Banco Santander Mexico, S.A.

everyone, and thank you for joining Santander's 2024 results presentation. I'm Raul Sinha, Global Head of Investor Relations, and I'm delighted to be here joining our Executive Chair, Anna Boutin, our CEO, Hector Grissy, and our CFO, Jose Garcia-Cantera. Today's presentation will follow the usual structure for full-year presentations. Anna will kick off the presentation by talking about our results and achievements in the context of our strategy, then Hector will add detail to our financial performance. Finally, Anna will conclude with our outlook for 2025 before opening for Q&A. Anna, over to you.

Thank you, Raul, and welcome everybody to our full year results presentation. 2024 was another record year, the third consecutive year of record results for Santander. It shows the benefits of our strategy, the resilience of our business model. As we said, in 23, we have entered a new phase of value creation, and this has enabled us to deliver or exceed all our key financial targets. Profit reached a record 12.6 billion euros, supported by both strong revenue growth and customer growth. We grew 8 million customers, and this happened across all our global businesses in a very balanced way. We have continued to invest for the future, and we're making excellent progress towards a more simple and more integrated model through one transformation. This has been instrumental in improvements in efficiency by more than two percentage points and increasing our profitability, our OTE, to 16.3. Our balance sheet remains solid with a strong capital ratio, ends the year at an all-time high of 12.8, reflecting our ability to generate capital organically. Finally, we delivered again strong shareholder value creation with TNAB and dividend pressure growing by 14%. And by the way, this is in spite of pressure from currency devaluation in some markets, which was offset by our profitability and the appreciation of the U.S. dollar, with our U.S. business acting as a natural hedge against the pressure on the Brazilian real, for example. So let me just go into a bit more detail on our full year performance. Again, very high quality of results with strong growth in our top line, revenue up 10% in constant euros. And as I said, supported by both customer activity and good delivery across all our businesses. Fee income is up 11%, again in constant, supported by significant growth in customers, up 8 million, and very much the network benefits we are capturing throughout the group which already represent about 20 billion, about a third of our revenues are due to being part of the Santander Group. Expenses grew well with our revenue showcasing again the positive effects of our one transformation and we delivered record net operating income of 36 billion. Finally, we continue to be prudent in our approach to risk and our cost of risk ended at 115 better than our initial guidance. for the year. Again, we have shown over time that our results are sustainable and less volatile over the cycle than most of our peers. And this is again because we are retail consumer powerhouse with a business model that combines both geographical diversification with business diversification and a strong risk management. You can see here that all of our five global businesses delivered revenue growth while we improve profitability. The performance of retail consumer reflects the scale and the benefits of our transformation, one transformation improving efficiency but also growing customers. Wealth, CIB and Pagonex have each delivered improved profitability, again leveraging our network strengths and capabilities. The combination of these global businesses with a geographical diversification places us in a very strong spot for the next year and for the future. We're enhancing our disclosure to allow the market, all of you, to better forecast our global businesses in the same way that we have been doing for years internally. I would also highlight that while higher interest rates benefit our retail franchise in Europe, other parts of our business, such as consumer and certain developing market geographies, will do better with lower rates. And it is this diversification that allows us to deliver current strong results, consistent profitable growth, and value creation. Again, our performance this year, the execution of our strategy puts us on track for our 25 financial targets. On retail, which is the heart of our banking business, we are making very good progress. Our aim is to become the number one bank for our customers. One transformation is delivering excellent results. And by the way, there's a lot more to come, growing 4 million, around 4 million active customers with about 280 million total with lower cost per transaction. We are improving our digital onboarding, digital sales grow by 16%. The number of products has been reduced by almost 40% with special focus on the front book. And this is, you're going to see benefits of this in the next few years, of course. And you will see this not just on the cost side, but also on revenues for 25, 26. Second, we are consistently but relentlessly deploying our global platform. In the UK, for example, customers have been migrated to the new global app that's already up and running in Spain, Portugal, and Poland. And again, the global platform rollout and improvements in customer experience will drive additional customer growth with lower absolute cost. In consumer, our priority continues to be delivering the best solutions for our customers, but also improve our competitive advantage on cost across our footprint. You can see here the operational leverage for the year, where we're growing revenues at six and decreasing costs by 1%. It's been a groundbreaking year in our transformation, and a great example of this is our checkout lending platform, Xenia. which again, thanks to our scale and teams, we have been able to partner with both Apple and Amazon in Germany. This is absolutely key, not just today, but for the future, to be where our customers are going to be operating with us under our own brand. We have also successfully launched OpenBank in the U.S. and Mexico. Open Bank U.S. has gathered $2 billion of deposits. That's about double what we expected, and it's also improving our loan-to-deposit in the U.S. by about 12 percentage points. It's going to allow us to optimize our U.S. funding structure from the beginning. We are reducing the cost to serve and consumer. It's down significantly, as you can see. And for 2025, and this is key, We are actually expecting consumer to be one of our best performing divisions in terms of the upside, with the U.S. being one of the countries that most improves the total country P&L. Our other three global businesses, wealth, CIB, and payments, are the ones driving fee growth. We anticipated this to you all in 23 due to very strong network effects and also leveraging technology. Our corporate bank, we are focused on the markets where we are present with a strong footprint. And as you know, we're delivering good growth and profits. We are maintaining our usual risk profile. In the U.S., in 2024, corporate bank fees have increased by 21% and revenues up by 14%. We are building the best wealth and insurance manager in our footprint, again, leveraging on our network. Wealth revenue is up 15% in 24 with fees up again double digits across the three business lines. In payments, we are building the backbone to connect the group across different businesses and geographies. It's essential in our one transformation. This is a very big market and a growing opportunity. In 24, payments volume is up 11% and the key metric that we committed to EBITDA margin is close to a 30% target for this year, for 25. We're very close to that already. Going forward, and especially in an environment of lower rates in Europe, CIB wealth and payments are going to be critical in ensuring our targets for this year, including the fee income growth. So all of this performance, the strong operational and financial performance, is driving higher capital generation, double-digit value creation and shareholder return, Our fully loaded CET1 rose to 12.8 at the end of December. January 1st, still 12.8, supported by record organic capital generation after investing in profitable growth, increasing remuneration to shareholders, and absorbing regulatory impacts. At current prices, share buybacks remain the best way to generate shareholder value. Since 21, and including this new share buyback we've announced today for the year on 24 earnings, we will have repurchased 15% of outstanding shares with a return on investment approximately 18% for our shareholders. And there is more to come. Hector will go into our financial performance in more detail, but let me just briefly, given that I only get a chance to be with you all once a year, at least formally, remind all of you of our model and our strategy. As I say, this is a marathon. It's not a sprint. And in every single sprint, we're delivering what we committed. And this is because we're delivering numbers and results as we guide you every year, but we're also building the Santander of tomorrow. Our aim is to be the best open financial services platform for all our customers. We are working to become more competitive in a way that few others can replicate. And this is based on a unique combination of a customer base of 173 million customers, a global scale with local leadership, and very important, all of this leading to high visibility of our results and predictability through the cycle. And the biggest area of upside, even today for Santander, comes from the network effect of belonging to the group across our footprint and through the global business. Our confidence in our guidance stems because a lot of what's coming is under our control. And all of this, let me stress, in what we do anticipate a much more challenging and volatile macro. Just a few examples of how this is not a PowerPoint. This is already delivering numbers and results for our shareholders and for our customers. These are some of the global platforms that are up and running and contributing to the performance and financial performance which you're seeing, and which is increasingly, and this will continue to increase, making us different from our peers. These platforms will deliver, and partly delivering already, best services and better efficiency. Open Bank is our digital bank, rolled out now in the US and Mexico. Xenia, I mentioned already. In 24, there were 1.7 million new contracts, and we are signing in new countries with these partners. And Gravity, our core system, where our partner is Google, is being offered to third parties through our joint venture, but it has already enabled Santander to reduce our cost per transaction by 10%. But it's obviously helping us to do much more than that in terms of the front-end systems. We are confident we will compound growth throughout the cycle, creating value for our shareholders. Just a brief reminder of how this business model has already delivered the numbers. You can see it here. Sustainable earnings growth year after year. Improvements in profitability. Over the last decade, we have doubled our profit. Actually, we have tripled if you go back to the end of 2013. And a new record again in 2024. We have attracted 56 million new customers to Santander. Our ROT, our profitability, increased to 16.3 from 11 in 2014. And, of course, we have steadily built capital throughout this period. I just want to remind us, actually, when I took over, we started with a CET ratio of 8.3%. And, of course, the way we calculate capital is not the same. But very importantly for you, our shareholders, we have increased six times shareholder remuneration. We are now closing at 12.8, which is near the top of our target operating range. And let me just stress operating range. We're not changing our target of over 12. And this is, as I just mentioned, despite RWA inflation. So last but not least, before I turn over to Hector, this is our North Star, and this is our North Star since 23. We could not target and commit to TNAV and dividend pressure before 23 for reasons that you all know well. The progress towards the target that we set is well ahead of plan. We continue to be focused on profitability and being very disciplined on capital allocation. Today we have 87% of our WAs above cost of equity, further improving our profitability to above 16%. So let me now pass to Hector who will take you over our financial performance in more detail. Hector, please.

Yes, thank you, Anna. I will look at our performance in cost and currency, including the impact of Argentina, where a conservative approach to FX was adjusted in Q4. This resulted in a positive impact on NII with a negative offset in other income and cost. Let me start by highlighting our strong top-line performance. We achieved double-G revenue growth, exceeding the targets we provided at the start of the year and even the ones we upgraded during the year. This was underpinned by sound growth in customer activity across the businesses while reflecting the benefits of our model. The strong increase was mainly supported by the next things. First, a retail business which continues to grow at double digits with good performance and both NII and fees. A record year in CID, up 14%. on the back of our investments and good activity levels, and 15% revenue growth in wealth, driven by solid commercial activity in private banking and a really good performance of Santander asset management and insurance. Consumer and payments are also showing very good revenue trends, with consumer delivering double-digit growth in fees and both pagonists and clerks growing. More than 80% of the group's NII comes from our retail and consumer businesses. The group NII grew double-digit in 24, with NIMOP driven by asset repricing and controlled cost of deposits. Over the last few quarters, we have proactively managed our interest rate sensitivity to position our balance sheet for the new outlook on interest rates. In Spain, for example, our NII was flat quarter over quarter partly due to our hedges. And in Brazil, our negative sensitivity to 100 basis points rising rates is now lower at around 120 million euros. Going forward, our outlook for 2025 for the group is similar to what we said in Q3. Excluding Argentina, we expect NII to be slightly up in constant euros and slightly down in current euros based on forward rates. In an environment of low credit demand in general, we generated another rate of performance in fee income through network effects from all our global businesses. Retail increased driven by the strong performance across our footprint on the back of good commercial dynamics and customer growth. In 2024, we put a greater focus on deploying targeted high-value-added products and services, and this is expected to be a positive driver in 2025. In consumer, we delivered double-digit growth fees across our core markets, driven by insurance and DCB in Europe, Brazil and NATO in the U.S., and in 2025, we expect consumer fees to be slightly down due to the impact of the new regulation in insurance. CIB also grew strongly to record levels, supported by all CIB products, with the U.S. a top contributor for fees nearly doubled. In wealth, we delivered a very strong performance with double-day fee growth backed by record assets under management. Excluding a one-time positive fee recorded in cars during 23, payment fees were up slightly and are expected to grow strongly during 25. One transformation is key to why we can continue to get better in every single market, thanks to leveraging our global businesses. We expect sustainable improvements in operating leverage as this is a structural change in our model that will deliver benefits for years to come. Retail and consumer are leading our transformation, which is delivering structural efficiency gains and operating leverage with cost growth of 1%, well below revenue growth of 9%. These two businesses represent 70% of our cost base and will continue to see lower costs going forward. CIB and wealth cost increased by 13% year-on-year, showing positive jobs while driving higher fee income, and payments operating performance reflects our strategic investments. As a result, our cost-to-income ratio improved from 41.8 for 24, the best we have ever reported in 15 years, and better than our original guidance. There is still more upside over the medium term for our strategy, both revenue and cost. While we are ahead of our plan on execution of one transformation and global tech capabilities, we have more to do capturing network effects across our global businesses. This has delivered 66 basis points of improvements for our cost to income ratio, with more upside to our original target of 100 to 150 basis points. retail and consumer and more than 70% of our earnings and have significant upside. The rest of our earnings come from wealth, CIV and payments which are fee driven and will play to our network strengths. Our balance sheet, as you can see, is rock solid. Credit quality is stable across our footprint ahead of our expectations with low unemployment and easy monetary policies in most of the countries except for Brazil. Credit quality improved year-on-year as reflected in both NPL ratio and lower coverage needs. NPL ratio was 3.05%, improving both year-on-year and Q&Q. The NPL portfolio has collateral warranties and provisions that account for around 90% of its total exposure. The cost of risk improved to 1.15%, better than our target of around 1.2% for the year. In our retail business, 12-month cost of risk improved year-on-year to 0.92%, with sound underlying trends across all the countries. In Brazil, we have grown credit at a slower pace than our peers and have made improvements to our portfolio underwriting over the past few years. Meanwhile, in consumer, 12-month cost of risk finished at 2.16%, in line with the normalization expected in 24, supported by the good portfolio behavior in the U.S. auto, as we had expected since the beginning. Moving on to capital, where we delivered an exceptional outcome in Q4. Our CT1 ratio grew by 30 basis points in the quarter, backed by strong organic capital generation. We have been working on accelerating our capital generation for some time. This quarter, we generated 82 basis points organically in the back of the profit generation and RWA modification. We continue to deploy capital to the most profitable growth opportunities and expand our asset mobilization capabilities to maximize capital productivity. Our disciplined capital allocation is resulting In a new book, return on risk-weighted assets of 2.9%, equivalent to an ROTE of 23%. We have reached 87% of RWAs with returns above the cost of equity, up from 40% in 2015, and well above our target of 85% in 2025. Our asset desk is achieving exceptional results during the year. We disposed of an amount of capital risk equivalent to $60 billion in RWAs. The combination of these actions explained expanding profitability and the good performance on capital. All in all, we are in a new phase of value creation driven by higher profitability. Looking back at the period since 2016, our value creation has clearly accelerated and since 22 we have been able to generate an average 15% value to our shareholders. This is driven mainly by the step up in our profitability and helped by our diversification. Our exposure to the US dollar through our US businesses has acted as a natural hedge against depreciation of the Latin currencies. Let me highlight the sensitivity of our equity to foreign currency, which clearly shows that currency depreciation in Brazil and Mexico is at least partly offset by our exposure to the stronger U.S. dollar working as a natural hedge. That's all from my side. Ana, over to you.