Business context and reporting period
Banco Santander, S.A.’s Form 20-F is an audited annual report for the fiscal year ended 31 December 2021, prepared under IFRS as issued by the IASB. It is not a standalone 2021 Q4 report; the filing does not provide a clear set of Q4-only financial results. Santander is a diversified banking group operating across Europe, North America and South America, with retail banking, consumer finance, corporate and investment banking, wealth management, insurance and payments businesses.
Financial results and condition
| Metric | 2021 | 2020 comparable |
|---|---|---|
| Total income | €46.4bn | €44.3bn reported |
| Net interest income | €33.4bn | €32.0bn |
| Net fee income | €10.5bn | €10.0bn |
| Profit before tax, statutory | €14.5bn | Loss of €2.1bn |
| Profit attributable to the parent, statutory | €8.1bn | Loss of €8.8bn |
| Underlying profit attributable to the parent | €8.7bn | €5.1bn |
| Underlying RoTE / statutory RoTE | 12.73% / 11.96% | 7.44% / 1.95% |
| Efficiency ratio | 46.2% | 47.0% |
| Cost of credit / NPL ratio / coverage ratio | 0.77% / 3.16% / 71% | 1.28% / 3.21% / 76% |
Income growth was broad-based. Total income rose 4.8% in reported euros and 7.7% excluding foreign-exchange movements; the underlying results discussion reports 6.9% growth excluding foreign exchange. Net interest income increased 4.3% reported (7.1% excluding FX), and net fee income increased 4.9% (8.1% excluding FX). The Group reported an all-time record underlying profit before tax of €15.3bn.
At 31 December 2021, total assets were €1,595.8bn, loans and advances to customers €972.7bn, customer deposits €918.3bn, total customer funds €1,153.7bn and total equity €97.1bn. The fully loaded CET1 ratio was 12.12% (12.51% phased-in), and the fully loaded total capital ratio was 16.41%. Liquidity indicators included an LCR of 163%, NSFR of 126% and net loan-to-deposit ratio of 106%. Cash, cash balances at central banks and other demand deposits were €210.7bn.
The consolidated cash flow statement reports operating cash flow of €56.7bn, investing cash flow of -€3.7bn and financing cash flow of -€1.3bn. Cash and cash equivalents increased by €56.9bn during the year, including a €5.2bn favorable foreign-exchange effect. These bank cash-flow figures should be interpreted alongside movements in deposits and other financial balances.
Material changes versus the prior year
- Underlying attributable profit increased 70.3% reported (77.8% excluding FX), reflecting higher income, lower loan-loss provisions and improved operating performance.
- Statutory results reversed from a large 2020 loss to profit in 2021. The comparison is heavily affected by 2020’s €10.1bn goodwill impairment, €2.5bn deferred-tax-asset valuation adjustment and €1.3bn restructuring costs. 2021 included €530m of restructuring costs.
- Impairment of financial assets fell 40.2% to €7.4bn; Santander said approximately €750m of covid-related provisions were released during 2021. Cost of credit fell by 51 basis points.
- Loans grew 6.2% reported, while gross customer loans excluding reverse repos grew 4% in constant euros. Customer deposits rose 8.1% reported; customer funds excluding repos increased 7% in constant euros.
- Fully loaded CET1 increased 23 basis points to 12.12%. Organic capital generation was strong, although shareholder remuneration, RWA growth, regulatory and model changes, market movements and other items affected the ratio.
Outlook, commentary, risks and unusual items
Management’s 2022 goals were mid-single-digit revenue growth in constant euros, a 45% cost-to-income ratio, RoTE above 13%, fully loaded CET1 of 12% and shareholder remuneration of about 40% of underlying profit. The intended remuneration split was approximately equal between cash dividends and buybacks, subject to corporate and regulatory approvals. Santander also targeted €1bn of run-rate savings from its European common operating model by the end of 2022 and indicated technology investment of about €2bn per year.
For 2021 results, the Group paid an interim cash dividend of €0.0485 per share and completed a €841m buyback. The board proposed a final cash dividend of €0.0515 per share and a further €865m buyback, subject to shareholder and regulatory approval. The announced acquisition of the remaining Santander Consumer USA minority interest closed on 31 January 2022; the Amherst Pierpont acquisition remained subject to completion and regulatory approvals.
Management described recovery alongside inflation, supply-chain and labour-market constraints, changing interest rates and continuing pandemic uncertainty. Principal disclosed risks include credit losses and collateral values, interest-rate and foreign-exchange movements, funding and liquidity access, regulatory and capital changes, cyber and operational incidents, financial crime, model risk, litigation, climate transition and physical risks, and execution and integration of strategic initiatives. Forward-looking statements are not guarantees; actual results may differ materially.
PwC issued unqualified opinions on the IFRS consolidated financial statements and on the effectiveness of internal control over financial reporting as of year-end. Critical audit matters included impairment estimates for customer loans, goodwill impairment assessments and provisions for contingent liabilities. The filing reports €9.6bn of total provisions, including €2.0bn for taxes and other legal contingencies. It describes a range of ongoing proceedings; outcomes and potential losses may remain uncertain.
Most important facts for investors to verify
- Reconcile statutory results with underlying measures and confirm the treatment of the 2020 goodwill, deferred tax and restructuring items.
- Review credit quality by geography and portfolio, especially the rise in NPLs in North America and South America, coverage changes, remaining covid-related overlays and the performance of loans after payment holidays or government support.
- Confirm capital headroom after shareholder distributions, regulatory requirements and the closed SC USA minority acquisition; assess the pending Amherst Pierpont transaction separately.
- Verify approval and execution of the proposed final dividend and second buyback, and the conditions attached to the 2022 remuneration outlook.
- Assess the assumptions, sensitivity and timing of material legal, tax, goodwill, pension and climate-related exposures; the filing does not provide a single clear quantified total for possible future litigation losses.
- Use audited cash flow and balance-sheet disclosures to assess liquidity and funding, bearing in mind that the reported bank cash-flow movements are affected by customer deposits and other financial activity.