2009 AGM - press release
Press release
Banco Santander Annual General Meeting
Emilio Botín: 'The goal of the Bank is
to maintain 2008's level of profit
and the payout to our shareholders'
▪ The Board of Directors approves the payment of the first dividend charged against 2009
results of EUR 0.13 per share, unchanged from the first 2008 dividend.
▪ The Chairman of Banco Santander highlighted the positive development of second
quarter results and said that 'the Group is coming out of this crisis clearly strengthened.'
▪ 'We have very probably seen the worst of this financial crisis.'
▪ 'The Spanish financial system has withstood the effects of the crisis better than
others. If some sort of intervention were to be necessary, the Bank of Spain should the
ability to act without political interference.'
▪ 'I am convinced that Santander's share price will in the medium-term reflect the true value
of our Group.'
▪ 'Our capital base sustains organic growth in our businesses and enables us to maintain in
the future, whatever the circumstances, the Bank's cash dividend policy.'
Madrid, June 19, 2009 - The Chairman of Banco Santander, Emilio Botín, presided over the Annual General Meeting of the bank's shareholders today, where the 2008 results were approved. During his speech, Botín expressed his 'full confidence' in the future of the Group and highlighted that 'Grupo Santander is coming out of this crisis clearly strengthened.' He announced that 'goal of the Bank's Board for 2009, which will be even harder than the previous year, is to maintain net ordinary profit at the level achieved by the Group in 2008, that is, EUR 8,876 million euros, and to maintain the payout to our shareholders last year: EUR 4,812 million. In the first quarter, the bank's profit amounted to EUR 2,100 million. Moreover, Botín shared the Board's 'very positive impressions of our earnings' performance in the second quarter.'
As a result, he added, and in line with our dividend policy, the Board of Directors yesterday approved a first dividend charged against 2009 earnings of 0.13 euros per share, the same amount as in the first 2008 dividend.
Botín began has speech by pointing to the 'extraordinarily difficult period for the economy and for the international financial system' of the last twelve months. He said that 'every analysis agrees that you have to go back to the Great Depression of the 1930s to find a crisis similar in scale to this one.' He added that 'the crisis has put into question some banking business models and severely punished the shares of banks and damaged general confidence in markets.'
However, Botín said: 'We have probably seen the worst of this financial crisis. My confidence is based:
- on the significant improvement in liquidity in interbank markets;
- on the recapitalization of financial institutions
- and on the continuing downward correction in risk differentials for key financial products.
The Chairman of Banco Santander highlighted the two main problems that have affected international banking, 'insufficient risk control and, in certain instances, poor supervision.' He also discussed the necessary reforms to avoid similar circumstances in the future. 'Twelve years of economic expansion and the clearly mistaken perception that risk in banking had been mitigated to the point of nearly disappearing led many international institutions to relax their internal control systems and accept clearly excessive levels of leverage. When the first liquidity problems arose, signalling a rapid deterioration of risk, it was too late to react and losses grew to the levels I mentioned before,' he said.
The origin of these problems is, obviously, insufficient attention to risk and a departure from the traditional principles of banking, which are:
- To focus on direct banking relationships with customers.
- To carry out this business with a medium- and long-term view.
- To keep risk management independent of business areas.
- To very directly involve the Board of Directors in risk management.
'Any proposed reform within the international financial system should take these basics into account,' he added.
With respect to the changes in regulation, he said, 'I don't believe that changes in regulations alone can guarantee that these principles are followed. The discipline of the market should continue to play a fundamental role, as it has done so far.' Regarding banking supervision, he said that 'the banking systems that have best withstood the crisis are precisely those where there has been stricter supervision and better foresight. The practice of having proactive, physically present inspectors in institutions is something rarely seen in other systems, but it has proved its value in Spain.' He also highlighted the 'excellent work' the Bank of Spain has done and the 'decisive' role it has played implementing the generic provisions.
Botín also argued that 'it is urgent to reinforce, internationally, the systems for banking supervision, adopting the practices that the crisis has shown to be most efficient and promoting decisively better and deeper coordination among banking supervisors. I don't believe that a single, supranational European supervisor is necessarily the best way to achieve this goal. To the contrary, it could result in an unadvisable distance between supervisor and supervised. I am confident that the activities of large international banks - through subsidiaries with their own capital bases and sources of funding - need not imply a major global systemic risk, as long as they are subject to supervision in each of the countries in which they are present.'
Regarding the Spanish financial system, 'which has withstood the effects of the crisis better than others,' Botín said: 'The need for intervention in the Spanish financial system - and consequently the effect on taxpayers - has been minimal compared to that in some of our neighbours….To maintain this situation, it would be desirable if, in the future, were some sort of intervention to be necessary, that it be done in a way that anticipates events, on a case by case basis, together with a restructuring plan for the institution involved, and with the Bank of Spain having responsibility to initiate and carry out the measures. The Bank of Spain should have throughout this process the ability to act with the utmost flexibility and without political interference.'
Botín explained how the crisis has underlined the differences among the different models of business and bank management, and highlighted the distinctive characteristics of Grupo Santander's model, 'a clear winner in this crisis.' 'Our way of banking has positioned us among the three leading banks in the world by profit. Our model has been reinforced in these difficult circumstances. I have mentioned on various occasions, at these shareholder meetings, the characteristics that differentiate our Group. We share some of them with other financial institutions, but it is the sum of all of them that makes Santander's model unique,' he said. The distinctive characteristics are the following:
Balance sheet strength: 'We have always placed much importance on capital and reserves. Both make a financial institution solid and allow it to better withstand difficult times,' Botín said. He pointed out that after the capital increase of the last quarter of 2008 the Group is one of the best capitalized banks in the world, with core capital of 7.3%. Moreover, he highlighted that the Bank's shares have appreciated by 79.11% from the issue price. He also reminded that the bank has generic reserves of more than EUR 6,000 million, 'which gives us a wide margin for the next two years, guaranteeing our results and our capital base'.
Risk management: 'Banco Santander has demonstrated, through rates of non-performing loans consistently below those of its competitors in all the markets in which we operate, that it manages risks well. And, of course, we do not have on our balance sheet the types of toxic assets that caused many of the problems that today beset the international financial system,' Botín said. He added that 'the Board and every area of the Bank must be strongly committed to our culture of risk management.'
Retail banking and diversification: 'We are fundamentally a very diversified retail bank,' the Chairman of Banco Santander said. He recalled that 85% of the Group's earnings come from commercial banking, which 'leads to recurrence in our revenues and a balance sheet that is easy to explain and to understand. It is a robust model that is more resistant in times of crisis.' Moreover, 'to work with a strong local presence in 9 or 10 main markets avoids concentration in a particular geographic area or business line that could be severely affected by a crisis or economic disruption. For these reasons, expanding the perimeter of our businesses, through the acquisitions we have carried out in the last couple of years, has been aimed at shaping a very balanced Group in terms of assets and revenues in all markets where we operate. Botín indicated that the most recent acquisitions (Alliance & Leicester and Brandford & Bringley in the UK, Banco Real in Brazil, the consumer businesses of GE in Germany and Sovereign in the US) 'enhance our geographical diversification with a retail banking model based on our relationship with our customers and which enables us to obtain clear competitive advantages.' Grupo Santander has 90 million customers all over the world.
Technological efficiency and cost control: Botín emphasized the importance of efficiency as 'crucial in achieving profitability in a very competitive environment.' He highlighted that the Bank 'has put together a very flexible technology platform which we are able to quickly implement in the new units we integrate into the Group.' At the close of 2008, the cost to income ratio was 41.86%, positioning Santander as the fourth most efficient bank in the world.
Regarding Santander's performance, the Chairman said, 'Santander's management model has proved successful in 2008, with excellent results which are being confirmed this year.' In 2008, Banco Santander was the third Bank in the world in terms of profit, with attributable profit of EUR 8,876 million. He also highlighted that the total cash dividend against 2008 results was EUR 4,812 million and that 'this amount, paid in cash, is the highest paid by any international bank.'
Moreover, he explained the steps done by the Group in the UK and Brazil. 'In the UK, our investment in Abbey has been a resounding success. The integration of Alliance & Leicester and Bradford & Bingley is taking place quickly and effectively. In 2008, net profit in the UK market was EUR 1,247 million. These results, together with our efficiency ratios and credit quality, give our franchise a leading position, strengthening the UK as a clear platform for the Group's future growth. I am confident that this investment is one of the best and most profitable transactions in international banking.' Finally, he highlighted the appointment of António Horta-Osório, Abbey's CEO, as a non-Executive Board Member of the Bank of England.
Regarding Brazil, he said that 'the integration of Banco Real is exceeding our expectations. The Brazilian economy is coping better than other countries with the economic crisis' and that 'in recent years, Brazil has laid the foundations for sustainable long-term growth, underpinned by macroeconomic, institutional and social stability.'
Regarding the bank's share performance, Botín said that, in his opinion, 'Banco Santander's shares have been unduly affected by a general adverse sentiment towards financial institutions. I am convinced that Santander's share price will in the medium-term reflect the true value of our Group.'
With respect to the dividend policy, he said that the Bank intends 'to maintain our payout ratio at around 50% and to pay in cash.'
'The Bank confirms its policy of paying cash dividends, offering shareholders the chance to receive part of them in shares with certain advantages,' he said, referring to initiative to give shareholders the possibility to receive in cash or Bank's shares an equivalent amount to the second annual dividend. The General Meeting approved the free capital increase, with a value of EUR 1,000 million for this purpose.
Emilio Botín focused the last part of his speech in his outlook for 2009. 'The world economy is showing a better tone since the spring. This improvement is especially visible in the United States and in certain Asian and Latin American emerging economies. There are some positive signs suggesting that monetary and fiscal policy measures are having the expected effects. And with some delay, the European economy will also benefit from a more favourable environment and the changed trend in international financial markets. In the case of Spain, some indicators suggest a certain improvement which is still fragile. For the Spanish economy to be able to join the next international recovery cycle and to reach a similar cruise speed to the one we had before de crisis….It is essential that we carry out all the necessary reforms to enhance our competitiveness and ability to grow.'
The Chairman of Banco Santander ended his speech before the shareholders with a message of confidence for the future of the company. Grupo Santander is coming out of this crisis clearly strengthened. Our balance sheet strength, our business model and our prudent risk policy have clearly helped us get around the worse difficulties. We have been able to continue building a diversified business base which provides ample opportunities for future growth. We have absolutely no need for new acquisitions to increase our results. Our capital base sustains organic growth in our businesses and enables us to maintain in the future, whatever the circumstances, the Bank's cash dividend policy.'
Alfredo Sáenz: 'Six months ago we said thar our NPL ratio in Spain would end the year at approximately 4.5%. We now expect it to come in at around 3.5%'
The Chief Executive Officer of Banco Santander, Alfredo Sáenz, explained to shareholders the favourable performance in 2008 and the outlook for the coming years. 'The adjustments we have made in all units have enabled us to obtain good results in 2008 and they will enable us to continue to have good results in 2009,' Sáenz said. He noted that 'the Group's growth has been very balanced. All units have obtained good results.' Sáenz highlighted that the Bank has 'continued to lend and we will continue to lend.' He cited as an example the active involvement of Santander in the ICO program lines. 'This year, we have a total share of ICO lines over 20%, higher than our business share and office share. In the ICO lines of Business Promotion we have a share close to 24%.'
He added, 'The results of the first quarter demonstrate that we maintain a good cruising speed, despite operating in a clearly difficult environment. Moreover, he showed greater optimism than six months ago regarding NPLs performance in Spain. 'At that time, we said that our NPL ratio in Spain would end the year at approximately 4.5%. We now expect it to come in at around 3.5%.'
The major trends of the year are already seen this quarter:
- We continue to achieve revenue growth clearly above the growth in costs. In the
operational areas, we have obtained seven points in the 'jaws.'
- This enables us to achieve growth in net operating income's of more than 15%.
- The strong rise in provisions absorbs part of this growth.'
'We are being very careful to recognize risks and to provision. The provisions of the annualized first quarter represent almost EUR 10,000 million. Despite that effort, our first quarter earnings again position us among the leading banks in the world in terms of profit. The results we are achieving make me confident with our goal of 2009 of obtaining a net profit in line with that of 2008,' Sáenz said.
He added: 'However, our focus is not only 2009. Santander also has specific and differentiated arguments which will enable the bank to achieve solid results in the next two years.' The CEO mentioned the 'strategic importance' of the integrations the bank is carrying out. 'In all these businesses, we are taking a qualitative leap and we will come out of the crisis clearly strengthened.'
This information is provided by RNS
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