Name:

Jose Antonio Martínez Carnicero

Subject:
Business Risk

Group:
Erasmus

Semester:
Spring 2011
 INDEX

1. Banco Santander

1.1. SWOT Analysis Santander Bank

1.2 . Santander Bank data

1.3. Key Indicators

1. 4. Performance charts

2. Customers deposit.

3. Santander Bank Share:

4. Performance Indicators

5. Banlance sheet and Incomes statement

6. Risk Management

6.1.Market Risk

6.1.1. Activities subject

6.2. Credit Risk

6.2.1. Santander gross credit risk:

6.2.2. Credit risk distribution(%)

6.3. Credit and Market risk´s structure: First and Second level

6.4. Management model description

6.4.1. Pre-Sale

6.4.2.Sales

6.4.3.Post-Sales

7. GRUPO SANTANDER RESULTS

8. References
 1. Santander Bank.

“The Santander Group is a banking group centered on Banco Santander, the largest bank in the
Eurozone and one of the largest banks in the world in terms of
market capitalisation. It originated in Santander, Cantabria, Spain.
The 1999 merger of Banco Santander (founded in 1857) and
Banco Central Hispano (founded in 1991) following the merger of
Banco Central [est. 1919] and Banco Hispanoamericano [est.
1900]), created Banco Santander Central Hispano, or BSCH. On
26 July 2004 Banco Santander Central Hispano announced the acquisition of Abbey National plc.
Following shareholders' approval at the EGMs of Abbey (95 per cent voted in favour, despite vocal
opposition from most of those present) and Santander, the acquisition was formally approved by
the courts and Abbey became part of Grupo Santander on 12 November 2004.
In June 2006, Banco Santander Central Hispano purchased almost 20% of Sovering bank and
acquired the option to buy the bank for $40 per share for one year beginning in the middle of 2008.
In May 2007 Banco Santander Central Hispano announced that in conjunction with Royal Bank of
Scotland and Fortis it would make an offer for ABN AMRO. BSCH's share of the offer added up to
28% and the offer would have to be made up of a capital increase through a new share issue.
Then in October 2007 the consortium outbid Barclays and acquired ABN AMRO. As part of the deal,
Grupo Santander acquired ABN AMRO's subsidiary in Brazil, Banco Real, and its subsidiary in
Italy, Banca Antonveneta.
On 13 August 2007, Banco Santander Central Hispano changed its legal name to Banco
Santander. In November 2007, it sold Banca Antonveneta to Monte dei Paschi di Siena. In March
2008, Banco Santander sold Interbanca, a subsidiary of Banca Antonveneta, to GE Commercial
Finance, receiving in return GE Money businesses in Germany, Finland and Austria, and GE's
Card and Auto Financing Businesses in the UK, which it will integrate into Santander Consumer
Finance.
The group announced in July 2008 that it intended to takeover the UK bank Alliance & Leicester,
with £24bn in deposits and 254 branches. The acquisition was completed in October 2008 when
the group delisted the company's shares from the London Stock Exchange. This was followed by
the acquisition of the savings business of UK bank Bradford & Bingley(B&B) in September 2008,
with deposits of £22bn, 2.6m customers, 197 branches and 140 agencies. The banks, along with
Abbey, were merged together under the Santander name in the UK at the end of 2010. In 2006
Santander bought Drive financial. a subprime auto lender. In 2009 Santander completed the
purchase of Philadelphia-based Sovereign Bancorp, a 772-branch lender with about $72 billion in
assets. Santander Consumer USA, based in Dallas, has a serviced auto-loan portfolio of about
$14.9 billion.United States.
In October 2008, Grupo Santander announced that it would acquire the 75.65% of Sovereign
Bancorp it did not currently own for approximately US$1.9 billion (€1.4 billion): the acquisition of
Sovereign has given Santander its first retail bank in the mainland United States.
On 10 June 2010, Grupo Santander has announced an investment of approximately US$ 270
million (€200 million) in Campinas, Brazilor a technology center, research and data processing,
which will include a next-generation data center. The project will prepare the bank to expand its
branch network and customer base. This center will meet the operational unit in North America,
Central America and South America, from the data processing center to research and technical
area. It'll be one of five centers that Grupo Santander has in the world, but certainly the most
important and modern. Based on a plot of 1 million square meters, the new center will be
established within the Technology Park CIATEC (Companhia de Desenvolvimento do Pólo de Alta
Tecnologia de Campinas, in Portuguese) (Development Company for High Technology Cluster of
Campinas), which is attended by more than 20 other companies. The area began to be worked out
in January 2011, so that within two years, the pole is fully operational. There will be over 8,000
direct and indirect jobs.”[1]
[1]http://en.wikipedia.org/wiki/Grupo_Santander

1.1. SWOT Analysis Santander Bank:

Type of Factor
Location of Factor Favorable Unfavorable

Internal STRENGHTS Weaknesses

- Leanding market position -Negligible presence in Asia

- Strong infrasctructure -Negative cash flow from
- Robust operantional performance operations

External OPPORTUNITIES THREATS

- Growth in comsumer - Interest rates hikes in Eurozone

financeindustry - Fraud
- Proposed acquisition of ABN -Slowdown in economic growth
amor by a consurtium
- Positive outlook for buy-to-let
market in UK

1.2. Santander Bank data:

[2]:Year 2010
 1.3. Key Indicators[3]

1. 4. Performance charts: [4]

In these plots we can see the performance indicators you Santander Bank during the period of one year,
where we see the volume of Banco Santander during 2010-2011.
Here we can see the differences between SantanderBank volume and Bank of America.
And the next one we will see the differences with more importan Banks during the same timeframe.

[2]:http://www.santander.com/csgs/Satellite?
[3]:http://www.santander.com/csgs/StaticBS?blobcol=urldata&blobheader=application
%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1224975050343&cachecontrol=immediate&ssbinary=true&maxage=36
00
[4]:http://www.iii.co.uk/investment/detail?code=cotn:BNC.L&display=summary&it=le
 -Bank of Irland:

-HSBC Holding:

2. Customers deposit
Retail banking: Focused on customers: These years of financial crisis have highlighted the fact that financial
institutions with Banco Santander’s business more centred on retail banking have shown greater recurrence
and lessvolatility in their results. Santander’s retail banking businesses generate 76% of the retail banking
businesses Group’s profits. Generate 76% of the Grupo Santander serves almost 100 million customers
through its 14,082 branches, Group’s profitsthe largest network of any international bank. This is
complemented by a wide rangeof multi-channel banking. The quality of customer service, innovation in
products andservices and the confidence and security transmitted by the Bank help to capture,link and retain
a growing customer base.Our customer banking model also has cutting-edge technology, which transforms
costs avings into higher value for customers and shareholders, while the Santander brand,the third most
valued financial brand in the world, today has unprecedented levels ofrecognition and renown

In their search for liquidity, the banking system has turned on deposits, a race that means, at a sensitive
moment for investors betting on a chance that customers should take.
Banco Santander was the first to offer a product at a yield of 4% (a move that earned him capture nearly 10%
of the savings available, 30,000 million euros). This is a product that by its characteristics and performance
(4% at 12 months) remains the most attractive of the moment. A shell that is available at Banco Santander
and its partners: Banesto, iBanesto and Openbank.
Something to consider as part of the strength of a stock is the number of
customers who have invested in it. The numbers work in favor of the
Deposit of Santander: 191,000 customers, with an average of 157,000
euros each.

Customers Millon:

3. Santander Bank Share: [5]

The Santander share: The performance of the Santander share in 2010 did not truly reflect the
Bank’s results or growth prospects. The share ended the year at EUR 7.93, down from EUR 11.55
in 2009 (-31%). The concerns about the international financial sector,regulatory uncertainty and,
above all, the performance of Spain’s sovereign risk dented the share price in 2010, although I am
sure that when the economic and financial environment clears up the share will rise and reflect
Grupo Santander’s real value.Nevertheless, Santander still has one of the highest total shareholder
return among its Santander remains European bank competitors in the medium- and long-term. The
dividend yield in 2010 was 6.36%. One of the banks with the highest total Banco Santander is well
placed to continue to create shareholder value. Today, we area more solvent bank, with a greater
degree of leadership in our main markets and shareholder return with a stronger growth potential
than at the start of the crisis. Furthermore, we have among its European the best and most
committed management team, led by the best CEO in banking. competitors in the Lastly, I would
like to thank you again for your support during these years and for medium- and long-term the
confidence you have placed in Banco Santander. You can rest assured that all ofus who work for
Grupo Santander will strive to make this Bank the best investment for all shareholders.

In the next points we can see the most important Santander´s share and the differences between
them on friday, 05/06/11:

 Share Santander Bank (Madrid), chart:

 Share Santander Bank (New York), chart:

  Share Santander Bank (London), Chart:

[5]:http://www.iii.co.uk/investment/detail?code=cotn:BNC.L&display=summary&it=le
4. Performance Indicators [6]
[6]: http://www.ri.santander.com.br/web/conteudo_en.asp?idioma=1&search=1&conta=44
5. Banlance sheet and Incomes statement [7]
Solid capital ratios, with core capital of 9.66% at the end of the first quarter (8.80% at the end of 2010). The
increase was due to ordinary generation of profits, reduction in risk-weighted assets and recognition of the
issue of
convertible bonds in Brazil in the fourth quarter of 2010.
Improved structure of financing and liquidity ratios (loan-to-deposit ratio of 115% compared to 127% in
March 2010). In the first quarter, selective capturing of deposits and strong activity in wholesale issues with
good access to markets although at higher prices because of the environment.
The Group’s non-performing loan and coverage ratios stabilized in the quarter at 3.61% and 71%,
respectively.
Moreover, net entries of non-performing loans and the risk premium remained on a favourable trend. The
NPL ratio
in Spain was 4.57% and coverage 53%

Attributable profit in the first quarter was EUR 2,108 million, 4.8% less than in the same period of 2010 and
0.4% more than the fourth quarter. Earnings per share were EUR 0.2367.
Solid results, with a big effort in provisions and affected in some geographical areas by regulatory changes
and higher tax pressure.
All the revenues are recurring, as the capital gain from the operation agreed with Zurich Financial Services
has not yet been included. Also, no results from the incorporation of Zachodni have been included, as this
took place in April.
Net operating income after provisions increased 7.9% year-on-year. Double-digit growth at Santander
Consumer.
Finance, Brazil, Latin America ex-Brazil and Sovereign. Declines in Spain and Portugal.
– Good performance of revenues: net interest income and net fee income notched up quarterly records.
– Operating expenses increased because of new business projects, investments in technology and increased
installed capacity.
– Provisions declined because of the reduced needs of SCF, the UK, Latin America ex-Brazil and Sovereign.
Improved trend over the fourth quarter of 2010. Net operating income after provisions rose 9.4% due to
higher gross income, control of costs and lower provisions.

[7]:http://www.santander.com/csgs/StaticBS?blobcol=urldata&blobheader=application
%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1265299148274&cachecontrol=immediate&ssbinary=true&maxage=36
6. Risk Management [8]
Banco Santander‘s operations are subject to a variety of risks. To manage these risks actively, the Bank has
incorporated the Santander Group‘s worldwide risk management functions into various levels of its
organization. Certain members of its risk management area are seconded from the Santander Group to ensure
a consistent risk management approach worldwide by implementing Santander Group‘s risk management
policies for all of its areas, including financial, credit and market risk. In addition, committees headed by
senior management oversee its financial, credit and market risk reports from the divisions assigned to risk
management. Risk limits and exposures in local jurisdictions are further subject to approval from the
Santander Group.

6.1. Market Risk

The Bank is exposed to market risk mainly as a result of the following activities:
Trading in financial instruments, which involves interest rate, foreign exchange rate, equity price and
volatility risks.
Engaging in retail banking activities, which involves interest rate risk because a change in interest rates
affects interest income, interest expense and customer behavior.
Investing in assets (including subsidiaries) whose returns or accounts are denominated in currencies other
than the real, which involves foreign exchange rate risk.
Investing in subsidiaries and other companies, which subjects the Bank to equity price risk.
All trading and non-trading activities, which involve liquidity risk.

6.1.1. Activities subject:

The perimeter for measuring, controlling and monitoring the area of Financial Risks covers those operations
where equity risk is assumed. This risk comes from the change in interest rates, exchange rates, shares, the
spread on loans, raw material prices and from the volatility of these elements, as well as the liquidity risk of
the various products and markets in which the group operates. On the basis of the finality of the risk,
activities are segmented in the following way:

a) Trading: this includes financial services for customers and the buying and selling and
positioning mainly in fixed-income, equity and currency products.

b) Balance Sheet Management: interest rate and liquidity risk comes from mismatches
between maturities and repricing of assets and liabilities. it also includes active management of credit risk
inherent in the group’s balance sheet.

c) Structural risks:

• Structural Exchange-Rate Risk/Hedging of Results: Exchange rate risk, due to the

currency in which the investment is made, both in companies that consolidate and do not consolidate
(structural exchange rate) and exchange rate risk arising from the hedging of future results generated in
currencies other than the euro (hedging of results).

• Structural equity: This covers equity stake investments in financial and non-
financial companies that do not consolidate, generating risk in equities. The treasury area is responsible for
managing the taking of trading activity positions. The financial management area is responsible for the
centralised management of these structural risks, applying standardised methodologies, adapted to each
market where the group operates. in the area of convertible currencies (euro, sterling and the dollar),
financial management directly manages the parent bank’s risks and coordinates management of the rest of
the units which operate in these currencies. The management decisions for these risks are taken by each
country’s ALcO committee and, in the last instance, by the markets committee of the parent bank. The aim of
financial management is to inject stability and recurrence into the net interest margin of commercial activity
and the group’s economic value by maintaining appropriate levels of liquidity and solvency. Each of these
activities is measured and analysed with different tools in order to show in the most precise way their risk
profile.
6.2. Credit Risk
Santander understands the credit risk as the possibility of losses associated with the failure by
the borrower or counterparty to their respective financial obligations under agreed upon, the
devaluation of the credit agreement arising from the deterioration of the risk rating in the
borrower's, reducing the profit or remuneration, the benefits granted in the renegotiation and
costs of recovery.
Santander’s credit risk definition also includes:

• The counterparty credit risk, understood as the possibility of non‐compliance, for

certain counterparty obligations relating to the settlement of transactions involving
financial trading assets, including those relating to liquidation of derivative financial
instruments;
• The country risk, understood as the possibility of losses associated with the failure to
contractual financial obligations in accordance with the case by borrower or
counterparty located outside the country, due to actions taken by the Government of
the country in which it is the policy‐holder or counterparty;
• The risk transfer understood as the possibility of barriers in the currency exchange of
values received;
• The possibility of disbursements to honour guarantees, sureties, commitments credit
contracts or other transactions of a similar nature; and
• The possibility of losses associated to the failure of contractual financial obligations in
accordance with the case by the intermediat.

6.2.2. Santander gross credit risk:

 6.2.3. Credit risk distribution(%):

The distribution by geographic area and product of lending in the segment of standardised risks is
set out below.

6.3. Credit and Market risk´s structure: First and Second level
Santander recognizes that Risks is essential for the business management through analysis and decision,
showing the importance of an adequate approach to protect the bank’s business, and enable the management
the appropriate treatment of risk as one vectors of creating value. Santander’s risk policy is focused on
maintaining a lowmedium and predictive profile in all risks.

6.4. Management model description

Santander holds a global view of the bank’s credit portfolio throughout the various phases of the risk cycle,
with a level of detail sufficient enough to be able to assess current risks and eventual shifts. This mapping is
monitored by the Board of Directors and the Risk Committee, which establish the risk policies and
procedures, the limits and delegation of powers, in addition to approving and supervising operations of the
sector.
The management process consists of identifying, measuring, reviewing, controlling, negotiating and deciding
upon the risks incurred in the bank’s operations. This cycle is made up of three distinct phases:

6.4.1. Pre-Sale

 Objectives Setting:

The start point of this process is the bank’s estimated growth based on commercial area studies. This studies
looks for each segment, product or business line in accordance to the Santander’s strategy. The risk
department evaluates these numbers and based on other portfolio indicators calculates the expected
delinquencies. This analysis is independent and is the main source for strategy business decisions. These
objectives are monthly reviewed by risks specific reports.

 New products:
The new products policy is defined by the Santander compliance department and involves not only the
products department. All products needs the approval of financial, organization, compliance and legal
department. The credit risks approval is basic condition where applicable. A Santander value is collegiate
decisions, so, without the approval of these five departments a credit product will not release.

 Planning risk limits:

This is the process that identifies the bank’s interest by means of the assessment of business proposals and
risk position. This process is defined in the global risk limit plan, an agreed-upon document for the integrated
management of the balance sheet and the inherent risks. The limits are based on two basic structures:
clients/sectors and products.
In the case of individualized risks, clients represent the most basic level, for which individual limits are
established (pre‐assessment). For large corporate groups a pre ‐assessment model based on an economic
capital measurement and monitoring system is used. As regards the corporate sector, a simplified pre‐
assessment model is applied for clients that meet certain requirements (thorough knowledge, rating, etc).
In the case of standardized client risk, the limits are planned using credit management programs (PGC), a
document agreed upon by the areas of business and risk, and approved by the risk committee or its delegated
committees. This document contains the expected results for the business in terms of risk and return, in
addition to the limits the activity is subject to and the related risk management.

 Main assignments of Risks’ Executive Committee:

 Monitoring and analysis results – analysis the deviations from planned expectations and
proposed action plans to reach the objectives.
 Approves the maximum performance milestones for each credit portfolio by segment or relevant
product.

 Risk analysis:
Risk analysis is a pre-requisite for the credit approval to clients and consists of examining the counterparty’s
ability to meet its contractual commitments to Santander, which includes analyzing the client’s credit quality,
its risk operations, its solvency, the sustainability of its business, and the expected return taking the risk
undertaken into account.
This analysis is carried out at preset intervals or whenever a new client or transaction arises. In addition, the
rating is analyzed whenever the warning system is triggered or an event occurs affecting the
counterparty/transaction.

 Environmental and Social Risks:

The Santander’s environmental objective is to persuade corporate and private banking clients to engage in
sustainable practices. Santander adopted an inclusive stance with an emphasis on solutions for changes in
attitude.
Santander analyzes the social and
environmental issues of clients with a relevant
credit limit and in the acceptance of new
account holders and investments. The
experience shows that there is a frequent
connection between social and environmental
problems and financial issues. Companies that
take care of the well being of their employees
and of the environment 13 they work in tend
to have more efficient management and
therefore more chance of honoring their
commitments and generating good business
for the bank.

6.4.2.Sales
  Decisions on operations:
The decision‐making process on operations aims to review them and adopt solutions, consideration the
interest risk and any important elements of the operation to optimize profits and losses.
The Retail decision process may take the form of pre ‐approval, by using Credit and Behavior Score models,
whereby amounts are made available in accordance with the customer quality and repayment ability or, to a
lesser extent, by using traditional approval methods, where the manager reviews the customer and the
proposed teal in order to make a decision, within predetermined authority levels.
At Wholesale segment the process is based on the stipulation of maximum limits to customers, while
business proposals are submitted to committees, in accordance with established authority levels. Decisions
beyond local authority levels are escalated to a superior Credit Committee.

6.4.3.Post-Sales
 Risk monitoring and control:
The Executive Vice‐Presidency for Risk has a specialized risk monitoring area for the control of credit
quality, formed by local and global teams to which specific managers and resources hav been assigned. This
monitoring area is based on an ongoing process of observation, which ensures the early detection of any
events that might arise in the development of risk, the transactions, the clients and their environment, so that
preventive action may be taken.
Santander has a system called Companies in Special Watch (FEVE) which identifies four levels on the basis
of the degree of concern arising from the circumstances observed (extinguish, secure, reduce, monitor). The
inclusion of a company in FEVE does not mean there have been defaults, but rather the advisability of
adopting a specific policy toward that company and establishing the period for it. Clients in FEVE are
reviewed at least every six months, and every quarter for the most serious cases. A company can end up in
special watch as a result of monitoring, a review conducted by internal auditing, a decision of the person
responsible for the company or the entry into functioning of the system established for automatic warnings.
In relation to standardized client risk, the key indicators are monitored in order to detect any variations in the
performance of the credit portfolio, with respect to the forecasts made in the credit management programs.
The monitoring is based on a continuous process of permanent observation, which enables incidents to be
detected in advance in the evolution of risk, operations, customers, and their environment in order to take
steps to mitigate them. The monitoring is conducted on the basis of customer segmentation.

 Solvency Committe:
The main subjects are the macroeconomic perspective, product analysis and portfolios
behaviors. One of the main the focus is the implementation objectives, correct the
deviations from then and reach opportunities to optimize the profit and losses
relation.

 Risk Control:
Its function is to obtain a global view of the bank’s credit portfolio throughout the various phases of the risk
cycle, with a level of detail sufficient enough to be able to assess the current circumstances and eventual
shifts.

Changes to the bank’s risk exposure are controlled in an ongoing and systemic manner according to budget,
limits and benchmarks. The impacts of these changes in certain future situations, both those of an exogenous
nature and those arising from strategic decisions are assessed with the aim of establishing measures that
place the profile and the amount of the credit portfolio within the parameters established by the bank.
Provisions Solvency risk is responsible, among other activities, for ensuring that the losses associated with
credit risk are properly ascertained or estimated and adequately provisioned according to resolution No.
2,682 from Central Bank of Brazil (BACEN), and IAS 39 for IFRS publications. This function also handles
provisioning in accordance to the rules of the Bank of Spain (BdE).

 Capital:
The process of managing, monitoring and control of capital is accomplished for regulatory and economic
capital. The regulatory capital management is based on the analysis of the adequacy of capital levels through
Basel index using the criteria defined by the Central Bank of Brazil.
The objective is to achieve an efficient capital structure considering capital costs, regulatory requirements,
goals of rating and return to investors.
  Recovery/Collections:
The strategies and channels for collection are established in accordance with the number of overdue days and
the amount of the debt. A responsibility map is then drawn up. During the first few days of delinquency, a
more intensified collection model is adopted, employing specific strategies and closer internal monitoring.
Service centers, credit blacklisting, and collection by mail and through the branch network are the methods
used by the branch network during this phase, all aimed at client recovery. In cases of delays of over 60 days
and more significant amounts, internal teams specializing in credit restructuring and recovery enter
into action, operating directly with the delinquent clients. Recovery of lesser amounts or more15 serious
delays is carried out by legal or administrative third parties, who are paid commission on any amounts
recovered in accordance with internal criteria.
Non‐performing loan portfolio, particularly write‐off transactions, is periodically sold through an auction
process, in which the conditions and characteristics of the transactions are evaluated, without risk retention.

 Validation
The credit cycle uses information systems and statistical models developed to give the tooling support to its
functioning. Whole system passes by the functional specification, post ‐ deployment follow ‐up and approval,
which is always made by independent area following pre‐ defined script.
About the risks models classification, its approval for development and deployment, as well as monitoring, is
made jointly by providers (Analytical Centre and Methodology) and users (Retail, wholesale, Risk Aymoré
and cards), with the accompaniment of Solvency as the control area. There is also the involvement of
Internal Validation area, outside and independent of the Credit Vice ‐Presidency.

The quality Monitoring of the model is done by models’ developers (retail and wholesale) from reports
submitted to other risk areas and the validation department. The Models Committee ensures that decisions
occur on a consensual and involving senior management. Systems certifications that support the credit
models is performed by the external area as the same way described above.
Statistical validation is a function of Validation department. This area has to validate all credit processes,
systems, and models that will be working at the moment of Basel 2 implementation.
The other control and validation areas are compliance, internal audit and internal controls (includes SOX).
Risk is responsible for sending the evidences of process controls, as frequency set for each control, for the
SOX.

 Employees Training:
Santander has a global model of corporate school in the risk department with a special focus on risks issues.
This school presents a training schedule for each employee who works in the risk department. The trainings
can be traditional (classroom) or e‐learning tools (bank’s intranet). These schedules are constant revisited and
updated.

[8]http://www.santander.com.br/document/wps/3721_Internet_Validado_17%2009%202010_ingles%20_2_.pdf
7. GRUPO SANTANDER RESULTS [9]
Santander’s net attributable profit in 2010 was EUR 8,181 million.
The recurrence of profits, which for the fourth year in a row were more than EUR 8,000 million, is based on
a business model that focuses on retail banking, geographic diversification and the strength of Santander’s
balance sheet. These results enabled the Bank, for the second year running, to provide total shareholder
remuneration of EUR 0.60 per share. The Group’s results are increasingly more geographically dversified:
Continental Europe contributes 35% of profits (the commercial networks in Spain 15%), Latin America 43%
(Brazil 25%), the UK 18% and Sovereign in the US 4%.

The Group kept up intense activity in 2010. Deposits grew 22% and loans 6%. Gross income increased 6.8%,
spurred by the most commercial revenues such as net interest income, fee income and insurance, as well as
the contribution of the new units. Costs remained under firm control in almost all countries in which the
Group operates. This, coupled with revenues, pushed up net operating income by 3.9%.

The efficiency ratio of 43.3% was one of the best among international banks. Profit was 8.5% lower than in
2009 because of the Bank’s decision to apply very prudently and conservatively the Bank of Sain’s new
regulations on provisions, which absorbed EUR 472 million of the third quarter’s net profit.

The credit quality of the Group’s main units improved in 2010, with falls in net entries of bad loans and in
the risk premium. The NPL ratio rose from 3.24% in 2009 to 3.55%, a slower pace of growth than in 2009
and 2008. The ratio was lower in Brazil, Sovereign and Santander Consumer Finance. NPL coverage was
73% and the Group’s generic provisions amounted to EUR 5,846 million. Santander has a comfortable
liquidity position. In 2010 it increased its deposits by EUR 109,000 million, captured EUR 38,000 million in
debt issues and improved the main liquidity ratios.
Core capital, the main measure of a bank’s solvency, was 8.8% and is expected to surpass 9% in 2011.

[9]:http://www.santander.com/csgs/StaticBS?blobcol=urldata&blobheader=application
%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1265299530310&cachecontrol=immediate&ssbinary=true&maxage=36
00
8. References

 http://en.wikipedia.org/wiki/Grupo_Santander1.

 http://www.santander.com/csgs/Satellite?

 http://www.santander.com/csgs/StaticBS?blobcol=urldata&blobheader=application

%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1224975050343&cachecontrol

=immediate&ssbinary=true&maxage=3600

 http://www.iii.co.uk/investment/detail?code=cotn:BNC.L&display=summary&it=le

 http://www.iii.co.uk/investment/detail?code=cotn:BNC.L&display=summary&it=le

 http://www.ri.santander.com.br/web/conteudo_en.asp?idioma=1&search=1&conta=44

 http://www.santander.com/csgs/StaticBS?blobcol=urldata&blobheader=application

%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1265299148274&cachecontrol

=immediate&ssbinary=true&maxage=36

 http://www.santander.com.br/document/wps/3721_Internet_Validado_17%2009%202010_in

gles%20_2_.pdf

 http://www.santander.com/csgs/StaticBS?blobcol=urldata&blobheader=application

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