|
Equity instruments |
|
|
1,643 |
|
|
3,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt instruments |
|
|
67,127 |
|
|
679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and receivables |
|
|
223 |
|
|
5,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets available for sale |
|
|
|
|
|
|
|
|
72,211 |
|
|
2,487 |
|
|
|
|
|
|
|
Debt instruments and equity instruments |
|
|
|
|
|
|
|
|
72,211 |
|
|
2,487 |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
LIABILITIES |
|
|
692,277 |
|
|
1,145 |
|
|
610,238 |
|
|
779 |
|
|
|
|
|
|
|
Financial liabilities held for trading |
|
|
235,202 |
|
|
1,079 |
|
|
340,136 |
|
|
723 |
|
|
|
|
|
|
|
Central banks |
|
|
- |
|
|
- |
|
|
1,120 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Credit institutions |
|
|
- |
|
|
- |
|
|
1,160 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Customers |
|
|
- |
|
|
- |
|
|
111,952 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Derivatives |
|
|
235,202 |
|
|
1,079 |
|
|
225,900 |
|
|
723 |
|
|
|
|
|
|
|
Swaps |
|
|
179,895 |
|
|
423 |
|
|
178,943 |
|
|
397 |
|
|
Present Value Method Gaussian Copula (b) |
|
|
Interest rates curves, FX market prices, Basis, Liquidity, HPI |
|
Exchange rate options |
|
|
3,848 |
|
|
60 |
|
|
1,975 |
|
|
36 |
|
|
Black-Scholes Model |
|
|
Interest rates curves, Volatility surfaces, FX Market prices, Liquidity |
|
Interest rate options |
|
|
20,266 |
|
|
102 |
|
|
21,462 |
|
|
75 |
|
|
Black's Model, advanced multi factor interest rates models |
|
|
Interest rates curves, Volatility surfaces, FX Market prices, Liquidity |
|
Index and securities options |
|
|
6,962 |
|
|
489 |
|
|
6,067 |
|
|
163 |
|
|
Black-Scholes Model |
|
|
Interest rates curves, FX market prices |
|
Interest rate and equity futures |
|
|
5 |
|
|
- |
|
|
4 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, Volatility surfaces, FX Market prices and EQ, Dividends, Correlation, Liquidity, HPI |
|
Other |
|
|
24,226 |
|
|
5 |
|
|
17,449 |
|
|
52 |
|
|
Present Value Method , advanced and local stochastic volatility models and other |
|
|
Interest rates curves, Volatility surfaces, FX Market prices and EQ, Dividends, Correlation, HPI, Credit, Other |
|
Short positions |
|
|
- |
|
|
- |
|
|
4 |
|
|
- |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices and equity |
|
Hedging derivatives |
|
|
28,386 |
|
|
33 |
|
|
31,898 |
|
|
28 |
|
|
|
|
|
|
|
Swaps |
|
|
26,465 |
|
|
33 |
|
|
30,087 |
|
|
28 |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices, Basis |
|
Interest rate options |
|
|
679 |
|
|
- |
|
|
1,140 |
|
|
- |
|
|
Black's Model |
|
|
Interest rates curves, Volatility surfaces, FX market prices and liquidity |
|
Other |
|
|
1,242 |
|
|
- |
|
|
671 |
|
|
- |
|
|
Present Value Method, advanced and local stochastic volatility models and other |
|
|
Interest rates curves, volatility surfaces, FX market prices, Credit, Liquidity, Other |
|
Financial liabilities designated at fair value through profit or loss |
|
|
424,920 |
|
|
33 |
|
|
233,765 |
|
|
28 |
|
|
Present Value Method |
|
|
Interest rates curves, FX market prices |
|
Liabilities under insurance contracts |
|
|
3,769 |
|
|
- |
|
|
4,439 |
|
|
- |
|
|
|
|
|
|
|
(*)See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
(a) |
Includes mainly short-term loans and reverse repurchase agreements with corporate customers (mainly brokerage and investment companies). |
(b) |
Includes credit risk derivatives with a negative net fair value of EUR 0 million (0 million of reais) recognized in the interim condensed consolidated balance sheet. These assets and liabilities are measured using the Standard Gaussian Copula Model. |
58
The measurements obtained using the internal models might have been different had other methods or assumptions been used with respect to interest rate risk, to credit risk, market risk and foreign currency risk spreads, or to their related correlations and volatilities. Nevertheless, the Bank’s directors consider that the fair value of the financial assets and liabilities recognized in the consolidated balance sheet and the gains and losses arising from these financial instruments are reasonable.
Level 3 financial instruments
Set forth below are the Group’s main financial instruments measured using unobservable market data that constitute significant inputs of the internal models (Level 3):
-Instruments in Santander UK’s portfolio (loans, debt instruments and derivatives) linked to the House Price Index (HPI). Even if the valuation techniques used for these instruments may be the same as those used to value similar products (present value in the case of loans and debt instruments, and the Black-Scholes model for derivatives), the main factors used in the valuation of these instruments are the HPI spot rate, the growth rate of that rate, its volatility and mortality rates, which are not always observable in the market and, accordingly, these instruments are considered illiquid.
The HPI spot rate: for some instruments the NSA HPI spot rate, which is directly observable and published on a monthly basis, is used. For other instruments where regional HPI rates must be used (published quarterly), adjustments are made to reflect the different composition of the rates and adapt them to the regional composition of Santander UK’s portfolio.
HPI growth rate: this is not always directly observable in the market, especially for long maturities, and is estimated in accordance with existing quoted prices. In order to reflect the uncertainty implicit in these estimates, adjustments are made based on an analysis of the historical volatility of the HPI, incorporating reversion to the mean.
HPI volatility: the long-term volatility is not directly observable in the market but is estimated on the basis of more short-term quoted prices and by making an adjustment to reflect the existing uncertainty, based on the standard deviation of historical volatility over various time periods.
Mortality rates: these are based on published official tables and adjusted to reflect the composition of the customer portfolio for this type of product at Santander UK.
-Callable interest rate trading derivatives (Bermudan style options) where the main unobservable input is mean reversion of interest rates.
-Derivatives of negotiation on interest rates, taking asset securitizations and with the redemption rate (CPR) as the main unobservable input as an underlying asset.
The net amount recorded in the results of the first nine months of 2018 resulting from the aforementioned valuation models which main inputs are unobservable market data (Level 3) amounts to EUR 117 million (499 million of reais) gains.
59
The table below shows the effect, at September 30, 2018, on the fair value of the main financial instruments classified as Level 3 of a reasonable change in the assumptions used in the valuation. This effect was determined by applying the probable valuation ranges of the main unobservable inputs detailed in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacts (in millions of euros) |
|
|||
Portfolio/Instrument (*) |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Unfavorable |
|
|
Favorable |
|
|
(Level 3) |
|
Valuation technique |
|
|
Main unobservable inputs |
|
|
Range |
|
|
average |
|
|
scenario |
|
|
scenario |
|
|
Financial assets held for trading |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading derivatives |
|
|
Present Value Method |
|
|
Curves on TAB indices (**) |
|
|
(a) |
|
|
(a) |
|
|
(0.4) |
|
|
0.4 |
|
|
|
|
|
|
|
Long-term rates MXN |
|
|
(a) |
|
|
(a) |
|
|
0.0 |
|
|
0.0 |
|
|
|
|
Present Value Method, Modified Black-Scholes Model |
|
|
HPI forward growth rate |
|
|
0%-5% |
|
|
2.54% |
|
|
(22.9) |
|
|
22.2 |
|
|
|
|
|
|
|
HPI spot rate |
|
|
n/a |
|
|
777.72 (***) |
|
|
(8.2) |
|
|
8.2 |
|
|
|
|
|
|
|
Long-term FX volatility |
|
|
10%-18% |
|
|
13.7% |
|
|
(4.1) |
|
|
0.4 |
|
|
|
|
Standard Gaussian Copula Model |
|
|
Probability of default |
|
|
0%-5% |
|
|
2.44% |
|
|
(2.0) |
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt instruments and equity holdings |
|
|
Present Value Method, others |
|
|
Contingencies for litigation |
|
|
0%-100% |
|
|
35% |
|
|
(22.0) |
|
|
11.8 |
|
|
|
|
Present Value Method, others |
|
|
Late payment and prepayment rate capital cost long-term profit growth rate |
|
|
(a) |
|
|
(a) |
|
|
(2.8) |
|
|
2.8 |
|
Non-trading financial assets mandatorily at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit to customers |
|
|
Weighted average by probability (according to forecast mortality rates) of European HPI options, using the Black-Scholes model |
|
|
HPI forward growth rate |
|
|
0%-5% |
|
|
2.67% |
|
|
(5.7) |
|
|
5.0 |
|
Debt instruments and equity instruments |
|
|
Weighted average by probability (according to forecast mortality rates) of HPI forwards, using the present value model |
|
|
HPI forward growth rate |
|
|
0%-5% |
|
|
2.54% |
|
|
(8.6) |
|
|
8.3 |
|
|
|
|
|
|
|
HPI spot rate |
|
|
n/a |
|
|
777.72 (***) |
|
|
(13.1) |
|
|
13.1 |
|
Financial liabilities held for trading |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading derivatives |
|
|
Present Value Method, Modified Black-Scholes Model |
|
|
HPI forward growth rate |
|
|
0%-5% |
|
|
2.44% |
|
|
(7.5) |
|
|
7.1 |
|
|
|
|
|
|
|
HPI spot rate |
|
|
n/a |
|
|
748.19 (***) |
|
|
(5.4) |
|
|
6.2 |
|
|
|
|
|
|
|
Curves on TAB indices (**) |
|
|
(a) |
|
|
(a) |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Derivatives (Liabilities) |
|
|
Advanced models of local and stochastic volatility |
|
|
Correlation between the price of shares |
|
|
55%-75% |
|
|
65% |
|
|
n/a |
|
|
n/a |
|
|
|
|
Advanced multi-factor interest rate models |
|
|
Mean reversion of interest rates |
|
|
0.0001-0.03 |
|
|
0.01 (****) |
|
|
- |
|
|
0.0 |
|
Financial liabilities designated at fair value through profit or loss |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(b) |
|
|
(b) |
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacts (in millions of reais) |
|
|||
Portfolio/Instrument (*) |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Unfavorable |
|
|
Favorable |
|
|
(Level 3) |
|
|
Valuation technique |
|
|
Main unobservable inputs |
|
|
Range |
|
|
average |
|
|
scenario |
|
|
scenario |
|
Financial assets held for trading |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading derivatives |
|
|
Present Value Method |
|
|
Curves on TAB indices (**) |
|
|
(a) |
|
|
(a) |
|
|
(1.8) |
|
|
1.8 |
|
|
|
|
|
|
|
Long-term rates MXN |
|
|
(a) |
|
|
(a) |
|
|
(0.2) |
|
|
0.2 |
|
|
|
|
Present Value Method, Modified Black-Scholes Model |
|
|
HPI forward growth rate |
|
|
0%-5% |
|
|
2.54% |
|
|
(106.4) |
|
|
103.3 |
|
|
|
|
|
|
|
HPI spot rate |
|
|
n/a |
|
|
777.72 (***) |
|
|
(38.3) |
|
|
38.3 |
|
|
|
|
|
|
|
Long-term FX volatility |
|
|
10%-18% |
|
|
13.7% |
|
|
(19.2) |
|
|
2.0 |
|
|
|
|
Standard Gaussian Copula Model |
|
|
Probability of default |
|
|
0%-5% |
|
|
2.44% |
|
|
(9.4) |
|
|
9.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt instruments and equity holdings |
|
|
Present Value Method, others |
|
|
Contingencies for litigation |
|
|
0%-100% |
|
|
35% |
|
|
(102.3) |
|
|
55.1 |
|
|
|
|
Present Value Method, others |
|
|
Late payment and prepayment rate capital cost long-term profit growth rate |
|
|
(a) |
|
|
(a) |
|
|
(12.9) |
|
|
12.9 |
|
Non-trading financial assets mandatorily at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit to customers |
|
|
Weighted average by probability (according to forecast mortality rates) of European HPI options, using the Black-Scholes model |
|
|
HPI forward growth rate |
|
|
0%-5% |
|
|
2.67% |
|
|
(26.6) |
|
|
23.2 |
|
Debt instruments and equity instruments |
|
|
Weighted average by probability (according to forecast mortality rates) of HPI forwards, using the present value model |
|
|
HPI forward growth rate |
|
|
0%-5% |
|
|
2.54% |
|
|
(40.0) |
|
|
38.7 |
|
|
|
|
|
|
|
HPI spot rate |
|
|
n/a |
|
|
777.72 (***) |
|
|
(60.8) |
|
|
60.8 |
|
Financial liabilities held for trading |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading derivatives |
|
|
Present Value Method, Modified Black-Scholes Model |
|
|
HPI forward growth rate |
|
|
0%-5% |
|
|
2.44% |
|
|
(34.9) |
|
|
33.3 |
|
|
|
|
|
|
|
HPI spot rate |
|
|
n/a |
|
|
748.19 (***) |
|
|
(25.2) |
|
|
28.8 |
|
|
|
|
|
|
|
Curves on TAB indices (**) |
|
|
(a) |
|
|
(a) |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging Derivatives (Liabilities) |
|
|
Advanced models of local and stochastic volatility |
|
|
Correlation between the price of shares |
|
|
55%-75% |
|
|
65% |
|
|
n/a |
|
|
n/a |
|
|
|
|
Advanced multi-factor interest rate models |
|
|
Mean reversion of interest rates |
|
|
0.0001-0.03 |
|
|
0.01 (****) |
|
|
- |
|
|
0.0 |
|
Financial liabilities designated at fair value through profit or loss |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(b) |
|
|
(b) |
|
(*) See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
61
(**) TAB: “Tasa Activa Bancaria” (Active Bank Rate). Average deposit interest rates (over 30, 90, 180 and 360 days) published by the Chilean Association of Banks and Financial Institutions (ABIF) in nominal currency (Chilean peso) and in real terms, adjusted for inflation (Unidad de Fomento - UF).
(***) There are national and regional HPI indices. The HPI spot value is the weighted average of the indices that correspond to the positions of each portfolio. The impact reported is a change of 10%.
(****) Theoretical average value of the parameter. The change arising on a favorable scenario is from 0.0001 to 0.03. An unfavorable scenario is not considered as there is insufficient margin for an adverse change from the current parameter level.
(a) |
The exercise was conducted for the unobservable inputs described in the main unobservable inputs column under probable scenarios. The range and weighted average value used are not shown because the aforementioned exercise was conducted jointly for various inputs or variants thereof (e.g. the TAB input comprises vector-time curves, for which there are also nominal yield curves and inflation-indexed yield curves), and it was not possible to break down the results separately by type of input. In the case of the TAB curve the gain or loss is reported for changes of +/‑100 b.p. for the total sensitivity to this index in CLP and CLF. The same is applicable to the MXN interest rates. |
(b) |
The Group calculates the potential impact on the measurement of each instrument on a joint basis, regardless of whether the individual value is positive (assets) or negative (liabilities), and discloses the joint effect associated with the related instruments classified on the asset side of the consolidated balance sheet. |
Lastly, the changes in the financial instruments classified as Level 3 in the first nine months of 2018 (IFRS 9) were as follows:
|
|
|
01-01-18 |
|
|
Changes |
|
|
09-30-18 |
|
||||||||||||||||||
Millions of euros (*) |
|
|
Fair value |
|
|
Purchases/ |
|
|
Sales/ |
|
|
Settlements |
|
|
Changes in fair |
|
|
Changes in |
|
|
Level |
|
|
Other |
|
|
Fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets held for trading |
|
|
437 |
|
|
29 |
|
|
(16) |
|
|
(34) |
|
|
(13) |
|
|
- |
|
|
208 |
|
|
(15) |
|
|
596 |
|
Debt instruments and equity instruments |
|
|
32 |
|
|
- |
|
|
- |
|
|
(34) |
|
|
1 |
|
|
- |
|
|
110 |
|
|
(9) |
|
|
100 |
|
Trading derivatives |
|
|
405 |
|
|
29 |
|
|
(16) |
|
|
- |
|
|
(14) |
|
|
- |
|
|
98 |
|
|
(6) |
|
|
496 |
|
Swaps |
|
|
189 |
|
|
- |
|
|
(6) |
|
|
- |
|
|
(26) |
|
|
- |
|
|
- |
|
|
- |
|
|
157 |
|
Exchange rate options |
|
|
5 |
|
|
- |
|
|
- |
|
|
- |
|
|
(2) |
|
|
- |
|
|
- |
|
|
(1) |
|
|
2 |
|
Interest rate options |
|
|
162 |
|
|
- |
|
|
(3) |
|
|
- |
|
|
(30) |
|
|
- |
|
|
1 |
|
|
- |
|
|
130 |
|
Index and securities options |
|
|
5 |
|
|
7 |
|
|
(1) |
|
|
- |
|
|
(3) |
|
|
- |
|
|
97 |
|
|
(7) |
|
|
98 |
|
Other |
|
|
44 |
|
|
22 |
|
|
(6) |
|
|
- |
|
|
47 |
|
|
- |
|
|
- |
|
|
2 |
|
|
109 |
|
Hedging derivatives (Assets) |
|
|
18 |
|
|
- |
|
|
- |
|
|
- |
|
|
(1) |
|
|
- |
|
|
- |
|
|
- |
|
|
17 |
|
Swaps |
|
|
18 |
|
|
- |
|
|
- |
|
|
- |
|
|
(1) |
|
|
- |
|
|
- |
|
|
- |
|
|
17 |
|
Financial assets at fair value through profit or loss |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(2) |
|
|
- |
|
|
699 |
|
|
22 |
|
|
719 |
|
Credit entities |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(2) |
|
|
- |
|
|
202 |
|
|
- |
|
|
200 |
|
Loans and advances to customers |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
497 |
|
|
22 |
|
|
519 |
|
Non-trading financial assets mandatorily at fair value through profit or loss |
|
|
1,050 |
|
|
37 |
|
|
(30) |
|
|
- |
|
|
94 |
|
|
- |
|
|
27 |
|
|
154 |
|
|
1,332 |
|
Loans and advances to customers |
|
|
150 |
|
|
37 |
|
|
(23) |
|
|
- |
|
|
12 |
|
|
- |
|
|
- |
|
|
150 |
|
|
326 |
|
Debt instruments |
|
|
518 |
|
|
- |
|
|
(5) |
|
|
- |
|
|
(25) |
|
|
- |
|
|
26 |
|
|
(2) |
|
|
512 |
|
Equity instruments |
|
|
382 |
|
|
- |
|
|
(2) |
|
|
- |
|
|
107 |
|
|
- |
|
|
1 |
|
|
6 |
|
|
494 |
|
Financial assets at fair value through other comprehensive income |
|
|
2,267 |
|
|
49 |
|
|
(130) |
|
|
- |
|
|
- |
|
|
(205) |
|
|
151 |
|
|
(60) |
|
|
2,072 |
|
TOTAL ASSETS |
|
|
3,772 |
|
|
115 |
|
|
(176) |
|
|
(34) |
|
|
78 |
|
|
(205) |
|
|
1,085 |
|
|
101 |
|
|
4,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities held for trading |
|
|
182 |
|
|
- |
|
|
(71) |
|
|
- |
|
|
(39) |
|
|
- |
|
|
168 |
|
|
(8) |
|
|
232 |
|
Trading derivatives |
|
|
182 |
|
|
- |
|
|
(71) |
|
|
- |
|
|
(39) |
|
|
- |
|
|
168 |
|
|
(8) |
|
|
232 |
|
Swaps |
|
|
100 |
|
|
- |
|
|
(6) |
|
|
- |
|
|
(27) |
|
|
- |
|
|
24 |
|
|
- |
|
|
91 |
|
Exchange rate options |
|
|
9 |
|
|
- |
|
|
- |
|
|
- |
|
|
3 |
|
|
- |
|
|
- |
|
|
1 |
|
|
13 |
|
Interest rate options |
|
|
19 |
|
|
- |
|
|
(1) |
|
|
- |
|
|
(4) |
|
|
- |
|
|
8 |
|
|
- |
|
|
22 |
|
Index and securities options |
|
|
41 |
|
|
- |
|
|
(64) |
|
|
- |
|
|
(4) |
|
|
- |
|
|
141 |
|
|
(9) |
|
|
105 |
|
Others |
|
|
13 |
|
|
- |
|
|
- |
|
|
- |
|
|
(7) |
|
|
- |
|
|
(5) |
|
|
- |
|
|
1 |
|
Hedging derivatives (Liabilities) |
|
|
7 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
7 |
|
Swaps |
|
|
7 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
7 |
|
Financial liabilities designated at fair value through profit or loss |
|
|
7 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
7 |
|
TOTAL LIABILITIES |
|
|
196 |
|
|
- |
|
|
(71) |
|
|
- |
|
|
(39) |
|
|
- |
|
|
168 |
|
|
(8) |
|
|
246 |
|
62
|
|
01-01-18 |
|
|
Changes |
|
|
09-30-18 |
|
|||||||||||||||||||
Millions of reais (*) |
|
|
Fair value |
|
|
Purchases/ |
|
|
Sales/ |
|
|
Settlements |
|
|
Changes in fair |
|
|
Changes in |
|
|
Level |
|
|
Other |
|
|
Fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets held for trading |
|
|
1,737 |
|
|
124 |
|
|
(69) |
|
|
(145) |
|
|
(56) |
|
|
- |
|
|
890 |
|
|
292 |
|
|
2,773 |
|
Debt instruments and equity instruments |
|
|
127 |
|
|
- |
|
|
- |
|
|
(145) |
|
|
4 |
|
|
- |
|
|
471 |
|
|
8 |
|
|
465 |
|
Trading derivatives |
|
|
1,610 |
|
|
124 |
|
|
(69) |
|
|
- |
|
|
(60) |
|
|
- |
|
|
419 |
|
|
284 |
|
|
2,308 |
|
Swaps |
|
|
751 |
|
|
- |
|
|
(26) |
|
|
- |
|
|
(111) |
|
|
- |
|
|
- |
|
|
117 |
|
|
731 |
|
Exchange rate options |
|
|
20 |
|
|
- |
|
|
- |
|
|
- |
|
|
(9) |
|
|
- |
|
|
- |
|
|
(2) |
|
|
9 |
|
Interest rate options |
|
|
644 |
|
|
- |
|
|
(13) |
|
|
- |
|
|
(128) |
|
|
- |
|
|
4 |
|
|
98 |
|
|
605 |
|
Index and securities options |
|
|
20 |
|
|
30 |
|
|
(4) |
|
|
- |
|
|
(13) |
|
|
- |
|
|
415 |
|
|
8 |
|
|
456 |
|
Other |
|
|
175 |
|
|
94 |
|
|
(26) |
|
|
- |
|
|
201 |
|
|
- |
|
|
- |
|
|
63 |
|
|
507 |
|
Hedging derivatives (Assets) |
|
|
72 |
|
|
- |
|
|
- |
|
|
- |
|
|
(4) |
|
|
- |
|
|
- |
|
|
11 |
|
|
79 |
|
Swaps |
|
|
72 |
|
|
- |
|
|
- |
|
|
- |
|
|
(4) |
|
|
- |
|
|
- |
|
|
11 |
|
|
79 |
|
Financial assets at fair value through profit or loss |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(9) |
|
|
- |
|
|
2,990 |
|
|
365 |
|
|
3,346 |
|
Credit entities |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(9) |
|
|
- |
|
|
864 |
|
|
76 |
|
|
931 |
|
Loans and advances to customers |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,126 |
|
|
289 |
|
|
2,415 |
|
Non-trading financial assets mandatorily at fair value through profit or loss |
|
|
3,774 |
|
|
158 |
|
|
(128) |
|
|
- |
|
|
402 |
|
|
- |
|
|
115 |
|
|
1,878 |
|
|
6,199 |
|
Loans and advances to customers |
|
|
539 |
|
|
158 |
|
|
(98) |
|
|
- |
|
|
51 |
|
|
- |
|
|
- |
|
|
867 |
|
|
1,517 |
|
Debt instruments |
|
|
1,862 |
|
|
- |
|
|
(21) |
|
|
- |
|
|
(107) |
|
|
- |
|
|
111 |
|
|
538 |
|
|
2,383 |
|
Equity instruments |
|
|
1,373 |
|
|
- |
|
|
(9) |
|
|
- |
|
|
458 |
|
|
- |
|
|
4 |
|
|
473 |
|
|
2,299 |
|
Financial assets at fair value through other comprehensive income |
|
|
9,016 |
|
|
210 |
|
|
(556) |
|
|
- |
|
|
- |
|
|
(877) |
|
|
646 |
|
|
1,203 |
|
|
9,642 |
|
TOTAL ASSETS |
|
|
14,599 |
|
|
492 |
|
|
(753) |
|
|
(145) |
|
|
333 |
|
|
(877) |
|
|
4,641 |
|
|
3,749 |
|
|
22,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities held for trading |
|
|
723 |
|
|
- |
|
|
(304) |
|
|
- |
|
|
(166) |
|
|
- |
|
|
719 |
|
|
107 |
|
|
1,079 |
|
Trading derivatives |
|
|
723 |
|
|
- |
|
|
(304) |
|
|
- |
|
|
(166) |
|
|
- |
|
|
719 |
|
|
107 |
|
|
1,079 |
|
Swaps |
|
|
397 |
|
|
- |
|
|
(26) |
|
|
- |
|
|
(115) |
|
|
- |
|
|
103 |
|
|
64 |
|
|
423 |
|
Exchange rate options |
|
|
36 |
|
|
- |
|
|
- |
|
|
- |
|
|
13 |
|
|
- |
|
|
- |
|
|
11 |
|
|
60 |
|
Interest rate options |
|
|
75 |
|
|
- |
|
|
(4) |
|
|
- |
|
|
(17) |
|
|
- |
|
|
34 |
|
|
14 |
|
|
102 |
|
Index and securities options |
|
|
163 |
|
|
- |
|
|
(274) |
|
|
- |
|
|
(17) |
|
|
- |
|
|
603 |
|
|
14 |
|
|
489 |
|
Others |
|
|
52 |
|
|
- |
|
|
- |
|
|
- |
|
|
(30) |
|
|
- |
|
|
(21) |
|
|
4 |
|
|
5 |
|
Hedging derivatives (Liabilities) |
|
|
28 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
5 |
|
|
33 |
|
Swaps |
|
|
28 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
5 |
|
|
33 |
|
Financial liabilities designated at fair value through profit or loss |
|
|
28 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
5 |
|
|
33 |
|
TOTAL LIABILITIES |
|
|
779 |
|
|
- |
|
|
(304) |
|
|
- |
|
|
(166) |
|
|
- |
|
|
719 |
|
|
117 |
|
|
1,145 |
|
(*)See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
63
a) |
Sovereign risk with peripheral European countries |
The detail at September 30, 2018 (IFRS 9) and December 31, 2017 (IAS 39), by type of financial instrument, of the Group credit institutions’ sovereign risk exposure to Europe’s peripheral countries and of the short positions exposed to them, taking into consideration the scope established by the European Banking Authority (EBA) in the analyses performed on the capital needs of European credit institutions (Note 54 to the consolidated financial statements for 2017), is as follows:
Sovereign risk by country of issuer/borrower at September 30, 2018 (**) |
|
|||||||||||||||||||||||||||
|
|
|
Millions of euros (*) |
|
||||||||||||||||||||||||
|
|
|
Debt instruments |
|
|
|
|
|
|
|
MtM Derivatives (****) |
|
||||||||||||||||
|
|
|
Financial assets |
|
|
Short |
|
|
Financial |
|
|
Non-trading |
|
|
Financial |
|
|
Loans and |
|
|
Total net |
|
|
Direct Risk |
|
|
Indirect |
|
Spain |
|
|
4,292 |
|
|
(3,218) |
|
|
28,255 |
|
|
- |
|
|
7,906 |
|
|
14,473 |
|
|
51,708 |
|
|
367 |
|
|
- |
|
Portugal |
|
|
122 |
|
|
(40) |
|
|
4,110 |
|
|
- |
|
|
287 |
|
|
3,369 |
|
|
7,848 |
|
|
- |
|
|
- |
|
Italy |
|
|
324 |
|
|
(915) |
|
|
2,183 |
|
|
- |
|
|
436 |
|
|
18 |
|
|
2,046 |
|
|
(2) |
|
|
2 |
|
Greece |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Ireland |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Sovereign risk by country of issuer/borrower at September 30, 2018 (**) |
|
|||||||||||||||||||||||||||
|
|
|
Millions of reais (*) |
|
||||||||||||||||||||||||
|
|
|
Debt instruments |
|
|
|
|
|
|
|
MtM Derivatives (****) |
|
||||||||||||||||
|
|
|
Financial assets |
|
|
Short |
|
|
Financial |
|
|
Non-trading |
|
|
Financial |
|
|
Loans and |
|
|
Total net |
|
|
Direct Risk |
|
|
Indirect |
|
Spain |
|
|
19,973 |
|
|
(14,975) |
|
|
131,485 |
|
|
- |
|
|
36,791 |
|
|
67,350 |
|
|
240,624 |
|
|
1,708 |
|
|
- |
|
Portugal |
|
|
568 |
|
|
(186) |
|
|
19,126 |
|
|
- |
|
|
1,336 |
|
|
15,678 |
|
|
36,522 |
|
|
- |
|
|
- |
|
Italy |
|
|
1,508 |
|
|
(4,258) |
|
|
10,159 |
|
|
- |
|
|
2,029 |
|
|
84 |
|
|
9,522 |
|
|
(9) |
|
|
9 |
|
Greece |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Ireland |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
(*) See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
(**) Information prepared under EBA standards. Also, there are government debt instruments on insurance companies balance sheets amounting to EUR 12,786 million (59,500 million of reais) (of which EUR 11,055 million, EUR 1,278 million, EUR 451 million and EUR 2 million) (51,444, 5,947, 2,099 y 9 million of reais) relate to Spain, Portugal, Italy and Ireland, respectively) and off-balance-sheet exposure other than derivatives – contingent liabilities and commitments– amounting to EUR 5,313 million (24,724 million of reais) (of which EUR 4,621 million, EUR 230 million and EUR 462 million (21,504, 1,070 y 2,150 million of reais) to Spain, Portugal and Italy, respectively).
(***) Presented without taking into account the valuation adjustments recognized (EUR 112 million) (521 million of reais).
(****) "Other than CDSs" refers to the exposure to derivatives based on the location of the counterparty, irrespective of the location of the underlying. “CDSs” refers to the exposure to CDSs based on the location of the underlying.
(*****) Regarding the exposure in Italy, EUR 1,781 million (8,288 million of reais) corresponds to bonds sold under a forward agreement.
Sovereign risk by country of issuer/borrower at December 31, 2017 (*) |
|
|||||||||||||||||||||||||||
|
|
|
Millions of euros |
|
||||||||||||||||||||||||
|
|
|
Debt instruments |
|
|
|
|
|
|
|
MtM Derivatives (***) |
|
||||||||||||||||
|
|
|
Financial assets |
|
|
Short |
|
|
Financial |
|
|
Loans and |
|
|
Financial |
|
|
Loans and |
|
|
Total net |
|
|
Direct Risk |
|
|
Indirect |
|
Spain |
|
|
6,940 |
|
|
(2,012) |
|
|
37,748 |
|
|
1,585 |
|
|
1,906 |
|
|
16,470 |
|
|
62,637 |
|
|
(21) |
|
|
- |
|
Portugal |
|
|
208 |
|
|
(155) |
|
|
5,220 |
|
|
232 |
|
|
3 |
|
|
3,309 |
|
|
8,817 |
|
|
- |
|
|
- |
|
Italy |
|
|
1,962 |
|
|
(483) |
|
|
4,613 |
|
|
- |
|
|
- |
|
|
16 |
|
|
6,108 |
|
|
(5) |
|
|
5 |
|
Ireland |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
64
Sovereign risk by country of issuer/borrower at December 31, 2017 (*) |
|
|||||||||||||||||||||||||||
|
|
|
Millions of reais |
|
||||||||||||||||||||||||
|
|
|
Debt instruments |
|
|
|
|
|
|
|
MtM Derivatives (***) |
|
||||||||||||||||
|
|
|
Financial assets |
|
|
Short |
|
|
Financial |
|
|
Loans and |
|
|
Financial |
|
|
Loans and |
|
|
Total net |
|
|
Direct Risk |
|
|
Indirect |
|
Spain |
|
|
27,572 |
|
|
(7,993) |
|
|
149,969 |
|
|
6,297 |
|
|
7,572 |
|
|
65,434 |
|
|
248,851 |
|
|
(83) |
|
|
- |
|
Portugal |
|
|
826 |
|
|
(616) |
|
|
20,739 |
|
|
922 |
|
|
12 |
|
|
13,146 |
|
|
35,029 |
|
|
- |
|
|
- |
|
Italy |
|
|
7,795 |
|
|
(1,919) |
|
|
18,327 |
|
|
- |
|
|
- |
|
|
64 |
|
|
24,267 |
|
|
(20) |
|
|
20 |
|
Ireland |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
(*) Information prepared under EBA standards. Also, there are government debt instruments on insurance companies balance sheets amounting to EUR 11,673 million (46,376 million of reais) (of which EUR 10,079 million, EUR 1,163 million and EUR 431 million (40,043 million of reais, 4,620 million of reais and 1,172 million of reais) relate to Spain, Portugal and Italy, respectively) and off-balance-sheet exposure other than derivatives –contingent liabilities and commitments– amounting to EUR 3,596 million (14,287 million of reais) (EUR 3,010 million, EUR 146 million and EUR 440 million (11,958 million of reais, 580 million of reais and 1,748 million of reais) to Spain, Portugal and Italy, respectively).
(**) Presented without taking into account the valuation adjustments recognized (EUR 31 million) (123 million of reais).
(***) "Other than CDSs" refers to the exposure to derivatives based on the location of the counterparty, irrespective of the location of the underlying. “CDSs” refers to the exposure to CDSs based on the location of the underlying.
(****) The direct exposures in the Balance sheet include EUR 19,601 million (77,873 million of reais), mainly concentrated in debt instruments in the Grupo Banco Popular.
The detail of the Group’s other exposure to other counterparties (private sector, central banks and other public entities that are not considered to be sovereign risks) in the aforementioned countries at September 30, 2018 and December 31, 2017 is as follows:
Exposure to other counterparties by country of issuer/borrower at September 30, 2018 (****) |
|
||||||||||||||||||||||||||||||
|
|
|
Millions of euros (*) |
|
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Debt instruments |
|
|
|
|
|
|
|
|
Derivatives (***) |
|
||||||||||||
|
|
|
Balances |
|
|
Reverse |
|
|
Financial |
|
|
Financial |
|
|
Non-trading |
|
|
Financial |
|
|
Loans and |
|
|
Total net |
|
|
Other |
|
|
CDSs |
|
Spain |
|
|
40,920 |
|
|
7,749 |
|
|
634 |
|
|
2,086 |
|
|
348 |
|
|
4,291 |
|
|
202,395 |
|
|
258,423 |
|
|
3,407 |
|
|
1 |
|
Portugal |
|
|
1,113 |
|
|
44 |
|
|
153 |
|
|
92 |
|
|
- |
|
|
4,182 |
|
|
33,873 |
|
|
39,457 |
|
|
1,143 |
|
|
- |
|
Italy |
|
|
6 |
|
|
8,716 |
|
|
291 |
|
|
734 |
|
|
- |
|
|
- |
|
|
10,256 |
|
|
20,003 |
|
|
141 |
|
|
- |
|
Greece |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
56 |
|
|
56 |
|
|
28 |
|
|
- |
|
Ireland |
|
|
- |
|
|
- |
|
|
36 |
|
|
913 |
|
|
606 |
|
|
28 |
|
|
8,239 |
|
|
9,822 |
|
|
95 |
|
|
- |
|
Exposure to other counterparties by country of issuer/borrower at September 30, 2018 (****) |
|
||||||||||||||||||||||||||||||
|
|
|
Millions of reais (*) |
|
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Debt instruments |
|
|
|
|
|
|
|
|
Derivatives (***) |
|
||||||||||||
|
|
|
Balances |
|
|
Reverse |
|
|
Financial |
|
|
Financial |
|
|
Non-trading |
|
|
Financial |
|
|
Loans and |
|
|
Total net |
|
|
Other |
|
|
CDSs |
|
Spain |
|
|
190,421 |
|
|
36,060 |
|
|
2,950 |
|
|
9,707 |
|
|
1,619 |
|
|
19,968 |
|
|
941,845 |
|
|
1,202,570 |
|
|
15,854 |
|
|
5 |
|
Portugal |
|
|
5,179 |
|
|
205 |
|
|
712 |
|
|
428 |
|
|
- |
|
|
19,461 |
|
|
157,628 |
|
|
183,613 |
|
|
5,319 |
|
|
- |
|
Italy |
|
|
28 |
|
|
40,560 |
|
|
1,354 |
|
|
3,416 |
|
|
- |
|
|
- |
|
|
47,726 |
|
|
93,084 |
|
|
656 |
|
|
- |
|
Greece |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
261 |
|
|
261 |
|
|
130 |
|
|
- |
|
Ireland |
|
|
- |
|
|
- |
|
|
168 |
|
|
4,249 |
|
|
2,820 |
|
|
130 |
|
|
38,340 |
|
|
45,707 |
|
|
442 |
|
|
- |
|
(*) See reconciliation of IAS 39 as at December 31, 2017 to IFRS 9 as at January 1, 2018 (Note 1.b).
(**) Also, the Group has off-balance-sheet exposure other than derivatives -contingent liabilities and commitments- amounting to EUR 74,425 million, EUR 8,187 million, EUR 4,175 million, EUR 201 million and EUR 871 million (346,337, 38,098, 19,428, 935 and 4,053 million of reais) to counterparties in Spain, Portugal, Italy, Greece and Ireland, respectively.
(***) Presented without taking into account valuation adjustments or impairment corrections (EUR 10,599 million) (49,322 million of reais).
65
(****) “Other than CDSs” refers to the exposure to derivatives based on the location of the counterparty, irrespective of the location of the underlying. “CDSs” refers to the exposure to CDSs based on the location of the underlying.
Exposure to other counterparties by country of issuer/borrower at December 31, 2017 (*) |
|
||||||||||||||||||||||||||||||
|
|
|
Millions of euros |
|
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Debt instruments |
|
|
|
|
|
|
|
|
Derivatives (***) |
|
||||||||||||
|
|
|
Balances |
|
|
Reverse |
|
|
Financial |
|
|
Financial |
|
|
Loans and |
|
|
Held to |
|
|
Loans and |
|
|
Total net |
|
|
Other |
|
|
CDSs |
|
Spain |
|
|
36,091 |
|
|
6,932 |
|
|
623 |
|
|
4,784 |
|
|
2,880 |
|
|
- |
|
|
210,976 |
|
|
262,286 |
|
|
2,299 |
|
|
2 |
|
Portugal |
|
|
761 |
|
|
178 |
|
|
160 |
|
|
764 |
|
|
4,007 |
|
|
106 |
|
|
35,650 |
|
|
41,626 |
|
|
1,416 |
|
|
- |
|
Italy |
|
|
17 |
|
|
2,416 |
|
|
438 |
|
|
1,010 |
|
|
- |
|
|
- |
|
|
10,015 |
|
|
13,896 |
|
|
211 |
|
|
5 |
|
Greece |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
56 |
|
|
56 |
|
|
30 |
|
|
- |
|
Ireland |
|
|
- |
|
|
- |
|
|
20 |
|
|
476 |
|
|
584 |
|
|
- |
|
|
1,981 |
|
|
3,061 |
|
|
79 |
|
|
- |
|
Exposure to other counterparties by country of issuer/borrower at December 31, 2017 (*) |
|
||||||||||||||||||||||||||||||
|
|
|
Millions of reais |
|
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Debt instruments |
|
|
|
|
|
|
|
|
Derivatives (***) |
|
||||||||||||
|
|
|
Balances |
|
|
Reverse |
|
|
Financial |
|
|
Financial |
|
|
Loans and |
|
|
Held to |
|
|
Loans and |
|
|
Total net |
|
|
Other |
|
|
CDSs |
|
Spain |
|
|
143,386 |
|
|
27,540 |
|
|
2,475 |
|
|
19,006 |
|
|
11,442 |
|
|
- |
|
|
838,187 |
|
|
1,042,036 |
|
|
9,134 |
|
|
8 |
|
Portugal |
|
|
3,023 |
|
|
707 |
|
|
636 |
|
|
3,035 |
|
|
15,919 |
|
|
421 |
|
|
141,634 |
|
|
163,375 |
|
|
5,626 |
|
|
- |
|
Italy |
|
|
68 |
|
|
9,599 |
|
|
1,740 |
|
|
4,013 |
|
|
- |
|
|
- |
|
|
39,789 |
|
|
55,209 |
|
|
838 |
|
|
20 |
|
Greece |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
222 |
|
|
222 |
|
|
119 |
|
|
- |
|
Ireland |
|
|
- |
|
|
- |
|
|
79 |
|
|
1,891 |
|
|
2,320 |
|
|
- |
|
|
7,870 |
|
|
12,160 |
|
|
314 |
|
|
- |
|
(*) Also, the Group has off-balance-sheet exposure other than derivatives -contingent liabilities and commitments- amounting to EUR 81,072 million, EUR 8,936 million, EUR 4,310 million, EUR 200 million and EUR 714 million (322,091, 35,502, 17,123, 795 and 2,837 million of reais) to counterparties in Spain, Portugal, Italy, Greece and Ireland, respectively of which Grupo Banco Popular EUR 15,460 million (61,421 million of reais) with counterparts in Spain, Portugal, Italy, Greece and Ireland, respectively.
(**) They are presented without taking into account valuation adjustments or impairment corrections for impairment of EUR 10,653 million (42,323 million of reais) of which approximately EUR 3,986 million (15,836 million of reais) come from the Banco Popular Group exposure.
(***) Other than CDSs” refers to the exposure to derivatives based on the location of the counterparty, irrespective of the location of the underlying. “CDSs” refers to the exposure to CDSs based on the location of the underlying.
(***) The direct exposures in the Balance sheet include EUR 83,625 million (332,234 million of reais), mainly concentrated in loans to customers in the Banco Popular Group.
Following is certain information on the notional amounts of the CDSs detailed in the foregoing tables at September 30, 2018 and December 31, 2017:
09-30-18 |
||||||||||||||||||||||
Millions of euros |
||||||||||||||||||||||
Notional amount |
Fair value |
|||||||||||||||||||||
Bought |
Sold |
Net |
Bought |
Sold |
Net |
|||||||||||||||||
Spain |
Sovereign |
- |
- |
- |
- |
- |
- |
|||||||||||||||
Other |
292 |
423 |
(131) | (2) |
3 |
1 |
||||||||||||||||
Portugal |
Sovereign |
26 |
26 |
- |
- |
- |
- |
|||||||||||||||
Other |
- |
- |
- |
- |
- |
- |
||||||||||||||||
Italy |
Sovereign |
26 |
602 |
(576) |
- |
2 |
2 |
|||||||||||||||
Other |
114 |
164 |
(50) | (5) |
5 |
- |
66
09-30-18 |
||||||||||||||||||||||
Millions of reais |
||||||||||||||||||||||
Notional amount |
Fair value |
|||||||||||||||||||||
Bought |
Sold |
Net |
Bought |
Sold |
Net |
|||||||||||||||||
Spain |
Sovereign |
- |
- |
- |
- |
- |
- |
|||||||||||||||
Other |
1,359 | 1,969 | (610) | (9) | 14 |
5 |
||||||||||||||||
Portugal |
Sovereign |
121 | 121 |
- |
- |
- |
- |
|||||||||||||||
Other |
- |
- |
- |
- |
- |
- |
||||||||||||||||
Italy |
Sovereign |
121 | 2,801 | (2,680) |
- |
9 | 9 | |||||||||||||||
Other |
530 | 763 | (233) | (23) | 23 |
- |
12-31-17 |
||||||||||||||||||||||
Millions of euros |
||||||||||||||||||||||
Notional amount |
Fair value |
|||||||||||||||||||||
Bought |
Sold |
Net |
Bought |
Sold |
Net |
|||||||||||||||||
Spain |
Sovereign |
- |
- |
- |
- |
- |
- |
|||||||||||||||
Other |
324 |
499 |
(175) | (3) |
5 |
2 |
||||||||||||||||
Portugal |
Sovereign |
25 |
128 |
(103) | (1) |
1 |
- |
|||||||||||||||
Other |
1 |
1 |
- |
- |
- |
- |
||||||||||||||||
Italy |
Sovereign |
25 |
450 |
(425) |
- |
5 |
5 |
|||||||||||||||
Other |
225 |
201 |
24 |
(3) |
8 |
5 |
12-31-17 |
||||||||||||||||||||||
Millions of reais |
||||||||||||||||||||||
Notional amount |
Fair value |
|||||||||||||||||||||
Bought |
Sold |
Net |
Bought |
Sold |
Net |
|||||||||||||||||
Spain |
Sovereign |
- |
- |
- |
- |
- |
- |
|||||||||||||||
Other |
1,287 |
1,982 |
(695) | (12) |
20 |
8 |
||||||||||||||||
Portugal |
Sovereign |
99 |
508 |
(409) | (4) |
4 |
- |
|||||||||||||||
Other |
4 |
4 |
- |
- |
- |
- |
||||||||||||||||
Italy |
Sovereign |
99 |
1,787 |
(1,688) |
- |
20 |
20 |
|||||||||||||||
Other |
894 |
799 |
95 |
(12) |
32 |
20 |
17.Explanation added for translation to English
These interim condensed consolidated financial statements are presented on the basis of the regulatory financial reporting framework applicable to the Group in Spain (Note 1.b).
67
BANCO SANTANDER, S.A. and companies comprising the Santander Group
Interim consolidated directors' report for the nine-month period ended 30 September 2018
General backdrop
Grupo Santander developed its business in the first nine months in a generally dynamic and solid economic environment. However, the maximum point of the current expansive cycle could have been reached. The countries where the Group conducts its business are performing at a less even pace, although they are growing.
As happened in the first months of the year, trade tensions, despite the agreement reached in the renegotiation of NAFTA, and the tightening of US monetary policy are the main causes of greater uncertainty, which has triggered tensions of varying intensity, particularly in developing markets such as Argentina and Turkey and, to a lesser extent, in Brazil, also affected by general elections.
Other factors such as the Brexit negotiations and the shape of Italy’s fiscal policy have also weighed on the tone of the markets.
The trends in the main macroeconomic variables are summarized below at country level:
- |
Eurozone (GDP: +2.3% year-on-year in the first half of 2018). Growth continued to slowdown as the year advanced. GDP grew 2.2% year-on-year in the second quarter and could be lower in the third. The unemployment rate fell further (8.1% in August) and inflation was 2.1% in September, although the underlying rate was lower. |
- |
Spain (GDP: +2.7% year-on-year in the first half of 2018). The economy showed signs of growing less in the third quarter, although growth remained strong at around 2.5% (above the Eurozone average). The jobless rate fell again in the second quarter to 15.3% and inflation was 2.3% in September (underlying rate of 0.8%). |
- |
Poland (GDP: +5.2% year-on-year in the first half of 2018). Growth remained strong in the second quarter. The unemployment rate was still at an historic low (3.6% in the second quarter). Inflation fell in September to 1.8% after staying at 2% for three months. The central bank has held its key rate at 1.5% throughout the year. |
- |
Portugal (GDP: +2.3% year-on-year in the first half of 2018). Growth accelerated in the second quarter, driven by exports and investment. The labor market continued to improve: the unemployment rate fell to 6.7% in June and the participation rate increased. Inflation reached 1.4% in September. |
- |
United Kingdom (GDP: +1.1% year-on-year in the first half of 2018). The economy picked up in the second quarter after a first quarter affected by bad weather. Inflation remained high (2.4% in September) and sterling fluctuated because of Brexit negotiations. The jobless rate of 4% in June is one of full employment. The Bank of England’s key rate rose 25 basis points in August to 0.75%. |
- |
Brazil (GDP: +1.1% year-on-year in the first half of 2018). GDP slowed in the second quarter because of the transport strike and began to pick up gradually in the third. The central bank held the Selic rate at 6.5% but showed it was ready to raise it if the real’s depreciation put the inflation target at risk. |
- |
Mexico (GDP: +2.0% year-on-year in the first half of 2018). The economy decelerated in the second quarter and gathered pace in the third. Inflation rose to 5.0% in September and the central bank held its key rate at 7.75%, following two rises of 25 basis points, until June. The trade agreement with Mexico and Canada restored some calm and caused the peso to appreciate. |
68
- |
Chile (GDP: +4.8% year-on-year in the first half of 2018). The economy was strong in the second quarter, spurred by private consumption, investment and exports. Inflation rose to 3.1% in September (2.5% in July) and although the key rate remained at 2.5% in the third quarter, there was a rise of 25 basis points in October. |
- |
Argentina (GDP: -0.5% year-on-year in the first half of 2018). The government renegotiated its agreement with the IMF in order to cover the financing needs for 2018-2019. The economic program will focus on correcting the fiscal deficit and inflation in order to stabilize the economy. The economy shrank in the second quarter and inflation rose due to the peso’s depreciation. |
- |
United States (GDP: +2.7% year-on-year in the first half of 2018). GDP grew strongly in the second quarter (4.1% annualized) and the jobless rate dropped to 3.9%. Inflation is close to the target of the Fed, which continues to normalize its monetary policy. It increased the federal funds rate in September by 25 basis points to 2.0-2.25%. |
Summary of the period for the Santander Group
1. |
Growth |
Santander’s strategy remained focus on customer loyalty. The number of loyal customers continued to rise in the third quarter and was 3.1 million higher than in September 2017 (+19%), with individuals as well as companies rising.
The number of digital customers rose by 5.7 million (+24% in the last 12 months), underscoring the strength of our multichannel strategy. Penetration of digital clients and the use of mobile devices is growing notably.
Growth benefited from the incorporation of Banco Popular’s customers in March 2018.
Volumes grew year-on-year in local currency, +3% in loans with increases in eight of the ten core units, and +4% in customer funds, with increases in seven of the ten core units (falls of less than 1% in the other three) and growth in demand deposits and mutual funds.
2. |
Profit and efficiency |
The first nine months attributable profit stood at EUR 5,742 million, up 13% (+28% in constant euros), and earnings per share (EPS) 5%.
Excluding non-recurring results, underlying attributable profit was EUR 6,042 million, 8% higher (+21% in constant euros), and rose in eight of the ten core markets. Underlying EPS was EUR 0.349.
The efficiency ratio was 46.9%. Customer revenue growth in constant euros for the sixth straight quarter, together with operational excellence is enabling us to combine one of the sector’s best efficiency ratios and be among the top 3 banks in customer satisfaction in six of our core countries.
3. |
Profitability and strength |
The Group’s profitability continues to be one of the best among European banks. RoTE was 11.7% (underlying RoTE 12.1%). Both RoTE and RoRWA improved year-on-year.
Santander was able to grow these ratios, while strengthening the capital ratios. The fully loaded CET1, applying the IFRS 9 transitional arrangement, was 11.11%, after generating 31 basis points in the last quarter from profits and the reduction of risk weighted assets, benefiting from securitizations an the review of parameters.
69
Improved credit quality. Cost of credit was 0.98% at the end of September (1.12% in September 2017). The NPL ratio improved for the fifth quarter running (-5 basis points) and fell 37 basis points year-on-year. Coverage increased 2 percentage points, in the same period.
4. |
Business areas (% changes excluding the exchange rate impact) |
Continental Europe: generated an attributable profit of EUR 2,436 million in the first nine months, 22% more year-on-year including the costs associated with integrations (mainly restructuring costs) this year (in the second quarter) and last year (in the third quarter). Excluding these impacts, underlying attributable profit was EUR 2,696 million (+13% year-on-year), largely due to the increase in customer revenue and also benefiting from Banco Popular’s integration and the greater stake in Santander Asset Management.
United Kingdom: in a highly competitive environment with some remaining uncertainties on Brexit, attributable profit was 9% lower year-on-year in the first nine months at EUR 1,077 million. This was due to pressure on spreads and investments in regulatory and strategic projects. The cost of credit was only 8 basis points.
Latin America: attributable profit of EUR 3,160 million in the first nine months, 21% higher year-on-year. Growth in volumes, spreads management and increased loyalty underpinned the good evolution, both in net interest income as well as fee income, in addition to an improved cost of credit. Operating expenses grew mainly due to plans relating to the expansion, commercial transformation and increased digitalization of our retail networks.
United States: first nine months attributable profit of EUR 460 million, 47% more year-on-year, due to a fall in costs and, above all, reduced provisions, which comfortably offset the decline in customer revenue associated with lower spreads, higher funding costs, reduced fee income from servicing and tougher competition.
70
Santander Group earnings
The table below compares January-September 2018 and January- September 2017 earnings.
Consolidated income statement
EUR million
|
|
|
9M'18 |
|
|
9M'17 |
|
|
|
|
|
|
|
|
|
Interest income |
|
|
39,902 |
|
|
42,488 |
|
Interest expense |
|
|
(14,622) |
|
|
(16,799) |
|
Net interest income |
|
|
25,280 |
|
|
25,689 |
|
Dividend income |
|
|
292 |
|
|
309 |
|
Share of results of entities accounted for using the equity method |
|
|
532 |
|
|
480 |
|
Commission income |
|
|
10,834 |
|
|
10,875 |
|
Commission expense |
|
|
(2,305) |
|
|
(2,227) |
|
Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net |
|
|
576 |
|
|
353 |
|
Gain or losses on financial assets and liabilities held for trading, net |
|
|
1,532 |
|
|
1,036 |
|
Gains or losses on non‐trading financial assets and liabilities mandatorily at fair value through profit or loss |
|
|
109 |
|
|
|
|
Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net |
|
|
146 |
|
|
(85) |
|
Gain or losses from hedge accounting, net |
|
|
5 |
|
|
(35) |
|
Exchange differences, net |
|
|
(1,009) |
|
|
13 |
|
Other operating income |
|
|
1,179 |
|
|
1,188 |
|
Other operating expenses |
|
|
(1,347) |
|
|
(1,315) |
|
Income from assets under insurance and reinsurance contracts |
|
|
2,395 |
|
|
1,869 |
|
Expenses from liabilities under insurance and reinsurance contracts |
|
|
(2,337) |
|
|
(1,820) |
|
Gross income |
|
|
35,882 |
|
|
36,330 |
|
Administrative expenses |
|
|
(15,069) |
|
|
(15,059) |
|
Staff costs |
|
|
(8,797) |
|
|
(8,856) |
|
Other general administrative expenses |
|
|
(6,272) |
|
|
(6,203) |
|
Depreciation and amortisation cost |
|
|
(1,774) |
|
|
(1,899) |
|
Provisions or reversal of provisions, net |
|
|
(1,725) |
|
|
(2,622) |
|
Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss, net |
|
|
(6,473) |
|
|
(6,973) |
|
Financial assets at fair value with changes in other comprehensive income |
|
|
(4) |
|
|
|
|
Financial assets at amortised cost |
|
|
(6,469) |
|
|
|
|
Financial assets measured at cost |
|
|
|
|
|
(7) |
|
Financial assets available‐for‐sale |
|
|
|
|
|
(3) |
|
Loans and receivables |
|
|
|
|
|
(6,963) |
|
Held‐to‐maturity investments |
|
|
|
|
|
- |
|
Impairment of investments in subsidiaries, joint ventures and associates, net |
|
|
- |
|
|
- |
|
Impairment of non‐financial assets, net |
|
|
(121) |
|
|
(141) |
|
Tangible assets |
|
|
(45) |
|
|
(44) |
|
Intangible assets |
|
|
(77) |
|
|
(41) |
|
Others |
|
|
1 |
|
|
(56) |
|
Gain or losses on non financial assets and investments, net |
|
|
24 |
|
|
71 |
|
Negative goodwill recognised in results |
|
|
- |
|
|
- |
|
Gains or losses on non‐current assets held for sale not classified as discontinued operations |
|
|
(158) |
|
|
(211) |
|
Profit or loss before tax from continuing operations |
|
|
10,586 |
|
|
9,496 |
|
Tax expense or income from continuing operations |
|
|
(3,709) |
|
|
(3,332) |
|
Profit for the period from continuing operations |
|
|
6,877 |
|
|
6,164 |
|
Profit or loss after tax from discontinued operations |
|
|
- |
|
|
- |
|
Profit for the period |
|
|
6,877 |
|
|
6,164 |
|
Profit attributable to non‐controlling interests |
|
|
1,135 |
|
|
1,087 |
|
Profit attributable to the parent |
|
|
5,742 |
|
|
5,077 |
|
In the table above, non-recurring profits recognized in 2018 and 2017 are included in each of the income statement lines corresponding to their nature, which distorts the period-on-period comparison.
To facilitate the comparison and analysis of earnings from the various businesses, the condensed income statement set out below shows these impacts for the net amount on a separate line, just before the profit attributable to the Group (Net capital gains and provisions). Some of the income statement items also differ from those shown in the table above, such as net operating income.
71
The non-recurring profits recorded in 2018 are related to integrations (mainly restructuring charges), net of tax, for a value of EUR -300 million, broken down as follows: Spain (EUR -280 million, Corporate Centre (EUR -40 million) and Portugal (EUR 20 million).
In 2017, non-recurring charges registered were EUR 515 million (net of tax), as follows: integration of Banco Popular in Spain (EUR -300 million), integrations in Santander Consumer Finance, mostly in the retail networks in Germany (EUR -85 million) and charges for equity stakes and intangible assets in the Corporate Centre (EUR -130 million).
Summarised management income statement
EUR million
|
|
|
|
|
|
|
|
|
Change |
|
||||||
|
|
|
9M'18 |
|
|
9M'17 |
|
|
Absolute |
|
|
% |
|
|
% w/o FX |
|
Net interest income |
|
|
25,280 |
|
|
25,689 |
|
|
(409) |
|
|
(1.6) |
|
|
8.3 |
|
Net fee income |
|
|
8,529 |
|
|
8,648 |
|
|
(119) |
|
|
(1.4) |
|
|
9.7 |
|
Gains (losses) on financial transactions |
|
|
1,359 |
|
|
1,282 |
|
|
77 |
|
|
6.0 |
|
|
21.6 |
|
Other revenues |
|
|
714 |
|
|
712 |
|
|
2 |
|
|
0.3 |
|
|
5.6 |
|
Gross income |
|
|
35,882 |
|
|
36,330 |
|
|
(448) |
|
|
(1.2) |
|
|
9.0 |
|
Operating expenses |
|
|
(16,843) |
|
|
(16,957) |
|
|
114 |
|
|
(0.7) |
|
|
8.4 |
|
General administrative expenses |
|
|
(15,069) |
|
|
(15,058) |
|
|
(11) |
|
|
0.1 |
|
|
9.5 |
|
Personnel |
|
|
(8,797) |
|
|
(8,856) |
|
|
59 |
|
|
(0.7) |
|
|
7.9 |
|
Other general administrative expenses |
|
|
(6,272) |
|
|
(6,203) |
|
|
(69) |
|
|
1.1 |
|
|
11.8 |
|
Depreciation and amortisation |
|
|
(1,774) |
|
|
(1,899) |
|
|
125 |
|
|
(6.6) |
|
|
0.2 |
|
Net operating income |
|
|
19,039 |
|
|
19,373 |
|
|
(334) |
|
|
(1.7) |
|
|
9.5 |
|
Net loan‐loss provisions |
|
|
(6,418) |
|
|
(6,930) |
|
|
512 |
|
|
(7.4) |
|
|
3.8 |
|
Impairment losses on other assets |
|
|
(107) |
|
|
(185) |
|
|
78 |
|
|
(42.1) |
|
|
(38.8) |
|
Other income |
|
|
(1,284) |
|
|
(2,083) |
|
|
799 |
|
|
(38.4) |
|
|
(31.4) |
|
Ordinary profit before tax |
|
|
11,230 |
|
|
10,175 |
|
|
1,055 |
|
|
10.4 |
|
|
22.7 |
|
Tax on profit |
|
|
(4,053) |
|
|
(3,497) |
|
|
(556) |
|
|
15.9 |
|
|
28.4 |
|
Ordinary profit from continuing operations |
|
|
7,177 |
|
|
6,678 |
|
|
499 |
|
|
7.5 |
|
|
19.7 |
|
Net profit from discontinued operations |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Ordinary consolidated profit |
|
|
7,177 |
|
|
6,678 |
|
|
499 |
|
|
7.5 |
|
|
19.7 |
|
Minority interests |
|
|
1,135 |
|
|
1,085 |
|
|
50 |
|
|
4.6 |
|
|
12.3 |
|
Ordinary attributable profit to the Group |
|
|
6,042 |
|
|
5,592 |
|
|
450 |
|
|
8.0 |
|
|
21.1 |
|
Net capital gains and provisions |
|
|
(300) |
|
|
(515) |
|
|
215 |
|
|
(41.7) |
|
|
(41.7) |
|
Attributable profit to the Group |
|
|
5,742 |
|
|
5,077 |
|
|
665 |
|
|
13.1 |
|
|
28.4 |
|
Earnings
The first nine months attributable profit of EUR 5,742 million was 13% higher year-on-year in euros and 28% in constant euros.
Underlying attributable profit (excluding net capital gains and provisions both this year and last) was EUR 6,042 million (+8% in euros and +21% in constant euros). The P&L performance by line was as follows. To facilitate analysis and comparisons of management actions, all variations exclude the exchange rate impact.
Gross income
The structure of our gross income, where net interest income and fee income accounted for 94% of total revenue in the first nine months, well above the average of our competitors, continues to enable us to grow in
72
a consistent and recurring way, limiting the impact that periods of high volatility can have on gains on financial transactions. Gross income increased 9%, as follows:
- |
Net interest income rose 8%, due to greater lending and deposit volumes, mainly in developing countries, which overall grew at double-digit rates, and management of spreads. |
All units increased except for the United Kingdom, affected by pressure on spreads on new mortgages and standard variable rate (SVR) balances, and the United States, hit by competitive pressure, reduced spreads and the higher cost of funding. The decline in revenue in the US was offset by a 16% fall in loan-loss provisions.
- |
Fee income was up 10%, reflecting greater activity and customer loyalty, as well as the strategy of growth in services and higher value-added products and in areas of low capital consumption. Growth in fee income from Retail Banking (+7%) and Wealth Management (+66%), while that from Corporate & Investment Banking was stable. |
- |
Gains on financial transactions, which account for less than 4% of gross income, increased 22%, while the sum of dividends, equity-accounted income and other income rose 6%, partly due to the higher income from leasing in the United States. |
Operating expenses
Operating expenses rose 8% as a result of higher inflation in some countries, investments in transformation and digitalization, and the perimeter impact. In real terms (excluding inflation and perimeter impact), costs were almost stable. Of note by units was the fall in costs in the United States, Spain, where they fell for the third quarter running, and Portugal, the latter two reflecting the optimization plans implemented.
The main rises were in Mexico, due to investments in infrastructure; in Argentina, due to investments in digitalization and the automatic review of salary agreements from the rise in inflation, and in Poland because of transformation projects and pressure on salaries.
The measures to optimize costs, as part of the ongoing integration processes, will be reflected in the achievement of greater synergies in the future. This evolution is enabling us to combine the investments made to enhance the customer experience with an operational efficiency that continuous to be the sector’s reference.
Loan-loss provisions
Good evolution of credit quality ratios. The NPL ratio, as well as the coverage ratio and the cost of credit, improved in the last 12 months.
By countries, provisions fell in the United States, Mexico and Portugal and rose in Brazil at a slower pace than lending, while the United Kingdom maintained a cost of credit of just 8 basis points. The main rises were in Spain, due to the greater perimeter, in Santander Consumer Finance (SCF), because of higher releases and portfolio sales in 2017, but it maintained a cost of credit below the standards for its business, and Argentina due to higher provisions for individual borrowers and the impact of the peso’s depreciation in dollar balances.
The cost of credit dropped from 1.12% in September 2017 to 0.98% a year later.
Other results and provisions
Other results and provisions were EUR -1,391 million, 32% better than in the first nine months of 2017. This item records different kinds of provisions, as well as capital gains, capital losses and asset impairment.
73
The improvement over 2017 was largely due to lower provisions for legal and labor claims (trabalhistas) in Brazil, lower charges in the United Kingdom stemming from potential customer complaints and derivatives, and some releases from various items made at Santander Consumer Finance in 2018 (in 2017 provisions for legal claims and customer complaints were made and restructurings in some of the countries where we operate).
Profit and profitability
Underlying profit before tax rose 23% year-on-year and underlying attributable profit 21%. Underlying earnings per share were EUR 0.349, in line with that in the first nine months of 2017. Underlying RoTE rose to 12.1% and underlying RoRWA was 1.60%, also higher year-on-year and over the whole of 2017.
Including non-recurring items, attributable profit increased 28% (+13% in constant euros), and earnings per share were EUR 0.331 (+5% year-on-year in euros). RoTE was 11.7% and RoRWA 1.55%, in both cases higher than in 2017.
74
Santander Group balance sheet (comparison September 2018–December 2017)
Condensed balance sheet at 30 September 2018 and at 31 December 2017, is set out below.
Condensed consolidated balance-sheet
EUR million
|
|
|
Sep‐18 |
|
|
Dec‐17 |
|
Assets |
|
|
|
|
|
|
|
Cash, cash balances at central banks and other demand deposits |
|
|
111,704 |
|
|
110,995 |
|
Financial assets held for trading |
|
|
98,448 |
|
|
125,458 |
|
Debt securities |
|
|
28,230 |
|
|
36,351 |
|
Equity instruments |
|
|
17,239 |
|
|
21,353 |
|
Loans and advances to customers |
|
|
239 |
|
|
8,815 |
|
Loans and advances to central banks and credit institutions |
|
|
63 |
|
|
1,696 |
|
Derivatives |
|
|
52,677 |
|
|
57,243 |
|
Financial assets designated at fair value through profit or loss |
|
|
70,573 |
|
|
34,781 |
|
Loans and advances to customers |
|
|
24,318 |
|
|
20,475 |
|
Loans and advances to central banks and credit institutions |
|
|
37,401 |
|
|
9,889 |
|
Other (debt securities an equity instruments) |
|
|
8,854 |
|
|
4,417 |
|
Financial assets at fair value through other comprehensive income |
|
|
116,356 |
|
|
133,271 |
|
Debt securities |
|
|
112,288 |
|
|
128,481 |
|
Equity instruments |
|
|
2,771 |
|
|
4,790 |
|
Loans and advances to customers |
|
|
1,297 |
|
|
- |
|
Loans and advances to central banks and credit institutions |
|
|
- |
|
|
- |
|
Financial assets measured at amortised cost |
|
|
931,411 |
|
|
916,504 |
|
Debt securities |
|
|
40,089 |
|
|
31,034 |
|
Loans and advances to customers |
|
|
840,373 |
|
|
819,625 |
|
Loans and advances to central banks and credit institutions |
|
|
50,949 |
|
|
65,845 |
|
Investments in subsidaries, joint ventures and associates |
|
|
9,371 |
|
|
6,184 |
|
Tangible assets |
|
|
24,727 |
|
|
22,975 |
|
Intangible assets |
|
|
27,855 |
|
|
28,683 |
|
Goodwill |
|
|
24,956 |
|
|
25,769 |
|
Other intangible assets |
|
|
2,899 |
|
|
2,914 |
|
Other assets |
|
|
54,242 |
|
|
65,454 |
|
Total assets |
|
|
1,444,687 |
|
|
1,444,305 |
|
|
|
|
|
|
|
|
|
Liabilities and shareholders' equity |
|
|
|
|
|
|
|
Financial liabilities held for trading |
|
|
66,805 |
|
|
107,624 |
|
Customer deposits |
|
|
- |
|
|
28,179 |
|
Debt securities issued |
|
|
- |
|
|
- |
|
Deposits by central banks and credit institutions |
|
|
- |
|
|
574 |
|
Derivatives |
|
|
51,775 |
|
|
57,892 |
|
Other |
|
|
15,030 |
|
|
20,979 |
|
Financial liabilities designated at fair value through profit or loss |
|
|
92,182 |
|
|
59,617 |
|
Customer deposits |
|
|
55,154 |
|
|
28,945 |
|
Debt securities issued |
|
|
2,323 |
|
|
3,056 |
|
Deposits by central banks and credit institutions |
|
|
34,293 |
|
|
27,027 |
|
Other |
|
|
412 |
|
|
589 |
|
Financial liabilities measured at amortized cost |
|
|
1,139,066 |
|
|
1,126,069 |
|
Customer deposits |
|
|
723,597 |
|
|
720,606 |
|
Debt securities issued |
|
|
231,708 |
|
|
214,910 |
|
Deposits by central banks and credit institutions |
|
|
155,446 |
|
|
162,714 |
|
Other |
|
|
28,315 |
|
|
27,839 |
|
Liabilities under insurance contracts |
|
|
810 |
|
|
1,117 |
|
Provisions |
|
|
13,269 |
|
|
14,490 |
|
Other liabilities |
|
|
26,887 |
|
|
28,556 |
|
Total liabilities |
|
|
1,339,019 |
|
|
1,337,472 |
|
Shareholders' equity |
|
|
119,793 |
|
|
116,265 |
|
Capital stock |
|
|
8,068 |
|
|
8,068 |
|
Reserves |
|
|
107,032 |
|
|
103,608 |
|
Attributable profit to the Group |
|
|
5,742 |
|
|
6,619 |
|
Less: dividends |
|
|
(1,049) |
|
|
(2,029) |
|
Other comprehensive income |
|
|
(24,816) |
|
|
(21,777) |
|
Minority interests |
|
|
10,691 |
|
|
12,344 |
|
Total equity |
|
|
105,668 |
|
|
106,832 |
|
Total liabilities and equity |
|
|
1,444,687 |
|
|
1,444,305 |
|
NOTE: Due to the application of IFRS 9 from 1 January 2018 and the decision to not restate the accounts, as permitted in the regulation, the balance sheet from the September 2018 is not comparable with previous reporting periods. As such, for comparative purposes, and given the portfolio reclassification and the corresponding nomenclature changes were not significant, the 2017 accounts have been reorganized in accordance with the new aims and valuation methods. The initial impact as of 1 January 2018 was a 1.8% increase in fair value portfolios and a 0.8% decrease in portfolios valued at a mortised cost, including a EUR 2 billion increase in impairment losses. The resulting decrease in equity was just under EUR 1.5 billion.
75
To facilitate evaluation of the Santander Group's management in the period reviewed, the comments below exclude the exchange rate impact, which have a negative impact across the entire Group of one percentage point on loan balances and two percentage points on funds.
Gross customer loans and advances, maintained a balanced structure: individuals (45%), consumer (16%), SME and companies (28%) and CIB (11%).
Net loans rose 3% since December 2017. Gross loans excluding reverse repurchase agreements increased 2%, with the following performance by country:
- |
Increase of 9% in the balances of developing countries, in line with the expansion recorded in Brazil, Mexico, Chile and Poland from the higher business activity (+9% in all of them). Higher growth in Argentina, partly due to the rise in inflation and the impact of the peso’s depreciation against dollar balances. |
- |
Loan balances in mature countries rose 1%. |
On the liabilities side, the structure of customer funds (deposits excluding repurchase agreements and mutual funds) is well diversified by products: 61% are demand deposits, 21% time deposits and 18% mutual funds.
Total funds rose 3% since December 2017, (+2% deposits and +5% mutual funds), with the following performance by country:
- |
Funds grew 11% in developing markets, with rises in all countries in their currency, particularly in Brazil and Poland. In Brazil, explained by the strategy to replace financial instruments with customer deposits to optimize the cost of funding, and in Poland, because of higher business activity and the actions carried out to increase the liquidity buffer ahead of the acquisition of Deutsche Bank Polska. On the other hand, the strong growth in Argentina, which is lower in absolute terms, was partly conditioned by the high inflation and the effect of the peso’s depreciation in dollar balances. |
- |
Mature markets remained stable, as the increase in the various units was offset by a 2% drop in the United Kingdom as part of its strategy to reduce time deposits. |
The net loan-to-deposit ratio improved to 111%, from 109% in December 2017.
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 nine months of 2018, the Group issued:
- |
Medium- and long-term senior debt amounting to EUR 14,507 million and covered bonds placed in the market of EUR 5,178 million. Additionally, there were EUR 14,564 million of securitizations placed in the market. |
- |
Issuances to meet the TLAC (Total Loss-Absorbing Capacity) requirement amounting to EUR 11,246 million, in order to strengthen the Group's position, consisting of senior non-preferred: EUR 8,261 million; subordinated debt: EUR 1,485 million and preferred: EUR 1.500 million. |
- |
Maturities of medium- and long- term debt of EUR 19,960 million. |
The Group’s access to wholesale financing markets, as well as the cost of its issuances, depends in part on the ratings granted by rating agencies.
76
At 30 September 2018, the ratings for long-term debt with the main agencies were as follows: A2 (Moody’s), A- (Fitch), A (S&P) and A (high) (DBRS), with a stable outlook in all cases.
In certain cases, the methodology applied by these agencies limits the rating a bank can receive to the sovereign rating assigned to the country in which it is headquartered.
In the second quarter, three agencies improved their rating for Santander Bank long-term senior debt after the Spanish sovereign rating was raised. On 6 April 2018, S&P raised the rating from A- to A. On 12 April 2018, DBRS raised its rating from A to A (high), and on 17 April Moody’s improved its rating from A3 to A2.
The Santander rating with these agencies is therefore higher than the sovereign rating for the country in which it is headquartered, which clearly reflects the financial strength and diversification of the Santander Group.
On the other hand, the Fitch agency confirmed the A- rating on July.
Risk management
The Group's NPL ratio was 3.87% at the end of September 2018, continuing its favorable trend and improving
21 basis points since the end of December 2017 (4.08%).
The coverage ratio increased 3 percentage points to 68%, boosted by the entry into force of the standard on expected loss provisioning (IFRS 9).
Real estate exposure in Spain
As announced after the acquisition of Banco Popular, and in order to reduce Santander Group's non-performing assets to irrelevant levels, on 8 August 2017 Banco Popular signed agreements with the Blackstone funds for the acquisition by the fund of 51% of Banco Popular's real estate business, and thus control over it. This business consists of the foreclosed real estate portfolio, non-performing loans emanating from the real estate sector and other assets related to Banco Popular’s activity and that of its subsidiaries.
The transaction was closed as expected, in the first quarter of 2018, once the required regulatory authorizations have been obtained, allowing Santander to focus on the integration of Banco Popular and mitigate uncertainties regarding possible additional losses related to real estate exposure.
Closing of the transaction entailed the creation of a company controlled by Blackstone, in which Santander has a 49% stake, to which Banco Popular transferred the business comprising the aforementioned assets and 100% of the share capital of Aliseda.
The transaction did not generate significant earnings for Banco Popular and Banco Santander. The positive impact on the fully-loaded CET1 ratio of the Santander Group has been 10 basis points.
Following this transaction, total net exposure of Spain Real Estate Unit (Actividad Inmobiliaria España) amounted to EUR 4,907 million and a coverage of 50%, with the following detail: real estate assets for a net value of EUR 3,862 million and a coverage of 51%, and real estate loans of EUR 1,045 million with a coverage of 42%.
Management continued to be aimed at reducing these assets, particularly loans and foreclosed assets. During the third quarter, the Group reached agreement with a subsidiary of Cerberus Capital Management to sell 35,700 properties for an amount of EUR 1,535 million, with no material impact on profit and capital expected. This transaction is expected to be finalized by the end of 2018 or the beginning of 2019.
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Solvency ratios
In regulatory terms (phased-in), at 30 September 2018 the total capital ratio was 14.81% and the CET1 ratio was 11.29%, comfortably meeting the minimum levels required by the European Central Bank on a consolidated basis, which are 12.249% and 8.749% for the total capital ratio and the CET1 ratio, respectively.
In fully-loaded terms, and taking into account the transitional arrangement of IFRS 9, the CET1 ratio was 11.11% at the end of September. This ratio does not include the estimated 9 basis points positive impact from WiZink, expected to be registered in the coming months.
The ratio has increased 27 basis points since December 2017 (10.84%). This performance reflected organic generation of 55 basis points (favored by securitizations and parameters review), the elimination of excess capital attributed to non-controlling interests at SC USA (-18 basis points), and restructuring costs (-5 basis points). Other effects like the scope and valuation of available-for-sale portfolios had a combined negative impact of 5 basis points.
Had the IFRS 9 transitional arrangement not been applied, the total impact on the fully loaded CET1 at the end of September would have been -27 basis points.
Business areas
The performance of the different business areas is outlined below. Compared to the previous year, several changes to their configuration have taken place, as follows:
- |
Banco Popular's financial results and balance sheet have been allocated to the corresponding geographic areas. In 2017, since the integration date, Banco Popular was recorded separately. The main areas affected were Spain, Portugal and Spain Real Estate Unit. |
- |
The Wealth Management unit, created at the end of 2017, will be reported independently as a global business. This unit was previously included in Retail Banking. This change has no impact on the geographic segments |
- |
The scope of the Global Customer Relationship Model has been adjusted, affecting Retail Banking and Corporate & Investment Banking. This change does not impact the geographic businesses. |
The variations shown in the operations of the various areas refer to gross customer loans excluding reverse repurchase agreements and customer funds, that is, deposits excluding repurchase agreements and mutual funds.
Geographic breakdown
Continental Europe (% changes excluding the exchange rate impact)
Continental Europe includes all of the business activities carried out in the region.
In the first nine months of the year this region generated an attributable profit of EUR 2,436 million, 22% higher year-on-year, including the costs associated with integrations (mainly restructuring costs) this year (in the second quarter) and last year (in the third quarter). Excluding these impacts, underlying attributable profit was EUR 2,696 million (+13% year-on-year). This growth is mainly explained by the increase in customer revenue and also benefiting from Banco Popular’s integration and the greater stake in Santander Asset Management.
Detailed financial information is provided below for the main commercial units: Spain, Portugal, Poland and Santander Consumer Finance (SCF covers all the business in the region, including that of Spain, Portugal and Poland).
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Spain
The integration of Banco Popular is proceeding according to schedule. The legal integration was completed in the third quarter.
From a business standpoint, in 2018, launch of the first joint offer of Santander and Popular: the 1l2l3 Profesional account for the self-employed and micro-enterprises. Also noteworthy was the increase in the turnover of Santander cards, the increase in insurance premiums and the offer of sustainable and responsible mutual funds.
Turning to the balance sheet, loans decreased 2% since December 2017, mainly those of large companies and institutions, offsetting the increase in consumer finance, SME and private banking segments. Funds rose 1%, due to demand deposits and mutual funds, which offset the fall in time deposits.
Attributable profit for the first nine months of 2018 was EUR 1,026 million, 27% higher year-on-year, benefiting from the integration of Banco Popular in June 2017. Excluding extraordinaries, underlying attributable profit increased 18%, with the following detail:
- |
Revenue was up 20%, with improvement in all the main lines. |
- |
Net interest income rose 18%, with sustained improvement of spreads due to the lower cost of funding. |
- |
Fee income was 21% higher thanks to increased transactions. |
- |
Cost of credit of 0.35%. |
Better credit quality indicators: NPL ratio of 6.23% (6.32% in December 2017) and coverage 48% (47% in December 2017).
Santander Consumer Finance (% changes excluding the exchange rate impact)
SCF continues to grow backed by its business model: geographic diversification, efficiency and risk and recovery systems that allow it to maintain a high credit quality.
Management continued to focus on boosting auto finance (growth in new business was significantly higher than Europe’s new auto market) and growing consumer credit by strengthening digital channels.
New lending increased 8% since December 2017, driven by commercial agreements in various countries. Of note, France, Poland, Austria and Spain. The lending portfolio grew 2% over December 2017.
On the liabilities side, customer deposits, a key product that sets us apart from our competitors, increased 3% to almost EUR 37.0 billion. Moreover, the Group has substantial capacity to wholesale financing recourse.
Attributable profit of EUR 1,000 million in the first nine months, 18% higher than in the same period of 2017. Excluding costs related to Germany’s integration in 2017, underlying attributable profit rose 7% year-on-year:
- |
Net interest income grew 5% due to higher volumes and lower funding costs, and fee income was lower because of regulatory impacts. |
- |
The efficiency ratio was below 44%. |
- |
The cost of credit remained at low levels (0.40%), confirming the good performance of portfolios. |
79
- |
The largest profits were generated by Germany (EUR 233 million), the Nordic countries (EUR 220 million) and Spain (EUR 184 million). |
Better credit quality indicators compared to December 2017: the NPL ratio improved five basis points to 2.45% and coverage rose five percentage points to 106%.
Poland (% changes excluding the exchange rate impact)
In the third quarter, Bank Zachodni WBK was renamed to Santander Bank Polska S.A.
The Bank continues its strategy to become the bank of first choice, responding to and predicting customer expectations.
The Bank is still the market leader in mobile banking and the Internet. In digital channels, it now offers five different mobile phone payment methods.
Loans rose 9% since December 2017, underpinned by all segments. Customer funds grew 11% partly due to the increase in time deposits.
Attributable profit for the first nine months stood at EUR 236 million, 8% more year-on-year, backed by higher customer revenue and controlled costs, despite ongoing investments:
- |
Net interest income rose 6% and net fee income 3% year-on-year, while gains on financial transactions were 11% lower. |
- |
Operating expenses grew 5% driven by higher transformation project costs and certain pressure on salaries. |
- |
Higher loan-loss provisions, partly due to the sale of a non-performing loan portfolio in the first half of 2017. |
The NPL ratio improved by 34 basis points over December 2017, and coverage four percentage points, to 72%.
Lastly, Deutsche Bank Polska transaction is expected to be completed by year-end, as scheduled.
Portugal
The Bank completed the operational and technological integration of Banco Popular Portugal in October, while enhancing loyalty continued to be one of the Bank’s main drivers.
Of note, in addition to the Mundo 1|2|3 program, was the launch of the Conta SIM, a simple and more digital account, with a basic offer of products and services for customers at the start of their working life or with lower income.
Loans fell 1% since December 2017, hit by the sale of non-profitable portfolios, and customer funds rose 9%, due to the growth in deposits, both in demand and time deposits.
The first nine months attributable profit increased 15% to EUR 364 million. Excluding non-recurring impacts associated with the second quarter’s inorganic operations, underlying attributable profit was EUR 344 million, 9% higher, due to:
- |
Gross income increased 10% largely driven by net interest income (+14%). |
80
- |
The slight increase in costs enabled net operating income to increase 13%. The efficiency ratio improved to 47.5% (-1.4 percentage points year-on-year). |
- |
Loan-loss provisions were lower and the cost of credit was just 0.03%. |
The NPL ratio was 7.43% (7.51% in December) and coverage 53% (62% in December 2017).
In April, DBRS upgraded its long-term debt rating for the Bank to A, with stable outlook, and in September S&P improved the stable outlook to positive.
United Kingdom (% changes excluding the exchange rate impact)
This unit includes all the business carried out by the Group’s units and branches operating in the UK.
Santander UK has further expanded its offering with tailor-made products and services to drive improvement in customer experience and operational efficiency.
We continue to gain loyal SME and corporate customers. Moreover, our enhanced digital capability attracted around 455,000 digital customers in the last twelve months.
Our ring-fence structure is now close to completion ahead of the 1 January 2019 legislative deadline following the conclusion of required transfers from Santander UK to Santander Group.
Lending increased 1% since December 2017, mainly due to the focus on customer service and customer retention, reflected in the growth in mortgage loans, partially offset by active management of commercial real estate exposures and non-core loans.
Customer funds fell 2%, mainly due to the reduction in time deposits, as a result of management pricing actions, as current accounts increased.
Attributable profit for the first nine months was EUR 1,077 million, down 9% year-on-year, due to:
- |
Lower revenue (-5%) driven by competitive pressure on mortgage spreads, continued Standard Variable Rate (SVR) attrition and lower gains on financial transactions. |
- |
Increased regulatory, risk and control costs and ongoing investment in strategic and digital transformation projects. |
- |
Higher provisions (+6%), with cost of credit remaining at just 8 basis points. |
As regards credit quality, the portfolio remains robust and indicators are improving. The NPL ratio was 1.10% (1.33% in December 2017) and coverage increased to 33% (32% in December 2017).
Latin America (% changes excluding the exchange rate impact)
Latin America includes all of the business activities carried out in the region.
Latin America recorded attributable profit of EUR 3,160 million in the first nine months, 21% higher year-on-year. Growth in volumes, spreads management and increased loyalty underpinned the good evolution, both in net interest income as well as fee income, in addition to an improved cost of credit.
Operating expenses grew mainly due to plans relating to the expansion, commercial transformation and increased digitalization of our retail networks.
81
Detailed financial information is provided below for the units in Brazil, Mexico, Chile, Argentina, Uruguay, Peru and Colombia.
Brazil (% changes excluding the exchange rate impact)
Our strategic focus on enhancing customer experience and satisfaction was reflected in the growth of our customer base and the improvement in the Net Promoter score.
Commercial and digital activities carried out in the third quarter were: within the acquiring business, launch of Select Digital, the new digital POS system and the app for management of sales, and the focus on consumer finance are leading market share gains in loans, deposits, consumer finance, card turnover and payrolls.
Volumes increased significantly in the third quarter and since December 2017. Lending increased 9% in the first nine months, with rises in almost all segments, particularly in individuals, consumer finance and SME. Customer funds rose 17%, with increases across all products, mostly in time deposits, which offset the reduction in letras financeiras.
The first nine months attributable profit stood at EUR 1,942 million, 24% more year-on-year. Of note:
- |
Net interest income rose 17% driven by larger volumes. |
- |
Fee income grew 15%, with rises in almost all lines: cards (+16%), current accounts (+13%), mutual funds (+53%) and insurance (+11%). |
- |
Operating expenses increased 5%, in line with business growth. The efficiency ratio improved to 33.1%, the best ratio of the last five years. |
- |
The cost of credit fell to 4.17% from 4.55% in September 2017. |
With regard to credit quality, against the end of 2017 the NPL ratio fell by 3 basis points to 5.26% and coverage increased by 16 percentage points to 109%.
Mexico (% changes excluding the exchange rate impact)
The strategy continued to focus on the transformation of the branch network and digitalization, reflected in greater customer attraction and enhanced loyalty, and also in the launch of new businesses such as auto finance.
The main initiatives during the year have been the Santander Plus program (over 4.2 million clients, 54% of whom are new), the launch of the Digital Payroll Transformation Plan, the Hipoteca Plus, which benefits the banks’ current customers, or the first digital account for SME. We continued to develop our digital proposition via Súper Móvil, with new functionalities.
Of note was the launch of Súper Auto for auto and motorbike finance through a fully digital credit origination.
The focus on loyalty and digitalization has led to strong year-on-year growth in loyal (+23%) and digital (+32%) customers.
Compared to December 2017, lending rose 9%, with widespread increases by segments and products. Customer funds grew 5%, backed by higher deposits and mutual funds.
82
The first nine months attributable profit of EUR 554 million was 13% higher than in the same period of 2017, as follows:
- |
Net interest income rose 12%, driven by higher interest rates and increased volumes. Fee income grew 9%, mainly from credit cards, mutual funds and insurance. |
- |
Operating expenses increased 14%, in line with the ongoing investment plans. |
- |
Loan-loss provisions declined 7%, which produced a cost of credit notably lower than a year ago. |
The NPL ratio fell 28 basis points to 2.41% and coverage increased 22 percentage points to 120% since December 2017.
Chile (% changes excluding the exchange rate impact)
Santander is Chile's leading private sector bank by assets and customers, with a strong focus on retail (individuals and SME) and transactional banking.
The focus remains on commercial transformation and on overhauling the traditional network towards a new branch model, with new Work Café branch openings.
We launched Santander Life at the end of 2017. This is a new way of relating to the community and customers via products aimed at the mass consumer market. We will launch Life 2.0 before the end of the year, which will offer better benefits to customers who already form part of the program.
In business activity, compared to December 2017, lending was up 9%, with growth in loans to individuals and, particularly, to companies. Customer funds grew 2%, due to increased deposits and mutual funds.
Attributable profit in the first nine months was 8% higher than in the same period of 2017 at EUR 461 million. Of note:
- |
Gross income rose underpinned by net interest income (+7%), growth in volumes and a better mix of funds. Fee income rose 13%, driven by income from transaction banking, greater use of cards and mutual funds. |
- |
Operating expenses were almost in line with gross income. The efficiency ratio remained at around 41%. |
- |
The cost of credit continued to improve to 1.18% (1.27% in September 2017). |
In credit quality, the NPL ratio was 4.78% (4.96% in December 2017) and coverage 60% (58% in December 2017).
Argentina (% changes excluding the exchange rate impact)
Santander Rio has consolidated its position as Argentina's largest private sector bank by loans, deposits and branches. The Bank has made further headway in digitalization and operational efficiency. One of the most important projects in the products and services digitalization campaign has been the launch of Individual Online Banking, which has been refurbished with a more innovative and customer-friendly digital experience. We started the process to obtain the license for Open Bank Argentina, the Group’s fully digital bank.
In business, compared to December 2017, loans rose 60% and customer funds 52%, due to increase in deposits. This growth was impacted by higher inflation and the peso’s depreciation in dollar balances.
83
The first nine months attributable profit was EUR 67 million, 38% less than in the same period of 2017 because of the hyperinflation adjustment of EUR -169 million.
- |
Net interest income grew 49%, driven by management of spreads in a scenario of higher interest rates and lower volumes. |
- |
Fee income rose 37%, spurred by greater foreign currency activity in a volatile exchange rate environment and by income from cash deposits. |
- |
The growth in costs reflected investments in digitalization projects and the automatic revision of salary agreements because of the rise in inflation and the peso’s depreciation in dollar balances. |
- |
Loan-loss provisions grew mainly in the individuals’ portfolio, particularly in medium and low income segments. Cost of credit increased to 2.92%. |
Credit quality remained high: the NPL ratio was 2.47% (2.50% in December 2017) and coverage 124% (100% in December 2017).
Uruguay (% changes excluding the exchange rate impact)
The Group remains the top-ranking private sector bank in the country, with a strategy focused on growth in retail banking, and on improving efficiency and service quality.
Santander remains focused on improving customer satisfaction and on increasing customer loyalty. Further progress has been made in the digital transformation strategy and in modernizing channels, leading to a 32% increase in the number of digital customers and improving digital penetration.
Lending increased 20% since December 2017 and customer funds 18%, spurred by the increase in both demand and time deposits.
The first nine months attributable profit was 45% higher year-on-year at EUR 103 million:
- |
Gross income rose 17%, driven by net interest income and the main revenue lines. The efficiency ratio was 43.6%, four percentage points better than in the first nine months of 2017. |
- |
Despite the rise in provisions because of the entry into force of IFRS 9 regulation and other impacts, the NPL ratio remained low (3.05%), coverage was high (120%) and the cost of credit was 2.76%. |
Peru (% changes excluding the exchange rate impact)
The strategy remains focused on the corporate segment, the country's large companies and the Group's global clients.
Lending was 4% higher than in December 2017. Customer funds increased 11% due to growth in time deposits.
Attributable profit in the first nine months was 10% higher at EUR 28 million. The good performance of fee income and gains on financial transactions more than offset the rise in costs from corporate projects. The efficiency ratio was 34.9%.
High credit quality: NPL ratio of 0.73% and coverage of 204%.
84
Colombia
In Colombia, business activity remained focused on Corporate & Investment Banking clients, large companies and companies, providing solutions in treasury, risk hedging, foreign trade and reverse factoring, and in developing investment banking products, supporting the country's infrastructure plan. The Bank has applied for a license for Santander Securities Services Colombia, and soon will be able to offer custody services.
Moreover, Santander Colombia continued with its strategy to consolidate the auto financing business. This will enable us to have the critical mass needed to consolidate ourselves in this market.
Profit of EUR 5 million. Of note was the particularly good performance of gross income.
United States (% changes excluding the exchange rate impact)
The holding company, SHUSA, passed the Federal Reserve's stress tests and received no objections to its capital plan, allowing the entity to increase dividend payments. The Federal Reserve also terminated the 2015 Written Agreement signed with Santander Holdings USA on 2 July 2015, demonstrating continued improvement on regulatory issues.
At Santander Bank (SBNA), the focus remained on improving customer experience and product offerings, both in digital channels and in branches, which contributed to increased customer satisfaction in retail banking. For example, Santander Bank Auto Initiative went live at the beginning of July. By the end of September USD 685 million were already funded.
At Santander Consumer USA (SC USA), the aim is to increase profitability in prime and non-prime segments and leasing and achieving greater customer satisfaction, to increase customer loyalty and grow new lending.
Lending grew 3% since December 2017, with higher loan balances in both Santander Bank and SC USA. The Bank's customer funds remained stable, as the increase in time deposits offset the fall in demand deposits, due to outflow of public sector balances and higher interest rates.
Attributable profit in the first nine months of 2018 was EUR 460 million, 47% higher year-on-year, with strong growth at both Santander Bank and SC USA:
- |
Net interest income fell hit by lower spreads on loans at SC USA and higher cost of funding at Santander Bank due to higher interest rates and aggressive competitor pricing. Fee income was also down because of lower fee income from servicing activity at SC USA. |
- |
These reductions were partially mitigated by higher income from leasing, lower costs, which declined for the third quarter running, and reduced provisions both at SC USA and Santander Bank. |
In credit quality, the NPL ratio was 3.00% (2.79% in December 2017) and coverage 146% (170% in December 2017).
Corporate Centre
In addition to these operating units, which report by geographic areas and by businesses, the Group continues to maintain the area of Corporate Centre.
The Corporate Centre adds value to the Group by: strengthening the Group's governance (through global monitoring and control frameworks, and strategic decision-making) and encouraging the exchange of best practices in cost management and economies of scale. The Corporate Centre also contributes to the Group's earnings growth by sharing the best commercial practices, implementing global commercial initiatives and promoting digitalization.
85
It also carries out financial management and capital management functions, managing the structural liquidity risk associated with funding the Group’s recurring activity, stakes of a financial nature and the net liquidity related to the needs of some business units. The Corporate Centre also actively manages interest rate risk and exposure to exchange rates on equity and on the countervalue of the units’ results in euros for the next 12 months. Lastly, it assigns capital to each unit within the scope of capital management.
First nine months loss of EUR 1,391 million, including restructuring charges of EUR 40 million (net of tax), down from a loss of EUR 1,641 million in the first nine months of 2017, which included a charge of EUR 130 million for equity stakes and intangible assets.
Excluding these impacts, loss of EUR 1,351 in 2018 compared to EUR 1,511 million in 2017. The improvement was mainly due to lower costs related to hedging of exchange rates.
In addition, net interest income was hit by the volume of issuances made under the funding plan, largely focused on eligible TLAC instruments, and greater liquidity.
Operating expenses, on the other hand, remained virtually unchanged as a result of the streamlining and simplification measures that enable the investment in global projects aimed at the Group’s digital transformation to be offset.
Detail by business
Retail Banking (% changes excluding the exchange rate impact)
This covers all customer banking businesses, including consumer finance, except those of corporate banking, which are managed through the CIB, and asset management and private banking, which are managed by Wealth Management.
Santander maintains its focus on three main priorities:
- |
Continuous improvement of customer loyalty and satisfaction. In Mexico, the Santander Plus offering already has more than 4.2 million customers, 54% of whom are new. In Portugal, as well as maintaining the focus on Mundo 1|2|3, we launched Conta SIM, a simple and more digital account. We carry on setting ourselves apart from our competitors through innovative products. Spain has extended its offer of sustainable and responsible funds, such as Santander Sustainable Action. For the middle-income segment, Chile continued to promote Santander Life. Mexico, launched the first digital SME account for companies under the SAS (Simplified Joint Stock Company) regime. |
- |
Promoting of digital transformation in all channels, products and services. The number of digital customers and their contribution to sales of all products, continues to increase, underpinned by the various initiatives in each country. |
- |
Keep on enhancing customer satisfaction and experience. To this end, we are forging ahead with the transformation of the conventional branch network, with the opening of new Work Café branches in Chile and the new distribution model for branches in Mexico. The main focus continues to be on becoming the best bank for our customers, and that is the market's perception. In Poland, for example, Gold Banker magazine recognized Santander as the best bank in multi-channel service in the country, and in Spain, our contact center was awarded the gold CRC for excellence in customer attention. |
Attributable profit in the first nine months was EU 5,671 million. Excluding non-recurring impacts registered in Spain, Portugal and SCF, underlying attributable profit was EUR 5,931 million, 17% more than in the same period of 2017, partly driven by Banco Popular’s incorporation and the good dynamics in customer revenue.
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CIB - Corporate & Investment Banking (% changes excluding the exchange rate impact)
This business reflects the revenues 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 equities business.
Santander maintains its leadership in Latin America and Europe, with leading positions in export & agency finance, debt capital markets and structured finance.
We have stepped up our support to global clients in their capital issuances, providing them with financing solutions and transactional services. We also continued to adapt our product offering to the Bank's digital transformation.
Attributable profit of EUR 1,258 million, in the first nine months, 3% lower year-on-year:
- |
Net interest income and fee income were virtually unchanged affected by the strategy of selective growth, reduced demand for loans and a market environment where less corporate transactions were carried out. |
- |
Lower gains on financial transactions than in 2017 whose first quarter was excellent. |
- |
Higher costs associated with transformation projects. |
- |
Provisions were significantly lower in Spain, UK, Brazil and the US. |
- |
Better results from global transactional banking. Lower income from global markets and, to a lesser extent, global debt financing. |
Wealth Management (% changes excluding the exchange rate impact)
Following its creation at the end of 2017, the Wealth Management division launched a number of strategic initiatives:
- |
Private Banking: the development of a global proposition and the launch of a single brand to provide comprehensive service to our customers in more than 10 countries. Moreover, a leading proposition is being developed in Europe and Latin America for high net worth clients (UHNW). Santander became the first bank in Spain to obtain the AENOR certificate for advisory services, which underscores our business model, increases transparency and helps to consolidate Santander as the country’s best private bank. |
- |
Santander Asset Management (SAM) has concentrated on further improving its range of products. Of note were the equity investment strategies in Spain and Latin America. |
Digital transformation is also a priority, underscored by installing in all private banking offices in Mexico the global private banker tool SPiRIT, which will also be installed in Brazil and Chile
Total customer assets under management amounted to EUR 333,000 million and there were EUR 14,000 million in loans to private banking customers.
The first nine months attributable profit was EUR 392 million, 15% more year-on-year:
- |
Higher revenue, with a 12% rise in net interest income and 66% in fee income, mainly due to an increase in managed and higher value-added volumes. |
- |
Increase in operating expenses, partly affected by investments in the Private Wealth (UHNW) project. |
87
- |
The increase in revenue and costs was affected by the greater stake in Santander Asset Management. |
Human Resources Information
At 30 September 2018, Santander Group employed 201,101 professionals worldwide, with an average age of 38 years; 55% of which were women and 45% men.
Santander aims to be the employer of choice and be chosen for our purpose, culture and responsible way of producing results. We want to be able to attract and retain the best talent, which will allow us to contribute to the progress of people and companies and to carry out responsible, competitive and sustainable banking.
During 2018, progress was made in the cultural transformation in order to become the Bank of the future with various initiatives:
Once again, the MyContribution management model has been used as a lever for transformation. This model is based on engagement, meritocracy, transparency and constant communication. Under MyContribution, the 360 assessment process, executives are evaluated by their peers, line managers and their manager, to assess the adoption on a day-to-day basis of the eight corporate behaviors.
Further progress was made in the implementation of the Workaday platform (One Team program), creating a global talent pool. During this period, harmonization of the processes in the countries involved in the first phase was achieved. This project will assist with the cultural and digital transformation, with the roll-out of a common Human Resources management platform in all the Group's countries.
Young leaders was launched, a training program in which 280 employees in 14 countries have been identified as young leaders. They will help to design their own training program and contribute to the development of the Bank’s strategy.
The Bank has continued to promote employees' development through international mobility. Global Job Posting was launched in 2014. In this corporate platform professionals can find out and apply for vacant positions in other countries, companies or divisions. Since its launch more than 4,300 positions have been posted globally. Moreover, thanks to Mundo Santander program, around 2,000 employees had an experience abroad.
The Global Engagement Survey was launched in September in order to learn more about employees’ engagement, as well as to detect areas of improvement and opportunities to make the Bank a better place to work. This year, the survey included other tools to provide a more in-depth and continuous follow-up of the results.
We are also making progress in creating a new way of working at the Bank, through new floor spaces, without closed offices, and areas that foster collaboration and knowledge sharing, equipped with technological tools that allow continuous contact with teams in other countries. This initiative includes Flexiworking, the Group's commitment to eradicating presence-based culture and working in a more flexible and efficient way.
The culture of recognition has been further promoted through Starme Up, a global network which can be used to recognize people who use a corporate behavior on a day-to-day basis. Risk-pro Star was launched to recognize colleagues with a proper risk culture. Over 1.3 million stars were given to colleagues up to September.
The Bank is also committed to be one of the healthiest companies in the world, by offering employees global health and wellness features as well as to promote related knowledge through the BeHealthy program. Santander signed a global agreement with Gympass, an innovative company in the gym sector which offers employees discounts in a wide health and wellness network around the world.
88
Santander Group recognizes and supports all types of diversity: in gender, race, age, disability, and professional and life experiences; religion, values and beliefs, sexual orientation and personality. To this end, general principles have been defined, they intend to be a framework of action and reference to ensure that Banco Santander is always a diverse and inclusive organization. This framework also aims to encompass all strategies and actions developed in each country in these matters, as well as to reduce the salary gap.
Information on the environment and climate change
The Bank has a defined governance structure. One body is the Sustainability Committee, chaired by the Chief Executive Officer, which defines and proposes the Bank's main sustainability initiatives and the Group's corporate and sector-wide policies in this area.
In January 2018, Banco Santander carried out the annual review and approval of its sustainability policies: general sustainability policy, environmental management and climate change policy, volunteer policy and human rights policy, as well as sector-wide policies: defense, energy and soft commodities, defense, energy and soft commodities. The Bank has also added a new mining and metallurgy policy. Excerpts of the sector-wide policies were published - for the first time - and are available on the corporate website.
On February 16, 2018, Santander published its 2017 Sustainability Report. The report is available on the Bank's corporate website and is verified by PricewaterhouseCoopers Auditors, S.L.
Lastly, at its meeting on 25 June 2018, the Board of Directors set up the Responsible Banking, Sustainability and Culture Committee, as provided for in the Board Regulations; it will have effect from 1 July. This Committee advises the board on the Bank’s values and corporate culture, the sustainability strategy, ethical, social and environmental matters regarding the main stakeholders (employees, customers, shareholders and society) and supervises the correct reporting of non-financial information. This committee meets quarterly and held its first meeting on 4 September.
Other initiatives were also adopted in the first half of the year:
On March 24, 2018, Banco Santander took part in the WWF (World Wildlife Fund) Earth Hour campaign, and turned off the lights of its most significant buildings in its 10 main markets and its branch network for the ninth consecutive year.
Santander, along with 15 other major banks, has come on board for the UNEP FI initiative to develop a pilot project to implement the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD) of the Financial Stability Board (FSB). All participants have undertaken to develop specific analytical tools and indicators to assess and evaluate the potential impacts of climate change.
Santander has joined the responsible banking initiative promoted by the United Nations. Together with 25 other major banks on five continents, principles will be developed to adapt the financial sector to the challenges of the UN's Sustainable Development Goals (SDOs) and the Paris Agreement on Climate Change.
These standards will respond to the long-recognized need for a comprehensive framework covering all aspects of sustainable banking. The process of developing the principles will include consultations with different interest groups, such as civil society organizations, banking associations, regulators and UN agencies.
In February 2018, Santander Corporate & Investment Banking (SCIB) acted as the sole insurer and bookrunner in financing the expansion of Ence's renewable energy subsidiary for EUR 220 million. Ence is the European leader in eucalyptus pulp production and the number one company leader in Spain in the integral and responsible management of forest areas and crops. Its energy subsidiary is the first Spanish company to produce renewable energy from forest and agricultural biomass. This is the only renewable energy with a positive economic balance due to the benefits generated given its capacity for job creation, rural development
89
and contribution to environmental improvement, both through the capture of CO2 and forest maintenance and cleaning, reducing the risk of fires by up to 70%.
In May, Santander Bank Polska S.A. made a private issue of subordinated bonds for PLN 1 billion, in which the European Bank for Reconstruction and Development (EBRD) subscribed PLN 150 million (EUR 36 million). Santander Bank Polska S.A. has earmarked 140% of these EBRD resources to finance the construction of certified commercial and residential greenfield projects, in line with EBRD's Green Economy Transition (its main initiative to promote sustainability in the use of energy and resources).
In July, Santander Corporate & Investment Banking (SCIB) led the financing of the first incentive and state subsidy free wind project in Spain, in which they structured and underwrote the financing of the development of the 300 MW awarded in the first renewable energy auction in Spain.
A major environmental awareness campaign, #MovimientoYoSí, has been launched in the corporate center, with different initiatives under the slogan “Reduce, Reuse and Recycle”.
In the same way, the Bank will give out reusable and recyclable bags for free in Chile over a period of time. Once the end of their useful life is reached, they can be deposited at any recycling center or taken to the company's branches so these can be recycled.
Lastly, with regard to the Group's presence within sustainable and investor indices:
- |
In 2018, Banco Santander was ranked third in the world among banks and the first in Europe in the Dow Jones Sustainability Index (DJSI), the international benchmark that measures sustainability based on the economic, environmental and social impact of companies, which is its best result to date. |
- |
Santander has been classified as a leading company in diversity according to the Bloomberg Gender-Equality Index. In 2018, Banco Santander was placed first in the list of 104 companies that make up the global diversity index worldwide. |
Subsequent facts
Between 1 October 2018 until the date of preparation of the interim financial statements for the first half of 2018, the following significant event:
On October 18, the Judgment of October 16, 2018 of Section 2 of the Contentious Chamber of the Supreme Court, which annuls article 68.2 of the Regulations of the Tax on Capital Transfers and Documented Legal Acts, approved by Royal Decree 828/1995, of 25 December 1995, was published on the Judicial Branch website. Subsequently, on 19 and 22 October, two informative notes were published indicating that the Plenary of the Chamber has decided to take cognizance of any of the pending appeals in order to decide whether or not the criteria of this Judgment should be confirmed and that the Plenary will take place on 5 November. At the date of issuance of these interim financial statements, the aforementioned Judgment has not been published in the Official State Gazette. With the information available at the date of preparation of these interim financial statements, it is not possible to evaluate the potential impact derived from such judgment at this time.
Glossary of alternative performance measures
Below we set out information on alternative performance measures in order to comply with the Guidelines on Alternative Performance Measures published by the European Securities and Markets Authority, ESMA, on 5
90
October 2015 (Guidelines on Alternative Performance Measures, ESMA/2015/1415en). This information has not been audited.
· |
The Group uses the following indicators for managing its business. They enable profitability and efficiency, credit portfolio quality, the volume of tangible equity per share and the net loan-to-deposit ratio to be measured, analyzing their evolution over time and comparing them with those of our competitors. |
o |
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 amortization costs are needed to generate revenue. |
o |
The Credit risk indicators measure the quality of the credit portfolio and the percentage of non-performing loans covered by provisions. |
o |
The capitalization indicator provides information on the volume of tangible net asset value (TNAV) per share |
o |
Other indicators are also included. 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 analyze 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. |
· |
Impact of exchange rate changes on changes in the income statement |
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.
These changes, 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 nine months of 2018 to all periods contemplated in the analysis. The average exchange rates of the main currencies in which the Group operates are as follows:
Exchange rates: 1 euro/ currency parity
|
|
|
Average |
|
|||
|
|
|
9M'18 |
|
|
9M'17 |
|
US dollar |
|
|
1.194 |
|
|
1.112 |
|
Pound sterling |
|
|
0.884 |
|
|
0.873 |
|
Brazilian real |
|
|
4.278 |
|
|
3.525 |
|
Mexican peso |
|
|
22.720 |
|
|
20.974 |
|
Chilean peso |
|
|
750.447 |
|
|
726.965 |
|
Argentine peso |
|
|
28.609 |
|
|
17.970 |
|
Polish zloty |
|
|
4.248 |
|
|
4.264 |
|
· |
Impact of exchange rate changes on changes in the balance sheet |
The Group presents, at both the Group level as well as the business unit level, the real changes in the balance sheet as well as the changes excluding the exchange rate effect for loans and advances to
91
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 September 2018 to all periods contemplated in the analysis. The final exchange rates of the main currencies in which the Group operates are as follows:
Exchange rates: 1 euro/ currency parity
|
|
|
Period‐end |
|
|||
|
|
|
Sep‐18 |
|
|
Dec‐17 |
|
US dollar |
|
|
1.158 |
|
|
1.199 |
|
Pound sterling |
|
|
0.887 |
|
|
0.887 |
|
Brazilian real |
|
|
4.654 |
|
|
3.973 |
|
Mexican peso |
|
|
21.780 |
|
|
23.661 |
|
Chilean peso |
|
|
765.301 |
|
|
736.922 |
|
Argentine peso |
|
|
47.635 |
|
|
22.637 |
|
Polish zloty |
|
|
4.277 |
|
|
4.177 |
|
· |
Impact of certain items on the consolidated profit and loss accounts |
This Management Report includes the consolidated abridged profit and loss accounts for the first nine months of 2018 and 2017. These accounts include all the items in each of the lines of the account where they are registered according to their type, including those which, in the Group's opinion, distort the comparison of the business performance between the two periods.
Accordingly, this Management Report also includes income statements for the same periods, in which the amounts of these items, net of taxes and minority interests, are presented net separately in a line item that the Group refers to as “Net of capital gains and provisions”, which is presented immediately before the profit attributable to the Group. In the Group's opinion, these accounts provide a clearer explanation of the changes in profit or loss. These amounts are deducted from each of the lines in the income statement where they have been registered according to their type.
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The definitions and calculation method for each of the indicators mentioned above are shown below:
Profitability and Efficiency |
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|
|
|
|
|
Ratio |
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|
Formula |
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|
Relevance of the metric |
|
|
|
|
|
|
|
RoE |
|
|
Group's attributable profit |
|
|
This ratio measures the return that shareholders obtain on the funds invested in |
(Return on equity) |
|
|
Average stockholders' equity* (excl. minority interests) |
|
|
the entity and as such measures the company's ability to pay shareholders. |
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|
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|
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|
|
|
|
RoTE |
|
|
Group's attributable profit |
|
|
This is a very common indicator, used to evaluate the profitability of the |
(Return on tangible equity) |
|
|
Average stockholders' equity* (excl. minority interests) - intangible assets |
|
|
company as a percentage of a 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. |
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|
|
|
|
Underlying RoTE |
|
|
Group's underlying attributable profit |
|
|
This indicator measures the profitability of the tangible equity of a company |
|
|
|
Average stockholders' equity* (excl. minority interests) - intangible assets |
|
|
arising from ordinary activities, i.e. excluding results from non-recurring operations. |
|
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|
|
|
|
|
|
|
|
|
|
|
RoA |
|
|
Consolidated profit |
|
|
This metric, commonly used by analysts, measures the profitability of a |
(Return on assets) |
|
|
Average total assets |
|
|
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 give n period. |
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|
|
|
|
|
|
|
|
RoRWA |
|
|
Consolidated profit |
|
|
The return adjusted for risk is an derivative of the RoA metric. The difference is |
(Return on risk weighted assets) |
|
|
Average risk weighted assets |
|
|
that RoRW A measures profit in relation to the bank's risk weighted assets. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying RoRW A |
|
|
Underlying consolidated profit |
|
|
This relates the underlying profit (excluding non-recurring results) to the bank's |
|
|
|
Average risk weighted assets |
|
|
risk weighted assets. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency |
|
|
Operating expenses** |
|
|
One of the most commonly used indicators when comparing productivity of |
|
|
|
Gross income |
|
|
different financial entities. It measures the amount of funds used to generate the bank's operating income. |
|
|
|
|
|
|
|
Credit Risk |
|
|
|
|
|
|
Ratio |
|
|
Formula |
|
|
Relevance of the metric |
NPL ratio |
|
|
Non-performing loans and advances to customers customer guarantees and customer commitments granted |
|
|
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 |
(Non-performing loans) |
|
|
Total Risk*** |
|
|
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 |
|
|
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 |
|
|
|
Non-performing loans and advances to customers customer guarantees and customer commitments granted |
|
|
both present and future. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Credit |
|
|
Allowances for loan loss provisions over the last 12 months |
|
|
This ratio quantifies loan loss provisions a rising from credit risk over a defined period of time for a given loan portfolio. As such, it acts as an indicator of cred |
|
|
|
Average loans and advances to customers over the last 12 months |
|
|
it quality. |
|
|
|
|
|
|
|
Market Capitalisation |
|
|
|
|
|
|
Ratio |
|
|
Formula |
|
|
Relevance of the metric |
TNAV per share |
|
|
Tangible book value**** |
|
|
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 |
(Tangible net asset value per share) |
|
|
Number of shares excluding treasury stock |
|
|
the amount each shareholder would receive if the company were to enter in to liquidation and had to sell all the company's tangible assets. |
Other indicators |
|
|
|
|
|
|
Ratio |
|
|
Formula |
|
|
Relevance of the metric |
LtD |
|
|
Net loans and advances to customers |
|
|
This is an indicator of the bank's liquidity. It measures the total (net) loans and |
(Loan -to-deposit) |
|
|
Customer deposits |
|
|
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) |
|
|
Net profit + Fees paid from Santander Asset Management to Santander, net of taxes, excluding Private Banking customers |
|
|
Metric to assess Wealth Management's total contribution to Grupo Santander profits |
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(*).- Stockholders' equity = Capital and Reserves+ Accumulated other comprehensive income+ Group Attributable profit + Dividends
(**).- Operating expenses: General administrative expenses+ Depreciation and amortisation
(***).- Total risk = Total loans& advances and guarantees to customers(performing and non-performing) + non-performing contingent liabilities
(****).- Tangible book value= Stockholders' equity – intangible assets
Lastly, the numerical data for each of the indicators for the periods considered are included below:
Profitability and efficiency |
|
|
9M'18 |
|
|
9M'17 |
|
RoE |
|
|
8.20 |
% |
|
7.54 |
% |
Attributable profit to the Group |
|
|
7,755 |
|
|
6,941 |
|
Average stockholders' equity (excluding minority interests) |
|
|
94,615 |
|
|
93,178 |
|
RoTE |
|
|
11.69 |
% |
|
10.99 |
% |
Attributable profit to the Group |
|
|
7,755 |
|
|
6,941 |
|
Average stockholders' equity (excl. minority interests) ‐ intangible assets |
|
|
66,348 |
|
|
63,919 |
|
Underlying RoTE |
|
|
12.14 |
% |
|
11.80 |
% |
Underlying attributable profit to the Group |
|
|
8,055 |
|
|
7,456 |
|
Average stockholders' equity (excl. minority interests) ‐ intangible assets |
|
|
66,348 |
|
|
63,919 |
|
RoA |
|
|
0.65 |
% |
|
0.59 |
% |
Consolidated profit |
|
|
9,270 |
|
|
8,389 |
|
Average total assets |
|
|
1,436,286 |
|
|
1,392,398 |
|
RoRWA |
|
|
1.55 |
% |
|
1.39 |
% |
Consolidated profit |
|
|
9,270 |
|
|
8,389 |
|
Average risk weighted assets |
|
|
599,746 |
|
|
603,751 |
|
Underlying RoRWA |
|
|
1.60 |
% |
|
1.47 |
% |
Underlying consolidated profit |
|
|
9,569 |
|
|
8,904 |
|
Average risk weighted assets |
|
|
599,746 |
|
|
603,751 |
|
Efficiency ratio |
|
|
46.9 |
% |
|
46.7 |
% |
Operating expenses |
|
|
16,843 |
|
|
16,957 |
|
Gross income |
|
|
35,882 |
|
|
36,330 |
|
Credit risk |
|
|
Sep‐18 |
|
|
Dec‐17 |
|
NPL ratio |
|
|
3.87 |
% |
|
4.08 |
% |
Non‐performing loans and advances to customers customer guarantees and customer commitments granted |
|
|
36,332 |
|
|
37,596 |
|
Total risk |
|
|
939,685 |
|
|
920,968 |
|
Coverage ratio |
|
|
67.9 |
% |
|
65.2 |
% |
Provisions to cover impairment losses on loans and advances to customers, customer guarantees and customer commitments granted |
|
|
24,685 |
|
|
24,529 |
|
Non‐performing loans and advances to customers customer guarantees and customer commitments granted |
|
|
36,332 |
|
|
37,596 |
|
Cost of credit |
|
|
0.98 |
% |
|
1.07 |
% |
Allowances for loan‐loss provisions over the last 12 months |
|
|
8,600 |
|
|
9,111 |
|
Average loans and advances to customers over the last 12 months |
|
|
879,772 |
|
|
853,479 |
|
Market capitalization |
|
|
Sep‐18 |
|
|
Dec‐17 |
|
TNAV (tangible book value) per share |
|
|
4.16 |
|
|
4.15 |
|
Tangible book value |
|
|
67,122 |
|
|
66,985 |
|
Number of shares excl. treasury stock (million) |
|
|
16,125 |
|
|
16,132 |
|
Others |
|
|
Sep‐18 |
|
|
Dec‐17 |
|
Loan‐to‐deposit ratio |
|
|
111 |
% |
|
109 |
% |
Net loans and advances to customers |
|
|
866,226 |
|
|
848,914 |
|
Customer deposits |
|
|
778,751 |
|
|
777,730 |
|
Notes:
(1) |
Averages included in the RoE, RoTE, RoA and RoRWA denominators are calculated using 10 months' (from December to September) |
(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). |
94
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: November 5, 2018 |
By: |
/s/ José García Cantera |
|
Name: |
José García Cantera |
|
Title: |
Chief Financial Officer |
95