BANCO SANTANDER, SA
Otras Comunicaciones #27530 - 31/10/2008 11:19
Presentación relativa a Santander Brasil.
PDF Adjunto:
GRUPO
SANTANDER BRASIL
Integration for
leadership
São Paulo. 31 October 2008
Alfredo Sáenz,
CEO Santander
2
Important information
Banco Santander, S.A. ("Santander") cautions that this presentation contains forward-looking statements within the meaning of the US
Private Securities Litigation Reform Act of 1995. 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 and other key 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.
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.
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, historical share price or financial accretion are not intended to mean that future
performance, historical 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.
3
The importance of emerging markets in a
The importance of emerging markets in a
diversified portfolio
diversified portfolio
We believe in Brazil’s growth potential…
We believe in Brazil’s growth potential…
…and we bring a business model that adds value
…and we bring a business model that adds value
Summary //outlook for SAN
Summary outlook for SAN
4
Emerging markets’ “differential growth”
Emerging markets’ “differential growth”
is now more valuable than ever
is now more valuable than ever
The growth potential
The growth potential
of emerging markets’
of emerging markets’
banking systems
banking systems
remains solid…
remains solid… … at a point when
… at a point when
banking in many
banking in many
mature markets has
mature markets has
become “exhausted”
become “exhausted”
5
Emerging markets are a key ingredient in
Emerging markets are a key ingredient in
any “diversified growth” banking portfolio
any “diversified growth” banking portfolio
Diversification
Diversification
Differential growth
Differential growth
… with a reduced risk
… with a reduced risk
profile
profile
6
The importance of emerging markets in a diversified
The importance of emerging markets in a diversified
portfolio
portfolio
We believe in the Brazil’s growth
We believe in the Brazil’s growth
potential…
potential…
…and we bring a business model that adds value
…and we bring a business model that adds value
Summary //outlook for SAN
Summary outlook for SAN
7
Why did we buy Banco Real?
We believe in the sustained growth
potential of…
1
1 2
2
…the Brazilian
…the Brazilian …the Brazilian
…the Brazilian
economy
economy banking system
banking system
1 We believe in the growth potential of the Brazilian economy 8
Brazil can be a USD 2-3Tr economy
within two decades (Top 5 in the World)
Sound economic policies
Sound economic policies
Favourable ‘terms of trade’
Favourable ‘terms of trade’
… and now they even find oil!
… and now they even find oil!
Rise of middle class
Rise of middle class
Stability //growth virtuous circle
Stability growth virtuous circle
Source: Goldman Sachs
22 We believe in the potential of the Brazilian banking system
We believe in the potential of the Brazilian banking system 9
… and development
… and development
Increasing banking
Increasing banking of strong domestic
of strong domestic
penetration…
penetration… capital markets
capital markets
Growth potential relative not only
Growth potential relative not only
to “mature” economies…
to “mature” economies…
…but also relative even to
…but also relative even to
other emerging markets
other emerging markets
As a result… 10
Bancarisation in Brazil can double again over
Bancarisation in Brazil can double again over
the next 10 years
the next 10 years
The emerging markets’
The emerging markets’
growth multiplier
growth multiplier
Higher GDP
Higher GDP
growth
growth x Higher banking
Higher banking
penetration
penetration
11
The importance of emerging markets in a diversified
The importance of emerging markets in a diversified
portfolio
portfolio
We believe in the Brazil’s growth potential …
We believe in the Brazil’s growth potential …
…and we bring a business model that
…and we bring a business model that
adds value
adds value
Summary //outlook for SAN
Summary outlook for SAN
12
Santander brings a business model that
Santander brings a business model that
adds value…
adds value…
1. Commercial excellence
1. Commercial excellence
2. Efficiency focus
2. Efficiency focus
3. Global synergies
3. Global synergies
4. Risk management discipline
4. Risk management discipline
… and we will execute a “textbook”
… and we will execute a “textbook”
integration
integration
1
1 Commercial excellence
Commercial excellence
13
We are focused on retail and commercial banking
We are focused on retail and commercial banking
Business Areas
Profit before Taxes proforma
•• Strong deposit-based franchise
Strong deposit-based franchise
•• Customer-driven relationships
Customer-driven relationships
Commercial
Banking Global •• Capacity to manage large
Capacity to manage large
Banking & commercial networks: branches
commercial networks: branches
17% Markets and multi-channel
and multi-channel
79%
•• Wide and innovative product
Wide and innovative product
4% offering
Insurance / offering
Asset Mgmt
83% “Invest in the front…”
“Invest in the front…”
retail
1
1 Commercial excellence
Commercial excellence 14
Managing distribution networks is one of our core skills
Managing distribution networks is one of our core skills
Focus on distribution: Santander now has 80 million customers2 2
Focus on distribution: Santander now has 80 million customers
Number of branches (*)
0 3,500 7,000 10,500 14,000
Santander
Wells Fargo (1)
…and we continue
…and we continue
Unicredit to grow:
to grow:
HSBC
Citi
Intesa SP
Brazil:
Brazil: +2,011
+2,011
BBVA
US:
US: +747
+747
BNP Paribas (1) UK:
UK: +592
+592
Bank of America (1)
JP Morgan (1)
Barclays
RBS
“Invest in the front…”
“Invest in the front…”
(*) After new incorporations and including PABs in Brazil and B&B agencies in UK
(1) Including new incorporations: Wells Fargo + Wachovia; BNP Paribas + Fortis; BoA + Merrill Lynch; JP Morgan +
WaMu
(2) Proforma, including A&L, B&B and Banco Real
1
1 Commercial excellence
Commercial excellence 15
We have a track record of improving
We have a track record of improving
“commercial muscle”…
“commercial muscle”…
The Abbey case: revenue trends
9% 7% 9%
6% 5%
1% 5%
3% 3%
“Invest in
“Invest in
(7%) the front…”
the front…”
2004 2005 2006 2007 H108
Abbey Sector PFS
2
2 Efficiency focus
Efficiency focus
16
We believe in improving our efficiency, year after year
“Jaws” ...
% change
+21.3
+17.1 +9.7 p.p. +10.8 p.p.
+13.0
+10.5 +9.5 p.p.* “Opening
“Opening
+7.4
+3.5 our jaws”
our jaws”
every year is
every year is
Revenues Expenses Revenues Expenses Revenues Expenses a clear
a clear
2006/2005 2007/2006 9M’08/9M’07 imperative
imperative
In the past, we have proven that we can
In the past, we have proven that we can “…while
“…while
successfully execute synergies and improve the
successfully execute synergies and improve the
efficiency of acquired banks…
efficiency of acquired banks…
cutting
cutting
… and we will do it again in Brazil
… and we will do it again in Brazil the back”
the back”
3
3 Global synergies
Global synergies 17
The Group is making each unit
more efficient and more competitive
Global unit
Global unit
Local unit
Local unit
Local unit
Local unit
•
•
•
•
… leveraging the … and taking full
Group’s advantage of
Best local
economies of “best practices”
business…
scale…
“local tools” “global tools”
“global tools”
“local tools”
3
3 Global synergies
Global synergies 18
Impact on revenues:
Impact on revenues:
The Group adds higher top-line growth
The Group adds higher top-line growth
Cooperation with global • •Global Banking & Markets
Global Banking & Markets
Cooperation with global
• •Santander Cards
Santander Cards
business units makes each
business units makes each • •Santander Private Banking
Santander Private Banking
local bank more competitive:
local bank more competitive: • •Asset Management
Asset Management
• •Insurance
Insurance
•• Global reach
Global reach
•• Transfer of best-practices //
Transfer of best-practices
know-how
know-how Global unit
•• Faster product innovation //
Faster product innovation Global unit
reduced time-to-market
reduced time-to-market
Local unit
Local unit
Local unit
Local unit
•
•
•
•
4
4 Risk management discipline
Risk management discipline 19
Our risk management principles:
Focus on customer business…
Focus on customer business…
… in our core markets
… in our core markets
Focus on products we understand
Focus on products we understand
High geographic and business diversification
High geographic and business diversification
Sharp focus on risk-return trade-offs
Sharp focus on risk-return trade-offs
Medium-low and predictable risk profile
4
4 Risk management discipline
Risk management discipline 20
Our differential management capabilities
and our lower risk appetite translate into
better asset quality…
…as a Group …and in our main markets
NPLs (%) Coverage (%) Spain UK ** LatAm**
4.20
(Aug.)
2.64 (Sep.) 2.50
119 2.47
1.34 65 1.50
0.72 1.33
SAN European
SAN Banks Abbey Sector SAN Sector
SAN European
+Savings
peers* peers*
June 2008 NPL ratio (%) June 2008
(*) Average European banks included in our peer group (**) Data according to local criteria, on a like-for-like basis
with the sources for each sector
Sources for Sectors: Spain - Banco de España, UK – Council Morttgage Lenders,
LatAm – Central Banks
4
4 Risk management discipline
Risk management discipline 21
Adding value through increased customer business…
…not through relaxed standards / “climbing up the risk curve”
During the previous cycle, an environment of apparent “zero 4
risk” invited the sector to climb up the “risk curves”:
• No toxic products
Credit risk:
Credit risk:
Shift towards subprime segments
Shift towards subprime segments
Financing of leveraged structures (e.g., private equity)
Financing of leveraged structures (e.g., private equity)
• No conduits / SIV’s
Liquidity risk:
• No liquidity or
Liquidity risk:
Financing long term assets with short term liquidity
Financing long term assets with short term liquidity
Increasingly lower reliance on retail deposits
interest rate carry
Increasingly lower reliance on retail deposits
trades
Market risk:
Market risk:
Interest rate / /FX: carry trades
Interest rate FX: carry trades
Equity market: e.g., prop trading
• Importance of
Equity market: e.g., prop trading
deposit funding
22
Santander brings a business model that
Santander brings a business model that
adds value…
adds value…
1. Commercial excellence
1. Commercial excellence
2. Efficiency focus
2. Efficiency focus
3. Global synergies
3. Global synergies
4. Risk management discipline
4. Risk management discipline
… and we will execute a “textbook”
… and we will execute a “textbook”
integration
integration
1
1 Banco Real and Santander Brasil are highly
Banco Real and Santander Brasil are highly 23
complementary banks
complementary banks
Very limited overlap…
Very limited overlap…
… which means that the integration can
… which means that the integration can
be executed with limited revenue attrition
be executed with limited revenue attrition
Low product //
Low product
Excellent geographical fit
Excellent geographical fit customer overlap
customer overlap
% of Market Market Combined PF individuals SMEs
national share share- market Corporates Real Estate & Others
GDP SAN ABN share 6 5 6
Sao Paulo 34% 13% 7% 20% 25
35
Rio de Janeiro 13% 3% 10% 13% 49
19
Minas Gerais 10% 2% 7% 9% 15
8% 8% 2% 11% 10
Rio Grande do Sul
51 44
Subtotal- "top 4" 64% 9% 7% 16% 35
Brazil- total 100% 6% 6% 12%
SAN REAL Combined
2
2 Well-defined integration plan
Well-defined integration plan 24
We have a very clear plan:
We have a very clear plan: We will execute a
We will execute a
We know how to do this…
We know how to do this… “textbook” integration:
“textbook” integration:
••In-market acquisition in a
In-market acquisition in a
core market
core market
••Strong and experienced
Strong and experienced
teams in both banks,
teams in both banks,
••Existing base allows us
Existing base allows us
to achieve “quick wins”
to achieve “quick wins”
••Established IT platform
Established IT platform
In summary: We want to be as profitable as Brazil’s “best in class” 25
There is no reason why our operations in Brazil would not
There is no reason why our operations in Brazil would not
generate, over the medium term, a net profit similar to
generate, over the medium term, a net profit similar to
Brazil’s “best in class”
Brazil’s “best in class”
BR$ 4,8bn BR$ 7,9bn
BR$ 4.8 bn BR$ 7.9 bn
A high-value
A high-value
investment +BR$
investment 2-3bn
for
for
Santander’s
Santander’s
stockholders
stockholders
+BR$
+BR$
2,8bn
3.1bn
Santander + Real
Santander + Real Combined
Combined- 2010 target Brazil’s “best in
Brazil's "best in class"
proforma 2008
proforma
2008 2010 target class”
26
The importance of emerging markets in a diversified
The importance of emerging markets in a diversified
portfolio
portfolio
We believe in the Brazil’s growth potential…
We believe in the Brazil’s growth potential…
…and we bring a business model that adds value
…and we bring a business model that adds value
Summary // outlook for SAN
Summary outlook for SAN
27
Santander Group’s goals: To deliver long term,
Santander Group’s goals: To deliver long term,
high quality, balanced, recurrent profit growth:
high quality, balanced, recurrent profit growth:
Santander’s business model…
Santander’s business model… …plus our “extra
…plus our “extra
Well-diversified Group
kicker”: BRAZIL
kicker”: BRAZIL
Well-diversified Group
Focused on commercial banking
Focused on commercial banking Market growth
Market growth
“Vertical strategy” principle
“Vertical strategy” principle Banking system growth
Banking system growth
Footprint in attractive markets
Footprint in attractive markets Cost / /Revenue synergies
Cost Revenue synergies
Solid retail banking model
Solid retail banking model
Intensive in Distribution/Customer Relationship Closing of the profit gap
Closing of the profit gap
Intensive in Distribution/Customer Relationship
with Brazil’s “best in class”
with Brazil’s “best in class”
Conservative balance sheet and risk management
Conservative balance sheet and risk management
Brazil will be a key driver of Santander’s
Brazil will be a key driver of Santander’s
outperformance vs our peers
outperformance vs our peers
Fuente: CNMV