To help people and businesses prosper - Santander

2016

ANNUAL REPORT

To help people and

businesses prosper

31.01.2017

Santander in 2016: We progressed in becoming the best retail

Santander is one of the most efficient and

profitable banks in the world, thanks to

the talent and hard work of our teams. We

have achieved excellent results by doing

things in a simple, personal and fair way.

In 2016 Santander has achieved strong

results, meeting all our business objectives:

we increased loyal customers, grew lending

and served 125 million people and businesses.

Ana Bot¨ªn,

Group executive

chairman

Attributable profit

Million euros

Return on Tangible

Equity

6,204

*

+4%

5,966

(underlying)

2016/2015

11.1%

10.55%

Core Equity Tier1

Capital Ratio

fully loaded (+50bp 2016/2015)

2015

2016

* +15% at constant exchange rates.

Geographic diversification (contribution to underlying Group profit, %)

UNITED

KINGDOM

UNITED

STATES

BRAZIL

POLAND

21%

8%

3%

PORTUGAL

5%

OTHER

COUNTRIES

3%

SPAIN

12%

CHILE

6%

ARGENTINA

4%

Main countries

Santander Consumer Finance

2

2016 ANNUAL REPORT

13%

20%

5%

MEXICO

SANTANDER

CONSUMER

FINANCE

and commercial bank by helping people and businesses prosper

Our balance sheet strength enables us to

finance our growth, while increasing the cash

dividend and accumulating more capital.

Our investment in technology, together with the

advantages of working as a Group, make Santander

one of the most efficient banks in the world, while

also improving the customer experience. Santander

now ranks among the top three banks for customer

satisfaction in eight of our nine main countries.

79%

78%

of employees perceive

Banco Santander as

Simple, Personal and Fair

15.2 (+10%)

million loyal

customers

employee

engagement rate

20.9 (+26%)

million digital

customers

Customers

People

125

188,492

million

employees

Our aim is to be the

best retail and

commercial bank,

earning the lasting

loyalty of our people,

customers, shareholders

and communities.

Communities

Shareholders

million people

helped in 2016

million

1.7

36,684

scholarships

granted in 2016

1,183

agreements with universities

and academic institutions in 21

countries

3.9

3,363

million euros of CET1

capital generated

+8%

cash dividend

per share

2016 ANNUAL REPORT

3

2016

ANNUAL REPORT

1

6 M

 essage from Ana Bot¨ªn, Group

executive chairman

14 Message from Jos¨¦ Antonio ?lvarez,

chief executive officer

20 Corporate governance

24 Business model and strategy

40 2

 016 Results

26 P

 urpose and business model

28 Aim and value creation

30 Employees

32 Customers

36 Shareholders

38 Communities

42 Economic, banking and

regulatory context

46 Santander Group results

49 Countries

57 Global Corporate Banking

Banco Santander¡¯s 2016 annual

report is available online.

You can go straight to it on a

smartphone or tablet by scanning

the QR code.



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2016 ANNUAL REPORT

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3

4

5

58 

Corporate

governance report

96 Economic and financial

information

158 Risk management report

60

62

63

66

98 Consolidated financial report

98 2016 summary of Santander

Group

100 Santander Group results

106 Santander group Balance sheet

111 Santander Group¡¯s own funds

and capital adequacy data

114 Geographical footprint

116 Continental Europe

130 United Kingdom

133 Latin America

147 United States

150 Corporate Centre

152 Global businesses

152 Retail and commercial banking

155 Global Corporate Banking

160 Executive summary

164 A. Pillars of the risk function

165 B. Risk control and management

model-Advanced Risk Management

166 1. Map of risks

166 2. Risk governance

169 

3. Management processes

and tools

175 4. Risk culture- Risk Pro

177 C. Background and upcoming

challenges

183 D. Risk profile

183 1. Credit risk

215 2. Trading market risk

and structural risks

235 3. Liquidity and funding risk

243 4. Operational risk

254 5. Compliance and conduct risk

263 6. Model risk

265 7. Strategic risk

266 8. Capital risk

275 Appendix: EDTF transparency

Executive summary

Introduction

Ownership structure

B

 anco Santander¡¯s

board of directors

86 

Group structure and governance

framework

89 

Shareholder rights and the

general shareholder¡¯s meeting

91 

Santander Group

management team

93 Transparency and independence

95 Challenges for 2017

278 Historical data

280 Glossary

284 General information

2016 ANNUAL REPORT

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