Final Results
Banco Santander Central Hispano SA
01 February 2007
Press release
Santander net attributable income for 2006 increases 22% to EUR 7.596 billion
Excluding capital gains, attributable profit rose 26%
to EUR 6.582 billion; earnings per share also rose 26%
• The strong results allow the Board to increase the dividend by 25% to
EUR 0.5206 a share, a payout to shareholders of EUR 3.256 billion, or 49.47%
of ordinary profit.
• The increase in profit was driven by growth in revenues of 17%, twice
the rate of growth in costs of 7%, leading to an improvement in efficiency of
more than 4 percentage points to 48.5%.
• Growth in revenues was supported by strong activity in all business,
in Europe as well as in Latin America. Loans grew by 20% and customers funds
9%.
• In Continental Europe, profit grew by 16% to EUR 3.471 billion, owing
to growth in loans of 29% and in customer funds of 16%.
• In Latin America, attributable profit increased by 29% to EUR 2.287
billion, with growth of 22% in loans and 25% in Customer funds, measured in
local currency.
• Abbey's attributable profit rose 24% to EUR 1.003 billion, with growth of 9%
in loans and 2% in deposits in pounds sterling.
• The NPL ratio was 0.78%, a decline of 0.11 point. Coverage increased
from 182% to 187% at the close of 2006.
• The Group generated in 2006 EUR 2.487 billion in capital gains through the
sale of stakes in Urbis (EUR 1.218 billion), 10% of Antena 3 TV (EUR 294
million), 4.8% of San Paolo (EUR 705 million) and 7.23% of Santander
Santiago (EUR 270 million).
• Of these capital gains, EUR 1.386 billion were allocated to extraordinary
provisions (for early retirements, to cover the impact of the corporate tax
reform and the distribution of shares to employees) and EUR 1.014 billion to
profit.
Madrid, February 1, 2007 - Grupo Santander registered net attributable income of
EUR 7,596 million in 2006, an increase of 22% from EUR 6,220 million in 2005.
Santander thus begins 2007, which marks the 150th anniversary of its founding,
by presenting the best results in its history.
All business units registered strong growth in activity in 2006 while
maintaining strict discipline in costs, which has enabled revenues to grow at
more than double the rate of costs. This resulted in an increase of 26% in
recurring profits, excluding capital gains, of EUR 6,582 million. At the same
time, Santander registered in 2006 EUR 2,487 million in gross extraordinary
capital gains from the sale of investment stakes, of which EUR 1,386 million
have been earmarked for extraordinary provisions, which strengthen the balance
sheet, and another EUR 1,014 million to the annual results.
The quality of the results allows the Board of Directors to approve for the
second consecutive year a 25% increase in the dividend, with a charge against
2006 results of EUR 0.5206 per share. The distribution to shareholders will thus
come to EUR 3.256 million, or 49.47% of ordinary profit, in line with
Santander's payout policy.
Attributable income distribution
Europe generated EUR 4,474 million of attributable profit
EUR Mill. % of operating areas
Continental Europe 3,471 51%
UK - Abbey 1,003 15%
Subtotal Europe 4,474 66%
Latin America 2,287 34%
Total 6,761 100%
EUR million and % o/ operating areas total
Group earning 2006
In million of euros
Full-year results maintain a very similar profile to the previous quarters
2006 Change/2005
Amount %
Gross operating income 22,615 +3,282 +17.0
Operating costs -11,176 -776 +7.5
Net operating income 11,369 +2,459 +27.6
Loan-loss provisions -2,467 -852 +52.8
Income before tax 8,776 +1,939 +28.4
Attributable income 6,582 +1,307 +26.3
(without gains)
Net capital gains 1,014 +5 +0.5
Attributable income 7,596 +1,376 +22.1
(with gains)
Earnings
The key factor in the 2006 results is the strong growth in business activity,
which enabled revenue to grow by ten percentage points more than costs, at 17%
and 7%, respectively. As a result of this, the operating margin grew by 28%,
similar to the level of growth in ordinary attributable profit. The limited
growth in costs is especially noteworthy when considering the investment in 2006
in new projects such as 'We want to be your bank' in Spain and the expansion of
branch networks in various countries, with 651 net openings. Santander's global
network now includes 10,852 branches, making it the largest retail bank
distribution franchise in the world.
Businesses in Continental Europe (Spain, Portugal and Santander Consumer
Finance) registered an operating margin of 20%, with an increase of 15% in
revenue and of 8% in costs. Growth in loans generated a strong increase in
generic provisions, so that final growth in profit came to 16% to EUR 3,471
million. The greatest contribution came from the Santander branch network in
Spain, with EUR 1,505 million, followed by Banesto with EUR 585 million
(excluding the capital gains from the sale of Urbis) and Santander Consumer
Finance with EUR 565 million.
The Santander branch network in Spain focused in 2006 on profitable growth,
which enabled it to continue to improve its rates of growth in net interest
income, which increased by 14% over the year and by 17% in the final quarter.
Moreover, the Santander branch network was able to bear the costs of eliminating
income from fees on services to all linked customers and keep growth in costs at
2%, while opening 180 branches. Banesto registered net profit of EUR 1.451
billion, including the capital gains obtained from the sale of Urbis.
Continental Europe: Main units - 2006
In millions of euros and % change from 2005
Strong growth in net operating income and attributable income, well balanced
among units
Gross operating income: 10,710 million; +15%
Santander Network 4,182 +9%
Banesto 1,987 +11%
Santander Cons. Fin. 1,825 +15%
Portugal 1,103 +11%
Rest** 1,613 +46%
Net operating income: 6,270 million; +20%
Santander Network 2,429 +16%
Banesto 1,060 +16%
Santander Cons. Fin. 1,201 +14%
Portugal 570 +14%
Rest** 1,010 +58%
Attributable income:* 3,471 million; +16%
Santander Network 1,505 +17%
Banesto 585* +17%
Santander Cons. Fin. 565 +21%
Portugal 423 +22%
Rest** 392 +2%
(*) Excluding capital gains from the sale of Urbis
(**) Banif, Asset Management and Global Wholesale Banking
Latin America: Main units 2006
In million of US$ and % change from 2005
Strong revenue growth with costs under control in all countries. Increase in
provisions due to expansion and change of mix
Gross operating income: 10,833 million; +27%
Brazil 4,211 +26%
Mexico 2,650 +36%
Chile 1,751 +28%
Rest of countries 1,883 +18%
S. Private Banking 338 +23%
Net operating income: 5,499 million; +43%
Brazil 2,164 +42%
Mexico 1,376 +69%
Chile 1,009 +36%
Rest of countries 749 +25%
S. Private Banking 200 +28%
Attributable income: 2,866 million; +30%
Brazil 941 +28%*
Mexico 662 +41%
Chile 613 +46%
Rest of countries 475 +6%
S. Private Banking 175 +22%
(*) Without impact of AES Tiete in 2005: +45%
In Latin America, costs grew by 13%, due principally to investment being carried
out in new projects and the branch networks in the main countries, but were
still half the rate of growth in revenues of 27%, so that net operating income
grew by 43% in dollars, the operating currency. Attributable profit from the
region grew by 30% to US$2,866 million, or by 29% in euros to EUR 2,287 million.
Brazil made the largest contribution, with profit of $ 941 million, an increase
of 28%, followed by Mexico, $662 million, up 41% and Chile, $613 million, up
46%, the second consecutive year it has grown by more than 45%.
Abbey's results are in line with the framework laid out in its strategic plan,
with growth of 5% in revenue and a reduction of 7% in costs, resulting in growth
of 25% in net operating income and of 23% in profit, measured in pounds.
Attributed profit for the year increased 24% to EUR 1,003 million.
By businesses, retail banking registered pretax ordinary profit, excluding
capital gains and extraordinary write-offs, increased 24% to EUR 7,436 million;
Global Wholesale Banking rose 17% to EUR 1,353 million and Asset Management and
Insurance increased 18% to EUR 645 million. Within Asset Management and
Insurance, revenue from insurance grew by 29% and from investment funds by 9%.
Global Wholesale Banking registered a sharp increase in activity, with revenues
increasing by 32% and costs by 18%. The gap between them enabled net operating
profit to increase by 40% and gross profit by 17%, as generic provisions were
4.3 times higher. The increase in generic provisions is a result of the strong
growth in credit but does not affect risk quality, as specific provisions were
reduced.
In addition to these ordinary earnings, Santander in 2006 sold stakes in Urbis,
Antena 3 TV (10%), Sanpaolo IMI (4.8%) and 7.23% of Santander Santiago, with the
objective of increasing its stock market liquidity. These sales generated gross
capital gains of EUR 2,487 million, which have been allocated to cover the cost
of early retirements in Spain (EUR 716 million), to cover the affect of the
corporate tax reform, and (EUR 491 million) and extraordinary fund (EUR 179
million) to cover the costs of distributing 100 shares to each employee to mark
the Group's 150th anniversary. The remaining capital gains contributed EUR 1,014
million to attributable profit, reinforcing the solvency and capital base of the
Group.
Business
Santander's funds under management exceeded a trillion euros for the first time
in 2006, increasing by 4% to EUR 1,000.996 billion. Assets rose 3% and accounted
for EUR 833,873 million of the total, while off-balance sheet customers' managed
funds (mutual funds and pensions, mainly) rose 9% to EUR 167,124 million.
Loans to customers (gross)
EUR billion
Dec 04 376
Dec 05 443
Mar 06 459
Jun 06 484
Sep 06 505
Dec 06 532(*)
(*)+19.9% as compared to Dec 05. The increase is of 20.5%
excluding the effect of exchange rate
Loans to customers. December 2006
% o/ operating areas
Latin America 12%
Continental Europe 52%
UK - Abbey 36%
Total Group lending came to EUR 531,509 million at the close of 2006, an
increase of 20%. Some 52% of the lending comes from Continental Europe, 36% from
the United Kingdom (Abbey) and the remaining 12% from Latin America.
In Continental Europe, lending grew by 29% to EUR 271,687 million, with
increases in all countries and units. The Santander branch network increased
lending by 18%, Banesto by 27%, Portugal by 4% and Santander Consumer Finance by
34%. Faster growth in the Santander branch network in Spain was the result of
the success of the 'We want to be your bank' programme, launched in 2006, which
strengthened linkage with existing customers and attracted 466,000 new
customers. Loans to individuals grew by 15% and to businesses by 23%, while
mortgage lending continued to grow by 16%, the same rate as in 2005.
Banesto's loans to individuals grew by 19%, to small businesses by 25% and
medium-sized businesses by 35%, while mortgages grew by 25%. Santander Consumer
continued to grow both organically (by opening branches in Germany and Italy)
and through selective acquisitions such as Drive in the U.S. Auto financing, its
main business, grew 17% and direct lending and cards by 36%. In Portugal,
Santander Totta grew by 23% in lending to SMEs and by 10% in loans to
individuals.
Lending in Latin America grew by 14% in euros, to EUR 60,172 million, and by 22%
in local currencies. Lending in Brazil, which opened 129 branches last year,
grew by 34%, with an increase of 30% in loans to individuals and 38% in SMEs
and corporales. Lending in Mexico grew by 41%, with an increase of 85% in loans
to individuals and 64% in SMEs. Lending in Chile grew by 17%, with increases of
24% in loans to individuals and 27% to SMEs.
Managed customer funds
EUR billion
Dec 04 595
Dec 05 681
Mar 06 699
Jun 06 709
Sep 06 720
Dec 06 744(*)
(*)+9.2% as compared to Dec 05. The increase is of 10.9% excluding
the effect of exchange rate
Managed customer funds. December 2006
% o/ operating areas
Latin America 21%
Continental Europe 47%
UK - Abbey 32%
Abbey continued its strategic business restructuring, ending the year with loans
of EUR 190,512 million, growth of 11% in euros and 9% in pounds. Net mortgage
production increased to GBP 7,800 million, 2.6 times the 2005 figure of GBP
3,000 million, which enabled the bank to gain market share in new production.
Production of personal loans grew by 7% to GBP 2,259 million on the year.
Total managed customer funds managed by the Group rose 9% on the year to EUR
743,543 million. On-balance sheet customers funds were EUR 576,419 million and
off-balance sheet EUR 167,124 million, with growth of 9% in both cases. Funds
held in mutual funds rose by 9% and in pensions by 3%.
In Continental Europe, overall Customer funds under management rose 16% to EUR
301,238 million. Spain accounted for around 80%, with the Santander branch
network growing by 9%, Banesto by 20% and Santander Consumer by 32%, with the
biggest gains in Spain, Germany and Italy. Customer funds in Portugal grew by
24%.
In Latin America, customer funds grew by 12% in euros, to EUR 139,549 million,
and by 25% in local currencies. Deposits grew by 15% and investment funds by 34%
in local currencies. By country, growth in the capture of new savings was 18% in
Brazil, 13% in Mexico and 22% in Chile.
Abbey closed 2006 with EUR 205,860 million in customer funds, a decline of 9%
due to the sale of the insurance business. On a like-for-like basis, excluding
the insurance business, customer funds grew by 8% in euros and 6% in pounds.
Management & capital ratios
Efficiency: The growth of revenues by ten percentage points more than the growth
in costs led to an improved efficiency ratio. At the end of 2005, costs and
amortisations as a whole took up 52.8% of revenues, whilst this percentage was
48.5% at the close of 2006. Abbey showed the greatest improvement in efficiency,
from 62.2% in 2005 to 55.1% one year later. Continental Europe improved by 2.7
percentage points to 40.8%. Latin America improved 5.8 percentage points to
47.0%.
Non-performing loans: The expansion of the Group's lending activity came hand in
hand with a fall in the NPL rate, with the delinquent and doubtful risk/total
lending ratio at an all-time low at the end of 2006. Grupo Santander's NPL rate
is 0.78% (down 0.11 point), with coverage at 187% ( up 5 points). The Group has
generic reserves of EUR 5,667 million, for future use.
Group Results 2006. Efficiency
Group's efficiency ratio(*)
%
2005 52.8%
2006 48.5%(**)
(**) -4.3 p.p. as compared to 2005
(*) with amortisations
Efficiency ratios(*) by areas (%)
(*) with amortisations
Continental Europe
%
2005 43.5%
2006 40.8%(**)
(**) -2.7 p.p. as compared to 2005
Abbey
%
2005 62.2%
2006 55.1%(**)
(**) -7.1 p.p. as compared to 2005
Latin America
%
2005 52.8%
2006 47.0%(**)
(**) -5.8 p.p. as compared to 2005
Group's NPLs and coverage ratios 2006.
Group's NPL and coverage ratios
Dec'05 Dec'06
Coverage 182% 187%
NPL 0.89% 0.78%
NPL and coverage ratios by areas
Continental Europe
Dec'05 Dec'06
Coverage 247% 245%
NPL 0.76% 0.73%
Abbey
Dec'05 Dec'06
Coverage 78% 86%
NPL 0.67% 0.60%
Latin America
Dec'05 Dec'06
Coverage 186% 167%
NPL 1.82% 1.38%
Capital: At the close of 2006, the Group's eligible capital amounted to EUR
59,776 million, with a EUR 21,478 surplus over minimum requirements. With this
capital base, the BIS ratio is 12.5%, with Tier I at 7.4% and core capital at
5.9%.
The share & the dividend
EPS
Euros
EPS Without capital gains Including capital
or extraordinary gains or
allowances extraordinary
allowances
2004 0.73 -----
2005 0.84(*) 1.00
2006 1.05(**) 1.22
(*)+15% as compared to 2004.
(**)+26% as compared to 2005
Dividends (per share)
Euros
2004 0.33
2005 0.42(*)
2006 0.52(**)
(*)+25% as compared to 2004
(**)+25% as compared to 2005
Share price close 2006
Euros
2004 9.13
2005 11.15(*)
2006 14.14(**)
(*)+22% as compared to 2004
(**)+27% as compared to 2005
The Santander share closed 2006 at EUR 14.14, up 27% in the year. At the end of
2006, Santander's market capitalisation was EUR 88,436 million, representing the
creation of EUR 18,701 million in shareholder value. Santander has reinforced
its position as Spain's leading company by market capitalisation and as the
number one bank in the euro zone.
The Board of Directors has approved the dividend charged to the 2006 earnings,
which will be EUR 0.5206 per share, a 25% dividend increase for the second
consecutive year. Of the four yearly dividends, three, amounting to EUR
0.106904 each, have already been paid, with a fourth dividend of EUR 0.199913
per share still pending. The return per share by dividend was 4.27% in 2006.
Over the last ten years, the dividend per share has registered accumulative
annual growth of 13%. In 2006, profit distributed to shareholders will be EUR
3,256 million - equivalent to 49.47% of ordinary attributable income - a record
for Santander and Spanish companies as a whole.
Grupo Santander's shareholder base amounts to 2,310,846 shareholders. 129,749
people work in the Group, serving 67 million customers in 10,852 branches.
For more information, see: www.gruposantander.com
Income statement
Million euros
Variation
2006 2005 Amount % 2004
Net interest income (w/o dividends) 12,084 10,334 1,750 16.9 7,172
Dividends 404 336 68 20.4 389
Net interest income 12,488 10,669 1,818 17.0 7,562
Income from companies accounted for by the 427 619 (192) (31.0) 449
equity method
Net fees 7,223 6,256 967 15.5 4,727
Insurance activity 298 227 71 31.4 161
Commercial revenue 20,436 17,772 2,664 15.0 12,899
Gains (losses) on financial transactions 2,180 1,562 618 39.6 1,100
Gross operating income 22,615 19,333 3,282 17.0 13,999
Income from non-financial services 119 156 (37) (23.9) 118
Non-financial expenses (70) (91) 20 (22.5) (121)
Other operating income (119) (90) (30) 33.3 (62)
Operating costs (11,176) (10,400) (776) 7.5 (7,504)
General administrative expenses (10,025) (9,382) (643) 6.9 (6,670)
Personnel (6,004) (5,619) (385) 6.8 (4,221)
Other administrative expenses (4,021) (3,763) (258) 6.9 (2,448)
Depreciation and amortisation (1,151) (1,017) (133) 13.1 (834)
Net operating income 11,369 8,909 2,459 27.6 6,431
Impairment loss on assets (2,550) (1,802) (748) 41.5 (1,847)
Loans (2,467) (1,615) (852) 52.8 (1,586)
Goodwill (13) - (13) - (138)
Other assets (71) (187) 116 (62.3) (123)
Other income (42) (270) 229 (84.5) (196)
Income before taxes (ordinary) 8,776 6,837 1,939 28.4 4,387
Corporate income tax (1,986) (1,320) (666) 50.5 (526)
Net income from ordinary activity 6,790 5,517 1,273 23,1 3,861
Net income from discontinued operations 354 225 129 57.5 135
Net consolidated income (ordinary) 7,144 5,742 1,402 24.4 3,996
Minority interests 562 530 32 6.0 390
Attributable income to the Group (ordinary) 6,582 5,212 1,370 26.3 3,606
Net extraordinary gains and writedowns 1,014 1,008 5 0.5 -
Attributable income to the Group 7,596 6,220 1,376 22.1 3,606
Customer loans
Million euros
Variation
31.12.06 31.12.05 Amount % 31.12.04
Public sector 5,329 5,243 86 1.6 5,741
Other residents 199,994 153,727 46,266 30.1 126,253
Secured loans 110,863 81,343 29,520 36.3 62,457
Other loans 89,131 72,384 16,747 23.1 63,796
Non-resident sector 326,187 284,468 41,719 14.7 244,201
Secured loans 191,724 174,117 17,608 10.1 160,514
Other loans 134,463 110,352 24,111 21.8 83,687
Gross loans and credits 531,509 443,439 88,071 19.9 376,195
Credit loss allowance 8,163 7,610 554 7.3 6,845
Net loans and credits 523,346 435,829 87,517 20.1 369,350
Pro memoria: Doubtful loans 4,613 4,356 257 5.9 4,208
Public sector 18 3 15 590.0 3
Other residents 1,212 1,027 184 17.9 1,015
Non-resident sector 3,383 3,326 57 1.7 3,189
Customer funds under management
Million euros
Variation
31.12.06 31.12.05 Amount % 31.12.04
Public sector 15,266 14,366 901 6.3 13,998
Other residents 94,750 83,392 11,358 13.6 79,273
Demand deposits 55,050 50,124 4,927 9,8 44,259
Time deposits 24,670 18,799 5,871 31.2 19,821
REPOs 15,030 14,470 560 3.9 15,193
Non-resident sector 221,206 208,008 13,199 6.3 189,941
Demand deposits 119,861 113,603 6,258 5.5 95,263
Time deposits 72,258 77,195 (4,937) (6.4) 74,934
REPOs 26,343 14,366 11,977 83.4 17,128
Public Sector 2,744 2,844 (99) (3.5) 2,616
Customer deposits 331,223 305,765 25,457 8.3 283,212
Debt securities 204,069 148,840 55,229 37.1 113,839
Subordinated debt 30,423 28,763 1,659 5.8 27,470
Insurance liabilities 10,704 44,672 (33,968) (76.0) 42,345
On-balance-sheet customer funds 576,419 528,041 48,378 9.2 466,865
Mutual funds 119,838 109,480 10,358 9.5 97,838
Pension funds 29,450 28,619 831 2.9 21,679
Managed portfolios 17,835 14,746 3,089 20.9 8,998
Off-balance-sheet customer funds 167,124 152,846 14,278 9.3 128,515
Customer funds under management 743,543 680,887 62,656 9.2 595,380
Shareholders' equity and minority interests
Million euros
Variation
31.12.06 31.12.05 Amount % 31.12.04
Capital stock 3,127 3,127 - - 3,127
Additional paid-in surplus 20,370 20,370 - - 20,370
Reserves 12,352 8,781 3,570 40.7 6,949
Treasury stock (127) (53) (74) 138.9 (104)
On-balance-sheet shareholders' equity 35,722 32,225 3,497 10.9 30,342
Net attributable income 7,596 6,220 1,376 22.1 3,606
Interim dividend distributed (1,337) (1,163) (174) 15.0 (792)
Shareholders' equity at period-end 41,981 37,283 4,698 12.6 33,156
Interim dividend not distributed (1,919) (1,442) (477) 33.1 (1,046)
Shareholders' equity 40,062 35,841 4,221 11.8 32,111
Valuation adjustments 2,871 3,077 (206) (6.7) 1,778
Minority interests 2,221 2,848 (627) (22.0) 2,085
Preferred securities 668 1,309 (641) (48.9) 2,124
Preferred securities in subordinated debt 6,837 6,773 64 0.9 5,498
Shareholders' equity and
minority interests 52,658 49,848 2,811 5.6 43,596
Computable capital and BIS ratio
Million euros
Variation
31.12.06 31.12.05 Amount % 31.12.04
Computable basic capital 35,539 32,532 3,007 9.2 24,419
Computable supplementary capital 24,237 20,894 3,344 16.0 19,941
Computable capital 59,776 53,426 6,351 11.9 44,360
Risk-weighted assets 478,733 412,734 65,999 16.0 340,946
BIS ratio 12.49 12.94 (0.45) 13.01
Tier 1 7.42 7.88 (0.46) 7.16
Core capital 5.1 6.05 (0.14) 5.05
Cushion 21,478 20,407 1,071 5.2 17,084
This information is provided by RNS
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