Banco Santander - Chile ADS

Good morning, everyone, and welcome to our third quarter earnings presentation, like always. The presentation will start with our CEO, Hector Gris's comments, followed by my more detailed explanation of the P&L. He will have his concluding remarks, and then we will open it up for questions. Hector, please go ahead.

Thank you very much, José. Good morning to everyone, and thank you for joining us. Today's presentation, as always, First, I will talk about our results in the context of our study. Then Jose will review our financial performance in greater detail, and then I will conclude with some final messages, as Jose said. We will then open the floor for all your questions. The main highlights of our results in this period are the following. Q3 was another record quarter for Santander, which continues to demonstrate the benefits from the execution of our strategy and the resilience of our business model. Profit reached $3.3 billion, 12% above the Q3 of 2023. on the back of a solid franchise of 171 million customers that continues to increase as we improve our customer experience through simplification, automation, and leverage of our global platforms. Profit reached 9.3 billion in the first nine months, also a record of 14%, supported by strong customer revenue growth across regions and all the global businesses. We achieve this as we invest for the future and continue to make excellent progress towards a simpler and more integrated model which has helped us to improve our efficiency by 229 basis points and increase our ROTE to 16.2%. Finally, our balance sheet remains solid with a sound capital ratio and robust credit quality, and contributed to the strong profitable growth, shareholder value creation, and attractive remuneration. TNAF plus dividend per share increased by 14%, and the cash dividend per share will be 39% higher in 2024. Going into more detail into our income statement, as always, we present growth rates in both current and constant euros. These quarters, there were no material differences between them year on year, but as we say, we'll explain later, they are more significant on the quarter on quarter. Our P&L remains strong from top to bottom. Number one, strong top line supported by all our businesses and regions. NII and fees, both at record levels, accounted for over 95% of total income, driving the vast majority of our revenue growth. Number two, expenses grew below revenue and inflation, showcasing the possible effects of our transformation. sorry, the positive effects of our transformation. Three, loan loss provisions grew fairly in line with average lending and credit quality also had an excellent performance. All in all, as shown over time, our results are sustainable and less volatile than peers due to our business and geographical diversification, the high quality of our revenues, and a prudent approach to risk. We are on track to exceed the targets we set in January and upgraded in July. Solid business dynamics supported high single-digit revenue growth. Our efficiency ratio improved as we accelerated one transformation and increased operational leverage. Cost of risk is expected to remain in line with our 24 target on the back of active risk management, strong labor markets, and interest rates dropping in most of our countries. As a reference, year-to-date cost of risk improved to 1.4%. 14%, even with the additional provisions in Poland in Q2. Our City-1 ratio ended September at 12.5%, and we are comfortably in line with our target of keeping it above 12%, even after Basel III implementation fully loaded. And our ROTE is already above the target we set for the end of the year. Our execution of one transformation continues to boost our operational leverage, structurally improving both revenue and cost performances. Simplifying and automating processes and our active spread management have already contributed 259 basis points of efficiencies since we started, surpassing the levels which we expected to reach at the end of 2025. Our global businesses continue to drive the group's profitability and have delivered 82 basis points in efficiency gains. Finally, our proprietary and global tech capabilities have generated 72 basis points in efficiencies so far. Remember that we are focused on going back to basics, offering the best products and user experience to our customers and boosting operational leverage through our global platforms to support value creation for our shareholders based on profitable growth with minimal volatility. This is already reflected in the great performance of our businesses. All of them show solid revenue growth, retail and consumer, and will strongly improve our efficiency ratio, leading to higher ROTE. While CIB and payments reflect our efforts to develop new products and global platforms, which have started to deliver results. This is a fantastic example of how our model works. Higher interest rates benefit some of our retail franchises, while other parts of our business perform better under different circumstances. But overall, our combination of highly diversified businesses allows us to deliver consistent, profitable growth and value creation. The global businesses and the cross collaboration are helping us to extract the full potential from our unique combination of local leadership and global capabilities with the cost of infrastructure that delivers efficiency and scalability. This allows us to reach our 25 profitability targets. In retail, which is at the heart of our banking business, we are working to become the number one bank for our customers. Let's look at how one transformation is delivering results. Innovation is key. We are enhancing our digital onboarding and promoting simpler customer journey and better experiences across the bank. For example, in Brazil we have reduced onboarding time by 50%, which has contributed to a 3% customer growth only this quarter. We are progressing fast towards a common operating model across our banks, which together with automation and digitalization frees up time of our people to focus on commercial activities on our branches. Dedication of resources to non-commercial activities has dropped by 11% since we started with One Transformation. Deployment of our global platform remains on track, and for example, in the UK, customers have been migrated to our global app that already operates in Spain, Portugal, Poland, and OpenBank with great success. As a result, our profit grew 29% year-on-year, with ROTE up 400 basis points to 18.5% on the back of revenue growth. up close to double-digit on good performance of NII and fees, with all regions growing, especially Europe and South America. Cost is well under control, down 5 percent in real term, reflecting structural benefits from our transformation. provision is improving, and the cost of risk fairly stable at really comfortable levels. Going forward, our improvements in customer experience, the implementation of a common operating model, and the deployment of our global tech platform will drive additional customer growth, better efficiency, and profitability. In consumer, our priority is to continue expanding our leadership across all our footprint. Our best-in-class global solutions are integrated into our partners' processes. For example, we have integrated our front-end Hyundai systems, providing our customers the best digital experience, faster credit approval, and time to pay. We are making great progress in our deposit strategy to increase NII stability and reduce the funding cost. Deposits increased 12% year-on-year on the back of our deposit gathering platforms. The deployment of global platforms is key to scale of business, reduce our cost to serve, and improve profitability. Last Monday, we reached an important milestone in the U.S. with the nationwide launch of OpenBank. In the last four weeks, we have already gathered around 200 million in deposits and welcomed over 7,000 clients. We also launched Xenia, a co-branded card with Amazon in Germany, and we are deploying a new operational leasing functionality. Consumer continues to grow a strong operation leverage with a 9% net operating income increase and some profit growth on the back of, number one, strong revenue with solid NII performance and 25% fee growth. Number two, cost falling 2% in real terms thanks to our transformation efforts, even if we continue to invest in growth. And third, LLP is normalizing in Europe and in the U.S. in line with expectations. Overall, we continue to see positive operating trends, and we expect them to improve on the back of lower rates and volume growth. We are building a world-class CIB business for our clients that leverages our strengths and global footprint to go profit while maintaining the same low-risk profile. Number one, we are deepening our client relationships and increasing our capabilities in the U.S., building on our areas of expertise to accelerate growth across the group. Revenue in CIB in the U.S. rose 41% year-on-year and is expected to boost cross-border revenue across the group as we continue to progress on our U.S. build-out initiative. We continue to execute our global markets plan, which is starting to pay off with institutional sales doubling in Europe and more than tripling in the U.S. Number two, we're expanding and sophisticating our centers of expertise. we're strengthening our financial sponsor franchise, which is leading to business opportunities in M&A, capital markets, and GTV across a group, and continues to pay off with several first deals. This quarter, for example, for the first time, we were appointed sole book runner for an IPO of SPAC, and we acted as the lead left-under writer in an LBO transaction with one of the largest industrial-focused investment firms. And these are just a few examples of a long list. Third, we are driving cross-border revenues on the back of enhanced client solutions and global collaboration. We had a great number of cross-border deals in Q3, such as those resulting from the collaboration of our teams in Mexico and Spain, France and Brazil, Peru and Mexico or Italy and France, among others. CIB reached solid results with revenue up 9% after record 23, making the first nine months the best ever. Free is growing at double digits and the vast majority of our growth coming from client flows. And the best is still to come. Growth will accelerate going forward as we continue to execute our strategy on a global basis. Moving on to wealth, we continue to build the best wealth and insurance manager in Europe and the Americas. How? Number one, by improving customer relationships through the best customer service and right solutions, resulting in double-digit growth in private banking customer and fees. We are shifting our product offering towards value-added solutions, such as discretionary portfolio management, advisory and alternative investments, and this has also supported Spain's double-digit increase in the number of private banking customers and a 22% total revenue growth. Number two is promoting collaboration with other businesses, especially with retail and CIV, which is a major driver for growth and allows to capture network benefits. Collaboration fees increase by 13% year-on-year. Number three is developing global platforms across all the businesses and digitalizing our distribution and advisory capabilities to improve customer experience and really promote growth. Good examples of this are the recent implementation of a single operating platform for alternative products and the deployment of Sun Connecta in Mexico and Brazil, which boosts the distribution network capabilities and provides real-time information about funds and markets. In summary, we are accelerating growth and maintaining high profitability. Attributable profit rose 15% on the back of strong activity and fees growing a double digit across the three businesses. Finally, efficiency improved 210 basis points year-on-year and ROTE rose 400 basis points to 81%. Finally, payments. As I already advanced last quarter, we have a unique position on both sides of the value chain, issuing where we manage more than 100 million cards group-wide and merchant acquiring. In merchant, we are one of the largest acquirers in Latin America, Spain and Portugal, with the right balance between growth and profitability. GetNet total payments volume and PagoNext open market revenue keeps growing strongly, which is helping us to consolidate our presence in core markets, such as Brazil and Mexico, where we maintain a leadership position. And at the same time, we build up market share in fast-growing markets, such as Chile, where we recently launched GetNet. Our payments hub already processes all types of payments, for example, credit transfers, direct debits or instant payments, and international payments for several countries and businesses. We have already migrated 800 million transactions this year. This is five times more than than the same period last year. Also, we continue to deploy Plard, our global cards platform. In Brazil, we currently manage more than 8 million debit cards through Plard, and we are on track to full migration by Q2 2025 to manage around 17 million total cards. In a second phase, we will start with the credit card portfolio. At the same time, we continue to boost our cards proposition through our risk data lab, our solution based on AI. Payments delivered strong results with good revenue trends in both businesses, cost under control, and sound credit quality in cards, which drove to a 10% profit growth, excluding the non-recurring items with its cost in Q2. Pago Next EBITDA margin improved to 23%, backed by GetNet, with one of the best ratios among our competitors. We expect cost efficiency and CapEx optimization to continue to drive profitability in the coming quarters. Our capital ratio has improved this year from 12.3% to 12.5%, backed by strong organic capital generation, after investing in profitable growth, absorbing regulatory impacts, and shareholder remuneration. As a result, we continue to grow our value creation, which in terms of TNAP plus DPS increased 14%, which represents around $10 billion year-on-year. and we are increasing our shareholder remuneration. In September, the Board of Directors approved an interim distribution against H-124 results, which is being executed in two equal parts, a cash dividend of $0.10 per share, which will be paid from the 1st of November, and a share buyback program up to $1.5 billion that is currently underway. Cash dividend will be 39% higher in 2024. And at the same time, since 2021, if we include the full amount of the current share buyback program, Santander will have repurchased 12.5% of its outstanding shares. I'll leave you now with Jose, who will go into our financial performance in more detail.

Thank you, Hector. Let me go into more detail, the P&L and the capital. As Hector has mentioned, we are yet again reporting record results as our transformation continues to drive operational leverage. Revenue grew 8% on the back of the highest NII and fees in our history and the best efficiency ratio in the last years, boosting the net operating income, which rose 13% year on year. Provisions grew only slightly, even after the expected normalization in consumer and the Swiss franc provisions in Poland were recorded in the second quarter, while cost of risk fell in the quarter. On the right-hand side of the slide, you can see the upward trend in profit, which grew 1% quarter-on-quarter in euros, 5% in cost in euros, driven mainly by customer revenue and lower provisions. This quarter, there is an effect from the depreciation of some currencies, affecting the quarter-on-quarter comparison, But as you can see in the P&L, the impact year on year is not material. Please remember that the last quarter we decided to take a more conservative approach to valuing, to recognizing the value of the results obtained in Argentina. So we began to apply an inflation-adjusted exchange rate for the Argentine peso, which in the quarter was 1,618 compared to the official exchange rate of 1,069 to the euro. And obviously this is a much more conservative exchange rate than the one used by our peers. This approach caused some distortions in the quarter-on-quarter comparison that I will comment during the presentation only were relevant. Total revenue increased 8%, with all businesses and regions growing, driven by customer revenue growth, which made up more than 90% of total revenue. This strong growth was primarily supported by our retail business, which continues to grow close to double digits, with good performance in NII and fees, especially in the Americas, and also by CIB, growing across the three lines of business on the back of good activity levels, mainly in global banking and markets. Consumer revenue also rose, supported in this case by volumes and active asset repricing and double-digit growth in fees across our geographies. We also delivered double-digit revenue growth in wealth, driven by solid commercial activity, both in private banking and in asset management. Payments is growing at good trends, showing relatively good underlying performance. As both Pago Next and Cards increased, even more so if we exclude the one-time positive fee recorded in Brazil in the first quarter of last year. Finally, the corporate center's revenue improved on the back of less negative impact from FX hedging. Turning to NII, net interest margin, most of our revenue came from net interest income, which increased 9% year-on-year, supported by all our businesses and regions, basically due to active price management, particularly in retail in Europe and in consumer, and higher volumes and the benefits from negative sensitivity to rates in South America, in retail South America. which is now very evident, especially in Brazil and Chile, and also good activity levels in our global banking business in CIB. NII was resilient quarter-on-quarter, rising 1% in constant euros. in a new interest rate environment, particularly driven by retail, where it was up 2%, with the vast majority of our countries positively contributing in the quarter, especially Brazil, driven by higher average volumes, Poland due to better spreads and higher volumes, and the U.K. supported by good price management. In terms of profitability, we improved our net interest margin year on year. This is explained by higher yields on assets as we actively manage credit spread, focusing on profitability, not market share, which more than outweighed higher funding costs. We were able to contain, thanks to our discipline, deposit remuneration in Europe and deposit repricing downwards in South America. As we commented last quarter, we are seeing a slight deceleration in net interest margin and net interest income in line with our expectations. Please remember that the decrease in net interest margin in the second quarter was due to the prudent adjustment we made to the exchange rate in Argentina. And this quarter, net interest margin was also affected by the hyperinflation accounting in Argentina and the depreciation of the real and the Mexican peso, and to a lesser extent, the beginning of a new interest rate cycle in Europe. Over the last few quarters, we have gradually adapted the sensitivity of our balance sheet to position for this new monetary policy. This and the positive contribution we expect from our consumer businesses put us in a good condition, in a good position to mitigate the effects of margin compression expected in Europe and North America going forward. In an environment of low credit demand in general, we generated another record in fee income, reflecting our transformation efforts to promote connectivity across the group and provide the best customer service. Retail increased as more customers chose Antander as their primary financial service provider. We added 5 million new customers over the last 12 months to a total of 171 million customers. Outstanding performance in consumer, largely driven by increased insurance penetration in Europe. CIB also grew from record levels last year, especially in the U.S., on the bank of strong dynamics in global banking. We had a 16% increase in wealth, with all three businesses growing at double digits. And payments was impacted, as I mentioned before, by the one-time positive fee recorded in the first quarter in 2023 in Brazil. Our transformation towards a simpler and more integrated model continued to deliver structural efficiency gains. Our cost-to-income ratio for the nine-month period improved to 41.7%, the best level that we have reported in the last 15 years, one of the best in the sector, and is already at better levels than the guidance we provided for 2024. Costs declined 1% year-on-year in real terms, despite the lagged effects from higher inflation on salaries and other costs and our investments in transformation. By business, costs remain very well under control in retail and consumer, which represent 70% of our cost base. More than 90% of the nominal cost increase came from CIB as part of our strategy to reinforce our CIB franchise. Costs remain contained in wealth, even with higher commercial activity, and we're fairly flat in payments, even as we invest in global platforms. As we look ahead, structural improvements from our new operating model, which help us achieve our target of maintaining cost-to-income at around 42% in 2024, while it should improve further next year. Credit quality remains robust around and across our footprint in line with our expectations. We record low unemployment rates in most countries and easy monetary policies. Credit quality improved year on year as reflected both in the NPL ratio and lower coverage needs. The NPL portfolio has collateral guarantees and provisions that account for 90% of its total exposure. Twelve-month cost of risk improved to 1.18%. In our retail and consumer, 12-month cost of risk improved in the quarter. In retail, there were some underlying trends across the different countries. Cost of risk improved across Europe and remained at very low levels in the UK and Portugal. In Brazil, it fell for the second quarter in a row. And in Mexico, it also declined in the quarter following a year of expected normalization. Similarly, in consumer, 12-month cost of risk was impacted year on year by the normalization we expected. but it dropped in the quota to 2.12%. The cost of risk in the first nine months of the year was 1.14%, putting us in good position to end the year comfortably within our target of 1.2%. Finally, turning to capital, our fully loaded capital ratio remains at a comfortable level, backed by strong organic capital generation and significant risk-weighted asset mobilization. This quarter, we generated 43 basis points organically, on the back of 52 basis points from profit generation, partially offset by risk-weighted asset growth and by minorities. We recorded a 26 basis point charge for shareholder remuneration in line with our 50% payout policy We had 18 basis points of regulatory charges, mostly related to model updates in low default portfolios. And finally, we had positive impacts from the placement of Santander Poland and ALCO portfolio valuations, which were offset by impacts on deductions, pensions for the most part. We continue to deploy capital to the most profitable growth opportunities and expand our asset mobilization capabilities to maximize capital profitability and productivity. Our disciplined capital allocation is resulting in a new book return on risk-weighted assets of 2.9% in the quarter, which is equivalent to a return on tangible equity of 23%, well above that of our back book at 16%. Our centralized asset management desk, which aims to optimize capital deployment, is achieving outstanding results. In the first nine months of the year, we have disposed of an amount of capital equivalent to $40 billion in risk-weighted assets at a cost of capital of half of that of new originations. In addition, one-third of our balance sheet that matures every year is being substituted by more profitable new business. The combination of these actions explains the expanding profitability and resilient capital ratio. That's all from my side. Hector, back to you. Thank you.