SME GLOBAL STRATEGY

SMEs are a strategic segment for the Group

• 24 million SMEs in the markets where we operate.

• Contribute between 30% (e.g. USA) and 60% (e.g. MX) of GDP.

• Generate 300 million jobs, 66% of total in Europe and 69% in Latin America.

• Growing presence in international business, up to 40% of exports.

They are the driving force of the economies where we operate:

18% 11%

6%

11%

9%

8%

20%

6.5%

30%

SMEs’ market share by country

• Spain includes micro companies and SMEs,

excludes retailers and the self-employed.

• UK includes retailers and the self-employed.

SMEs are a strategic segment for the Group

They are the driving force of the economies where we operate:

Significant contribution to Group’s results:

• 24 million SMEs in the markets where we operate.

• Contribute between 30% (e.g. USA) and 60% (e.g. MX) of GDP.

• Generate 300 million jobs, 66% of total in Europe and 69% in Latin America.

• Growing presence in international business, up to 40% of exports.

• 3.8 million customers

• EUR 6.5 billion gross income, 22% of commercial banking.

• EUR 65 billion in loans.

• EUR 125 billion of business volume.

•Education and training for their employees.

•Access to other markets

•Constantly updating its technology

•Means to connect with complementary SMEs

•Guidelines for management and leadership

And they tell us that they need much more than financing.

We have actively listened to our CUSTOMERS…

•At our branches

•Through surveys

•Pilot workshops with more than 200

companies

•Market research

•Expert reports

We looked at the Group’s best practices.

SMEs are a strategic segment for the Group

•Santandertrade.com

•Argentina SME training – Universities

•SME Power (Mexico)

•Breakthrough (UK)

•Exporta Plan and SME Internship

Programme (Spain)

• International Desk (Latin America)

Our proposal:

Advance

Financing

Financing and linkage

programme for SMEs Advance Fund

Value

proposition

for SMEs,

customers

and non-

customers

Recruitment

and training International

Advance

Development

Employment Connectivity

SMEs’

partner of

choice for

growth

Progressive implementation in the Group’s units

Phase 1: Spain

Phase 2: Mexico

Brazil

UK Phase 3: Other major markets

15%

70%

MAR-14 2015 START 2H’14

Advance Financing

Linkage and

financing

programme

Dec-13 Dec-14 Santander Market

Spain* 26,200 29,100 11% 0%

Brazil 8,313 9,727 17% +11%-13%

UK 14,029 16,123 15% +2.5%

Mexico 2,255 2,900 29% +26%

Chile 4,300 4,844 13% 12%

Growth in balances Outstanding balance (in € mn)

* Excluding self-employed and retailers.

• Selected SMEs (operational for at

least three years, growing and

with a specific investment project).

• Minimum investment: € 1mn;

medium / long term financing.

• New or existing customers.

Advance

Fund

• EUR 250 mn for

Spain. Can be

expanded and

replicated in other

markets.

• Subordinated debt

Capital

Advance Development

Advance

Development

• Knowledge Institute

• Development workshops

• Masterclass 80,000

Jobs and

scholarships

• Scholarships

• Jobs platform 80,000

Connectivity • Santanderadvance.com

International

• International Desk

• Santander Trade

• Trade missions

• Santander Passport (June 2014)

30,000

Aim of the Advance programme: provide service to 200,000

SMEs in three years

Spain 20,000 42,000 60,000

2014 2014* 2016*

Mexico / Brazil / UK 7,500 45,000 90,000

Rest -- 13,000 50,000

27,500 100,000 200,000

* Cumulative figures

Santander, a partner of choice for SMEs

• We have the capital and liquidity to support SMEs’ growth.

• We have the geographic diversification to support their

international expansion.

• We have partnerships to offer (Santander Universities).

• We have the experience of proven strategies in different

countries.

• We have the necessary teams and tools to help.

• We are determined to become their partner of choice.

SME GLOBAL STRATEGY

SPAIN

We are seeing loan growth and signs of genuine demand

SMEs already show credit growth and a rising demand...

New loans to SMEs have stopped

falling and are growing at 5-10%

year-on-year.

There is demand from SMEs that

only needs a change in the market

New loans to SMEs1 ECB survey of SMEs

-25%

-13%

-20% -19%

-9%

-16% -12%

-7% -6%

-1%

0%

4.7%

9.6%

5.0%

dic

-12

ene

-13

feb-1

3

ma

r-1

3

abr-

13

ma

y-1

3

jun

-13

jul-

13

ago

-13

sep

-13

oct-

13

nov-1

3

dic

-13

ene

-14

SMEs that needed loans…

11%

30%

59%

Expected

loan to be

denied

Expected

restrictive

conditions

Did not have

sufficient funds

of their own

Request

ed loans 27%

73% Did not

seek loans

1 New loans to companies of less than €1 million. (Source: Bank of Spain)

… and they make an outstanding

contribution to Santander Spain

They are the driving force of

the Spanish economy…

• Spain’s is an economy

based on SMEs

• They are 1,250,000…

• … 90% of corporate Spain

• They represent > 50% of GDP

• They generate > 65% of jobs in

the private sector

• They account for 56% of exports

• 280,000 active customers

including companies, SMEs and

micro companies

• > €26 bn loans

• > €45 bn business volume

SMEs: A strategic segment in Spain and for the bank

We want to be the partner of choice in their growth: Santander Advance

Transformation

of the business

model

Financial offer:

Products and services centred on

the customer.

Specialisation, quality, security and

agility in loans as an integral part of

the business.

The best non-

financial offer

An innovative offer:

Unique value offer to help SMEs grow by providing

complementary services alongside financing

Areas involved:

• Business

• Risks

• HR

• Technology

• Finance

The pillars of

Advance

Financing

Financing and linkage

programme for SMEs Advance Fund

Recruitment

and training International

Advance

Development

Employment Connectivity

Advance Financing

Short-term

domestic market

financing

Advance lending

• Interest rate discounts depending on linkage

• Spreads of 3.50%, dependent on linkage and amount

• Other Advance products to assist with billing and payments

Short-term

international

financing

Exporta plan

• International trade finance: export and import

• Specialists in international business and support services

• Discounts for using electronic banking

Long-term

financing

Aim: to be leader in ICO credit lines and EIB funding Competitive products to meet their needs:

• Mortgage lending

• Equipment leasing / renting

• Launch of Bansacar Advance

Advance Financing

Basic principles • Complements traditional financing

• Independent vehicle, with its own process and risk managements

Characteristics

Stated target:

• SMEs with a record of growth (3 years)

• Job creation

Investment:

• Minimum €1 million

• Medium- and long-term financing

• Flexible repayments and guarantees

Debt structure:

• Mainly subordinated debt

• Eventually, convertible debt or other kind of debt

Advance Fund of €250 million

Advance Development

Business

inspiration

• SME days hosted by regional

“flagship companies”.

Development

workshops/ SME

Observatory

• Workshops in Santander branches

with 15-20 SMEs to discuss specific

problems

• Information collected and studied in

SME Observatory

Business

inspiration

• Themed training videos

• Testimonials of SME experiences

Knowledge

Institute

• Training course (Business management

and export training programmes)

• Online training (languages, other skills)

• Everything SME leaders need

RECRUITMENT AND TRAINING

Advance Development INTERNATIONAL EXPANSION

Santander Trade

Portal / Club

• International trade portal. Market research

and contact with potential business

partners

• www.santandertrade.com

International

Desk/

Passport

• Network of specialists in different countries

and regions to support customers in their

international growth

International

Connections

• Virtual and physical trade missions. We can

put SMEs in touch with the different markets

where the Santander Group is present.

Local events with

customers

• Breakfast:

promotional meetings with 15-20 SMEs

• Talks on international expansion:

for 50-75 SMEs

Advance Development

EMPLOYMENT

Employment • Platform to help find employees, including

publication of specific vacancies.

• Capacity for 50,000 job offers from 10,000 SMEs.

Santander

Scholarships • 5,000 scholarships for university students

to do internships in SMEs

Advance Development

www.santanderadvance.com

What makes Santander Spain’s offer different

Proximity to

SMEs

• Extensive network of universal branches (4,097): Proximity to

SMEs

• Extensive network of corporate branches (224): Largest in Spain

• Plan to increase number of staff specialising in SMEs from 325 to

600 in the corporate branches

• In the universal branches we have more than 3,648 sales staff who

directly handle SME business

Specialisation

• Product specialists to support the SME business (353): International

and Transactional Banking managers

• Risk management teams that specialise in SMEs (400):

• Analysts specialised in managing non-customers

• Sectorial expertise

• Commitment to respond to every request: 3 days

• Risk pre-classification for SMEs to analyse their future needs

International

presence • Presence in 15 countries: Support for SMEs in their international

expansion

Advance Financing goals for 2014

Loans New loan production

+ 24% €30.7 billion

Customers Capture

22%

Linkage

29%

Advance Development goals for 2014

•20,000 SMEs will access various training initiatives, internationalization

and employment

•In addition, 6,000 university students will benefit from Santander

scholarships

Training • 8,500 trained SMEs

International • 1,500 pymes with international initiatives

Employment • 10,000 SMEs in job portal/5,000 scholarships

Main goals in 2014

“Partners for growth”

20,000 SMEs will benefit from Advance Development

Conclusions

2014 ADVANCE PROGRAMME

• SMEs are a strategic segment for the country and for Santander

Spain

• Banco Santander is launching:

• A unique programme in the market

• With a range of products with very competitive financial

conditions and

• Based on entirely new non-financial solutions to support SMEs

EUR 31 billion available to SMEs

20,000 SMEs in non-financial programme

SME GLOBAL STRATEGY