Banco Santander Mexico, S.A.

Good morning and welcome to Santander's first half 2025 results presentation. We are delighted to be joined by our CEO Hector Grissy and our CFO Jose Garcia Cantera. We will start with the presentation and then come back for your questions. Hector, over to you.

Thanks Raul. Good morning everyone and thank you for joining Santander results presentation. We will follow the usual structure. First, I will talk about our results with a special focus on the performance of our global businesses. Then Jose, our CFO, will give a deep dive on the financials. And I will conclude with some final remarks before opening up for Q&A. Before starting the presentation, let me remind everyone that we have announced an agreement to sell our business in Poland. Given that, until the deal is completed, we're still managing Poland as prior to the announcement. All figures in this presentation include Poland. We are approaching the end of our strategic cycle well ahead of our plan. Thanks to our disciplined capital allocation, which is further improving profitability, up to 16% post-81, with our C81 ratio at 13%, and 88% of our RWAs generating returns above our cost of equity. After our latest inorganic transaction, we decided to accelerate execution of our €10 billion share buybacks, and upgrade our share buyback target so we now expect to distribute at least €10 billion to our shareholders through share buybacks for 2025-2026 subject to regulatory approvals. Q2 was another record quarter, demonstrating the strength of our strategy and the resilience of our business model in a more challenging environment. Our quarterly profit hit a new record of 3.4 billion, making H125 the first half ever, driven by strong revenue growth across global businesses and our solid franchise of 176 million customers that continues to grow, having increased by more than 8 million year-on-year as we improve customer experience, leveraging our global platforms. We achieved this as we continue to invest for the future through one transformation, making excellent progress towards a simpler and more integrated model. This has helped us to improve our efficiency and increase our post-81 ROTE by almost one percentage point to 16%. Our balance sheet remains solid with a strong capital ratio, which ended the quarter at 13% at the top end of our 12 to 13 operating range. All this contributed to strong shareholder value creation, with TINA plus dividend per share growing 16%, despite the depreciation of some currencies across our footprint. Going into more detail on our income statement, our P&L remained very solid. We delivered strong top-line growth with revenue up 5% in constant euros, supported by NII, which increased 1%, or 4%, excluding Argentina, and also by new record fees, up near double digits supported by significant customer growth and the network benefits we are capturing through our global businesses. Expenses grew below revenue, showcasing the positive effects from our transformation. We reiterated our target of lower costs in current euros in 2025. We are once again demonstrating the sustainability of our results with 5% growth in net operating income. Our prudent approach to risk is also evident in our robust credit quality trends, with a cost of risk that is consistently improving year on year. As a result, profit rose by double digits year on year. Lastly, This quarter we had positive and negative one-off charges that were not part of our ordinary business and are fully compensated in the net capital gains and provisions line. All in all, as we have shown over time, our results are sustainable and less volatile than Peter's, even in an increasingly challenging environment. We are ahead of plan in executing our transformation, which 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 243 basis points of efficiencies since we started. Our global businesses continue to drive the group's profitability and have delivered 104 basis points in efficiency gains. Our proprietary and global tech capabilities have generated 87 basis points in efficiency so far, surpassing the levels which we expected to reach by the end of 2025. As we said last quarter, there is still more upside over the medium term from our strategy, for both revenue and cost. Retail and consumer, which represent 70% of our revenue, have significant upside as we progress on the implementation of common platforms across all our global footprint. The rest of our revenue comes from wealth, CID and payments, which are more fee driven and will deliver additional efficiency improvements as we continue playing to our network strengths. All our global businesses deliver revenue growth while we improved groups profitability. Customer activity continues to drive revenue growth across all businesses, double-digit in wealth and payments, and also strongly in CIB. Profit also grew at double-digit rates in every business except consumer, which remained broadly stable year-on-year and improved significantly in the second quarter. In terms of profitability, we're already above the target we set for 25 in most of the cases, with an efficiency ratio that is improving at group level. The combination of our global businesses and our geographic footprint is a powerful example of how diversification works, putting us in a great position to navigate the challenges ahead. Higher than expected interest rates support some of our retail franchises, while other parts of our businesses, such as consumer and certain emerging markets, perform better with lower rates. Is this diversification that allows us to deliver recurring strong results, consistent profitable growth and value creation even under more challenging circumstances? Overall, the record first half performance, the execution of our strategy and our diversification keeps us on track to achieve our full year profitability targets. In retail, We are transforming the way we operate to become a digital bank with branches, combining cutting-edge technology with expertise and proximity of our teams. This combination is very powerful. It enables us to match the customer experience of digital-only competitors while offering personalized support and advisory through our branch network. Over the last year, we have gained almost 3 million AFTIC customers, increased 3% our deposits, and digital sales are up 16%. A key initiative is our new based AI global CRM, already being deployed across the group. In Spain, we completed the rollout of this CRM in the branch network during the quarter, boosting agent productivity by 23% in our assisted channels. On the cost side, automation is reducing operational complexity, allowing teams to focus more on customer interactions and value added activities and reducing manual activities to improve our cost to serve by 2% year on year. We are progressing in the rollout of our global platform. This quarter we achieved a major milestone. We completed the migration of gravity in Spain following last quarter launch in Chile. This wing goes closer to becoming the first major Western bank to operate fully in the cloud and has already resulted in tangible benefits. Respond times are 15% faster. Running costs have dropped over 65% in Spain. Deployment speed has improved from one month to just two days, and customers now enjoy a faster, more agile, and intuitive digital banking experience. Retail profits were strongly year-on-year, driven by solid revenue across most countries. Costs declined in real terms, while credit quality remained solid. In a more demanding environment, NAI grew 3% year-on-year, excluding Argentina, reflecting our focus on profitability and disciplined margin management. Fees rose 8%, supported by higher customer activity. As we said last quarter, by enhancing customer experience, reducing operational complexity, and fostering connectivity, we expect our transformation to continue driving customer growth and lowering costs in euros. In consumer, we continue to advance in our priority to become the preferred choice for our partners and customers. By delivering the best solutions and increasing our costs, Competitive advantage across our footprint. We are converging towards platforms. The recent launch of Open Bank in the US, Mexico, and Germany has proven highly successful, attracting 6 billion euros in incremental customer deposits. We're expanding and consolidating partnerships, offering global and best-in-class solutions integrated into our partners' processes. Xenia, our checkout lending platform, continues to gain traction. with more than 200,000 new customers onboarded in Q2. Consumer profit was relatively stable year on year in a context of lower car volumes in Europe, which began to show signs of recovery towards the end of Q2 and was supported by a solid cost of risk performance. Quarter on quarter, profit grew 16%. driven by strong net interest income and fees, as well as solid underlying LLP trends, mainly in the US, which was also benefited from some seasonality. Costs remain flat, reflecting the benefits of our transformation. Our focus is clear. We prioritize profitability over volume. We are currently originating at ROTES above 16%, well ahead of our back book. At the same time, we are lowering funding costs. Retail customer deposits grew 10% year-on-year and now represent 62% of total funding, up five points year-on-year. We are accelerating our transformation, which keeps bringing cost savings, and we actively manage capital to maximize returns, redeploying it from lower-return businesses to most profitable opportunities. As a result, we expect profit and NII to improve through the year as we continue to regenerate at attractive profitability levels, lower funding costs, and accelerate transformation. In CIB, we are building a world-class business to better serve our corporate and institutional clients across our footprint, while maintaining the same low-risk profile. Number one, we continue deepening our client relationships by expanding our advisory capabilities in the US, building on our areas of expertise to accelerate growth across the group. As a result, we are gaining market share and more relevant roles in investment banking. In the U.S., for example, we have won 30% more deals than last year, with better roles in a market where overall deal count has fallen by 11%. Number two, we're strengthening our position in our core markets, leveraging our centers of expertise. A good example of this is our record half in global markets, with revenue of 25% driven by, first of all, grind flows, the investment banks, investment, sorry, we've made, and the collaboration with global transactional banking and global banking. Third, collaboration with other businesses is also a key growth level. CIB provides FX solutions to retail, product development and structuring to wealth, and a full sheet of products, including capital markets and advisory, to commercial and auto. Even in a more challenging context in Q2, CIB delivered solid results with revenues up 9% year-on-year, leading to the highest H1 revenue on record, supported by a higher NII increase and fee growth across the business lines, and the exceptional performance of global markets in Q1. All this while we maintain one of the best efficiency ratios in the sector, and an ROTE above 20%, reflecting our focus on profitability and capital discipline. In wealth, we are building the best wealth and insurance manager in Europe and the Americas. Number one, in private banking, we remain focused on expanding our fee business and consolidating our global position through value-added solutions. This quarter, we launched Beyond Wealth, our new global family office service, and opened a dedicated service center for non-resident customers in Spain. Number two, in asset management, we strengthened our position in alternatives with the launch of the Real Estate Co-Living Opportunities Fund. And third, in insurance, which represents one of our most relevant growth opportunities, we're accelerating our strategy across two verticals. life and pensions, with new lines such as retirement in Spain and unit-linked products in Mexico, and property and casualty, expanding high-growth businesses such as Health and Autocompara. These efforts have supported a 6% year-on-year growth in gross return premiums. Fourth, promoting connectivity and collaboration with other businesses, mainly CIV and retail, is also a major growth driver for wealth. Collaboration fees increase close to double digits. In summary, all this supports strong growth and high profitability. Profit grows 24% driven by strong commercial activity and double-digit fee growth across businesses. Efficiency improved 1.5 percentage points year-on-year and rotates close to 70%, making wealth an extremely efficient and profitable business for the group. Finally, payments, where we hold a unique position on both sides of the value chain. In Merchant Acquiring, we are among the largest players in Latin America, Spain, and Portugal. We are focused on expanding our global platform with a single API to serve all our customers, and we have already integrated several partners in Mexico, Argentina, and Uruguay. As a result, GetNet total payments volume keeps growing strongly. which is helping us to consolidate our presence in core markets. Pagonex Payments is leveraging the best proprietary technology to deliver account-to-account payments processing, FX, fraud detection, and other value-added services. Volume processes by our payments hub were four times higher than the same period last year. In cards, where we are amongst the largest issuers globally, with 106 million active cards, we continue to expand the business, offering best-in-class products to our customers. This quarter, we have introduced PaySmarter in Spain, a new initiative designed to enhance the security, control and benefits of credit card usage, encouraging greater adoption among our customers. We also continue to expand our joint value proposition with GetNet, now available in Spain, Chile, and Portugal, and following the recent launch also in Argentina. Payments delivered a strong quarter, with double-digit revenue growth year-on-year, both in cards and Pagonex, and cost-under-control driving 47% profit growth. Finally, Pagonex EVDA margin improves to 29% backed by GetNet with one of the best ratios among our competitors. We expect revenue growth, cost efficiency, and capital optimization to continue driving profitability in the coming quarters. Our strong operational and financial performance is improving profitability and driving double-digit value creation for the ninth consecutive quarter. Post-81 Rote was 16%, up nearly one percentage point year-on-year, reflecting the high levels of the new business profitability. Earnings per share rose to more than $0.43, supported by strong profit generation and fewer shares following the buybacks. As a result, we continue to grow our value creation, which in terms of PNAP plus cash DPS increased 16%, reflecting our disciplined capital allocation and again, the impact of our share buybacks. Buybacks remain one of the most effective ways to generate shareholder value. Yesterday, the Board of Directors approved a new buyback program up to 1.7 billion euros against 25 results, which As the ECB has already granted the corresponding approval, will start to be executed tomorrow. Since 21, and including this last program we are announcing today, we will have repurchased around 15 to 16% of our outstanding shares. These programs have been executed at an average price of 3.9 euros per share, providing a return on investment of approximately 20% to our shareholders. I will leave you now with Jose, who will go into our financial performance in more detail.

Thank you, Hector, and good morning, everyone. I will go into more detail on the group's P&L and capital performance, but before I do that, let me make a couple of comments. First, this quarter we have recorded two one-offs, obviously not part of our ordinary business, of the same amount but opposite directions. A net capital gain of 231 million euros from the sale of our stake in Casseis, amount that we decided to use to strengthen the balance sheet in Brazil. Second, as we always do, we present growth rates in both current and constant euros. We have a difference of around 5 percentage points between them, again this quarter. mainly due to the depreciation of the Brazilian real and the Mexican peso towards the end of last year. As the CEO explained, we are yet again reporting record results this quarter for the fifth quarter in a row. Revenue grew 5% with a good performance in costs in line with our objective for 2025. Cost of risk remains stable in the quarter, supported by robust labor markets and prudent risk management. There are several positives and negatives in the other results line, but the concepts that explain most of the significant jump in this line year on year are the write-downs in PagoNext and the temporary levy on revenue earned in Spain, which were accounted for last year. Finally, on the right-hand side of the slide, you can see the upward trend in profit, which grew 4% this quarter, on the bank of understanding NII performance, which rose 2% quarter-on-quarter, cost control, and better loan loss provisions. Total revenue increased 5% to $31 billion, on track to meet the target for the year in a less favorable context than initially anticipated. This was underpinned by growth in number of customers and interactivity with us across all businesses. All our global businesses contributed to revenue growth, which was mainly supported by another record half in CIB, up 9% year-on-year, driven especially by global markets and our growth initiatives in the U.S. We had 14% revenue growth in wealth, with record assets under management and strong commercial trends. Payments was up 17%, with double-digit growth in NII and fees, both in Pago Next and Cards, which was fueled by higher activity levels. And we showed a strong performance in retail and consumer. In retail, particularly due to good NII and fee income in most countries, and in consumer, supported by net interest income growth, both in Europe and in the U.S. The group's NII increased 4% year-on-year, excluding Argentina. Almost 85% of the group's net interest income comes from retail and consumer. However, this quarter, most of our businesses contributed to the overall positive growth year-on-year, which was supported by our active asset and liability pricing management, most evident in consumer, both in Europe and in the U.S., with improving loan yields and a funding structure with a larger share of customer deposits. but also in retail, especially in UK, Chile and Mexico. Lower funding costs related to market activities in CIB and the measures that we have been taking in the last few quarters to adapt the sensitivity of our balance sheets to protect NII on the new cycle of interest rates. A good example of this is retail, where NII increased across most countries and remained fairly flat in Spain and Brazil in a less favorable context for interest rates. As you know, we have positive sensitivity to rates in Spain and negative in Brazil. Net interest income grew 2% quarter-on-quarter, primarily due to the performance of net interest margin, which improved in the quarter for the same reasons that I mentioned before, while it fell only 10 basis points year-on-year without Argentina. This performance is in line with our guidance of NII going slightly up in 2025 in constant euros, excluding Argentina, and slightly down in current euros, guidance that we reiterate. We generated another record half in net fee income, reflecting our transformation efforts to promote connectivity across the group, deploy high value-added products and services, and provide the best customer experience. Net fee income grew close to double digits, well above inflation and cost, on the bank of a strong activity in general, customer growth, and a mix that is more weighted towards value-added products and services. Retail showed good performance across our footprint with solid consumer growth. CIB grew 9% up from record levels last year. After an excellent first quarter, And this second quarter was supported by the good performance in GTV, and as we continue executing our growth initiatives, particularly in global banking in the U.S. We had a 20% increase in wealth, with a strong growth in all business lines, backed by record assets under management, and a greater share of fee businesses. We showed double-digit growth also in payments, both in PagoNext and Cards, supported by high activity levels as GetNet's total payments volume increased 15% and Cards' spending rose 9% year-on-year. As we detailed in the first quarter, this year consumer is affected by the impact of a new insurance regulation in Germany and also by lower card registrations in Europe. However, strong fee income growth in consumer U.S. came mainly from servicing fees on auto portfolios sold under our capital light strategy, which is helping to partially offset this impact. And our strategic focus on insurance is also delivering tangible progress in consumer across Europe and Latin, with rising penetration expected to translate into higher fee income generation as activity gains momentum. One transformation is key to understanding why we're improving our profitability in every single market, leveraging the connectivity of our global businesses, providing economies of scale and scope. As a result, we expect sustainable improvements in operational leverage as we further implement the structural changes to our model. These improvements are already very evident. as demonstrated by the evolution of our cost base in absolute terms, that translates into better efficiency levels, which are amongst the best in the industry. In retail and consumer, which are leading our transformation, costs remain well under control, down 1% in real terms, even after absorbing wage inflation in some of the countries, an upfront cost of rolling out global platforms. Retail and consumer represent 70% of our cost base, and we expect them to showcase the benefits of one transformation going forward. CIB, wealth, and payments are more fee-driven. Cost in these businesses grew 6%, however, showing positive operating jaws with a double-digit fee increase, as I just explained. We had a strong cost performance also in the quarter. which was affected by Argentina. Excluding Argentina, cost remains flat, even after our investments on transformation and initiatives for future growth. As a result, net operating income rose 5% from last year, and our efficiency ratio improved to 41.5%, the best in more than 15 years. As Hector said, we reiterate our guidance for lower absolute cost in current euros for 2025. The risk profile of our balance sheet remains low, with robust credit quality across the footprint on the back of strong labor markets and easing monetary policies in general. Loan loss provisions increased 6% year-on-year, reflecting a reforce to reduce NPLs and also some deterioration in Brazil in the context of higher interest rates and inflation. Excluding the provisions allocated to accelerating write-offs, the increase would have been just 3%. Credit quality continued to improve year on year as reflected both in the NPL and the cost of risk. The NPL ratio fell further and is now at 2.91%. Remember that much of our NPL portfolio has collateral, guarantees and other provisions that account for more than 80% of total exposure. Cost of risk improved seven basis points year-on-year and remained stable in the quarter at 1.14%, despite proactive management actions to lower NPLs, as I just explained. In retail, cost of risk improved across all our main countries and was also slightly down in the quarter with significant improvement in Mexico, compensating a weaker performance in Brazil. In consumer, cost of risk improved both year-on-year and quarter-on-quarter, with notable improvements in the U.S., where we are seeing a resilient customer behavior, stronger used car prices, and stable labor market. We anticipate a stable cost of risk going forward, as we do not foresee a deterioration in employment levels. Moving on to capital, as you know, we have been improving our capital productivity and accelerating our capital generation for some time. Our CET1 ratio increased to 13% and stands at the top of our 12% to 13% operating range. This quarter, we generated 54 basis points of capital from attributable profit and asset rotation initiatives more than offset organic risk-weighted asset growth. Since the asset rotation typically concentrates in the second half of the year, we would expect net organic capital generation to accelerate meaningfully in the next two quarters. This enabled us to accumulate capital after compensating capital distribution charges for shareholder remuneration M81s and absorbing other charges, including some regulatory headwinds, which this year will be lower than initially expected, as some of them have been postponed to 2026. As a result, we expect regulatory charges of around 20 basis points in the second half of 2025. These figures do not yet reflect the impact from our recent inorganic transactions in Poland and in the UK. We continue to deploy capital to the most profitable opportunities and leverage our global asset desks mobilization capabilities to maximize capital productivity. Our disciplined capital allocation delivered a new book return on risk-weighted assets of 2.8% in the quarter, equivalent to a return on tangible equity of 22%, well above that of our back book. We are selling credit risk at a ROA of approximately half of that figure. All these actions underpin our growing profitability and consistent capital generation. Accredited capital redeployment is a top priority for us. Recent organic transactions are a clear example of our consistent application of a strict capital hierarchy under which we prioritize organic profitable growth and ordinary distributions, while any bolt-on acquisition must be complementary to our strategy and deliver attractive financial results at least in line with those of any organic investments and exceed share buybacks. we announced the disposal of Santander Polska at three times our initial investment, which is expected to generate around 100 basis points of capital. As buybacks remain one of the most effective ways to generate risk-free shareholder value, we decided to use half of this excess capital to accelerate the execution of the share buybacks that we announced at the beginning of the year and improve our target to at least 10 billion euros for 2025 and 2026 earnings. We will deploy the remaining half excess capital into the acquisition of TSP at highly attractive returns while we enhance our strategic positioning. We are deploying capital at least at 20% return on investment capital. The bill will be EPS accretive from day one, and it will increase group EPS by around 4% by 2028. We are buying TSB at around five times earnings post synergies. At the same time, TSB will contribute to the group with a low risk profile. It will accelerate Santander UK's transformation, improve connectivity across the group, and increase our exposure to mature markets and hard currency. During 2026, we expect that organic capital generation will provide additional room to deploy capital in line with our capital hierarchy. That's all from my side. Hector, over to you. Thanks, Jose.