Banco Santander SA Q4 FY2023 earnings call

• Record results of €11.1 billion in 2023, delivered on financial targets. Added 5 million customers, revenue grew double-digit. - Invested for future, improved efficiency by 173 basis points, profitability ~15%. - Strengthened balance sheet, growing deposits, sound asset quality, gross organic capital generation. - Earnings per share grew 21%, TNAV and cash DPS by 15%, dividend per share near 50% higher than last year. - Net interest income rose 12% (16% in constant euros), net fee income higher due to network effects. - Completed creation of five global businesses, focusing on simplification, automation, global tech platforms.

Retail Commercial Bank: Record net interest income growth of 12% (16% in constant euros) in Europe and Mexico. Revenue contribution significant. Consumer Bank: Focus on digital consumer lending, OEM relationships, global platforms; growing business with openbank, leasing, buy now pay later. Corporate Bank: Leveraged strengths to deepen customer relationships, over 80% revenues from customer revenues, growth faster than balance sheet. Wealth Business: Leveraged presence in Miami, renewables, infrastructure, SMEs, insurance verticals. Payments: Large and growing, 165 million customers, 100 million active payment cards, 16% revenue from open market, EBITDA margin improved to ~25% in 2023.

• 2024 expected to be a better year, revenue growth mid-single digit. - Net interest income growth in consumer businesses, fees driven by customer growth and transactionality. - Cost of risk roughly flat, targeting cost income below 43%, return on tangible equity 16%. - Accelerate implementation of global model in retail and consumer.

• Argentina's exchange rate impact on quarterly numbers and capital. - Competition and market dynamics affecting UK mortgage and deposit volumes. - Potential normalization in provisions for consumer businesses based on economic forecast. - Regulatory impacts and countercyclical buffers affecting capital ratios.

Q: What are the drivers of revenue growth in 2024?

A: Ana and Hector mention positive revenue growth in retail (especially South America, Mexico), consumer businesses benefiting from lower rates, and fees driven by customer growth and transactionality across global businesses like corporate bank and payments.

Q: How does the one transformation impact costs?

A: Hector explains one transformation involves simplification (reducing products), automation (freeing time for customer service), and deployment of global platforms, leading to flattish costs and improved efficiency.

Q: What is the outlook for UK NIM and RoTE?

A: Hector and Jose discuss UK NIM pressure due to competition, low loan volumes, and market deposit growth, expecting flattish costs and a slightly lower RoTE but still double-digit.

Q: How is asset quality expected to perform in the U.S.?

A: Hector states U.S. auto business has robust growth, robust economy, low delinquencies, and expects cost of risk around 1.2% with no significant deterioration in asset quality.

Q: What is the capital outlook for 2024?

A: Ana and Hector mention comfortable capital levels, organic capital generation, Basel III compliance, and a CET1 ratio expected to remain above 12% even after final implementation of Basel III in 2025.