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Institutional PresentationBanco Santander Mexico
3M’20
Investor Relations Mexico City
Safe Harbor Statement
Banco Santander México cautions that this presentation may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of1995. These forward-looking statements could be found in various places throughout this presentation and include, without limitation, statements regarding our intent,belief, targets or current expectations in connection with: asset growth and sources of funding; growth of our fee-based business; expansion of our distribution network;financing plans; competition; impact of regulation and the interpretation thereof; action to modify or revoke our banking license; exposure to market risks including interestrate risk, foreign exchange risk and equity price risk; exposure to credit risks including credit default risk and settlement risk; projected capital expenditures; capitalizationrequirements and level of reserves; investment in our formation technology platform; liquidity; trends affecting the economy generally; and trends affecting our financialcondition and our results of operations. While these forward-looking statements represent our judgment and future expectations concerning the development of ourbusiness, many important factors could cause actual results to differ substantially from those anticipated in forward-looking statements. These factors include, amongother things: changes in capital markets in general that may affect policies or attitudes towards lending to Mexico or Mexican companies; changes in economic conditions,in Mexico in particular, in the United States or globally; the monetary, foreign exchange and interest rate policies of the Mexican Central Bank (Banco de México); inflation;deflation; unemployment; unanticipated turbulence in interest rates; movements in foreign exchange rates; movements in equity prices or other rates or prices; changes inMexican and foreign policies, legislation and regulations; changes in requirements to make contributions to, for the receipt of support from programs organized by orrequiring deposits to be made or assessments observed or imposed by, the Mexican government; changes in taxes and tax laws; competition, changes in competition andpricing environments; our inability to hedge certain risks economically; economic conditions that affect consumer spending and the ability of customers to comply withobligations; the adequacy of allowance for impairment losses and other losses; increased default by borrowers; our inability to successfully and effectively integrateacquisitions or to evaluate risks arising from asset acquisitions; technological changes; changes in consumer spending and saving habits; increased costs; unanticipatedincreases in financing and other costs or the inability to obtain additional debt or equity financing on attractive terms; changes in, or failure to comply with, bankingregulations or their interpretation; and certain other risk factors included in our annual report on Form 20-F. The risk factors and other key factors that we have indicated inour past and future filings and reports, including those with the U.S. Securities and Exchange Commission, could adversely affect our business and financial performance.The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “forecast” and similar words are intended to identify forward-lookingstatements. You should not place undue reliance on such statements, which speak only as of the date they were made. We undertake no obligation to update publicly or torevise any forward-looking statements after we distribute this presentation because of new information, future events or other factors. In light of the risks anduncertainties described above, the future events and circumstances discussed herein might not occur and are not guarantees of future performance.
Note: The information contained in this presentation is not audited. Nevertheless, the consolidated accounts are prepared on the basis of the accounting principles andregulations prescribed by the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) for credit institutions, as amended (MexicanBanking GAAP). All figures presented are in millions of nominal Mexican pesos, unless otherwise indicated. Historical figures are not adjusted by inflation.
2
3
1. Banco Santander Mexico at a glance
2. The Mexican banking sector
3. Closer look at Banco Santander Mexico
4. COVID-19 & key takeaways
5. Links to Santander Mexico public
materials
Content
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Banco Santander Mexico at a glance1.
Banco Santander Mexico at a glance
Source: CNBV and Santander filings. Data as of March 30th, 2020, unless otherwise stated.1. Market share calculated as percentage of system loans and deposits; deposits include demand and term deposits. 2. Million customers. Figures may vary from those previously reported due to restatements. 3. As of May 11th 2020. 4. As of April 2020. As of mid-June, volume rose to 5.6 million USD.
One of the leading Banks in the country, aiming to become the best bank in Mexico for businesses and individuals, helping them prosper.
Infrastructure
1,211 branches 46% under the new SmartRed format
9,096 ATMs of which 1,138 are full-function
19,638 employees
Growing the customer base
Our stock BSMX
• Market cap of ~4 billion USD³ and
trading at BMV and NYSE
• Free float of 8%
• ADTV of 3 million USD⁴
3rd largest bank by loans and deposits
23.2
13.4 13.4 12.5
22.6
13.2 14.1 14.3
Loans Deposits
Market share¹
1.6
3.3
2016 3M20
2.1x
Loyal² Digital²
1.4
4.4
2016 3M20
3.1x
0.9
3.4
3M202016
3.7x
Mobile²
5
Q1’20 Highlights
Santander, a leading financial group
Our Simple | Personal | Fair strategy is built around a virtuous circle based on loyalty
More motivated and engaged employees
Making our customers more satisfied and loyal
Resulting in higher investment in the
community
Driving profitability & sustainable growth
1,802,210Total assets (MXP, Million)
775,809Customer loans (MXP, Million)
810,340Customer deposits (MXP, Million)
Net income (MXP, Million)
ROAE (%)
5,414
15.48
Active customers (Million) 9.6
The best way to support our shareholders is to prioritize the health and safety of our employees, help our customers and communities, and ensure a profitable business continuity
6
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The Mexican banking sector2.
Regulatory structure
Sources: SHCP and Banxico. Data as of October, 2019.
1. Includes credit unions, brokerage houses, multiple purpose financial institutions (Sofomes), savings and loans cooperative societies (Socaps), popular financial societies (Sofipos), and others. 2. Includes total loans, securities and assets under management
Overview of the Mexican financial sectorThe Mexican financial sector enjoys a stable regulatory environment. Key players include +50 banks, of which 7 hold ~85% of loans and deposits, 10 pension fund managers, 31 mutual fund managers, 10 development banks and 113 insurance groups.
Market share of total assets2
Finance ministryBanco de MéxicoFederal Economic
Competition Commission
National Banking and Securities Commission
(CNBV)
National Commission for the Protection of Users of
Financial Services (CONDUSEF)
Institute for the Protection of Bank Deposits (IPAB)
National Insurance and Bonds Commission
(CNSF)
National Commission for the Pension System
(CONSAR)
47%
16%
12%
11%
7%
7%
Banking sector
DevelopmentBanks
Pension Fund Managers
Mutual FundManagers
Insurance Groups
Others¹
8
187161
16 27 33 35 43 62 63 6687
117
Source: World Bank, 2018.
Total assets by bank
A strong and well capitalized banking sector with substantial upside potentialThe country’s top 7 banks hold 85% of total loans and deposits. System loans and deposits have been growing above nominal GDP taking loans to the private sector to 35% of GDP from a minimum of 13% in 2001. Yet, credit penetration remains below LatAm average of 53%.
System loan and deposit growth
Credit penetration evolution1 Credit penetration vs. peers
2,5321,782
1,4151,293
847648
399
(MXP in billions)
(Credit to private sector as % of GDP) (Credit to private sector as % of GDP)
LatAm avg: 53%
10.5
13.3 13.211.5
8.4
4.5
12.310.3
14.612.9
9.4 9.3
4.3
9.9
7.46.2
8.3 9.07.3
3.1 1.6
2826
31
23
15
2119 16
1513
1515 151619 21 21 23 2325
2629 29
3234 3535
20
00
19
95
19
92
19
99
20
03
20
02
20
01
20
04
20
05
20
06
20
07
20
08
20
14
20
09
20
10
20
11
20
12
20
17
20
13
20
15
20
16
Source: World Bank, 2018.
Source: CNBV and INEGI, 1Q20.Source: CNBV, 1Q20.
2014 2015 2016 2017 2018 2019 1Q20
Deposits Loans(%)
19
93
19
94
19
96
19
97
19
98
20
18
Nominal GDP
1. Includes loans from Infonavit, Fovissste and other financial institutions.
9
Source: Press Release. Note: Balance sheet and income statement data as of March 31st, 2020 and for 1Q20, respectively. Proforma with additional provisions.
A dynamic banking sector with 7 key players
-20
-15
-10
-5
0
5
10
15
20
25
30
5 10 15 20 25 30
3M’20 ROAE (%)
Circle size represents loan portfolio sizeThe number inside the circle represents loan market share
Loan
gro
wth
YoY
(%
)
9.1%
Average G7 ROAE of 14.6%%
%
Average G7 loan growth of
• Business volumes grew significantly in March,as corporates tapped their committed lines ofcredit to have liquidity to face COVID-19’simpact on the economy
• Given current macro environment, consumerand SMEs loans have started to contract
• Note that the recent depreciation of theMexican peso contributed to a relevantincrease in the loan portfolio
• BBVA, Citi and Inbursa made additionalprovisions during 1Q20 in preparation forhigher delinquencies due to the COVID-19pandemic
23.2
13.4
13.4
12.5
7.4
7.7
4.6
10
Source: Financial Groups Press Release as of March 2020.
Loan and deposit growth vs peers
-0.1
0.3 1.2
-1.9
2.84.9
3.7
-1.7
3.0 2.33.8
-2.7
2.1
-3.0
10.07.8 8.7
2.3
7.3 7.86.1
1Q19 4Q19 1Q20
Total loan growth QoQ (%)
Deposit growth QoQ (%)
-2.5 -1.6
1.3
-2.9
4.51.4
3.1
-0.1
4.61.3 0.4
10.5
-2.5
1.9
9.1 9.4
17.0
5.7
-5.0
14.7
7.3
1Q19 4Q19 1Q20
11
Banco Santander Mexico’s positioning within the banking sector
• BSMX is ranked in the top 4 across
deposits and loans
• Medium and long-term strategy is
focused on attracting more individual
customers, looking to increase
demand deposits to improve funding
costs
− Individual demand deposits
have grown 64% over the last
three-years, reflecting the
successful results from loyalty
campaigns
• Mortgages and payroll loans have also
been an important part of our strategy,
complementing our value-offer
proposition
Market share of deposits (%)
Total Demand Time
Market share of loans (%)
Total Businesses¹ Individuals² Mortgages
Others
14.1
22.6
14.3
13.2
7.8
6.5
3.1
18.4
13.7
26.3
17.5
11.7
7.4
4.5
3.9
14.9
15.0
15.0
7.9
16.2
8.7
10.5
1.3
25.5
13.4
23.2
12.5
13.4
7.4
7.7
4.6
17.8
13.4
21.0
11.7
12.7
7.9
6.9
5.6
20.8
10.8
28.6
18.0
11.2
6.2
4.2
4.2
16.9
16.7
25.9
9.3
18.9
7.2
15.2
0.6
6.2
3rd 3rd 2rd 3rd 2nd 4th 3rd
Source: CNBV. Notes: Data as of March 31st, 2020; 1.Includes SMEs, middle-market companies, corporates and government. 2. Includes credit cards, consumer loans, payroll loans, auto loans and other consumer loans.
12
Source: Press Release. Notes: Balance sheet and income statement data as of March 31st 2020 and 1Q20, respectively; net interest margin was calculated using productive assets; employees include outsourced;
Banco Santander Mexico’s positioning within the banking sector (cont’d)
G7 Avg
• BSMX’ higher cost of funding given less deposits from individuals
• 3rd in terms of ROAE
• Solid capitalization ratio well above regulatory requirements
• In terms of infrastructure, BSMX is ranked 4th in terms of branches and 3rd in terms of ATMs
Net interest margin (%)
Cost of funding (%)
Efficiency ratio (%)
Return on avg. equity (%)
Capitalization index (%)
Branches (units)
ATMs (units) Employees
4.6
6.1
10.1
5.9
4.6
4.4
10.1
3.8
1.7
1.9
3.0
3.8
4.6
6.2
44.0
36.6
56.7
38.9
54.3
53.4
29.1
16.2
15.1
13.5
19.0
13.0
12.9
18.7
1,211
1,864
1,465
1,178
948
754
822
9,096
13,066
9,519
9,090
5,561
1,617
5,151
19,638
37,167
24,068
29,801
15,832
12,538
11,346
6.5% 3.6% 44.7% 15.5% 1,177 7,586 21,484
15.5
22.1
10.3
18.5
12.0
11.6
12.1
14.6%
13
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Closer look at Banco Santander Mexico3.
A full service bankBSMX is positioned as an award-winning, full service bank with a nationwide presence and a leading position offering a broad range of products and services.
~40% of loans & depositsIndividuals
Retail Private banking Financial
Inclusion
• Deposits• Micro-credit• Micro-insurance• Debit cards• Financial
education
• Deposits• Consumer loans• Payroll loans• Mortgages• Credit and debit
cards• Auto loans• Insurance
products
• Custody• Trading accounts• Managed accounts• Investment funds• Portfolio-backed
loans• Insurance products
Businesses
SMEs Middle-market CIB
• Deposits• Loans• Payroll accounts• Insurance
products
• Deposits• Loans• Payroll accounts• Insurance
products
• Corporate & government loans
• Capital markets• M&A• Trade Finance
~60% of loans & deposits
15
Highlights
SMEs and Middle-marketWe want to be the bank of choice for SMEs and Middle-market companies on every country we have presence in. As leaders in the SME and Middle-market segment in Mexico, we’re accelerating our digitalization by developing global payments and financial solutions for our customers.
Strategic priorities and recent events
We continue making relevant progress on developing our platforms
We acquired Elavon Mexico jointly with our parent’s Global Acquiring Platform
New software solutions for trade finance
Electronic transactional banking
Offering more insurance products
New digital solutions for SMEs
Alliance with Contpacqi
BET
Market leadership Biggest SME and Middle-market lender in Mexico
Our SME and Middle-market strategy is
building with global platforms, leveraging our
scale for efficiency and customer experience
Digital payment services as a driver of customer
engagement and loyalty
Internationalization
Digitalization
Training
Employment
Our programs support SME growth based on 4 pillars
Our aim is to transform our customer’s banking experience
16
Support our customers along their transformation journey and contribute to the Group’s green finance public commitment
Highlights
Data as of 2019.
Santander corporate and investment bankingSCIB is a global business division for corporate and institutional customers who require a tailored service and value-added wholesale products suited to their complexity and sophistication.
Strategic priorities
9,951Total income (MXP, Million)
32%
11%25%
2%
12%
17%
1%
Total revenue breakdown
Leverage on our customer-centric model to drive greater penetration of our franchise and faster growth in retail
Strengthen our value proposition while delivering the exact same service quality across geographies
Continue the digital transformation to build the Digital Investment Bank
Market leadership Top-3 in M&A, Project Finance, ETDs, ECM, and Local DCM.
RRCC + ACPM
Markets
Global Transactional Banking
Loan book
Global Debt Financing
Investment Banking
Cash Equity + CED
17
Highlights
Note: Digital and mobile customers as of 1Q20. 1. Monetary transactions of individuals.
RetailThe trust and loyalty of our customers are the most important assets for Santander. In Mexico we have doubled the number of loyal customers, reaching a loyal-customer penetration of 34%, rising from 21% three years ago.
Strategic priorities
Creation of collectives
Medics, notaries, expats, airplane pilots, etc.
Multichannel and branch transformation
Broadening the business scope
Creation of the micro financing Tuiio and an auto loan business
Digital & mobile customers are engaging and transacting more
4.4 mnDigital customers
(+38% YoY)
4.2 mnMobile customers
(+51% YoY)
19%
Mar’19
16.5%
81%
92%
8%
Mar’20
25.4%
Mar’18
11.6%
62%
38%
Internet
Mobile
Digital Transactions / Total Transactions¹
3.3 mnLoyal customers
(+24% YoY)
34%Loyal/Active customers ratio
Santander Plus Hipoteca Plus
Launch of products that aim to increase customer loyalty…
… retain our customers and to serve them better
18
Highlights
Wealth managementOur aim is to become the best and most responsible wealth manager in Europe and the Americas.
Strategic priorities
Santander was recognized by Euromoney as the “Best private bank in Mexico” in 2019
• Single truly global Private Banking platform
• One global value proposition
• Global customers
• Executing the digital transformation
through the best products and services
~13,100Customers in Mexico
Market leadership
International presence in 10 key markets with 174 thousand customers around the world
Our customers are global, they receive Private Banking attention on any of our worldwide offices
~10,900~5,900
~5,600
~13,100
~16,900¹ ~4,300
~98,800
~11,700 Top 3 auto finance
~6,300
North America
South America
Europe
1) Includes US and Switzerland. Map data as of 2018.
19
CNBV data as of March 31st 2020. Ranked by size.
Branches
• 1,211 branches, 46% under the new SmartRed format
• Ranked #4
Supported by a solid infrastructure and nationwide footprintBSMX is present nationwide, with Mexico City’s metropolitan area housing 26%, 23% and 24% of branches, ATMs and POS terminals, respectively. The South East region is the second in importance. Otherwise, infrastructure is fairly spread out among the remaining six regions.
ATMs
• 9,096 ATMs, 13% are last generation ATMs
• +70% of traditional ATMs have been renewed over the past 3 years
• Ranked #3
POS terminals
• BSMX completed the acquisition of themerchant payment solutions company,Elavon Mexico, jointly with its parentcompany’s Global Acquiring Platform
• Ranked #2
20
Source: Company filings under CNBV GAAP as of 1Q20. Notes: 1. Includes money market.
A well-diversified loan portfolio
7%
28%
16%12%
10%
20%
7%
ConsumerCredit Cards
Mortgages
Middle-Market
CorporatesGov&FinEnt
SMEs
Deposit breakdown Loan portfolio breakdown
Ps. 775,809 MM in total portfolio
Diversified loan portfolio (44% retail & 56% corporates) and healthy funding mix resources.
In 3M20, the Strong deposit growth was driven by corporates, favoringliquidity and deposit attraction strategies
1Q201Q19
463,941531,094
+14.5%
+11.7%Individuals
Corporate +15.6%
238,703
1Q19 1Q20
279,246
+17.0%
Individuals
Corporate
+4.3%
+23.7%
Demand Deposits
Term Deposits1
21
Focused strategyTo become the best commercial and retail bank in Mexico, BSMX aims to be client centric and its customers’ primary bank as well as a market leader in profitability. To that end, BSMX is pursuing a focused strategy:
demand deposit from individuals in order to
cost of funding in order to
profitability
• Provide a one-stop-shop solution
• Empower branch heads to manage their branches’ P&L and risk according to the needs and opportunities of each micro-market
• Transform customer journeys and experiences through innovation, digitalization, newly redesigned infrastructure, mobile and digital channels, data analytics, and an improved CRM to attract and retain individual customers
• Happy employees serve clients better
• Transform BSMX’s cultural architecture to become the bank where things get done
• This transformation will support the attraction and retention of top talent
• Increase loyal customers, which are 4x more profitable, as well as digital and mobile customers, which hold the highest future potential
• Maintain leadership in SMEs, mid-market, CIB and private banking
• Focus on strategic segments suchas mortgages and payroll loans
• Enter new high-potential markets
Increase
exposure to
individuals
Keep focus on high-potential
businesses
Enhance customer
experience
Transform the Bank’s culture
Improve branch management
Increase loyal and digital customers
22
Operational transformationOur three-year Investment plan has strengthened our franchise and positioned Santander to boost profitability and become more client-centric.
53%
33%
14%
Distribution Network Transformation +IT
Broaden Business Scope
• Structural transformation
• Digitalization of processes and services
• Technological catch-up
• Enhanced customer journey
• Loyalty programs and cross-selling
• Payroll attraction initiatives
• Data analytics
• Service quality enhancements
• Financial inclusion (TUIIO)
• Auto loans
• Leasing
• P+C Insurance
Client Attraction & Loyalty
15
bn
pe
sos
inve
stm
en
ts (2
01
7-2
01
9)
23
Highlights
Note: Digital and loyal customers as of 1Q20.
Technology, digitalization and loyaltyThe investments made in IT and digitalization over the past three years have enhanced the Bank’s ability to serve its customers through digital channels at a time when social distancing is required.
Customer focus
Digital customers are engaging and transacting more
Digital technology boosting financial access
4.4 mnDigital customers
(+38% YoY)25%
Digital transactions as % of total transactions (vs. 16.5% in March 19)
Availabilityanytime, anywhere, anyhow
Collaboration
Collaborative spaces & increased digital capabilities
Working in collaboration with fintechs and other tech companies
Santander smart and agile branches
Mis Metas and Santander Tap
Interactive VoiceResponse technology
BET, Getnet & Digital banking
Traditional banking
Digital banking
Branches, ATMs, retail agents,…
Internet, mobiles, tablets, smartphones and smart watches…
24
Good progress on cultural transformation
52% 45%55%
% of employees
% of board members
December 2014 December 2019
Women Men
82%18%5%
The SPF culture is based on our 8 corporate behaviours…
40%How we do it
10%Risks
50%What we do
Our corporate management evaluation model
Improvement in diversity by genderOur culture
…and 4 leadership commitments
Our aim is to be an employer of choice, leveraging our SPF culture to retain and attract the best talent. BSMX remains as one of the top banks to work for in Mexico¹ and in 2019, employee engagement in Mexico rose to 90%².
1. Great Place to Work 2018. 2. Encuesta Compromiso 2019; 2015-2018 average of 82%. 3. Santander’s internal information.
Net promoter score (NPS)
• Happy employees serve clients better
• NPS: how likely are the employees to recommend Banco Santander to their family and friends?
• Ranked #4³
Our priority has been to protect the health and
safety of our employees as we quickly moved to
remote working
25
COVID-19
Board of directors
• Mrs. Laura Diez Barroso Azcárragareplaced Mr. Marcos Martínez as Chairman of BSMX’ Board of Directors
• 7 of 11 board members are independent
• Strong board committees in place
Strong corporate governance
Business ethics
• BSMX has developed a value-based, behavior-led culture with a focus on risk and strong tools to support it
Parent / Investors / Authorities
• The Bank follows best practices in its relationships with its parent company, investors and authorities
BSMX has strong local governance, which is reinforced with oversight from its parent company.
• Audit Committee
• Corporate Practices, Nominating,and Compensations Committee
• Comprehensive Risk ManagementCommittee (CAIR)
• Compensation Committee
• Code of Conduct
• Risk Management
• Cybersecurity and Money Laundering Prevention
• Personal Information Protection
• Corporate Governance Best Practices
• Access to information
26
The risk model relies on Advanced risk management tools Risk culture
A clear Risk Strategy with well defined priorities
Common Risk Principles which are mandatory and must be applied at all times
3 lines of defense model with a robust structure of risk recommittees
Clearly defined management and control processes
The identification and assessment of the
various risks that it is exposed to
The amounts and type of risks considered prudent to assume
Analysis of impacts triggered by different
scenarios
Complete, precise and recurring information
Risk profile assessment
Risk appetite & structure of limits
Scenario Analysis
Risk Reporting Structure
Anticipating changes in the riskprofile & defining strategies tomitigate negative impacts is key topreserve our solid position, mainlyin terms of capital and liquidity
Our risk management andcontrol model is a key driver ofSantander’s contribution tosustainable economic growth
COVID-19
Risk management and controlSantander’s risk management and control model, specially under the current circumstances, is key to ensure that we remain a robust, safe and sustainable bank that helps people and businesses
27
Solid responsible banking performance
Part of the IPC Sustainability Index since 2013
Responsible bankingrecognition held since 2004
In line with the overarching goal of being the best bank, BSMX aims to earn the lasting loyalty of its stakeholders by contributing to their long-term social and economic progress while being mindful of its environmental impact.
Awards and recognitions
ISO 14001:2015 certification since 2004
HealthApp to make a self-diagnose of Covid-19 and localize hospitals’ availability
Santander Group has been recognized as the most sustainable bank in the world
Social responsibility
Students6,300 grants awarded in 2019
Most Socially Responsible Bank in Mexico for 2 years in a row
Environment12-year alliance with Reforestamos
Financial literacy55,300 people received financial education through Tuiio
28
Market share data as of December 2019 and the US and SCF latest available. The UK includes London Branch. Poland: including SCF business in Poland. The US: in all states where Santander Bank operates. Brazil: deposits including debenture, LCA (agro business notes), LCI (real estate credit notes), financial bills (letras financeiras) and COE (certificates of structured operations).
Our parent companyWe enable greater collaboration across the Group to generate higher revenue and efficiencies.
10% loans12% deposits
18% loans17% deposits
10% loans10% deposits
13% loans13% deposits
3% loans3% deposits
18% loans16% deposits
17% loans19% deposits
10% loans8% deposits
Top 3 auto finance
12% loans12% deposits
North America
South America
EuropeFocused on relevant global markets and building on relevant assets to accelerate growth
Accelerating digitalization by developing global solutionsWe maintain our leadership position in our 10 core markets
Santander Global Platform
IndividualsSMEs
Global Merchant Services
Global Trade
Services
Banking without a
bank
Global digital
banking
Super Digital
Our global scale allows us to learn best practices from differentgeographies, get the latest technology and leverage on our globalproducts to serve our clients better
29
Corporate structure
1. Contribution to Q1’20 underlying attributable profit as % of operating areas, excluding Corporate Centre and Santander Global Platform. Note: Other South America includes Uruguay, Peru and Colombia.
Our parent company (cont’d)Grupo Santander adds value to its subsidiaries, providing scale, governance and advise, but each subsidiary is independent in terms of capital and liquidity needs.
Subsidiary contribution to net profit¹
Grupo Santander
Grupo Financiero
Santander Mexico
Banco Santander
MexicoCasa de Bolsa
Santander Asset
Management
Mexico
Zurich Santander
Mexico S.A.
100% 8%92%
50% 100%100%
Free float
• On April 2019, the Group launched a public offer to acquire
the 25% minority stake of BSMX in exchange of shares from
the Santander Group
• As the result of the operation a free float of 8% remains
listed on the BMV and on NYSE.
12%
8%
5%
11%
5%
14%
Brazil
PortugalSpain
SCF
UK
2%
Argentina
Poland
US
Mexico
2%
Other South America
2%
Chile
29%10%
SouthAmerica
38%
Europe41%
NorthAmerica
21%
30
Summary of ratings
1. Long-term senior unsecured global notes due 2022. 2. Long term senior global notes due 2025. 3. Tier 2 subordinated capital notes due 2028. 4. Perpetual subordinated non-preferred contingent convertible additional tier 1 capital notes (AT1). 5. As of 1Q20. 6. Including short-term positions. 7. Including additional Tier 1 Capital Notes issued in December 2016.
Ratings and public issuancesDiversified funding sources and manageable maturity profile.
Debt maturity profile⁵
14,197
31,649
10,150
31,571
12,143⁷
>20282020 2021 2022 2026 2028
31,093⁶
• On April 14th, the bank issued U.S.$1.75 billion of senior notes due 2025
Bank’s LT global foreign curr.
Bank’s LT local
Outlook
Sr. notes due 2022¹
Sub. notes due 2025²
Sub. notes due 2028³
Perpetual notes⁴
BBB+
AAA(mex)
Negative
BBB+
BBB+
BBB-
BB
Baa1
Aaa.mx
Negative
Baa1
Baa1
Baa3
Ba1
Fitch Moody’s
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CET1
Data as of 1Q20.
Strong capital and liquidity positionCore capital well in excess of regulatory minimums and liquidity has been strengthened by the most recent issuance.
Liquidity coverage ratio
1.2%
8.2%
2.5%
11.1%
+540bps
Regulatory Minimum 1Q20
Capital conservation buffer (waived)
4.5%
CET1
+290bps
Systemic buffer
Minimum CET1 Ratio
100%
125%
Regulatory Minimum 1Q20
25% above regulatory minimum
• Core Capital well in excess of regulatory minimums • 1Q20 LCR of 125% in average and 136% by quarter end, well above 100% Banxico regulatory requirement
• Recent issuance of senior notes due 2025 will strengthen liquidity further; as of 1Q20 these resources were not included in the LCR
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Source: Santander’s 1Q20 Earnings Release.
Q1’20 Highlights
COVID-19
• The outbreak has caused an unprecedented worldwide health crisis; today’s financial system is more resilient and Banks are part of the solution to the current economic situation
• We have implemented operational resiliency and actions to ensure the health of our employees as well as support programs for individuals and SMEs
Growth
• New lending in the 1Q20 exceeded typical monthly levels, as corporates tapped their committed lines of credit in march and we made efforts to compensate deposits for loan growth
• Loan book up 12.2% YoY and deposits up 15.3% boosted by corporates, middle-market and government customers• Our digital products and services are being more important tan ever
Profitability• 1Q20 net profit was 5,414 million MXP, up 2.3% YoY and 10.1% sequentially, impacted by strategic investments,
lower interest rates and higher taxes• Improvement in efficiency while maintaining strong profit levels
Strength• Asset quality remained stable in Q1’20: NPL ratio of 2.16% and Cost of Risk of 2.65% • Strong capital and liquidity position, supported with recent issuance of U.S.$1.75 billion of senior notes due 2025
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Amounts in million Pesos except net income per share.
Volume growth 3M20
Loans 3M20 %YoY 12M19 12M18
Middle mkt. & corporates 336,400 20.5 281,121 273,198
SMEs 74,587 -4.7 76,344 77,389
Gov. & Fin. Ent. 93,697 19.1 87,165 79,775
Mortgage 155,214 8.4 151,929 141,649
Consumer 115,911 3.4 117,122 110,837
Total loans 775,809 12.2 713,680 682,848
Deposits Mar-20 %YoY Dic-19 Dic-18
Individuals 236,628 8.9 238,674 217,723
Corporates 573,712 18.2 453,863 476,089
Total deposits 810,340 15.3 692,537 693,812
• Business volumes grew significantly in March,as corporates tapped their committed lines ofcredit
• Deposits also grew significantly in March,mainly driven by our efforts to compensate forloan growth
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Amounts in million Pesos except net income per share.
Financial performance 3M20
Income Statement 3M20 %YoY 12M19 12M18
Net interest income 16,896 2.7 66,353 61,408
Fee and commission, net 4,697 6.1 18,028 16,832
Core revenues 21,593 3.4 84,381 78,240
Provisions for loan losses 5,165 19.6 18,112 17,751
Administrative and promotional expenses
9,785 5.7 38,865 35,294
Net income 5,414 2.3 21,332 19,584
Net income per share 0.80 2.1 3.14 2.89
Balance Sheet Mar-20 %YoY Dic-19 Dic-18
Total assets 1,802,210 38.2 1,411,994 1,381,570
Total loans 775,809 12.2 713,680 682,848
Deposits 810,340 15.3 692,537 693,812
Shareholders’ equity 141,041 6.6 138,695 125,693
Solid 1Q20 results with non-material impact from COVID-19 pandemic
• NII impacted by lower interest rates and lowmargin segments growth
• Asset quality remains healthy while provisionswere affected by internal model adoption
• Expenses and efficiency reflect amortization ofstrategic investments
• Net Income impacted by lower interest rates,higher non-recurrent provisions, and higher taxrate
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1. Includes cash desks (espacios select, box select and corner select) and SMEs business centers. Excluding brokerage house offices.
Financial performance 3M20 (cont’d)
Key Ratios 3M20 bps YoY 12M19 12M18
Net interest margin 5.45 (13) 5.61 5.47
Net loans to deposits ratio 92.94 (247) 99.95 95.38
ROAE 15.48 (92) 16.14 16.19
ROAA 1.35 (23) 1.53 1.45
Efficiency ratio 43.95 (86) 45.37 45.14
Capital ratio 16.23 (67) 16.37 15.91
NPLs ratio 2.16 1 2.28 2.36
Cost of Risk 2.65 (4) 2.60 2.72
Coverage ratio 135.17 401 132.02 131.16
Operating Data Mar-20 %YoY Dic-19 Dic-18
Branches 1,211 (0.2) 1,209 1,219
Branches and offices1 1,406 1.2 1,402 1,393
ATMs 9,096 6.9 9,015 8,384
Customers 18,374,959 7.9 18,134,468 16,690,063
Employees 19,638 1.8 19,975 18,979
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COVID-19 & key takeaways4.
COVID-19: How BSMX is contributing to tackle the outbreak
Since the beginning of the pandemic the Bank has been monitoring the situation and activated all of the protocols, including specific measures to support key stakeholders
(customers, shareholders, employees and communities)
We are taking a number of steps to protect and support our customers and society as a whole while our robust T&O has allowed us to continue running the Bank and servicing
our customer remotely with the highest standards
Strong Corporate Governance has been demonstrated with close coordination within corporate areas and across countries
Business activity indicators point towards expected deterioration but now it is too early to asses the full impact
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Employees Customers
Operational readiness for servicing customers through all digital channels and contact centers
Debtor Relief Program
Participation in Federal Program to Support Small Businesses
Zero Interest Payments in Credit Cards for 3 months for purchases at on-line supermarkets and 5 to 10 months on purchases at pharmacies, laboratories and hospitals
Bank’s health insurance products offer coverage for the COVID-19 pandemic
Established work-from-home protocols for business continuity
Critical personnel works remotely or split into teams working on alternative schedules or at alternate work sites
Branch employees are split into teams
• Sanitization measures and protection kits• Recoveries functionalities
Additional IT resources channeled into remote operating tools and cybersecurity
Medical assistance: AsisMed App and special support line for confidential counseling
COVID-19 Newsletter with relevant information
Webinars on health and wellbeing, online sport classes, meditation and nutrition
Working from home, 90% Critical, 10%
Employees
Branch, 55% Working from home, 45%
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Initiatives implemented to mitigate the COVID-19 pandemic
Branch employees working from…
1. Data as of 1Q20. Note: Consumer includes auto, personal and payroll loans.
Debt relief program received strong response from customers
Portfolio under support program
The portfolio under support program represents 16% of the total loan book accounting for Ps.122 Bn¹
• Aimed at customers with current loans as of Feb 28,2020. Registration ended on April 30th.
• Benefits:
− Grace period for up to 4 + 2 months
− Customers will not enter the credit bureau
− NPLs nor provisions will be affected during graceperiod
• Nearly 406,000 customers have registered into theprogram
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31%
8%Credit cards
46%
Mortgages
SMEs
Consumer15%
17%
31%
52%
36%
of loans under support program
of product’sloan book
Debtors support program for individuals and SMEs will not havean impact during the grace period neither on loan lossprovisions nor NPLs
Flexibility for using the capital conservation buffer of 2.5%without triggering any regulatory corrective measures
Banks allowed to fall below 100% of their Liquidity CoverageRatio (LCR) without consequences; volatility impact excludedfrom LCR
Recommendation to abstain from paying dividends andrepurchasing shares to enhance financial position
Santander will participate in Federal Program to Support smallbusinesses
10 actions to provide liquidity announced by Banxico
Government & Regulators Community
Launch of campaigns to encourage people to stay at homeand an appreciation campaign aimed at health professionals
#YoMeQuedoEnCasa#HéroesConBata
Santander launched a support website as a resource guide tohelp people and companies overcome the COVID-19 crisisand an App together with BBVA in Mexico to run COVID-19self-diagnosis
+ Ps.55 million from Santander Universidades programchanneled to support digital learning platforms atuniversities and scholarships for students
Launch of a fund to collect resources from employees to aidthose in need and the Bank will double the amount collected
Donation of vital signs monitors to the National Institute ofRespiratory Diseases
Esto lo superamos juntos
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Initiatives implemented to mitigate the COVID-19 pandemic
Key takeaways
Banco Santander Mexico is one of the leading banks in Mexico and it is positioned as an award-winning full service bank with a nationwide presence and a leading position in SMEs, middle-market and corporate and investment banking with significant potential to increase its exposure to individuals
The successful execution of our medium-term strategy and the MXP 15 billion investments made in IT and digitalization over the past three years have enhanced the Bank’s ability to serve its customers through digital channels at a time when social distancing is required nationwide, while advancing on its cultural transformation and maintaining strong corporate governance and social responsibility
Key priorities on the medium and long-term are centered on allowing us to expand our presence in the market:• attracting more individual customers • strengthening their loyalty to become their primary bank• broadening our business capabilities with more products such as auto lending, micro-finance, leasing and P&C insurance
Santander Mexico is well positioned against the current and growing impact of the pandemic, and the Bank is taking a number of steps to protect its key stakeholders, supporting its customers and society as the Bank’s agile and experienced management and operational teams, its conservative origination standards and prudent financial management have allowed the Bank to build a very strong balance sheet in recent years
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Links to Santander Mexico public materials5.
Links to Santander Mexico public materialsFor additional information on the Bank, please click on the images or icons below
Earnings release Earnings presentation Responsible banking
Fixed income
Follow us on:
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www.santander.com.mx/ir/home/
Investor Relations Webpage
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Thank you
Investor Relations Contact Héctor Chávez López Managing Director - IRO +52 55 5269 1925 hchavez@santander.com.mx
Investor Relations Team investor@santander.com.mx
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