BCDRF - Banco Santander S.A. (SAN) Q4 2023 Earnings Call Transcript

2024-01-31 09:40:10 ET

Banco Santander, S.A. (SAN)

Q4 2023 Results Conference Call

January 31, 2024 04:00 AM ET

Company Participants

Begona Morenes - Investor Relations

Ana Botin - Executive Chair

Hector Grisi - Chief Executive Officer

Jose Garcia-Cantera - Chief Financial Officer

Conference Call Participants

Ignacio Ulargui - BNP Paribas

Benjamin Toms - RBC

Antonio Reale - Bank of America

Carlos Cobo - Societe Generale

Sofie Peterzens - JPMorgan

Francisco Riquel - Alantra Equities

Andrea Filtri - Mediobanca

Ignacio Cerezo - UBS

Alvaro Serrano - Morgan Stanley

Marta Sanchez Romero - Citi

Presentation

Begona Morenes

Good morning, everybody, and welcome to Banco Santander's Conference Call to Discuss our Financial Results for the Fourth Quarter of 2023. Just as a reminder, both the results report and presentation we will be following today are available to you on our website.

I am joined here today by our Executive Chair, Ms. Ana Botin; our CEO, Mr. Hector Grisi; and our CFO, Mr. Jose Garcia-Cantera. Following their presentations, we will open the floor for any and all questions that you may have in the Q&A session.

With this, I will hand over to Ms. Botin. Ana, the floor is yours.

Ana Botin

Good morning, everybody, and thank you, Begonia. It’s great pleasure to be with you all and thank you for joining. As a reminder, we have recently announced, a last step towards one Santander. We finished the creation of the five global businesses, which we began a few years ago. I would come back to this in more detail in a moment, but I would like to note that any reference to these global businesses today relate to the new business definitions that were communicated last December.

So, the focus today will be, first, main highlights of our results and update on our strategy. Hector will then review our financial performance in greater detail and then I'll conclude with a few closing remark remarks on our guidance for '24. So, the high level messages we're presenting record results, €11.1 billion. We have delivered again on all our financial targets.

Our customer focus and scale are driving consistent, sustainable profitable growth. In '23, we added 5 million customers and our revenue increased double-digit. And we did this as we continue, and I something we've reiterated year-after-year. We are investing for the future, and we are also making excellent progress towards a more simple and more integrated model. This is the driver to the improvement in efficiency year after year, 173 basis points. And it's also the driver to increase our profitability this year to about 15% as we committed.

We have also in '23 strengthened our balance sheet, growing deposits, sound asset quality, again, below our guidance, and increasing our gross organic capital generation. So, in a summary, backed by strong profit growth with less shares following the buybacks, our earnings per share grew 21%, our TNAV and cash DPS by 15%. And once approved by shareholders, we expect our dividend per share to be near 50% higher than last year.

So, just briefly, to the income statement, again, you can see the successful execution of our strategy and a strong top line performance. And what's really important is that across all our global businesses, this is the case. Our net interest income rose 12%, 16% in constant euros in a context of higher rates and with a special good performance in our retail and commercial banking business in Europe and Mexico. Net fee income was also higher. In this case, the network effects are the driver and the two global divisions of global businesses, the corporate bank and payments driving higher fees.

Very important, the sustainability and the low volatility of our results across the cycle, I want special focus on the high quality of our revenue, where net interest income and fees are more than 95% of total income and drove the vast majority of Santander's total revenue growth. We're growing costs less than revenues, so positive operating leverage, including investment in our transformation where we're already seeing results. We achieved record net operating income of 32 billion that's the second highest among our global peers, again, showing our continuing focus on operational performance.

And finally, the strength of our model is again evident in our cost of risk, where we finish at 1.18 again better than our guidance, and therefore, delivering on all the targets as I just mentioned. So what this means in terms of capital generation and the double-digit shareholder value creation that resulted from the results. We're ending the year, at the same level as September with a CET1 ratio at 12.3%, and that is after accruing 20 basis points for the buyback, which means that actually would have been at 50 basis points on a like for like compared to last year....

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