Banco Santander(SAN) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The Q1 attributable profit was €2.5 billion, representing an 18% increase year-on-year in underlying profit and a 58% increase compared to the previous year [6][10] - The return on tangible equity improved to 14.2%, and earnings per share (EPS) grew by 22% compared to Q1 2021 [6][22] - The tangible net asset value per share increased to €4.29, up 4% quarter-on-quarter and 13% year-on-year [7][22] - The cost of credit remained stable at 0.77%, below the annual guidance, while the non-performing loan (NPL) ratio was 3.26% [7][18] Business Line Data and Key Metrics Changes - Net interest income (NII) grew by 6% in constant euros, driven by higher volumes and interest rates across various countries [12] - Net fee income increased by 6% in constant euros, supported by improved activity in high value-added products and services [13] - The digital consumer bank saw new lending increase by 17%, with profits rising in double digits [27][41] Market Data and Key Metrics Changes - In Europe, net operating income and profit achieved double-digit growth, with a return on tangible equity of 13.5% [27][28] - North America reported a return on tangible equity of 24%, with solid growth in individual and commercial loans [27][32] - South America experienced an 8% year-on-year profit growth, with a focus on customer acquisition and business opportunities [38] Company Strategy and Development Direction - The company aims to maintain cost growth below inflation while improving efficiency, targeting an efficiency ratio of 45% [6][14] - The strategy includes disciplined capital allocation and a focus on high-risk adjusted returns, with risk-weighted assets growing below loan growth [20] - The company is committed to ESG initiatives, having originated €69 billion in green finance since 2019 [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's solid starting position despite geopolitical challenges and inflationary pressures [50][51] - The outlook for Brazil remains stable, with expectations of portfolio growth in line with inflation [56] - The company anticipates maintaining a cost of risk below 1% even in the current geopolitical scenario [18][52] Other Important Information - The company announced a total shareholder remuneration of €3.4 billion, split between cash dividends and share buybacks [21] - The corporate center reported an attributable loss of €460 million, impacted by negative FX hedging results [48] Q&A Session Summary Question: Update on Brazil's situation and outlook for 2022 - Management expects portfolio growth in Brazil to align with inflation, around 10%, despite tightening credit standards [56] Question: Information on Chrysler fee agreement and U.S. cost of risk - Management confirmed a satisfactory agreement with Stellantis, expecting portfolio growth in Europe and stable origination levels in the U.S. [63][65] Question: Outlook for cost of risk in Spain - Management maintains a guidance of around 50 basis points for the cost of risk in Spain, unaffected by recent geopolitical events [80] Question: Regulatory impact and capital levels - Regulatory charges are estimated at 20 to 25 basis points for 2022, with no significant changes expected for 2023 [82]