Transcription

Scott PowellCountry Head USA

Santander Holdings USA, Inc. (“Santander USA”) and Banco Santander, S.A. ("Santander") both caution that this presentation contains forward-looking statements. These forwardlooking statements are found in various places throughout this presentation and include, without limitation, statements concerning our future business development and economicperformance. While these forward-looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties andother important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: (1) general market, macroeconomic, governmental and regulatory trends; (2) movements in local and international securities markets, currency exchange rates and interest rates; (3) competitive pressures; (4)technological developments; and (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties. The risk factors that we have indicated in ourpast and future filings and reports, including those with the Securities and Exchange Commission of the United States of America (the “SEC”) could adversely affect our business andfinancial performance. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements.Forward-looking statements speak only as of the date on which they are made and are based on the knowledge, information available and views taken on the date on which they aremade; such knowledge, information and views may change at any time. Santander does not undertake any obligation to update or revise any forward-looking statement, whether as aresult of new information, future events or otherwise.The information contained in this presentation is subject to, and must be read in conjunction with, all other publicly available information, including, where relevant any fuller disclosuredocument published by Santander. Any person at any time acquiring securities must do so only on the basis of such person's own judgment as to the merits or the suitability of thesecurities for its purpose and only on such information as is contained in such public information having taken all such professional or other advice as it considers necessary orappropriate in the circumstances and not in reliance on the information contained in the presentation. In making this presentation available, Santander gives no advice and makes norecommendation to buy, sell or otherwise deal in shares in Santander or in any other securities or investments whatsoever.Neither this presentation nor any of the information contained therein constitutes an offer to sell or the solicitation of an offer to buy any securities. No offering of securities shall bemade in the United States except pursuant to registration under the U.S. Securities Act of 1933, as amended, or an exemption therefrom. Nothing contained in this presentation isintended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotion in the U.K. Financial Services and MarketsAct 2000.Note: Statements as to historical performance, share price or financial accretion are not intended to mean that future performance, share price or future earnings (including earnings pershare) for any period will necessarily match or exceed those of any prior year. Nothing in this presentation should be construed as a profit forecast.Note: The businesses included in each of the geographical segments and the accounting principles under which their results are presented by Grupo Santander may differ from thebusiness included in the public subsidiaries in such geographies and the accounting principles applied locally. Accordingly, the results of operations and trends shown by Grupo Santanderfor its geographical segments may differ materially from those disclosed locally by such subsidiaries.Helping people and businesses prosper1

Agenda1Market and financial system2Strengths and opportunities3Strategy4TargetsHelping people and businesses prosper2

Agenda1Market and financial system2Strengths and opportunities3Strategy4TargetsHelping people and businesses prosper3

The US is an important market for Santander with significant growth potentialThe US has one of the highest GDP per capita .GDP per capita (US k, 2014)55US46UKHQ of Fortune 1000 companies (#, 2014)Northeast US GDP per capitaof US 62k vs. US 51k for therest of the country3018SpainOther SAN1markets8Rest ofworldThe US banking market is 1/3 of the world market Total loans, deposits and payments2(US trn, 2014)18110819USUK and hosts the highest number of large companies5Spain23Other SAN Rest ofmarkets 1 world643287US5413UKSpain70Other SAN1marketsRest ofworld and has by far the largest profit poolPre-tax profit (US bn,2014)330US8825813UKSpain146Other SANmarkets 1Rest ofworld(1) Includes Brazil, Germany, Argentina, Mexico, Chile, Poland and Portugal Source: McKinsey banking pools; IMF; Fortune 1000; national statistics boards(2) All domestic B2B payment transactions, including cash, cheque, card (excl. ATM withdrawals), transfers between accounts at banks and NBFIs and retail payment transactionsHelping people and businesses prosper4

Macroeconomic conditions are expected to improve steadilyUS GDP Growth (%)2.3 2.2 2.4 2.2201220132014Unemployment (%)3.2 3.02.82015(e) 2016(e) 2017(e) 2018(e)8.320127.72013Inflation (CPI)6.620145.62.00.5201220122015(e) 2016(e) 2017(e) 2018(e)0.32.01.90.30.40.22013201410-Yr Treasury0.50.32.41.20.72.61.71.52.72.12.02015(e) 2016(e) 2017(e) 2018(e)1-Yr TreasurySource: Moody’s Analytics, US Bureau of Labor Statistics, Federal Reserve; US Bureau of Economic AnalysisHelping people and businesses prosper4.6Interest Rates (%)250245240235235228 23220144.82015(e) 2016(e) 2017(e) 2018(e)2.820135.053 Month Libor

US financial services landscape presents very unique dynamicsModel / sizeNorthernTrustTrustsMedian ROA, % 200.69BNYMellon 50.78Wells Fargo 50.64SuperregionalCapitalOne ine/specialtyplayersBank ofAmericaUS BankTD BankBB&TM&T 200.94FirstRepublic 200.42 6,0000.91 101.59CreditSuisseHSBCCiti cificNorthwestFirstMercantileBancshares MidwestBancorpAllyMorganStanleyStateStreetJP MorganChaseMoney verRBSFifth ThirdUnionRegionsBanc BFinancialPinnacleBancorpAmericanExpressNote: Financials under GAAP standardsHelping people and businesses prosperSantander US modelNumber of banksExamples of playersGlobal / InvestmentbanksFocus on retail andcommercial banking6

Agenda1Market and financial system2Strengths and opportunities3Strategy4TargetsHelping people and businesses prosper7

Santander has a long track record in the USKey financials1H’15Santander’s track1New Yorkrepresentativeoffice, becomes abranch oneyear later196835Banco SantanderInternational,Miami-basedprivate bank1976197979Acquisition of 90%of Drive Financialof DallasUS 636MM200520062007Remainder ofSovereignUS 1.9bn20092013Total assetsSantanderConsumer USAlaunches IPOvalued atUS 8.3bn20142015US 135bnProfit1US 751MMROA21.13%24Acquisition of FirstNational Bank ofPuerto Rico620% investmentin SovereignBancorp US 2.4bn8Drive becomesSantanderConsumer USA10SovereignbecomesSantander BankOctober 2013Additional 9.68%of SantanderConsumer USA(pending)(1) Consolidated profit before minority interest (2) Calculated using consolidated profit before minority interest (LTM) IFRS standardsHelping people and businesses prosper8ROE211.5%

The main markets where Santander competes are attractiveRetail (Consumer)banking in NE1 6% p.a.Total loans,deposits andpayments213.5Commercial and Corporatebanking in NE1 6% p.a.15.010.82.1Auto finance 8% p.a.2.31.01.70.7(US trn)201020142016(e)201020142016(e)2010(1) Estimated as a percentage of GDP (Northeast vs. USA)(2) All domestic B2B payment transactions, including cash, cheque, card (excl. ATM withdrawals), transfers between accounts at banks and NBFIs and retail payment transactionsSource: McKinsey’s Global Banking poolHelping people and businesses prosper1.1920142016(e)

Santander US has been growing earning assets while reducingnon-performing loans and maintaining strong deposit and capital levelsCustomer loans (EOP, US bn)822012802013852014Non-performing loans (% of stomer deposits (EOP, US bn)582012626220132014FL CET1(1) (%)6513.814.01H'152012201310.811.920141H'15(1) 2012-2014 figures are based on Basel I, 2015 new Basel III framework implemented (shown as fully phased in) Note: IFRS criteria except for capital ratios of SHUSAHelping people and businesses prosper10

Santander US net income: recent performance and breakdown by primarybusinessesSantander US NII (US MM)Santander US quarterly Income Statement (US MM)Income Statement Item1Q’14 2Q’14 3Q’14 4Q’14 1Q’15 2Q’15Net Interest Income1,5571,6101,6181,5661,6461,711Net Fees273283272272294300Other Income17475129218140153Operating n Operating Profit1,1821,2501,2681,2771,2971,358Net Loan-Loss Provisions(748)(684)(811)(718)(719)(834)Profit Before Taxes434566458559579524Tax on Profit(128)(189)(117)(149)(177)(174)Consolidated Profit306377340410401350Minority Interest60906576112111Attributable Profit to the Group2462872753342892391,557 152Q’152Q’14Santander US consolidated Profit (US 153403Q’14Other2SBNA(1) Including dividends, income from equity-accounted method and other income/other provision (2) Puerto Rico, New York, Miami and Holding CompanyHelping people and businesses prosper11SCUSA

Santander Holdings USA is currently comprised of two primary businessesSantander Holdings USASantander Bank, N.A. (SBNA) Retail (Consumer) BankingSantander Consumer USA Holdings Inc. (SCUSA) Business BankingFull-service technology-drivenconsumer finance company focused on: Vehicle financing solutions forCommercial and CorporateBankingdealers and individuals across theUnited States Servicing of auto loans owned bythird parties10thBank in theNortheast21stBank in the US15thAuto-lender inthe country24th(1) Ranking based on total deposits as of June 2014 (2) Ranking based on automotive loan originations in 1Q2015, includes Santander and Chrysler Capital combinedSource: SNL Financial GAAP standards, Experian – State of Automotive Finance MarketHelping people and businesses prosper12Used vehiclelender2

SBNASantander Bank has a significant franchise in the Northeast USStrong footprint in the attractive Northeast US among the largest players in the regionNortheastBanks Total assets as of June 2015: US 74bn Branches within the Northeast as of June 2015: 682 2MM households and in more than 12k mid-sizedcompanies in Northeast Proven customer strategy and ability to leverage globalcapabilities for large corporationsDeposits in the NortheastMarket share (%), June 201422.81)JP Morgan Chase2)Bank of America3)TD Bank4.84)PNC4.75)Wells .210)10.52.4Source: SNL FinancialGroup criteriaHelping people and businesses prosper13

SBNAImprovements across all elements of the Santander Bank NAcan help USA to achieve the RoTE of our leading competitorsRoTE 11%9.2%1H’15 SantanderUSA RoTESource: SNL FinancialIFRS standardsBecome theprimary bankfor more of ourRetail customersCapture our fairshare of themost attractiveBusiness BankingcustomersHelping people and businesses prosperDeliver the fullset of profitableCommercialand CorporateproductsChange mix andpricing to lowerfunding costsPrudentexpensemanagement142018 targetSantander USARoTE

SBNAIn Retail (Consumer), we have significant areas for profitable growthKey opportunitiesLarge potential marketProfitpoolYearlygrowth1US 33bnMore primary accounts and completerelationships will drive revenueProduct penetration vs. Market (%) 6%Strong starting position 2MM customers 682 branches Presence in country’smost attractive regions68CheckingaccountsCredit cardsCurrent situation87Bottom quartile in JDPower ranking5258OnlinebankingMortgagesHigher satisfaction andproductivity will support growth76Productivity levelsbelow peer’s average1127SantanderMarket(1) 2010-2016 CAGRSource: CBA Digital Benchmark, McKinseyHelping people and businesses prosper15

SBNABusiness Banking offers many areas of opportunityKey opportunitiesLarge potential marketRevenuepoolYearlygrowthStrengthen the product offeringand sales performanceUS 10bnImprove customer targetingand experienceProduct offering vs. Market 5-10%Strong starting position US 10bn of balances(loans and deposits) 170,000 customersReal estate1BusinessLOC11CreditcardsC&Iloans1Current situationUnderweighted inupper end of BusinessBanking segment20Limited product suiteand sales capabilitiesfor Business Banking537SantanderMarket(1) Includes C&I loans, auto loans and business loansSource: Santander, Bank websites, Synthetic Bank, Barlow, McKinseyHelping people and businesses prosper16

SBNAIn Commercial and Corporate, we will improve our product suite and leverageGroup capabilitiesKey opportunitiesLarge potential marketRevenuepoolYearlygrowth1US 24bn 6%Stronger product offering, particularly cashmanagement, will drive RoECash Management contribution% commercial revenue, 20133237Opportunity to take advantageof Group capabilitiesLeverage Group capabilitiesand reputationin expanding GlobalCorporate BankingStrong starting position 25p.p. US 40bn of balances(commercial, real estateand SGCB) 6,000 customers Part of Santander GroupTrade flowswithin Santanderregions7.2SantanderPeer avg.Of total worldtrade flows2Top performers(1) 2010-2016 CAGR Note: peer set includes Bank of America, Citibank, Citizens, SunTrust, Union Bank, US Bank, Wells Fargo, JP Morgan, PNC(2) Santander footprint. In the case of the US: considering all states where Santander Bank operatesSource: Santander, Bank websites, Synthetic Bank, Barlow, Global Banking Pools, McKinsey Midmarket Corporate Banking survey, Greenwich AssociatesHelping people and businesses prosper23%17

SBNAWe have a significant opportunity to improve our funding costsSBNA’s yields vs. peersKey opportunities(1H’15)Interest BearingDepositsSantanderMedian peer0.6%0.2% Improve loyalty and strengthen depositmix via core operating account acquisition Deposit pricing improvementBorrowingsDebt and EquitySecurities1.7%2.4% Payoff or restructuring of certain legacyborrowings1.8%2.2%Loans andLeases3.5%3.6%Note: peer set defined as US banks with assets between 50Bn and 250Bn (N 14) Source: SNL Financial GAAP standardsHelping people and businesses prosper18

SBNAAdditionally, we can improve expenses controlSBNA’s efficiency ratio1 vs. peersKey opportunities(%, 1H’15)75.8SBNA1st quartile2nd quartile3rd quartileMaximumvalue Improved efficiency through automation andexpense management Optimisation of organisation structure and64.1operating model (including overlap betweenbank and holding)65.9 Optimisation of corporate facilities, continuedbranch rationalizsation68.578.3 Reduction in regulatory transformationexpenses in three years(1) Noninterest expense, less amortisation of intangible assets, divided by net interest income on a fully taxable equivalent basis and noninterest incomeNote: peer set defined as US banks with assets between 50Bn and 250Bn (N 14)Source: SNL Financial GAAP standardsHelping people and businesses prosper19

SCUSASCUSA’s expertise in nonprime has allowed it to become a top five playerin national auto finance (top four in used vehicles)Auto loan origination occurs through three channelsDescriptionChannelIndirect OEMrelationshipsFull-spectrum lenderTop auto financecompaniesAutomotive loan originationsMarket Share (%), 1Q’15TotalNew vehicles1) Wells Fargo DS5.42) Ally5.34.6Offering prime and nonprime loans,leases and dealer financing solutions4) Capital One4.44.6 Auto loans directly to consumers4.14.6 Via online channels, primarily throughRoadloans.com5)6) Toyota FS3.8Helping people and businesses prosper206.34.56.73) ChaseSource: Experian – State of Automotive Finance Market, Santander Consumer USA includes Chrysler CapitalUsed vehicles3.6Preferred lender for FCA US LLC(“Chrysler”) Direct-toconsumerSubstantial dealer network throughoutthe United StatesSCUSA is already a major player in auto finance7.72.94.33.97.51.8

SCUSASCUSA delivers strong profitability today and has additional growthopportunities in third-party servicing and Chrysler CapitalFocused in core nonprime assetsRetail installment contractson balance1 (Jun’15)15%85%Highly profitableKey opportunitiesSCUSA RoE3100%19.1%23.0%22.2%Chrysler relationshiphas additionalgrowth potentialHigh potential growth inservicing platform2Nonprime2PrimeTotal201320142Q'15Total Portfolio of c.US 49bnc.US 36bn ownedc.US 13bn serviced for others(1) Balances held for investment; excludes prime assets held for sale and personal loans (2) Nonprime assets with FICO scores under 640 (3) IFRSHelping people and businesses prosper21

In 2016, Santander USA will include all US and Puerto Rico operations of theSantander GroupAdditions to Santander USA effective July 1st 2016Private Banking (Miami) Comprehensiveservice to high networth customers: AUM US 22bn 13,000 customers Service customers across 16 LatinAmerican countries Open architecture productproposition, best-in-class costefficiency, strict compliancePuerto Rico Retail (Consumer)and Commercialoperation withUS 5.5bn in assets Good credit quality, level ofcapitalisation, liquidity and quality ofservice Only investment grade bank onisland Challenging business environmentHelping people and businesses prosperSantander Investment Securities Santander InvestmentSecurities is a brokerdealer in New Yorkwith: US 1.3bn in assets US 111MM Capital22

Agenda1Market and financial system2Strengths and opportunities3Strategy4TargetsHelping people and businesses prosper23

Santander is working to meet regulatory expectations in the USContext SHUSA is building out theappropriate processes andmanagement structures toeffectively manage all theGroup’s activities in the US Key areas of focus: Governance and oversightof the consolidated USorganisation Risk management Capital planning Liquidity risk managementHelping people and businesses prosperMain initiatives1. Significant US management and Board ofDirector changes, including independentdirectors, with large US banking managementexperience and deep expertise of regulatorymatters2. Launched a multi-year transformationprogram to strengthen risk, capital andliquidity management3. Investing in technology to further improveour internal controls, risk management andcapital planning systems24Building re

Going forward, Santander Holdings USA will focus on four strategic prioritiesBecome the regional bank of choice in ourfootprint and a national leader in auto finance1Retail (Consumer) Easy to use productsuite to drive loyalty Improved customerexperience across allchannels Advanced digitalcapabilities in keyprocesses andservices2 Business bankingKnowledgeablesales force withstrong localrelationshipEasy-to-use multichannelcapabilitiesHelping people and businesses prosper3 Commercial andCorporateEnhanced cashmanagement andtreasury productsLeverage of theunique Globalcapabilities of theGroupEffective sales force4Auto Optimisedportfolio mix Significantservicing business Relationship withChrysler that isfully realised25

1Retail (Consumer)In retail we will focus on acquiring primary customer relationships by building asimple and innovative value propositionPriorityMain initiativesDevelop asimplified, valueadding core offerIllustration New mass market checking product Core credit card product: cash back rewards with no annual fee Simplify overall product portfolioEnable convenient “anytime, anywhere, anyhow” interfacesExtend value proposition to complement our branch presenceLeverage client profiling in sales and service (Neo CRM)Move simple / routine transactions to digital channelsEnhance digitalcapabilities Optimize thebranch network Transform people equation: sales tools, routine, coaching,training, partner collaboration and performance metrics Optimise footprint and format: right-size and relocate Enhance branch experience, processes and capabilitiesImprovecustomersatisfaction Improve platform reliability, performance and functionality Simplify processes and reduce existing friction points Empower frontline and back officeHelping people and businesses prosperImprove our positionin J.D. Power ranking26

1Retail (Consumer)We are steadily improving digital capabilities and will focus on the processes andservices most relevant for the value proposition and customer satisfactionMultichannel CRMProvides front line with clearunderstanding of high-level customerdigital behaviour or non-behaviourHelping people and businesses prosperEnhancements in online andmobile banking“Best Digital Platform”Digital Strategy Awards 2015by innovation enterpriseTransaction migrationATM Image Deposit capability across theentire proprietary networkMobile Check Deposit for iOS andAndroid27

1Retail (Consumer)More loyal customers will deliver higher quality earnings (expected impact)Loyal customers (MM)Checking balances (MM) 8%2015(e)Deeper and morestable customerrelationships (moreproduct penetrationand fees) 8%2018(e)2015(e)Grow multi-channel engagement (%)2% penetration2018(e)Credit Card spend1 (MM)Lower cost of funding2018(e)2015(e)60 6416 22Direct depositOnline billpay18 78%40MobilebankingReduce level of risk2015(e)2018(e)(1) Includes Retail spend, cash advances and balance transfers (2) Based on deposit customersHelping people and businesses prosper28

2Business BankingIn Business Banking we will focus on our product, sales and risk capabilitiesPriorityMain initiativesCompleteproduct offeringStrengthen salesforceExpected Impact Develop products that are required to compete: Cash management Flagship credit card product for businesses Deliver a better digital experienceChecking Account Production Increase sales force Improve commercial routines to increase sales forceeffectiveness Ability to target larger customers 100%2015Streamline riskprocesses Develop two differentiated and streamlined creditpipelines: Turnover US 0-3MM: scoring and Score Plusdriven and standardised processes Turnover US 3-25MM: faster processes ofindividualised evaluationsHelping people and businesses prosperRevolving CreditbalancesChecking balance 90%20152018 25%2018201529Term Loanbalances 50%201820152018

3Commercial and CorporateIn commercial and corporate we will improve the product proposition,strengthen the sales force and leverage the full potential of the GroupPriorityBuild a strongerand morecomprehensivecash mgmt.propositionMain initiatives Develop cashmanagement productsthat enable Santander toeffectively competeExpected ImpactExpected impact – Middle MarketNon-credit % of revenue 25% Build on / add tospecialised sales force Improve commercialroutines to increase salesforce effectivenessStrengthensales forceLeverage GlobalcapabilitiesAdditional impacts Improve Loan toDeposit ratio Improve RoE Leverage unique Groupcapabilities: Trade finance Global CorporateBanking (SGCB)Helping people and businesses prosper20152018Expected impact – Global Corporate BankingDeposit Av. Balances 25%2015Loans Av. Balances 25%20182015Unfunded Commitments-40%20183020152018

4AutoAt SCUSA, we will maintain our momentum while increasing the serviced forothers business and fully leveraging the potential of the Chrysler relationshipPriorityMain initiativesMaintainmomentumof core businessFully realizepotential ofChryslerrelationshipGrow servicing tosupport fee-basedbusinessIncrease number ofasset flowagreements Continue to focus origination on the nonprime segment Drive origination through dealer network and DTC channelsExpected impactChrysler contractual capture rate1 (%) Maintain strong underwriting discipline Continue to grow compliance and risk capabilities 21p.p. Capture full value of Chrysler relationship throughappropriate levels of subvention and fulfillment of salesobjectives6544 Scale up capital efficient fee-based business by leveragingour servicing expertise1H'15 Continue to expand marketplace Build stable funding sources(1) See SCUSA SEC filings for more detailHelping people and businesses prosper312018(e)

Agenda1Market and financial system2Strengths and opportunities3Strategy4TargetsHelping people and businesses prosper32

2018 USA es2018Employee engagementBelow peersPeers levelAttrition levels (SBNA)16.9%Market rateRetail loyal customers (k) (SBNA)164182Digital customers (k) (SBNA)5751,200Bottom quartileApproach peersFee income CAGR7%(2)22%(3)RoTE9.2% 11%FL CET111.9% 12%NPL ratio2.2%2.5%C/I ratio37%c.37%Customer service satisfaction1 (SBNA)Number of scholarships 2016-2018 (k)(1) J.D. Power, applicable for SBNA Retail only (2) 1H’14-1H’15 (3) 2015-2018Helping people and businesses prosper6.3Note: IFRS criteria except for capital ratios of SHUSA33

Transparent performance metrics for 2016Key metricDigital(# customers)Chrysler contractualcapture rate1 (%)Retail LoyalCustomers(# customers)1H’15575k2016 725k44164k54 170kImprovement 26% 10p.p. 5%Comment Increase penetration with expanded base Steady development of digital capabilities Capture further potential of Chryslerrelationship Increase cross-product usage/linkage byclients Focus on customer satisfaction(1) See SCUSA SEC filings for more detailHelping people and businesses prosper34

Key takeawaysThe US market continues to be an attractive opportunity for Santander GroupImmediate focus on enhancing foundational elements to meetregulatory requirementsClear plans and roadmaps to become a strong banking franchisein the US North East and maintain leadership in Auto FinanceImproving our overall RoTE to 11%Helping people and businesses prosper35

Sep 23, 2015 · Helping people and businesses prosper 1 Santander Holdings USA, Inc. (“Santander USA”) and Banco Santander, S.A. ("Santander") both caution th