Message from José Antonio Álvarez

Grupo Santander results again underscored the soundness of our business model.

Grupo Santander carried out its business in 2017 in a more favourable environment, one of the most positive in recent years. The global economy and, in particular, the economies of the countries where the Bank operates, secured the upswing seen in the second half of 2016. The low interest rates in mature economies continued to be the most unfavourable factor for banking activity.

In this environment, Grupo Santander results again underscored the soundness of our business model. Underlying profit grew at double-digit rates at Group level and in most countries, the RoTE was one of the sector’s highest and our capital ratios increased further.

I would like to thank our more than 200,000 professionals, as the results achieved in 2017 would not have been possible without the contribution of each one of them.

Our objective is to consolidate our position as the best retail and commercial bank for our employees, customers, shareholders and society in general. To this end, we must continue to strengthen the pillars of our corporate culture, being Simple, Personal and Fair in all we do. We are convinced this is the best way to lay the foundations for progress and improve not only the quality of the income statement, but also the company’s value and the share price.

The Group’s performance in 2017

Our priorities were to:

  1. Continue our commercial transformation, both in the traditional banks as well as via new units that work independently under a start-up model. Their objective is to create agile and innovative platforms, focused on creating synergies for the Group. In 2017 we invested around €1 billion in global and digitalisation projects, and we have similar plans for the coming years.
  2. Strengthen our position in the markets in which we operate.. As well as organic growth in most of our countries (mainly in developing markets), 2017 presented us with new acquisition opportunities. The most notable transaction was the purchase of Banco Popular, which enabled us to reinforce our leadership in Spain and Portugal, with the clear aim of generating shareholder value. We also improved our position in retail banking in Argentina, increased stake in Santander Consumer USA and reached an agreement to acquire the retail and commercial business of Deutsche Bank in Poland.
  3. Exit non-core businesses in order to improve the Bank’s profitability. Of note were the sales of 51% of Banco Popular’s real estate business to Blackstone and TotalBank in the United States.

We posted an attributable profit of €6,619 million, 7% more than in 2016. These results were hit by some non-recurring impacts amounting to a net negative €897 million, mainly to do with amortisation of goodwill and ongoing optimisation plans.

Profit before extraordinary results was 14% higher at €7,516 million. Nine of the core units increased their earnings, seven of them at double-digit rates.

Gross income rose 10% to a record €48,392 million, driven by double-digit growth in net interest income and fee income which together generated 95% of revenues. This enabled us to grow consistently and recurrently.

Attributable profit


Gross income


Record gross income

  • Record gross income
  • Double-digit growth in net interest income and fee income

The number of digital customers grew 21% and loyal clients 13%. Their increase was important for securing quality growth in the income statement.

Loyal customers and Digital customers

Operating expenses remained stable in real terms and on a like-for-like basis, despite higher regulatory costs and investments in transformation. The focus on operational excellence and digitalisation has enabled us to continue to be the reference in efficiency terms, while our units in seven of our core countries are among the top three in customer satisfaction.

The 4% decline in loan-loss provisions and the continued improvement in the cost of credit (to 1.07%) reflect a proactive risk management that has enabled us to keep on enhancing the quality of the portfolio and reduce the NPL ratio to 4.08%.

We are conscious of the importance of strengthening the risk culture of all the Group’s employees, bolstering, among others, processes in cyber security, prevention of money laundering and operational and reputational risk.

Operating expenses stable in real terms and on a like-for-like basis

Operating expenses stable in real terms and on a like-for-like basis

Cost of credit improvement and proactive risk management

Cost of credit improvement and proactive risk management

The balance sheet:

  • Lending, which rose 12%, was balanced between individual customers, consumer credit, SME s and corporates. Customer funds, increased 17%. Both loans and funds were driven by strong growth in developing countries and by the integration of Banco Popular. Excluding Popular, growth would have been 2% and 8%, respectively. All figures are stated at constant exchange rates.
  • The Bank’s liquidity position is very comfortable, as is that of all its units. The liquidity ratios easily meet the minimum requirements.
  • We have generated capital quarter after quarter. In fully loaded terms, we reached a CET 1 ratio of 10.84%, while comfortably meeting the legal requirements.

We ended 2017 with an underlying RoTE of 11.8%, one of the highest among international banks, and an underlying RoRWA of 1.5%, which we expect to keep on improving in 2018

We ended 2017 with an underlying RoTE of 11.8%, one of the highest among international banks, and an underlying RoRWA of 1.5%, which we expect to keep on improving in 2018, as we take measures to more efficiently manage risk weighted assets and consumption of capital.

The market positively assessed our strategy and its impact on business. The total shareholder return (TSR) was 16.6% in 2017.

Performance of the units in 2017

There are two aspects of business that I consider particularly important.

The first is the excellent geographic diversification of our results between mature and developing markets, which gives us stability, recurrence and growth greater than that of our competitors.

The second is that we see a consistent improvement in countries’ profits as well as in their main metrics: customers, cost of credit, efficiency and profitability.

Spain excluding Popular

We combined the acquisition of Banco Popular and the first steps of its integration with the execution of our strategy in Santander and a very positive business performance.

The 1l2l3 account helped us to add close to 600,000 loyal customers (+42%) in 2017 and the number of digital customers rose 15%, spurred by the launch of Digilosofía. The new means of payment strategy led to record sales of cards and we are the mobile payments leader in Spain. This growth produced market share gains in the main products.

Of note in results were the increase in fee income, lower operating expenses and the decline in loan-loss provisions, due to the better credit quality, all of which offset the pressure on net interest income and boosted profits.

€1,180 (+46%)


Banco Popular’s incorporation produced a loss of €37 million, due to extraordinary charges made for integration costs. Excluding these, underlying attributable profit was €263 million.

We began to integrate Banco Popular, a process that is expected to be completed in the next two years. We have been very careful to ensure this process is done in the most reasonable way in order to attain the efficiency levels promised to the market, but also looking after those affected and treating them appropriately.

A commercial action was also taken for customers of Santander and Popular who were shareholders of Banco Popular. This was successfully completed, with 78% acceptance of the loyalty bonds subscription offer.

Lastly, I would like to point out that we see a recovery of business momentum, reflected in growth in deposits and a slower decline in loans, which were stable in the fourth quarter.


United Kingdom

Business was carried out in an environment of lower growth and uncertainty over Brexit. Customer loyalty remains our priority, aided by 1I2I3 World, the commercial transformation and operational excellence.

Activity evolved very positively. The current account balances of individuals, mortgages and corporate loans and deposits all increased. The results in the upper part of the income statement were robust, although specific provisions and amortisation of intangibles dented profit.

€1,498 (-3%*)

Santander Consumer Finance

SCF is Europe’s consumer finance leader. The unit continued to advance in its strategy of striking brand agreements with car manufacturers and European distributors.

Profit grew for the eighth year running, spurred by a positive trend in revenues, larger volumes and high geographic diversification. The efficiency ratio and cost of credit were also at historically low levels. RoTE increased to 16%.

€1,168 (+4%*)

United States

Santander US passed the Federal Reserve’s profitability of retail and commercial banking, reducing duplications in costs and optimising the structure of capital, as Santander Holding USA begins to normalise its policy of paying dividends to the Group.

Underlying profit rose 5%. The final profit was hit by impacts stemming from the hurricanes, increased stake in Santander Consumer USA and the tax reform.

€332 (-7%*)


The acquisitions of Banif and Popular bolstered Santander Totta’s position as the largest private sector bank in Portugal, gaining market share in new lending to companies as well as in mortgages and positioning it as the country’s most profitable bank.

In addition, the good performance of the 1I2I3 World programme facilitated organic growth in loyal and digital customers, increased volumes and boosted profit by 10%.

€440 (+10%)


2017 was an excellent year for our franchise in Brazil. We gained market share, and profit evolution reflected the profitable, sustainable and customer-focused business model, coupled with solid organic growth.

Profit was 34% higher, growth that was well above the sector, underpinned by a significant increase in net interest income and fee income, the fruit of the commercial strategy and greater customer loyalty. These growth rates, together with a lower cost of credit, pushed up RoTE to 17%, higher than in 2016.

The strength of our franchise, combined with better macroeconomic prospects, make us optimistic about recurring results in the future.

€2,544 (+34%*)


We are strengthening the distribution model and investing in systems and infrastructure that focus on multichannel innovation, digitalisation and the launch of new business initiatives.

Attributable profit rose 16%. Of note was the 13% increase in net interest income. The RoTE reached more than 19%.

€710 (+16%*)


We continued to consolidate our commercial transformation, launching digital onboarding, the first fully digital system, and opening more WorkCafé branches. Penetration of high income, SME and large company segments remained a priority, and we began to recover growth in the mass consumer market.

Profit was 12% higher, thanks to a moderate rise in gross income, control of operating expenses and a lower cost of credit.

€586 (+12%*)


Our bank has a leading position in a country with a high growth potential of the banking system. A greater financial stability environment should enable us to capture this growth and translate it into profits.

Attributable profit was 14% higher than in 2016, driven by gross income growth.

€359 (+14%*)


At the end of 2017 we announced the agreement to acquire Deutsche Bank’s commercial and private banking business in Poland, which will strengthen our position (market share of 12% in loans and 11% in deposits). Our aim is to continue to lead in digital channels and innovation.

Profit was in line with 2016 when it benefited from capital gains. Excluding this impact, profit was 8% higher thanks to growth in gross income, control of costs and lower provisions.

The units in Uruguay and Peru increased their profits 19% and 7%, respectively. Uruguay’s were driven by net interest income and fee income. Peru maintained activity, despite the economic downturn, and the cost of credit dropped.

€300 (-3%*)

Global Segments

Global Corporate Banking, our wholesale banking business, gained market share in high value-added businesses, under a strategy that places particular importance on efficient use of capital. Santander is securing its leadership and market position in Spain, Portugal and Latin America. Also noteworthy was the significant growth in our cash management platform for multinationals and a continuous improvement in the services for retail clients. GCB is establishing itself as one of the most profitable units in RoRWA terms.

Lastly, we created the Wealth Management Division, which will integrate the private banking businesses and asset management. The creation of this division means focusing efforts on a segment that is efficient in terms of capital consumption and which boosts fee income.

€1,821 (+1%*)

2018 Objectives

The estimates for 2018 point to GD P growth of around 2% in both mature economies as well as in Latin America.

Banco Santander's solid position in 10 core markets puts us in a privileged position to seize the opportunities that arise

Banco Santander’s solid position in its 10 core markets puts us in a privileged position to seize the opportunities that arise. Our focus in mature markets will be on improving profitability, adapting the business models in order to increase customer satisfaction and gain market share. In developing countries, we will try to use the good conditions to gain market share and improve, even more, our operational efficiency.

We attained our goals in 2017 and begin 2018 in a good position to reach those for this year announced at the Group Strategy Update.

2018 financial objectives announced at the Group Strategy Update


> 11,5%

Earnings per share


Cash dividend per share


Fee income

Average growth 2015-2018

Efficiency ratio


Cost of credit

Average cost 2015-2018

Fully-loaded CET1

> 11%

In order to achieve these objectives, we have set the following goals and management priorities:

  • Improve the quality of the income statement in an environment with significant pressure on spreads.
  • Gain market share on a sustained basis, as our growth opportunities are in those markets in which we already operate.
  • Continue the commercial and digital transformation without affecting the efficiency ratio. Offset the investment plan with measures to optimise costs.
  • Improve the main risk metrics. Manage the higher loan-loss provisions derived from greater lending and the impact of the new accounting regulation on recognition of provisions (IFRS9).

I would like to end by thanking our more than four million shareholders for their confidence in Banco Santander. We are working to give them personalised attention, listening to their concerns and informing the market continuously and transparently on our daily activities.

Our priority is to increase the profitability of their investment in a sustainable way and to this end we are dedicating our best efforts.

Sign José Antonio Álvarez

José Antonio Álvarez
Chief executive officer