Business Context and Reporting Period
This Form 6-K filing covers Banco Santander, S.A.'s interim consolidated results for the six-month period ended June 30, 2024 (H1 2024). The report was approved by the Board of Directors on July 23, 2024. The Group operates in a global environment characterized by a gentle economic slowdown, stable interest rates, and moderating inflation, though geopolitical tensions and electoral processes in Europe and Latin America persist. The Group has reorganized its reporting into five primary global segments: Retail & Commercial Banking, Digital Consumer Bank, Corporate & Investment Banking, Wealth Management & Insurance, and Payments.
Key Financial Metrics
| Metric | H1 2024 (EUR million) | H1 2023 (EUR million) | Change (%) |
|---|---|---|---|
| Total Income | 30,715 | 28,010 | +9.7% |
| Net Operating Income | 17,802 | 15,531 | +14.6% |
| Profit Before Tax | 9,508 | 8,090 | +17.5% |
| Profit Attributable to Parent | 6,059 | 5,241 | +15.6% |
| Earnings Per Share (EPS) | 0.37 | 0.31 | +19.2% |
| Return on Tangible Equity (RoTE) | 15.9% | 14.5% | +1.4 pp |
| Efficiency Ratio | 41.6% | 44.2% | -2.6 pp |
| Cost of Risk | 1.21% | 1.08% | +13 bps |
| Non-Performing Loan (NPL) Ratio | 3.02% | 3.07% | -5 bps |
| Fully-Loaded CET1 Ratio | 12.5% | 12.2% | +30 bps |
| Liquidity Coverage Ratio (LCR) | 163% | 158% | +5 pp |
Material Changes vs. Prior Period
- Revenue Growth: Total income increased 10% year-on-year, driven by a 12% rise in Net Interest Income (NII) and a 6% increase in Net Fee Income. NII growth was widespread, supported by Retail in Europe and South America, and strong activity in CIB and Wealth.
- Profitability: Profit attributable to the parent rose 16% to EUR 6.06 billion. This growth was achieved despite specific charges, including a EUR 335 million temporary levy on revenue in Spain (Q1) and EUR 452 million in charges in Q2 related to CHF mortgage provisions in Poland and write-downs in the Payments segment.
- Efficiency: The efficiency ratio improved to 41.6%, beating the initial target of under 43%, driven by transformation efforts (ONE Transformation) and operational leverage.
- Balance Sheet: Loans and advances to customers grew 2% year-on-year to EUR 1.07 trillion. Customer funds increased 5% year-on-year, with strong growth in time deposits and mutual funds.
- Segment Performance: Retail & Commercial Banking profit surged 37% (driven by revenue and lower provisions in Europe). Digital Consumer Bank profit grew 4%. CIB profit declined 5% due to higher investment costs and lower trading gains, despite record revenue. Wealth Management profit increased 15%.
Guidance, Outlook, and Risks
- Guidance Upgrade: Management upgraded its full-year targets based on H1 performance:
- Revenue: Upgraded from mid-single digit to high-single digit growth.
- Efficiency: Upgraded from under 43% to close to 42%.
- Profitability (RoTE): Upgraded from 16% to more than 16%.
- Shareholder Remuneration: The Group maintained its policy of distributing approximately 50% of reported profit. Total remuneration for 2023 results was EUR 5.55 billion (dividends and buybacks). A second buyback program for 2023 results was completed in June 2024.
- Risks and Contingencies:
- Legal/Regulatory: Significant exposure to litigation regarding CHF-indexed mortgages in Poland. Provisions are considered sufficient, but outcomes remain uncertain pending Supreme Court rulings.
- Operational/Cyber: An unauthorized access to a third-party hosted database occurred in May 2024. Measures were implemented to contain the incident, but operational risk losses increased slightly in Q2.
- Argentina: The Group began applying a theoretical exchange rate for the Argentine peso in Q2 2024 to better reflect inflation, which impacts comparability of results.
Key Facts for Investor Verification
- CHF Mortgage Provisions (Poland): Verify the adequacy of provisions (EUR 209 million in Q2) regarding the legal risk of CHF-indexed loans following recent Polish Supreme Court rulings.
- Argentina Exchange Rate: Confirm the impact of the new theoretical exchange rate applied from Q2 2024 on the reported results and future comparability.
- Payments Segment Write-downs: Review the EUR 243 million write-downs related to the discontinuation of the merchant platform in Germany and Superdigital in Latin America.
- Cost of Risk Normalization: Monitor the normalization of the Cost of Risk in the Digital Consumer Bank segment (2.17%), which is expected to continue rising towards pre-pandemic levels.
- Share Buybacks: Verify the execution of the second 2023 buyback program (EUR 1.46 billion) and the subsequent capital reduction.