DISCURSO COMPLETO: Ana Botín | Junta General Accionistas 2021 | Banco Santander

Good morning, shareholders, and thank you for attending this virtual general meeting. I want to start by thanking every member of the bank's team for their great effort during 2020, without doubt the most difficult year in recent decades. On behalf of the entire Santander Group, we remember the families who have lost loved ones, especially colleagues who have passed away during this pandemic, and we wish a speedy recovery to those still ill. In the most complex year of our history, we remained faithful to our mission of contributing to the progress of people and companies while meeting our commitments to all stakeholders. Our priority has been and continues to be protecting the health of our teams, ensuring they could continue serving our clients. We organized shifts, and within weeks over 100,000 professionals started working from home. We increased capacity for online and phone service, and kept nearly 70% of our branches open. Thanks to our health protocols and testing systems, many teams have returned to work; over 90% of our branches worldwide are open. We adapted quickly to each country's situation, for example in Brazil where most of the team is teleworking due to a resurgence of cases. Thanks to all this, we continued providing our clients the service and support they expect, maintaining high quality standards. COVID-19 accelerated digital transformation: in 2020, 44% of our sales were through digital channels, even more pronounced in some markets like the UK where digital sales reached 80%. We served over 42 million digital clients, up 15% year-on-year, and over 35 million used mobile banking, up 21%. More importantly, we provided financial support when it was most needed: we granted an average of €1 billion in new loans every day, supporting 6 million clients. We also granted payment deferrals, reduced or temporarily suspended some fees, and served clients facing economic difficulties with specialized teams. We granted loan moratoriums totaling €112 billion, of which 79% expired by end of 2020 and only 3% are classified as having significant probability of default. Of the €23 billion still in moratorium at year-end, 78% had real guarantees and 83% were in Europe. We also supported society with over €105 million in solidarity initiatives worldwide, with many employees participating. For all this, Euromoney recognized us in 2020 as the best bank in the world for small and medium-sized enterprises. The virus tested us, and Santander passed with good marks. We also made decisions that reduced the impact of the crisis on our capital, liquidity, and risk profile, while offering sustainable returns to shareholders. Although all our markets suffered the pandemic's impact, Santander's businesses showed resilience thanks to the foundations built in recent years. In 2020 we generated ordinary profit of over €5 billion. Importantly, we achieved these results the right way: the group closed the year with nearly 23 million loyal clients, over 42 million digital clients, maintaining revenues similar to last year at around €45 billion, and increasing net margin by 2% at constant exchange rates. Our commercial activity reached levels close to pre-pandemic; loans and deposits grew 5% and 10% year-on-year respectively. The new operating model we are developing across the group contributed to a three-percentage-point improvement in our efficiency ratio, reaching 47%, keeping us leaders in the sector. Above all, we have a solid balance sheet: we closed the year with a CET1 capital ratio of 12.34%, well above our target, despite increasing provisions by almost 50% due to the pandemic. This capital strength is a great starting point for 2021. Our clients are showing great financial resilience, as our NPL ratio fell 11 basis points, and we closed the year with a cost of credit of 1.28%, slightly better than anticipated. These results highlight Santander's three strengths: customer focus, scale, and diversification. In customer satisfaction, we rank among the top three in six of our markets based on Net Promoter Score. Regarding scale, we have one of the largest customer bases in Europe and the Americas, serving 148 million people and companies. Finally, our geographic and business diversification gives us greater resilience, as we have seen again in times of crisis. This unique combination of local leadership and global reach in businesses like Santander Corporate & Investment Banking, Wealth Management, Insurance, and Payments promotes greater collaboration within the group, generating higher revenues and efficiency improvements. These three global businesses, together with Digital Consumer Bank, represented 54% of the group's attributable ordinary profit in 2020. In Europe, we have focused and will continue to focus on executing the new, more efficient operating model that helps improve profitability. Our goal is to achieve an ordinary RoTE of between 10% and 12% and an efficiency ratio of around 45% in the medium term. In the last two years we have generated €1 billion in cost savings in Europe, and we are committed to reducing the cost base by an additional €1 billion by the end of 2022. In Spain, credit grew 5% during the year, driven mainly by SMEs and large companies, while in the UK loans grew 3%, driven by new mortgages and public credit lines for businesses. The NPL rate in Europe fell 10 basis points to 3.15%. North America was the best-performing region in terms of ordinary profit in 2020, with $1.2 billion attributable profit in the US. Our goal there is to continue improving service quality to grow clients and increase productivity. We have also strengthened collaboration between Mexico and the US by launching common services and collaborating on international trade. In this region, our medium-term targets are an ordinary RoTE of 11% to 13% and an efficiency ratio of 40%. South America remains the group's growth engine, with good business evolution: net margin growing 5%, loyal clients 9%, loans 15%, and deposits 30%. We will continue increasing collaboration between countries in the region to build common platforms that seize business opportunities, for example in consumer finance and insurance. Our medium-term goal is to achieve an ordinary RoTE of 19% to 21% and an efficiency ratio of 35%. Finally, the global businesses had a very good year, supported by client growth and improved relationships. So far in 2021, in the first quarter, business evolution has been positive, with revenues in line with the last quarter. In Europe we are generating savings that improve the group's efficiency ratio, and the cost of credit continues to trend downward as we announced in our annual results presentation. These good results and our solid capital position give us flexibility to remunerate our shareholders attractively. The first quarter results allow us to set a target of approximately 10% ordinary RoTE for 2021, at the high end of the range we announced. Regarding shareholder remuneration, you know well what supervisors did by limiting dividend distribution in the European financial sector. Last April, given these restrictions, the board proposed and shareholders received a scrip dividend on 2019 results equivalent to €0.10 per share, thus fulfilling our commitment to retail shareholders. The total reduction compared to 2019 was €0.20 per share. The board agreed yesterday to pay a cash dividend of €0.275 per share in May this year, corresponding to 2020. This amount is the maximum possible within the limits set by the ECB in its December 2020 recommendation on dividends, and will be paid on May 4. Going forward, the board's intention is to resume a shareholder remuneration policy of 40% to 50% of the group's ordinary profit. Therefore, during the year we will accrue in the capital ratio the amount necessary to execute this policy if supervisors allow it, under the expectation of achieving an ordinary RoTE of approximately 10% by the end of 2021. This dividend prohibition has inevitably affected the share price of European financial institutions relative to other regions. Santander's total shareholder return in 2020 was similar to that of our global competitors; however, since we published third-quarter results, our share price rose 73%. In valuation terms, Santander closed 2020 trading at market multiples in line with our global peer group and the European banking sector. Since we presented our 2020 results, our share price has outperformed the market and our peers. We are confident in the solidity of our business model, our prospects for 2021, and in continuing the current positive trend. We have achieved these solid financial results while implementing best environmental, social, and governance practices—ESG—to be an increasingly responsible bank. Our strategy is reflected in 11 specific, measurable public objectives published in 2019, covering our priorities and commitment to support the UN Sustainable Development Goals and the Paris Agreement on climate change. I want to inform you that we are advancing at a good pace. Let me review the highlights of last year, starting with the environment and how we are supporting the green transition. In 2020 alone, we facilitated over €15 billion in green financing, issued a €1 billion green bond—the second since 2019—and reduced our environmental footprint, achieving carbon neutrality in our own operations for the first time. Second, our social commitment: at Santander we promote diversity and inclusion through a strategy that includes global standards for maternity and paternity leave, training to avoid unconscious bias, policies for filling vacancies that consider gender diversity, and targets for incorporating more people with disabilities. We are also facilitating access to the financial system for the most vulnerable while training them to use financial services prudently. In 2020 we granted over 4,500 microcredits per day in South America, helping to financially empower nearly 3 million people. Through our world-leading higher education support program, we granted over 150,000 scholarships in 2020, already surpassing the target we set for end of 2021 of 200,000 scholarships granted. Finally, corporate governance, which we consider key to Santander's sustainability and success. Recent advances include the open channel through which any group employee can anonymously communicate any problem or concern. We also implemented our new consumer protection policy and guidelines on vulnerable clients across the group. We are developing a pilot project to incorporate ESG criteria in the hiring process of our 400 main suppliers. Our corporate governance is based on an executive chairman and a CEO with clearly separated functions and responsibilities, an independent lead director with solid leadership, and a large majority of independent directors on the board. This model is key to achieving profitable and sustainable growth over time. Year after year, our corporate governance has the full support of our shareholders, as reflected in the fact that 99.68% of shareholders backed the bank's management at the last ordinary general meeting, with only 0.32% voting against. As explained in the annual report, our governance model was recently rated very positively in its design and effectiveness by the external expert responsible for the board evaluation in 2020. This solidity has been continuously recognized in the Dow Jones Sustainability Index since 2000, with an average score of nearly 80 out of 100. Similarly, Santander is positioned well above average in the MSCI ESG and in the top 20% according to Sustainalytics. In any case, we are aware that there is no room for complacency, and we will continue improving our governance model to stay aligned with best international practices. We did so last year, for example by strengthening and updating succession plans. The board's strength and effectiveness are due both to its diversity—40% of directors are women—and to the fact that its members have held prominent leadership positions in their fields, including important areas such as technology and digital. This diversity of geographic origin, experience, and viewpoints allows the board to guide the group's strategy and independently supervise our management team. Recently, we welcomed four new directors who embody these attributes: Martín Chávez, China Diez Barroso as independent directors, Sergio Real as executive director, and Luis Isasi as non-executive director. They replace Esther Giménez-Salinas, Rodrigo Echenique, Ignacio Benjumea, and Guillermo de la Dehesa, who have been valuable members of our board for many years and to whom I want to express my special gratitude for their great contribution. We have also strengthened our International Advisory Board with the appointment of Andreas Dombret, whose knowledge and experience, especially in European banking supervision, will significantly reinforce the role of this board. We present today for shareholder approval the update of our bylaws, which, together with modifications to the board regulations that the Secretary General will detail, and other internal rules and practices, will keep us fully aligned with good governance principles and current regulations. Finally, but very importantly, I would like to recall that good governance practices reflect a good culture. At Santander we aspire to be simple, personal, and fair in everything we do, and we believe these three concepts have helped us create a great company to work for. 86% of our professionals are proud to work at the bank, and we have been recognized as one of the ten best companies to work for in six of our main markets. So, although much remains to be done, we are advancing at a good pace. The ESG agenda will become increasingly important, especially regarding climate change. I mentioned how we are already supporting the green transition; we are leaders in renewable energy financing, but we have much more to do as a company to meet the goals of the Paris Agreement. Therefore, last month we announced the group's commitment to achieve net zero emissions by 2050. This is a huge change that will take time, but our next steps are clear. First, we will focus on industries with the greatest climate impact, starting with energy in general and coal in particular. By 2030, we will align our lending to the electric power sector with the Paris Agreement goals. Our first decarbonization targets are that by 2030 we will have stopped providing financial services to clients that derive more than 10% of their revenues from thermal coal, and by that year we will reduce our exposure to thermal coal mining to zero worldwide. During the coming year we will provide more details of our roadmap; by September 2022, for example, we will set decarbonization targets for other industries including oil and gas, transport, mining, and metals. I am going into this level of detail because these are real and substantial changes to our business model. It is about managing the risks generated by climate change, but it is also a huge business opportunity. For example, we can help households become energy efficient, finance the installation of solar panels, electric vehicles, and contribute to low-carbon agriculture. Meanwhile, we will continue supporting people and companies in making sustainable decisions, particularly by meeting our goal of facilitating €120 billion in green financing by 2025, increasing to €220 billion by 2030. Santander Wealth Management will increase its offering of ESG funds by developing new products with social and environmental impact, leveraging the success of our software platform. Our strategy reflects a simple idea: banks are part of the solution to the global climate challenge, and at Santander we are 100% committed to doing our part. I will now refer to our strategy in a broad sense. We will continue focusing on increasing client loyalty and expanding higher-value products and services. The strength of our balance sheet gives us the capacity to continue growing organically, investing in our geographies and in the most profitable, capital-light businesses, including global product factories. For example, in 2020 we focused on faster asset rotation, reallocating capital toward geographies and businesses like the Americas, corporate banking, private banking, insurance, and payment platforms. We have set more ambitious, more granular minimum profitability thresholds across all segments and aligned senior management compensation with these objectives. In 2020, around 40% of our invested capital generated double-digit ordinary RoTE despite the difficult environment. In line with this strategy, this morning we announced the intention to buy out minority shareholders in Santander Mexico. We believe in Mexico, in the potential of its financial sector and of Santander Mexico, which today is one of the leading banks in the country. For our shareholders, this transaction meets our strategic and financial criteria: it has an attractive return on invested capital and will increase the group's net profit and organic capital generation in the future. For Santander Mexico shareholders, it is an opportunity to monetize their shares at a 24.3% premium over the closing price of Santander Mexico shares on March 25, 2021. At the same time, we continue investing in three strategic growth initiatives that are essential pillars for transforming Santander: One Santander, PagoNext, and the Digital Consumer Bank. These initiatives are fundamental to achieving our goal of being the best open financial services platform in the world. Given their importance, I will detail each one, and we will report on their progress quarterly. First, One Santander aims to create a new, common operating and business model for the entire group. We want our 148 million clients to see us the same way, offering a homogeneous customer experience across all our markets. With a complete, integrated view of our clients, we can improve our offering and better tailor it to their preferences. This transformation has started in Europe and will be extended to the rest of the group, although we are also advancing in the Americas. To improve this customer experience, our products will be simpler and more global. Shared processes and the most innovative technology will allow us to grow in number of clients and be more productive. But I want to make it very clear that to build stronger relationships with clients, traditional branches and people will continue to play an important role. We will adapt them to reflect our clients' new habits—a great example is our Work Cafés—and complement them with a wide range of digital channels and a top-tier mobile app. With One Santander, we aim in the medium term to be leaders in customer satisfaction in our markets, which should allow double-digit client growth and a significant improvement in our efficiency ratio to around 40%. PagoNext is the second strategic initiative to increase growth and profitability. PagoNext will be the group's technological backbone, integrating our most innovative global payment initiatives into a single platform. We want to offer our clients better, more agile payment solutions because payments are a fundamental part of our customer relationship strategy and the main growth driver in all our geographies. They also represent a very attractive potential market: €500 billion in revenues globally. With PagoNext, we will accelerate growth in three business areas: payment solutions for merchants, international trade, and consumers. Merchants represent an €80 billion revenue opportunity worldwide, a market growing rapidly—e-commerce at 11%—and we have a very good starting point with over 11 million active merchant clients and around 60 million active credit and debit cards. In international trade, we want to offer SMEs more agile and efficient financing services through a platform that will provide foreign exchange payments, logistics, and other services that until now were only available to larger companies. Our investments in Ivory and Mercury will help strengthen this offer. International trade represents a €350 billion opportunity worldwide, and we already count among our clients over 4 million SMEs, of which 200,000 operate internationally. We expect these open international business platforms to attract and accompany a growing number of new clients in their growth. Finally, we want to offer consumers simple, attractive payment solutions that make their daily lives easier. In this case, we will build this platform through Superdigital, a solution for the unbanked population in Latin America that is already operational in five markets, serving 500,000 active clients, and our ambition is to at least triple the number of clients we already serve. Our third strategic growth initiative is to create the digital leader in consumer finance, which we call our Digital Consumer Bank. To achieve this, we are in the process of combining two of our most successful businesses: Santander Consumer Finance and Openbank. Again, we start from a position of strength. Santander Consumer is the European leader in consumer finance, with over 18 million clients in 15 European markets; more than 6 million clients sign a consumer loan with us each year. Openbank is our 100% digital bank, a leader among its European competitors, number one in deposits, using an innovative, scalable, and efficient banking platform developed by ourselves. Each Openbank client has on average more than four products, well above the market average. Through the Digital Consumer Bank, we will be able to serve clients seeking financing and also offer them other banking services. As we commented in January, our medium-term ambition is to double our net profit, achieve an ordinary RoTE of 15%, and improve our efficiency ratio to 39%. To conclude this section, having the right skills and competencies—the people who will help us in this endeavor—is fundamental to successfully carrying out this transformation. That is why we are attracting the best digital talent. In 2020 alone, we incorporated over 2,000 people who, together with our excellent teams with long banking experience, will build the best open financial services platform. These are our three strategic growth priorities, which I am convinced are the right ones to achieve ordinary RoTE growth close to 10% in 2021, as I just mentioned, and 13% to 15% in the medium term, which in turn will give us greater capital generation capacity, generating more growth, profitability, and returns for shareholders. We are confident that continuing the disciplined execution of our strategy, as we have been doing in recent years, will allow us to grow client loyalty, grow revenues, and always with the priority of increasing earnings per share and tangible net asset value per share. In the short term, uncertainty will continue. The Managing Director of the International Monetary Fund said a few days ago that the global economy is showing resilience, but we cannot take this stability for granted; it is key that governments do not withdraw fiscal support too soon. To ensure the rapid and sustainable recovery we all want, countries must work together, leveraging the strength of their institutions to continue attracting investment. Europe has demonstrated and is demonstrating leadership in managing this economic crisis with a more effective and coordinated response than ever. It has shown that Europe works when it acts united and in solidarity. Avoiding a two-speed recovery will be key for Europe to emerge stronger. European institutions have adopted important measures to support economies: employment support programs and publicly guaranteed loans to large and small companies, which have largely solved their liquidity problems. In Spain, with a GDP drop in 2020 similar to that of the previous crisis, 600,000 jobs were destroyed compared to 3.5 million lost in the great financial crisis. At the worst moment of 2020, these support programs allowed 5 million Spaniards to keep their jobs, and nearly 4 million of them have already returned to normal. Spain was the fastest in providing liquidity to companies through ICO loans, thanks to excellent public-private collaboration and the banks' reach, knowledge, and close relationship with companies. One in five companies in Spain received an ICO loan; a total of €116 billion in financing was granted, representing 10% of GDP. Activity levels are now recovering in much of the Spanish economy, but key sectors like hospitality, restaurants, and leisure are still 40% below pre-crisis levels. To support them, vaccination is key. Vaccines are beating the virus and opening the door to recovery. The EU's goal is clear: vaccinate 70% of the adult population by the end of summer. In the short term, the pace and quantity of vaccines arriving is not in our hands; what is in our hands is being well prepared to vaccinate massively and quickly. To date, about 60 million adults have been vaccinated in the EU, many still awaiting a second dose. Achieving that EU goal requires reaching a vaccination rate of three to four million people per day, seven days a week at some point. Reaching these targets requires an extraordinary effort and using all available means. As demonstrated in countries that are more advanced in this process, such as the UK, US, or Chile, having detailed vaccination plans and then effective execution in each country is critical. Despite this challenge, we have the means, and I trust that EU leaders will work together to achieve this vaccination target. If we execute this vaccination plan well, we can see a strong rebound of the Spanish and European economy in the second half of the year and during 2022. The European vaccination passport being worked on will also be important, allowing tourists to return to our hotels, restaurants, and terraces. The sooner it is approved, the sooner mobility will recover. As recent OECD projections for the Spanish economy suggest, pre-pandemic GDP levels could be recovered sooner than expected. Spain can thus be a protagonist in this new stage and once again lead growth in the coming years, growing above 5% in 2021 and 2022 if we do things right, meet vaccination targets, and the US fiscal package is implemented quickly, which will also help Europe. In the medium term, European funds will be very relevant. The rapid and effective arrival of these funds to companies will accelerate recovery and minimize the damage of the crisis. We must, of course, ensure they serve as a boost for the transition to a green and digital economy. But we cannot settle for this; we must also seize the moment to make reforms that attract and encourage local and foreign investment, improve productivity, and create jobs and wealth in an inclusive way. That is the best way to guarantee the welfare state. We must protect viable companies and support innovative companies with transformative potential. Rest assured that banks will continue to be there. Our sector is best positioned to understand what each company needs and how best to help them emerge stronger. In 2020, we demonstrated that we can protect and support our SMEs by channeling funds in a time of crisis. We expect to continue contributing to the recovery with a €40 billion growth in our loan portfolio across all our geographies. Ladies and gentlemen, shareholders, there is no doubt that 2020 has been the most complex year in our history. Today, the priority—besides continuing to manage the health crisis—is to ensure that companies that survived the pandemic grow and generate jobs. To do so, they will need to invest, and banks must be able to meet their financial needs. Companies and governments have the responsibility to work together for the well-being of our society. This brings me back to the starting point of my speech: at Santander, we are fully committed to our mission of helping people and companies progress, in good times and bad. Throughout our history, Santander has always emerged stronger from difficult moments. Now it will be the same. We will support the recovery and at the same time build a more responsible, greener, and more digital bank, reinforcing the trust of our 148 million clients, with the goal of being simple, personal, and fair in everything we do. That is the path to generating value sustainably and achieving our financial objectives. Before finishing, I would like to say a few words about Santander and Cantabria. COVID-19 restrictions do not allow us to celebrate this general meeting in Santander as we would have liked. We have historically done so there, and we hope to return soon. The transformation of our corporate headquarters in Pereda and the Hernán Cortez building in Santander—by the way, the former Banesto headquarters, which was previously the Mercantil—will be symbols of our commitment to this city, our city, and to Cantabria. The new building will reflect the change we are leading. We are reinventing ourselves while remaining faithful to our principles and roots. As every year, I want to thank you again for the trust you place in Banco Santander. Thank you very much.