10th May 2005 07:30
Banco Santander Central Hispano SA10 May 2005 Press Release Grupo Santander net attributable income increases 38.5% to EUR 1,185 million in the first quarter of 2005 • The income statement includes Abbey for the first time, with a contribution of EUR 153 million to net attributable income. Without Abbey, profit would have increased 20.6%. • The EUR 717 million extraordinary capital gain from the sale of 2.57% of The Royal Bank of Scotland was offset by a provision that will be allocated in the course of the year and thus has had no effect on results. • Increased profit is based on high business growth and revenue from retail banking, where net operating income increased by 24.4%. • In continental Europe, net operating income rose 23% and net attributable income 45% (to EUR 752 million). In Latin America, net operating income and profit improved 14% in dollars (to $553 million), its operating currency. • This growth is due to good business performance, especially in lending, with increases of more than 15% in Latin America, Spain and Santander Consumer. • Cost control has led to a 0.8 percentage point improvement in the efficiency ratio, to 47.0%. If Abbey is included, the efficiency ratio is 50.9% for the Group as a whole. • The NPL ratio is 1.07% for overall lending, with coverage of 162%. Without Abbey, the NPL ratio fell by 0.11 percentage points from March 2004 to 1.22%, with coverage increasing 33 points, to 202%. Madrid, May 10, 2005 - Grupo Santander registered net attributable income of EUR1,185 million in the first quarter of 2005, an increase of 38.5% from the sameperiod in 2004. This was the first quarter in which Abbey (consolidated on thebalance sheet at the end of 2004) was included in the income statement,contributing EUR 153 million in profit. Without Abbey, Grupo Santander's incomewould have increased 20.6% from the same quarter last year. The results were notaffected by the EUR 717 million capital gain obtained from the sale of 2.57% ofThe Royal Bank of Scotland, which was offset by a provision for contingencieswhich will be allocated in the course of the year. Grupo Santander has drawn up its 2005 financial statements following the newinternational financial reporting standards (IFRS) and has redrafted restatedall the information for 2004 in line with these criteria. The application ofthese standards involves changes in accounting principles, the presentation ofstatements and the structure of business areas. The performance of Grupo Santander in the first quarter of 2005 was marked bysignificant growth in business activity - and therefore in revenue - from retailbanking in Europe and Latin America. This growth came hand in hand with costcontrol and a reduction in loan-loss provisions, as the limit for genericprovisions had already been reached. This combination of higher revenue withcost control and a reduced need for provisions enabled income to grow by morethan 20% without Abbey and more than 38% when Abbey is included. Grupo Santander results Q1' 05 EUR million Q1'05 % change Q1'05 % change w/o Abbey on Q1'04 with Abbey on Q1'04Commercial revenue 3,328 +7.3 4,096 +32.1Gross operating income 3,669 +7.3 4,538 +32.7Operating costs - 1,930 +5.3 -2,591 +41.3Net operating income 1,784 +10.2% 2,054 +26.9Loan-loss provisions -223 -32.0 -281 -14.3Income before taxes 1,387 +20.3 1,618 +40.4Attributable income 1,032 +20.6 1,185 +38.5 Attributable income does not include the capital gain (EUR 717 million) from the sale of RBS in January 2005 (*) Commercial revenue: basic revenue + insurance activity Earnings Growth in business activity helped push net interest revenue income to EUR 2,358million in the first quarter of 2005, up 27.9% (6.6% excluding Abbey) from thesame period in 2004. The increases in fee income and insurance (+7.9%) andincome from equity-accounted holdings (+11.7%) generated commercial revenue ofEUR 4,096 million euros, up 32.1% (7.3% without Abbey). Trading gains rose toEUR 441 million, growth of 38.8% (7.5% without Abbey), putting net operatingrevenue at EUR 4,538 million, an increase of 32.7% (7.3% excluding Abbey). Thisincrease occurred with a lower contribution from the Group's treasuries. Grupo Santander's overall personnel and general expenses account for 50.9% ofrevenue, whilst for the Group without Abbey the efficiency ratio would be 47.0%,an improvement of 0.8 points from a year earlier. This is due to the fact thatgeneral and administration expenses, including new projects, grew 5.5%, whilstrevenue increased by almost two points more. This enabled net operating incometo grow 10.2% without Abbey and 26.9% for the Group as a whole. Provisions amounted to EUR 291 million, a drop of 20.4% (-36.3% without Abbey).Most of this item (EUR 281 million) stems from loan-loss provisions. Withouttaking Abbey into consideration, such provisions would be 32.0% lower, withdecreases in all geographical areas and main business units. The fall in provisions is due to the heavy contributions made in previous yearsin applying the Bank of Spain's norms, bringing us back to provisions more inline with the business risk involved. Specific loan-loss provisions increased15.6%, below the growth of lending activity. Main Units Europe Q1'05 Millions of euros and % change on Q1'4 Gross operating income: 2,267; +12.8% Net operating income: 1,301; +22.8% Attributable income: 752; +44.9%SAN Network: 906; +5.6% 475; +12.0% 306; +38.2%Banesto: 438; +5.7% 279; +14.1% 126; +19.8%Santander Consumer: 366; +33.2% 243; +40.7% 111; +77.8%Portugal: 253; +7.9% 130; +16.9% 94; +21.6%Other (*): 304; +32.9% 174; +63.5% 115; +117.5% (*) Private Banking, Asset management and Global Wholesale Banking These provisions, together with other losses amounting to EUR 144 million (EUR164 million without Abbey) resulted in income before taxes of EUR 1,618 million,up 40.4% (20.3% excluding Abbey). Under "other income", a profit of EUR 717million is included following the sale of 2.57% of The Royal Bank of Scotlandand the setting-up of a contingency fund for the same amount. Therefore, thissale has no impact on final earnings. The Group's first quarter net attributable income after taxes and minorityinterests was EUR 1,185 million, an increase of 38.5% (20.6% without Abbey). Ofthese earnings, 57% were generated by the Group's businesses in ContinentalEurope, 32% from Latin America and 11% from the U.K. (Abbey). Earnings fromcontinental Europe improved 44.9% and Latin America again registered positivegrowth rates in euros of 8.8%. Principal countries in Latin America Q1'05 Millions of US$ million and % change on Q1'4 Gross operating income: 1,950; +12.4% Net operating income: 881; +13.9% IBT: 761; +16.4%Comm. Brazil: 563; +17.7% 177; +19.6% 151; +57.9%Comm. Mexico: 374; +21.6% 146; +48.1% 119; +31.8%Comm. Chile: 242; +27.9% 119; +87.0% 86; 132.3%Comm. Other countries: 320; +31.3% 136; +81.8% 99; +67.3%BPI: 65; +13.2% 37; +18.2% 36; +21.6%AMgt&Ins: 142; 31.2% 88; +50.8%% 94; +72.1%GWB: 243; -30.5% 179; -40.3% 175;-38.9% Business The volume of funds managed by Grupo Santander amounted to EUR 841,155 millionat the close of the first quarter of this year. This amount represents growth of74.9% in one year, which would have been 13.3% without Abbey. Of these overallresources, EUR 698,581 million is on the balance sheet, and the remainderoff-balance sheet customer deposits such as mutual funds and pensions. The consolidation of Abbey caused a quantitative leap in business figures,doubling the amount of loans and increasing customer managed funds by 70.0%. Butit was also a qualitative leap, contributing greater geographical diversity inrisk, with 47% of loans in continental Europe, 43% in the U.K. and the remaining10% in Latin America. Grupo Santander's gross lending amounted to EUR 370,061 million at the close ofthe first quarter of 2005, up 101.7%. Without Abbey, lending volume reached EUR215,850 million, an increase of 15.8%, discounting the effect ofsecuritisations. Lending to other resident sectors rose 17.6%, reflectingbusiness activity in Spain, with 23.0% growth in mortgage lending. Lending tothe non-resident sector grew 14.0%. Lending rose 15% in continental Europe, across all countries and units. Businessin the Santander branch network in Spain increased 18%, in Banesto 21%, inPortugal 6% and in Santander Consumer 31%. In turn, Latin America improved 23%in local currency terms, with strong growth in the main countries: Brazil (33%),Mexico (24%) and Chile (13%). Total managed customer funds amounted to EUR 607,828 million at the end of thefirst quarter of 2005, an increase of 70.0% compared to last year. WithoutAbbey, this figure would be EUR 392,671 million (+9.8%). Balance sheetresources, without Abbey, grew 10.4% to EUR 265,055 million, whilst off-balancesheet items (basically mutual funds and pensions) rose 8.7%, to EUR 127,616million. Between March 2004 and March 2005, mutual funds increased 7%, pensionplans 10.6% and managed portfolios, 20.2%. Continental Europe Change Mar'05 / Mar'04 Loans (*) Customer funds (**)SAN Network +18% +7%Banesto +21% +10%Santander Consumer +31% +18%Portugal +6% +4% (*) Including Securitisations(**) Customer funds ex-REPOs, mutual funds and pension funds Latin America Change Mar'05 / Mar'04 Loans (*) Customer funds (**)Brazil +33% +21%Mexico (*) +24% +15%Chile +13% +12% (*) Including Securitisations(**) Customer funds ex-REPOs, mutual funds and pension funds In continental Europe, customer funds under management amounted to EUR 247,970million, an increase of 9.7%. In Spain, which accounts for more than 80%,customer funds under management rose by 10.6% to EUR 205,066 million. The Groupremains the leader in mutual funds in Spain, with a market share of around 27%after growing 5.0% in net worth from March 2004. In Latin America, customer resources funds amounted to EUR 92,842 million,growth of 15% without the exchange rate effect. In deposits lesssecuritisations, all countries registered double-digit growth, especially Brazil(+32%), whilst Mexico and Chile increased at around 12%. Mutual funds grew 16%,with noteworthy increases in Argentina, Mexico, Colombia and Puerto Rico. Inpension plans, overall growth was 13%. Abbey The acquisition of Abbey was completed on 12th November 2004, with just itsbalance sheet consolidated in Grupo Santander at year-end. This is the firstquarter in which Abbey's earnings are included in those of Grupo Santander. The management team was completed this year, with new division heads in Salesand Marketing, as well as Insurance and Asset Management, to form a new, moreflexible and business-focused organisation. The new corporate image identity wasalso adopted, in line with the Group's global imagebrand, adding the Santanderred colour, flame and lettering to Abbey's brand. The implementation of this newmageidentity will commence in May. With a view to improving productivity, a new management structure has been outin place in branches and a training programme is being carried out to increasethe number of sales personnel. In addition, the mortgage product catalogue hasbeen revised, with a re-launch of fixed-income mortgages. The marketing of a newrange of investment products has also begun. Although it is too soon for these initiatives to have a significant impact onsales, the performance of business in the first quarter has begun to reflectsigns of recovery. Customer-related sales, such as the opening of currentaccounts and the granting of credit cards, increased from the last quarter of2004. Likewise, the volume of mortgages approved in March was the highest infifteen months. This overall activity is helping to stabilise recurrent income. Total lending reached EUR 161,406 million, a 2.4% increase in the quarter.Managed customer funds (minus repos) amounted to EUR 212,472 million,practically the same as at the close of 2004. Regarding cost reduction, the processes of headcount reduction, renegotiationwith global suppliers and certain aspects of technological development are beingaddressed simultaneously. At the end of the quarter, 2,400 redundancies had beennotified, with 1,000 employees having already left the Group. A headcountreduction of some 4,000 roles is expected for 2005. At the same time, twocustomer help lines have been closed and the closure of another has beenannounced. The impact of these measures, as well as the renegotiation of globalagreements with suppliers, the cancellation of non-essential projects and thestart-up of new technological and business platforms will be felt over the nextquarters. Management and capital ratios The expansion of the Group's lending activity came with a drop in the NPL ratio,meaning that the ratios of NPLs and doubtful loans reached an all-time low atthe end of the first quarter of 2005. Grupo Santander's NPL rate is 1.07%, with162% coverage. Excluding Abbey, this rate would show a decrease from 1.33% to1.22% in the year, with coverage increasing by 33 points, to 202%. Management ratios Efficiency ratio Q1'04 Q1'05 Change % 47.8% 47.0% (*) -0.8 p.p. (*) Without Abbey. Including Abbey: 50.9% BIS ratio Core cap. Tier I BIS ratio 5.3% 7.2% 13.0% NPL ratio Mar'04 Mar'05 Change % 1.33% 1.22% (*) -0.11 p.p. (*) Without Abbey. Including Abbey: 1.07% Coverage ratio Mar'04 Mar'05 Change % 169% 202% (*) +33 p.p. (*) Without Abbey. Including Abbey: 162% In Spain, the NPL rate is 0.59%, 0.14 points lower than in March 2004, withcoverage at 359%, 101 points higher. Consumer finance (Santander Consumer)closed March with a NPL rate of 2.4% and 127% coverage, slight increases in bothitems in the quarter. In Latin America, NPLs fell 0.47 points, to 2.73% in theyear, whilst coverage increased 20 points, to 160%, in the same period. Bothratios also improved from the last quarter of 2004. The Group's eligible capital amounted to EUR 46,525 million at the end of March2005, with a surplus of EUR 17,818 million over minimum requirements. With thiscapital base, the BIS ratio is 13%, with Tier I at 7.2%. The share Santander shares ended March 2005 at EUR 9.39. In the second half of last yearits performance was affected by the takeover offer for Abbey. Between theannouncement of the transaction until the end of March, it appreciated by 20.5%.At the end of March, Santander's market capitalisation was EUR 58,728 million,reinforcing its position as the leading bank in the euro zone and ninth in theworld. Banco Santander previously announced in connection with its acquisition of AbbeyNational plc its intention to make an application for its ordinary shares to beadmitted to the Official List and to trading on the London Stock Exchange'smarket for listed securities. It had initially been expected that such a listingwould be obtained in the first half of 2005. In light of the forthcoming changesto the UK listing regime as a result of the implementation of the ProspectusDirective, it is now anticipated that, subject to the UK government implementingthe Prospectus Directive as planned on 1 July 2005, the listing will becomeeffective as soon as practicable thereafter. As a result, the free share dealingfacility established at the time of the acquisition of Abbey will continue infull force and effect in accordance with its terms until such time as the BancoSantander ordinary shares are listed in London. A further announcement will bemade in due course. The third interim dividend charged to the 2004 earnings was paid on February 1stand the fourth dividend on May 1st, amounting to EUR 0.083 and EUR 0.084,respectively. These two dividends were also paid to the holders of the newshares handed over in November 2004 to the former shareholders of Abbey,amounting to an additional EUR 250 million in dividend payout. Following thesedividends, the amount received on 2004 earnings was EUR 0.3332 per share, anincrease of 10%. The return per dividend obtained by Santander shareholdersamounted to 3.82%, based on the average share price throughout 2004. In April, the Bank's Board of Directors agreed to appoint Luis Angel Rojo as anindependent external director. Following this appointment, Santander's Boardcomprises 20 members holding 4.2% of the Bank's capital. Grupo Santander's shareholder base increased significantly following theacquisition of Abbey, to 2,578,094 shareholders. 125,933 people work in theGroup, serving 63 million customers in 9,935 branches. Income statement Million euros Q1'05 Q1'04 Variation % with Abbey w/o Abbey w/o Abbey with AbbeyNet interest income (w/o dividends) 2.321,4 1.928,8 1.798,5 7,25 29,08Dividends 36,4 36,4 44,6 (18,42) (18,27)Net interest income 2.357,9 1.965,2 1.843,1 6,63 27,93Income from companies accounted for by the 140,5 140,0 125,3 11,71 12,14equity methodNet fees 1.384,2 1.170,1 1.101,6 6,22 25,65Insurance activity 213,6 52,3 31,5 66,19 578,52Commercial revenue 4.096,2 3.327,6 3.101,5 7,29 32,07Gains (losses) on financial transactions 441,5 341,8 318,1 7,45 38,80Gross operating income 4.537,7 3.669,4 3.419,5 7,31 32,70Income from non-financial services 155,7 100,9 88,8 13,68 75,39Non-financial expenses (35,0) (35,0) (38,4) (8,84) (8,84)Other operating income (13,2) (21,3) (17,9) 19,29 (26,20)Operating costs (2.591,4) (1.929,9) (1.833,5) 5,26 41,34General administrative expenses (2.311,4) (1.723,1) (1.633,5) 5,49 41,50Personnel (1.383,7) (1.074,0) (1.016,7) 5,64 36,10Other administrative expenses (927,7) (649,0) (616,7) 5,24 50,41Depreciation and amortisation (280,1) (206,8) (200,0) 3,40 40,02Net operating income 2.053,7 1.784,0 1.618,6 10,22 26,89Impairment loss on assets (291,3) (233,2) (365,9) (36,25) (20,37)Net loan loss provisions (281,1) (223,0) (328,1) (32,05) (14,35)Goodwill 0,0 0,0 (2,4) (100,00) (100,00)Other assets (10,3) (10,3) (35,3) (70,90) (70,90)Other income (144,5) (163,7) (100,1) 63,63 44,42Income before taxes 1.617,9 1.387,1 1.152,6 20,34 40,37Corporate income tax (314,4) (237,0) (189,1) 25,36 66,30Net income from ordinary activity 1.303,4 1.150,1 963,5 19,36 35,28Net income from discontinued operations 0,5 0,5 2,2 (79,85) (79,85)Net consolidated income 1.303,9 1.150,5 965,8 19,13 35,01Minority interests 118,8 118,8 110,2 7,78 7,78Attributable income to the Group 1.185,1 1.031,7 855,6 20,59 38,52 Customer loans Million euros 31.03.05 31.03.04 Variation % with Abbey w/o Abbey w/o Abbey with AbbeyPublic sector 4.279 4.279 5.626 (23,94) (23,94)Other residents 128.876 128.876 110.053 17,10 17,10Secured loans 62.962 62.962 51.655 21,89 21,89Other loans 65.914 65.914 58.398 12,87 12,87Non-resident sector 244.101 82.695 72.555 13,98 236,43Secured loans 155.693 20.855 20.636 1,06 654,46Other loans 88.408 61.840 51.919 19,11 70,28Gross loans and credits 377.256 215.850 188.235 14,67 100,42Credit loss allowance 7.195 6.223 4.775 30,32 50,69Net loans and credits 370.061 209.628 183.460 14,26 101,71Pro memoria: Doubtful loans 4.489 3.135 2.990 4,84 50,12Public sector 2 2 3 (22,33) (22,33)Other residents 898 898 955 (5,94) (5,94)Non-resident sector 3.589 2.235 2.033 9,94 76,54 Customer funds under management Million euros 31.03.05 31.03.04 Variation % with Abbey w/o Abbey w/o Abbey with Abbey Public sector 18.172 18.172 11.467 58,48 58,48Other residents 83.104 83.104 83.194 (0,11) (0,11)Demand deposits 46.123 46.123 42.306 9,02 9,02Time deposits 20.786 20.786 21.422 (2,97) (2,97)REPOs 16.054 16.054 19.275 (16,71) (16,71)Other 141 141 191 (26,28) (26,28)Non-resident sector 183.455 80.171 75.905 5,62 141,69Demand deposits 98.380 31.036 28.314 9,61 247,45Time deposits 50.002 25.831 25.739 0,36 94,26REPOs 9.818 7.134 7.891 (9,60) 24,42Public Sector 2.658 2.658 2.225 19,45 19,45Other 22.597 13.512 11.735 15,15 92,57Customer deposits 284.732 181.447 170.566 6,38 66,93Debt securities 116.119 62.963 47.529 32,47 144,31Subordinated debt 21.999 13.131 12.759 2,91 72,41Insurance liabilities 42.404 7.513 9.343 (19,58) 353,86On-balance-sheet customer funds 465.253 265.055 240.197 10,35 93,70Mutual funds 94.707 93.258 87.172 6,98 8,64Pension plans 36.218 22.709 20.533 10,60 76,39Managed portfolios 11.649 11.649 9.692 20,19 20,19Off-balance-sheet customer funds 142.574 127.616 117.397 8,70 21,45Customer funds under management 607.828 392.671 357.594 9,81 69,98 Shareholders' equity and capital ratios Million euros Variation 31.03.05 31.03.04 Amount % 31.12.04 Capital stock 3.127 2.384 743 31,16 3.127Additional paid-in surplus 20.370 8.721 11.649 133,58 20.370Reserves 10.495 8.219 2.276 27,70 6.949Treasury stock (2) (17) 15 (87,55) (104)On-balance-sheet shareholders' equity 33.990 19.306 14.684 76,06 30.342Net attributable income 1.185 856 330 38,52 3.606Interim dividend distributed (1.311) (1.109) (202) 18,22 (792)Shareholders' equity at period-end 33.865 19.053 14.811 77,74 33.156Interim dividend not distributed (527) (336) (191) 56,85 (1.046)Shareholders' equity 33.338 18.718 14.620 78,11 32.111Valuation adjustments 1.735 2.202 (467) (21,21) 1.778Minority interests 2.283 2.046 238 11,62 2.085Preferred securities 7.061 4.184 2.877 68,77 7.623Shareholders' equity and minority interests 44.417 27.149 17.268 63,61 43.596Basic capital 25.992 17.088 8.904 52,11 24.419Supplementary capital 20.533 8.894 11.639 130,86 19.941Computable capital (BIS criteria) 46.525 25.982 20.543 79,07 44.360Risk-weighted assets (BIS criteria) 358.834 211.375 147.459 69,76 340.946BIS ratio 12,97 12,29 0,68 13,01Tier 1 7,24 8,08 (0,84) 7,16Cushion (BIS ratio) 17.818 9.072 8.747 96,42 17.084 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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