Banco Santander S A : H1'21 Financial Report

January - June

2021

Index

Key consolidated data	3
Business model	5
Group financial information	6
Group performance	6
Income statement and balance sheet	7
Solvency ratios	16
Risk management	17
General background	20
Financial information by segment	21
Primary segments	21
Secondary segments	39
Responsible banking	46
Corporate governance	48
The Santander share	49
Appendix	51
Financial information	52
Alternative performance measures	73
Interim condensed consolidated financial statements	83
Glossary	86
Important information	87

This report was approved by the Board of Directors on 27 July 2021, following a favourable report from the Audit Committee. Important information regarding this report can be found on pages 87 and 88.

Key consolidated data		Group financial		Financial information		Responsible banking
			Corporate governance		Appendix
Business model		information		by segment		Santander share

Key consolidated data

BALANCE SHEET (EUR million)	Jun-21	Mar-21	%	Jun-21	Jun-20	%	Dec-20
Total assets	1,568,636	1,562,879	0.4	1,568,636	1,572,881	(0.3)	1,508,250
Loans and advances to customers	954,518	939,760	1.6	954,518	934,796	2.1	916,199
Customer deposits	894,127	882,854	1.3	894,127	846,832	5.6	849,310
Total funds	1,121,969	1,095,970	2.4	1,121,969	1,039,996	7.9	1,056,127
Total equity	95,745	92,686	3.3	95,745	91,859	4.2	91,322

Note: Total funds include customer deposits, mutual funds, pension funds and managed portfolios

INCOME STATEMENT (EUR million)	Q2'21	Q1'21	%	H1'21	H1'20	%	2020
Net interest income	8,240	7,956	3.6	16,196	16,202	-	31,994
Total income	11,305	11,390	(0.7)	22,695	22,268	1.9	44,279
Net operating income	6,046	6,272	(3.6)	12,318	11,561	6.5	23,149
Profit before tax	3,812	3,102	22.9	6,914	(6,410)	-	(2,076)
Attributable profit to the parent	2,067	1,608	28.5	3,675	(10,798)	-	(8,771)

Changes in constant euros:

Q2'21 / Q1'21: NII: +2.6%; Total income: -1.6%; Net operating income: -4.7%; Profit before tax: +21.4%; Attributable profit: +27.2%

H1'21 / H1'20: NII: +7.6%; Total income: +9.8%; Net operating income: +16.7%; Profit before tax: -/+; Attributable profit: -/+

EPS, PROFITABILITY AND EFFICIENCY (%)	Q2'21	Q1'21	%	H1'21	H1'20	%	2020
EPS (euros) (2)	0.112	0.085	31.4	0.197	(0.639)	-	(0.538)
RoE	9.91	9.80		9.53	(9.28)		(9.80)
RoTE	12.29	12.16		11.82	1.73		1.95
RoA	0.64	0.62		0.61	(0.51)		(0.50)
RoRWA	1.74	1.67		1.66	(1.34)		(1.33)
Efficiency ratio	46.5	44.9		45.7	47.3		47.0

UNDERLYING INCOME STATEMENT (1) (EUR million)	Q2'21	Q1'21	%	H1'21	H1'20	%	2020
Net interest income	8,240	7,956	3.6	16,196	16,202	-	31,994
Total income	11,305	11,390	(0.7)	22,695	22,518	0.8	44,600
Net operating income	6,046	6,272	(3.6)	12,318	11,561	6.5	23,633
Profit before tax	3,815	3,813	0.1	7,628	3,841	98.6	9,674
Attributable profit to the parent	2,067	2,138	(3.3)	4,205	1,908	120.4	5,081
Changes in constant euros:

Q2'21 / Q1'21: NII: +2.6%; Total income: -1.6%; Net operating income: -4.7%; Profit before tax: -1.3%; Attributable profit: -4.4%

H1'21 / H1'20: NII: +7.6%; Total income: +8.4%; Net operating income: +13.4%; Profit before tax: +122.9%; Attributable profit: +152.8%

UNDERLYING EPS AND PROFITABILITY (1) (%)	Q2'21	Q1'21	%	H1'21	H1'20	%	2020
Underlying EPS (euros) (2)	0.112	0.116	(3.4)	0.227	0.094	141.5	0.262
Underlying RoE	9.91	10.44		10.17	3.98		5.68
Underlying RoTE	12.29	12.96		12.62	5.44		7.44
Underlying RoA	0.64	0.65		0.65	0.31		0.40
Underlying RoRWA	1.74	1.77		1.75	0.80		1.06

January - June 2021

3

Key consolidated data		Group financial			Financial information			Responsible banking
					Corporate governance		Appendix
Business model		information			by segment			Santander share
SOLVENCY(3) (%)			Jun-21	Mar-21				Jun-21	Jun-20		Dec-20
CET1 phased-in		12.11	12.26				12.11		11.84		12.34
Phased-in total capital ratio		15.82	16.12				15.82		15.48		16.18
CREDIT QUALITY (%)			Q2'21	Q1'21				H1'21	H1'20		2020
Cost of credit (4)		0.94	1.08				0.94		1.26		1.28
NPL ratio		3.22	3.20				3.22		3.26		3.21
Total coverage ratio		73	74				73		72		76
MARKET CAPITALIZATION AND SHARES		Jun-21	Mar-21	%	Jun-21	Jun-20	%	Dec-20
Shares (millions)		17,341	17,341	0.0	17,341		16,618	4.3	17,341
Share price (euros) (2)		3.220	2.897	11.1	3.220		2.084	54.5	2.538
Market capitalisation (EUR million)	55,828	50,236	11.1	55,828		36,136	54.5	44,011
Tangible book value per share (euros) (2)	3.98	3.84				3.98		3.83		3.79
Price / Tangible book value per share (X) (2)	0.81	0.75				0.81		0.54		0.67
CUSTOMERS (thousands)			Q2'21	Q1'21				H1'21	H1'20		2020
Total customers		150,447	148,641	1.2	150,447		146,010	3.0	148,256
Loyal customers		24,169	23,428	3.2	24,169		21,507	12.4	22,838
Loyal retail customers		22,100	21,441	3.1	22,100		19,703	12.2	20,901
Loyal SME & corporate customers	2,069	1,987	4.1	2,069		1,804	14.6	1,938
Digital customers		45,352	44,209	2.6	45,352		39,915	13.6	42,362
Digital sales / Total sales (%)		54	50				52		44		44
OTHER DATA			Jun-21	Mar-21	%	Jun-21	Jun-20	%	Dec-20
Number of shareholders		3,879,232	3,937,711	(1.5)	3,879,232		4,080,201	(4.9)	4,018,817
Number of employees		190,751	190,175	0.3	190,751		194,284	(1.8)	191,189
Number of branches		10,073	10,817	(6.9)	10,073		11,847	(15.0)	11,236

1. In addition to financial information prepared in accordance with International Financial Reporting Standards (IFRS) and derived from our consolidated financial statements, this report contains certain financial measures that constitute 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, including the figures related to "underlying" results, which do not include the items recorded in the separate line of "net capital gains and provisions", above the line of attributable profit to the parent. Further details are provided in the "Alternative performance measures" section of the annex to this report.

For further details of the APMs and non-IFRS measures used, including its definition or a reconciliation between any applicable management indicators and the financial data presented in the annual consolidated financial statements prepared under IFRS, please see our 2020 Annual Financial Report, published in the CNMV on 23 February 2021, our 20-F report for the year ending 31 December 2020 filed with the SEC in the United States as well as the "Alternative performance measures" section of the annex to this report.

1. Data adjusted for the capital increase in December 2020.
2. The phased-in ratio includes the transitory treatment of IFRS 9, calculated in accordance with article 473 bis of the Regulation on Capital Requirements (CRR) and subsequent amendments introduced by Regulation 2020/873 of the European Union. Additionally, the total phased-in capital ratio includes the transitory treatment according to chapter 2, title 1, part 10 of the aforementioned CRR.
3. Allowances for loan-loss provisions over the last 12 months / Average loans and advances to customers over the last 12 months

4	January - June 2021

Key consolidated data		Group financial		Financial information		Responsible banking
			Corporate governance		Appendix
Business model		information		by segments		Santander share

Our business model is based on three pillars

1. Our scale

Local scale and leadership. Worldwide reach through our global businesses

total customers in Europe

and the Americas

1. Market share in lending as of March 2021 including only privately-owned banks. UK benchmark refers to the mortgage market. DCB refers to auto in Europe.

2. Customer focus

Unique personal banking relationships strengthen customer loyalty

2. NPS - Customer Satisfaction internal benchmark of active customers' experience and satisfaction audited by Stiga / Deloitte.

3. Diversification

Our geographic and business diversification makes us more resilient under adverse circumstances

• Geographic diversification3

balanced between mature and emerging markets

• Business diversification

between customer segments (individuals, SMEs, mid-market companies and large corporates)

3. H1'21 underlying attributable profit by region. Operating areas excluding Corporate Centre.

Our corporate culture

The Santander Way remains unchanged to continue to deliver for all our stakeholders.

Our purpose

To help people and businesses prosper.

Our aim

To be the best open financial services platform, by acting responsibly and earning the lasting loyalty of our people, customers, shareholders and communities.

Our how

Everything we do should be

Simple, Personal and Fair.

January - June 2021

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