Argentina H1'22 Earnings Presentation - 28 July 2022 - Santander
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28 July 2022 Argentina H1’22 Earnings Presentation
Important Information
Non-IFRS and alternative performance measures
This presentation contains, in addition to the financial information prepared in accordance with International Financial Reporting Standards (“IFRS”) and derived from our financial statements, alternative
performance measures (“APMs”) as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority (ESMA) on 5 October 2015
(ESMA/2015/1415en) and other non-IFRS measures (“Non-IFRS Measures”). These financial measures that qualify as APMs and non-IFRS measures have been calculated with information from
Santander Group; however those financial measures are not defined or detailed in the applicable financial reporting framework nor have been audited or reviewed by our auditors. We use these APMs
and non-IFRS measures when planning, monitoring and evaluating our performance. We consider these APMs and non-IFRS measures to be useful metrics for our management and investors to compare
operating performance between accounting periods, as these measures exclude items outside the ordinary course performance of our business, which are grouped in the “management adjustment” line
and are further detailed in Section 3.2 of the Economic and Financial Review in our Directors’ Report included in our Annual Report on Form 20-F for the year ended 31 December 2021. Nonetheless, these
APMs and non-IFRS measures should be considered supplemental information to, and are not meant to substitute IFRS measures. Furthermore, companies in our industry and others may calculate or use
APMs and non-IFRS measures differently, thus making them less useful for comparison purposes. For further details on APMs and Non-IFRS Measures, including its definition or a reconciliation between
any applicable management indicators and the financial data presented in the consolidated financial statements prepared under IFRS, please see the 2021 Annual Report on Form 20-F filed with the U.S.
Securities and Exchange Commission (the “SEC”) on 1 March 2022, as updated by the Form 6-K filed with the SEC on 8 April 2022 in order to reflect our new organizational and reporting structure, as well
as the section “Alternative performance measures” of the annex to the Banco Santander, S.A. (“Santander”) Q2 2022 Financial Report, published as Inside Information on 28 July 2022. These documents
are available on Santander’s website (www.santander.com). Underlying measures, which are included in this presentation, are non-IFRS measures.
The businesses included in each of our geographic segments and the accounting principles under which their results are presented here may differ from the included businesses and local applicable
accounting principles of our public subsidiaries in such geographies. Accordingly, the results of operations and trends shown for our geographic segments may differ materially from those of such
subsidiaries.
Forward-looking statements
Santander advises that this presentation contains “forward-looking statements” as per the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by
words like “expect”, “project”, “anticipate”, “should”, “intend”, “probability”, “risk”, “VaR”, “RoRAC”, “RoRWA”, “TNAV”, “target”, “goal”, “objective”, “estimate”, “future” and similar expressions. Found
throughout this presentation, they include (but are not limited to) statements on our future business development, economic performance and shareholder remuneration policy. However, a number of
risks, uncertainties and other important factors may cause actual developments and results to differ materially from our expectations. The following important factors, in addition to others discussed
elsewhere in this presentation, could affect our future results and could cause materially different outcomes from those anticipated in forward-looking statements: (1) general economic or industry
conditions of areas where we have significant operations or investments (such as a worse economic environment; higher volatility in the capital markets; inflation or deflation; changes in demographics,
consumer spending, investment or saving habits; and the effects of the war in Ukraine or the COVID-19 pandemic in the global economy); (2) exposure to various market risks (particularly interest rate
risk, foreign exchange rate risk, equity price risk and risks associated with the replacement of benchmark indices); (3) potential losses from early repayments on our loan and investment portfolio,
declines in value of collateral securing our loan portfolio, and counterparty risk; (4) political stability in Spain, the United Kingdom, other European countries, Latin America and the US (5) changes in
legislation, regulations, taxes, including regulatory capital and liquidity requirements, especially in view of the UK exit of the European Union and increased regulation in response to financial crises; (6)
our ability to integrate successfully our acquisitions and related challenges that result from the inherent diversion of management’s focus and resources from other strategic opportunities and
operational matters; and (7) changes in our access to liquidity and funding on acceptable terms, in particular if resulting from credit spreads shifts or downgrade in credit ratings for the entire Group or
significant subsidiaries.
2
Important Information
Numerous factors could affect our future results and could cause those results deviating from those anticipated in the forward-looking statements. 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 of this presentation and are informed by the knowledge, information and views available on such date. Santander is not required to update or
revise any forward-looking statements, regardless of new information, future events or otherwise.
No offer
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 this presentation. No investment activity should be undertaken on the basis of the information contained in this 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.
Historical performance is not indicative of future results
Statements about historical performance or accretion must not be construed to indicate that future performance, share price or results (including earnings per share) in any future period will necessarily
match or exceed those of any prior period. Nothing in this presentation should be taken as a profit forecast.
Third Party Information
In particular, regarding the data provided by third parties, neither Santander, nor any of its administrators, directors or employees, either explicitly or implicitly, guarantees that these contents are exact,
accurate, comprehensive or complete, nor are they obliged to keep them updated, nor to correct them in the case that any deficiency, error or omission were to be detected. Moreover, in reproducing
these contents by any means, Santander may introduce any changes it deems suitable, may omit partially or completely any of the elements of this document, and in case of any deviation between such
a version and this one, Santander assumes no liability for any discrepancy.
3Index
1 2 3 4 5
Financial Strategy and Results Concluding Appendix
system business remarks
4Transactional and well capitalized financial system
Total loans (Constant € bn1)
50 Loans/GDP3: 9%. Deposits/GDP3: 18%.
41 45
33 36
Loans: 56% growth YoY in local currency and -15% in dollar-
YoY
32.6% 36.6% 42.2% 47.9% 52.9%
(%) denominated portfolio (in local currency).
Deposits: up 57% YoY, +66% in local currency and +22% in
Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 dollar-denominated portfolio (in local currency).
Total customer funds (Constant € bn1,2) High liquidity levels in both pesos and US dollars. Excess
120 133 liquidity placed in Central Bank notes and repos.
109
95
85 Improving capital ratio3: 26.2%. CET1 Ratio3: 24.9%.
YoY
(%) 49.8% 52.3% 59.1% 57.7% 57.1% Private sector NPL ratio3 at 3.9% and coverage3 at 116%.
Temporary flexibility in regulation ended in Jun-21.
Jun-21 Sep-21 Dec-21 Mar-22 Jun-22
12m Inflation: 65%.
Source: Central Bank of Argentina. 5
(1) End period exchange rate as of Jun-22.
(2) Total customer funds includes total deposits and mutual funds.
(3) As of Mar-22.Index
1 2 3 4 5
Financial Strategy and Results Concluding Appendix
system business remarks
6Santander Argentina: the leading privately-owned bank in Argentina by deposit volumes
KEY DATA H1’22 YoY Var.5
Strategic Priorities
Customer loans1 €6,336mn +54.9%
Increase our customer base and loyalty and ensure
Customer funds2 €14,822mn +72.6%
the best customer service through our multi-channel
strategy
Underlying att. Profit €145mn +58.0%
RoTE 3 33.5% +5.4pp Further develop new businesses
Efficiency ratio 58.0% -4.2pp
Continue our process of efficiency improvement and
Loans market share 4
10.7% -20bps simplification through digital transformation
Deposits market share4 10.9% +6bps Boost profitable growth, optimizing the use of
capital and preserving the quality of the portfolio
Total customers 4.4mn +7.4%
Digital customers 2.9mn +4.9% Be agile and collaborative, with challenging goals
and clear priorities
Branches 407 -0.2%
Employees 8,514 -3.4%
(1) Gross loans excluding reverse repos.
(2) Excluding repos.
(3) Adjusted RoTE: adjusted based on Group’s deployed capital calculated as contribution of RWAs at 12%. Using tangible equity, RoTE is 20.9%.
7
(4) As at Jun-22.
(5) Constant euros.Customer satisfaction is our top priority
Total customers (mn) Loyal customers (mn) Digital customers (mn)
+7% +4% +5% 2.9
4.4 2.7
1.6
1.6
4.1
Jun-21 Jun-22 Jun-21 Jun-22 Jun-21 Jun-22
Digital sales / total1: 79% (+1pp YoY)
Customer satisfaction: 2nd place in NPS ranking
New loyalty programme: SuperClub+, based on data that drives customer behaviour
51% of our active customers are loyal (49% individuals, 68% SMEs and 60% middle market companies)
Strong positioning in digital channels. 65% of our total customers are digital customers. Mobile customers rose 14% YoY. Best ranked
app among banks. 100% digital onboarding for basic accounts and SMEs
(1) YTD data. 8Customer-centric business model
Building Santander platform Adding value to different audiences
100% digital
Grupo Santander platform to
payment solution promote financial
inclusion
Systemic company to
Consumer finance promote digital
company payments and increase Cuenta Blanca Cuenta Senior
financial inclusion
Enhancing our network model Reward and benefit programmes
Santander Express: Financial inclusion branches
expanding our non-banking
2.0 branches: closer to our
correspondent network
customers supported by
Agribusiness office technology
WorkCafé
Towards a more digital bank Awards & recognitions
100% digital onboarding for basic ECHEQ: digital experience in check
accounts and SMEs issuing, endorsing and financing
Top app rating in iOS and Android Foreign Trade services in digital Top 5 in GPTW Best Bank Best Bank
channels for 12 years 2022 2021
9Further embedding ESG to build a more responsible bank
Environmental: Social: building a Governance: doing
supporting the more inclusive business the right
green transition society way
One of the leading banks in >€350k >13k ESG variables
sustainable finance in Argentina invested in university financially taken into account to
programmes educated people distribute bonus pools
sponsorship
Carbon €231mn
Neutral in green bonds and a >11.3k
offsetting 13,358 Sustainability Linked
45%
Items exchanged under independent
tCO2(e) with a wind Bond (SLB) for “SuperClub Comprometidos” directors
project in Mexico renewable projects
12 >844k c.25% 27%
sustainable branches financially
women in women on
with solar panels empowered people
senior positions the board
2019-H1’22
Note: H1’22 data, unless otherwise stated. 10Loans grew 55% YoY driven by auto, SMEs and corporates
Total customer loans (Constant € bn)1
Jun-22 Jun-21 YoY (%) QoQ (%)
2
6.3 Individuals 2.8 1.8 48.7 13.9
5.4 o/w Mortgages 0.3 0.2 38.9 14.0
4.8 o/w Cards & Consumer
2.2 1.5 50.3 17.2
4.1 4.3 Credit
SMEs 0.7 0.4 72.0 13.5
Corporates & Institutions 1.0 0.5 83.9 16.1
CIB 1.7 1.2 42.9 20.2
Other 0.1 0.1 86.3 90.3
Total customer loans 6.3 4.1 54.9 17.0
Jun-21 Sep-21 Dec-21 Mar-22 Jun-22
Group criteria.
(1) Excludes reverse repos. End period exchange rate as at Jun-22. 11
(2) Includes Private Banking.Customer deposits increased 67% YoY, with rises in both demand and time deposits.
Strong growth in mutual funds (+94% YoY)
Total customer funds (Constant € bn)1
14.8
12.6
Jun-22 Jun-21 YoY (%) QoQ (%)
10.6
9.9 Demand 7.4 4.5 64.7 23.8
8.6
Time 3.8 2.2 71.2 15.9
Total deposits 11.3 6.8 66.9 21.0
Mutual Funds 3.5 1.8 93.5 8.3
Total customer funds 14.8 8.6 72.6 17.7
Jun-21 Sep-21 Dec-21 Mar-22 Jun-22
Group criteria. 12
(1) Excluding repos. End period exchange rate as at Jun-22.Index
1 2 3 4 5
Financial Strategy and Results Concluding Appendix
system business remarks
13NII rose 93% YoY due to higher volumes and spreads
Net interest income (Constant € mn)1 Yields and Costs (%)
Yield on loans
449
28.80%
331 23.33% 24.39%
21.97% 21.63%
283 17.65%
212 237
11.92% 12.13% 12.05% 13.62%
Cost of deposits
Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22
NII / Average total assets Differential
9.48% 9.61% 12.40% 9.44% 12.96% 10.0pp 9.5pp 11.3pp 10.8pp 11.1pp
Official interest rate2
34.11% 34.15% 34.17% 38.37% 45.71%
(1) Average exchange rate as at 6M'22. 14
(2) Quarterly average.Net fee income increased 88% YoY underpinned by transactional and mutual fund fees
Net fee income (Constant € mn)1 H1'22 H1'21 YoY (%) QoQ (%)
Transactional fees 163 93 75.7 13.3
Payment methods 57 34 69.4 21.1
150 Transfers, drafts, cheques
39 22 77.4 14.7
136 and other orders
Foreign exchange
114 4 2 93.1 -23.8
currencies
98 Other transactional 63 35 79.6 8.7
79 Investment and pension
29 13 124.3 53.8
funds
Insurance 18 12 56.2 13.3
Securitites and custody
5 4 23.1 21.4
services
Other 48 18 160.2 123.5
Total net fee income 264 140 88.3 31.9
Q2'21 Q3'21 Q4'21 Q1'22 Q2'22
(1) Average exchange rate as at 6M'22. 15Total income grew 69% YoY on the back of higher NII and net fee income. This
performance clearly outstripped inflation
Total income (Constant € mn)1
H1'22 H1'21 YoY (%) QoQ (%)
479
424 Net interest income 732 379 92.9 58.9
323 343 Net fee income 264 140 88.3 31.9
271
Customer revenue 996 519 91.7 51.2
Other2 (174) (33) 434.4 125.4
Total income 821 487 68.7 39.6
Q2'21 Q3'21 Q4'21 Q1'22 Q2'22
(1) Average exchange rate as at 6M'22. 16
(2) Other includes Gains (losses) on financial transactions and Other operating income.Costs rose 57% YoY, at a slower pace than total income and virtually in line with
inflation
Operating expenses (Constant € mn)1
273
H1'22 H1'21 YoY (%) QoQ (%)
231
204 Operating Expenses 477 303 57.3 33.5
181
162
Branches (#) 407 408 -0.2 0.0
Employees (#) 8,514 8,814 -3.4 -0.4
Q2'21 Q3'21 Q4'21 Q1'22 Q2'22
(1) Average exchange rate as at 6M'22. 17Net operating income increased 88% boosted by the solid performance in the main
revenue lines. The efficiency ratio improved 4.2pp YoY
Net operating income (Constant € mn)1
206 H1'22 H1'21 YoY (%) QoQ (%)
193
Total income 821 487 68.7 39.6
141 139
Operating Expenses (477) (303) 57.3 33.5
109
Net operating income 345 184 87.7 48.6
Efficiency ratio 58.0% 62.3% -4.2pp
Q2'21 Q3'21 Q4'21 Q1'22 Q2'22
(1) Average exchange rate as at 6M'22. 18LLPs were up from extraordinarily low levels in 2021 (following large pandemic-related
provisioning in 2020). Credit quality indicators improved YoY and QoQ
Net LLPs (Constant € mn)1
H1'22 H1'21 YoY (%) QoQ (%)
Net operating income 345 184 87.7 48.6
Loan-loss provisions (72) (42) 70.6 -4.0
48 Net operating income after
273 142 92.8 67.4
provisions
35 37 35
31
NPL ratio 2.48% 3.34% -86bps -73bps
Cost of risk2 3.07% 3.94% -87bps -23bps
Coverage ratio 171% 168% 3.5pp 9.4pp
Q2'21 Q3'21 Q4'21 Q1'22 Q2'22
(1) Average exchange rate as at 6M'22. 19
(2) Cost of risk based on 12-month loan-loss provisions divided by average customer loans.Profit rose 58% YoY underpinned by higher revenue and the efficiency improvement
Underlying Attributable Profit (Constant € mn)1
H1'22 H1'21 YoY (%) QoQ (%)
89
85 PBT 168 85 97.7 52.5
Tax on profit (22) 8 - 14.2
64
56 Consolidated profit 146 93 57.4 59.5
55
Minority interests 0 (1) -33.3 3.0
Underlying attributable
145 92 58.0 59.7
profit
Effective tax rate 13.1% -9.1% 22.2pp
Q2'21 Q3'21 Q4'21 Q1'22 Q2'22
(1) Average exchange rate as at 6M'22. 20Index
1 2 3 4 5
Financial Strategy and Results Concluding Appendix
system business remarks
21Concluding remarks
Financial System
High liquidity levels in both pesos and USD. Excess liquidity placed in Central Bank notes and repos
Loans: 56% growth YoY in local currency and -15% in dollar-denominated portfolio (in local currency)
Deposits: up 57% YoY, +66% in local currency and +22% in dollar-denominated portfolio (in local currency)
Strategy & Business
Customer-centric business model. Customer satisfaction: 2nd place in NPS ranking
Loans grew 55% YoY driven by auto, SMEs and corporates
Customer deposits increased 67% YoY, with rises in both demand and time deposits. Strong growth in mutual funds (+94% YoY)
Results
Total income grew 69% YoY on the back of higher NII, net fee income and gains on financial transactions. This performance clearly
outstripped inflation
Costs rose 57% YoY, at a slower pace than total income and virtually in line with inflation
LLPs were up from extraordinarily low levels in 2021 (following large pandemic-related provisioning in 2020). Credit quality indicators
improved YoY and QoQ
Profit rose 58% YoY underpinned by higher revenue and the efficiency improvement
22Index
1 2 3 4 5
Financial Strategy and Results Concluding Appendix
system business remarks
23Balance sheet
1
Constant € million Variation
Jun-22 Jun-21 Amount %
Loans and advances to customers 6,098 3,868 2,229 57.6
Cash, central banks and credit institutions 3,615 2,783 831 29.9
Debt instruments 4,511 1,899 2,612 137.6
Other financial assets 35 67 (32) (48.0)
Other asset accounts 1,062 725 337 46.5
Total assets 15,320 9,343 5,978 64.0
Customer deposits 11,279 6,758 4,521 66.9
Central banks and credit institutions 719 716 2 0.3
Marketable debt securities 156 55 101 183.8
Other financial liabilities 956 586 371 63.2
Other liabilities accounts 400 272 128 46.9
Total liabilities 13,510 8,387 5,123 61.1
Total equity 1,810 955 855 89.5
Other managed customer funds 3,543 1,831 1,712 93.5
Mutual funds 3,543 1,831 1,712 93.5
Pension funds — — — —
Managed portfolios — — — —
(1) End of period exchange rate as at Jun-22. 24Income statement
1
Constant € million Variation
H1'22 H1'21 Amount %
Net interest income 732 379 352 92.9
Net fee income 264 140 124 88.3
Gains (losses) on financial transactions 115 57 58 101.8
Other operating income (289) (89) (199) 223.0
Total income 821 487 335 68.7
Operating expenses (477) (303) (174) 57.3
Net operating income 345 184 161 87.7
Net loan-loss provisions (72) (42) (30) 70.6
Other gains (losses) and provisions (105) (57) (48) 85.5
Underlying profit before tax 168 85 83 97.7
Tax on profit (22) 8 (30) —
Underlying profit from continuing operations 146 93 53 57.4
Net profit from discontinued operations — — — —
Underlying consolidated profit 146 93 53 57.4
Non-controlling interests (0) (1) 0 (33.3)
Underlying attributable profit to the parent 145 92 53 58.0
(1) Average exchange rate as at 6M'22. 25Quarterly income statement
1
Constant € million
Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22
Net interest income 167 212 237 331 283 449
Net fee income 61 79 98 136 114 150
Gains (losses) on financial transactions 26 31 38 36 49 66
Other operating income (39) (50) (50) (78) (103) (186)
Total income 216 271 323 424 343 479
Operating expenses (141) (162) (181) (231) (204) (273)
Net operating income 75 109 141 193 139 206
Net loan-loss provisions (11) (31) (35) (48) (37) (35)
Other gains (losses) and provisions (28) (28) (26) (39) (36) (70)
Underlying profit before tax 35 50 81 107 66 101
Tax on profit 2 6 (17) (21) (10) (12)
Underlying profit from continuing operations 37 56 64 85 56 90
Net profit from discontinued operations — — — — — —
Underlying consolidated profit 37 56 64 85 56 90
Non-controlling interests (0) (0) (0) (1) (0) (0)
Underlying attributable profit to the parent 37 55 64 85 56 89
(1) Average exchange rate as at 6M'22. 26Thank You. Our purpose is to help people and businesses prosper. Our culture is based on believing that everything we do should be:
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