Banco Santander S A : Portugal FY'23

31 January 2024

Portugal

2023

Earnings Presentation

Important Information

Non-IFRS and alternative performance measures

This presentation contains financial information prepared according to International Financial Reporting Standards (IFRS) and taken from our consolidated financial statements, as well as alternative performance measures (APMs) as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority (ESMA) on 5 October 2015, and other non-IFRS measures. The APMs and non-IFRS measures were calculated with information from Grupo Santander; however, they are neither defined or detailed in the applicable financial reporting framework nor audited or reviewed by our auditors. We use these APMs and non-IFRS measures when planning, monitoring and evaluating our performance. We consider them to be useful metrics for our management and investors to compare operating performance between periods. APMs we use are presented unless otherwise specified on a constant FX basis, which is computed by adjusting comparative period reported data for the effects of foreign currency translation differences, which distort period-on-period comparisons. Nonetheless, the APMs and non-IFRS measures are supplemental information; their purpose is not to substitute IFRS measures. Furthermore, companies in our industry and others may calculate or use APMs and non-IFRS measures differently, thus making them less useful for comparison purposes. APMs using ESG labels have not been calculated in accordance with the Taxonomy Regulation or with the indicators for principal adverse impact in SFDR. For further details on APMs and Non-IFRS Measures, including their definition or a reconciliation between any applicable management indicators and the financial data presented in the consolidated financial statements prepared under IFRS, please see the 2022 Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission (the SEC) on 1 March 2023 (https://www.santander.com/content/dam/santander-

com/en/documentos/informacion-sobre-resultados-semestrales-y-anuales-suministrada-a-la-sec/2023/sec-2022-annual-20-f-2022-en.pdf), as well as the section "Alternative performance measures" of Banco Santander, S.A. (Santander) Q4 2023 Financial Report, published on 31 January 2024 (https://www.santander.com/en/shareholders-and-investors/financial-and-economic-information#quarterly-results). Underlying measures, which are included in this document, are non-IFRS measures.

The businesses included in each of our geographic segments and the accounting principles under which their results are presented here may differ from the businesses included and local applicable accounting principles of our public subsidiaries in such geographies. Accordingly, the results of operations and trends shown for our geographic segments may differ materially from those of such subsidiaries.

Non-financial information

This presentation contains, in addition to financial information, non-financial information (NFI), including environmental, social and governance-related metrics, statements, goals, commitments and opinions.

NFI is included to comply with Spanish Act 11/2018 on non-financial information and diversity and to provide a broader view of our impact. NFI is not audited nor reviewed by an external auditor. NFI is prepared following various external and internal frameworks, reporting guidelines and measurement, collection and verification methods and practices, which are materially different from those applicable to financial information and are in many cases emerging and evolving. NFI is based on various materiality thresholds, estimates, assumptions, judgments and underlying data derived internally and from third parties. NFI is thus subject to significant measurement uncertainties, may not be comparable to NFI of other companies or over time or across periods and its inclusion is not meant to imply that the information is fit for any particular purpose or that it is material to us under mandatory reporting standards. NFI is for informational purposes only and without any liability being accepted in connection with it except where such liability cannot be limited under overriding provisions of applicable law.

Forward-looking statements

Santander hereby warns that this presentation contains "forward-looking statements" as per the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such statements can be understood through words and expressions like "expect", "project", "anticipate", "should", "intend", "probability", "risk", "VaR", "RoRAC", "RoRWA", "TNAV", "target", "goal", "objective", "estimate", "future", "commitment", "commit", "focus", "pledge" and similar expressions. They include (but are not limited to) statements on future business development, shareholder remuneration policy and NFI.

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Important Information

While these forward-looking statements represent our judgement and future expectations concerning our business developments and results may differ materially from those anticipated, expected, projected or assumed in forward-looking statements.

In particular, forward looking statements are based on current expectations and future estimates about Santander's and third-parties' operations and businesses and address matters that are uncertain to varying degrees and may change, including, but not limited to (a) expectations, targets, objectives, strategies and goals relating to environmental, social, safety and governance performance, including expectations regarding future execution of Santander's and third-parties' (including governments and other public actors) energy and climate strategies, and the underlying assumptions and estimated impacts on Santander's and third-parties' businesses related thereto; (b) Santander's and third-parties' approach, plans and expectations in relation to carbon use and targeted reductions of emissions, which may be affected by conflicting interests such as energy security; (c) changes in operations or investments under existing or future environmental laws and regulations; (d) changes in rules and regulations, regulatory requirements and internal policies, including those related to climate-related initiatives ; (e) our own decisions and actions including those affecting or changing our practices, operations, priorities, strategies, policies or procedures; and (f) the uncertainty over the scope of actions that may be required by us, governments and others to achieve goals relating to climate, environmental and social matters, as well as the evolving nature of underlying science and industry and governmental standards and regulations.

In addition, the important factors described in this presentation and other risk factors, uncertainties or contingencies detailed in our most recent Form 20-F and subsequent 6-Ks filed with, or furnished to, the SEC, as well as other unknown or unpredictable factors, could affect our future development and results and could lead to outcomes materially different from what our forward-looking statements anticipate, expect, project or assume.

Forward-looking statements are therefore aspirational, should be regarded as indicative, preliminary and for illustrative purposes only, speak only as of the date of this presentation, are informed by the knowledge, information and views available on such date and are subject to change without notice. Santander is not required to update or revise any forward-looking statements, regardless of new information, future events or otherwise, except as required by applicable law. Santander does not accept any liability in connection with forward-looking statements except where such liability cannot be limited under overriding provisions of applicable law.

Not a securities offer

This presentation and the information it contains does not constitute an offer to sell nor the solicitation of an offer to buy any securities.

Past performance does not indicate future outcomes

Statements about historical performance or growth rates must not be construed as suggesting that future performance, share price or results (including earnings per share) will necessarily be the same or higher than in a previous period. Nothing in this presentation should be taken as a profit and loss forecast.

Third Party Information

In this presentation, Santander relies on and refers to certain information and statistics obtained from publicly-available information and third-party sources, which it believes to be reliable. Neither Santander nor its directors, officers and employees have independently verified the accuracy or completeness of any such publicly-available and third-party information, make any representation or warranty as to the quality, fitness for a particular purpose, non-infringement, accuracy or completeness of such information or undertake any obligation to update such information after the date of this presentation. In no event shall Santander be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for inaccuracies or errors in, or omission from, such publicly-available and third-party information contained herein. Any sources of publicly-available information and third-party information referred or contained herein retain all rights with respect to such information and use of such information herein shall not be deemed to grant a license to any third party.

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Index

1

2

3

4

5

Financial	Strategy and	Results	Concluding	Appendix
system	business		remarks

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Loan and deposit volumes continued to decrease YoY but at a lower pace

		Total loans (€ bn)
	228.1	227.0	227.9	227.4	226.5
YoY	1.9
(%)
	-0.2
		-0.5	-1.1	-0.8
	Dec-22	Mar-23	Jun-23	Sep-23	Nov-23

		Total customer deposits (€ bn)
	291.4	283.6	286.6	285.2	287.2
YoY	6.4
(%)		1.5
		-0.3	-0.9	-0.8
	Dec-22	Mar-23	Jun-23	Sep-23	Nov-23

• System loan growth continued its downward trend, reflecting lower demand in a context of higher interest rates, as households face higher cost of living and companies higher financing costs.
• Tight monetary policy, with positive real interest rates, is leading to a decline in net new loan origination, as companies and households show less willingness to invest and consume.
• Asset quality remained steady at historically low levels.
• Deposits are stabilizing, as interest rate increases have been gradually passed through to deposit remuneration. However pass-through decelerated at the end of the year as banks kept a targeted approach to the pricing of deposits.
• Nevertheless, households and corporates continue to use their excess liquidity to repay their loans, although at a more gradual pace.
• Deposit stability has allowed banks to maintain a balanced funding structure in the context of high interest rates.

Source: Statistics Portugal, Ministry of Finance, Santander Portugal forecasts and estimates.

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Index

1

2

3

4

5

Financial	Strategy and	Results	Concluding	Appendix
system	business		remarks

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Santander Portugal aims to provide best-in-class service to its customers, maintaining a leadership position in lending

KEY DATA			2023	YoY Var.
1			€37.7bn	-6.0%
Customer loans
2			€40.6bn	-3.6%
Customer funds
Attributable profit			€896mn	+67.9%
RoTE			25.9%	+10.9pp
Efficiency ratio			27.3%	-11.4pp
Loans market share	3		16.6%	-83bps
Deposits market share	3	13.0%	-143bps
Total customers			2.9mn	-0.5%
Digital customers			1.2mn	+5.6%
Branches			376	-1.8%
Employees			4,945	-0.1%

Strategic Priorities

• Continue to implement our transformation plan with the aim of improving service quality and increasing our customer base
• Grow organically in terms of profitable market share and with adequate capital remuneration
• Maintain our position as market leaders in efficiency, improving the cost base
• Maintain an appropriate risk policy with high credit quality and strong capital position

(1)	Excluding reverse repos.	7
(2)	Excluding repos.
(3)	As of Sep-23.

Santander Portugal continues to drive its commercial and digital transformation, resulting in increased loyalty and better customer experience

Total customers (mn)

-1%

2.9 2.9

Active customers (mn)

	+3%
1.8	1.8

Digital customers (mn)

+6%

1.1 1.2

Dec-22

Dec-23

Dec-22

Dec-23

Dec-22

Dec-23

• We continue to execute our commercial and digital transformation, aimed at providing first-class service to customers, by simplifying its offer and processes, which is:
• • Contributing to the sustained growth in the number of active customers (+3% YoY); and
  • Translating into the continued increase in digital customers (+6%), underpinned by our focus on providing a seamless experience across channels.

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We are fully committed to helping people and businesses prosper

Individuals

Payroll Campaign

Businesses

Better Service

Kids & Teen Campaign

Business Current Accounts Campaign

University Students Campaign

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Higher interest rates caused households and corporates to deleverage, affecting new business and stock of mortgages

Total customer loans1 (€ bn)

40.1	39.3	38.7	37.8	37.7

Dec-22

Mar-23

Jun-23

Sep-23

Dec-23

	Dec-23	Dec-22	YoY (%)	QoQ (%)
Individuals2	24.4	25.6	-4.7	-0.5
o/w Mortgages	21.9	23.0	-4.7	-0.5
SMEs	5.6	6.0	-7.0	-0.6
Corporates & Institutions	2.7	3.2	-15.6	-5.2
CIB	2.0	2.5	-20.4	-0.2
Other	3.0	2.8	8.1	5.5
Total customer loans	37.7	40.1	-6.0	-0.4

Group criteria.

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1. Excludes reverse repos.
2. Includes Private Banking.