Item

Key audit matter

How our audit addressed the key audit matter

Loan-loss impairment provisions

Estimating loans and receivables impairment provisions for credit-risk is one of the most significant and complex estimation exercises performed in preparing the attached consolidated annual financial statements.

The assessment of credit risk impairment provisions is based on models that entail a significant degree of judgement for the determination of the impairment losses considering factors such as:

•    The classification of the various credit portfolios by risk.

•    The identification and their classification as impaired assets.

•    The use of significant assumptions regarding variables such as historical default levels, future income cash flows, valuation of guaranties, impairment emerge period, etc.

•    Design of parameters for the above mentioned models, such as the probability of impairment (PI) and Loss Given Impairment (LGI).

The Group’s business is focused primarily on commercial banking products and is geographically concentrated in 10 key markets (Argentina, Brazil, Chile, Spain, the US, Mexico, Poland, Portugal and the UK and consumer financing in Europe).

In this context, the Group develops a general framework of risk models that is adapted by geography and by product, in order to take into account peculiarities of each market. The above mentioned internal models allow the company to estimate both the collective provisions and the significant individual provisions.

Please refer to Note 10 of the consolidated annual financial statements.

Our work regarding the estimation of the credit-risk impairment focused on analysing, assessing and verifying the control environment as well as performing tests of details with respect to the credit risk provisions estimated collectively and individually.

As for the internal control system, we have focused on testing the design and the operational effectiveness of controls relating to the following business procedures :

•    Calculation methodologies used, recalibrations and back-testing processes put in place by the Management.

•    Compliance of the management approved internal models with the applicable regulatory framework and their effectiveness.

•    Reliability of data sources used for calculation and the appropriateness of the models in light of the circumstances.

•    The periodic assessment of risks and monitoring procedures employed by the Group.

•    The periodic review process for borrower case files in order to monitor their classification and valuation.

In addition , we carried out the following tests of details:

•    Verified: i) calculation and segmentation methods; ii) the historical loss rates used to estimate future cash flows and historical discount rates; iii) correct loan classification in the corresponding categories.

•    Re-performing of the credit risk provisions estimated collectively for the main portfolios.

•    Review of a sample of borrower case files to check their proper classification, discounted cash flows models and impairment.

•    Back-testing of the impairment losses actually incurred against those impairment losses estimated in prior periods.

Differences emerged as a result of our tests with respect to the calculations performed by management were not outside a reasonable range.

Key audit matter

How our audit addressed the key audit matter

Disclosure in the annual financial statements of the estimated impact of IFRS 9 adoption

In relation to the effectiveness in 2018 of the new IFRS 9 on the Classification and Valuation of Financial Instruments, as it is described in Note 1.b, the Group has designed an implementation plan for the adoption of this standard.

This implementation plan entails conducting an evaluation of the population of financial instruments affected by the classification and measurement requirements of IFRS 9 and the development of an impairment methodology of loans and receivables due to credit risk for the determination of the expected credit losses. In this first application of the standard, the Group has decided not to adopt the new standard regarding hedge accounting, as detailed in Note 1.b and included in the IFRS 9 itself.

Since it is very relevant for Santander Group, the directors and management closely monitor the implementation projects completed in the following business units: Brazil, United Kingdom, United States, Portugal, Spain, Poland, Chile, Mexico and the main geographical areas of the Consumer Group.

In this line, the Group has completed the definition of the main assumptions used in the valuation, classification and provisions process, such as: the main business models used, definition of default, future information included in the provision models or completed evaluation for the determination of significant increase in credit risk.

Thus, as a disclosure requirement for a breakdown in the consolidated annual accounts and according to the IAS 8 requirements, the Group has made an estimation of the impact of the adoption of this new regulation.

Please refer to Note 1.b of the consolidated annual financial statements.

For the aforementioned geographies, our work has focused on the analysis, evaluation and verification of the internal control and on performing test of detail, all referred to the disclosure of financial information related to the estimated impact of the adoption of this new regulation in each of its key areas: classification, valuation and impairment.

With respect to the internal control, in compliance with the requirements of IAS 8, we have focused on testing the design and the operational effectiveness of controls related to the presentation and disclosure of the information in the consolidated annual accounts. Among the other, the governance controls should be outlined for the following aspects:

•    Accounting policies and the methodological framework developed by the Group in order to assess compliance with new regulations.

•    Analysis of the main methodologies and calculation variables considered in the quantification process.

Moreover, we carried out tests of detail regarding calculations presented and disclosed in Note 1.b:

•    Sampling of operations in order to assess their adequate classification, registration and valuation, based on our analysis of business models and solely payments of principal and interest (SPPI) tests carried out.

•    For the most relevant po1tfolios, checks with respect to: i) Methodology for estimating parameters of expected loss, ii) Historical and prospective information used, iii) Loan classification criteria by staging.

•    Review of impairment calculations including the information related to scenarios and their assumptions.

As a result of our procedures, we have not identified additional observations outside a reasonable range.

Key audit matter

How our audit addressed the key audit matter

Goodwill impairment testing

The Group yearly checks for evidence of impairment in the registered goodwill.

The Management estimates the recoverable amount of the most representative cash generating units by calculating its value in use discounted cash flow projections. These estimations are inherently uncertain and include a high level of judgement since they are based on assumptions regarding some aspects such as discount rates, results projections and long term constant growth rates employed.

These estimations are sensitive to variables and hypothesis used, being subject, due to their own nature, to risk of material misstatement when being valued.

Due to their relevance for the Santander Group, the management closely monitor the goodwill deriving from Brazil, the United Kingdom and the United States.

Please refer to notes 2 and 17 of the attached consolidated annual financial statements.

We have documented, with the assistance of our valuation experts, our understanding and review of the assessment undertaken by the management.

With respect to the internal control, we evaluated the design and tested the controls operational effectiveness in the following areas:

•    Criteria for the definition of the Group’s CGUs.

•    Methodology used by the management for the testing of goodwill impairment, including an assessment of the controls in place to supervise the process and the approvals involved.

•    Budgeting process on which results projections employed on the cash flow projections discount rates are based on.

•    Capability of reliable prediction from the management by comparing previous years’ estimations and impairment assessments with the actual results.

•    Reviewing the annual valuation reports, both performed by the Group and by external experts, regarding the goodwill impairment testing.

On the other hand, we also conducted tests to cross-check the cash flow projections discount rates employed by the Group included in its estimation, considering the regulatory requirements, market practices and specific banking sector expectations. This work included the verification of the hypothesis, such as growth rates and discount rates.

Additionally, we performed the following procedures:

•    Verified the mathematical accuracy of the cash flow projections discount rates, including the validation of the key inputs with external data.

•    Performed a specific sensitivity analysis of the key inputs as well as those related to: i) financial projections for the following years; ii) expected long term growth rate; and iii) methodology and assumptions for the calculation of the discount rate.

•    Likewise, we reviewed the adequacy of the information disclosed in the attached consolidated annual financial statements.

As a result of the above procedures, we believe that the estimations employed by management are not outside a reasonable range in the context of the prepared consolidated annual financial statements.

Key audit matter

How our audit addressed the key audit matter

Recoverability of deferred tax assets

Assessing the recoverability of deferred tax assets is a complex exercise and requires a high degree of judgement and estimation; this aspect is of particular relevance to the Group in multiple geographies, including Spain, the United States, Brazil and Mexico.

In keeping with the recoverability model defined by the Group, the management of each business unit compiles the assumptions that underpin the business plans that are projected over the time horizon established for that business.

This process implies specific and complex considerations that the management takes into account in order to assess the initial and ongoing recognition of deferred tax assets. The most significant considerations made by the Group in this respect are:

•    Assuring themselves that the tax regulations of each country are applied correctly and the temporary differences that qualify as deductible are duly recognised.

•    Maintaining a control environment, running the models and validating the calculations deriving therefrom to ensure that the tax assets are properly recognised and measured and that the conclusions drawn regarding their recoverability are accurate.

•    Reviewing that the projections that form part of the defined model which is in turn used to estimate the tax profits used to infer the amount of deferred tax assets that will be recoverable in future periods in relation to deductible temporary differences and tax carryforwards are indeed achievable.

Please refer to Note 2 of the consolidated annual financial statements.

We have documented, in collaboration with our tax experts, our understanding and review of the estimation exercise undertaken by the management.

With respect to the internal control we focused on the controls design and operational effectiveness of the following processes:

•    The process of drawing up the business plan for each geography under the scope of the model established for estimating the recognition, measurement and recoverability of deferred tax assets.

•    Calculation of deferred tax assets.

We also carried out the following tests of details:

•    Evaluate the assumptions made by the Group to calculate and estimate its deductible temporary differences to assess whether they are comprehensive and accurate.

•    Analysis of the key data used by management to estimate the various deferred tax assets and track their subsequent recoverability, including:

•    Parallel reperformance of the income projections carried out by the entity and the hypothesis employed, including the detail of the economic forecasts and indicators used in the analysis (inflation, interest rates, etc.);

•    Obtaining the necessary management information that support the business plan (budgets, future economic forecasts, estimations on financial products to be contracted, etc.);

•    Evaluate the tax strategy planned by the Group for the recoverability of the deferred tax assets.

We have obtained adequate audit evidence throughout our procedures to corroborate the estimates made by the group with respect to the recoverability of its deferred tax assets.

Key audit matter

How our audit addressed the key audit matter

Measurement of pension obligations

The regulations applicable to pension obligations are complex and the estimation of such obligations implies actuarial calculations which require the use of significant judgement, a high volume of data and estimates regarding various assumptions in multiple geographies.

These estimates are particularly relevant in certain geographies, specifically Spain, the United Kingdom, Brazil and Portugal.

In making their estimates, the management takes into account certain considerations in order to determine the amount of pension obligations to be recognised, most notable among which:

•    Guaranteeing compliance with legislation country by country.

•    Maintaining and validating calculations to ensure that the Group’s pension obligations are properly measured and recognised.

•    Reviewing the key assumptions and hypotheses used in the calculations and estimates made by the actuaries at year-end.

Please refer to notes 2 and 25 of the consolidated annual financial statements.

We documented, with the assistance of our actuarial experts, our understanding and review of the estimation exercise carried out by the management.

With respect to the internal control we focused on the controls design and operational effectiveness of the following processes:

•    Update of the staff database.

•    Assumptions and hypotheses used to estimate the Group’s pension obligations, and an assessment of the evidence of any changes which may have affected them.

•    Actuarial criteria used in the estimation process and in the calculation of the pension obligations by geography and at the Group level.

We also carried out the following tests of details:

•    Validation of the key information and hypothesis employed by the management for the estimation of the pension obligations.

•    We obtained confirmation letters from insurance companies that work with the Group to obtain an additional source of information regarding the savings policies written with these entities.

•    We reviewed the valuation performed by the Group for the assets and liabilities related to pension obligations.

•    We obtained and reviewed the actuarial reports prepared by the experts external to the Group’s Management.

As a result of the previous procedures, no differences were identified, outside a reasonable range.

Key audit matter

How our audit addressed the key audit matter

Provisions for tax, legal and labour lawsuits

The Group is party to a range of tax, legal and labour proceedings - administrative and judicial - which primarily arose in the ordinary course of its business operations. There are also situations not yet subject to any judicial proceedings that have nevertheless required the Group to recognise provisions; these include customer conduct related matters and the attendant compensation. The estimation of the provisions registered for the mentioned purposes is one of the areas for which a greater judgement is required.

These proceedings generally take a long period of time to run their course, giving rise to complex processes dictated by the legislation prevailing in the various jurisdictions in which the Group operates.

The Group’s management decide when to recognise a provision for these proceedings based on estimates made using prudent calculation procedures that are consistent with the uncertainty intrinsic to the obligations they cover.

Within these provisions, the most significant are those corresponding to the tax and labour proceedings in Brazil, as well as those recognised to cover customer compensation for the sale of certain products in Spain and the UK; these estimates are based on the number of claims expected to be received, the number expected to be admitted, and the estimated average payout per case.

Please refer to notes 1.h, 2 and 10 of the consolidated annual financial statements.

We have documented our understanding and review of the estimation exercise undertaken by the management.

With respect to the internal control we focused on the controls design and operational effectiveness of the following processes:

•    Update of the databases that contain the ongoing legal procedures.

•    Evaluation of the accuracy of the constituted provisions for regulatory, legal or tax procedures and its recognition.

•    Conciliation between the minute in accordance and, if applicable, in discordance of the Inspections with the amounts registered.

In addition, we performed test of details consisting of the following:

•    We familiarised ourselves with the policy for classifying lawsuits and allocating provisions.

•    Monitoring of the ongoing tax inspections.

•    Analysis of the reasonableness of the expected outcomes of the most significant tax, legal and labour proceedings.

•    Assessment of possible contingencies relating to compliance with the Group’s tax obligations for all the years open to inspection.

•    We obtained confirmation letters from external lawyers and tax advisors who work with the Group to cross-check its assessment of the outcome of the lawsuits, all of the information used, the correct recognition of the various provisions and the identification of potentially omitted liabilities.

•    Examination of the communications with the regulatory bodies, analyse the ongoing regulatory inspections and value the impact of any regulatory finding in the audit.

•    Analysis of the recognition and reasonableness of the provisions recorded for accounting purposes and the movements therein.

Key audit matter

How our audit addressed the key audit matter

Specifically in connection with the provisions recorded to cover customer compensation, our procedures focused on:

•    Assessment of the design and testing the operational effectiveness of the controls associated with the calculation and review of the provision recognised for customer compensation, including the process of generating and approving the model assumptions and results.

•    Evaluation of the methodology used by the management, verifying that it is in line with market practice and the recommendations issued by the supervisory organisms.

•    Running sensitivity analysis, varying the key inputs to test the model’s results.

As a result of the previous procedures, no differences were identified, outside a reasonable range, in the procedures previously described.

Key audit matter

How our audit addressed the key audit matter

IT systems - access controls

The Group’s business is highly dependent on information technology (IT) systems in the geographical locations where it operates, such that adequate control of these systems is crucial to ensuring correct data processing.

Moreover, as the systems become more numerous and complex, the risks relating to the organisation’s IT systems and, by extension, the data they process, increase.

Considering this context, it is vital to evaluate aspects such as the organisation of the Group’s Technology and Operations Department, software maintenance and development controls, physical and logical security and system operation.

In this respect, the management has developed a system efficiency plan including aspects such as access controls in systems, databases and applications

With the help of our IT system experts, our work consisted of reviewing the internal controls over the IT systems and software that support the core business activity and have an impact on the Group’s financial reporting.

For this purpose procedures were carried out in order to evaluate the design and operating effectiveness of the controls related to:

•    Functioning of the IT governance framework.

•    Access control and logic security over the applications, operating systems and databases that support the relevant financial information.

•    Application development and update management.

•    Maintenance of the IT operations.

Our review revealed incidents related with access controls in respect of certain applications.

The Group has prepared a plan to remedy these incidents which is in the process of being implemented and formal mitigating controls are being put in place.

Against this backdrop, our approach and audit plan centred on the following aspects:

•    We reviewed the remediation plan and the new controls implemented by the Group in 2017.

•    The controls related to the segregation of duties (access control) and access to critical transactions.

•    We increased sampling of the mitigating controls identified by management.

•    We expanded the samples analysed for derivatives and other financial assets to confirm their existence and measurement and the correct functioning of the IT governance framework.

The results of our procedures involving the samples added to our tests of controls and tests of details were satisfactory and we did not detect any material aspect affecting the financial information included in the consolidated annual financial statements.

Key audit matter

How our audit addressed the key audit matter

Acquisition of Banco Popular Español

On 7 June 2017, the parent company of these Group publicly announced the acquisition of 100% of the shares and capital instruments of Banco Popular Español, S.A. (Banco Popular) under the ‘resolution’ scheme authorised by the Single Resolution Board (SRB) and implemented by the Spanish National Resolution Authority (FROB for its acronym in Spanish).

Implementation of the above ‘resolution’ decision materialised in the acquisition by Banco Santander of all of the shares of Banco Popular for the consideration of one Euro.

Prior to the acquisition, Banco Popular had to amortised all of its shares outstanding as of 7 June 2017 and all of the shares resulting from the conversion of the regulatory capital instruments ‘Additional Tier 1’ it had issued and to convert all of the ‘Tier 2’ issued by Banco Popular into new-issue shares of Banco Popular.

In accordance with IFRS 3, the Group has classified the identifiable assets acquired and liabilities assumed at their provisional fair values and engaged a third party to obtain an independent valuation of them.

Please refer to Note 2 of the consolidated annual financial statements.

We documented our understanding and internal control assessment focusing on the design and operational effectiveness of controls over the identification and valuation process of the assets acquired and liabilities assumed at provisional fair value carried out by management.

Likewise, we performed audit procedures to obtain sufficient audit evidence of the balances as of the date of acquisition.

In addition, with the help of our valuation experts, we checked whether the methodology used to determine the fair values was adequate, specifically testing the underlying assumptions and the mathematical accuracy of the calculations.

Specifically, we assessed whether the allocation of the purchase price to the assets acquired and liabilities assumed was adequate.

Note that the acquirer has one year from the date of acquisition to definitively account for this business combination and to state the assets and liabilities of the entity acquired at their fair values.

As a result, the measurements made by the Group represent the best estimate available as at the date of authorising the consolidated annual financial statements for issue and should be considered provisional and not still definitive.

The results of our procedures performed corroborated management’s preliminary valuation work and allocation of the purchase price, as well as the appropriateness of the disclosed information in relation to this acquisition included in the attached consolidated annual financial statements.

A specific level that is applicable to the statement of non-financial information, as well as to certain information included in the Annual Corporate Governance Report, defined in article 35.2. b) of Law 22/2015 on Accounts Auditing, which solely consists of verifying that the aforementioned information was included in the consolidated management report or otherwise report on it.

A general level applicable to the rest of the information included in the consolidated management report, which consists of evaluating and informing about the concordance of the mentioned information with the consolidated annual accounts, based on the knowledge of the Entity acquired from the audit of the accounts and without including information other than that obtained as evidence during such audit, as well as evaluating and informing about whether the content and presentation of this part of the consolidated management report comply with the applicable regulations. If we conclude, based on the work performed, that there are material misstatements, we would be compelled to report on this.

Identify and assess the risks of material misstatement of the consolidated annual accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Parent company’s directors.

Conclude on the appropriateness of the Parent company’s directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated annual accounts or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’ s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the consolidated annual accounts, including the disclosures, and whether the consolidated annual accounts represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated annual accounts. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

Banco Santander, S.A. and

Companies composing

Santander Group

Consolidated Financial Statements and Consolidated Directors’

Report for the year ended December 31, 2017

ASSETS

CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEPOSITS ON DEMAND

FINANCIAL ASSETS HELD FOR TRADING

Derivatives

Equity instruments

Debt instruments

Loans and advances

Central banks

Credit institutions

Customers

Memorandum items: lent or delivered as guarantee with disposal or pledge rights

FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

Equity instruments

Debt instruments

Loans and advances

Central banks

Credit institutions

Customers

Memorandum items: lent or delivered as guarantee with disposal or pledge rights

FINANCIAL ASSETS AVAILABLE-FOR-SALE

Equity instruments

Debt instruments

Memorandum items: lent or delivered as guarantee with disposal or pledge rights

LOANS AND RECEIVABLES

Debt instruments

Loans and advances

Central banks

Credit institutions

Customers

Memorandum items: lent or delivered as guarantee with disposal or pledge rights

INVESTMENTS HELD-TO-MATURITY

Memorandum items: lent or delivered as guarantee with disposal or pledge rights

HEDGING DERIVATIVES

CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK

INVESTMENTS

Joint ventures entities

Associated companies

REINSURANCE ASSETS

TANGIBLE ASSETS

Property, plant and equipment:

For own use

Leased out under an operating lease

Investment property:

Of which leased out under an operating lease

Memorandum items:acquired in financial lease

INTANGIBLE ASSETS

Goodwill

Other intangible assets

TAX ASSETS

Current tax assets

Deferred tax assets

OTHER ASSETS

Insurance contracts linked to pensions

Inventories

Other

NON-CURRENT ASSETS HELD FOR SALE

TOTAL ASSETS

LIABILITIES AND EQUITY

FINANCIAL LIABILITIES HELD FOR TRADING

Derivatives

Short positions

Deposits

Central banks

Credit institutions

Customers

Marketable debt securities

Other financial liabilities

FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

Deposits

Central banks

Credit institutions

Customers

Marketable debt securities

Other financial liabilities

Memorandum items: subordinated liabilities

FINANCIAL LIABILITIES AT AMORTISED COST

Deposits

Central banks

Credit institutions

Customers

Marketable debt securities

Other financial liabilities

Memorandum items: subordinated liabilities

HEDGING DERIVATIVES

CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RISK RATE

LIABILITIES UNDER INSURANCE CONTRACTS

PROVISIONS

Provision for pensions and other employment defined benefit obligations

Provisions for other long term employee benefits

Provisions for taxes and other legal contingencies

Provisions for commitments and guarantees given

Other provisions

TAX LIABILITIES

Current tax liabilities

Deferred tax liabilities

OTHER LIABILITIES

LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE

TOTAL LIABILITIES

SHAREHOLDERS’ EQUITY

CAPITAL

Called up paid capital

Unpaid capital which has been called up

Memorandum items: uncalled up capital

SHARE PREMIUM

EQUITY INSTRUMENTS ISSUED OTHER THAN CAPITAL

Equity component of compound financial instruments

Other equity instruments

OTHER EQUITY

ACCUMULATED RETAINED EARNINGS

REVALUATION RESERVES

OTHER RESERVES

Reserves or accumulated losses in joint ventures investments

Others

(-) OWN SHARES

PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

(-) DIVIDENDS

OTHER COMPREHENSIVE INCOME

ITEMS NOT RECLASSIFIED TO PROFIT OR LOSS

Actuarial gains or (-) losses on defined benefit pension plans

Non-current assets classified as held for sale

Other recognised income and expense of investments in subsidiaries, joint ventures and associates

Other valuation adjustments

ITEMS THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS

Hedge of net investments in foreign operations (Effective portion)

Exchange differences

Hedging derivatives. Cash flow hedges (Effective portion)

Financial assets available-for-sale

Debt instruments

Equity instruments

Non-current assets classified as held for sale

Other recognised income and expense of investments in subsidiaries, joint ventures and associates

NON-CONTROLLING INTEREST

Other comprehensive income

Others items

EQUITY

TOTAL LIABILITIES AND EQUITY

MEMORANDUM ITEMS

CONTINGENT LIABILITIES

CONTINGENT COMMITMENTS

Interest income

Interest expense

Net interest income

Dividend income

Share of results of entities accounted for using the equity method

Commission income

Commission expense

Gains or losses on financial assets and liabilities not measured at fair value through profit or loss, net

Gains or losses on financial assets and liabilities held for trading, net

Gains or losses on financial assets and liabilities measured at fair value through profit or loss, net

Gains or losses from hedge accounting, net

Exchange differences, net

Other operating income

Other operating expenses

Income from assets under insurance and reinsurance contracts

Expenses from liabilities under insurance and reinsurance contracts

Total income

Administrative expenses

Staff costs

Other general administrative expenses

Depreciation and amortisation cost

Provisions or reversal of provisions

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

Financial assets measured at cost

Financial assets available-for-sale

Loans and receivables

Held-to-maturity investments

Profit from operations

Impairment of investments in subsidiaries, joint ventures and associates, net

Impairment on non-financial assets, net

Tangible assets

Intangible assets

Others

Gains or losses on non financial assets and investments, net

Of which: Investments in subsidiaries, joint ventures and associates

Negative goodwill recognised in results

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

Profit or loss before tax from continuing operations

Tax expense or income from continuing operations

Profit for the period from continuing operations

Profit or loss after tax from discontinued operations

Profit for the period

Profit attributable to non-controlling interests

Profit attributable to the parent

Earnings per share

Basic

Diluted

CONSOLIDATED PROFIT FOR THE YEAR

OTHER RECOGNISED INCOME AND EXPENSE

Items that will not be reclassified to profit or loss

Actuarial gains and losses on defined benefit pension plans

Non-current assets held for sale

Other recognised income and expense of investments in subsidiaries, joint ventures and associates

Other valuation adjustments

Income tax relating to items that will not be reclassified to profit or loss

Items that may be reclassified to profit or loss

Hedges of net investments in foreign operations (Effective portion)

Revaluation gain (losses)

Amounts transferred to income statement

Other reclassifications

Exchanges differences

Revaluation gain (losses)

Amounts transferred to income statement

Other reclassifications

Cash flow hedges (Effective portion)

Revaluation gain (losses)

Amounts transferred to income statement

Transferred to initial carrying amount of hedged items

Other reclassifications

Financial assets available-for-sale

Revaluation gains (losses)

Amounts transferred to income statement

Other reclassifications

Non-current assets held for sale

Revaluation gains (losses)

Amounts transferred to income statement

Other reclassifications

Share of other recognised income and expense of investments

Income tax relating to items that may be reclassified to profit or loss

Total recognised income and expenses

Attributable to non-controlling interests

Attributable to the parent

Balance as at
12/31/16 (*)

Adjustments due to errors

Adjustments due to changes in accounting policies

Adjusted balance as at 12/31/16 (*)

Total recognised income and expense

Other changes in equity

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

Purchase of equity instruments