7th Feb 2008 07:35
Banco Santander S.A.07 February 2008 Press release Banco Santander's attributable profit rose 19% to EUR 9.060 billion in 2007 Attributable profit excluding capital gains rose 23% to EUR 8.111 billion, with a 21% increase in earnings per share. • Reflecting the strong results, the Board of Directors increases thedividend by 25% for the third consecutive year, to EUR 0.65 a share, for apayout of EUR 4,070 million, or 50% of ordinary profit. • The increase in profit was driven by revenue growth of 21%, more thandouble the rate of growth in costs of 10%, which improved the efficiency ratioby more than four percentage points, to 44.2%. • All business units contributed to the increase in revenues. Loans anddeposits grew by 12%, excluding the exchange rate effect. • In Continental Europe, attributable profit rose 27% to EUR 4,423million, with a 14% increase in loans and an 8% increase in customer funds. • In Latin America, attributable profit rose 27% in dollars, toUS$3,648 million, with an increase of 20% in loans and 21% in customer funds, inlocal currencies. In euros, attributable profit rose 17% to EUR 2,666 million. • Abbey's attributable profit rose 20% to £822 million, with growth of8% in loans and 5% in deposits in pounds. In euros, attributable profit rose 20%to EUR 1,201 million. • Non-performing loans stood at 0.95%, with a coverage rate of 151%,compared to rates of 0.82% and 179%, respectively, at the close of 2006. • The capital ratios underline Santander's high level of solvency, witha BIS ratio of 12.7% and core capital of 6.3%. • The Group realized net capital gains of EUR 2,348 million in 2007through assets sales, most notable the sale of real estate properties (EUR 1,076million), the pension fund management companies in Latin America (EUR 622million) and the 1.79% stake in Intesa Sanpaolo (EUR 566 million). • Of these capital gains, EUR 1,398 million will be assigned mainly toadjust the value of the investment in Sovereign (EUR 737 million), to amortizethe acquisition of clients in Brazil (EUR 351 million) and to reserves for earlyretirements (EUR 242 million).The remaining EUR 950 million contribute toattributable profit. Madrid, February 7, 2008 - Banco Santander registered attributable net profit ofEUR 9,060 million in 2007, an increase of 19% from 2006. The result is thehighest profit in the history of the bank, which celebrated the 150thanniversary of its founding in 2007, making it the fifth largest bank in theworld by profit. These results are more noteworthy when taking into account the difficultfinancial environment, which caused large losses at a number of global financialinstitutions. At the same time, Santander participated, together with The RoyalBank of Scotland and Fortis, in the largest financial sector transaction inhistory: the acquisition of ABN Amro. The 2007 results are underpinned by the strong growth in revenues, which doubledthat of costs. This allowed recurring profit, without capital gains, to grow by23%, to EUR 8,111 million. At the same time, Santander in 2007 realized netextraordinary capital gains of EUR 2,348 million, of which EUR 1,398 millionhave been assigned to extraordinary charges and EUR 950 million to attributablenet profit. The quality of these results allowed the Board of Directors to approve, for thethird consecutive year, a 25% increase in the dividend, with a total chargeagainst 2007 earnings of EUR 0.6508 per share. This will result in a dividendpayout of EUR 4,070 million, or 50% of ordinary profit, in line with Santander'spay-out policy. In 2007 Santander notched up a new record profit ... 2007 Attributable profitEUR million 2006 2007Total profit (1) 7,596 9,060Net capital gains (2) 1,014 950Profit excl. capital gains 6,582 8,111 (*)(1) Growth rate of 19.3%; (2) Growth rate of 23.2%(*) Including EUR 60 million due to ABN impact (net between profit and financingcosts) 2007 world's Top 10 by attrib. profit (*) ... in the world's top 5 for the first timeEUR millionBank 1 13,200Bank 2 11,200Bank 3 10,800Bank 4 9,900Santander 9,060Bank 6 8,300Bank 7 7,800Bank 8 7,600Bank 9 6,600Bank 10 6,500(*) Final data or Bloomberg estimates. Quality profit High "vertical" quality of the income statementEUR Mill. Change 2007 2006 Amount % Gross operating income 27,074 22,333 +4,741 +21.2Operating expenses -12,208 -11,045 -1,162 +10.5Net operating income 14,821 11,218 +3,604 +32.1Loan-loss provisions -3,470 -2,467 -1,002 +40.6Net op. income net of LLPs 11,352 8,750 +2,601 +29.7 Attr. profit (exc. ABN & 8,051 6,582 +1,468 +22.3cap. gains)ABN's* net contribution 60 -- +60 --Attr. profit (exc. capital 8,111 6,582 +1,528 +23.2gains)Net capital gains 950 1,014 -64 -6.3Attr. profit (incl. capital 9,060 7,596 +1,464 +19.3gains)(*) Including EUR 141 million in revenues and EUR 81 million infinancing costs net of taxes Results Revenues grew by 21%, driven by growth in volumes of 12% and price management,to EUR 27,095 million. Revenues grew at twice the rate of costs, which increasedby 10%, allowing net operating income to increase by 32% to EUR 14,842 million.The increase in costs was linked to the opening of a net 326 new branches,bringing the total number of branches in the Santander network to 11,178, makingit the largest retail banking distribution franchise in the western world. OnceBanco Real in Brazil is integrated, the Group will have more than 13,000branches. The performance in revenue and costs resulted in a significant improvement inefficiency. At the close of 2007, costs equalled 44.2% of total revenues, animprovement of 4.4 percentage points from a year earlier. The businesses inContinental Europe had an efficiency ratio of 38.8%, the U.K. (Abbey) 50.1% andLatin America 41.8%. The strong increase in net operating income was accompanied by a 41% increase inprovisions for bad loans, or an increase of 24% excluding Drive, the U.S.consumer finance company which was consolidated into the Group's accounts from2007. Ordinary attributable profit, excluding extraordinaries, was EUR 8,111million, up 23%. Apart from these results generated by ordinary activities, in 2007 the Grouprealized net capital gains of EUR 2,348 million. Among these capital gains, mostnotable were the EUR 1,076 million generated by the sale of real estateproperties, not including the sale of the Ciudad Santander headquarters agreedin January, 2008, which will result in a net capital gain of EUR 605 million.Other sales included the pension fund management companies in Latin America,which generated a gain of EUR 622 million, the 1.79% stake in Intesa Sanpaolo,with capital gains of EUR 566 million and 5.87% of BPI Portugal, with a gain ofEUR 84 million. These capital gains have been assigned to an adjustment in thevalue of the investment in Sovereign (EUR 737 million) and the acquisition ofclients in Brazil (EUR 351 million), to reserves for early retirement and otherretirement plans (EUR 242 million) and write-offs in Portugal (EUR 68 million). The difference between the net capital gains and reserves come to EUR 950million, which contributes to Banco Santander's final 2007 net profit figure ofEUR 9,060 million, an increase of 19%, reinforcing the solvency and capitalstrength of the Group. Earnings per share came to EUR 1.43, up 17.5% from 2006.Excluding capital gains, earnings per share was EUR 1.28, an increase of 21.4%. 2007 Europe: Main unitsEUR mill. and % o/ 2006 Solid and diversified growth: recurrent profit above 20% in all units Gross operating income: 12,843 mill.; +20% SAN Branch Network 4,747 +14% Banesto 2,282 +15% Santander Consumer Finance *** 2,638 +45% Portugal 1,214 +10% Other **** 1,962 (GB&M: 1,332) +22% Net operating income: 7,786 mill.; +24% SAN Branch Network 2,863 +18% Banesto 1,312 +24% Santander Consumer Finance *** 1,867 +55% Portugal 672 +18% Other **** 1,072 (GB&M: 829) +6% Attributable profit*: 4,423 mill.; +27%SAN Branch Network 1,806 +20%Banesto 668 +14% (+24%)**Santander Consumer Finance *** 719 +27%Portugal 511 +21%Other **** 719 (GB&M: 601) +83% (*) Excluding net capital gains and extraordinary allowances (**) Results from ordinary activity (***) Including Drive. Ex- Drive: gross operating income +7%; net op. income +6%and attributable profit +8% (****) Banif, Asset Management and Insurance and Global Banking & Markets 2007 Latin America: Main countriesUS$ Mill. and % o/ 2006 Strong growth of revenues in all countries with costs under control. IncreasedLLPs due to greater lending and change of mix Gross operating income: 14,210 mill.; +36% Brazil 6,001 +42% Mexico 3,404 +33% Chile 2,060 +23% Other countries 2,300 +35% Santander Private Banking 446 +32% Net operating income: 7,947 mill.; +50% Brazil 3,466 +60% Mexico 2,060 +54% Chile 1,223 +27% Other countries 939 +46% Santander Private Banking 258 +29% Attributable income: 3,648 mill.; +27% Brazil 1,239 +32% Mexico 894 +35% Chile 743 +21% * Other countries 549 +16% Santander Private Banking 223 +28% (*) Net profit (before minority interests): +29% By geographical areas, Continental Europe recorded net income of EUR 4,423million, an increase of 27%, as revenue grew by six percentage points more thancosts, 20% compared to 14%, respectively..Abbey registered a profit of £822million (EUR 1,201 million), an increase of 20%, supported by a 7% increase inrevenues and a 3% decline in costs. Banco Santander profit in Europe came to EUR5,624 million, 68% of total Group profit. In Latin America, attributable profit rose by 27% in dollars, the operatingcurrency, to $3,648 million. In euros, attributable profit was EUR 2,666million, up 17%. The greatest contribution was made by Brazil, which rose by32%, to $1,239 million (EUR 905 million); followed by Mexico, with an increaseof 35% to $894 million (EUR 654 million) and Chile, where attributable profitincreased by 29% to $743 million (EUR 543 million). By businesses, retail banking registered ordinary pretax profit (excludingcapital gains and extraordinary write-offs) of EUR 9,339 million, up 26%; GlobalWholesale Banking EUR 1,830 million, up 28%; and Asset Management and InsuranceEUR 537 million, up 14%. The quality of these results is underpinned by theroughly 20% growth in retail banking seen in all markets, while 78% of GlobalWholesale Banking revenue is generated by customer business. Asset managementand insurance contribute recurring revenues of EUR 3,600 million to the Group. Business Santander concluded 2007 with EUR 1,063,892 million in funds under management,an increase of 6%. Of these, EUR 912,915 million are on the balance sheet, up9%. The rest are off-balance mutual funds, pensions and other customer funds,which amount to EUR 159,986 million. Excluding the effect of certain currencies'depreciations, Banco Santander in 2007 grew by 12% in lending as well as incustomer funds. Group gross lending was EUR 574,172 million at the end of the year, up 8%.Continental Europe accounted for 55% of this lending, the United Kingdom (Abbey)33% and Latin America the remaining 12%. In Continental Europe, lending grew by 14%, to EUR 310,618 million, withincreases in all countries and units. In Spain, lending grew by 13%, withmortgage business slowing to 11%. Lending in the Santander branch network inSpain increased by 11%, Banesto by 21%, Portugal by 6% and Santander ConsumerFinance by 16%. Customers loans Gross customer loansEUR billion Dec 05 443Dec 06 532Mar 07 539Jun 07 561Sep 07 560Dec 07 574 (*)(*) +8.0% as compared to Dec 06. The increase is of 11.8%without exchange rate impact. Gross customers loans: December 2007 % o / operating areas Continental Europe 55%UK - Abbey 33%Latin America 12% The Santander branch network in Spain continued implementing its successful "Wewant to be your bank" programme, launched in 2006, which resulted in linkedcustomers totalling 4 million versus 2.4 million two years ago. Net branchgrowth in 2007 was 55. Lending volume to individuals grew by 8% and to SMEs andcompanies by 18%. Banesto grew by 13% in loans to individuals and 27% in loansto SMEs and companies. In Portugal, Santander Totta grew lending by 6%, due to less lending for largetransactions, while loans to individuals grew by 9% and SME and company lendingby 21%. Santander Consumer continued its expansion, both organic (branch openings inGermany and Italy) and through selective acquisitions (Drive in the U.S.).Activity was affected by rising interest rates and the decline in autopurchases. New lending grew 6%, with direct lending increasing 20% and cardfinancing 18%. Loans for auto purchases fell 1%. Loan volume in Latin America came to EUR 68,854 million, an increase of 14% ineuros and 20% in local currencies. Brazil, which opened 78 branches last year,increased lending by 32%, with growth of 28% in lending to individuals and 41%to SMEs. Mexico, which opened 49 branches, grew by 25%, with increases of 30% inlending to individuals, and 66% to SMEs. Chile, where 97 new branches wereopened, increased lending by 19%, with growth of 15% to individuals and 19% toSMEs. Abbey continued with its restructuring, closing the year with loan volume of EUR184,086 million, an increase of 8% in pounds. Net mortgage production in 2007amounted to £8,800 million, up £1,000 million, or 12%, from 2006. At the close of 2007, the non-performing loan rate continued to be below onepercentage point, at 0.95%, growing 0.13 point from the previous year. Thecoverage ratio stood at 151%, down 28 points. The Group's provisions amount toEUR 9,302 million, of which EUR 6,027 million were generic. Managed customer funds EUR billion Dec 05 633Dec 06 721Mar 07 752Jun07 780Sep 07 787Dec 07 785 (*)(*) +8.9% as compared to Dec 06. The increase is of 12.6%without exchange rate impact.Note: Previous quarters adjusted with the impact of thesale of pension funds management institutions in LatinAmerica. Managed customer funds: December 2007 % o/ operating areas Continental Europe 48%UK - Abbey 32%Latin America 20% The Group's total customer funds under management came to EUR 784,995 million atthe end of 2007, a like-for-like increase of 9% from a year earlier. Balancesheet resources rose 10% to EUR 625,009 million. Off-balance sheet resourcesdeclined due to the sale of the Latin American pension fund managementcompanies, which had EUR 18,052 million in funds under management at the closeof 2006. Excluding this impact, off-balance sheet funds under management grew by3%. In Continental Europe, total customer funds under management were EUR 323,602million, up 8%, accounting for 48% of the Group's total managed customer funds.Customer funds under management in Spain grew by 5%, or 8% if the placement ofthe EUR 7,000 million Valores Santander issue for the financing of the ABN Amropurchase is included. Santander Consumer Finance grew by 33%. In Latin America, customer funds came to EUR 137,682 million, down 1% due to thesale of the pension fund management companies. Excluding this effect, fundsunder management grew by 14% in euros or 21% in local currencies. In Brazil,savings grew by 30%, with 22% increase in deposits and 36% in investment funds.In Mexico, customer funds grew by 12%, with deposits increasing by 6% andinvestment funds by 24%. In Chile, growth was 18%, with deposits up 16% andinvestment funds up 24%. Abbey ended 2007 with EUR 216,672 million in customer funds, up 5%, or 15% inpounds. Net inflow of deposits was £3,200 million in 2007, nearly three timesthe amount of a year earlier, when they were £1,100 million. Growth was achievedwithout increasing costs, as the margin of Abbey's customer funds portfolioimproved during the period. The acquisition of ABN AMRO On May 29th, Banco Santander, together with The Royal Bank of Scotland andFortis, announced its intention to put forward an offer to acquire ABN Amro. Theoffer was made on July 20th. The amount offered by the three banks for each ABNAmro share was EUR 35.60 per share in cash and 0.296 new RBS shares. Santander's investment in its share of the assets was EUR 19,900 million, anamount that will come down to EUR 10,100 million as a result of the sale ofAntonveneta, its Interbanca unit and a small Dutch consumer finance company thatwas also allotted to Santander. At the same time, Santander will acquire RBS'global clients business in Brazil, so that Santander's estimated finalinvestment in the acquisition of ABN Amro assets, basically Banco Real, willamount to EUR 10,500 million. The share and dividend EPS excluding capital gains *Euro 1997 (1) 0.341998 0.381999 0.432000 0.542001 0.542002 0.482003 0.552004 (2) 0.732005 0.842006 1.052007 1.28(1) CAGR between 1997 and 2007: +14%; (2) CAGR between 2004 and 2007:+21%.(*) Adjusted from share splits and capital increases. From 2004 underIFRS criteria. Dividend per shareEuro 1997 (1) 0.181998 0.191999 0.232000 0.272001 0.292002 0.292003 0.302004 (2) 0.332005 0.422006 0.522007 0.65(1) CAGR between 1997 and 2007: +14%; (2) CAGR between 2004 and 2007:+25%. At the close of 2007, Santander's eligible capital came to EUR 65,225 million,with a surplus of EUR 24,021 million above the required minimum. With thiscapital base, the BIS ratio came to 12.7%, Tier I capital to 7.7% and corecapital to 6.3%. These ratios underscore Santander's capital strength. The Santander share ended the year at EUR 14.79 euros, up 4.6% from a yearearlier, making it the only bank in the Eurostoxx with a positive performance in2007. At the end of the year, Santander's market capitalization amounted to EUR92,501 million. Santander is the leading bank in the euro zone and the eighth inthe world by market value. The Board of Directors has agreed that the total dividend charged against 2007earnings will amount to EUR 0.6508 per share, an increase of 25% for the thirdconsecutive year. Santander has already paid three of the four annual dividends,amounting to EUR 0.1229 each. The fourth one, totalling EUR 0.2820 per share,will be paid in May. The share's dividend yield came to 4.67% in 2007. In thelast ten years, the dividend has registered annual cumulative growth of 14%. In2007, profit distributed to shareholders will amount to EUR 4,070 million (50%of ordinary attributable profit), a record for Santander. Santander has 2,278,321 shareholders. 131,819 persons work in the Group, serving65 million customers in 11,178 branches. More information at: www.santander.com Income StatementMillion euros Variation 2007 2006 Amount % 2005 Net interest income (w/o 14,882 12,076 2,806 23.2 10,324dividends)Dividends 413 404 9 2.3 336Net interest income 15,295 12,480 2,815 22.6 10,659Income from companies 441 427 15 3.4 619accounted for by the equitymethodNet fees 8,040 7,024 1,016 14.5 6,061Insurance activity 319 253 66 26.2 201Commercial revenue 24,096 20,184 3,912 19.4 17,541Gains (losses) on financial 2,998 2,149 849 39.5 1,534transactionsGross operating income 27,095 22,333 4,761 21.3 19,076Income from non-financial 152 119 33 27.9 156servicesNon-financial expenses (78) (70) (8) 11.7 (91)Other operating income (119) (119) (0) 0.0 (89)Operating expenses (12,208) (11,045) (1,162) 10.5 (10,288) General administrative (10,940) (9,899) (1,041) 10.5 (9,274) expenses Personnel (6,510) (5,926) (584) 9.9 (5,555) Other administrative (4,430) (3,973) (457) 11.5 (3,719)expenses Depreciation and (1,268) (1,147) (121) 10.6 (1,014)amortisationNet operating income 14,842 11,218 3,624 32.3 8,765Impairment loss on assets (3,549) (2,551) (998) 39.1 (1,802) Loans (3,470) (2,467) (1,002) 40.6 (1,615) Goodwill (14) (13) (2) 13.1 - Other assets (65) (70) 6 (8.3) (187)Other income (383) (45) (337) 742.4 (265)Profit before taxes (w/o 10,910 8,622 2,288 26.5 6,698capital gains)Tax on profit (2,392) (1,947) (444) 22.8 (1,287)Profit before ordinary 8,518 6,674 1,844 27.6 5,411activityNet profit from 112 470 (357) (76.1) 331discontinued operationsNet consolidated profit (w/ 8,631 7,144 1,487 20.8 5,742o capital gains)Minority interests 520 562 (41) (7.4) 530Attributable profit to the 8,111 6,582 1,528 23.2 5,212Group (w/o capital gains)Net extraordinary capital 950 1,014 (64) (6.3) 1,008gainsAttributable profit to the 9,060 7,596 1,464 19.3 6,220Group Customer loansMillion euros Variation 31.12.07 31.12.06 Amount % 31.12.05 Public sector 5,633 5,329 305 5.7 5,243Other residents 227,512 199,994 27,518 13.8 153,727 Commercial bills 18,248 17,276 972 5.6 15,371 Secured loans 123,371 110,863 12,508 11.3 81,343 Other loans 85,893 71,854 14,039 19.5 57,013Non-resident sector 341,027 326,187 14,840 4.5 284,468 Secured loans 199,316 191,724 7,592 4.0 174,117 Other loans 141,711 134,463 7,247 5.4 110,352Gross customer loans 574,172 531,509 42,663 8.0 443,439Loan-loss allowances 8,695 8,163 532 6.5 7,610Net customer loans 565,477 523,346 42,131 8.1 435,829Pro memoria: Doubtful loans 6,070 4,613 1,457 31.6 4,356 Public sector 1 18 (17) (95.5) 3 Other residents 1,812 1,212 600 49.6 1,027 Non-resident sector 4,257 3,383 874 25.8 3,326 Customer funds undermanagementMillion euros Variation 31.12.07 31.12.06 Amount % 31.12.05 Public sector 15,239 15,266 (27) (0.2) 14,366Other residents 103,772 94,750 9,022 9.5 83,392 Demand deposits 53,779 55,050 (1,271) (2.3) 50,124 Time deposits 31,007 24,670 6,337 25.7 18,799 REPOs 18,986 15,030 3,956 26.3 14,470Non-resident sector 236,693 221,206 15,487 7.0 208,008 Demand deposits 117,699 119,861 (2,162) (1.8) 113,603 Time deposits 78,287 72,258 6,029 8.3 77,195 REPOs 37,538 26,343 11,195 42.5 14,366 Public Sector 3,168 2,744 424 15.5 2,844Customer deposits 355,704 331,223 24,482 7.4 305,765Debt securities 233,634 204,069 29,565 14.5 148,840Subordinated debt 35,670 30,423 5,247 17.2 28,763On-balance sheet customer 625,009 565,715 59,294 10.5 483,369funds Mutual funds 119,211 119,838 (628) (0.5) 109,480 Pension funds 11,952 29,450 (17,498) (59.4)* 28,619 Managed portfolios 19,814 17,835 1,979 11.1 14,746 Savings-insurance 9,009 6,385 2,624 41.1 15,146policiesOther customer funds under 159,986 173,509 (13,522) (7.8) 167,991managementCustomer funds under 784,995 739,223 45,772 6.1* 651,360management (*) Without impact of the sale of pension funds management institutions in LatinAmerica, pension funds: +4.9%; customer funds under managament: +8.9% Shareholders' equity andminority interestsMillion euros Variation 31.12.07 31.12.06 Amount % 31.12.05 Capital stock 3,127 3,127 - - 3,127Additional paid-in surplus 20,370 20,370 - - 20,370Reserves 23,458 12,352 11,107 89.9 8,781Treasury stock (0) (127) 127 (99.8) (53)On-balance sheet 46,955 35,722 11,233 31.4 32,225shareholders' equityAttributable profit 9,060 7,596 1,464 19.3 6,220Interim dividend (1,538) (1,337) (201) 15.0 (1,163)distributedShareholders' equity at 54,478 41,981 12,497 29.8 37,283period-endInterim dividend not (2,532) (1,919) (613) 32.0 (1,442)distributedShareholders' equity 51,945 40,062 11,884 29.7 35,841Valuation adjustments 722 2,871 (2,149) (74.8) 3,077Minority interests 2,358 2,221 138 6.2 2,848Preferred securities 523 668 (146) (21.8) 1,309Preferred securities in 7,261 6,837 425 6.2 6,773subordinated debtShareholders' equity and 62,810 52,658 10,151 19.3 49,848minority interests Computable capital and BISratioMillion euros Variation 31.12.07 31.12.06 Amount % 31.12.05 Computable basic capital 39,725 35,539 4,186 11.8 32,532Computable supplementary 25,500 24,237 1,262 5.2 20,894capitalComputable capital 65,225 59,776 5,448 9.1 53,426Risk-weighted assets 515,050 478,733 36,317 7.6 412,734BIS ratio 12.66 12.49 0.17 12.94 Tier 1 7.71 7.42 0.29 7.88 Core capital 6.25 5.91 0.34 6.05Shareholders' equity 24,021 21,478 2,543 11.8 20,407surplus This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Banco Santander