Neha Gaddam, Lorna Hajdini & Omar Khedr28-Oct-09

Agenda• Introduction• Thesis• Financial Analysis• Q&A

ThesisWe need to invest in Banco Santander because:

Highest expected growth in Brazil

U.K. also a primary driver for volume growth

Global presence and increasing network

One of the best performing banks in the world

A Snapshot of Santander• In 2008:

– 3rd largest bank in the world in terms of profits– 7th largest bank in terms of stock market

capitalization– Attributable profits of $ 8,876 bn (+9% )

• Excluding extraordinary income

Geographic DiversificationContinental

Europe United Kingdom The Americas

Profit = 32%of STD Group

Profit = 54% of STD Group

Profit = 14%of STD Group

Profits by Line of Business

Brazil

Outlook on BrazilConsumer credit markets are expanding

Credit amounts to only about 50% of GDP, compared 169% in the U.S.

• 29% ROE, • 2.9% RoRWA• LatAm operations offer:

• higher NII and lower costs• *LTD is 104, lot of scope to grow

*LTD – Loan to Deposits

Potential in Brazil: Key Statistics

Santander and Brazil: Profits

IPO: The Aftermath

Benefits as a shareholder

Maintain high dividend payout

Increase book value per share

U.K.

UK a driver for volume growth

2004

Jul 08

Sep 08

UK: A Driver for Volume GrowthTotal Net Income divided by geographic region

Europe55%

LatAm24%

UK21%

NI 2009

Europe54%

LatAm32%

UK14%

NI 2008

UK: A Driver for Volume Growth• The Abbey Network reported a net profit

increase from £849 million to £1.16 billion (YTD in 2009)

• UK divisions net profit (total): £ 2.14 Billion • a 37 % increase from last year.

• Abbey collected more than £ 2.7 Billion deposits

UK a driver for volume growth

Liquidity Analysis Jun-09 Dec-09 Jun-08

Total Loans/Total Deposits 160.31 164.88 187.21

Total Loans/Total Assets 60.68 59.49 61.35

Total Deposits/Total Assets 37.85 36.08 32.77

Total Deposits/Funding 53.39 46.69 45.49

1. High capital base: • Core capital increased from 6.7% to 8.5% • Capital from the IPO of $8bn • High interest from SWFs

2. RoRWA is third best in Europe 3. Highest dividend yield (7.6%)4. Pioneer of cross border banking in Europe5. Forecast earnings to grow 34% CAGR ‘08-116. Decreasing LTD

Best Bank in the World

Best Balance Sheet

• Recurring profits in spite of the downturn– $6.7bn ytd, 14% annual increase

• Strength of the B/S – Core capital ratio 8.4% – Net Operating Profit 2.4x Provisions

• Generate value to shareholders – BV of Equity increased by 8%– High dividend payout : 54%

Q&A

APPENDIX

Analyst coverage

Sovereign Funds Support

• Examples: – Aabar Investments (Abu Dhabi Investment Fund)

bought a piece of the Santander Brazil for $328M

“We are delighted to have had the opportunity to invest in such a strong and successful entity”

– Qatar Sovereign Wealth raised the stake in the U.K. branch of Santander as well