BANCO SANTANDER, S.A. Head of Organisation, Costs and
Human Resources
Banco Santander, S.A. ("Santander") cautions that this presentation contains forward-looking statements. These forward-looking statements are found in various places throughout this presentation and include, without limitation, statements concerning our future business development and economic performance. While these forward-looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: (1) general market, macro-economic, governmental and regulatory trends; (2) movements in local and international securities markets, currency exchange rates and interest rates; (3) competitive pressures; (4) technological developments; and (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties. The risk factors that we have indicated in our past and future filings and reports, including those with the Securities and Exchange Commission of the United States of America (the "SEC") could adversely affect our business and financial performance. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements.
Forward-looking statements speak only as of the date on which they are made and are based on the knowledge, information available and views taken on the date on which they are made; such knowledge, information and views may change at any time. Santander does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
The information contained in this presentation is subject to, and must be read in conjunction with, all other publicly available information, including, where relevant any fuller disclosure document published by Santander. Any person at any time acquiring securities must do so only on the basis of such person's own judgment as to the merits or the suitability of the securities for its purpose and only on such information as is contained in such public information having taken all such professional or other advice as it considers necessary or appropriate in the circumstances and not in reliance on the information contained in the presentation. In making this presentation available, Santander gives no advice and makes no recommendation to buy, sell or otherwise deal in shares in Santander or in any other securities or investments whatsoever.
Neither this presentation nor any of the information contained therein constitutes an offer to sell or the solicitation of an offer to buy any securities. No offering of securities shall be made in the United States except pursuant to registration under the U.S. Securities Act of 1933, as amended, or an exemption therefrom. Nothing contained in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotion in the U.K. Financial Services and Markets Act 2000.
Note: Statements as to historical performance, share price or financial accretion are not intended to mean that future performance, share price or future earnings (including earnings per share) for any period will necessarily match or exceed those of any prior year. Nothing in this presentation should be construed as a profit forecast.
Note: The businesses included in each of our geographical segments and the accounting principles under which their results are presented here may differ from the businesses included in our public subsidiaries in such geographies and the accounting principles applied locally. Accordingly, the results of operations and trends shown for our geographical segments may differ materially from those disclosed locally by such subsidiaries.
Helping people and businesses prosper 1
Santander has a unique model for cost management that enables us to a
superior efficiency performance
• Tight cost control and budgeting - offsetting increases derived from BAU1, inflation, regulatory requirements, new commercial projects and perimeter modifications
• Positive jaws - revenue growth above cost growth
(€MM)
Costs evolution
CAGR
-0.2%
20,116 20,158 20,038(1) Business as usual
2012 2013 2014
Helping people and businesses prosper 2
We leverage our global scale while keeping accountability at a local level
Corporate / Global initiatives
Local efficiency plans implementation
Efficiency Plan
Definition
Global Factories
• Corporate methodology
• Continuous monitoring
• Best practices sharing
• Partenón, Altair and Alhambra
Network
Rationalisation
Integration + Efficiency Plan
and IT Systems
• Geoban, Isban, Produban,
Efficiency +
Z n
Aquanima, etc.
ero Base Pla
Headquarters
Rationalisation
• Corporate role redefinition
(from 15 to 10 Divisions)
• 'Zero base' Plan
Strong execution culture in all local units
Helping people and businesses prosper 3
Additionally, best practices are systematically transferred to all countries
(Example of best practice)
Levers
Impact
Santander Group has a Global Purchasing Model that leverages global capabilities to realise savings in all units
1. Global Model
• Annual Purchases Plan and monthly reports
• Purchases consolidation / catalogues usage
• Global and local negotiations integration to guarantee best deals
2. Global Platform
• Aquanima Purchasing Platform
• Best-in-class online negotiation technology
(above 40% volume negotiated online)
• €4.5bn purchases centrally managed
• Average cost savings of ~10% per year
Model implementation dates
2008
(B&B, A&L) Real Estate (Altamira)
2009 2010 2011 2012
Helping people and businesses prosper 4
Efficiency is a significant competitive advantage vs. peers
Efficiency ratio1 vs. Peers2 Advantage vs. Peers (15 p.p.)
P1 41
P2 45
Santander 47
P3 49
P4 52
P5 56
P6 56
P7 57
P8 59
P9 60
P10 61
P11 65
P12 66
P13 68
P14 73
>62
47
P15
P16
P17
73 Santander Peers
84
85
(1) Expenses / Revenues in 1H'15 (2) Peer Group: Bank of America, Barclays, BBVA, BNP Paribas, Citigroup, Deutsche Bank, HSBC, ING, Intesa Sanpaolo, JP Morgan, Banco Itaú, Lloyds, Standard
Chartered, Societe Generale, UBS, UniCredito, and Wells Fargo
Helping people and businesses prosper 5
Building on our principles, we adapt our cost strategy across economic cycles
Phase I - Growth cycle
Phase II - Crisis management
Phase III - New challenges
Model implementation and integrations' execution
2005- 2009
Model enhancements and cost management
2010- 2014
Model transformation
2015- 2018
Efficiency levers
• Roll-out of Santander model in all geographies
• Capture integration synergies of acquisitions
• Enhance Santander model
• Efficiency plans in all geographies
• Headquarters and factories rationalisation
• Further economies of scale
• Invest in commercial transformation and digital banking …
• …to guarantee a superior and sustainable efficiency model…
• ...under a new regulatory environment
Limited growth of costs
contributes to
'Positive jaws'
Efficiency plans
allow for
'Flat jaws"'
Model transformation
drives
'Positive jaws'
From cost efficiencies to operational excellence
Helping people and businesses prosper 6
And we tailor it on a country basis, but with an overall Group target:
Cost to Income below 45% in 2018
1
Costs as a growth enabler
2
Cost
management
as profitability
lever
3
Investment to meet
regulatory
requirements
Group 2018 target: Cost to IncomeBelow inflation Below revenue growth
Cost growth (real terms)Helping people and businesses prosper 7
Looking forward, investment in commercial transformation and digital banking
will guarantee a superior and sustainable efficiency model
• Network optimisation
• Lean Corporate Centre
• Local HQ / Intermediate structures
• General expenses management
• New distribution models
• Further network optimisations
• IT infrastructure investments
• Innovation projects and channel enhancements
• Regulatory requirements
Helping people and businesses prosper 8
We expect to achieve our €2bn cost savings target, one year ahead of schedule
and we have set a new target: €3bn by 2018 vs. 2013
Efficiency Plan. Accumulated savings1
(€MM)
1,000
2,000
One year ahead of schedule
1,188
1,750 >2,000
3,000
Main levers
• Network optimisation
leveraging digital banking
• Lean Corporate Centre: cost efficient, value adding, transparent and favouring accountability
• Local HQ / Intermediate structures optimisation
• General expenses
2014 2016 2014 1H'15 FY 2015 2018
management
Original Plan Savings achieved
New target
(1) Gross savings calculated with a bottom up approach adding all efficiency initiatives. This Efficiency Plan is a key lever to improve our cost to income to the committed 45%
Helping people and businesses prosper 9
Key takeaways
Efficient cost management has always been a top priority and distinctive capability for SantanderLooking forward, investment in commercial transformation and digital
banking will guarantee a superior and sustainable efficiency modelIn order to maintain our efficiency while investing, we are
extending our Efficiency Plan: €3bn target for 20182018 Target: Cost to Income below 45%
Helping people and businesses prosper 10
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