2013 results press release - Chairman's speech
Press Release
Chairman's speech at the 2013 results presentation
Botín: "The board will propose maintaining the dividend at EUR 0.60 a share in 2014 for the sixth consecutive year"
§ "Banco Santander made a profit of EUR 4.37 billion, 90% more than in 2012. It managed to remain among the leading banks in the world in terms of pre-provision profit and efficiency throughout the crisis."
§ "In the last five years, the group has made EUR 65 billion of provisions and write-downs to strengthen the balance sheet. It has also generated EUR 18.4 billion of capital, the equivalent of 413 basis points under Basel II criteria, and has distributed EUR 28.1 billion in remuneration to shareholders."
§ "Santander is now much better positioned strategically, in terms of diversification, than it was at the beginning of the international financial crisis and it is a key factor in explaining the success of Santander in these years."
§ Santander's results during the crisis have been much more stable than those of the rest of the sector. We have not made a loss in any quarter during the financial crisis."
§ "Spain's economic recovery will gather strength gradually in 2014. It is important to continue with the reforms that are still pending, which are vital to restoring satisfactory rates of growth, and we are on the right track."
Madrid, January 31, 2014 -Banco Santander's chairman, Emilio Botín, said the bank made an attributable net profit of EUR 4.37 billion in 2013, 90% more than the previous year. "Banco Santander is stronger now than it was when the crisis began. We have reinforced the balance sheet in recent years and are now fully prepared for a phase of profit growth."
Botín announced, during the presentation of the bank's 2013 results, that at the next shareholders meeting on March 28, the board would propose maintaining the 2014 dividend at EUR 0.60 a share, unchanged for the sixth consecutive year. The dividend will be paid as four scrip dividends, which allow shareholders to choose between receiving cash or shares.
Botín detailed the highlights of the bank's solid performance:
- Geographic diversification. The group's presence in ten main markets and its balance between mature and emerging countries, which account for 47% and 53% of profits, respectively, help make its results less volatile.
- Focus on commercial and retail banking that provides 87% of group income.
- Subsidiaries model. Santander's subsidiaries are autonomous in terms of capital and liquidity. The group's policy is to list its main subsidiaries when market conditions allow.
- Prudent risk management and a solid balance sheet, thanks to the retail banking nature of the group's business.
- Good solvency, with a core capital ratio (BIS III phase-in) of 11% on January 1, 2014, which means the group has gained 138 basis points of core capital during 2013.
- Ample liquidity, supported by the strength of its retail network, which means the bank can finance most of its lending with deposits, and ease of access to the wholesale funding market. The loan-to-deposit ratio has come down from 150% in 2008 to 109% in 2013. In Spain the ratio is 87%.
- Technology and efficiency models, that are common to all the bank's geographic markets, and help make Santander one of the most efficient banks in the world.
"Santander is one of the international banks that has overcome the crisis most successfully. We are now stronger than in 2008 and better prepared to face the changes in the financial system and in the global economy itself," Botín said. "The crisis of the last few years proves how important it is to have a portfolio of businesses that is geographically well-diversified. Banco Santander's diversification, which was already quite considerable in 2008, has increased during the crisis and today, no bank in the world is as diversified as we are. It is a key factor in explaining the success with which the Bank has overcome the financial crisis.
Botín recalled how ABN-AMRO's crisis allowed Santander to acquire its Brazilian subsidiary Banco Real and turn into one of the three biggest non-state banks in the country. "Our position in Brazil is one of the main elements that set the Santander group apart," he added. In the United Kingdom, the group also bought Alliance & Leicester and Bradford & Bingley in 2008 and transformed itself from what was basically a mortgage lender into a universal bank. Today we are the only major international bank with a strong presence in retail and commercial banking in the country".
In Mexico, Banco Santander acquired General Electric's mortgage portfolios in 2010 and ING's in 2013. In the United States in 2009 it bought the 75% of Sovereign it did not already own. In Germany, it acquired the Scandinavian bank SEB's branch network in 2010. In Poland, it was able to buy Zachodni, thanks to Irish banks being intervened, and then added the Kredyt Bank unit. In Spain, Botín said, "the group opted to strengthen its competitive position in two ways: by increasing its market share in deposits and by merging its brands".
Botín also emphasized that the bank had reinforced its position in certain strategic market segments, such as consumer finance. He recalled the expansion of Drive (now Santander Consumer USA) by buying portfolios and through agreements with Chrysler, the purchase last year of 51% of El Corte Ingles' finance unit; and the agreements signed with Hyundai and Mazda in auto financing.
He also mentioned China, where the bank has increased its presence by buying a stake in Bank of Shanghai. "Although China is not one of our core markets, the flows of direct and financial investment between Asia and Latin America will exceed those of the more advanced economies in a few years. Our investments there will help us benefit from this trend," he said.
Santander's chairman said the bank had further developed its subsidiaries model in the last few years through the stock market listing of its units in Brazil, Mexico, Chile, Poland and the recently-completed listing of the consumer finance arm in the U.S. "Today, the stakes in our listed banks have a market value of EUR 38 billion," he said.
Strong balance sheet
Botín underlined the strength of the bank's balance sheet. "We have started the year by easily meeting the regulatory requirements. The group's core capital under Basel III criteria is 11%. Our medium-to-low risk profile, centred on retail banking and with a well-diversified loan portfolio that is more than 60% covered by real guarantees, provides an additional solvency cushion for the group." He also said the bank had reduced the level of risk on the balance sheet by decreasing its exposure to problem assets, such as Spanish real estate, from EUR 41 billion net in 2008 to EUR 11 billion in 2013. "We have a very solid capital position, which, along with the provisions we have made, leave us in an excellent position ahead of the comprehensive banking assessment the ECB will carry out in 2014."
"The combination of strategic decision-making, and the strength of its balance sheet and P&L, means Santander's results during the crisis have been much more stable than those of the rest of the sector and it has continued to generate capital. We have not made a loss in any quarter during the financial crisis." In summary, he continued, "Banco Santander has managed to square the circle during the crisis":
- It has remained among the top banks in the world by pre-provision profit and by efficiency.
- It has invested in strategic operations in its ten core markets.
- It has set aside EUR 65 billion in provisions and write downs to reinforce its balance sheet.
- It has generated EUR 18.4 billion of capital, which gives it a Basel III ratio of 11%.
- It has distributed EUR 28.1 billion to shareholders.
- It has achieved the best non-performing loan ratios in each of its markets."
Outlook for 2014
Banco Santander's chairman said the outlook for the group in 2014 was "very good". "The objective is to increase results, which will be helped by the improving economic backdrop and Santander's strong starting position. We are now fully prepared to start a new phase of profit growth. We expect our profitability to return to pre-crisis levels in the next three years, while we continue to meet the new rules and regulations on capital and liquidity at all times."
He said he thought the state of the world economy and the outlook "had clearly improved in the last few months". "For the first time in five years, all ten of our core markets will post positive economic growth. The more developed economies will confirm the improvements that were already in evidence last summer and the emerging economies are showing positive signs."
He mentioned the economy of the euro zone, which "came out of recession last summer and has better prospects in 2014". Botín said the steps taken towards banking union were having a very positive impact on financing costs for banks. "Santander fully supports the setting up of the single supervisory mechanism, which means that in November 2014 the ECB will directly oversee the 130 biggest euro zone banks. Banking union will allow us to break the vicious circle between banks and sovereign risk, so that financial institutions' values are a better reflection of their strength and the quality of their management than of their country of origin."
Regarding the Spanish financial system, Botín stressed the "profound change that has happened in the last few years" and the "huge amount of public money needed to restructure the savings banks". "It is incorrect and unfair to talk about rescuing the banking sector. The EUR 40 billion of European and Spanish government aid was spent on savings banks that were insolvent. The other banks received no state aid. On the contrary, Santander contributed EUR 4 billion to reorganizing and restructuring the savings banks through the Deposit Guarantee Fund and the Sareb. Banks' contribution has been, and is still, a decisive factor in turning the Spanish financial system into what is now one of the most solid in the world and in reactivating the Spanish economy."
The Spanish economy
Finally, Santander's chairman expressed his confidence in the state of the Spanish economy "which is sharing in the general improvement of the global outlook". "In 2013, we definitely moved out of the crisis spotlight and turned into an example of reforms, which are now bearing fruit. Labour market reform has allowed the job market to perform better as economic activity begins to pick up. The private sector has also shown itself to be more flexible, as seen in the improvements in competitiveness and in the external balance. The risk premium has fallen significantly and foreign investment has grown rapidly in the last few months, which demonstrates the level of international investor interest in Spain. More importantly, the government is continuing to reform and has key projects in several areas: in fiscal policies and the public sector, support for businesses, the internal market, the sustainability of the pension system and active job creation policies. The economy began to grown in the second half of 2013, after nine consecutive quarters of decline. The recovery will gain strength gradually in 2014, when we expect growth of 1%, in line with that of the euro zone as a whole."
Despite the positive signs, he said: "We should remain cautious. The economic backdrop is still difficult. Consolidating the recovery does not mean we are back to normal, if by normal we understand the years before the crisis. The effects of the crisis will take time to disappear. Even if unemployment has improved in recent months, it is still very high and the aim must be to reduce it. I am sure it will improve gradually as the recovery consolidates. Public and private debt levels still need to fall. It is important to advance in the reforms that are still pending as they are vital for a return to satisfactory growth rates, and we are on the right track."
This information is provided by RNS
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