25th Feb 2005 07:30
Banco Santander Central Hispano SA25 February 2005 Press Release Grupo Santander attributable net income rose 20% to EUR 3.136 billion in 2004 • These results do not include Abbey profits, which will be included in 2005. Abbey has been included in the Group's consolidated year-end balance sheet. • The dividend per share charged to these earnings is increased by 10% to EUR 0.3332, a yield of 3.8% on the average price for 2004. • Profit growth was underpinned by increased revenues - loans grew by 18% and customer funds by 13% - and control of costs. • Profit during the period came from recurring businesses, as the extraordinary earnings of EUR 831 million were applied to cover costs related to early retirements (EUR 527 million), to early amortization of goodwill (EUR 154 million) and to a provision for costs associated with the acquisition of Abbey (EUR 155 million). • Retail banking in Europe grew by 19% in loans and 12% in manager funds, generated earnings of EUR 2.120 billion, an increase of 20.4%. • Latin America registered a strong increase in business activity, with growth of 25% in loans and 18% in customer funds in local currencies. Net attributable income increased 7.1% in dollars, to US$1.595 billion. • The efficiency ratio improved by 1.9 percentage points, with costs at 47.4% of overall revenues. This enabled net operating income to grow by 14.4%, rising above EUR 6 billion for the first time. • The non-performing loans rate, excluding Abbey, fell to a record low of 1.27%, with NPL coverage by provisions at 208%. The solvency ratio stands at 13%. Madrid, February 25, 2005 - Grupo Santander net attributable income rose to EUR3,136 million in 2004, an increase of 20.1% from 2003. In the fourth quarter,ordinary net income rose 17.2% from the year-earlier period to EUR 798 million.Capital gains realized during the period and earnings from Abbey, which wasacquired in November, 2004, are not included in the year-end results, though ithas been incorporated into the Group's year-end consolidated balance sheet. These are the best results in the history of the Group, which after theacquisition of Abbey is the ninth largest bank in the world by marketcapitalisation, with a stock market value of nearly EUR 60,000 million. Theseearnings have enabled the Group to increase the per share dividend by 10%, evenwith the addition of 1.486 billion new shares, issued in exchange for Abbeyshares. Those shares received two of the four dividend payments charged against2004 earnings, despite Abbey's profit not being included in those results. Grupo Santander's performance in 2004 was marked by strong growth in businessand profit from the most recurring business areas in both Europe and theAmericas, while maintaining cost control and enhancing risk quality. Thisstrategy has led to increased market share in the Group's benchmark markets andan improvement in the main management ratios such as efficiency, credit qualityand profitability. Moreover, this was achieved while the offer for Abbey waslaunched and its acquisition completed in a record 110 days. By improving results and performance we enhance management ratios EfficiencyJanuary - December 2002 January - December 2003 January - December 2004 Improvement (December 2003 - December 2004)52.3% 49.3% 47.4% -1.9% ROE (cash basis)January - December 2002 January - December 2003 January - December 2004 Improvement (December 2003 - December 2004)16.0 % 17.4 % 19.2%(*) +1.8% NPL ratio:January - December 2002 January - December 2003 January - December 2004 Improvement (December 2003 - December 2004)1.89 % 1.55 % 1.27 % -0.28% Coverage ratio:January - December 2002 January - December 2003 January - December 2004 Improvement (December 2003 - December 2004)140 % 165 % 208% +43% Note: All ratios are ex-Abbey, in order to be able to make like-for-likecomparisons. (*) Estimate without the capital increase. Results Growth in business enabled net interest revenue to reach EUR 8,636 million in2004, up 8.5% from 2003. This improvement had a favourable effect on fee income,which rose 10.5%. Particularly noteworthy were the increases of 22.4% incommissions from mutual funds and pensions, 46.8% from insurance and 15.4% fromcards. By area, strong growth of 26.4% in local currencies was registered inLatin America Retail Banking and of 11% in European Retail Banking. Results Key highlights. REVENUES Growth in net interest revenue spurred by retail banking in Europe and America Data in million euros Group net interest revenueJanuary - December 2003 January - December 2004 Improvement:7,958 8,636 +8.5% Net interest revenue of operating business areas (w/out dividends) Q1'03 Q2'03 Q3'03 Q4'03 Q1'04 Q2'04 Q3'04 Q4'04Total 1,968 1,927 2,006 2,050 2,046 2,131 2,178 2,256Retail Banking 772 698 727 745 777 817 864 878AmericaEuropean 1,081 1,123 1,175 1,196 1,164 1,197 1,232 1,286Retail Banking This enabled basic revenue, which measures the capacity to generate profit, togrow by 9.2% to EUR 13,245 million. After trading gains of EUR 953 million,little changed from 2003, net operating revenue came to EUR 14,198 million,growth of 8.1%. Controlled costs held growth in general expenses to 3.3% after increases linkedto business relaunches in some countries and the implementation of corporateprojects. The growth of revenues at nearly three times the rate of growth in costs led toan improvement in the efficiency ratio of 1.9 percentage points. Overall generaland personnel costs now account for EUR 47.4 of every EUR 100 of net operatingrevenue. Grupo Santander's net operating income exceeded EUR 6 billion for thefirst time, with an increase of 14.4% to EUR 6,545 million. Provisions for non-performing loans rose to EUR 1,648 million, an increase of10.2% from 2003. This was the result of increased provisions to generic andstatistical funds, while earmarked provisions fell. Contributions from equity-accounted Group holdings, not including dividends,were EUR 540 million, an increase of 32.7%, thanks to the greater contributionsfrom institutions such as The Royal Bank of Scotland, Cepsa, Attijari Wafabank,Urbis and the Group insurance companies. Profit from group transactions came to EUR 466 million, a decline of 51.2%,nearly all of which was from capital gains realised on the sale of 2.5% of theRoyal Bank of Scotland. Moreover, the Group realised capital gains of EUR 241million on the sale of 0.46% of Vodafone and of EUR 118 million on the publicsale of 4% of Shinsei Bank. The gains realised on these last two sales areaccounted for as other results, an area which also shows charges of EUR 850million due to the Group's decision to make certain provisions to strengthen thebalance sheet. Most noteworthy is the charge for EUR 527 million for earlyretirements. Moreover, accelerated amortization of goodwill has resulted in acharge of EUR 154 million, and costs related to the acquisition of Abbey in acharge of EUR 155 million. All extraordinary capital gains applied to extraordinary allowances Capital Gains: EUR 831 million Application: EUR 836 millionRBoS 472 Early retirement 527 (net of taxes)Vodafone 241 Accelerated goodwill (*) 154 amortisationShinsei 118 Abbey's acquisition related 155 costs (*) Venezuela and Colombia, especially. Net attributable income for 2004 rose to EUR 3,136 million, up 20.1% from 2003.If ordinary amortisation of goodwill is added to this result, to facilitateinternational comparison, the net attributable cash-basis profit would be EUR3,601 million. Retail banking accounted for 82% of profit from the business areas. Retailbanking in Europe, whose earnings for the first time exceeded EUR 2 billion (atEUR 2,120 million, up 20.4%) contributed 55% and Latin American Retail Banking27%, with earnings of EUR 1.039 billion, a 2.4% decline due to the increasedminority interests following the sale of 24.9% of Santander Serfin (in March2003) and the depreciation of the dollar. Without these factors, profit wouldhave risen by 7.4%. The two global business areas (Asset Management/PrivateBanking and Global Wholesale Banking) contributed 18% of profit, with EUR 351million (+9,9%) and EUR 331 million (+46.8%), respectively. In Latin America, the key countries showed progress in their results. In Brazilin 2004, Group net attributable income was US$ 850 million, up 7.4%; in Chile,US$ 336 million, up 22.3%; in Mexico, US$ 412 million, down 10.3% (which wouldhave been an increase of 17.1% on a like-for-like, gross profit comparison). Business At the close of 2004, Grupo Santander, including Abbey, managed funds worth EUR715,393 million, of which EUR 575,398 million are on the balance sheet and theremainder off-balance sheet customers' funds, such as mutual funds and pensions.In order to facilitate a like-for-like comparison, the figures and percentagechanges below do not include Abbey. The key to performance in 2004 has been strong growth in business volumes inEurope as well as in Latin America. Credit grew by 18% and customers funds by13%, absorbing any negative impact from exchange rates. Grupo Santander lending, without Abbey and excluding the effect ofsecuritisations, rose by 17.7% to EUR 204,467 million at the end of 2004, theeighth consecutive quarter of growth. En Europe, Retail Banking showed strong growth in all countries. Loan volumerose to EUR 144,274 million, an increase of 19%, excluding the effect ofsecuritizations. In Spain, Santander Central Hispano lending activity grew by19% that of Banesto by 23%. Mortgage lending and loans to businesses both grewby more than 23%. European Retail Banking Strong business growth, especially in loans ... mar-03 jun-03 sep-03 dec-03 mar-04 jun-04 sep-04 dec-04 270.1 279.3 285.7 299.4 305.7 317.8 324.5 338.1 Loans (*) and customer funds (**) (EUR Billion)Loans: Customer funds:+19% +8% Variation Dec '04 / Dec '03 Loans (*) Customer funds (**)Retail Santander +19% +8%Banesto +23% +9%Santander Consumer +30% +24%Portugal +4%(***) +2% (*) including securitizations (**) customer funds ex-REPOs, mutual funds and pension funds (***) including amounts materialised in fixed-income: +10% Of particular note in 2004 was the success in Spain of business initiatives suchas the Superoportunidad series of mortgages, which generated EUR 11,700 millionin loans, and the Tarjeta Unica, developed jointly with the Autoclub Repsol,which has sold more than 200,000 cards, of which 50% were to new customers orreplaced unused cards. Our consumer finance unit, Santander Consumer, recorded strong growth, with anincrease in new financing of 30%, or 23% if the units acquired in Poland, Norwayand the Netherlands in 2004 are not included. Of particular note was automobilefinancing, which grew by 24%, well above the growth in automobile sales.Financing through consumer loans and credit cards rose by 36%. By country,Santander Consumer business activity grew by 25% in Spain and Portugal, by 36%in Italy and 19% in Germany. In Portugal, Santander Totta lending grew by 4%, excluding the impact ofsecuritisations, with very positive performance in mortgages, which grew by 12%,and in consumer financing, which increased 16%. In Latin America, the business has performed very favourably. Overall lendingincreased by 25% in local currencies, with increases of 37% in Brazil, 27% inMexico and 19% in Chile. This growth led to an increase in regional market shareof 0.6 percentage point, to 11.6%. The focus of the Group's banks in Latin America on their retail business and thedevelopment of businesses deemed to be strategic (credit cards, cash management,trade, investment funds and insurance) has yielded higher growth in businesswith individuals and small and medium-sized enterprises. This strategycontributed to an increase in income from fees and commissions of 26.4%,excluding the exchange rate effect. Total Latin America Significant business growth ... mar-03 jun-03 sep-03 dec-03 mar-04 jun-04 sep-04 dec-04 93.7 96.5 96.8 101.5 107.4 110.6 114.6 122.9 Loans (*) and customer funds (**) (constant US$ Billion) Loans: Customer funds:+25% +19% Variation Dec '04 / Dec '03 Loans (*) Customer funds (**)Brazil +37% +17%Mexico (*) +27% +17%Chile +19% +19%Venezuela +97% +71%Puerto Rico +8% +19% (*) including securitizations (**) customer funds ex-REPOs, mutual funds and pension funds The growth of Group lending activity has come hand-in-hand with a decline inthe non-performing loan ratio, so that the volume of non-performing and doubtfulloans fell in 2004 to a record low of 1.27% of lending compared to 1.55% a yearago. The Group's NPL rate in Spain is 0.65%, in consumer finance (SantanderConsumer) 2.2% and in Latin America 2.6%. At the same time, NPL coveragecontinued to increase and is now at 208%. The rate of coverage in Spain is 329%and in Latin America 162%. In savings, total managed customer funds came to EUR 365,605 million at theclose of 2004, up 12.9% from a year earlier. Balance sheet funds grew by 11.7%to EUR 240,151 million and off-balance sheet funds by 15.2% to EUR 125,454million. Total deposits in Spain, less repurchase agreements, investment funds andpensions plans, grew by 18.7% from the prior year. Balance sheet resources grewby 22% from 2003, while investment funds increased 14.6% and pension funds by10.9%. The Group's market share in assets under management in funds in Spaincontinued to stand above 27%. In Latin America, total managed customer funds increased by 18.2% in localcurrencies, with an increase of 18.3% in balance sheet funds, 20.2% ininvestment funds and 15.2% in pension plans. Total customer funds rose by 17% inBrazil and Mexico and by 21% in Chile. Acquisition of Abbey National In an extraordinary shareholders meeting on October 14th, the shareholders ofAbbey National approved, with the favourable vote of 94.2% of the present andrepresented capital, the proposal to acquire the bank made by Grupo Santander onJuly 26th. One week later, on October 21st, also in an extraordinary meeting,Santander shareholders approved the transaction with the favourable vote of99.4% of the present and represented capital. On November 12th, Grupo Santanderissued 1.4859 billion new shares to exchange for Abbey shares, so that theformer Abbey shareholders have become members of the shareholder base ofSantander. The largest cross-border European banking acquisition was completed in a record110 days. The Group's capital increase was valued at EUR 12,541 million and theshares priced at EUR 8.44. Abbey's balance sheet has been consolidated into Grupo Santander as of December31st 2004, so that its acquisition has affected the balance sheet but not theincome statement of these results. As a result of this consolidation, thegeographic distribution of Group assets has changed significantly. Some 40% ofGrupo Santander loans are now in the United Kingdom, 39% in Spain and 10% in therest in Europe, and 10% in Latin America. With Abbey's consolidation into the Grupo Santander balance sheet, eligiblecapital of the Group comes to EUR 41,303 million, a surplus of EUR 15,852million over BIS minimum required levels. At the close of 2004, the BIS ratiostood at 13% and core capital at 5.2%. The sale, in January, 2005, of 2.57% ofthe Royal Bank of Scotland had a positive impact of 0.23 point in the BIS ratioand of 0.20 point in core capital. The share and dividend The Santander share ended 2004 at EUR 9.13, a decline of 2.8% from the end of2003, a year in which the share rose 43.6%. The performance of the share wasaffected by the launch in late July of the public offer to acquire Abbey. Oncethe transaction was successfully completed, the Santander share registered astrong increase, and has risen 21% since the offer was announced. The Group'scapitalization is about EUR 60,000 million, consolidating its position as theeuro zone's leading bank and the ninth largest bank in the world. The Board of Directors of Santander approved a fourth dividend payment against2004 earnings of EUR 0.0842 per share, to be paid from May 1st. With thispayment, the total dividend paid against 2004 results comes to EUR 0.3332 pershare, an increase of 10%. Moreover, the third and fourth dividends are paid onthe new shares delivered in November 2004 to former Abbey shareholders,increasing the payout by EUR 250 million. The dividend yield for Santandershareholders was 3.82% on the basis of the average share price during the courseof 2004. As a result of the acquisition of Abbey, the shareholder base of Grupo Santanderincreased significantly to 2,685,317 shareholders. The Group's workforce stoodat 126,488, serving 60 million customers in 9,973 offices. Other important information At a presentation to be made in Madrid this morning at 10:00 a.m. (09:00 a.m.London time), Grupo Santander will announce that the share buy-back programmewhich has been in place since July 26, 2004, will not be renewed when it expireson March 31, 2005. In that presentation Grupo Santander will also provideinformation about the accounting effects of Abbey's integration in the Group onshareholders' equity and goodwill. The presentation is available on thecorporate web of Grupo Santander www.gruposantander.com Income statement 2004 2003 Variation Mill. euros %ATA Mill. euros %ATA Amount (%)Interest revenues 18.103,8 5,04 17.203,7 5,07 900,1 5,23Dividends 647,4 0,18 441,5 0,13 206,0 46,65Interest expenses (10.115,6) (2,82) (9.686,9) (2,86) (428,7) 4,43Net interest revenue 8.635,7 2,41 7.958,3 2,35 677,4 8,51Net fees and commissions 4.609,3 1,28 4.170,6 1,23 438,7 10,52Basic revenue 13.245,0 3,69 12.128,9 3,58 1.116,1 9,20Trading gains 952,7 0,27 998,8 0,29 (46,1) (4,62)Net operating revenue 14.197,7 3,95 13.127,7 3,87 1.070,0 8,15Personnel and general expenses (6.735,2) (1,88) (6.477,7) (1,91) (257,5) 3,98a) Personnel expenses (4.135,3) (1,15) (4.049,4) (1,19) (85,9) 2,12b) General expenses (2.599,9) (0,72) (2.428,3) (0,72) (171,6) 7,06Depreciation (735,0) (0,20) (762,8) (0,23) 27,8 (3,65)Other operating costs (182,3) (0,05) (166,5) (0,05) (15,8) 9,48Operating costs (7.652,5) (2,13) (7.407,0) (2,18) (245,5) 3,31Net operating income 6.545,2 1,82 5.720,7 1,69 824,5 14,41Income from equity - accounted holdings 540,4 0,15 407,3 0,12 133,1 32,69Less: Dividends from equity - accounted 365,5 0,10 309,5 0,09 56,0 18,09holdingsEarnings from Group transactions 466,2 0,13 955,6 0,28 (489,3) (51,21)Net provisions for loan - losses (1.647,7) (0,46) (1.495,7) (0,44) (152,0) 10,16Writedown of investment securities (0,3) (0,00) 0,7 0,00 (0,9) -Accelerated goodwill amortization (153,8) (0,04) (1.719,2) (0,51) 1.565,4 (91,06)Other income (850,3) (0,24) 754,6 0,22 (1.604,9) -Income before taxes (cash-basis*) 4.899,8 1,36 4.624,0 1,36 275,8 5,97Corporate tax (766,8) (0,21) (869,4) (0,26) 102,7 (11,81)Net consolidated income (cash-basis*) 4.133,0 1,15 3.754,5 1,11 378,5 10,08Minority interests 325,9 0,09 306,7 0,09 19,2 6,27Dividend - preferred shareholders 206,4 0,06 314,5 0,09 (108,1) (34,38)Net attributable income (cash-basis*) 3.600,7 1,00 3.133,3 0,92 467,4 14,92Ordinary goodwill amortization (465,2) (0,13) (522,5) (0,15) 57,3 (10,97)Net attributable income 3.135,6 0,87 2.610,8 0,77 524,7 20,10(*) Before ordinary goodwillamortization. Loans Million euros Variation excl. Abbey 2004 2004 w/o 2003 Amount (%) AbbeyPublic sector 4.206,6 4.206,6 5.487,4 (1.280,8) (23,34)Private sector 123.760,9 123.760,9 103.515,6 20.245,3 19,56Secured loans 60.267,8 60.267,8 47.999,6 12.268,2 25,56Other loans 63.493,1 63.493,1 55.516,0 7.977,1 14,37Non-resident sector 214.209,5 76.499,1 68.617,7 7.881,4 11,49Secured loans 132.722,9 18.289,0 18.796,1 (507,1) (2,70)Other loans 81.486,6 58.210,2 49.821,6 8.388,5 16,84Gross loans 342.177,0 204.466,6 177.620,7 26.845,9 15,11Less: allowance for loan-losses 6.969,3 5.955,9 5.116,7 839,2 16,40Net loans 335.207,7 198.510,7 172.504,0 26.006,7 15,08Note: Doubtful loans 4.046,5 3.115,8 3.276,7 (160,9) (4,91)Public sector 2,4 2,4 0,9 1,5 167,00Private sector 866,6 866,6 930,7 (64,1) (6,89)Non-resident sector 3.177,5 2.246,9 2.345,1 (98,3) (4,19) Customer funds Million euros Variation excl. Abbey 2004 2004 w/o 2003 Amount (%) AbbeyPublic sector 13.966,2 13.966,2 9.225,9 4.740,2 51,38Private sector 82.170,0 82.170,0 77.918,9 4.251,1 5,46Demand deposits 25.700,2 25.700,2 25.089,2 611,0 2,44Saving accounts 18.602,3 18.602,3 17.823,4 778,8 4,37Time deposits 19.474,4 19.474,4 18.640,1 834,3 4,48REPOs 17.766,9 17.766,9 16.348,5 1.418,4 8,68Other accounts 626,3 626,3 17,7 608,5 -Non-resident sector 197.709,5 77.706,0 72.190,7 5.515,3 7,64Deposits 180.609,5 71.730,0 65.885,5 5.844,6 8,87REPOs 17.100,0 5.976,0 6.305,2 (329,3) (5,22)Total customer deposits 293.845,7 173.842,2 159.335,6 14.506,6 9,10Debt securities 84.007,2 53.432,7 44.441,2 8.991,5 20,23Subordinated debt 20.194,1 12.875,7 11.221,1 1.654,6 14,75Total customer funds on balance sheet 398.047,0 240.150,6 214.997,9 25.152,7 11,70Total managed funds (off-balance sheet) 139.994,7 125.454,0 108.903,0 16.551,0 15,20Mutual funds 94.125,2 92.778,9 80.502,0 12.276,9 15,25Spain 69.588,5 69.588,5 60.725,4 8.863,1 14,60Abroad 24.536,7 23.190,4 19.776,6 3.413,8 17,26Pension funds 34.872,9 21.678,5 19.494,8 2.183,7 11,20Spain 7.375,4 7.375,4 6.652,7 722,7 10,86Individuals 6.329,8 6.329,8 5.767,7 562,1 9,75Abroad 27.497,5 14.303,1 12.842,1 1.461,0 11,38Managed portfolios 10.996,5 10.996,5 8.906,1 2.090,4 23,47Spain 2.916,5 2.916,5 2.450,5 466,0 19,02Abroad 8.080,0 8.080,0 6.455,6 1.624,4 25,16Total customer funds 538.041,7 365.604,5 323.900,8 41.703,7 12,88 Shareholders' equity and capital ratios Million euros Variation 2004 2003 Amount (%)Subscribed capital stock 3.127,1 2.384,2 742,9 31,16Paid-in surplus 20.370,1 8.720,7 11.649,4 133,58Reserves (includes net reservesat consolidated companies) 7.366,3 6.102,5 1.263,8 20,71Total primary capital 30.863,5 17.207,4 13.656,1 79,36Net attributable income 3.135,6 2.610,8 524,7 20,10Treasury stock (104,2) (10,2) (94,0) 925,90Distributed interim dividend (791,6) (739,1) (52,5) 7,10Shareholders' equity at period-end 33.103,4 19.069,0 14.034,4 73,60Interim dividend pending distribution (519,1) (369,6) (149,6) 40,47Final dividend (526,6) (335,7) (190,9) 56,85Shareholders' equity afterallocation of period-end results 32.057,6 18.363,7 13.693,9 74,57Preferred shares 7.393,4 4.484,9 2.908,6 64,85Minority interests 1.678,0 1.575,8 102,2 6,49Shareholders' equity and minority interests 41.129,1 24.424,4 16.704,7 68,39Basic capital (Tier I) 23.830,8 16.951,2 6.879,6 40,58Supplementary capital 17.471,8 8.570,2 8.901,7 103,87Eligible capital 41.302,7 25.521,4 15.781,2 61,84Risk weighted assets (BIS criteria) 318.133,2 205.253,4 112.879,8 55,00BIS ratio 12,98 12,43 0,55Tier I 7,49 8,26 (0,77)Excess (amount) 15.852,0 9.101,1 6.750,9 74,18 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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