Strategic Alliance etc
Banco Santander Central Hispano SA
31 January 2000
The banking Groups Banco Santander Central Hispano and Societe Generale, whose
cooperation goes back to 1194, want to report the progress made in their
strategic alliance. Both Groups share the view that opportunities exist to
create value for then shareholders by combining certain business lines and
launching new activities.
Following a study of different areas of collaboration, they have decided
initially to develop cooperation agreements and specific joint ventures within
the following business lines.
1. Asset Management,
2. Specialised Financial Services
3. Wholesale & investment Banking
4. Retail Banking
5. Internet Banking & Brokerage
The foregoing forms the basis for the development of a Strategic Alliance among
equals between the two Groups, which needs to be accompanied by the
participation of each one in the capital of the other. It is now the intention
of both Groups that SG will take a participation of up to 3% in BSCH and BSCH
will increase its participation to up to 7% in SG.
As a consequence of the above, both Groups have reached the following agreements
which will be developed in due course.
A/ General Organisational Principles
As a general rule, Banco Santander Central Hispano and Societe Generale will
take equal stakes in any joint company set up as a result of this agreement.
In order to guarantee rapid implementation and efficient management structures,
the following governance arrangements will be established subject to legal
constraints.
A Joint Business Committee will be set up for each business line. These
committees will supervise their respective technical agreements and will
be responsible for further developing any new opportunities that may arise.
In any joint company, the Board of Directors will be named by mutual agreement
and each Group will have the same number of seats on the Board.
The CEO will be chosen on the basis of competence and will have wide powers
delegated to him by the Board.
Additionally, one representative from each Institution will simultaneously he
appointed Member of the Board of Directors of the other Institution.
B/ Development of the Industrial Plan
1) Asset Management
BSCH and SG undertake to:
- Set up a joint venture with a view to acquiring fund management companies
outside France and Spain.
- Sign management delegation agreements for a number of asset-classes.
- Cooperate in the macro economic research, equity research and asset
allocation areas. A monthly meeting will be established to share market
views and to facilitate the common understanding of the investment teams.
- Share 'state of the art' processing IT solutions, and control and
performance attribution models.
- Jointly analyse the launching of new products in the retail areas.
An asset management Joint Business Committee will be responsible for managing
the pooling of these businesses and deciding on foreign investments.
2) Specialised Financial Services.
BSCH and SG intend to develop commercial agreements and joint companies in
the following areas of business:
- Consumer Credit
- Mortgage Loans for individual customers
- Point-of-Sale financing for cars and boats
- Long-term leasing of car and truck fleets
- Company financing and 'Vendor programs'
- Leasing
- Computer equipment leasing
Where feasible, joint companies will be created by the merger of existing ones
and new companies will be created on a 50-50 basis to tackle new markets.
3) Wholesale & Investment Banking
In this business area, BSCH and SG intend to put in place the conditions for
cross-fertilising their respective capabilities, leveraging their distribution
capacities and cutting costs in those sectors where this is possible by
pooling certain resources.
These areas of cooperation will include, as a first step:
- Mergers and acquisitions: cross-border business worldwide
involving Spain, Portugal, Latin America.
- Convertible bond origination and distribution, and Warrant structuring and
distribution to retail and institutional investors in Spain, Portugal and
Latin America.
- Emerging market equities and research: establishment of a
common marketing team to cover Latin America under the responsibility of
BSCH, with one or more common marketing teams being established for the
remaining emerging markets, under the responsibility of SG.
- Trade Finance and local banking services in Latin America and Asia:
SG will provide the Trade Finance and local banking services in Asia
for BSCH's clients, while BSCH will provide the same services in Latin
America for SG's clients.
- A Joint Business Committee will be appointed to supervise the areas of
cooperation outlined above, as well as to look into further opportunities
for collaboration.
4) Retail Banking and Banking Services
BSCH and SG will establish a Coordination Committee to work towards the
following objectives.
- The two-way referral of business with a view to providing to the
customers of each bank a similar level of services to that which they
would receive in their own.
- The preferential channeling of business between the two banks in the area
of operations, especially that related to the movement of funds.
- The development of common platforms in the area of credit and debit cards,
processing and ATMs
- The joint development of products in the area of Banking Services, Treasury
and Cash Management/Cash Pooling, International Payment processing and
Trade services
- The sharing of best practices in areas such as Marketing, Database
Marketing, Telephone Banking, Internet and Service Quality.
5) Internet Hanking & Brokerage.
Because of the importance of developments linked to internet for financial
services, BSCH and SG intend to set a common strategy in this area.
With this in mind, SG will further strengthen its e-brokerage arm through
Fimatex, and BSCH is similarly planning to further develop its stand-alone
e-banking subsidiary Open Bank. Both Groups are convinced that, by joining
forces in this area, potential synergies could be achieved and new
opportunities for organic growth or acquisitions could be more easily realised.
The Internet Banking and Brokerage Business Committee will be responsible for
evaluating possible areas of collaboration in this field, sharing analyses and
experiences and making proposals that will result in the common development of
meaningful propositions, including a possible common European platform. As a
first step, a Cooperation agreement between Fimatex Germany and Santander
Direkt Bank in Germany will be established.
Summary 4th Quarter Results
Balance sheet 31.12.99 31.12.98 Variation (%)
Euro MM Pta. MM. Pta. MM. 1999/1998
Total Assets 256,438.5 42,667,768 39,234,602 8.75
Loans 127,472.1 21,209,569 18,698,985 13.43
Customer funds 232,232.3 38,640,197 33,575,974 15.08
Customer deposits 153,756.6 25,582,941 22,011,372 16.23
Mutual funds 59,840.3 9,956,596 9,113,471 9.25
Pension funds 13,071.6 2,174,933 1,568,813 38.64
Managed portfolios 5,563.7 925,727 882,318 4.92
Capital accounts 8,026.2 1,335,455 1,460,504 (8.56)
Total managed funds 334,914.1 55,725,024 50,799,204 9.70
Income statement January - December 1999 Jan. - Dec. Variation (%)
1998
Euro MM Pta. MM Pta.MM 1999/1998
Net interest revenue 6,669.9 1,109,784 1,029,950 7.75
Basic revenue 9,747.1 1,621,776 1,487,681 9.01
Net operating income 3,479.0 578,853 490,736 17.96
Income before taxes 2,715.6 451,835 358,398 26.07
Net consolidated income 2,172.0 361,395 285,320 26.66
Net attributable income 1,575.1 262,076 207,945 26.03
Ratios
31.12.99 31.12.99 31.12.98
ROA 0.88 0.73
RORWA 1.50 1.28
ROE 18.51 16.04
Personnel and general
expenses/net operating
revenue 57.70 62.11
BIS ratio 12.03 12.48
Tier 1 8.19 8.42
NPL ratio 1.97 1.86
NPL coverage 120.84 120.13
Shares and Shareholders*
Number of shareholders 761,086 942,426
Shares outstanding (millions) 3,668 3,668
Share price (Euro, Pta.) 11.24 1,870 1,410
Market capitalization
(millions) 41,226.0 6,859,428 5,163,848
Net attributable income
per share (Euro, Pta.) 0.43 71.5 56.5
P/E ratio 26.17 24.83
Other data**
Number of branches 8,473 9,093
- Spain 6,011 6,463
- Abroad 2,462 2,630
Number of employees 95,442 106,485
- Spain 45,175 49,598
- Abroad 50,267 56,887
(*) All per share data have been adjusted for the stock split carried out on
11.06.99.
(**) Includes the total number of branches and employees of Banco Santiago,
Bancosur, Banco Tornquist and Banco de Asuncion, at all relevant dates.
Note: The information contained in this report has not been audited. However,
it has been produced utilizing generally accepted accounting principles and
criteria. All figures for December 1998 are proforma and basically correspond
to the aggregate of the Santander and BCH Groups.
Performance during the quarter
Mission accomplished in the first year of Santander Central Hispano
During the fourth quarter, Santander Central Hispano took major steps to
achieve the ambitious business, strategic and integration goals set for
1999
The strong activity developed by the Santander Central Hispano Group during the
fourth quarter of 1999 spurred fulfillment of the goals set in Program ONE for
its first year.
The Group's activities revolved around four basic areas: the integration and
increased efficiency of the organization, the business drive of the networks in
Spain, strengthening of the Group's strategic position in Europe and further
consolidation in Latin America.
A single and efficient organization
The process of technological, operational and functional integration proceeded
according to plan in 1999, with completion due in the year 2000. The objective
this year is to forge a single and efficient organization which supports the
Group in Spain, maintaining the multi-brand strategy, and in the other countries
where it operates. Among the main measures taken during the fourth quarter
were:
- Launch of the Technological Integration Project to develop a common IT
platform. This will begin to be established in BSCH's retail networks as of
February 19, in a gradual process lasting the whole year. In order to do this,
10,000 employees have received special training and close to 8,000 computers
have been replaced.
In parallel, BSCH carried out the last contingency tests relating to the Y2K
effect, which went off without problems.
- Design of the Intranet Project as a new platform of global corporate
communication (it already existed in some areas, such as Wholesale and
Investment Banking), which will replace and improve the existing channels. Its
development, in parallel with the Technological Integration Project, will
incorporate new management and information tools which will facilitate team
work.
At the moment, 700 branches of the Banco Santander and BCH networks and the
Central Services in Spain have the necessary infrastructure to establish
Intranet. This year, some 20,000 work posts, excluding the international units,
will have access to this system.
The program will be developed in three phases, starting in the fourth quarter of
1999 and ending in the first half of 2001.
- Significant progress was made in the unification of retail banking risks:
central and regional structures, integration of working teams, the re-design of
processes, the adoption of best practices, etc. The goal is a single and
integrated risk management system at customer level (during admission, analysis
and recovery), independent of the distribution network from which they proceed,
and without losing flexibility or speed.
- The drawing up of a single and universal Quality Model at BSCH, integrating
the best practices of both banks, which will be extended to the rest of
subsidiaries and geographic areas during this year. This model has begun to be
validated by external auditors, as shown by the ISO 9001 certificates obtained
by Banco Santander Central Hispano and Hispamer.
- Progress in the optimization of the structure of subsidiaries: legal
formalization of the merger of fund management entities; restructuring the
investment banking activities in Spain - custody, securities, corporate (grouped
under Santander Central Hispano Investment) and private banking (under BSN
Banif), integration of specialized financing units in Spain under the holding
Hispamer Banco Financiero.
As well as the above-mentioned measures, whose positive effect on efficiency
will become apparent in the months to come, Banco Santander Central Hispano has
increased efforts to achieve a quicker optimization of the organization, a key
aspect for attaining the cost savings envisaged in the merger and fulfilling the
goals of Program ONE.
The steps taken during the fourth quarter were simultaneously developed on three
fronts: the optimization of the branch networks, the rationalization of
headcount and trimming of general expenses.
- In 1999 the number of branches was cut by 425, either through closures or
transferring business to other branches of the same or a different network. The
reduction was made with no significant loss of business (less than 2%), which
places it among the best practices worldwide. Of note also was the streamlining
and unification of regional support structures for BSCH's retail networks
(resources, risks).
- Networks were also streamlined in some Latin American countries.
- The goals for headcount rationalization were met. The number of Group
employees worldwide was reduced to 95,442 at the end of 1999 from 106,485 (in
like-for-like terms) a year earlier.
- The first phases of plans to trim general expenses offset the impact of
increased investments during the period. General expenses rose by only 0.2%,
compared with increases of more than 10% in revenues and business volumes.
An energetic and fruitful business drive
The focus of effort on the merger and optimization processes did not distract
Banco Santander Central Hispano from its vision, which is to make customers the
center of gravity. The Group was one of the most active promoters of new
distribution channels and financial products, in response to customers'
increasingly demanding needs and the markets new requirements. The main actions
during the fourth quarter included:
- Fulfillment of the marketing objectives for unit linked products after the
promotion campaign which began last September. More than Pta. 200 billion of
premium income was obtained from 42,500 new policies.
The Group's mutual funds also continued to outperform the market during the last
months of 1999. The continuous rise in market share enabled the year to end at
all-time highs.
- Launch of Mobile Telephone Banking with WAP protocol (Internet banking via
mobile phone) at Santander Central Hispano and Banesto and of Channel BSCH
(Interactive Digital TV Banking).
These new remote channels represent a new step in the Group's multi-channel
strategy, which was strongly boosted during the fourth quarter. The
incorporation of new internet banking services and the launch of Broker.com,
among other actions, increased the total number of the Group's Internet
customers in Spain to over 200,000, including the subsidiaries in Spain and
Latin America, the number amounted to more than 300,000.
This put the Group in a very strong starting position in its strategy of
strengthening and broadening Internet business, on three fronts:
- Continue to provide banking and securities' services to support the
traditional networks
- Bolster Open Bank as an internet bank
- Invest in companies which conduct their business via Internet.
A stronger strategic position in europe
The activities developed during the fourth quarter led Banco Santander Central
Hispano to strengthen its position significantly in those regions considered as
strategic for the Group's future development.
In Europe, the negotiations to establish a stronger presence in Portugal were
concluded successfully, while the support provided to one of its partners has
opened up a process that will enable the Group to participate in the
consolidation of the British banking sector:
- In Portugal, Banco Santander Central Hispano reached an agreement to acquire
Banco Totta & Acores and Credito Predial Portugues, after the commitments
subscribed with the Champalimaud Group, and Caixa Geral de Depositors Under this
agreement, before June 30, 2000, Mr Antonio de Sommer Champalimaud will receive
shares in Banco Santander Central Hispano equivalent to 4.14% of its capital, as
approved by the extraordinary shares holders' meeting of Banco Santander Central
Hispano held on January 18, 2000. Mr Champalimaud has joined the Bank's Board.
After acquiring both banks, the BSCH Group will become the fourth largest
banking group in Portugal with a market share of more than 10%.
- In the United Kingdom, Banco Santander Central Hispano and The Royal Bank of
Scotland Group signed a collaboration agreement relating to the bid launched by
the latter for NatWest.
As a strategic partner and the largest shareholder of The Royal Bank of Scotland
(9.64%), Banco Santander Central Hispano has pledged its votes in favor of the
offer of its ally and is willing to subscribe shares amounting to £1,200 million
(around Pta. 320 billion). In exchange, BSCH will deliver new shares (whose
issue was approved at the aforementioned extraordinary shareholders' meeting)
for the same amount which will be placed among strategic European bank
investors.
Following this agreement, which depends on the success of the takeover, Banco
Santander Central Hispano would have a stake of more than 7% of the new bank,
the second largest banking group in the UK.
Consolidating the Group's position in Latin America
The Santander Central Hispano Group continued to implement measures to improve
the level of management and efficiency of its subsidiaries, while lifting its
stake in profitable and low risk businesses, and in regions where its presence
is not so strong. Of note were:
- The conclusion of the legal and accounting aspects of the merger of the
Peruvian banks, Banco Santander Peru and Bancosur.
- The agreements to acquire various pension fund management entitles:
In Peru, the purchase of 100% of Union, which together with Nueva Vida, raises
the Group's market share to 25% of Participants and 29% of managed assets.
In Colombia, the acquisition of 100% of Davivir and 75% of Colmena bring the
Group to the Colombian pensions market, with an 18% share of participants.
An agreement was reached in January 2000 to acquire 97% of Meriodional Financial
Group, which includes the Meridional (retail) and Bozano Simonsen (investment)
banks.
This operation forms part of the Group's strategy of selectively increasing its
presence in south and southeast Brazil, which generates 78% of the country's
GDP. Banco Meridional is the largest private bank in the state of Rio Grande do
Sul, with a market share of 25% of the private banking sector and 10% of the
whole banking system.
The operation, which is subject to , will make Santander Central
Hispano the fifth largest private banking group in Brazil, with assets of
US$12,500 million, 1.7 million customers and 704 points of sale (401 branches
and 303 customer assistance outlets). Banco Meridional has been restructured
and has one of the best ratios of employees per branch in Brazil.
Banco Bozano is one of the leading investment banks in Brazil, with long
experience in advisory services, privatizations, origination, etc and has been
selected best investment bank in Brazil three years running by Euromoney.
- Lastly, the Group also acquired Merrill Lynch's business in Puerto Rico of
securities sales to individual customers, which enables it to attain critical
mass and a market share which would have taken five years to achieve through
natural business growth. The operation gives the Group high net worth customers
and facilitates cross-selling of products.
The Group's strong activity during the fourth quarter was in many cases the
result of processes and activities developed throughout 1999.
In order to facilitate the review of the Group's activities during its first
year, the main highlights are set out in chronological order.
Merger, integration and strategic positioning process. Summary of 1999
JANUARY
* The merger is announced on January 15: by then a series of measures
essential for the merger's subsequent development had already been
adopted, including the establishment of the legal head office and the
operational headquarters, the composition of the administration and senior
management bodies and the share exchange of the two banks. In addition, and
already focusing on business, the income goals for 1999-2000 were set, cost
savings were estimated and a multi-brand strategy developed: Banco Santander,
BCH and Banesto.
* Presentation of the merger project to the National Securities Commission
() and to Spanish and foreign analysts and institutional investors.
* Work started to integrate IT systems and optimize branch networks.
FEBRUARY
* The merger project is inscribed in the Madrid and Santander Mercantile
Registers.
* The Group's new corporate image is launched.
MARCH
* Employment Protocol Agreement with the main trade unions.
* Senior management convention attended by 1,700 Group executives from all over
the world at which:
- The new Bank's corporate culture and main management guidelines are
announced.
- Goals by divisions are set for 1999 and 2000 under Program ONE.
* Shareholder meetings of Banco Santander and Banco Central Hispanoamericano
approve the merger of both banks.
APRIL
* Presentation of the merger prospectus and registration of the merger deed.
Legal birth of the new hank.
* On April 17 the Board of Banco Santander Central Hispano meets for the first
time.
* On April 19 the SCH shares begin to trade in Spain and in international
markets.
MAY
* Operational integration of treasury, the first of those envisaged during 1999
in the Wholesale Banking and Asset Management areas.
* Integration of the internal audit departments.
* Creation of the Internal Communication Committee, a key aspect of management
at BSCH as regards the Group's configuration and cohesion.
* Sale of the stake in Banco Comercial Portugues, which produced a capital gain
of Pta. 81,000 million.
* Purchase from the Luksic Group of its stake in the OHCH holding, whereby
Banco Santander Central Hispano attained 43.5% of Banco Santiago (Chile), 90%
of Bancosur (Peru), 78% of Banco Asuncion (Paraguay) and the whole of Banco
Tornquist (Argentina).
JUNE
* Launch of a plan to trim general expenses.
* Acquisition of an additional 16.3% of Airtel Movil and subsequent transfer of
5.4% to two Spanish savings banks, bringing the holding to 25%.
* Merger of the banks in Brazil.
* First agreement with the Portuguese financier Mr. Antonio de Sommer
Champalimaud.
* Integration of the Management Control departments.
* Integration of the departments of General Auditing.
* Integration of branches abroad.
* Unification of Internal Suggestion Schemes.
JULY
* In accordance with the report drawn up by the Fair Trade Authority, which
sets out the limits of stakes held by banks in public service companies,
Banco Santander Central Hispano sold its stake in Retevision, reduced its
holdinq in Endesa, committed itself to the sale of Uni2 and focused its
presence in the electricity sector through Union Fenosa.
* Recognition of the ISO certifications in the merged areas: Asset Management,
Telephone Banking and Multimedia, Training, Electronic Banking, Corporate
Banking, Internal Auditing and Consultation Line (for the design, management
and resolution of all types of legal advice in the retail networks).
* New quality certifications obtained in Bansafina, Gestarsa, Hispamer
(management of financial services and consumer area) and Banesto (Telephone
Banking).
* Catalan Quality Award granted by the regional government of Catalonia to
BCH's network of corporate branches in Catalonia.
* The International Private Banking area completes its integration.
AUGUST
* The SCH share begins to trade on the Milan stock exchange.
* The stake in San Paolo-IMI reaches 6.9%
SEPTEMBER
* Integration of Corporate Banking completed.
* Closure of the IT center at Pinar del Rey and upgrading of the two remaining
centers (optimizing costs and increasing total processing capacity).
* Commencement of the first phase of the Intranet Project, the new single
communication platform.
* The SCH share joins the selective Euro Stoxx 50 index.
* After several stages, the stake in Societe Generale reaches 5.06%.
* Redemption of the shares of minority interests of Hispamer Banco Financiero.
BSCH acquires full ownership. Massive launch of unit-linked products,
generating Pta. 200,000 million in premium income.
* Launch of Banco Santander Central Hispano Broker.com.
* Legal merger of Banco Santander's and BCH's broker-dealers.
OCTOBER
* Implementation of the new Internal Risk model.
* Quality certification obtained for adapting IT systems to the Y2K effect.
* Launch of the Technological Integration Project.
* Launch of mobile telephone banking with WAP protocol.
* Agreement to purchase the pension fund management companies Union (Peru) and
Davivir and Colmena (Colombia).
NOVEMBER
* Legal merger of the banks in Peru.
* Legal merger of the mutual fund management entities (Gesbansander, BCH
Gestion and Banesto Fondos).
* Development or a single and universal quality model at Santander
Central Hispano.
* Integration of specialized financing units (Hispamer, Bansarina,
Gestarsa) under HBF Banco Financiero (new name of Hispamer Banco Financiero)
* Definitive agreement with the Champalimaud Group to acquire Banco Totta
& Acores and Credito Predial Portugues
* Agreement with The Royal Bank of Scotland in relation to the latter's bid for
Natwest, providing financial support.
DECEMBER
* The plan to optimize branch networks in 1999 is completed, with the
closure of 425 branches.
* Launch of the private banking in Spain project through BSN-Banif. The
integration plans for various management and marketing teams of BSN Banca
Privada and Banif, in the process or being merged, are put into effect.
* Restructuring of investment banking activities (custody, securities and
corporate) into Santander Central Hispano Investment
* Launch of a new interactive banking service by TV.
* Quality certifications for HBF Banco Financiero (at a global level,
which broadens the scope of the previous one) and for Development and
Selection of Human Resources,
* Unification of almost all the contractual documents used by the retail
networks.
* Y2K effect: successfully overcome, after having completed all the
necessary adaptation processes.
Income Statement January - December 1999 Jan-Dec 1998
Euro MM. Pta. MM %ATA Pta.MM %ATA
Interest revenues 19,612.0 3,263,169 7.93 3,032,896 7.72
Dividends 331.7 55,187 0.13 42,264 0.11
Interest expenses 13,273.8 2,208,572 5.37 2,045,210 5.21
Net interest revenue 6,669.9 1,109,784 2.70 1,029,950 2.62
Net fees and
commissions 3,077.1 511,992 1.24 457,731 1.17
Basic revenue 9,747.1 1,621,776 3.94 1,487,681 3.79
Trading gains 379.6 63,164 0.15 63,030 0.16
Net operating
revenue 10,126.7 1,684,940 4.10 1,550,711 3.95
Personnel and
general expenses 5,843.2 972,224 2.36 963,111 2.45
a) Personnel expenses 3,775.8 628,240 1.53 619,839 1.58
b) General expenses 2,067.4 343,984 0.84 343,272 0.87
Depreciation 735.8 122,424 0.30 100,397 0.26
Other operating
costs 68.7 11,439 0.03 (3,533) (0.01)
Operating costs 6,647.7 1,106,087 2.69 1,059,975 2.70
Net operating
income 3,479.0 578,853 1.41 490,736 1.25
Income from
equity - accounted
holdings 322.8 53,717 0.13 39,405 0.10
Less:
Dividends from
equity-accounted
holdings 240.3 39,977 0.10 25,447 0.06
Earnings from
Group transactions 740.5 117,220 0.28 64,937 0.17
Net provisions
for loan-losses 988.1 164,401 0.40 110,359 0.28
Writedown of
investment securities 4.0 658 - 1,095 -
Goodwill amortization 648.0 107,819 0.26 55,471 0.14
Other income (150.7) (25,077) (0.06) (69,755) (0.18)
Income before taxes 2,715.6 451,835 1.10 358,398 0.91
Corporate tax 543.6 90,440 0.22 73,078 0.19
Net consolidated
income 2,172.0 361,395 0.88 285,320 0.73
Minority interests 231.2 38,463 0.09 29,953 0.08
Dividend-preferred
shareholders 365.8 60,856 0.15 47,422 0.12
Net attributable
income 1,575.1 262,076 0.64 207,945 0.53
Note:
Average Total
Assets 247,222.1 41,134,295 39,289,814
Average Share
holders' Equity 8,511.4 1,416,178 1,296,415
Income Statement
Variation 99/98
Amount %
Interest revenues 230,273 7.59
Dividends 12,923 30.58
Interest expenses 163,362 7.99
Net interest revenue 79,834 7.75
Net fees and
commissions 54,261 11.85
Basic revenue 134,095 9.01
Trading gains 134 0.21
Net operating
revenue 134,229 8.66
Personnel and
general expenses 9,113 0.95
a) Personnel expenses 8,401 1.36
b) General expenses 712 0.21
Depreciation 22,027 21.94
Other operating
costs 14,972 -
Operating costs 46,112 4.35
Net operating
income 88,117 17.96
Income from
equity - accounted
holdings 14,312 36.32
Less:
Dividends from
equity-accounted
holdings 14,530 57.10
Earnings from
Group transactions 52,283 80.51
Net provisions
for loan-losses 54,042 48.97
Writedown of
investment securities (437) (39.91)
Goodwill amortization 52,348 94.37
Other income 44,678 -
Income before taxes 93,437 26.07
Corporate tax 17,362 23.76
Net consolidated
income 76,075 26.66
Minority interests 8,510 28.41
Dividend-preferred
shareholders 13,434 28.33
Net attributable
income 54,131 26.03
Note:
Average Total
Assets 1,844,481 4.69
Average Share
holders' Equity 119,763 9.24
Average yield of assets
January-December 1999 January-December 1998
(%) % of total Average rate % of total Average rate
Central banks and 13.95 5.34 14.83 6.35
Government debt
securities
Due from banks 14.47 5.77 19.46 6.06
Loans 48.32 9.10 44.65 10.38
EMU currency 30.43 5.69 28.58 7.13
Other currencies 17.89 14.91 16.06 16.18
Investment securities 12.73 6.66 11.91 6.44
Other assets 10.53 - 9.15 -
Other revenue - 1.24 - 0.30
Total 100.00 8.07 100.00 7.83
Average cost of funds
January-December 1999 January-December 1998
(%) % of total Average rate % of total Average rate
Due to banks 28.37 4.33 29.07 5.71
Customer deposits 46.68 4.31 50.21 4.91
EMU currency 27.87 1.90 32.81 2.62
Other currencies 18.82 7.88 17.39 9.24
Debt securities and
subordinated debt 10.07 7.79 7.97 8.91
EMU currency 2.16 5.78 2.61 6.85
Other currencies 7.92 8.34 5.36 9.91
Net shareholders'
equity 3.99 - 3.57 -
Other liabilities 10.88 0.91 9.19 0.53
Other costs - 1.25 - 0.32
Total 100.00 5.37 100.00 5.21
Consolidated Balance Sheet
31.12.99 31.12.98 Variation 99/98
Euro MM Pta.MM Pta. MM Amount (%)
Assets
Cash and central
banks 6,226.9 1,036,067 586,720 449,347 76.59
Government debt
securities 29,717.6 4,944,590 5,238,413 (293,823) (5.61)
Due from banks 30,226.3 5,029,230 6,171,079 (1,141,849) (18.50)
Loans 127,472.1 21,209,569 18,698,985 2,510,584 13.43
Investment
securities 36,037.7 5,996,162 4,379,860 1,616,302 36.90
Fixed income 25,613.8 4,261,772 3,151,218 1,110,554 35.24
Equity 10,423.9 1,734,390 1,228,642 505,748 41.16
- Shares and other
securities 5,526.2 919,474 554,391 365,083 65.85
- Equity stakes 4,036.7 671,656 531,918 139,738 26.27
- Equity stakes in
Group companies 861.0 143,260 142,333 927 0.65
Tangible and
intangible assets 6,302.8 1,048,693 1,073,268 (24,575) (2.29)
Treasury stock 35.7 5,939 19,997 (14,058) (70.30)
Goodwill 2,542.6 423,053 365,703 57,350 15.68
Other assets 17,040.2 2,835,244 2,568,509 266,735 10.38
Prior years' results
from consolidated
companies 836.7 139,221 132,068 7,153 5.42
Total Assets 256,438.5 42,667,768 39,234,602 3,433,166 8.75
Liabilities
Due to banks 63,252.2 10,524,283 11,556,677 (1,032,394) (8.93)
Customer deposits 121,573.1 20,228,069 18,975,034 1,253,035 6.60
- Deposits 104,756.2 17,429,961 15,721,453 1,708,508 10.87
- REPOS 16,817.0 2,798,108 3,253,581 (455,473) (14.00)
Debt Securities 24,084.8 4,007,367 1,986,096 2,021,271 101.77
Subordinated debt 8,098.7 1,347,505 1,050,242 297,263 28.30
Pension and other
allowances 4,370.2 727,148 562,765 164,383 29.21
Minority interests 6,340.1 1,054,902 831,465 223,437 26.87
Net consolidated
income 2,172.0 361,395 285,320 76,075 26.66
Capital 1,833.9 305,135 210,898 94,237 44.68
Reserves 6,358.4 1,057,941 1,299,507 (241,566) (18.59)
Other liabilities 18,355.0 3,054,023 2,476,598 577,425 23.32
Total liabilities 256,438.5 42,667,768 39,234,602 3,433,166 8.75
Other managed funds
(off balance sheet) 78,475.7 13,057,256 11,564,602 1,492,654 12.91
Total Managed funds 334,914.1 55,725,024 50,799,204 4,925,820 9.70
Contingent
liabilities 20,895.4 3,476,705 3,155,337 321,368 10.18
Guarantees 17,618.2 2,931,418 2,728,165 203,253 7.45
Documentary credits 3,277.2 545,287 427,172 118,115 27.65
Loans
31.12.99 31.12.98 Variation 99/98
Euro MM Pta.MM Pta. MM Amount (%)
Public sector 4,099.6 682,112 676,285 5,827 0.86
Private sector 71,443.4 11,887,179 10,589,160 1,298,019 12.26
- Secured loans 23,899.7 3,976,575 3,303,677 672,898 20.37
- Other loans 47,543.7 7,910,604 7,285,483 625,121 8.58
Non-resident sector 55,394.2 9,216,819 7,937,597 1,279,222 16.12
- Secured loans 14,508.5 2,414,003 1,785,943 628,060 35.17
- Other loans 40,885.7 6,802,816 6,151,654 651,162 10.59
Gross loans 130,937.2 21,786,110 19,203,042 2,583,068 13.45
Less: allowance
for loan losses 3,465.1 576,541 504,057 72,484 14.38
Net loans 127,472.1 21,209,569 18,698,985 2,510,584 13.43
Note: Doubtful loans 2,999.6 499,097 414,820 84,277 20.32
- Public sector 8.7 1,447 2,423 (976) (40.28)
- Private sector 850.0 141,432 174,640 (33,208) (19.02)
Non-Resident sector 2,140.9 356,218 237,757 118,461 49.82
Evolution of non-
performing loans*
31.12.99 31.12.98 Variation 99/98
Euro MM Pta.MM Pta. MM Amount (%)
Non-performing loans 2,997.8 498,789 418,604 80,185 19.16
NPL ratio (%) 1.97 1.86 0.11
Allowances for loan
losses 3,622.6 602,755 502,869 99,886 19.86
NPL coverage (%) 120.84 120.13 0.71
Non-performing loans** 2,593.3 431,489 355,715 75,774 21.30
NPL ratio (%)** 1.71 1.59 0.12
NPL coverage (%)** 139.69 141.37 (1.68)
(*) Excluding country-risk
(**) Excluding NPLs backed by residential mortgages
Note - NPL ratio: Non performing loans / computable risk
Customer funds
31.12.99 31.12.98 Variation 99/88
Euro MM. Pta. MM. Pta. MM. Amount (%)
Public sector 2,151.5 357,976 354,803 3,173 0.89
Private sector 62,458.6 10,392,237 11,003,090 (610,853) (5.55)
Demand deposits 19,127.0 3,182,457 2,745,177 437,280 15.93
Saving accounts 13,008.3 2,164,395 1,934,079 230,316 11.91
Time deposits 19,206.2 3,195,638 3,957,989 (762,351)(19.26)
REPOS 10,971.4 1,825,495 2,349,770 (524,275)(22.31)
Other accounts 145.8 24,252 16,075 8,177 50.87
Non-resident sector 56,963.1 9,477,856 7,617,141 1,860,715 24.43
Deposits 51,267.1 8,530,131 6,716,824 1,813,307 27.00
REPOS 5,695.9 947,725 900,317 47,408 5.27
Total customer deposits 121,573.1 20,228,069 18,975,034 1,253,035 6.60
Debt securities 24,084.8 4,007,367 1,986,096 2,021,271 101.77
Subordinated debt 8,098.7 1,347,505 1,050,242 297,263 28.30
Total customer funds on
balance sheet 153,756.6 25,582,941 22,011,372 3,571,569 16.23
Total managed funds
(off-balance sheet) 78,475.7 13,057,256 11,564,602 1,492,654 12.91
Mutual funds 59,840.3 9,956,596 9,113,471 843,125 9.25
Spain 51,365.7 8,546,531 7,944,997 601,534 7.57
Abroad 8,474.7 1,410,065 1,168,474 241,591 20.68
Pension funds 13,071.6 2,174,933 1,568,813 606,120 38.64
Spain 4,537.2 754,930 711,157 43,773 6.16
Individuals 3,971.6 660,815 629,054 31,761 5.05
Abroad 8,534.4 1,420,003 857,656 562,347 65.57
Managed portfolios 5,563.7 925,727 882,318 43,409 4.92
Spain 2,922.8 486,308 433,505 52,803 12.18
Abroad 2,641.0 439,419 448,813 (9,394) (2.09)
Total customer funds 232,232.3 38,640,197 33,575,974 5,064,223 15.08
Note: All data for 1998 has been adjusted for the new Bank of Spain regulations
for collection accounts and other special accounts.
Main data by business areas
January - December 1999 Jan-Dec 98
Euro MM. Pta. MM. Pta. MM.
Retail Banking in Spain 732.8 121,931 102,817
Banesto 297.5 49,499 34,334
Retail Banking Abroad 510.3 84,907 75,831
Asset Management & Private Banking 136.4 22,696 11,662
Global Wholesale Banking 268.3 44,647 24,921
Corporate Activities (370.2) (61,604) (41,620)
Total 1,575.1 262,076 207,945
Net attributable income ROE (%)
Var. 99/98 January - December
Amount (%) 1999 1998
Retail Banking in Spain 19,114 18.59 35.08 34.07
Banesto 15,165 44.17 17.89 15.15
Retail Banking Abroad 9,076 11.97 15.10 18.64
Asset Management & Private Banking 11,034 94.61 18.08 13.22
Global Wholesale Banking 19,726 79.15 13.06 7.05
Corporate Activities (19,984) - - -
Total 54,131 26.03 18.51 16.04
January - December 1999 Jan-Dec 98
Euro MM. Pta. MM. Pta. MM.
Retail Banking in Spain 1,153.4 191,913 171,389
Banesto 427.8 71,177 62,175
Retail Banking Abroad 1,628.3 270,919 201,141
Asset Management & Private Banking 245.1 40,785 21,281
Global Wholesale Banking 457.2 76,064 53,892
Corporate Activities (432.8) (72,005) (19,142)
Total 3,479.0 578,853 490,736
Net operating income Efficiency (%)
Var. 99/98 January - December
Amount (%) 1999 1998
Retail Banking in Spain 20,524 11.98 56.71 59.44
Banesto 9,002 14.48 58.84 62.64
Retail Banking Abroad 69,778 34.69 54.21 61.07
Asset Management & Private Banking 19,504 91.65 52.69 59.48
Global Wholesale Banking 22,172 41.14 46.24 61.02
Corporate Activities (52,863) - - -
Total 88,117 17.96 57.70 62.11
NPL ratio (%)
31.12.99 31.12.98
Retail Banking in Spain 0.98 1.44
Banesto 1.21 1.85
Retail Banking Abroad 3.74 3.33
Asset Management & Private Banking 0.29 -
Global Wholesale Banking 1.49 0.77
Total 1.97 1.86
NPL coverage (%)
31.12.99 31.12.98
Retail Banking in Spain 134.32 112.51
Banesto 168.79 135.49
Retail Banking Abroad 106.29 107.00
Asset Management & Private Banking - -
Global Wholesale Banking 127.47 137.03
Total 120.84 120.13
Investor Relations
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Telephones: 3491 558 10 31 - 3491 558 13 65
3491 558 20 40 - 3491 558 13 70
Fax: 3491 558 14 53 - 3491 552 66 70
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