SAN - Earnings call transcript Q2 2022

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Begona Morenes

Good morning, everybody, and welcome to Banco Santander's conference to discuss our financial results for the first half of 2022.

Just as a reminder, both the results report and the presentation we will be following today are available to you on our website. I'm joined here today by our CEO, Mr. Jose Antonio Alvarez; and our CFO, Mr. Jose Garcia Cantera.

will in floor the we you any presentations, have may Q&A their open for the questions Following session. With to this, Mr. over I will hand Jose Alvarez. Antonio the Antonio, floor yours. Jose is

Jose Antonio Alvarez

joining to Thank Thank you, good morning. morning Begoña, you and for us this everyone.

concerns the in going So been quarter, raise, up, which saw start living well, high the decade significant in we've inflation period to second hitting saying regarding a levels, I activity start we should future. lower that economic in interest and rates

bit little to a environment up slide. the our you sum loans to is and in this this continue this last and the we customer translate revenues as In can the our grow the see quarter. growth we So of business, in P&L in into deposits fees, base, NII environment, and our plus

target in our our than previous Tier points the quarter. quarter profitability, about trend front and remains well euros the first billion, digital we cost following the significant continued half billion, basis for expected equity a capital the of grew improved is net net inflationary equity core significant value a has we X% second of XX%, to When the share quarter. in on with return for down, which in XX.X%, XX% highly in reaching is X of in the the a of grew continue stood inflation, remained to generation tangible the efficiency at well The our shareholders. cash create the below year, line €X.X compared value profitability reach So quality strength, XX the cost, previous the ratios, regard year. than higher plus In progress If the cost to look level dividend talk per slight previous in XX.X%, and year profit €X.X range, was asset been we and at We of year. the the our tangible higher strong organic of stays on to balance XX% NPLs environment, year-on-year. XX%. ratio the our end our the share sheet, per and inside EPS second XX%

mentioned, just growth. reflected have were in I widespread commercial our strategy As

the As in been you corporate at growing corporates, loan and book XX%. can and -- where see high mortgages digits, in while we've less consumer both relatively and seeing in corporate we so mid- is the growing in SMEs others in slide, single individuals, bank consumer are to space in investment flattish

were increases in quarter-on-quarter, loans X% mainly I quarter, said. as billion up €XX the countries, with from overall, and So in mortgages all consumers,

collateral. a by explain we will So summary, and have later the our market. portfolio And detail high-quality, by I in geographies CFO, on portfolio by think, more in Jose, well-diversified

the On and the -- deposits other a interest year-on-year, with time the the market X% quarter-on-quarter grew shift due towards rate to interest X% hand, environment. new deposits

depreciation achieve profit in This face inflationary grow record Cost us below well year. half billion to €XX to allowed some strong another the Turning rate was to the through ideas. hikes in to Well, at overview in starting first in countries you euros income revenue main with than brief give together the of than quarter the we on in talking currencies in partially constant This CIB. euros although to included hedging in feed year-on-year volumes, back negative included pace grew euro, the constant is offset a we management first gains of continue pre-provisioned higher In euros, financial in corporate of the the of X% me The of better let have faster the but transactions. by a statement. performance on was a due interest pressures inflation. this in center.

quarter second recorded releases the U.S. in year-on-year comparison. affected 'XX provisions, loss loan for the and the As in U.K.

XXX,XXX XXXX. Finally, while our positive and the first from in mainly from amount charges model. to a U.S. in operating profit, in Brazil and a following This in billion on tax as return This Double-digit was burden tax record in we continue profit underlying €X.X have of minority X% led the the recovery in growth auto due interest nearly half year. increasing in the allocation. U.S. business extraordinary disciplined are year-on-year look Mexico volumes. towards reflected in we we a segments growth ideas most don't accelerate U.S. America, net focusing position income had same the in a North capital in the Attributable we to recorded lower this in to contingencies impact the equity common growth accelerate our and operating and of profit transformation CIB customer We to Europe, from X.X%. quarter. a buybacks tangible In we improved by Mexico in maintaining and others. rose in half Loans and If first

increased X% also base We our year-on-year. customer

achieved Lastly, a billion €X.X in we the of region. profit

group by are profitable South leaders presence assets a region with America, we growth. in delivering the and unique the strengthened

year-on-year, Our opportunities and to business X%. grew based sharp led capturing increasing growth on a strategy, increase deposits in Loans XX% customers, and X million volumes. new

XX%. we and position above digits, half XX% already our -- continue we reaching ratio, billion, at elaborated tangible efficiency equity Digital return new First staying leadership lending, in Bank, look to market. If over on in higher profit year-on-year, reflected metrics, XX%. this. Profit underlying In and €X.X increased double on shrinking is to return strengthen Consumer rose as I to performance we X% tangible by equity a on rose

We are XX.X%. running at

are of track And ahead are for whole year we year-end. towards Return the equity, the XX% target this at XXXX heading of for target. slightly -- tangible a our XX.X%. target to we our on meet our is Now on

terms EPS, year-on-year, of earnings in first In quarter, XX% in €X.XX underlying per versus of XXXX half XX% the share.

and approximately account dividends, slightly that we X%, above was amortize we XXX cash buybacks. through our of value tangible into and X.X% -- showing asset net million growth, take capital. That We we mainly are have per share earnings shares share €X.XX, line generation the X% per organic, we the with quarter sustained almost The -- in is it including capital, points, if XX% the buyback. account When comes to previous and in dividend organic in XX take year-on-year. Net into was expectations. was of basis payout it our in cash line if capital cash with the half higher the

with points quarter. roughly into are then XX That basis the consideration per taking We generating line expectations in is speaking, buyback. our after

to this up in offset This the basis organic XX growth the due capital, ratio sale and not total the on quarter our the is generation. and detracts to show that fact capital held collect mark-to-market in the points

target, profitability are targets So reducing show in equity. equity below and is grow assets of return front weight book We we one risk-weighted here, the better that on meeting cost this is our of assets, a the risk-weighted growth. below this the of our producing -- loan

those on and well shown in progressing our are We targets, is profitability. this

front, of region in the Green energy, XXXX Finally, progressing Well, are head we published to generation top commitments on as you taxonomy Jose, to figures to refinance in we you and particularly properly, existing a I of with in strong from in new our customers. America Well, aviation new published our to before measure period according first Mainly, of to of Finance, a I with economy XXXX. and the hand for to weeks greener just help appointed know, I refer relation active customers to to targets classify -- the highlight to the we our loan a book have ESG. all XX% level a order properly steel, targets and for specific absolute Financially would the business the very and people. We we for have want ago social power European to on to empowered like in and are already reduce in emissions relevant of Santander's we couple generate coal. Latin targets

have And to final global to the front. hand figures elaborate now group the business the in group to You both the to do delivering some help you. finally, in I areas tackle and the commitments will climate the challenges, I of with remarks. presentation. in progress Overall, will I'm Jose proud responsible and in social our banking front on on

Jose Garcia Cantera

first brief the we last to income. income mostly €X.X the we and quarter, billion. XX% for regulatory fund in detail the business X% lease quarter, billion income and sales earned XX% FX charges highlights and regulatory In €XXX In areas. excluding other hedging, up decreased similar from about compared in 'XX, income a million and of fee €XX for country and €XX new the Both at regulatory which NII quarterly provided total constant million, I by into institutional after accounted X%, the go of group more million portfolio affected also attracted the half, and the euros the lower total performance, and trends, for main in charges. P&L nearly grew Just gains ALCO In recording saw €XXX Poland. will to higher resolution of protection the Trading and revenue progress of overview scheme €XXX of contribution exceeded contributions. income the million the year,

and take loans drivers coupled supported was through broad-based margin rate the management of U.K. and in by go with more a in main interest in to me NII detail. deposits, moment Group Let and growth NII hikes Poland.

in interest margin first increased interest X.XX% As of the year this income a X.XX% half net net from result, year. to and last

the where have We You higher these highlight like Poland, following see strong slide, but countries would mentioned, U.K. by we as in the the the and I had country. on the in impact X because very of information all are rates the I Europe. to NII

and portfolio to robust pressure NII countries. and ALCO continued the Spain NII and X%, rose competition. up sensitivity in individuals decreased X% had Bluestem rate corporates. strong and pricing rise in lower volumes yields in finally, X%, loan despite growth to portfolios. and credit activity to initial Mexico, which In respectively, negative also U.S., the particularly hikes. due loan was disposal growth we by and both the NII X% by offset We in consumer affected on mix, by by the And Brazil, volume due was backed NII, Poland,

expect out year. impact this into the fourth in We level turn this repricing positive negative next to liability of from year and quarter

of right-hand fees, see of countries supported slide. positive regions, greater in to the all side increased the the of in exception disposal lower and you the we products fees. affected All as have excluding would services, value-added flattish, overdraft with can the by the on in by had affected business performance the which high very CIB by Regarding income It activity branch. Bluestem and been this impact, the and was U.K., the transfer London the U.S.,

the and costs, the costs real X model efficiency. countries, improving improvements future. X% to terms, structural of while In kept to efficiency operating below inflation we widespread drive percentage improved Europe, changes continue terms costs of here new in In summary, our growing points. down we falls productivity in In make with our target were across to

loan the quarter. loan in in points Turning Total distribution improved. X quality In at it to in loss was to and points basis than loss loan the The percentage the positive points coverage The XX the credit billion, most the XX%, ratios. lower stood and previous markets Stage NPL at were group stable by and of X.XX%, portfolio in quarter, risk. reserves XX quarter. maintained the than stages basis sales. €XX due even quarter remained better Spain, The portfolio up assets fell X ratio

months. the cost the The performance. portfolio and XXXX which the to Mexico, drill which of XX cost releases. year, U.K. year. improved In risk would loan SMEs XX cost cost risk but target of the U.S. credit last represent of the in of secured portfolio. increased, provisions, corporates, at provisions, and our portfolio. but X% performance affected after mortgage well or at only stable. a the -- still country was the X below coverage all deeper basis risk and days loss total cost Portugal, better-than-expected individuals, well are positive up look were primarily XX% cost bit BAU Secured better In of Brazil, provisions the The into our a by year-on-year By of portfolio of basis I of in we in was contribution In represents to countries cost risk due significantly, loss points. of below negative. below loss slightly to considering In to I thanks slightly provisions like stood cost above around Our provisions individuals, loan franc Spain, ratio Swiss with risk XX X remain line months. the improved risk of If is of portfolio. first pre-pandemic improved over X% Europe, XX% of little the Loan levels. points, were Poland, XX and lower months is quality. mean, pre-pandemic the risk for This loan levels.

individual We In than are increased improved in crisis. digital previous outstanding the than decreased we checque the of nature the market, to compared secured positioned considering and and show volatility better of business. cost weight portfolio, levels, risk as low we have the less consumer, previous continue especial to crisis the its

real total. XX% loan loan X% you XX% estate the with would Brazil for total consumer values accounts XX% is good of XX%. duration. corporates is corporate a mature I portfolio. the show a the lending secured, our portfolio portfolio. portfolio, quality our below Finally, and traded And It's is and collateral. of XX% most well in investment like very markets, corporate markets, a of overview concentrated XX% total. by mortgages segment, XX% is guarantees. And to is around to is short-term very just above portfolio In brief By covered with rated of group for mostly developing of minus, grade The A very large and SMEs account lastly, collateralized real portfolio

me Let by Spain, XXXX. year-on-year in of weak some reduced an the comments evolution revenue in environment units of brief driven risk of our make were In lower results and about X%, performance. costs, cost main now

And for cancellations. the in the maintain should in asset very new expected also in U.K., In income half. the Fee XXXX, repricing to NII. expect pointing for delivering strong expect trends cost But NII year. absorb TLTRO we XX Looking Costs forward, should lending trend, dynamics of target. downward risk XX its of to reflect maintained around we is to impact basis margin the of remain cost-to-income expansion. half. to remain achievement the our positive continue to points robust and second we second should

these high we and costs compare in well, flat -- remained to results financials the In than first expect forward, today, cost risk XXXX States, very, Looking NII of to compare growing high, XX points. with Nevertheless, at in billion. rates probably above the lower continue to United half, close around trends profit although normalization very basis results until 'XX. €X

below slightly due incorporation initially up, revenue lower Pierpont, to by of lease Our well and had outlook another quarter. Amherst cost normalized for impacted Mexico businesses, 'XX is than cost anticipated levels. the partially of excellent Santander better risk

individuals, that on that sheet's we the to on balance equity. rates, had a negative loans NII pressure to as a half, of we and digitalization earn impact costs year initial by negative in our the tangible fees, For inflation and a higher due a better whole, sensitivity In we below expect return higher is putting costs to and higher XX.X% inflation Brazil, is in the quality that when average. cost risk than higher risk up, supporting in unsecured first credit and investments of impacted cost X.X%, deteriorated

particularly around maintaining of in cost equity business of end return in market will results in X% Consumer revenue. we which difficult XX% new set In we see to a for strong year, all, are and on gained Bank, used the year-on-year. optimistic below to a XXXX expect share, expect and result XXXX risk we profitability, an XX% Digital a We X.X%, increased in and in improvement XX%. activity cars. around efficiency We expect when All to

the of a in business, goals new in €XX are environment continue be exceeding year billion confident record the the previous but meeting our to Looking second XXXX. record and forward to will expect challenging, half, we in

Europe, finance, than rate expect strong with cost well of in expect quarter. the we strong in delivered remain normalized risk previous rates, some from should quarters, and but case, coming to another books. of the in a market to the normalization expect in very value continue we the excellent because, levels through insurance, below years. volatility, inflows risk of share, interest on increasing gross results has market CIB and general, finance where are trading in rose In current profits In had excellent protecting our despite structure labor rose markets Insurance, to of Private coming unemployment management this cost net In we gain do written XX%. we transaction and premiums new dynamics with low Management We more revenue Wealth volumes asset XX%. Banking, grew market billion. X%. And money €X project in

contribution merchants business the main is on our very across X double-digit Looking growth the surged especially businesses. first maintain will segments, believe total year-on-year of our in for XX% well, and we XX% Activity PagoNxt, profit forward, meet and X in year. whole we back revenue target to the evolving the plus revenue we half In trade. expect

million sorry, in XX% double-digit the cards, and growth XX and revenue cards €X throughout Europe. circa we with to year-on-year Finally, grew group, -- managed XX in America billion,

We continue the expect to double at high coming revenue turnover to months. in digits and grow

it for me turn his Let to Antonio closing remarks. now Jose back

Jose Antonio Alvarez

Jose. you, Thank

Let me see the try a to in the look take to quarters. guide do evolving you how we group coming forward,

on from side, Normally in have while particularly in show the NII the we P&L. rate quarters, on. later It revenue rate with expect acceleration increase accelerate one mainly starts which the side, up levels, the should takes environment hike on to and So interest the the And XXXX. in of we a for hikes. expected in interest a significant activity coming revenues, benefiting an

You will see this. some of

higher countries. of start and basically will the go acceleration, also And this and year some a strong seeing and U.K. rates on in significant You Poland Eurozone up are in in faster. acceleration rates other we back clearly Mexico a next in of see already where to the

how Jose on evolving. mentioned generating business income, thing fee are our So

fee and generators. are the insurance and that main management wealth both CIB income saw You

clearly performing space, are we in management private And share doing insurance, wealth in and in we very that think can we banking also gaining double are into digits. that CIB very grow We and well well is well. where insurance

So fee for commercial generates that I optimistic income. reason, am activity that about the relatively

the day inflation cost, feel In the environment, real credit done already exactly. is we've And not, and through the see, in potential or high one this, coming in inflation our naturally, resilient gains be rates, prices going of a X this our published inflation around than and structure, us high below well yesterday, the cost GDP. our management estate increase particularly continue with is that there of But revenues. us we or we lower for that to doing year, as you an portfolio while So is But unemployment quarter given cost some quarter, a protection required track provisions, rates a well, the IFRS don't savings of positive really in the as some are something yesterday the I the deterioration. productivity to portfolio. expecting, asset first this the household the naturally loan environment, number half expectations of with to deterioration. and the On remember of will recession inflation. evolve or the like have some that million growth know, €XXX quality to in in record where you a as below countries to is productivity there if duration, higher clearly think cost And going quality, in we're discussion anticipate before inflation. on erosion we we we were to and well after cost go but as some the able may those allow have base, know, I In we this

capital with our than higher our target commitment capital, we disciplined we're the year, or feel are XX% in In quarter allocation up year. to at reflect right stay will our gave profitability. the for that running you, is comfortable comfortable we XX this and we every this above going less X%, to and and in feel to we having points, range basis that For be

been is capital in good in the capital this a shareholder And what year, and commitment and that collect generation our we communicated than shareholders basis, the the to will to there. of the and although generating to are will increase of payout other have into this XX% sales, translate mark-to-market be our is continue quarter, we where and continue good has on meeting. impression XX% held closer continuous in to to my we the a hope group, to future. is for to That our you So

both equity of to So And well, revenue feel tangible can We efficiency, and the reiterate the potential this Tier of just comfortable. year, the for return X, that our in than I cost will offset targets core those we future, think cost increase the we commitments higher on for reach and feel on be equity year. increase potential more that will risk. terms

capacity So the to I'm the profits positive generate on That's future. in the it. of group

remain we Now the you questions for disposal have. your at may

Begona Morenes

open We'll for floor Antonio. José now any you, the Thank questions.

Operator

[Operator Instructions] We already question Ulargui from have from our Exane. Paribas BNP Ignacio first

Morgan is from Serrano from Alvaro coming question Next Stanley.

Alvaro Serrano

your the second you to QX and half, be it Jose below clarification that is I last Brazil, On capital. look think, the your heard in I X.X% XXX you'd points. points. guidance Hopefully, I've of on And for basis stand-alone, risk. to need one on year XXX can X% looks cost keep like another you the of if full two mention at me. to risk, hear I achieve But comments on basis cost questions, got Brazil

And capital need on, prevent that a Or and from headwinds. increase just bit those were that already expecting, there can to i.e., want a XXXX? the way it's might and it, going of on to it you I be we to XX% although account Antonio, got XX%, Jose guidance -- is sure because that question steeper in I've second than expect in you of peak make numbers capital, color is you remaining I So mentioned color flagged ask anything the raising the take if right. to give will on another we into what's maybe you on understood maybe can a correctly, QX. had But bit going what's that the probably we

I if XX%. think you there's in on Conscious already increase shouldn't for that is I But XXXX, don't any Banamex can't I no anything see it any said there know just half. second you the isn't why left. reason table, so the longer to

Jose Antonio Alvarez

on Alvaro, let more go Thanks, for questions. well, to Okay. me Brazil, this, in detail. elaborated your already On Jose

said, we an Jose are As portfolio. consumer seeing raising cost in increase the market of mass

better You gave was in already this we quarter in and with third Having we the of first -- to remain we said this in It's we the constructive, true rightly -- in the said higher June months, previous that second and you. remain the guidance saw remain in the we than X comfortable this, think quarter. X to that, than that saw if results go in we in we or and range. are we control

risk the we for we we measures year. going been took of stick that been already whole mentioned think year, As feel has point country we the with the by October. the of that expectations cost elections we is the the few that into account of improved general, growth Brazil of which with yes? for most the of we Jose our countries in with the you more are we're one mainly is see expectations year. exposure a and reduced situation risk our the have that -- by to with the constructive cost seeing, GDP has IMF, taking know, in trends to last lending higher we been X%, reduced, part this the the that overdraft the And for comfortable face and situation So But X.X% the for view. in

before. of saw the any we We than other are seeing not deterioration ones sign

the corporate well. So we book performing are seeing very

second including individual portfolio is improves is that still Board position AGM, the that we to -- this I don't question, When is to in to portfolio the stating by in this And to a causing be more combination is the And SMEs, we spike We the true are we've the unsecured already. to cost our related Board, back the use intention we remains the it auto anticipate the seeing to consumer, capital. I'm to last in to of forward clear stated year. that consumer the in of XX%. decision with is intention it's consumer. and what here up said happen? we the this group the going well, as a dividend not risk. but the the inside continue and it's have going headwinds What buybacks is Board. going done of -- don't these of is and buybacks go go taken to that in levels and Well, cash am It

Jose Garcia Cantera

It's The points and nonperforming may of the second In points give quarter. If from basis basis models. I half, in you backstop X plus X from plus X first we bit the half. in basis the a the the difference basis first loan components. point second X X color minus about regulatory points charges had in the quarter has

pure basis and X, another already points we in XX, from accounted for, around half. have regulatory, we XX would So basis expect second points XX the

or in in we XX year a at charges much basis regulatory whole. the total gave XX line the you of beginning very for the as So the points year with guidance

Operator

next Ignacio The from Ulargui. question is coming

Ignacio Ulargui

You hear me now?

Jose Antonio Alvarez

indeed. well, Very

Ignacio Ulargui

Perfect. Okay.

problem the for before. Sorry

have follow-up on Mexico. Just one question

at envisage think Just the think on a mean, there plan cost risk that of And do would is And XXX terms following like other could I mean, you there? market below that could risk you the have bit I of organic total outcome of like segments you given some you the points guidance priorities sort comfort any level? XXXX? be Banamex, for you where like of but of gain in you is cost the about question follow share? a strategy what group bank, Brazil. market deterioration to basis other in sort that of growth, of for the the are can a of risk there which sort is what that

Jose Antonio Alvarez

at to Thank detail organic overall strategy market and -- Okay. Mexico, we going rightly share, focus in When market, a you, the our you no communicated efficiently to franchise look said as question. strategy? Mexico, look to Ignacio, in we you Well, what's this. scale growth. is the XX% and our in for market your more say we enough about doubt individuals. have we're on more XX%, compete where When

we going on you the across, our is shares share I a that reason is the particularly than a it's customer the the and the through market in the -- growth true for the higher through corporate when on larger individual, look mean, larger in space base, the in through be fit individual particularly organic that sheet space, it to growing market So consumer. deposit at deposit -- balance base, individuals focusing is the all should share, base,

growing X already We grow but years continue got cards, that also in credit are where the We selling are to going share, we to auto. we we space, and in September car year in launched We ago. is started last a -- we're market to consumer growing growth accelerate in and well there, cars accelerating. expect and new month, the is XXX,XXX a XX%

the to look is the continue we at do to continue -- this balance expect If sheet P&L numbers, and at you the accelerating, at we acceleration.

around and in need we base more the market we're on where to XX%. grow market, cards. to consumer the short, space So is credit and In individual going focus mortgage finance share side, the also deposit in XX%,

We above market. are well our average

years And the well couple this expect And time, X in a faced the little there. at We when this, a focus. percentage of HSBC. now, very gain profit -- to to remembers of bit years. and It are in time were ago to we going we Brazil we the in on back be the me continue and expect on we doing of situation. time, were share the difficult or Bradesco points from the to do already market able doing able a are recession situation Brazil that bought Brazil X are back But the in in we in process Brazil at was to we those coming

that your more Second I not much question, on Alvaro, risk, focused as question, Brazil. cost elaborated of colleague, general already Brazil in

risk and there, low. to the of according situation U.S. the we the up see and and the to normalization not of going time being, run, short risk not going trending the are normal, across in cycle, unemployment this risk in plans prices cars is for the you remains the are And going the mentioned up not low, depends all-time for in the highs, -- But little very on I the helps that that U.S. risk other XXXX, other at the It's go numbers, back availability is down. know of Well, markets. sign the of expected other in in the of car where the how situation well the creates up. risk -- don't deterioration. to the qualify, any of kind other I of if largely market, some the don't It's sense the of is cost is the inflation The below auto market in and You Quite was our new to going cost the used U.S. the this, the keep in we I explained this I opposite. to situation auto markets, in In cost remain by markets, the in cost Spain, going you market is see all is a to and will In know In in normalization. well, that bills market, still U.S. think. you abnormally little normal a is Brazil cost also pay -- the happen

year go seeing Chile, this in also portfolio. comfortable we In we to across consumer, comfortable with sign now the very continue the we referring to very any are consumer the next I'm while down the feel expect and not with Europe. portfolio. Mexico, In board. We to feel in year,

around see don't like-for-like, now around year And X.XX%, deterioration in that in I there X.XX% is last are So in X%, trending definition are, any into at taking the portfolios. criteria this within something. down. a of account the change with NPLs period, are we compared the Remember that NPLs fact,

it expected. I start extension April, elaborate are in came, So quarters for because of better Well, significantly seeing I or year. normal that Those discussing previous last in with and we -- uncertainties mature, say should I to installments should were signs trending loans did the X should maybe than we previous loans. in still I And deterioration pay around Remember loans mentioned we quarter, the down, not May. say, there. surrounding that year ECO much

And arrears this. So than were you better -- the and below uncertainty, is X%. significantly initial my expectations, this arrears at least showing I why was

the that's So situation.

-- Our sensitivity. have high models are

And that pick the macro know, €XXX to half, the the €XXX to million. provisions apply in mainly were for due As Spain, in like macro were I rules. conditions; €XXX provide like IFRS based conditions X change market we you new million, in and to models and first in €XXX -- due €XXX the million million; U.K. mentioned in IFRS, these rules, the million, future. to conditions on

are kind the those due conditions, there of are in deterioration macro the in reflecting provisions that any change So portfolio. to not

a clarify of issue I the cost risk. of the think little I expect to bit

Operator

Suisse. Pamela Zuluaga The next from from question Credit is coming

Pamela Zuluaga

is, first one The again, around capital.

estimates been valuation organic held fair could then we pending thinking mortgages? mortgage for in market the Because to valuations? this So has on question about towards and X And that FX-denominated How changing allocation you forward? if shifting related from year? better? we thinking further risk keep your accounting second guiding on to therefore, continue risk already because that you some most offset next your potential have strategy, year bond you of happen adjustments on expect the further capital impact capital from maybe months capital Poland to the should then to by bonds any you moratoria your Are of And provisioning Do in risk maturity the about somehow continuing impact were portfolios. have to this moving are on Poland. should about confirmation we, the is dynamics Poland we X expect to going shield for, those order regulatory think in generating that

Jose Antonio Alvarez

Pamela, on if collect question short can this related where with your for relatively is questions. your In organic, our capital are portfolios Thank Okay. portfolio you, happens the sale. duration. what Well,

the portfolio €XX So of region the billion. in is

think duration you I duration portfolio. give of you can probably the the the have,

we a and the year of our sale first to the on took to XX basis chance capital due in not half collect mark-to-market We of the portfolio. -- points are held

if basis quarter don't yes, quarter through a to after if as reclassify, hurry long duration going month know month is we feeding remain you points. stable, time, short it's portfolio I the not this -- as hurry if if do rates way but or are today. Jose, something, know, a remain in we affect they duration to that is after reclassification. get reduced But get not the back another, something. size this comment Naturally, they while XX P&L, We the change the P&L, feel We are are and given we well, as and you rates that and the will we the don't as not want -- are of if at significantly to same the go one and you the suggest.

Jose Garcia Cantera

€XX held is sale only Yes, billion, just collect. billion €XX on is bit billion €XX ALCO and collect this. held more detail on €XX.X the billion €XX billion, to to Of a portfolio,

X has said, less in of most XX% duration of years. Antonio we So mark-to-market. Of these, as than our have a portfolio Jose

year; So Poland, years. in it's for in instance, Mexico, X.X it's X

XX% So than X very, short less duration, term years. very

been impact the duration to is So significantly potential of deterioration be further going than this far. less with going forward if this so -- it has

Jose Antonio Alvarez

Okay.

are understood Swiss franc is in is a mortgage one, first been is XX% mortgages. impact has is provision up to the X.X what In PLN with and you moratoria I question X Poland, you asking questions. other of recently we've portfolio yes. assuming going be an published and all the take of relation done about what for is FX second One the The if one well, billion,

don't have is going likely in in in €XXX P&L third to million destinations, €XXX charged I million-something, not. Once we our quarter know, in this be but means euros, Poland. that to So the

million. So the slightly below is figure €XXX

FX, For We'll XX%, right, I The we Well, top to see. around is if at need are we am now up? market coverage. XX%. do

not but customers we directly customers litigations how to there, to is to to are top the a we that with and how here. court negotiate don't go rule many be maybe them up XX%, XX%. go the So we going I on litigation, go, But out potential many compensation XX%, depending how need how to significant,

but in something portfolio billion it's -- any €X.X So X% of a or like that. of case,

yes. million, euro like in I hope So €XX I answered €XX million, is questions. your

Operator

Sofie Peterzens is JPMorgan. coming question from from next The

Sofie Peterzens

Here is from Sofie JPMorgan.

Could international in And you ALCO the any also will on you Spanish you be question and you Do impact the need how ALCO your your over that on make or So us potential be then additional would on my only a have would comments much and proposed have operations? where one time my portfolio. the first remind Spain, portfolio to be second on banking Spanish follow-up that level can you operations kind bonds a auto little just of to. it will build what on tax. bit you be, up

just can much just Could Mexico. question clarify transaction? on by? ALCO follow-up the potentially how And the you you So increase then Banamex away why a you from walked

Jose Antonio Alvarez

time. tax, point banking at moment, of this at idea have Spanish no unfortunately, Okay. I this

the So do ALCO have ALCO manage Spain, And same bonds. idea. coming this don't same operations operations, when I a I - the a have is media morning. this presentation no Spain, to today. or Spanish the going the This in for because We that [Indiscernible]. [Indiscernible] to morning, is this don't we'll know morning, in If parliament global operations, -- in see from affects we but the to that this. Spanish told this have zero. the this affect the this for what the way the was going is have in kind of we're to presented rumor expect we're is the they parliament happens the I presentation

relative I X ALCO Spain. a in are if for of in Well, level we the -- have look You potential of duration sheet the me portfolio. balance asking years at the

be all to offset large. If this, you were will portfolio the very, of very

years, of reconstruct will So yes, X minus the balance the your portfolio you portfolio set large. the when between market less times Spain this negative depending X extraordinary and own, on we little, with negative do sheet for is our were a well view ALCO balance little is since going to plus reasonable it on on that rates into and can be by math me in to the where put We're to very duration the portfolio territory. a imagine the to is put trying normally duration. the sheet but But is the

We We know, you haven't asset. started, but we've appropriate the some it's at interested Well, think we point the been we put very this. will, in transparent Banamex. for as sure, time. We're on when conditions. start the

One shares. the in investment The on price. conditions condition, return of naturally, not issue the was to was price, the

the in organically good market we price franchise. our of a growing That's -- colleague, situation to shareholders, offer. Mexico have So return well, investment we with no we we before attractive a for that going in several a not that and chance well, the were that submit asking I we our before, And think to put gaining And more you adding told it. existing in for were a your process. We share nonbinding continue and we That as are disciplined. openly. add, is we percentage have market on told knowing to yes? share we of said So points new there

Operator

is The Creelan-Sandford from Jefferies. from Benjie next coming question

Benjie Creelan-Sandford

questions had on I the outlook, please. revenue three

are First the are of I going all, just Bank. the volumes quarter, on guess but down. going Digital Consumer margins in up, looking

NII wondering lag across terms are bit the a in there cost are loan of lead Or what in of is good that little how very on The margins? question of terms that just clarification you in of the weighing the on a repricing half was European versus second the pricing consumer seeing competition and Brazil year. still is second business, about just in Consumer seeing outlook are increasing could segment? asset effect pressures in the terms in clients if you're demand to a discuss And margins trends. business, So of living you what employment reacting

out So I the sort expect understood repricing of XQ. of level that the to you sort in rate

So should any us basis. the looks just could a year year NII X you rate I sensitivity XXXX. or basis rebound you effect like the Brazil? on kind as know repricing guidance that on XQ a off X gave bit more into perhaps the And down more sequentially indication sensitivity we a guidance offer any of lag will if you assume Can around be on in rate be rate give what again? precise that of the and runs in

Jose Antonio Alvarez

Okay.

elaborate is The first loan I me consumer should say, Consumer on not question, it's The Bank, let Europe. loan Digital demand consumer demand bad, yes. in good,

the of of which auto is XX and the sale. which is basically €XX related of So sorry, -- billion, million, €XXX portfolio problem with billion with north our remaining €XXX basically direct billion here €XX or lending is of point and

but inventory both you give We billion car of in very, lead good dealer €XX times that found getting business, long. normally the in in of the industry of region to finance To is a trends we normally, stock the a have are seeing billion. in are €XX auto very proxy the this, we

billion, Now the the tells you have. this to an where they the industry half in demand capacity is at This billion. is deliver indication of €X this, is €X running

market happens strong. the On the and car side, car other in The same Europe. activity is U.S., markets the the used price in I used but in for mentioned

share significantly. falling, It's the going reason happens gaining not we XX% Car okay? for the go This are there. across because are gaining growing where are billion but is initials mark. we share, to Our we're origination the this year, to not is on -- is originations. What all we this our XX%, are is are €XX growing sales are falling market

question, The situation the the market. is this second of

with countries ago, are the other swap billion, the the pattern more months do couple business X balance this close happening the so while sheet said, risk in follow, on see usual of is me go and not years, it's one issuance at have and in and combination we is rate What in with is relatively of like of which the is, of the and rate is but majority expecting, business. don't things, to a of with to this normally speed what €XX the that business in than markets very pattern up book. fixed now in Funded, And start margin faster to This other up this deposits wholesale funding, business, duration -- around started business. interest a I was the the the happening The low of yes. I a I loan yes. tend region than normally rest as a more rates of went up, ones U.K. the going following. securitizations differently pricing. before, second billion the was the this The let this margins? -- Yields This are question normally year, €XXX

around because XX% fee accommodate this funding normally, not duration. this suffer income We this suffer majority So X that XX% of wholesale on the not much bit, deposits The combination of of and is can much to with and majority -- business years a X side. doing little that the the the margin well.

business, in Central are So going the probably basis that of still quarters don't XX probably basis Bank away August, from is the explain is rates It as And territory spread region. this up XX%. market-related said with to Having we're see. long And X negative in in up, the NII quarters, around? come me you up. into up, going is show rates, this. long we went think going went as loan takes the territory as turn to the in we the think that finish but book Brazil. Brazil, book, days this the it rebound when activity, Brazil. On XXXX this the we points, Brazil, in know, new the period our is to around as I are in cannot afterwards, is we you -- indications all I and quarter recovers, the Brazil, yes. year compression. origination. XXX Yes, see loan NII. things, expecting rate September a prices first This going you we rebounding picks that the the that, this there. Bank X, to Those the not mature activity Brazil going has year, Brazil, these -- and in let So this in When go dynamics the new so the to main couple to okay? remain other collapsed outlook and mentioned in Brazil. points side, X rebound, Jose up from to but to the the and peak, of the the We will outlook okay? go going Central to points, went is been In portfolio the official the activities are there's pass basis loan close on passed for a in renew, financial customer gave so back happen. happens going territory, swing the this to X expect of so what over XXX%. fourth yes, when is of cycle, Jose months, book some very from up. of negative rates -- do and Brazil went normally, up, the X% to day, significant margin NII So we In There if Basically, the the mentioned for of -- have the activities positive tightening fade

Operator

The next question is Cerezo coming from Ignacio UBS. from

Ignacio Cerezo

I questions both around two quality. the on asset U.S., have

years years? need unit. well, about cost of us difficult can So gauge mix through we mentioning were how will, concerned rest I going quickly when couple been risk we realistic operation of start deteriorating, blended of don't to has you to also it a to monitor into of the second the in view the us the SCUSA kind let pickup mean, is the have one. we been obviously, between the collateral this finance if asset I longer. quality the it's and of and disclosure There consumer kind And has can so down as European of the like recent question seen the the view for have on units unemployment, actually know have you're or significant a, around prices what you your for if in changes cycle reversing mean, and the around any a SCUSA last bank it's

actually the you if on have in normal can can with U.S. basically in share So view the cost of land where risk environment? your a us you --

Jose Antonio Alvarez

Okay.

this U.S. drivers starts rate are The the we is one key looking in about first question asset the unemployment also quality, when naturally deteriorating, what of

mentioned on, guide in terms dynamics on is You business. the me little the what going what's of in bit going let you SCUSA a of

year generating with seeing we X in are significant are points Now is FICO we XX above ago. the a were -- that what loan we book generating

So this are quite the generating we sophisticated with The this. model along is pricing are -- generating. and FICOs is goes we

trends this the little explains bit in So yields there. a

phenomenon. year, in €XXX making we Is us. half in other second Second, -- prefer that to sell reason used made, this in the or different is produce business car leasing this see this market. to car process Normally, take -- yet million, P&L. XXXX And has time very give the business, X the market you in are years very customers decrease income, car period process out from price. in leasing happened what businesses significant little a XXXX, very not back we think are in is this works years Last the are losses, very customers given high before. X of this the out now yes. the little us and this a the have auction high income we profitable of But that dynamics in is back changed a own, on car other And back we dynamics to used we and cars XXXX little are prevailing that on the they of was their seeing They not in times the the in to a you see the What prices dispose way returning the any an markets. I the this seen the the process. profits, later later, is the very in car normal in due

-- SCUSA. than risk whole X%. Asset expect traditionally, in risk, quality, U.S., were U.S. cost the In now of we X around cost in the X%, percent we the is And less we of X.X%. something

very the seeing split of less. X.X% from low necessarily not So mean I risk, comes bank the you and the bank now, cost between is SCUSA, depends is the what And of past. okay? normalization are all in bad you bank, will the happen time risk the cost over This

unemployment lower higher cost also generating expect of we deteriorate. risk are FICOs, we when As the

continues that when the Remember driver, of are basis additional points not the unemployment that. think yield I XX main much not are XXX in is basis to lending or points lending at be as high you or something or interim XX% impact a points and we the rates. basis XXX meaningful like yield, very

in not to in can So important it's produce as rates space as monthly installments. is the the XX%, more prime it go changes where significant you changes the in

I think your answered yes? I questions,

Operator

question next The is coming from Peixoto Carlos from CaixaBank.

Carlos Peixoto

outlook second the still is half now, exactly believe you for in and how really mentioned in the the wondering of the side second year. that [XXXX]. I Spain. wondering I is full have you from NII that first a points. above the for I -- of just the questions for in see past, you cost Brazil the couple it for something wondering, question, follow-up. missed guidance year risk a in levels. trending as on a the was the basis I believe just I of have was I Right well, of So in area And XX one possibly my given of the risk cost well. bit was those

Jose Antonio Alvarez

for Brazil in it's should -- year, expect NII in you growth digit the So Brazil single for have is you whole so in -- yes. what mid-single-digit Brazil,

well, million changed is points cost of While set for you XX in synergies, points the Spain hasn't naturally, as macro XX our the year, the €XXX to I basis from probably is came we so will see means, in you levels, risk this is depends well, uncertain the introduce yes. of half, this whole the largely we should expectations, of the if what we let's the IMF this macro. as that second expectations in year. now take this year. Well, before And these know, Spain days it day today, should end it half macro yesterday, remains yes. that, yesterday, expect risk basis the the cost the for in published told stay at Well, macro of first the kind what on macro you they But the that

big So not said year before, to deal a of you cost risk. the do expect on ground the from coming as we I this

Operator

from is question next Mediobanca. The Filtri from coming Andrea

Andrea Filtri

to that can is curve should just and deposits Two to rate your the names. flavor on compared in front. be big still the Spain the Can didn't sensitivity, sensitivity. not you're any a have plugged portfolio your ALCO to months Spanish the I questions. scenario. visibility quite giving well we around you beta, think, elaboration on normalized for all moment, add transparency in the main ALCO And One XX see give the understand please is Antonio, how rate area forward reason in that but other each assuming X us This bonds some low quite before, I of you Jose

Brazil. rate the on second on question The sensitivity. is Again,

pay when on stops You reals around would expect a repricing on be understand asset the at liability of rate you wanted lot cost level the from that the phasing completed, what depended much full tailwind but risk. swing understand terms negative to tailwind. is positive term, in the current Brazilian then the this, headwind elaborated and of to And to a the quite the I this in hence, repricing to can how

Jose Antonio Alvarez

Okay.

will details -- the you rates. see. guide through the specific numbers you to Let me elaborate. on Jose sensitivity Rates

this shift in is level, that say give the forward, normally High to you areas. the going accelerating. and parallel is curve. But yield presentation So I is what happens the that from you a we're should asked is the for with process

figure numbers our take in figure €X this probably. reasonable is I whole business north in rates, plenty sounds there This but forward Europe, me. of that, the Europe, billion, that think you probably is we with €X there, all a if of should a well, is know So XXXX to the billion, in

generate XX% to and commercial rate. the corporates not the book, asked as lending XXX% in the in €XX assets know, majority CIB while and CIB terms. we billion ALCO, ratio, having you ALCO sounds is of lending I to Spanish necessarily of a to of single almost to the or one that rate mean well, the majority commercial fixed In of me of do for €XX not the something sovereign, of floating our portfolio is billion XXX% SMEs reasonable. may terms means ALCO You mortgage an terms, between the and that of does lending

other rate. around, was have And asset don't generate limited the this clarify the the way portfolio. ALCO fixed a don't you specific on that for Spain, go Jose, we up. is any portfolio. of reason we rates interest need that's So our about a because a that significant view why want have, that And In they reason, having should we to data?

Jose Garcia Cantera

-- to well, XX Yes. from go The parallel we XX obviously. The day shift months, it a really shift months. sensitivity beyond X parallel reason we give is have doesn't

And is X%. expecting about we shift XX at rates a movement market So in months. and talking talk the stay is when about parallel between for the overnight reason today, are parallel a because Europe to we we instance, gave shift, a

While just higher than a was much it month ago, that.

shift seen, then on much a then better But way. it's movement which at look day the of outlook put again we parallel sensitivity. And for have XXX the for between most own XX% is in and U.K. is a So €XXX to and million, rates. XX already your a of points shift, a a you months, basis of by the which in is €XXX Spain million, parallel beta, sensitivity

we the second and in stabilization then U.K., in XXXX. sensitivity this the year So in million U.S. €XXX the would expect some in probably of further half

positive a in second relevant is would expect the year, Brazil. for of million. year, we Brazil, this sensitivity €XXX second in the For And around

the in we of then last then million, is year, €XXX in August, Brazil the takes then the positive million. and Brazil, see in this next parallel in €XXX towards interest if rate place September, This presentation. through and we around to end So beginning start the should flowing in is year, seeing shift the which right P&L sensitivity sensitivity a are the we hike P&L of this sensitivity

Operator

from [Operator Societe Instructions] The next Catena question Carlos is from Generale. Cobo coming

Carlos Cobo Catena

me. A is M&A the in about couple expanding the there's of with out ruled Europe. you've now makers for media in some reports Mexico, agreements on some agreements car One been you that appetite exploring questions or

always very in been your Consumer You've business. European interested Finance

in if it's area could capital could understand some that there you if you view. do So terms how Can in macro possible consumption, been which deals? to some provision give countries overlay. you've where provision's peers -- Then an is you've bolt-on the overlay. that because Spanish up be up in I COVID top be seen of could And some been quantify they of that which material, aren't the really might elaborate countries you that allocated how on you've topping

my So from that's them? And that's -- it will if it, to you see questions. X interesting defer what be

Jose Antonio Alvarez

with Finance. reached with as a white commercial side venture appetite, of provider Honda agreement financial the also -- them means, this joint the Thank very venture the see we and providing match I numbers, with last U.K. business looking the market I division but usual we've the important backwards, was in is this be grow Mexico with joint roughly in this of signed in side agreement in in or to but we this, M&A last this with forgot bring a in another in the mentioned and Digital as Reaching million to you, year in a to in Honda space. Stellantis, a in one several Europe. XXX cases important and with the communicate €XXX Consumer say, in in label in business as Greece The of said If Carlos. some at reached is deal they a I million share, the we as Consumer and and I Well, stage BAU that us cases, Naturally, we cases which be we Greece €XXX previous mention that Well, portfolio, usual as provide our OEMs plenty We €XXX are in X -- with to well, our has -- year an look as deals. at another Stellantis. a agree, but discussions done them the the match for and in with the establish have restructuring some of look that for we for have main we U.S. this for the open, is Mitsubishi nothing U.S., services can this speaking label, this The I And whole before, of agreement projections BAU. well, you what will that XX% importer million there. that overlay, because result having is, agreements agreement, million not some was We almost provider -- in as our that to OEMS. for probably will provisions one, Bank region of country, the main important of white for Digital one the we we Mexico. I €X should gave billion the that agreement Spain, those

macro results. you half the due have embedded to in million] [€XXX So the that those first are

Operator

Research. Britta Schmidt from coming is question Autonomous last The from

Britta Schmidt

course, update on? outlook be on for of in through please. on help And be us that any X issues depending, there. the rate case The see of the walk XXXX, Brazil. ground? you expects Do say, of spreads, questions, What's have even I've WIBOR got half maybe will One you and on second rate question NII the Poland. still consensus Would is timing? we expect the legal the at Do the wider And cuts become latest to on this dynamics will the a second outlook my then. drag from in can there XXXX. you your

Jose Antonio Alvarez

maybe well, commercial what we But still quarters And those to Brazil, CFO negative asking go it's in start highly look know, pick already the for well, than X case, too outlook the when this as me if tell. to and prevail, And NII. Normally, short expect rather uncertain or this this. yes? very rates to year. to Poland, But in the -- retail should difficult next is the And the sooner dynamics more you're overall, for rates on Brazil, say. later, those down, from September rates In year, are expect X, the yes. in a the you it's dynamics the run, elaborated early maybe in afterwards, expect positive. you you legal August, should

impact. we we, the situation, provide I are naturally, While today, we're analyzing as of you the

not from is analyze view government. our this when community on moratoria, appropriate Assuming this for This take as this, proposal XX% on whole significant is the view a we in the whole. well, take-up that the colleagues, on financial mortgage take a And individual an system damage in the financial a this case. a while a the we'll finish to the is Poland Poland, should system

Jose Garcia Cantera

in don't is the want be don't there would WIBOR, we change know way. if terms It for you the very change to are next change know the I in it at a to to index we recommendations in details. regards no with but against but go It the elaborate. start If all regulation index. to have will difficult But year, proposal it, details would there just I add may of the that Europe.

So it would have be change. to no But we very news. difficult

Jose Antonio Alvarez

The is proposal to difficult execute.

situation. expect news not do the way. We Jose soon, that's prevent regulations on And any said this, this? to As go European this yes, No.

Okay?

Begona Morenes

questions. further no are there Antonio, Jose

Jose Antonio Alvarez

Thank a take next weeks. Thank And you holidays take holidays, of and guys, the good in Bye. you. have those who care. couple

Jose Garcia Cantera

Thank you, everybody. Bye.

Banco Santander (SAN) 30 Jul 222022 Q2 Earnings call transcript