1. Press release
Chairman’s speech at the presentation of 2011 results
Botín: “We have shown that we are able to
simultaneously meet capital requirements, increase
provisions for property exposure and maintain per
share remuneration”
■ “Our strong revenues allow us to generate nearly EUR 25 billion in operating profits
before provisions, placing us among the leading banks in the world in ability to
generate earnings.”
■ “We’ve gotten ahead of the new requirements for property assets announced by the
Government, thus increasing coverage of on-balance real estate assets from 32% to
50%.”
■ “The additional provisions required for property assets go in the right direction.
These provisions should be fully made during this year. Each financial institution
should set aside its own provisions, limiting the use of government funds. Non-viable
institutions should be sold.”
■ “The Bank’s priorities for 2012 are to complete the real estate provisions in Spain in
line with the new standards, to reach 10% core capital by EBA criteria and to do this
while maintaining shareholder remuneration.
Madrid, Jan. 31, 2012 – Banco Santander Chairman Emilio Botín announced the bank
registered attributable net profit of EUR 5,351 million in 2011, down from 35% a year earlier.
Recurrent profit was EUR 7,021 million, a decline of 14.2%. “We have gone through the fourth
consecutive year of crisis, the toughest and longest period of volatility since the 1930s,
characterized by weak growth in volumes, pronounced instability in markets and regulatory
measures and changes with substantial effects. In this extraordinarily difficult environment,
Banco Santander has maintained its policy of giving priority to the strengthening of its balance
sheet in terms of capital, liquidity and provisions. In my opinion, it was a very good year.”
During his speech at the presentation of 2011 results, Botín said the bank “has demonstrated
its ability to simultaneously meet the 9% core capital requirement set out by the EBA, to
substantially increase provisions for property exposure (after a voluntary pretax charge of
EUR 1,812 million, bringing coverage of on-balance property in Spain to 50%), and
maintained per share remuneration at EUR 0.60 a share for a third consecutive year.”
Comunicación Externa.
Ciudad Grupo Santander Edificio Arrecife Pl. 2
28660 Boadilla del Monte (Madrid) Telf.: 34 91 289 52 11 1
comunicacionbancosantander@gruposantander.com

2. The bank’s Chairman reviewed the four management principles that have enabled the Group
to obtain these results: diversification and recurrence of revenues; capital and liquidity
management and the subsidiaries model; risk management; and efficiency in operations and
business.
Diversification and recurrent revenues
Botín highlighted that Santander’s business model keeps the bank “very close to our
customers, who now number 102 million.” He pointed out that the bank is present in ten core
markets, five of those in emerging countries – Brazil, Mexico, Chile, Argentina and Poland -
that represent 54% of profit and five in developed countries – Spain, the U.K., Portugal,
Germany and the U.S. - that make up 46% of profit. “This positioning is unique among global
banks. Our goal in each of our ten core markets is to have market share of more than 10%
and to be one of the top three commercial banks.”
Botín noted that Brazil makes the largest contribution of any unit - EUR 2,610 million, or 28%
- to the Group’s results. “We have completed the integration of two very good banks. Now the
focus will be on growing the business in line with the country’s steady development. We
expect that our bank in Brazil will grow steadily, thanks to the investments we have made to
increase our branch network and deepen our business with SMEs.”
In the United Kingdom, which registered profit of EUR 1,145 million, 12% of the Group’s
earnings, Botín said business was affected by the weak economy, increased cost of funding
and the impact of new domestic regulations for retail and commercial banks. “Our priority at
present is to invest in the corporate business, integrating the branches bought from the Royal
Bank of Scotland, to create a more diversified bank, with sufficient critical mass in various
business segments. At the same time, we are strengthening our investment in branches and
improving the quality of our customer service.”
Botín said that Spain, which recorded profit of EUR 1,149 million, or 9% of the Group’s total
compared with 34% in 2008, said that “the economy and the Spanish banking system remain
in the midst of an adjustment process that affects all areas of business. Nonetheless, I am
confident that in Spain, Banco Santander has reached a turning point.” Botín highlighted
that “In the Santander branch network, margins, fees and insurance activity are growing well.
This is a result of good management of asset and liability prices, which we have adapted to
the current economic and financial conditions.I wish to make it very clear that if we do not
lend more, it is because of a lack of solvent demand.”
He pointed out that “since 2009, we have gained 111 basis points in market share in deposits.
This has allowed us to reduce the gap between credits and deposits, while at the same time
moderating the cost of our retail liabilities.” He also noted that “we have kept costs flat without
reducing our commercial capabilities. We have not cut jobs or shut branches. This leaves us
ideally positioned to gain market share and capitalize on the scenario that will arise following
the pending restructuring of the Spanish banking system.” Regarding non-performing loans,
he highlighted that “the bank’s NPL rate in Spain is 5.5%, lower than the average of the
system but above our forecast that it would remain below 5%.”
Comunicación Externa.
Ciudad Grupo Santander Edificio Arrecife Pl. 2
28660 Boadilla del Monte (Madrid) Telf.: 34 91 289 52 11 2
comunicacionbancosantander@gruposantander.com

3. Capital and liquidity management and subsidiaries model
Botín underlined that “strengthening our balance sheet was, again in 2011, a management
priority for Banco Santander.” He pointed out “how rapidly and efficiently we adjusted to the
new requirements of the EBA. “In just two months we were able to meet the core capital
requirement of 9% by the EBA criteria, attesting to the advantages of our model of
listed subsidiaries that are autonomous in capital and liquidity, as well as our ability to
execute. I would like to underscore that the improvement of the core capital ratio was done
while maintaining full shareholder remuneration, showing the strength and flexibility of Banco
Santander, and did not entail the sale of strategic assets for the bank’s businesses, and was
realized even as the bank strengthened its balance sheet through provisions.”
Regarding liquidity, he said, “We continued to reinforce our position in 2011, reducing the
loans-to-deposits ratio to 117%, compared to 135% in 2009. He also highlighted that that
bank took advantage of windows of opportunity in the market to issue debt and that all issues
were made without state guarantees. “We issued medium- and long-term debt in amounts
that widely exceeded our maturities in the year. I would like to underscore that our group
policy is for our subsidiaries to manage their liquidity on their own, without depending on the
parent Group. We have access to the debt markets in our ten core markets.
The Banco Santander Chairman went over the asset sales the bank selectively realized in
2011, “in which the capital gains did not contribute to Group earnings.” These include
the strategic alliance with insurance compny Zurich to develop the insurance business in Latin
America, which generated EUR 641 million in capital gains; the entry of new partners who
acquired 25% of Santander Consumer USA, generating a capital gain of EUR 872 million; and
the sale of the bank in Colombia, which generated a capital gain of EUR 615 million, which
will be booked in 2012.
“The sales we have made this year show our strength and the value of our geographical
and business diversification, as well that of our model for subsidiaries, autonomous in
terms of capital and liquidity, and in many cases listed,” he added.
Risk management
“The attention we pay to risk management is the third factor that sets us apart. We have a
model based on strict discipline and independence from the business areas. This allows us to
continuously maintain lower default ratios than the average among our competitors in all the
geographical areas where we carry out our business. At the Group level, our NPL ratio was
3.89%,” he said.
He mentioned in particular real estate exposure in Spain, which came to EUR 32.100 billion.
“Our total exposure has declined by EUR 10.400 billion since December, 2009, representing
14% of our loan portfolio in Spain and 4% of the group portfolio. We have applied a write-off
policy that is always aligned with the standards set by our regulator. Also, we’ve gotten
ahead of the new requirements for property assets announced by the Government,
charging EUR 1.812 billion before tax against 2011 earnings, thus increasing coverage of on-
balance real estate assets from 32% to 50%.”
Comunicación Externa.
Ciudad Grupo Santander Edificio Arrecife Pl. 2
28660 Boadilla del Monte (Madrid) Telf.: 34 91 289 52 11 3
comunicacionbancosantander@gruposantander.com

4. Efficiency in operations and business
Botín highlighted the importance of efficiency in operations and business as one of the
Group’s management principles. ”Banco Santander is the most efficient international bank in
the world, with a cost-to-revenue ratio of 45%, compared to an average of 60% among our
global competitors. Our operational and business efficiency model features comprehensive
technology and operations management, with corporate policies in various areas that are
applied to all of the banks in the Group. These synergies are not easily replicated; it took us
ten years of work to develop them.”
The Chairman said: “Our management is focused on obtaining high return on capital for our
shareholders. We have 3.3 million shareholders around the world. In Spain, we have 1.5
million shareholders, following an increase by 130,000 in the last year. This proves that
they are confident in the performance of our bank and our capacity to pay a dividend.”
However, he recalled that the Santander share fell 26% in 2011. “The Santander share
outperformed the average of European banks by seven percentage points, but it does not
reflect our Group’s track record or potential. “ Botín announced that, pending approval by
the Shareholders’ General Meeting, the Santander Scrip Dividend Program will be
applied on the supplementary dividend paid in May, amounting to EUR 0.22 per share.
“Since it was launched, an average 80% of our shareholders have chosen to be paid in
shares.”
The last part of his speech focused on the outlook for 2012. “Emerging countries and in
particular Latin America will record good economic and financial growth. For advanced
economies, we have a much more cautious view. The improvement of the economic and
financial environment will be very gradual and will only start to be clearly visible starting in
2013. We think that in 2012 the macroeconomic adjustment and deleveraging process will
continue to weigh on growth and lending in the industrial economies in the aggregate,
especially in the eurozone. In the euro area, the situation will remain particularly difficult.
The global crisis has raised questions regarding its current design, with huge political and
economic implications.”
“The euro and sovereign debt will continue to be key issues in 2012. Although the European
Council in December took important steps towards a greater coordination and financial
discipline in Europe, a lot has yet to be done before full confidence in sovereign debt returns.
Without this, it will be hard for markets for private issuers to open up and for businesses to
resort to financing in a normal manner. In addition to fiscal discipline, it is essential for the
European economy that all mechanisms be used to enable a quick reestablishment of
confidence. I am convinced that action will be taken in this direction, because the stability of
the euro and of the eurozone have to be a priority.”
Botín said that the European Central Bank’s measures in December to provide liquidity are
“very positive and have helped to ease market tensions.”
As to Spain, he added: “In Spain, unlike 2011, which started better than it ended, the year
2012, in spite of the many difficulties in store, will end somewhat better than it started.
I wish to stress that the steps in reforms and fiscal consolidation being taken by the new
Spanish government are very positive and have contributed to the positive performance of
Comunicación Externa.
Ciudad Grupo Santander Edificio Arrecife Pl. 2
28660 Boadilla del Monte (Madrid) Telf.: 34 91 289 52 11 4
comunicacionbancosantander@gruposantander.com

5. Spanish public debt in the last few weeks. These measures will be painful in the short term
but are essential looking to the future. We urgently need to reform the labour market. We
need a reform that is deep and bold, that provides flexibility for companies and that links
salaries to productivity. ”Regarding the restructuring of the financial sector, although a
lot has been done, it must be completed out as soon as possible.“
“Further steps must be taken. What has been disclosed so far regarding additional
requirements for provisions against property assets goes in the right direction. These
provisions should be fully made during this year. Each financial institution should set
aside its own provisions, limiting the use of government funds. It should not be forgotten that
banks have already made an exceptional, unprecedented effort in Europe by merging the
deposit guarantee funds of banks, of the savings banks and credit unions. This was done to
solve the problems of the savings banks by taking money from the bank guarantee funds.
Non-viable institutions should be sold. As a result, the new banking environment must
have larger institutions that are sounder, more efficient, and with distribution networks more
aligned to the market’s size. This will help establish the flow of credit to the economy.”
He also spoke about Santander’s prospects for 2012. “The strategic positioning of Grupo
Santander gives us a comparative advantage over our major competitors. Our strength in
terms of income allows us to generate nearly EUR 25 billion in operating profits before
setting aside provisions, placing us among the leading banks in the world in ability to
generate earnings. Our current diversification provides us with the right balance. We do not
plan on making significant acquisitions or divestments over the coming years. We have a very
strong balance sheet. Maintaining high profit also allows us to organically generate a high
level of capital.”
Botín said: “Banco Santander’s current profit is well below our potential. Our priorities for 2012
are to complete the provisions for real estate in Spain according to the new standards; to
reach the 10% core capital requirement by EBA criteria; and to do this while maintaining
shareholder remuneration.”
As I stated at the meeting with investors in London last September, by 2014 we estimate we
will achieve, assuming the same consolidated group as at present, ROE of 12-14% and
ROTE of 16-18%, even despite the recent deterioration of the international environment.
The major levers for growth in returns will be:
- A gradual normalisation of profits in mature markets, especially in Spain, including
lower requirements for provisions.
- Organic growth in our emerging markets.
- The margin we have to optimise costs and income.
In short, we ended 2011 as one of the soundest, most solvent and liquid banks in the
world, with a business structure that allows us to face the future with confidence.“
Comunicación Externa.
Ciudad Grupo Santander Edificio Arrecife Pl. 2
28660 Boadilla del Monte (Madrid) Telf.: 34 91 289 52 11 5
comunicacionbancosantander@gruposantander.com