Santander: 04/04/2025 - Banco Santander SA: Hector Grisi's speech (jga 2025 04 04 hector grisi s speech en)

MR. HÉCTOR GRISI'S SPEECH 2025 ANNUAL GENERAL MEETING Good morning shareholders and thank you very much for attending this Annual General Meeting. Today I would like to focus on the following three main points: Before delving into the numbers, results and profits, I would like to remind you that what gives meaning to what we do are all the people who are part of Santander. Therefore, I would like to start by thanking all of you. Thanks to our customers, and to you, our shareholders, for the trust that you have in us and, particularly, in the Group's value creation strategy. I would also like to thank the more than 200,000 employees who work at Santander. They are 200,000 stories of dedication, effort, commitment and collaboration; 200,000 people who care not only about achieving and exceeding the goals we set in a way that is Simple, Personal and Fair. WITH THAT, I WOULD NOW LIKE TO TAKE YOU THROUGH THE MANAGEMENT ACTIONS CARRIED OUT IN 2024 THAT ENABLED US TO ACHIEVE EXCELLENT RESULTS. [1. 2024 RESULTS: EXECUTION OF MANAGEMENT PRIORITIES] Our main goal in 2024 was to extract the maximum value from Santander's business model, a model that very few competitors can replicate and which represents a significant competitive advantage, based on three fundamental pillars: We aimed to realize as much potential from this advantage as possible. To do so, we focused on collaboration, materializing existing synergies at a global level and capturing the benefits from these initiatives in the form of operational leverage. In 2024: As a result, profit reached an all-time high of EUR 12,574 million, as we made excellent progress towards a simpler and more integrated model. This supported efficiency and profitability gains. We continued to prove our ability to generate capital organically , which enabled us to report the highest capital ratio in our history, distribute more dividends and achieve double-digit growth in value creation . This positioned us at the end of the year as the bank with the highest capital generation in 2024 of the main banks both in the eurozone and globally, thanks to: - Greater results, making us the second largest bank in terms of profit among global players, mainly due to the better relative performance of net interest income, good management of costs and provisions... - ...and a strong improvement in profitability, driven by our transformation plan and disciplined capital allocation. This excellent performance enabled us to exceed all the financial targets we set for 2024: As a result, TNAV per share plus cash dividend per share grew double digits year-on-year. To achieve this record result, we focused on the following five management levers : FIRSTLY, TRANSFORMATION Our strategy, ONE Transformation, aims to simplify our product offering and automate processes. This way, we can provide better customer experience, facilitate their interactions with the bank and progress towards the Group's goal of becoming our customers' primary bank and increasing transactionality. It also promotes network effects through collaboration, which structurally improves operational leverage, achieving higher revenue and lower costs at the same time. SECONDLY, THE IMPLEMENTATION OF COMMON PLATFORMS Our global scale enables us to identify what we do best in each unit and export it to the rest of the Group. In terms of technology, this translates into developing the most innovative common platforms at the Group level, which allows us to deploy the best technology and operate it centrally. In 2024, we focused on continuing to develop, implement and migrate activity and customers to our new common platforms. This enables us to drive digitalization to enhance service and better meet our customers' needs, while also reducing operating costs. This generates efficiencies, enabling us to compete on equal terms with other market players, who have simpler and leaner structures, and to continue building our aim of becoming a digital bank with branches. THIRDLY, ACTIVELY MANAGE RISK AND BALANCE SHEET SENSITIVITY Active risk management, together with the good labour markets across our footprint, enabled us to maintain our solid credit quality, with cost of risk at controlled levels and improving compared to 2023. After having focused on maximizing net interest income in an environment of higher interest rates in recent years, asset and liability management in 2024 focused on positioning our balance sheets for the new interest rate cycles, significantly reducing their sensitivity to rates and, thus, mitigating future impacts. So, we activated one of the main mechanisms available to banks to manage our balance sheets, which is investments in our ALCO portfolio, comprising mainly government bonds. At the same time, we maintained a solid liquidity position throughout the year, with strong and diversified access to wholesale funding markets and a stable customer deposit base. Additionally, we continue to hedge a large portion of our expected results in the most volatile currencies that have a higher depreciation risk. All these measures are not only reflected in the 2024 results but also position us well for the year ahead. FOURTHLY, STRONG BALANCE SHEET AND DISCIPLINED CAPITAL ALLOCATION In a Group such as Santander, which is one of the largest in the world in terms of assets, it is essential to centrally manage our asset portfolio we originate at local level. In the past year, we expanded our risk transfer and asset mobilization capabilities through the creation of a fully-dedicated global team, the Global Asset Desk, which has already become a benchmark in the market. Thanks to this team, we managed to free up capital equivalent to more than EUR 60 billion in risk-weighted assets in 2024, at a cost of capital that is half of the return on the new origination. We also conducted a granular analysis of all portfolios and businesses to ensure an optimal allocation of the Group's capital to opportunities that generate the most value for our shareholders. As a result, our front-book RoTE was 23% in 2024, well above our portfolio's average return. This new business profitability enables us to reinvest the third of our balance sheet that matures each year at much higher RoTEs. This, along with the allocation of free capital to the most profitable opportunities, substantially improves Santander's profitability and capital generation. AS A RESULT OF ALL THE ABOVE, WE INCREASED VALUE CREATION FOR OUR SHAREHOLDERS Total remuneration paid to our shareholders in 2024, through cash dividends and share buybacks, was 34% higher than that paid in 2023. As a result of everything I've just mentioned, we achieved double-digit growth in value creation for the second consecutive year, something we expect will continue in the coming years. Moreover, we still believe that share buybacks are one of the best ways to invest capital and create value for shareholders. Therefore, as the Chair said earlier, the board intends to allocate up to EUR 10 billion through share buybacks corresponding to 2025 and 2026, stemming from the implementation of our shareholder remuneration policy and additional buybacks to distribute excess capital. [ 2. GLOBAL BUSINESS PERFORMANCE] LET ME NOW TAKE A LOOK AT THE FINANCIAL PERFORMANCE OF OUR GLOBAL BUSINESSES IN 2024. An important growth driver in the CIB and Wealth businesses is collaboration, which leverages the benefits of connectivity between businesses as well as across the Group's countries. 3. [MANAGEMENT PRIORITIES FOR OUR GLOBAL BUSINESSES IN 2025] AFTER AN EXCELLENT 2024, 2025 IS NOW WELL UNDERWAY. The good starting point thanks to the strong end of 2024 for the global economy allows us to address the potential instability of certain geopolitical risks this year. It is precisely in times of uncertainty that diversification becomes more important, acting as a stabilizing element. In Santander's case, since the publication of our Q4, the market is clearly recognizing both the 2024 results and the value of our business model. In fact, in the first quarter of 2025, Santander's market capitalization increased around 40%, the best performance among their peers. The value of the Group's business model is something we have been proving for years, and it enabled us to achieve record profits for three consecutive years. And we are confident that we will exceed it yet again in 2025, improving profitability through our global businesses. We expect to achieve year-on-year profitability growth in Consumer, CIB and Payments, while maintaining high levels in Wealth. In Retail, we also expect to maintain solid profitability, despite the rate environment, supported by the initiatives to reduce balance sheet sensitivity and our efforts to become the primary bank for our customers, driving good fee performance, with controlled costs and provisions. We will continue to foster efficient capital allocation, with all businesses working closely with the capital management team to support value creation for you, our shareholders. To achieve this, we have set the following management priorities: