Form 6-K
Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

 

Report of Foreign Issuer

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

the Securities Exchange Act of 1934

For the month of April, 2012

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  x

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  x

 

 

 


Table of Contents

Banco Santander, S.A.

TABLE OF CONTENTS

 

Item

    

1

  

Financial report 1st quarter results, 2012

2

  

Financial statements 1st quarter results, 2012


Table of Contents

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Table of Contents

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CONTENTS   

KEY CONSOLIDATED DATA

     5   

HIGHLIGHTS OF THE QUARTER

     6   

CONSOLIDATED FINANCIAL REPORT

     8   

Income statement

     9   

Balance sheet

     13   

RISK MANAGEMENT

     20   

THE SANTANDER SHARE

     23   

INFORMATION BY PRINCIPAL SEGMENTS

     24   

Continental Europe

     28   

United Kingdom

     36   

Latin America

     38   

United States

     46   

Corporate Activities

     48   

INFORMATION BY SECONDARY SEGMENTS

     50   

Retail Banking

     50   

Global Wholesale Banking

     52   

Asset Management and Insurance

     54   

CORPORATE GOVERNANCE

     56   

SIGNIFICANT EVENTS IN THE QUARTER AND SUBSEQUENT ONES

     57   

CORPORATE SOCIAL RESPONSIBILITY

     58   

www.santander.com

 

 

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Gross income

EUR Million

+ 8.3% Q1’12 - Q1’11

 

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Attributable profit

EUR Million

-23.9% Q1’12 - Q1’11

 

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Efficiency ratio

%

-0.4 p.p. Q1’12 - Q1’11

 

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Pre-provision profit

EUR Million

+9.2% Q1’12 - Q1’11

 

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Earnings per share

Euros

-28.5% Q1’12 - Q1’11

 

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Core capital

%

+ 0.4 p,p, Q1’12 - Q1’11

 

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KEY CONSOLIDATED DATA

 

 

Balance sheet (EUR Million)    Q1’12      Q1’11      Amount     (%)     2011  

Total assets

     1,283,349         1,208,563         74,786        6.2        1,251,525   

Net customer loans

     746,382         713,871         32,511        4.6        750,100   

Customer deposits

     642,786         620,774         22,013        3.5        632,533   

Customer funds under management

     1,007,804         984,668         23,136        2.3        984,353   

Shareholders’ equity (1)

     80,695         77,590         3,105        4.0        80,629   

Total managed funds

     1,418,528         1,350,922         67,606        5.0        1,382,980   
Income statement (EUR Million)    Q1’12      Q1’11      Amount     (%)     2011  

Net interest income

     7,821         7,075         746        10.6        29,110   

Gross income

     11,354         10,482         872        8.3        42,754   

Pre-provision profit

     6,280         5,750         530        9.2        23,195   

Profit from continuing operations

     1,829         2,332         (504     (21.6     7,812   

Attributable profit to the Group

     1,604         2,108         (504     (23.9     5,351   
EPS, profitability and efficiency (%)    Q1’12      Q1’11      Amount     (%)     2011  

EPS (euro)

     0.17         0.24         (0.07     (28.5     0.60   

Diluted EPS (euro)

     0.17         0.24         (0.07     (28.5     0.60   

ROE

     8.13         11.37             7.14   

ROTE

     11.99         16.90             10.81   

ROA

     0.57         0.77             0.50   

RoRWA

     1.28         1.58             1.06   

Efficiency ratio (with amortisations)

     44.7         45.1             45.7   
BIS II ratios and NPL ratios (%)    Q1’12      Q1’11                  2011  

Core capital

     10.10         9.66             10.02   

Tier I

     11.05         10.93             11.01   

BIS II ratio

     13.50         13.74             13.56   

NPL ratio

     3.98         3.61             3.89   

NPL coverage

     62         71             61   
Market capitalisation and shares    Q1’12      Q1’11      Amount     (%)     2011  

Shares (2) (millions at period-end)

     9,077         8,440         637        7.5        8,909   

Share price (euros)

     5.770         8.192         (2.422     (29.6     5.870   

Market capitalisation (EUR million)

     52,373         69,143         (16,769     (24.3     50,290   

Book value (1) (euro)

     8.45         8.72             8.62   

Price / Book value (X)

     0.68         0.94             0.68   

P/E ratio (X)

     8.47         8.60             9.75   
Other data    Q1’12      Q1’11      Amount     (%)     2011  

Number of shareholders

     3,269,996         3,149,422         120,574        3.8        3,293,537   

Number of employees

     189,613         177,648         11,965        6.7        189,766   

Continental Europe

     58,506         49,702         8,804        17.7        59,297   

o/w: Spain

     31,809         32,192         (383     (1.2     31,889   

United Kingdom

     27,381         26,902         479        1.8        27,072   

Latin America

     92,244         89,866         2,378        2.6        91,913   

USA

     9,151         8,928         223        2.5        9,187   

Corporate Activities

     2,331         2,250         81        3.6        2,297   

Number of branches

     14,696         14,179         517        3.6        14,756   

Continental Europe

     6,558         6,151         407        6.6        6,608   

o/w: Spain

     4,763         4,794         (31     (0.6     4,781   

United Kingdom

     1,363         1,412         (49     (3.5     1,379   

Latin America

     6,053         5,895         158        2.7        6,046   

USA

     722         721         1        0.1        723   

Note: The financial information in this report has not been audited, but it was approved by the Board of Directors at its meeting on April, 24 2012, following a favourable report from the Audit and Compliance Committee on April, 18 2012. The Committee verified that the information for the quarter was based on the same principles and practices as those used to draw up the annual financial statements.

 

(1)

In December 2011, estimated data of May 2012 scrip dividend

(2)

In December 2011, includes shares issued to cover the exchange of preferred shares of December 2011

 

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HIGHLIGHTS OF THE QUARTER

 

 

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Income statement: (pages 9-12)

 

 

In a quarter characterised by a difficult economic and financial environment, the Group posted an attributable profit of EUR 1,604 million (EPS of EUR 0.17), 23.9% less than in the first quarter of 2011. This was largely due to still high provisions in some units, higher minority interests in Brazil and Chile, and the reduced stake in Santander Consumer USA and more taxes.

 

 

The Group continued to show its capacity to generate high operating profits. Pre-provision profit set a new quarterly record of EUR 6,280 million, 9.2% more year-on-year and 13.4% above the fourth quarter.

 

 

The income statement reflects the main focuses of management during the quarter:

 

   

Good performance of basic revenues (+8.9% y-o-y) thanks to net interest income (+10.6%) and fee income (+4.1%), Trading gains were also good, chiefly due to wholesale businesses.

 

   

Year-on-year growth in expenses (+7.2%) slightly below the growth in gross income and with a better trend: zero growth in the first quarter over the fourth quarter of 2011 compared to a 7% rise in gross income.

 

   

Higher provisions for loan losses because of specific ones and consumption of the generic ones in Spain in 2011 (release of EUR 356 million in the first quarter of last year).

 

 

Better trend over the fourth quarter. Pre-provision profit was up 13.4%, spurred by a 6.8% rise in gross income and flat costs. This absorbed the higher provisions and increased profit before tax by 4.4%.

 

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Strong balance sheet: (pages 13-22)

 

 

Core capital ratio of 10.10% under BIS II criteria at the end of March (+ 8 b.p. since the end of 2011). In accordance with the requirements established by the European Banking Authority (EBA), the ratio is 9.11%.

 

 

Better financing structure (deposits plus medium- and long- term funding to loans ratio of 116% compared to 113% at the end of 2011).

 

 

The liquidity ratio (loans-to-deposits) was 115% (117% at the end of 2011). The preference for deposits throughout the Group and a conservative policy of issues was maintained, taking advantage of market opportunities and guaranteeing comfortable coverage of liquidity.

 

 

The Group’s non-performing loan and coverage ratios were 3.98% and 62%, respectively, at the end of March. The NPL ratio in Spain was 5.75% and coverage 46%. In each case, the NPL ratios rose in the quarter and coverage was 1 p.p. higher.

 

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Significant event in the quarter and subsequent ones: (more detail on page 57)

 

 

Banco Santander and KBC Bank agreed to merge their subsidiaries in Poland (Bank Zachodni WBK and Kredyt Bank), consolidating the combined bank as the third largest in the country. After the operation Santander will control between 76.5% and 81.5% of the bank.

 

 

The operation is in line with the Group’s strategy of growing in high potential core markets and will improve the critical mass and generate synergies in business in addition to those already announced at the time of the acquisition of Bank Zachodni WBK. It will have a positive impact on EPS and a ROI higher than the cost of capital in the third year.

 

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HIGHLIGHTS OF THE QUARTER

 

 

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The Santander share: (page 23)

 

 

The Santander share stood at EUR 5.770 on March 30, 1.7% lower than at the end of 2011 and 29.6% lower year- on-year.

 

 

Banco Santander has already paid the first interim dividend of EUR 0.135 in cash per share charged to 2011’s profits. The second and third dividends of EUR 0.126 and EUR 0.119 per share respectively were paid under the Santander Dividendo Elección (scrip dividend) scheme. In addition, the AGM on March 30 approved a final dividend of EUR 0.22 per share, also under the programme, to be paid in May.

 

 

The total remuneration per share for 2011 was EUR 0.60 for the third year running (a total of EUR 5,260 million).

 

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Business Areas: (more detail on pages 24-55)

 

   

Continental Europe: attributable profit of EUR 584 million, 33.5% less year-on-year because of the fall in the units in Spain and Portugal, which in the first quarter of 2011 consumed EUR 350 million of generic provisions. Net operating income before provisions, was 10.6% higher. The profit was two times higher than in the fourth quarter of 2011 and also clearly above that of the third quarter, due to higher gross income and lower costs and provisions.

 

   

United Kingdom: attributable profit of £255 million, 40.8% less year-on-year, hard hit by the higher cost of funding and the impact of low interest rates on the spreads of products. Costs remained stable and provisions increased.

 

   

Latin America: attributable profit of EUR 1,218 million in the first quarter of 2012. In local currency, profit was 4.1% lower because of the perimeter impact, higher provisions and taxes. On a like-for-like basis, profit was 4.0% higher and net operating income increased 17.5%. In relation to the fourth quarter, higher gross income and lower costs produced positive growth in net operating income and profits.

 

   

United States: attributable profit of $314 million, 20.6% less than in the first quarter of 2011 because of the perimeter impact. Sovereign Bank, which was not affected by the perimeter, produced attributable profit 8.9% higher year-on-year and 7.7% more than the fourth quarter of 2011.

 

Distribution of attributable profit

by geographic segments. Q1’12

 

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Distribution of attributable profit

by business segments. Q1’12

 

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CONSOLIDATED FINANCIAL REPORT

 

 

General background

Grupo Santander conducted its business in the first quarter of 2012 against a global economic backdrop that showed some signs of greater stability following approval of the new rescue package for Greece, higher growth in the US and the recovery of Latin American economies.

Yet the situation is not free of risks, which still emanate from Europe’s sovereign debt crisis, despite the extraordinary support measures taken by the European Central Bank, the surge in oil prices and signs of a downturn in the Chinese economy.

In the US, the upward revision in fourth quarter GDP growth (+3.0% quarter-on-quarter annualized), together with improvements in employment, consumption and the housing sector, should make it possible to continue this growth in the first quarter of 2012 at significant rates (above 2% according to the IMF). With inflation expected to continue to fall to around 2%, the Fed has leeway to maintain a monetary policy that supports growth and calms sovereign and financial tensions in Europe. Its official interest rate will remain at around zero beyond 2013.

Latin America’s indicators since the end of 2011 point to more solid growth than envisaged. This cooled expectations of lower official interest rates in the coming months and appreciated currencies.

Brazil’s GDP rose 2.7% in 2011 after growing 0.3% in the fourth quarter over the third. Domestic demand, which looks like accelerating in 2012 to an average 3.5%, was the engine of growth. Lower inflation (5.2% in March) enabled the central bank to cut interest rates again (to 9.0% from 11% in 2011). In this environment, the real strengthened notably and ended March at BRL 1.82/US$1 after the central bank’s measures and interventions.

Mexico grew 3.8% in 2011, after lower growth in the fourth quarter (0.4% quarter-on-quarter) due to services and agriculture. The low unemployment rate (5.2% in February) combined with strong growth in lending will help to boost domestic demand and public investment in 2012, key elements for maintaining GDP growth of around 3.5%, according to the IMF.

In this context and with inflation under control, the Bank of Mexico held its benchmark rate at 4.5% in a strategy that does not look like changing. The peso appreciated in the first quarter to MXN 12.7/US$1.

Chile’s growth accelerated in the fourth quarter (+2% over the third quarter; +0.3% third quarter over second quarter) to end the year at 5.9%. This pace continued in the first quarter of 2012. The spurt in inflation (3.8% in March) and the stronger growth led the central bank to change the bias of its monetary policy, initially focused on cutting its official rate (-0.25% in January to 5%) and now closer to a possible rise. The peso strengthened by almost 7% in the first quarter to CLP 486/US$1.

The euro zone economy shrank 0.3% in the fourth quarter, reducing growth for the year to 1.5%, due to the sharp deterioration in the confidence of markets, households and companies, and the tougher lending conditions due to the sovereign crisis.

With inflation (2.7% in March) expected to decline, the ECB carried out a second auction of long-term liquidity which, together with the first one, brought to EUR 1,021 million the three-year funding granted to European banks at 1%. The ECB seems to be adopting a strategy of wait and see in order to assess the impact of the unconventional measures. The euro remained stable against the dollar and ended the quarter at US$1.34/EUR.

The situation by countries reflects the very varied performance. The impact of sovereign debt tensions on the peripheral countries intensified in the fourth quarter (Italy’s GDP shrank 0.7% and Portugal’s 1.3%), while France grew 0.2%.

Germany, after the contraction in the fourth quarter (0.2%) began 2012 with greater signs of upturn than the rest of the euro zone and a robust labour market (lowest unemployment rate since 1991), which should gradually boost the contribution of domestic demand.

Spain’s economy shrank 0.3% in the fourth quarter over the third. Despite a solid external sector, the adjustment process (debt, real estate and the current account) and the substantial fiscal consolidation effort, will result in negative growth for the whole year. Inflation dropped to 1.9% in March.

The UK economy contracted 0.3% in the fourth quarter over the third. Inflation continued to fall (3.5% in March). The Bank of England held its base rate at 0.5% and increased the objective for acquiring bonds by £50,000 million (to £325,000 million), which it aims to complete in May. Sterling remained stable against the euro and ended March at EUR 1.20/£1.

Poland, after growing 4.3% in 2011, began 2012 with lower growth but still more than 2.5% according to the IMF. External demand and private consumption were weaker, while investment remained strong. With inflation lower in March at 3.8%, the central bank held its key rate at 4.5% (since June) while the zloty appreciated 7% against the euro during the first quarter to PLN 4.15/EUR 1.

 

 

Exchange rates: 1 euro / currency parity

 

     Average (income statement)      Period-end (balance sheet)  
     Q1’12      Q1’11      31.03.12      31.12.11      31.03.11  

US$

     1.3105         1.3672         1.3356         1.2939         1.4207   

Pound

     0.8344         0.8537         0.8339         0.8353         0.8837   

Brazilian real

     2.3156         2.2789         2.4323         2.4159         2.3058   

New Mexican peso

     17.0138         16.4943         17.0222         18.0512         16.9276   

Chilean peso

     640.4469         658.8955         649.3019         671.3400         683.1436   

Argentine peso

     5.6878         5.4932         5.8366         5.5686         5.7528   

Polish zloty

     4.2297         3.9450         4.1522         4.4580         4.0106   

 

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CONSOLIDATED FINANCIAL REPORT

 

 

Grupo Santander. Income statement

 

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New quarterly record for pre-provision profit of EUR 6,280 million, 9.2% more year-on-year and 13.4% above that of the fourth quarter of 2011.

 

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Basic revenues increased 8.9% year-on-year thanks to the good evolution of net interest income (+10.6%), fee income (+4.1%) and insurance activity (+10.0%). The increase over the fourth quarter was 5.3%.

 

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The quarter was also good for trading gains (+20.1%), general improvement over recent quarters.

 

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Year-on-year growth in expenses slightly below that of gross income and with a better trend in the last quarter: (gross income: +6.8%; expenses: -0.4%).

 

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Higher loan-loss provisions due to the rise in specific ones and release of EUR 356 million in the first quarter of 2011).

 

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Negative impact on attributable profit from a higher tax charge and perimeter (mainly in minority interests).

Attributable profit was EUR 1,604 million, 23.9% less than in the first quarter of 2011 and due to three factors that affected the year-on-year comparison:

 

 

Generic provisions instead of the release made in 2011.

 

 

A net negative perimeter effect of 3 p.p. This was due, on the one hand, to the difference between a positive impact from the entry in April 2011 of Bank Zachodni WBK and, to a lesser extent, of the business acquired from SEB in Germany as of February 2011, and, on the other hand, a negative impact from the lower contribution of income by the equity accounted method (because of the entry of new partners into the capital of Santander Consumer Finance and the partial disposal of insurance business in Latin America, which means that the Group has reduced its equity stakes in both cases) and the rise in minority interests after the placement of part of the capital of the subsidiaries in Chile and Brazil.

 

 

The larger impact of taxes.

These effects absorbed the good evolution of pre-provision profit, which set a new quarterly record of EUR 6,280 million (+9.2% y-o-y), spurred by sound basic revenues (+8.9%).

Attributable profit was 6.6% lower than recurring profit in the fourth quarter, also affected by minority interests and taxes as profit before tax was 4.4% higher, due to gross income and operating expenses.

 

 

Income statement

EUR Million

 

     Q1’12     Q1’11     Variation
Amount
    (%)     Q4’11     Variation
Amount
    (%)  

Net interest income

     7,821        7,075        746        10.6        7,536        285        3.8   

Dividends

     61        40        21        52.6        101        (39     (39.1

Income from equity-accounted method

     136        225        (90     (39.9     176        (41     (23.2

Net fees

     2,622        2,518        104        4.1        2,387        235        9.9   

Gains (losses) on financial transactions

     797        664        134        20.1        474        323        68.1   

Other operating income/expenses

     (83     (40     (43     107.8        (45     (38     83.9   

Gross income

     11,354        10,482        872        8.3        10,629        725        6.8   

Operating expenses

     (5,074     (4,731     (343     7.2        (5,093     19        (0.4

General administrative expenses

     (4,549     (4,227     (322     7.6        (4,563     14        (0.3

Personnel

     (2,637     (2,474     (163     6.6        (2,601     (36     1.4   

Other general administrative expenses

     (1,911     (1,752     (159     9.1        (1,961     50        (2.5

Depreciation and amortisation

     (525     (505     (21     4.1        (530     5        (0.9

Net operating income

     6,280        5,750        530        9.2        5,536        744        13.4   

Net loan-loss provisions

     (3,127     (2,065     (1,061     51.4        (2,577     (549     21.3   

Impairment losses on other assets

     (83     (48     (35     74.2        11        (94     —     

Other income

     (526     (546     20        (3.7     (531     5        (1.0

Profit before taxes (w/o capital gains)

     2,545        3,092        (547     (17.7     2,439        106        4.4   

Tax on profit

     (716     (759     43        (5.6     (545     (171     31.4   

Profit from continuing operations (w/o capital gains)

     1,829        2,332        (504     (21.6     1,894        (65     (3.4

Net profit from discontinued operations

     1        (6     7        —          (3     4        —     

Consolidated profit (w/o capital gains)

     1,829        2,327        (497     (21.4     1,890        (61     (3.2

Minority interests

     226        218        7        3.3        173        53        30.4   

Attributable profit to the Group (w/o capital gains)

     1,604        2,108        (504     (23.9     1,717        (114     (6.6

Net extraordinary capital gains and provisions

     —          —          —          —          (1,670     1,670        (100.0

Attributable profit to the Group

     1,604        2,108        (504     (23.9     47        1,556        —     

EPS (euros)

     0.17        0.24        (0.07     (28.5     0.00        0.17        —     

Diluted EPS (euros)

     0.17        0.24        (0.07     (28.5     0.00        0.16        —     

Pro memoria:

              

Average total assets

     1,275,368        1,210,814        64,554        5.3        1,243,254        32,114        2.6   

Average shareholders’ equity

     78,894        74,152        4,742        6.4        75,458        3,436        4.6   

 

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CONSOLIDATED FINANCIAL REPORT

 

Quarterly

EUR Million

 

     Q1’11     Q2’11     Q3’11     Q4’11     Q1’12  

Net interest income

     7,075        7,225        7,275        7,536        7,821   

Dividends

     40        193        60        101        61   

Income from equity-accounted method

     225        204        169        176        136   

Net fees

     2,518        2,667        2,636        2,387        2,622   

Gains (losses) on financial transactions

     664        722        639        474        797   

Other operating income/expenses

     (40     (90     (57     (45     (83

Gross income

     10,482        10,921        10,722        10,629        11,354   

Operating expenses

     (4,731     (4,826     (4,909     (5,093     (5,074

General administrative expenses

     (4,227     (4,303     (4,376     (4,563     (4,549

Personnel

     (2,474     (2,511     (2,569     (2,601     (2,637

Other general administrative expenses

     (1,752     (1,791     (1,807     (1,961     (1,911

Depreciation and amortisation

     (505     (523     (533     (530     (525

Net operating income

     5,750        6,095        5,813        5,536        6,280   

Net loan-loss provisions

     (2,065     (2,546     (2,711     (2,577     (3,127

Impairment losses on other assets

     (48     (52     (84     11        (83

Other income

     (546     (1,378     (357     (531     (526

Profit before taxes (w/o capital gains)

     3,092        2,119        2,661        2,439        2,545   

Tax on profit

     (759     (512     (683     (545     (716

Profit from continuing operations (w/o capital gains)

     2,332        1,607        1,978        1,894        1,829   

Net profit from discontinued operations

     (6     (0     (15     (3     1   

Consolidated profit (w/o capital gains)

     2,327        1,607        1,963        1,890        1,829   

Minority interests

     218        214        161        173        226   

Attributable profit to the Group (w/o capital gains)

     2,108        1,393        1,803        1,717        1,604   

Net extraordinary capital gains and provisions

     —          —          —          (1,670     —     

Attributable profit to the Group

     2,108        1,393        1,803        47        1,604   

EPS (euros)

     0.24        0.16        0.20        0.00        0.17   

Diluted EPS (euros)

     0.24        0.16        0.20        0.00        0.17   

 

Net interest income

EUR Million

 

LOGO

Basic revenues*

EUR Million

 

(*)

Including net interest income, fees and insurance activities

 

LOGO

Other aspects to be taken into account before looking at the results are:

 

 

The impact of exchange rates against the euro was virtually zero (less than one negative percentage point) when comparing gross income and operating expenses with the first quarter of 2011. The impact in the UK and the US was positive (2 and 4 p.p., respectively) and in Latin America the effect was negative (1 p.p.).

 

 

The profit for the quarter still does not reflect the capital gain from the sale of the business in Colombia (EUR 615 million net of tax), which is expected to occur in the second quarter and will be fully assigned, as announced, to strengthening the balance sheet.

The performance of the income statement and comparison between the first quarter 2012 and the same period of 2011 was as follows:

Gross income was EUR 11,354 million, 8.3% higher year-on-year (+6.8% excluding the perimeter and exchange rate impacts).

 

 

Net interest income rose 10.6% to EUR 7,821 million. This was due to the net impact of several factors.

 

   

There was a positive effect from the moderate increase in volumes and the improvement in the spreads on loans for the whole Group (from 3.59% to 3.89%).

 

   

The spread on deposits was 0.24% in the first quarter of 2012, the same as in the first quarter of 2011.

 

 

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Net fees

EUR Million

 

                   Variation        
     Q1’12      Q1’11      Amount     (%)  

Fees from services

     1,499         1,412         87        6.2   

Mutual & pension funds

     302         307         (5     (1.5

Securities and custody

     184         162         22        13.5   

Insurance

     637         637         (0     (0.0

Net fee income

     2,622         2,518         104        4.1   

 

   

Negative effect from the higher cost of funding and from higher liquidity requirements in some countries such as the UK.

 

 

Net fee income increased 4.1%, with a favourable performance of those from services (+6.2%) and from almost all concepts. Fee income from securities rose 13.5% while those originated by mutual funds were 1.6% lower.

 

 

Gains on financial transactions increased 20.1% year-on-year, largely due to the businesses contribution, with very good performance of GBM, as well as to Corporate Activities. The latter made a loss of EUR 74 million in the first quarter of 2011 (due to the negative effect of the foreing exchange rates variations in the payment of dividends and valuation of portfolios) and in the first quarter of 2012 was EUR 46 million positive.

 

 

Income by the equity accounted method was 39.9% lower at EUR 136 million (down from EUR 225 million), largely due to the perimeter impact from the Group’s reduced stake in Santander Consumer USA and insurance business in Latin America, which make up most of this concept.

 

 

Lastly, other operating results were EUR 83 million negative in the first quarter of 2012 (EUR 40 million also negative in the same period of 2011) because of the EUR 47 million increase in the contribution to the deposit guarantee funds, mainly in Spain.

Better trend of gross income over the fourth quarter of 2011, as it was 6.8% higher (+27% annualised) and 3.5% excluding the perimeter and exchange rate effects. This reflected the good performance of basic revenues and trading gains.

Operating expenses rose 7.2% year-on-year and 4.4% excluding the perimeter and exchange rate effects. The year-on-year performance varied throughout the Group.

In Europe, both the large retail units as well as the UK followed the same trend as in 2011 and registered negative growth in real terms or growth of around zero. Of note was the 3.8% fall in Portugal.

The increase in costs was due to the incorporations in Poland and Germany, Latin America (rise in commercial capacity and revision of the wage agreements made in 2011 in an environment of higher inflation) and the US, which reflects the greater level of investments in technology and structures.

Compared to the fourth quarter, operating expenses were basically flat for the whole Group and 3.0% lower excluding the exchange rate effect. Almost all of the main units registered negative growth.

Operating expenses

EUR Million

 

     Q1’12      Q1’11      Variation
Amount
    (%)  

Personnel expenses

     2,637         2,474         163        6.6   

General expenses

     1,911         1,752         159        9.1   

Information technology

     249         237         12        5.2   

Communications

     166         169         (2     (1.4

Advertising

     162         142         20        14.1   

Buildings and premises

     436         401         35        8.6   

Printed and office material

     45         41         4        9.6   

Taxes (other than profit tax)

     97         92         6        6.1   

Other expenses

     756         671         85        12.7   

Personnel and gen. expenses

     4,549         4,227         322        7.6   

Depreciation and amortisation

     525         505         21        4.1   

Total operating expenses

     5,074         4,731         343        7.2   

Operating expenses

EUR Million

 

LOGO

As a result, net operating income (pre-provision profit) was EUR 6,280 million in the first quarter, 9.2% more year-on-year and 13.4% above that of the fourth quarter. This performance underscored once again in a difficult environment like today’s, the Group’s capacity to continue to generate recurring revenues and absorb the higher provisions and writedowns required by the phase of the cycle.

Net operating income

EUR Million

 

LOGO

 

 

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Net loans-loss provisions

EUR Million

 

                 Variation        
     Q1’12     Q1’11     Amount     (%)  

Non performing loans

     3,401        2,343        1,058        45.1   

Country-risk

     2        3        (1     (21.6

Recovery of written-off assets

     (277     (281     4        (1.4

Total

     3,127        2,065        1,061        51.4   

Provisions for loan losses were EUR 3,127 million (+51.4% y-o-y). This was due to higher specific provisions because of larger volumes in emerging countries and because the moment of the cycle is still very demanding in provisions in some units. In 2011, EUR 356 million were released in the first quarter and EUR 80 million in the third and fourth quarters compared to a provision of EUR 99 million in the first quarter of 2012.

Net operating income after provisions was EUR 3,153 million, 14.4% lower year-on-year, but 6.6% more than in the fourth quarter due to growth in gross income and stable costs, which absorbed the increase in provisions.

Asset impairment losses and other results were EUR 608 million negative, virtually unchanged from the first quarter of 2011.

Profit before tax was 17.7% lower year-on-year at EUR 2,545 million (-18.1% excluding the perimeter and exchange rate effects), but 4.4% more than the fourth quarter.

The impact (on the first and fourth quarters of 2011) of higher taxes and minority interests made attributable profit 23.9% lower year-on-year at EUR 1,604 million (-21.1% excluding the exchange rate and perimeter effects) and 6.6% less than in the fourth quarter.

Earnings per share in the first quarter were EUR 0.17, 28.5% less than in the same period of 2011. They were slightly affected by the capital increases in 2011 and the beginning of 2012 to repurchase preferred shares and meet the dividend payment in shares for shareholders who chose the scrip dividend option.

The Group’s ROE was 8.1% and return on tangible equity (ROTE) (attributable profit/shareholders’ equity less goodwill) was 12.0%.

 

 

Attributable profit to the Group

EUR Million

 

LOGO

Earnings per share

Euros

 

LOGO

 

 

12

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Balance sheet

EUR Million

 

     31.03.12     31.03.11     Variation
Amount
    (%)     31.12.11  

Assets

          

Cash on hand and deposits at central banks

     111,943        86,006        25,937        30.2        96,524   

Trading portfolio

     174,223        148,138        26,085        17.6        172,637   

Debt securities

     53,235        55,426        (2,191     (4.0     52,704   

Customer loans

     13,300        2,080        11,220        539.3        8,056   

Equities

     5,304        8,146        (2,842     (34.9     4,744   

Trading derivatives

     95,495        62,509        32,986        52.8        102,498   

Deposits from credit institutions

     6,889        19,976        (13,087     (65.5     4,636   

Other financial assets at fair value

     20,358        41,907        (21,548     (51.4     19,563   

Customer loans

     12,116        6,892        5,224        75.8        11,748   

Other (deposits at credit institutions, debt securities and equities)

     8,242        35,014        (26,773     (76.5     7,815   

Available-for-sale financial assets

     99,165        85,125        14,040        16.5        86,612   

Debt securities

     94,349        78,741        15,608        19.8        81,589   

Equities

     4,816        6,384        (1,568     (24.6     5,024   

Loans

     780,763        760,084        20,679        2.7        779,525   

Deposits at credit institutions

     52,924        47,414        5,510        11.6        42,389   

Customer loans

     720,965        704,898        16,067        2.3        730,296   

Debt securities

     6,874        7,772        (898     (11.6     6,840   

Investments

     4,685        275        4,411        —          4,154   

Intangible assets and property and equipment

     16,816        17,041        (225     (1.3     16,840   

Goodwill

     25,200        23,856        1,344        5.6        25,089   

Other

     50,195        46,132        4,063        8.8        50,580   

Total assets

     1,283,349        1,208,563        74,786        6.2        1,251,525   

Liabilities and shareholders’ equity

          

Trading portfolio

     149,125        130,191        18,935        14.5        146,949   

Customer deposits

     16,085        7,838        8,247        105.2        16,574   

Marketable debt securities

     74        1,207        (1,133     (93.9     77   

Trading derivatives

     96,889        63,746        33,144        52.0        103,083   

Other

     36,077        57,400        (21,323     (37.1     27,214   

Other financial liabilities at fair value

     47,490        52,786        (5,297     (10.0     44,908   

Customer deposits

     32,068        30,836        1,233        4.0        26,982   

Marketable debt securities

     5,247        5,203        44        0.8        8,185   

Due to central banks and credit institutions

     10,174        16,747        (6,573     (39.2     9,741   

Financial liabilities at amortized cost

     964,252        898,476        65,776        7.3        935,669   

Due to central banks and credit institutions

     124,780        80,790        43,990        54.4        116,368   

Customer deposits

     594,633        582,100        12,533        2.2        588,977   

Marketable debt securities

     201,697        187,861        13,836        7.4        189,110   

Subordinated debt

     22,821        26,431        (3,611     (13.7     22,992   

Other financial liabilities

     20,321        21,293        (972     (4.6     18,221   

Insurance liabilities

     717        10,453        (9,736     (93.1     517   

Provisions

     15,486        15,142        344        2.3        15,571   

Other liability accounts

     22,123        21,762        361        1.7        25,052   

Total liabilities

     1,199,194        1,128,810        70,383        6.2        1,168,666   

Shareholders’ equity

     80,695        77,590        3,105        4.0        80,895   

Capital stock

     4,538        4,220        318        7.5        4,455   

Reserves

     74,552        74,592        (39     (0.1     72,660   

Attributable profit to the Group

     1,604        2,108        (504     (23.9     5,351   

Less: dividends

     —          (3,330     3,330        (100.0     (1,570

Equity adjustments by valuation

     (4,900     (3,813     (1,087     28.5        (4,482

Minority interests

     8,361        5,976        2,385        39.9        6,445   

Total equity

     84,155        79,753        4,402        5.5        82,859   

Total liabilities and equity

     1,283,349        1,208,563        74,786        6.2        1,251,525   

 

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Grupo Santander. Balance sheet

 

LOGO

Activity continued to reflect the market context:

 

   

Lower demand for loans in Europe, especially in Spain and Portugal, and double-digit growth in Latin America (+15%).

 

   

In funds, preference for deposits across the Group and conservative policy in issues.

 

   

The loan-to-deposit ratio improved again in the quarter to 115%.

 

LOGO

Core capital ratio (BIS II) of 10.10%, very solid as befits the Group’s business model and low risk profile.

 

LOGO

The European Banking Authority’s target has already been reached: core capital ratio of 9.11%, above that required by June.

Distribution of total assets by geographic segments

March 2012

 

LOGO

Total managed funds at the end of March amounted to EUR 1,418,528 million, of which EUR 1,283,349 million (90%) were on-balance sheet and the rest mutual and pension funds and managed portfolios.

Two factors need to be taken into account in the year-on-year comparisons:

 

 

A slightly positive perimeter impact from the net effect of the following changes in the Group’s composition:

 

   

positive impact from the consolidation of Banco Zachodni WBK in Poland and the acquisition of the mortgage business of GE Capital Corporation (Mexico) and Creditel (Uruguay).

 

   

negative impact of Santander Consumer USA, which stopped consolidating by global integration and moved to consolidation by the equity accounted method and of bancassurance business incorporated to the holding in Latin America. Also impact of changes of the units that consolidated by the proportional method, mainly in Spain, to integration by the equity accounted method.

 

 

The second effect came from the appreciation/depreciation of various currencies against the euro (end of period rates). On the one hand, the dollar and sterling appreciated by 6% each and the Chilean peso by 5% and, on the other, the rest of the main Latin American currencies depreciated: the Brazilian real by 5% and the Mexican and Argentine pesos by 1% each. The net impact of both effects is 2 p.p. positive.

The joint impact of the two effects on changes on customer balances was 3 p.p., positive both on lending as well as customer funds.

Lending

The Group’s gross lending amounted to EUR 765,619 million, 4% higher than in March 2011. Eliminating the exchange rate and perimeter effects lending was 1% higher.

The geographic distribution (principal segments) was also very different by markets.

 

 

Customer loans

EUR Million

 

     31.03.12      31.03.11      Variation
Amount
    (%)     31.12.11  

Public sector

     12,801         12,340         461        3.7        12,147   

Other residents

     193,462         210,430         (16,969     (8.1     202,411   

Commercial bills

     8,790         9,320         (530     (5.7     9,679   

Secured loans

     110,731         124,610         (13,879     (11.1     117,946   

Other loans

     73,940         76,500         (2,560     (3.3     74,785   

Non-resident sector

     559,356         510,246         49,111        9.6        554,478   

Secured loans

     343,492         309,769         33,723        10.9        342,676   

Other loans

     215,865         200,476         15,388        7.7        211,802   

Gross customer loans

     765,619         733,016         32,603        4.4        769,036   

Loan-loss allowances

     19,237         19,145         92        0.5        18,936   

Net customer loans

     746,382         713,871         32,511        4.6        750,100   

Pro memoria: Doubtful loans

     31,838         27,871         3,968        14.2        31,287   

Public sector

     139         44         95        212.7        102   

Other residents

     14,613         12,539         2,075        16.5        14,745   

Non-resident sector

     17,086         15,287         1,799        11.8        16,439   

 

14

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In Continental Europe, Spain’s and Portugal’s lending fell by 4% and 6%, respectively, due to deleveraging, while Santander Consumer Finance’s balances remained stable (-1). The incorporation of Bank Zachodni WBK increased the Group’s net lending by EUR 9,106 million.

 

 

Gross lending in Spain amounted to EUR 215,376 million, with the following structure:

Loans to the public sector amounted to EUR 12,801 million, (+4% year-on-year).

Loans to individuals amounted to EUR 75,902 million, of which EUR 56,948 million were mortgages for homes. These are the healthiest part and with the least risk of further deterioration of the portfolio in Spain because of the different features of this product compared to similar ones in other countries. For example, the principle is amortised as of the first day, the borrowers' responsibility extends to all their assets and almost all loans are for residences in ownership, with a very low expected loss.

In the specific case of Grupo Santander, the portfolio is mostly composed of mortgages that are for the first residence, with a large concentration of loans in the lowest tranches of loan-to-value (87% with an LTV lower than 80%) and a very low NPL ratio (2.5%).

Loans to SMEs and companies without real estate purposes amounted to EUR 105,166 million and were the main part (49% of the total). In the last 12 months, and in an environment of a cut in lending throughout the financial system, the volume of loans to SMEs and companies increased by 2%.

Loans with real estate purposes (with the greatest risk) stood at EUR 21,507 million, after falling again in the first quarter of 2012 (-EUR 1,935 million). The strategy begun in previous years of reducing exposure to this segment continued. The total reduction since December 2008 was EUR 16,181 million (-43%).

 

 

In Portugal, the fall in lending (6%) came from all segments: -15% to SMEs, -10% to companies and -4% to individuals. In addition, balances in construction and real estate, which represent only 3.4% of lending in Portugal, declined 17.4% in the year to March 2012.

 

 

Santander Consumer Finance’s lending remained stable. Germany, which accounts for 51% of the area’s credit, increased lending 1%, while other countries declined except for the Nordic nations (+12%).

New loans in the first quarter of 2012 rose 6% year-on-year. Those for auto financing were well above new loans for cars sales in Europe.

In the United Kingdom, the balance of customer loans was 6% higher. In local criteria, residential mortgages, in a still depressed market, were very stable, while loans to SMEs increased 21%, gaining further market share. Personal loans, reflecting the policy in the last few years of reducing them, declined 13% year-on-year.

Gross customer loans

EUR Billion

+ 4.4% Q1’12 - Q1’11

*

Excluding exchange rate impact: +2.5%

 

LOGO

Gross customer loans

% o/ operating areas. March 2012

 

LOGO

Loans portfolio in Spain

EUR Billion

 

LOGO

 

 

LOGO   FINANCIAL REPORT 2012 / JANUARY - MARCH

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Customer funds under managament

EUR Million

 

     31.03.12      31.03.11      Variation
Amount
    (%)     31.12.11  

Resident public sector

     10,925         8,640         2,285        26.5        6,528   

Other residents

     137,134         163,246         (26,112     (16.0     144,131   

Demand deposits

     67,382         71,018         (3,635     (5.1     68,389   

Time deposits

     60,511         78,500         (17,989     (22.9     61,185   

Other

     9,241         13,729         (4,488     (32.7     14,557   

Non-resident sector

     494,727         448,888         45,839        10.2        481,875   

Demand deposits

     224,318         211,861         12,456        5.9        220,299   

Time deposits

     194,764         197,313         (2,549     (1.3     197,249   

Other

     75,645         39,713         35,932        90.5        64,328   

Customer deposits

     642,786         620,774         22,013        3.5        632,533   

Debt securities*

     207,018         194,271         12,747        6.6        197,372   

Subordinated debt

     22,821         26,431         (3,611     (13.7     22,992   

On-balance-sheet customer funds

     872,625         841,476         31,149        3.7        852,898   

Mutual funds

     105,914         112,817         (6,903     (6.1     102,611   

Pension funds

     9,765         10,916         (1,151     (10.5     9,645   

Managed portfolios

     19,500         18,626         875        4.7        19,199   

Savings-insurance policies

     —           833         (833     (100.0     —     

Other customer funds under management

     135,179         143,192         (8,013     (5.6     131,456   

Customer funds under management

     1,007,804         984,668         23,136        2.3        984,353   

 

*

Including retail commercial paper. EUR 8,346 million in March 2012

 

Lending in Latin America (excluding the balances in the New York branch) increased 16% excluding the exchange rate impact, due to organic growth and the acquisition of the mortgage business in Mexico of GE Capital Corporation and of Creditel in Uruguay. Brazil’s lending, in local currency, rose 19%, Chile’s 5% and Mexico’s 21% (+14% excluding the perimeter impact).

Lastly, lending in the US increased 5% in dollars due to the rise to companies other than real estate ones.

Lending in the first quarter, excluding the exchange rate impact, dropped 0.6%: that in Continental Europe fell 1.5%, (Spain: -1.7%); while in the UK, Latin America and the US it increased 1.9%, 0.4% and 2.8%, respectively.

In March, Continental Europe accounted for 41% of the Group’s total lending (28% Spain), the UK 35%, Latin America 19% (11% Brazil) and the US 5%.

Customer funds under management

Total managed funds surpassed EUR 1 trillion for the first time (EUR 1,007,804 million), 2% more than in March 2011, slightly lower after deducting the perimeter and forex effects (-1%).

Customer deposits increased 6% including retail commercial paper in Spain and Brazil’s letras financeiras. Mutual and pension funds declined 7%, affected by the greater focus on capturing on-balance sheet funds.

Deposits and retail commercial paper in Continental Europe remained virtually unchanged (+0.2%) from March 2011 to March 2012, as follows:

 

 

Spain’s dropped 3%, reflecting the strategy followed for the renewal of funds captured in the 2010 campaign of giving priority to improved costs over volumes (mainly in the second quarter of 2011), and in the marketing of retail commercial paper in Spain in the fourth quarter of 2011 and in the first quarter of 2012.

 

 

Santander Consumer Finance’s deposits increased 5% year-on-year due to Germany which, through the campaign of welcome to Grupo Santander by Santander Retail Germany (SEB), increased its balances by EUR 2,500 million.

 

 

Portugal increased its customer deposits by 6% and significantly improved its liquidity position.

 

 

The incorporation of Bank Zachodni WBK contributed EUR 12,376 million of funds to the Group, of which EUR 10,028 million were deposits.

In the UK, customer deposits remained unchanged in sterling, while mutual funds rose 4%.

Mutual funds

EUR Million

 

     31.03.12      31.03.11      Var (%)  

Spain

     27,292         31,974         (14.6

Portugal

     1,809         3,051         (40.7

Poland

     2,059         

United Kingdom

     15,674         14,204         10.3   

Latin America

     59,080         63,588         (7.1

Total

     105,914         112,817         (6.1
 

 

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Pension funds

EUR Million

 

     31.03.12      31.03.11      Var (%)  

Spain

     8,983         9,602         (6.4

Portugal

     782         1,314         (40.5

Total

     9,765         10,916         (10.5

In Latin America (excluding the balances in the New York branch, which are more volatile), customer deposits without repos increased 7% excluding the exchange rate impact. Good evolution of the three main countries: Brazil (+12%, including the letras financeiras), Mexico (+22%) and Chile (+6%), with increases in both time and demand deposits except for Brazil (in demand deposits). Mutual funds dropped 7% in Brazil, 1% in Chile and rose 3% in Mexico. The overall reduction for the whole region was 4%.

Lastly, US customer deposits increased 7% in dollars in the last 12 months.

Continental Europe accounted for 37% of managed customer funds (27% Spain), the UK 32%, Latin America 27% (Brazil 16%) and the US 4%.

In the first quarter, and eliminating the exchange rate impact, managed customer funds increased 2.4%. Continental Europe’s rose 1.9% (Spain: +2.8%), the UK’s 0.1%, Latin America’s 5.9% (Brazil: +6.9%) and the US’s 2.7%.

As well as capturing large volumes of funds in the Group, for strategic reasons, maintained an active policy of issuing securities in the international fixed income markets.

The Group issued in the first quarter of 2012 EUR 12,185 million of medium- and long-term issues, as follows: EUR 6,651 million of senior debt and EUR 5,534 million of covered bonds.

This issuing activity underscores the Group’s capacity to access the different segments of institutional investors via more than 10 issuance units, including the parent bank, Banco Santander, and the main subsidiaries of the countries where it operates: Banesto, Santander Totta, Santander UK/Chile/Brazil/Mexico, Sovereign Bank and the units of Santander Consumer Finance. In all cases, issues were at higher prices than in 2011 because of the greater tensions and volatility in the markets.

As regards securitisations, the Group’s subsidiaries placed in the market in the first quarter of 2012 a total of EUR 3,845 million, mainly in the UK.

Maturities of medium and long-term debt amounted to EUR 11,289 million, of which EUR 8,617 million was senior debt, EUR 2,557 million covered bonds, EUR 112 million subordinated debt and EUR 3 million preferred shares.

This capturing of stable funds, via deposits, retail commercial paper and issues, combined with the trend of moderate growth in lending, improved the loan-to-deposit ratio to 115% (117% in December 2011), and put the ratio of deposits plus medium and long-term funding to the Group’s loans at 116%, underscoring the appropriate funding structure of the Group’s lending.

Customer funds under management

EUR Billion

+ 2.3% Q1’12 - Q1’11

(*)

Excluding exchange rate impact: +1.0%

 

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Customer funds under management

% o/ operating areas. March 2012

 

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Loans / deposits. Total Group*

%

 

(*)

Including retail commercial paper

 

LOGO

 

 

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CONSOLIDATED FINANCIAL REPORT

 

 

The Group’s access to wholesale funding markets, as well as the cost of issues, depend to some extent on the ratings accorded by rating agencies.

Rating agencies

 

     Long      Short      Stand-         
     term      term      alone      Outlook  

Standard & Poor’s

     A+         A-1         a         Negative   

Fitch Ratings

     A         F1         a         Negative   

Moody’s

     Aa3         P1         B-         Negative   

DBRS

     AA(low)         R1(medium)            Negative   

Rating agencies regularly review the Group’s ratings. Classification of long-term debt depends on a series of internal factors (solvency, business model, capacity to generate profits, etc) and external ones related to the general economic environment, the sector’s situation and the sovereign risk of the countries in which we operate.

Since the autumn, the difficulties in resolving the problems of European countries that required financial assistance, combined with a deterioration in the euro zone’s growth expectations, eroded confidence and intensified tensions on European sovereign debt. This situation led to a widespread and significant downgrading of the sovereign ratings of many European countries, and hence hit the ratings of banks.

Between October 2011 and April 2012, the rating of the Kingdom of Spain was reduced a notch by DBRS (from AA to AA low), three notches by Standard & Poor’s (from AA to A) and four by Moody’s (from Aa2 to A3) and Fitch (from AA+ to A), maintaining the negative outlook in all of them.

These downgradings led to a revision of Banco Santander’s ratings, which in March 2012 were as shown in the table.

Other items of the balance sheet

Total goodwill was EUR 25,200 million, EUR 1,344 million more than in March 2011, due to the net impact between the increase from the incorporations of BZ WBK, the Mexican mortgage business of GE Capital Corporation and Creditel in Uruguay and the reductions resulting from the amortisation of EUR 601 million of goodwill of Santander Totta in Portugal and the consolidation of Santander Consumer USA by the equity accounted method.

Trading derivatives rose strongly, both in assets and liabilities (+EUR 32,986 million and +EUR 33,144 million, respectively), due to the evolution of the market value, mainly interest rate swaps. The balance at the end of March was EUR 95,495 million in assets and EUR 96,889 million in liabilities.

The balances with central banks increased for both funds and loans, following the injections of liquidity by central banks in the countries where we operate and, particularly, in the euro zone. The European Central Bank implemented extraordinary monetary policy measures including larger guarantees and three-year liquidity auctions.

The Group followed the practice of recourse to these auctions and deposited most of the funds captured in the ECB, which boosted significantly its liquidity buffer while improving its structure by replacing short-term maturities with longer ones. The only Group bank that is still a net structural borrower from the ECB is Santander Totta (close to EUR 5 billion).

The balance of financial assets available for sale rose by EUR 14,040 million, from EUR 85,125 million in March 2011 to EUR 99,165 million in the same month of 2012, due to the rise in both private and public debt (the latter linked to hedging of interest rates).

 

 

Total equity and capital with the nature of financial liabilities

EUR Million

 

                 Variation              
     31.03.12     31.03.11     Amount     (%)     31.12.11  

Capital stock

     4,538        4,220        318        7.5        4,455   

Additional paid-in surplus

     31,172        29,446        1,726        5.9        31,223   

Reserves

     43,558        45,228        (1,669     (3.7     41,688   

Treasury stock

     (178     (82     (96     116.6        (251

Shareholders’ equity (before profit and dividends)

     79,091        78,812        279        0.4        77,115   

Attributable profit

     1,604        2,108        (504     (23.9     5,351   

Interim dividend distributed

     —          (1,399     1,399        (100.0     (1,429

Interim dividend not distributed (1)

     —          (1,931     1,931        (100.0     (408

Shareholders’ equity (after retained profit)

     80,695        77,590        3,105        4.0        80,629   

Valuation adjustments

     (4,900     (3,813     (1,087     28.5        (4,482

Minority interests

     8,361        5,976        2,385        39.9        6,445   

Total equity (after retained profit)

     84,155        79,753        4,402        5.5        82,592   

Preferred shares and securities in subordinated debt

     5,639        6,917        (1,279     (18.5     5,896   

Total equity and capital with the nature of financial liabilities

     89,794        86,671        3,123        3.6        88,488   

 

(1)

In December 2011, estimated data of May 2012 scrip dividend

 

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Shareholders’ equity and solvency ratios

Total shareholders’ equity, after retained profits, increased 4% (EUR 3,105) in the year to March to EUR 80,695 million.

Shareholders’ equity per share was EUR 8.45, a decline of EUR 0.17 in the first quarter due to the increase in shares resulting from the scrip dividend in February and the transfer of 4.41% of Santander Brazil to an international financial institution in January, which reduced reserves and increased minority interests by an equivalent amount.

Total equity at the end of March was EUR 85,155 million, an increase of EUR 4,402 million (+6% y-o-y).

Grupo Santander’s eligible equity applying the BIS II criteria amounted to EUR 76,999 million, EUR 31,380 million above the minimum requirement (+69%).

The core capital ratio (BIS II) was 10.10% (+8 b.p. in the first quarter, with a positive impact from organic generation of capital and a negative one from exchange rate differences). The core capital is of very high quality, very solid and adjusted to the business model, the balance sheet structure and the Group’s risk profile.

As regards the requirement of the European Banking Authority to have a core capital ratio of at least 9% by June, in accordance with the EBA’s criteria, Grupo Santander announced in January that it had already reached this figure (9.11%).

Capital ratio (BIS II)

%

 

LOGO

Book value per share*

Euros

 

*

(capital + reserves - own shares + profit - dividends) / (shares + Valores Santander)

 

LOGO

 

 

Computable capital and BIS II ratio

EUR Million

 

     31.03.12     31.03.11     Variation
Amount
    (%)     31.12.11  

Core capital

     57,567        55,478        2,089        3.8        56,694   

Basic capital

     63,031        62,730        301        0.5        62,294   

Supplementary capital

     15,173        18,513        (3,340     (18.0     15,568   

Deductions

     (1,205     (2,398     1,193        (49.7     (1,090

Computable capital

     76,999        78,845        (1,846     (2.3     76,772   

Risk-weighted assets

     570,239        574,036        (3,797     (0.7     565,958   

BIS II ratio

     13.50        13.74        (0.24 p.       13.56   

Tier I (before deductions)

     11.05        10.93        0.12 p.          11.01   

Core capital

     10.10        9.66        0.44 p.          10.02   

Shareholders’ equity surplus (BIS II ratio)

     31,380        32,922        (1,542     (4.7     31,495   

 

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RISK MANAGEMENT

 

 

Risk management

 

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Risk management mitigates the impact of the deterioration of the economic environment in some markets.

 

LOGO

Net NPL entries in the quarter are lower than those of the three previous quarters.

 

LOGO

The Group’s NPL ratio was 3.98% (+0.09 p.p. in the quarter) and coverage 62% (+1 p.p. in the quarter).

 

LOGO

The NPL ratio improved in the US, the UK, Mexico and Poland and continued to rise in Spain.

 

LOGO

Very active management of the exposure with real estate purpose in Spain. Total loans and foreclosures decreased by EUR 1,898 million in the first quarter.

 

Group’s NPL ratio

%

  

Group’s NPL coverage

%

[ LOGO    LOGO

NPLs and loans-loss allowances

EUR Million. March 2012

 

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Credit risk

The active risk management is reflected in a good evolution of NPL entries. The Group’s total in the first quarter, on a like-for-like basis and excluding the exchange rate impact, amounted to EUR 3,638 million, lower than that in the three previous quarters.

The Group’s annual risk premium was 1.72% in February, well below the peak of 2.47% in the third quarter of 2009.

The still weak situation in some markets, however, continues to push up NPLs due to the rise in bad and doubtful loans and the slower growth, or reductions in some cases, in lending volumes.

The Group’s NPL ratio was 3.98%, 9 b.p. more than at the end of 2011 (+37 b.p. since March 2011). Bad and doubtful loans amounted to EUR 32,560 million at the end of March, EUR 4,066 million more than a year earlier (+14%).

Total loan loss provisions were EUR 20,035 million. NPL coverage in March was 62% (+ 1 p.p. since the end of 2011).

To qualify this number, one must bear in mind that the ratio, mainly in the UK and in Spain, is affected by the balances of mortgage loans, which required lower on-balance sheet provisions, as they have guarantees not recorded here.

Residential balances, both in Spain and the UK, have an average LTV of 53%.

Net specific provisions, after deducting recovered write-offs, totalled EUR 3,025 million, 1.44% of the average credit risk (last 12 months) compared to EUR 2,418 million (1.51% in the equivalent period of 2011).

The NPL ratios by units and countries are set out below.

 

 

The NPL ratio in Spain of 5.75% is well below that of the banking sector as a whole, and coverage is 46%.

The ratio for mortgages for homes is 2.6%, while the remainder of the portfolio, (public sector, individual customers and companies without real estate purposes) has a ratio of 3.7%. In both cases, the ratios were moderately higher than 12 months ago.

The increase in the total ratio was due to loans with a real estate purpose (ratio of 32.8%) and reflects, on the one hand, the higher NPLs in this segment and, on the other, the Group’s anticipative policy of sharply reducing the balances in this segment.

Doubtful loans with real estate purpose amounted to EUR 7,047 million, and coverage is 33% (+2 p.p. since March 2011). There is also EUR 3,852 million of substandard loans, all of which are up-to-date with payments, and have a coverage of 16% (11% in March 2011).

 

 

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RISK MANAGEMENT

 

 

The gross balance of foreclosures was EUR 8,590 million, virtually the same as in December 2011. For the second quarter running, net entries were almost zero, compared to entries of about EUR 400 million in the first three quarters of 2011. This trend indicates that the Group will be able to start reducing the stock in the coming quarters.

Foreclosed real estate, following the effort made in the fourth quarter of 2011, has a coverage level of 48% compared to 32% in March 2011.

 

 

In Portugal, the NPL ratio increased again in the quarter (+53 b.p.) to 4.59% (+156 b.p. year-on-year). Coverage is 58%.

 

 

Santander Consumer Finance’s NPL ratio was 4.05% and coverage 108% (+94 b.p. and 10 p.p. respectively) on a like-for-like basis. The figures in March 2011 were 4.99% and 98% respectively.

 

 

Poland’s BZ WBK has a NPL ratio of 4.74%, 15 b.p. lower than at the end of 2011, and well below the 6.43% recorded last June when it was integrated into the Group. Coverage is 66%.

 

 

In the UK, the NPL ratio is 1.82% (1.73% in March 2011), 2 b.p. better than at the end of 2011. Coverage is 40%, virtually unchanged since the end of 2011.

Of note in the Group’s total lending are residential mortgages in the UK (£166,114 million), consisting of operations on properties in the UK which are first mortgages, as there are no second or further loans on the mortgaged properties.

This portfolio had a NPL ratio at the end of March of 1.51% compared to 1.43% a year earlier. This improvement was due to constant monitoring and control, as well as strict credit policies that include, among other measures, maximum loan-to-value criteria in relation to the properties in guarantee. At the end of March, the average LTV was 53%.

Another indicator of this portfolio’s good performance is the reduced volume of foreclosed properties, which amounted to EUR 171 million in March 2012 and accounted for only 0.08% of the total real estate exposure. Efficient management of these cases and the existence of a dynamic market for this type of home, which enables a quick sale, contributed to the good results.

NPL ratio in Spain

%

 

LOGO

 

 

Credit risk management*

EUR Million

 

                   Variation              
     31.03.12      31.03.11      Amount     (%)     31.12.11  

Non-performing loans

     32,560         28,494         4,066        14.3        32,036   

NPL ratio (%)

     3.98         3.61         0.37 p.          3.89   

Loan-loss allowances

     20,035         20,124         (89     (0.4     19,661   

Specific

     15,808         14,992         816        5.4        15,474   

Generic

     4,227         5,132         (905     (17.6     4,187   

NPL coverage (%)

     62         71         (9 p.       61   

Credit cost (%) **

     1.44         1.51         (0.07 p.       1.41   

Ordinary non-performing and doubtful loans ***

     19,213         17,987         1,225        6.8        18,318   

NPL ratio (%) ***

     2.39         2.31         0.08 p.          2.26   

NPL coverage (%) ***

     104         112         (8 p.       107   

 

*

Excluding country-risk

**

Net specific allowance / computable assets

***

Excluding mortgage guarantees

Note: NPL ratio: Non-performing loans / computable assets

 

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RISK MANAGEMENT

 

 

 

Brazil’s NPL ratio is 5.76%, 91 b.p. more than a year earlier and up 38 b.p. since the end of 2011. This increase was affected by a moderate increase in NPLs in individual customers segment. Coverage is 90%.

 

Latin America ex–Brazil’s NPL ratio is 3.24% and coverage 95%. Mexico improved its ratio in the first quarter, Argentina’s was stable and Chile’s was higher because of a marginal worsening of the quality in the market.

 

 

Lastly, the US’s NPL ratio improved for the ninth straight quarter to 2.46%, while coverage surpassed 100% for the first time (107%).

 

 

Non-performing loans by quarter

EUR Million

 

     Q1’11     Q2’11     Q3’11     Q4’11     Q1’12  

Balance at beginning of period

     28,522        28,494        30,186        30,910        32,036   

Net additions

     3,112        4,015        4,206        4,048        3,638   

Increase in scope of consolidation

     186        739        (0     —          (602

Exchange differences

     (558     (31     (444     671        37   

Write-offs

     (2,767     (3,031     (3,037     (3,594     (2,549

Balance at period-end

     28,494        30,186        30,910        32,036        32,560   

 

 

 

Market risk

The risk of trading activity, measured in daily VaR terms at 99%, averaged around EUR 14.6 million in the first quarter. It fluctuated between EUR 10.5 and EUR 19.1 million.

After reaching a high for the quarter of EUR 19.1 million on February 7, the VaR declined as a result of the risk reduction in Madrid and active credit portfolio management (ACPM), due to the lower credit spread exposure.

Trading portfolios*. VaR performance

EUR Million

 

*

Trading activity

 

LOGO

 

 

 

Trading portfolios*. VaR by region

 

*

Trading activity

 

First quarter    2012      2011  
EUR Million    Average      Latest      Average  

Total

     14.6         12.8         25.7   

Europe

     10.5         10.3         16.1   

USA and Asia

     1.2         1.2         1.3   

Latin America

     8.4         10.1         13.4   

Global activities

     6.3         0.9         10.4   

Trading portfolios*. VaR by market factor

 

*

Trading activity

 

First quarter 2012                        
EUR Million   Min     Avg     Max     Latest  

VaR total

    10.5        14.6        19.1        12.8   

Diversification effect

    (11.1     (17.8     (25.2     (15.8

Interest rate VaR

    8.0        10.9        16.9        8.1   

Equity VaR

    5.3        7.9        11.1        8.8   

FX VaR

    2.3        5.1        10.1        3.4   

Credit spreads VaR

    3.4        8.1        13.0        8.1   

Commodities VaR

    0.3        0.4        0.7        0.3   
 

 

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THE SANTANDER SHARE

 

 

The Santander share

Shareholder remuneration

Total shareholder remuneration for the year 2011 was EUR 0.60 per share, as follows: in August, a first interim dividend of EUR 0.135 in cash per share charged to 2011’s results was paid; in November a second one of EUR 0.126 and in February 2012 a third one of EUR 0.119. The second and third dividends were paid under the Santander Dividendo Elección (scrip dividend) scheme. The AGM on March 30 approved a fourth dividend of EUR 0.22 per share, also under this scheme, which will be paid in May.

The scheme enables shareholders to choose to receive the amount equivalent to the fourth dividend in cash or in shares. Every shareholder received a free allotment right of new shares for each share owned. Shareholders can sell the rights to the Bank at a set price (EUR 0.22 gross per right), on the stock market between April 13 and 27 at the market price, or receive new shares in the proportion of one new share for every 24 rights, and in the last two cases without withholding tax(*).

In order to meet this, a rights issue will be carried out for a maximum of EUR 189,101,112.50, represented by 378,202,225 shares. Shareholders are due to receive on May 3 the amount in cash if they opted to sell their rights to the Bank, and on May 9 the new shares those who chose this option.

Share price performance

The international stock markets ended higher in a first quarter marked by the green light given by the Eurogroup to the second rescue package for Greece and the EUR 500,000 million injection of liquidity by the European Central Bank into the financial system, despite the fact that several of the main rating agencies downgraded the rating of several European countries. In the last part of the first quarter and in April, the investors’ lack of confidence intensified volatility in the markets.

The Santander share ended March at EUR 5.770, 1.7% lower than at the end of 2011 and a smaller fall than the Ibex-35 (-6.5%) but below the DJ Stoxx Banks (+12.7%) and the DJ Stoxx 50 (+3.8%).

Market capitalisation

At March 30, Santander was the largest bank in the euro zone by market capitalisation and the 15th in the world among financial entities (EUR 52,373 million). The share’s weighting in the DJ Stoxx 50 index was 2.0%, 8.6% in the DJ Stoxx Banks and 17.1% in the Ibex-35.

Comparative performance of share prices

December 30, 2011 to March 30, 2012

 

LOGO

 

Trading

Santander’s share was the most liquid of the Eurostoxx. A total of 5,719 million shares were traded in the first quarter for an effective value of EUR 34,665 million. The average daily turnover was 88 million shares for an effective value of EUR 533 million.

Shareholders

There were 3,269,996 shareholders at March 30, of which 3,008,383 were European (87.20% of the capital stock) and 245,857 were from the Americas (12.47%).

Excluding the Board of Banco Santander, which holds 2.15% of the Bank’s capital, individual shareholders held 37.55% of the capital and institutional ones 60.30%.

 

(*)

The options, maturities and procedures indicated can present special features for shareholders holding Santander shares in the various foreign stock markets where the Bank is listed.

The Santander share. March 2012

 

Shareholders and trading data              

Shareholders (number)

        3,269,996   

Shares (number)

        9,076,853,400   

Average daily turnover (no. of shares)

        87,981,502   

Share liquidity (%)

        63   

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

     
Remuneration per share    euros      % (1)  

Fourth interim dividend 2010 (01.05.11)

     0.229         3.1   

First interim dividend 2011 (01.08.11)

     0.135         0.0   

Santander Dividendo Elección (03.11.11)

     0.126         5.9   

Santander Dividendo Elección (03.02.12)

     0.119         1.7   

Santander Dividendo Elección (01.05.12)

     0.220         (3.9
Price movements during the year              

Beginning (30.12.11)

        5.870   

Highest

        6.648   

Lowest

        5.387   

Last (30.03.12)

        5.770   

Market capitalisation (millions) (30.03.12)

        52,373   
Stock market indicators              

Price / Book value (2) (X)

        0.68   

P/E ratio (X)

        8.47   

Yield (3) (%)

        9.83   

 

(1)

Variation o/ equivalent previous year

(2)

Including the number of shares needed to compulsorily convert the “Valores Santander”

(3)

Total dividend 2011 / Q1’12 average share price

Capital stock ownership

 

March 2012    Shares      %  

The Board of Directors

     195,233,372         2.15   

Institutional investors

     5,473,769,064         60.30   

Individuals

     3,407,850,964         37.55   

Total

     9,076,853,400         100.00   
 

 

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INFORMATION BY SEGMENTS

 

 

Description of the segments

Grupo Santander is maintaining in 2012 the general criteria used in 2011, with the following exceptions:

 

 

The geographic areas of Continental Europe, the UK and Latin America are maintained and one for the US is created which includes Sovereign Bank and Santander Consumer USA, which exits Continental Europe and, within it, SCF in which it was integrated.

Furthermore, and given that Santander Consumer USA began to consolidate by the equity accounted method in December 2011, all the quarters of 2011 of the income statement have been incorporated on this basis, and a pro-forma balance sheet restated, also using this criteria.

 

 

The consumer business in the UK has been incorporated into Santander UK and exits Continental Europe (and within it, SCF in which it was integrated). The figures for 2011 have been restated.

 

 

Following the operation with Zurich Seguros, the insurance business in Latin America included in this deal now consolidates by the equity accounted method. In order to facilitate like-for-like comparisons, the income statements for all the quarters in 2011 have been reformulated for the whole of Latin America and the countries affected, as well as the area of Asset Management and Insurance.

 

 

In order to facilitate like-for-like comparisons, a pro-forma balance sheet has been reformulated for all the quarters of 2011 in Spain, in order to consolidate by the equity accounted method companies that consolidated on a proportional basis.

 

 

The annual adjustment was made to the Global Customer Relationship Model and resulted in a net increase of 36 new clients. This does not mean any changes in the principal (geographic) segments, but it does affect the figures for Retail Banking and Global Wholesale Banking.

None of these changes was significant for the Group as a whole.

The basic operating units have been drawn up by aggregating the financial statements of each business segment. The information relates to both the accounting data of the companies in each area as well as that provided by the management information systems. In all cases, the same general principles as those used in the Group are applied.

In accordance with the IFRS, the business areas are structured into two levels:

Principal level (or geographic). The activity of the Group’s operating units is segmented by geographical areas. This coincides with the Group’s first level of management and reflects our positioning in the world’s three main currency areas (euro, dollar and sterling). The segments reported on are:

 

 

Continental Europe. This covers all retail banking business (including Banif, the specialised private bank), wholesale banking and asset management and insurance conducted in this region. Given the importance of some of these units, detailed financial information of the Santander Branch Network, Banesto, Santander Consumer Finance, Portugal and Banco Zachodni BWK is also provided.

 

United Kingdom. This includes retail and wholesale banking, asset management and insurance conducted by the various units and branches of the Group in the country.

 

 

Latin America. This embraces all the Group’s financial activities conducted via its subsidiary banks and subsidiaries. It also includes the specialised units of Santander Private Banking, as an independent and globally managed unit, and New York’s business. Because of their specific importance, the financial statements of Brazil, Mexico and Chile are also provided.

 

 

United States. Includes the businesses of Sovereign Bank and Santander Consumer USA (consolidated by the equity accounted method).

Secondary level (or business). This segments the activity of the operating units by the type of business. The reported segments are:

 

 

Retail Banking. This covers all customer banking businesses, including private banking (except those of Corporate Banking, managed through the Global Customer Relationship Model). Because of their relative importance, details are provided by the main geographic areas (Continental Europe, United Kingdom, Latin America and the US) and the main countries. The results of the hedging positions in each country are also included, conducted within the sphere of each one’s Assets and Liabilities Committee.

 

 

Global Wholesale Banking (GBM). This business reflects the revenues from global corporate banking, investment banking and markets worldwide including all treasuries managed globally, both trading and distribution to customers (always after the appropriate distribution with Retail Banking customers), as well as equities business.

 

 

Asset Management and Insurance. This includes the contribution of the various units to the Group in the design and management of mutual and pension funds and insurance. The Group uses, and remunerates through agreements, the retail networks that place these products. This means that the result recorded in this business is net (i.e. deducting the distribution cost from gross income).

As well as these operating units, which cover everything by geographic area and by businesses, the Group continues to maintain the area of Corporate Activities. This area incorporates the centralised activities relating to equity stakes in financial companies, financial management of the structural exchange rate position and of the parent bank’s structural interest rate risk, as well as management of liquidity and of shareholders’ equity through issues and securitisations.

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

The figures of the various units of the Group listed below have been prepared in accordance with these criteria and therefore do not match those published by each institution individually.

 

 

24

   JANUARY - MARCH / FINANCIAL REPORT 2012   LOGO


Table of Contents

 

INFORMATION BY PRINCIPAL SEGMENTS

 

Income statement

EUR Million

 

     Net operating income     Attributable profit     Efficiency ratio (%)      ROE (%)  
     Q1’12     Q1’11     (%)     Q1’12     Q1’11     (%)     Q1’12      Q1’11      Q1’12      Q1’11  

Continental Europe

     2,019        1,826        10.6        584        878        (33.5     43.9         44.4         7.43         12.25   

o/w: Santander Branch Network

     606        588        3.2        75        274        (72.8     45.8         46.6         4.57         15.70   

Banesto

     335        273        22.6        41        101        (59.1     43.1         48.2         3.43         8.70   

Portugal

     192        151        27.3        33        90        (63.8     39.6         46.4         5.09         14.92   

Santander Consumer Finance

     473        486        (2.7     206        183        12.7        41.6         38.8         7.75         8.05   

Retail Poland (BZ WBK)

     114            73            47.9            17.05      

United Kingdom

     698        888        (21.4     306        505        (39.5     49.1         42.7         9.45         15.93   

Latin America

     3,876        3,367        15.1        1,218        1,270        (4.1     37.2         38.7         20.89         22.61   

o/w: Brazil

     2,825        2,445        15.5        647        732        (11.6     35.1         37.1         20.45         24.91   

Mexico

     428        379        13.1        296        256        15.6        36.7         37.7         27.03         22.45   

Chile

     352        321        9.7        133        162        (18.1     37.6         37.3         21.62         23.97   

USA

     387        471        (17.8     240        290        (17.2     41.6         33.8         19.29         29.85   

Operating areas

     6,980        6,551        6.6        2,348        2,943        (20.2     40.9         40.6         12.92         17.39   

Corporate Activities

     (700     (801     (12.6     (744     (835     (10.9           

Total Group

     6,280        5,750        9.2        1,604        2,108        (23.9     44.7         45.1         8.13         11.37   

Activity

EUR Million

 

     Net customer loans     Customer deposits     NPL ratio* (%)      NPL cover.* (%)  
     Q1’12      Q1’11      (%)     Q1’12      Q1’11      (%)     Q1’12      Q1’11      Q1’12      Q1’11  

Continental Europe

     301,654         303,460         (0.6     252,781         260,719         (3.0     5.42         4.53         55         62   

o/w: Santander Branch Network *

     100,487         110,051         (8.7     80,355         84,656         (5.1     8.90         5.99         40         50   

Banesto

     67,196         73,326         (8.4     53,875         59,660         (9.7     5.07         4.31         51         52   

Portugal

     27,808         29,744         (6.5     23,321         21,929         6.3        4.59         3.03         58         62   

Santander Consumer Finance

     56,306         56,524         (0.4     33,180         31,618         4.9        4.05         4.99         108         98   

Retail Poland (BZ WBK)

     9,106              10,028              4.74            66      

United Kingdom

     261,070         232,186         12.4        191,727         180,382         6.3        1.82         1.73         40         47   

Latin America

     141,411         124,691         13.4        143,065         135,034         5.9        4.67         4.01         92         107   

o/w: Brazil

     78,083         69,447         12.4        76,352         75,605         1.0        5.76         4.85         90         104   

Mexico

     19,146         15,907         20.4        26,120         20,528         27.2        1.61         1.58         195         234   

Chile

     27,257         24,562         11.0        20,547         18,353         12.0        4.52         3.80         68         89   

USA

     40,030         35,850         11.7        37,828         33,190         14.0        2.46         4.15         107         82   

Operating areas

     744,164         696,187         6.9        625,401         609,325         2.6        3.95         3.54         63         71   

Total Group

     746,382         713,871         4.6        642,786         620,774         3.5        3.98         3.61         62         71   

 

(*).-

Santander Branch Network is the retail banking unit of Banco Santander S.A. The NPL ratio of Banco Santander S.A. at the end of March 2012 stood at 6.33% (4.68% in March 2011) and NPL coverage was 41% (49% in March 2011).

Operating means

 

     Employees      Branches  
     Q1’12      Q1’11      Q1’12      Q1’11  

Continental Europe

     58,506         49,702         6,558         6,151   

o/w: Santander Branch Network

     17,964         18,234         2,915         2,912   

Banesto

     9,426         9,541         1,702         1,727   

Portugal

     5,753         5,934         694         758   

Santander Consumer Finance

     11,904         11,815         637         662   

Retail Poland (BZ WBK)

     9,200            526      

United Kingdom

     27,381         26,902         1,363         1,412   

Latin America

     92,244         89,866         6,053         5,895   

o/w: Brazil

     54,848         54,144         3,776         3,703   

Mexico

     13,032         12,337         1,125         1,099   

Chile

     12,216         11,815         499         506   

USA

     9,151         8,928         722         721   

Operating areas

     187,282         175,398         14,696         14,179   

Corporate Activities

     2,331         2,250         

Total Group

     189,613         177,648         14,696         14,179   

 

LOGO   FINANCIAL REPORT 2012 / JANUARY - MARCH

   25


Table of Contents

 

INFORMATION BY PRINCIPAL SEGMENTS

 

 

Income statement and balance sheet of principal segments

EUR Million

 

    Operating business areas     Continental Europe  
    Q1’12     Q1’11     Var (%)     Q1’12     Q1’11     Var (%)  

Income statement

           

Net interest income

    8,334        7,586        9.9        2,296        2,042        12.4   

Net fees

    2,635        2,522        4.5        921        939        (2.0

Gains (losses) on financial transactions

    751        738        1.8        335        235        42.5   

Other operating income (1)

    85        192        (55.7     45        68        (33.2

Gross income

    11,806        11,038        7.0        3,597        3,284        9.5   

Operating expenses

    (4,825     (4,487     7.5        (1,578     (1,459     8.2   

General administrative expenses

    (4,335     (4,015     8.0        (1,419     (1,316     7.8   

Personnel

    (2,560     (2,386     7.3        (879     (827     6.3   

Other general administrative expenses

    (1,775     (1,629     9.0        (540     (489     10.4   

Depreciation and amortisation

    (490     (472     3.9        (159     (142     11.4   

Net operating income

    6,980        6,551        6.6        2,019        1,826        10.6   

Net loan-loss provisions

    (3,112     (1,997     55.9        (1,085     (496     118.5   

Other income

    (491     (406     20.9        (157     (111     41.1   

Profit before taxes

    3,377        4,148        (18.6     777        1,218        (36.2

Tax on profit

    (773     (981     (21.2     (176     (311     (43.4

Profit from continuing operations

    2,604        3,167        (17.8     601        907        (33.7

Net profit from discontinued operations

    1        (6     —          1        (6     —     

Consolidated profit

    2,605        3,161        (17.6     602        901        (33.2

Minority interests

    258        218        18.1        18        23        (21.3

Attributable profit to the Group

    2,348        2,943        (20.2     584        878        (33.5

Balance sheet

           

Customer loans (2)

    744,164        696,187        6.9        301,654        303,460        (0.6

Trading portfolio (w/o loans)

    146,559        121,244        20.9        78,600        51,350        53.1   

Available-for-sale financial assets

    68,786        63,538        8.3        29,433        22,240        32.3   

Due from credit institutions (2)

    93,436        115,197        (18.9     49,609        63,415        (21.8

Intangible assets and property and equipment

    12,941        12,335        4.9        5,821        4,904        18.7   

Other assets

    128,090        129,395        (1.0     27,005        18,362        47.1   

Total assets/liabilities & shareholders’ equity

    1,193,976        1,137,897        4.9        492,122        463,731        6.1   

Customer deposits (2)

    625,401        609,325        2.6        252,781        260,719        (3.0

Marketable debt securities (2)

    140,920        123,405        14.2        39,869        40,280        (1.0

Subordinated debt (2)

    17,316        16,430        5.4        909        1,218        (25.3

Insurance liabilities

    717        10,453        (93.1     717        1,021        (29.7

Due to credit institutions (2)

    170,578        174,581        (2.3     81,429        64,213        26.8   

Other liabilities

    165,500        135,078        22.5        84,631        66,975        26.4   

Shareholders’ equity (3)

    73,543        68,625        7.2        31,786        29,305        8.5   

Other customer funds under management

    135,179        143,192        (5.6     46,320        51,296        (9.7

Mutual funds

    105,914        112,817        (6.1     31,160        35,025        (11.0

Pension funds

    9,765        10,916        (10.5     9,765        10,916        (10.5

Managed portfolios

    19,500        18,626        4.7        5,395        5,354        0.8   

Savings-insurance policies

    —          833        (100.0     —          —          —     

Customer funds under management

    918,817        892,352        3.0        339,879