SANTANDER UK-SANTANDER INVESTOR DAY 2011

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Ana Patricia Botín, CEO

Text of SANTANDER UK-SANTANDER INVESTOR DAY 2011

  • 1. Ana Patricia Botn Santander UK

2. DisclaimerSantander UK plc (Santander UK) and Banco Santander, S.A. ("Santander") both caution that this presentation contains forward-looking statements. These forward-looking statements are found in various places throughout this presentation and include, withoutlimitation, statements concerning our future business development and economic performance. While these forward-lookingstatements 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.Factors that may affect Santander UKs operations are described under Risk Factors in Santander UK s Annual Report andAccounts on Form 20-F for 2010. A more detailed cautionary statement is also given on page 5 of Santander UKs Annual Reportand Accounts on Form 20-F for 2010. Other unknown or unpredictable factors could cause actual results to differ materially fromthose in the forward-looking statements.The information contained in this presentation is subject to, and must be read in conjunction with, all other publicly availableinformation, including, where relevant any fuller disclosure document published by Santander UK or Santander. Any person at anytime acquiring securities must do so only on the basis of such persons own judgment as to the merits or the suitability of thesecurities for its purpose and only on such information as is contained in such public information having taken all such professionalor other advice as it considers necessary or appropriate in the circumstances and not in reliance on the information contained in thepresentation. In making this presentation available, both Santander UK and Santander give no advice and make norecommendation to buy, sell or otherwise deal in shares in Santander UK or Santander, or in any other securities or investmentswhatsoever.No offering of securities shall be made in the United States except pursuant to registration under the U.S. Securities Act of 1933, asamended, or an exemption therefrom. Nothing contained in this presentation is intended to constitute an invitation or inducement toengage in investment activity for the purposes of the prohibition on financial promotion in the U.K. Financial Services and MarketsAct 2000.Forward-looking statements speak only as of the date on which they are made and are based on the knowledge, informationavailable and views taken on the date on which they are made; such knowledge, information and views may change at any time.Neither Santander UK nor Santander undertakes any obligation to update or revise any forward-looking statement, whether as aresult of new information, future events or otherwise.Note: Statements as to historical performance or financial accretion are not intended to mean that future performance, share price orfuture earnings (including earnings per share) for any period will necessarily match or exceed those of any prior year. Nothing in thispresentation should be construed as a profit forecast.2 3. Index1 Santander UKs strengths and recent performance2Market environment3Commercial turnaround of Santander UK4Three year outlook3 4. Index1 Santander UKs strengths and recent performance2Market environment3Commercial turnaround of Santander UK4Three year outlook4 5. We have a unique position in the UK H1 2011 PBTH1 2011 Customer assets MarketsMarkets 199bn 1.15 Bn 6%10k Current Investment >1productonlysavings AccountOnly only only 22 23. 12More balanced Customerdriven modelbusiness mix andSME bank ofCustomer driven retail model (vs. product driven) choice1 3Leading efficiency and service underpinned by IT systemsSimple products that add value. Reward existingcustomers primary relationship3 million new currentFrom 1.4m to 3m accounts in 3 yearscredit cards in 2013 23 24. 12More balancedCustomer driven modelbusiness mix and SME bank ofCustomer driven retail model(vs. product driven)choice13Leading efficiency and serviceunderpinned by IT systemsFocus on primary relationships (current acc.,cards), will drive revenue growthOutlook for 2011-14 Balance sheet growth broadly flatMortgages &Mortgages and savings revenue Savings pressured by new business margins and limited scope for back-book repricing Other retail CAGR of c. 9%productsotherwise heavily impacted by regulatory + market environment 24 25. 12More balanced Customerdriven modelbusiness mix andSME bank ofMore balanced business mix (vs. product driven) choice2 3Leading efficiency and service underpinned by IT systemsAttractive opportunity in the SME andCorporate segments Revenue split by segment (H111) Santander UKPeers 21% 36% 64%79% RetailCorporatesNote: Peers split considers only UK Retail, SMEs and25Corporate business 26. 12More balanced Customerdriven modelbusiness mix andSME bank of More balanced business mix (vs. product driven) choice2 3Leading efficiency and service underpinned by IT systems Successful growth in SMEs/Corporates thanks to relationship bankingCorporate core assets (bn)The Santander modelCase Study23.9+66% We needed a bank that understood we arent just a standard consumer electronics firm and that we care about high-quality 14.4 products. When we met Santander, theyshowed a real ability to think outside the box. The service we have received hasbeen impressive, combining a can doattitude with invaluable commercial 9.6 acumen 5.8 Geoff Edwards, Executive Vice President 2008H111 Operations, B&W Group Ltd. SMEs Other Core26 27. 12More balancedCustomer driven modelbusiness mix and(vs. product driven) SME bank ofchoiceMore balanced business mix23Leading efficiency and serviceunderpinned by IT systemsContinuing to grow organically in SMEs/Corporates Regional business centers Growing regional 39 4232coverage for SMEs 23+82% +2010 2011 (e) 2012 (e) 2013 (e) Contribution of fee income (1)Completing product 2011 (e) 2013 (e) capability 28%35% Non NII Net 72% 65% Interest Income (1) Excludes run-down portfolios27 28. 12More balancedCustomer driven modelbusiness mix and SME bank ofMore balanced business mix(vs. product driven)choice23Leading efficiency and serviceunderpinned by IT systemsThe acquisition of RBS businesses istransformational1.5m current accountsRetail 10%2%100K premium customers200k business customers SMEs4% 5%30K customersMid-Corp 3% 3%1K customers Santander UKRBS/NatwestThe RBS transaction* is expected to be completed in Q4 2012*Pending the necessary authorizations28 29. 12More balanced Customerdriven modelbusiness mix andSME bank of More balanced business mix (vs. product driven) choice2 3Leading efficiency and service underpinned by IT systems Successful growth driven by more extensive footprint and better product capabilities/fees Corporate Banking organic revenue growth CAGR11(e) 14(e) 15%-20%Asset quality is apriorityRBS branches willstart to materiallycontributeadditional revenuein 20132010 2011(e) 2012(e) 2013(e) 2014(e) NII Non NII 29 30. 12More balancedCustomer driven modelbusiness mix andSystems driven efficiency and service quality (vs. product driven) SME bank ofchoice3 3Leading efficiency and serviceunderpinned by IT systemsOur commercial turnaround leverages SantanderGroup IT systems and proven commercial models IT Investment m 490m in 3 years210170 110 2012(e)2013(e) 2014(e)Partenon still not fully exploited: 364 businessapplications used in UK vs. 520 available30 31. 12More balancedCustomer driven modelbusiness mix andSystems driven efficiency and service quality (vs. product driven) SME bank ofchoice3 Our IT allows for low costs and high quality3Leading efficiency and serviceunderpinned by IT systemsservice at the core of our business model..Cost efficiency and service qualityAll call centers brought back toBusiness as usual costthe UKgrowth will be below inflation FSA reportable complaintsin 2012-13(monthly avg.)Outlook is further +c.100 m (20%) (14%)costs in 2012 and +c.60 m in2013 related to ourcommercial turnaround/business mix improvement 40,830 32,66228,148 H110H210 H111 31 32. Index1 Santander UKs strengths and recent performance2Market environment3Commercial turnaround of Santander UK4 Three year outlook 32 33. Financial outlook Financial Objectives2011(e)2012 / MT target2013 peer(1)2013>2014 consensusCost-to-Incomec. 45% 48% - 50% 11%>16%11%(Ex-PPI) NPLsc. 2%Best in classc. 4%Group view, objectives based on outlined macro scenario and do not include potentialIndependent Commission on Banking (ICB) impacts(1) UK Banks include RBS, LBG and Barclays. Consensus based on broker research pre-interim results(2) UK view (trading)33 34. Concluding remarks Our Plan to 2014 implies an investment period in 2012-2013, with payback and higher profitability starting in 2014 Within the outlined macro scenario, in the period to 2013 efficiency and profitability will still be better than or in line with peers By 2014, after absorbing systemic and structural impacts, SAN UK will be as efficient and profitable as it is todayHowever, this profitability will be based on new/more satisfied, more loyal customers, and thus as more sustainable business model and with a stronger balance sheet in terms of capital, liquidity and funding mix By 2014, Santander UK will be the leading UK bank inefficiency and profitability 34