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| 8-K - 8-K - Santander Holdings USA, Inc. | q117shusair.htm |
May 16, 2017
SANTANDER HOLDINGS USA, INC.
Fixed Income Investor Presentation
First Quarter 2017
2 Disclaimer
This presentation of Santander Holdings USA, Inc. (“SHUSA”) contains “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995 regarding the financial condition, results of operations, business plans and future performance of SHUSA. Words such
as “may,” “could,” “should, ” “looking forward,” “will,” “would,” “believe,” “expect,” “hope,” “anticipate,” “estimate,” “intend,” “plan,” “assume” or similar
expressions are intended to indicate forward-looking statements.
Although SHUSA believes that the expectations reflected in these forward-looking statements are reasonable as of the date on which the statements
are made, these statements are not guarantees of future performance and involve risks and uncertainties based on various factors and
assumptions, many of which are beyond SHUSA’s control. Among the factors that could cause SHUSA’s financial performance to differ materially
from that suggested by the forward-looking statements are: (1) the effects of regulation and policies of the Board of Governors of the Federal
Reserve System (the “Federal Reserve” or “FRB”), the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the
Consumer Financial Protection Bureau, including changes in trade, monetary and fiscal policies and laws, including interest rate policies of the
Federal Reserve, the failure to adhere to which could subject SHUSA to formal or informal regulatory compliance and enforcement actions; banking,
capital and liquidity, regulations and policies and the application and interpretations thereof by regulatory bodies, and the impact of changes in and
interpretations of generally accepted accounting principles in the United States of America; (2) the strength of the United States economy in general
and regional and local economies in which SHUSA conducts operations in particular, which may affect, among other things, the level of non-
performing assets, charge-offs, and provisions for credit losses; (3) the ability of certain European member countries to continue to service their debt
and the risk that a weakened European economy could negatively affect U.S.-based financial institutions, counterparties with which SHUSA does
business, as well as the stability of global financial markets; (4) inflation, interest rate, market and monetary fluctuations, which may, among other
things, reduce net interest margins, impact funding sources and affect the ability to originate and distribute financial products in the primary and
secondary markets; (5) adverse movements and volatility in debt and equity capital markets and adverse changes in the securities markets,
including those related to the financial condition of significant issuers in SHUSA’s investment portfolio; (6) SHUSA’s ability to manage changes in the
value and quality of its assets, changing market conditions that may force management to alter the implementation or continuation of cost savings or
revenue enhancement strategies and the possibility that revenue enhancement initiatives may not be successful in the marketplace or may result in
unintended costs; (7) SHUSA's ability to grow revenue, manage expenses, attract and retain highly-skilled people and raise capital necessary to
achieve its business goals and comply with regulatory requirements and expectations; (8) SHUSA’s ability to effectively manage its capital, including
approval of its capital plan by regulators; (9) changes in debt ratings assigned to SHUSA and its subsidiaries; (10) SHUSA’s ability to timely develop
competitive new products and services in a changing environment that are responsive to the needs of SHUSA's customers and are profitable to
SHUSA, the acceptance of such products and services by customers, and the potential for new products and services to impose additional costs on
SHUSA and expose SHUSA to increased operational risk; (11) changes or potential changes to the competitive environment, including changes due
to regulatory and technological changes, the effects of industry consolidation and perceptions of SHUSA as a suitable service provider or
counterparty; (12) the ability of SHUSA and its third-party vendors to convert and maintain SHUSA’s data processing and related systems on a
timely and acceptable basis and within projected cost estimates; (13) SHUSA's ability to control operational risks, data security breach risks and
outsourcing risks, and the possibility of errors in quantitative models SHUSA uses to manage its business and the possibility that SHUSA's controls
will prove insufficient, fail or be circumvented; (14) the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July
2010, which is a significant development for the industry, the full impact of which will not be known until the rule-making processes mandated by the
legislation are complete, although the impact has involved and will involve higher compliance costs that have affected and will affect SHUSA’s
revenue and earnings negatively; (15) SHUSA's ability to promote a strong culture of risk management, operating controls, compliance oversight
and governance that meets regulatory expectations; (16) competitors of SHUSA that may have greater financial resources or lower costs, may
innovate more effectively, or may develop products and technology that enable those competitors to compete more successfully than SHUSA;
3 Disclaimer (cont.)
(17) acts of terrorism or domestic or foreign military conflicts; and acts of God, including natural disasters; (18) the outcome of ongoing tax audits by
federal, state and local income tax authorities that may require SHUSA to pay additional taxes or recover fewer overpayments compared to what
has been accrued or paid as of period-end; (19) adverse publicity, whether specific to SHUSA or regarding other industry participants or industry-
wide factors, or other reputational harm; and (20) SHUSA’s success in managing the risks involved in the foregoing.
Because this information is intended only to assist investors, it does not constitute investment advice or an offer to invest, and in making this
presentation available, SHUSA gives no advice and makes no recommendation to buy, sell, or otherwise deal in shares or other securities of Banco
Santander, S.A. (“Santander”), SHUSA, Santander Bank, N.A. (“Santander Bank” or “SBNA”), or Santander Consumer Holdings USA, Inc. (“SC”) in
any other securities or investments. It is not our intention to state, indicate, or imply in any manner that current or past results are indicative of future
results or expectations. As with all investments, there are associated risks, and you could lose money investing. Prior to making any investment, a
prospective investor should consult with its own investment, accounting, legal, and tax advisers to evaluate independently the risks, consequences,
and suitability of that investment. No offering of securities shall be made in the United States except pursuant to registration under the U.S.
Securities Act of 1933, as amended, or an exemption therefrom.
In this presentation, we may sometimes refer to certain non-GAAP figures or financial ratios to help illustrate certain concepts. These ratios, each of
which is defined in this document, if utilized, may include Pre-Tax Pre-Provision Income, the Tangible Common Equity to Tangible Assets Ratio, and
the Texas Ratio. This information supplements our results as reported in accordance with GAAP and should not be viewed in isolation from, or as a
substitute for, our GAAP results, among others. We believe that this additional information and the reconciliations we provide may be useful to
investors, analysts, regulators and others as they evaluate the impact of these items on our results for the periods presented due to the extent to
which the items are indicative of our ongoing operations. Where applicable, we provide GAAP reconciliations for such additional information.
On February 18, 2014, the Federal Reserve issued the final rule implementing certain of the enhanced prudential standards mandated by Section
165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Final Rule") to strengthen regulatory oversight of foreign banking
organizations ("FBOs"). Under the Final Rule, FBOs with over $50 billion of U.S. non-branch assets, including Santander, were required to
consolidate U.S. subsidiary activities under an intermediate holding company (" IHC"). Due to its U.S. non-branch total consolidated asset size,
Santander was subject to the Final Rule. As a result of this rule, Santander transferred substantially all of its equity interests in U.S. bank and non-
bank subsidiaries previously outside SHUSA to SHUSA, which became an IHC effective July 1, 2016. These subsidiaries included Santander
BanCorp (“SBC”), Banco Santander International (“BSI”), Santander Investment Services, Inc. (“SIS”), Santander Securities LLC (“SSLLC”), as well
as several other subsidiaries.
As these entities were and are solely owned and controlled by Santander prior to and after July 1, 2016, in accordance with Accounting Standards
Codification 805, the transaction has been accounted for under the common control guidance which requires SHUSA to recognize the assets and
liabilities transferred at their historical cost of the transferring entity at the date of transfer. Additionally, as this transaction represents a change in
reporting entity, the guidance requires ret rospective combination of the entities for all periods presented in the financial statements as if the
combination had been in effect since the inception of common control. The entities transferred approximately $14.1 billion of assets and
approximately $11.8 billion of liabilities to SHUSA on July 1, 2016. The financial statements have been recast to reflect the operations of the
commonly controlled entities for all periods presented as a change in reporting entity. Historical financial information in this presentation, unless
noted otherwise, has been consistently recast to reflect the above financial reporting requirements.
4
Santander
Bank
Santander
Consumer
USA
Santander
Puerto Rico
Banco
Santander
International
Santander
Investment
Securities
SHUSA is a bank holding company (“BHC”) wholly owned by Santander (NYSE: SAN)
Introduction
• SHUSA consists of:
• Well-established banking franchises in
the Northeast and Puerto Rico
• A nationwide auto finance business
• A wholesale broker-dealer in New York
• International private banking business
• Headquartered in Boston
• Regulated by the Federal Reserve
• SEC registered1
• Website www.santanderus.com
12SHUSA’s SEC filings are accessible on the SEC website at www.sec.gov and are also accessible through
SHUSA’s website at www.santanderus.com.
5
Corporate Structure1
SHUSA
$135.1BN Assets
SBNA2
$79.6BN Assets
Retail Bank
SC3
$39.1BN Assets
Auto Finance
SHUSA is the intermediate holding company (“IHC”) for Santander’s U.S. operations
1Balances as of March 31, 2017 4Banco Santander Puerto Rico
2Santander Bank, N.A. 5Banco Santander International
3Santander Consumer Holdings USA, Inc. 6Santander Investment Securities
Approximately
58.7% ownership
Banco Santander, S.A.
BSPR4
$5.3BN Assets
Retail Bank
BSI5
$6.9BN Assets
Wealth Management
SIS6
$1.8BN Assets
Broker Dealer
100% ownership
Added to SHUSA effective July 1, 2016
6
1Q 2017 Executive Summary1
Liquidity and
Funding
Capital
Balance Sheet
1Data as of 3/31/17 unless otherwise noted.
2Includes non controlling interest.
3Liquidity coverage ratio.
Earnings
Credit Quality
1Q17 net income of $164MM2
SHUSA 1Q17 net interest margin 5.76%
SBNA net interest margin improved from 2.30% in 4Q16 to 2.62% in 1Q17
SHUSA’s balance sheet declined from $137.4BN at 4Q16 to $135.1BN at 1Q17
due to balance sheet optimization initiatives
SBNA completed a tender for $881MM of $1.0BN debt due January 2018
In 1Q17 SHUSA issued $1BN 5-year senior debt which is eligible for TLAC
SHUSA maintains an LCR3 in excess of the regulatory requirement
Holding company held $4.1BN in high quality liquid assets (“HQLA”) as of 1Q17
Common Equity Tier 1 (“CET1”) ratio of 14.6% as of 1Q17; 14.1% for Basel 3 fully
phased-in
On April 5, 2017 SHUSA submitted its 2017 Capital Plan to the Federal Reserve
SBNA’s credit metrics are in line with large bank peers
In 1Q17 49 of SC asset-backed securities (“ABS”) tranches impacting more than
$4.2BN were upgraded by Moody’s
SC delinquency and gross losses decreased QoQ reflecting seasonal trends
7 Quarterly Profitability1
1Net Income includes noncontrolling interest
Pre-Tax Pre-Provision Income/(Loss) ($MM)
Net Income/(Loss) ($MM)1
Net Interest Income ($MM)
Pre-Tax Income/(Loss) ($MM)
1,087 1,042 1,022
783
978
-
250
500
750
1,000
1Q16 2Q16 3Q16 4Q16 1Q17
1,696 1,665 1,621 1,583 1,603
0
500
1,000
1,500
2,000
1Q16 2Q16 3Q16 4Q16 1Q17
189
428
334
3
243
0
150
300
450
1Q16 2Q16 3Q16 4Q16 1Q17
110
275
226
30
164
0
100
200
300
1Q16 2Q16 3Q16 4Q16 1Q17
Improved profitability in 1Q17 after 4Q16 impacted by one time charges
8
2
2
Net Interest Margin and IRR Sensitivity
SHUSA’s lower net interest margin (“NIM”) since 1Q16 reflects:
SBNA: Higher NIM due to balance sheet optimization actions and asset sensitivity
SC: Lower NIM through disciplined approach to credit and modest liability sensitivity
SHUSA 1Q17 net interest margin of 5.76%
Net Interest Margin1 SHUSA Interest Rate Sensitivity
(% change in annual NII for parallel rate movement)
1SHUSA NIM for 1Q16 and 2Q16 have not been restated for the IHC consolidation effective July 1, 2016
9
Auto Loans
18%
12%
5%
8%
6%
5%
18%
5%
3%
3%
17%
Balance Sheet Overview1
6%
5%
4%
6%
5% 7%
6%
18%
15%
7%
19%
Investments
2%
Cash
Non Interest-
Bearing
Demand
Deposits
Other Assets
C&I
CRE
Residential
Mortgage
Other
Loans
Operating
Lease Assets
Goodwill
Home
Equity
Multi-Family
$135.1BN Assets
$112.5BN Liabilities
$22.6BN Equity
Interest-
Bearing
Demand
Deposits
Secured
Structured
Financings
Equity
Other
Liabilities
FHLB
Money
Market
Certificates
of Deposit
Savings
Revolving
Credit
Facilities
Other
Borrowings
SHUSA balance sheet reflects subsidiary banks funded by core deposits and an
auto finance company funded with wholesale funds
1Balances as of March 31, 2017
10 Balance Sheet Trends
$145
$140 $139 $137 $135
Liabilities & Equity
$ in billions
Balance sheet trend reflects optimization initiatives and consistent reduction in
borrowed funds
Assets
$145 $140 $139 $137 $135
11
2
Borrowed Funds Profile1
Sr
Debt
3.45%
FHLB
Bank Debt
HoldCo Debt
SC 3rd Party
Santander2
FHLB
0.6%
FHLB
0.8%
SC ABS
1As of March 31, 2017.
2Difference in Santander balance at SHUSA consolidated and SC reflects lending from SHUSA to SC that is eliminated at the
consolidated level.
$43.5
$41.5
SC Private Amort.
SBNA ($BN)
SHUSA HOLDCO ($BN) SHUSA Consolidated ($BN)
Private Amort.
3rd Party Rev.
Santander2
Holding company issuance will be driven by TLAC’s long term debt (“LTD”)
requirement
HoldCo Debt
$4.4
$5.4
Bank Debt
FHLB
$7.7
$5.3 ABS
SC ($BN)
$31.5 $31.3
12
2
2
TLAC Rule and SHUSA Issuance
SHUSA expects to issue approximately $5.5BN in HoldCo debt during 2017-2018 to meet
the LTD requirement of 6% of risk-weighted assets (“RWA”)
Net increase of ~$3.0BN in SHUSA debt as new issuances also replace maturities
1Chart does not include SHUSA trust preferred securities ($0.2BN) or SHUSA preferred stock ($0.2BN).
SHUSA will be required to meet TLAC and LTD requirements by January 1, 2019
$3.0BN
SHUSA Debt Outstanding1
13
2
2
SHUSA HoldCo Debt Profile
As of 3/31/17 SHUSA HoldCo held $4.1BN in HQLA
SHUSA debt issuances will be designed to maintain a laddered maturity
structure
2017 2018 2019 2020 … 2022 … 2025 … … 2036 Perp
Trust
Pref
Pref
Stock
Sr
Debt
4.6%
Sr
Debt
3M+
145
$0.6
$0.5
$0.22 $0.2
$1.0
Sr
Debt
2.65%
$1.1
Sr
Debt
4.5%
$1.0
Sr
Debt
2.7%
$1.0
Sr
Debt
3.7%
14
2
Under fully phased-in US Basel III rule3, CET1 ratio as of 1Q17 was 14.1%
Capital Ratios1,2
Tier 1 Leverage
Tier 1 risk based
Common Equity Tier 1
Total Risk Based
11.9%
12.4%
14.1%
14.5% 14.6%
1Q16 2Q16 3Q16 4Q16 1Q17
11.5% 11.6%
12.5% 12.5% 12.6%
1Q16 2Q16 3Q16 4Q16 1Q17
13.4%
14.0%
15.7%
16.1% 16.2%
1Q16 2Q16 3Q16 4Q16 1Q17
15.3%
15.8%
17.6% 18.0% 18.1%
1Q16 2Q16 3Q16 4Q16 1Q17
1Capital ratios calculated under the U.S. Basel III framework on a transitional basis
2Periods prior to 3Q16 have not been re-cast for the IHC consolidation
3Fully phased-in under the standardized approach - see SHUSA 1Q 2017 Form 10-Q
15
106.5%
100.2%
91.4%93.2%90.6%
111.3%114.6%
119.4%
94.7%
110.4%109.0%106.0%
120.0%118.6%120.6%115.3%
109.0% 114.1%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
SBNA Large Banks**
Reserve Coverage (ALLL/NPL2)
1.21% 1.16%
1.02%
1.17%1.18%
1.07%1.07%
1.17%
1. 7%
1.2 %1.27%1.29%1.26%1.28%1.31%1.34% 1.22% 1.20%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
SBNA Large Banks**
ALLL to Total Loans
1.13%
0.98%
0.94% 0.96%
1.30% 1.26%
1.12%1.16%1.13% 1.12%
1.20%1.25% 1.18% 1.17% 1.14%
1.28% 1.26%
1.22%
1Q15 Q15 3Q15 4Q15 1Q16 Q16 3Q16 4Q16 1Q17
SBNA Large Banks**
Non-Performing Loan Ratio2
0.26% 0.25%
0.91%
0.15%0.12%
0.43%
0.20%
0.31%
0.21%
0.43%0.41%0.39%
0.38%
0 360.35%0.36%
0.45% 0.41%
Q15 2Q15 3 15 4 15 1 16 2Q16 3Q16 4Q16 1Q17
SBNA Large Banks**
Annualized Net Charge off Ratio1
**Source: SNL Bank level data; Large Bank = BAC, COF, C, KEY, BMO, HSBA, PNC, RBS, JPM, UNB, TD, USB, and WFC
1NPLs= Nonaccruing loans plus accruing loans 90+ DPD
Annualized NCO = Quarterly NCO*4
Asset Quality: SBNA
SBNA asset quality metrics in line with peers
14Q16 impacted by two commercial clients. Excluding these clients, the charge-off ratio would have been 0.31%
2NPLs = Non accruing loans plus accruing loans 90+ DPD;
16 Asset Quality: SC – Loss and Delinquency
QoQ reduction in delinquency and gross losses reflect seasonal trends
YoY delinquency and gross losses increase driven by 2015 originations which
were more nonprime in nature and slower portfolio growth
Credit Delinquency
SOURCE: SC First Quarter 2017 Presentation, April 26, 2017.
See http://investors.santanderconsumerusa.com/financial-info/quarterly-results
17
2
2
Rating Agencies
Santander Bank
Te S&P Moody’s
Short Term
Deposits
A-2 P-1
Senior Debt BBB+ Baa2
Outlook Stable Stable
SHUSA
S&P Moody’s
N/A N/A
BBB+ Baa3
Stable Stable
On August 5, 2016, S&P affirmed SHUSA’s and SBNA’s ratings of
A-2/BBB+/stable
On October 18, 2016, Moody’s downgraded SHUSA’s senior debt
rating by 1 notch from Baa2 to Baa3 and moved SHUSA’s outlook
from negative to stable
On October 18, 2016, Moody’s affirmed SBNA’s ratings at P-1/Baa2
and the outlook at stable
March 31, 2017
Banco Santander
S&P Moody’s
A-2 P-2
A- A3
Positive1 Stable
1S&P raised Banco Santander’s outlook from Stable to Positive on February 9, 2017
Appendix
19
2
2
Consolidating Balance Sheet
(1) Includes holding company, eliminations, IHC eliminations and purchase accounting marks related to SC consolidation.
(2)The IHC entities are presented within "other" in the company's financial statement segment presentation due to immateriality.
(3) Other Investment securities include trading securities.
(US $ millions) Bank SC Other
(1)
IHC Entities
(2)
SHUSA
Assets
Cash and cash equivalents 3,463$ 421$ (107) 4,793 8,570$
Investments Available-for-sale at fair value 16,489 - 991 886 18,366
Investments Held-to-maturity 1,621 - - - 1,621
Other Investment securities
(3)
680 - - 23 703
Loans 49,680 27,067 (371) 7,339 83,715
Less allowance for loan and leases losses (535) (3,622) 334 (100) (3,923)
Total loans, net 49,145 23,445 (37) 7,239 79,792
Goodwill 3,403 74 967 11 4,455
Other assets 4,859 15,121 631 991 21,602
Total assets 79,660$ 39,061$ 2,445$ 13,943$ 135,109$
Liabilities and Stockholders' Equity
Deposits 60,107$ - (3,268) 9,762 66,601$
Borrowings and other debt obligations 5,270 31,475 4,471 260 41,476
Other liabilities 779 2,167 (24) 1,510 4,432
Total liabilities 66,156 33,642 1,179 11,532 112,509
Stockholders' equity including
noncontrolling interest 13,504 5,419 1,266 2,411 22,600
Total liabilities and stockholders' equity 79,660$ 39,061$ 2,445$ 13,943$ 135,109$
March 31, 2017
20 Consolidating Income Statement
(1)Includes holding company activities, IHC eliminations, eliminations and purchase accounting marks related to SC consolidation.
(2) SHUSA net income includes non-controlling interest.
(3)The IHC entities are presented within "other" in the Company's financial statement segment presentation due to immateriality.
(US $ Millions) Bank SC Other
(1)
IHC Entities
(3)
Interest income 557$ 1,270$ 38$ 91 1,956$
Interest expense (97) (227) (21) (8) (353)
Net interest income 460 1,043 17 83 1,603
Fees & other income/(expense) 197 433 (8) 106 728
Equity investment expense (3) - 1 - (2)
Other non interest income - - - 1 1
Net revenue 654 1,476 10 190 2,330
G & A expense (516) (617) (57) (121) (1,311)
Other expenses (24) (3) (11) (3) (41)
Provision for credit losses (27) (635) (58) (15) (735)
Income before taxes 87 221 (116) 51 243
Income tax (expense)/benefit (16) (78) 35 (20) (79)
Net income/(loss)
2
71$ 143$ (81)$ 31$ 164$
SHUSA
For the three-month period ended March 31, 2017
21
2
2
Quarterly Trended Statement of Operations
(1)Represents net income/(loss) including noncontrolling interest.
(US $ Millions) 1Q16 2Q16 3Q16 4Q16 1Q17
Interest income 2,058$ 2,029$ 1,971$ 1,932$ 1,956$
Interest expense (362) (364) (350) (349) (353)
Net interest income 1,696 1,665 1,621 1,583 1,603
Fees & other income 670 689 728 623 728
Equity investment expense (4) (1) - (6) (2)
Other non interest income 27 31 - - 1
Net revenue 2,389 2,384 2,349 2,200 2,330
G&A expense (1,225) (1,265) (1,281) (1,353) (1,311)
Oth r expenses (77) (77) (46) (64) (41)
Provision for credit losses (898) (614) (688) (780) (735)
Income before taxes 189 428 334 3 243
Income tax (expense)/benefit (79) (153) (108) 27 (79)
Net income(1) 110$ 275$ 226$ 30$ 164$
22
2
2
SHUSA’s capital ratios remain at the top of peers
Capital Ratios Peer Comparison (as of 3/31/17)
CET1 Tier 1 Risk-Based Capital (“RBC”)
Total RBC Tier 1 Leverage
- - - - Peer Median Peer data from SNL
23
2
2
Non-GAAP to GAAP Reconciliations
$55,756 $56,638
$57,059 $57,114 $57,548
0.46%
0.48%
0.47%
0.39% 0.39%
0.30%
0.35%
0.39%
0.44%
0.48%
0.53%
4Q15 1Q16 2Q16 3Q16 4Q16
Total Deposits Avg. Interest Cost
$ Milli n 1Q16 2Q16 3Q16 4Q16 1Q17
SHUSA Pre-Tax Pre-Provision Income
Pre-tax income, as reported 189$ 428$ 334$ 3$ 243$
Add back:
Provision for credit losses 898 614 688 780 735
Pre-Tax Pre-Provision Income 1,087$ 1,042$ 1,022$ 783$ 978$
24
2
2
1
$ Millions 1Q16
(1)
2Q16
(1)
3Q16 4Q16 1Q17
Common Equity Tier 1 to Risk-Weighted Assets
Tier 1 Common 12,644$ 12,750$ 15,153$ 15,136$ 14,912$
Risk-Weighted Assets 106,446 102,967 107,310 104,334 102,353
Ratio 11.9% 12.4% 14.1% 14.5% 14.6%
Tier 1 Leverage
(1)
Tier 1 Capital 14,281$ 14,401$ 16,866$ 16,844$ 16,603$
123,964 124,498 135,155 134,534 131,648$
Ratio 11.5% 11.6% 12.5% 12.5% 12.6%
Tier 1 Risk-Based
(1)
Tier 1 Capital 14,281$ 14,401$ 16,866$ 16,844$ 16,603$
Risk-Weighted Assets 106,446 102,967 107,310 104,334 102,353$
Ratio 13.4% 14.0% 15.7% 16.1% 16.2%
Total Risk-Based
(1)
Risk-Based Capital 16,288$ 16,270$ 18,834$ 18,775$ 18,508$
Risk-Weighted Assets 106,446 102,967 107,310 104,334 102,353$
Ratio 15.3% 15.8% 17.6% 18.0% 18.1%
Average total assets for leverage capital purposes
Non-GAAP to GAAP Reconciliations1,2
1Periods prior to 3Q16 have not been recast for the IHC consolidation . Refer to SHUSA 1Q 2017 10-Q.
2Basel III ratios on a transition basis under the standardized approach starting in 2Q15.
25
2
2
SBNA: Quarterly Profitability
US $ millions
1See non-GAAP to GAAP reconciliation of Pre-Tax Pre-Provision Income
Net Interest Income ($MM) Pre-Tax Pre-Provision Income ($MM)
Pre-Tax Income/(Loss) ($MM) Net Income/(Loss) ($MM)
100 104
114
47
113
0
20
40
60
80
100
120
140
1Q16 2Q16 3Q16 4Q16 1Q17
434 438 433 426
460
2.22% 2.24%
2.33% 2.30%
2.62%
0
100
200
300
400
500
1Q16 2Q16 3Q16 4Q16 1Q17
NII Net Interest Margin
(20)
104
126
23
86
-25
0
25
50
75
100
125
150
1Q16 2Q16 3Q16 4Q16 1Q17
(17)
93 91
(15)
70
-20
5
30
55
80
105
1Q16 2Q16 3Q16 4Q16 1Q17
26
2
2
SBNA: Quarterly Trended Statement of Operations
(US$ in Millions) 1Q16 2Q16 3Q16 4Q16 1Q17
Interest income 576$ 565$ 541$ 527$ 557$
Interest expense (142) (127) (108) (101) (97)
Net interest income 434 438 433 426 460
Fees & other income 227 240 248 213 194
Other non-interest income 26 31 - - -
Net revenue 687 709 681 639 654
General & administrative expenses (537) (540) (539) (544) (517)
Other expenses (50) (65) (28) (48) (24)
(Provision for)/release of credit losses (120) - 12 (24) (27)
(Loss)/income before taxes (20) 104 126 23 86
Income tax benefit/(expense) 3 (11) (35) (38) (16)
Net (loss)/income (17)$ 93$ 91$ (15)$ 70$
1Q16 2Q16 3Q16 4Q16 1Q17
Net interest margin 2.22% 2.24% 2.33% 2.30% 2.62%
27
2
2
SBNA: Quarterly Average Balance Sheet
Quarterly Averages
(In millions)
Average Yield/ Average Yield/ Average Yield/ Average Yield/
Balance Rate Balance Rate Balance Rate Balance Rate
Deposits and investments 21,504$ 1.89% 22,102$ 1.18% (598)$ 0.71% 26,321$ 1.70%
Loans 50,765 3.68% 52,988 3.50% (2,223) 0.18% 53,898 3.50%
Allowance for loan losses (531) --- (597) --- 66 --- (577) ---
Other assets 9,649 --- 10,147 --- (498) --- 11,075 ---
TOTAL ASSETS 81,387$ 2.79% 84,640$ 2.50% (3,253)$ 0.29% 90,717$ 2.58%
Interest-bearing demand deposits 9,601 0.20% 9,845 0.23% (244) -0.03% 10,794 0.54%
Noninterest-bearing demand deposits 11,215 --- 11,861 --- (646) --- 10,353 ---
Savings 4,081 0.09% 4,053 0.12% 28 -0.03% 4,012 0.10%
Money market 27,494 0.49% 27,398 0.46% 96 0.03% 26,336 0.51%
Ce tific t s of deposit 7,104 0.98% 8,074 0.95% (970) 0.03% 9,014 0.93%
Borrowed funds 6,899 2.37% 8,140 2.10% (1,241) 0.27% 14,806 1.96%
Other liabilities 1,493 --- 1,709 --- (216) --- 1,925 ---
Equity 13,500 --- 13,560 --- (60) --- 13,477 ---
TOTAL LIABILITIES & SE 81,387$ 0.48% 84,640$ 0.47% (3,253)$ 0.01% 90,717$ 0.63%
NET INTEREST MARGIN 2.62% 2.30% 0.32% 2.22%
1Q17 1Q164Q16 Change
28
2
2
SBNA: Funding – Deposits*
1Represents average quarterly balances
*SBNA total deposits less the SHUSA cash deposit held at SBNA.
Average Non Maturity Deposit Balances
1
($Mn)
$47,624 $48,282
$48,757 $49,474 $49,762
0.41%
0.39%
0.31%
0.30% 0.30%
0.20%
0.25%
0.30%
0.35%
0.40%
0.45%
0.50%
1Q16 2Q16 3Q16 4Q16 1Q17
Non Maturity Deposit Balances
Avg. Interest Cost
Average Total Deposit Balances
1
($Mn)
$56,638 $57,059 $57,114 $57,548 $56,865
0.48%
0.47%
0.39%
0.39% 0.39%
0.30%
0.35%
0.39%
0.44%
0.48%
0.53%
1Q16 2Q16 3Q16 4Q16 1Q17
Total Deposits Avg. Interest Cost
29
0.46%
0.39%
0.47%
0.37%
0.43%0.40%
0.47%
0.42% 0.41%
0.73%0.75%0.76%
0.86%0.83%0.79%
0.86%
0.80%
0.74%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
SBNA Large Banks**
Delinquency3
$1,972
$2,073
$2,171
$2,333
$2,626
$2,376 $2,337
$2,018
$2,108
3.78% 3.95%
4.09%
4.35%
4.81%
4.36% 4.42%
3.87%
4.22%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
Criticized Balances Criticized Ratio
$590
$515 $497 $513
$710
$687
$615
$583 $565
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
Non-Performing Loans1 Criticized Balances2
Texas Ratio4
SBNA: Asset Quality
$ MM
-4% $ MM
**Source: SNL Bank level data; Large Bank = BAC, COF, C, KEY, BMO, HSBA, PNC, RBS, JPM, UNB, TD, USB, and WFC
13.1% 12.9% 12.1%
9.2%8.5% 7.9% 8.6%
10.7% 10.3% 9.5%9.6%9.3%
13.7%15.1 1 .5 13.9% 14.0% 14.3%
1Q15 2Q15 3Q15 4Q15 Q16 2Q16 3Q16 4Q16 1Q17
SBNA Large Banks**
1NPLs = Nonaccruing loans plus accruing loans 90+ DPD;
2Criticized = loans that are categorized as Special Mention, Substandard, Doubtful, or Loss
3Delinquency = accruing loans 30-89 DPD plus accruing loans 90+ DPD
4See Appendix for Definition and Non-GAAP measurement reconciliation of Texas Ratio
1NPLs = Nonaccruing loans plus accruing loans 90+ DPD.
2Criticized = loans that are categorized as Special Mention, Substandard, Doubtful, or Loss.
3Delinquency = accruing loans 30-89 DPD plus accruing loans 90+ DPD.
4See Appendix for Definition and Non-GAAP measurement reconciliation of Texas Ratio.
30
Santander Real Estate Capital Commercial Real Estate1
Home Equity Mortgages
Outstandings NPL* to Total Loans Net Charge-Offs**
SBNA: Asset Quality (cont.)
*NPL = Nonaccruing loans plus accruing loans 90+ DPD **NCO = Rolling 12-month average for that quarter and the prior 3 quarters
1Commercial Real Estate is comprised of the commercial real estate, continuing care retirement communities and
non-owner occupied real estate secured commercial loans (SREC segment included in separate graph).
US $ Billions
$7.0 $6.8 $6.7 $6.5 $6.4 $6.6 $6.7
$7.0 $6.8
3.0% 2.9% 2.8% 2.7% 2.6% 2.4% 2.2% 2.3% 2.3%
1.3% 1.3%
0.3% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
$6.0 $6.0 $6.0 $6.0 $5.9 $5.9 $5.9 $5.9 $5.8
1.9% 1.8% 1.7% 1.8% 1.8% 1.7% 1.7% 1.7% 1.7%
0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.2% 0.2%
Q15 2Q15 3Q 5 4Q15 Q16 2Q16 3Q 6 4Q16 1Q17
$5.8 $5.9 $5.8 $6.0
$6.6 $6.6 $6.5 $6.5 $6.4
1.9%
1.3% 1.3% 1.3% 1.7% 1.6% 1.2% 1.2% 1.1%
0.2% 0.4% 0.1% 0.2% 0.2% 0.0% -0.1% -0.1% -0.1%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
$9.7 $9.7
$10.7 $10.5 $10.3 $10.1 $9.8 $9.3 $9.1
0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Q15 2Q15 3Q 5 4Q15 1Q16 2Q16 3Q 6 4Q16 1Q17
31
Global Corporate Banking2
1Commercial Banking = Non-CRE total for Middle Market, Asset Based Lending, Energy Finance, Government Banking, Mortgage
Warehouse, Equipment Finance & Leasing, Commercial Banking NCE, Financial Institutions Coverage and Institutional-Non Profit.
2Global Corporate Banking = Non-CRE total for Global Corporate Banking.
3Other Commercial = Non –CRE total for all other Commercial Business segments.
4Other Consumer = Direct Consumer, Indirect Consumer, RV/Marine, Credit Cards , SFC, & RDM Run-off.
Commercial Banking1
Other Consumer4 Other Commercial3
Outstandings NPL* to Total Loans Net Charge-Offs**
SBNA: Asset Quality (cont.)
*NPL = Nonaccruing loans plus accruing loans 90+ DPD **NCO = Rolling 12-month average for that quarter and the prior 3 quarters
US $ Billions
$6.7 $6.7 $6.9
$7.3 $7.6
$8.1 $8.0
$7.5 $7.1
0.8% 0.6% 0.4% 0.3%
2.2% 2.0%
1.5%
1.8%
2.2%
0.3% 0.2% 0.2% 0.2% 0.1% 0.0% 0.2%
0.9% 1.0%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
$9.5
$10.1 $9.7 $10.0 $10.1 $9.4
$8.4
$7.9
$6.8
0.0% 0.0% 0.1%
0.2%
0.6% 0.7% 0.8%
0.0% 0.1%0.0% 0.0% 0.0%
0.3%
0.3% 0.3% 0.3%
0.4% 0.4%
Q15 2Q15 3Q 5 4Q15 1Q16 2Q16 3Q 6 4Q16 1Q17
$5.6 $5.5 $5.6
$5.8 $5.9 $6.0
$6.1
$6.4 $6.3
0.9% 0.9% 1.0% 1.2% 1.0% 1.0% 1.0% 1.0% 0.9%
0.5% 0.5% 0.5% 0.4% 0.5% 0.4% 0.4% 0.4% 0.3%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
$1.8 $1.7 $1.7 $1.7 $1.6 $1.6 $1.6 $1.6 $1.5
2.2% 2.0% 2.0% 1.8% 1.7% 1.7% 1.8% 1.9% 1.8%
2 6 2 5 2.6 2.7 2.7% 2.8
2.9 3.1%
3.3%
Q15 2Q15 3Q15 4Q15 Q16 2Q16 3Q 6 4Q16 1Q17
32
2
2
SBNA: Capital Ratios
1Fully phased-in under the standardized approach - see SHUSA 1Q 2017 Form 10-Q.
Under fully phased-in US Basel III rule1, CET1 ratio as of 1Q17 was 16.6%
13.9%
14.9%
15.7% 16.2%
17.0%
1Q16 2Q16 3Q16 4Q16 1Q17
13.9%
14.9% 15.7%
16.2%
17.0%
1Q16 2Q16 3Q16 4Q16 1Q17
11.3% 11.4%
12.3% 12.3%
12.9%
1Q16 2Q16 3Q16 4Q16 1Q17
15.4%
16.2%
17.0% 17.4%
18.2%
1Q16 2Q16 3Q16 4Q16 1Q17
Common Equity Tier 1 Tier 1 Leverage Ratio
Tier 1 Risk-Based Capital Ratio Total Risk-Based Capital Ratio
33
2
2
1
SBNA: Non-GAAP to GAAP Reconciliations
$ Millions 1Q16 2Q16 3Q16 4Q16 1Q17
Tier 1 Common to RWAs
Tier 1 Common Capital 9,813$ 9,876$ 10,025$ 10,006$ 10,031$
RWAs 70,512 66,357 64,015 61,886 59,111
Ratio 13.9% 14.9% 15.7% 16.2% 17.0%
Tier 1 Leverage
Tier 1 Capital 9,813$ 9,876$ 10,025$ 10,006$ 10,031$
87,066 86,358 81,815 81,076 77,909
Ratio 11.3% 11.4% 12.3% 12.3% 12.9%
Tier 1 Risk Based
Tier 1 Capital 9,813$ 9,876$ 10,025$ 10,006$ 10,031$
RWAs 70,512 66,357 64,015 61,886 59,111
Ratio 13.9% 14.9% 15.7% 16.2% 17.0%
Total Risk Based
Risk Based Capital 10,827$ 10,771$ 10,874$ 10,759$ 10,785$
RWAs 70,512 66,357 64,015 61,886 59,111
Ratio 15.4% 16.2% 17.0% 17.4% 18.2%
Average total assets for leverage capital purposes
34 SBNA: Non-GAAP to GAAP Reconciliations (cont.)
$ Millions 1Q16 2Q16 3Q16 4Q16 1Q17
SBNA Texas Ratio
Total Equity 13,456$ 13,576$ 13,610$ 13,418$ 13,504$
Less:
Goodwill and Other Intangibles (excluding MSRs) (3,723) (3,716) (3,681) (3,664) (3,649)
Preferred Stock - - - - -
Add: Allowance for loan losses 643 640 616 533 535
Total Equity and Loss Allowances for Texas Ratio 10,376$ 10,500$ 10,545$ 10,287$ 10,390$
Nonperforming Assets 747$ 748$ 648$ 618$ 596$
90+ DPD accruing 2 2 3 3 4
Accruing TDRs 364 364 356 353 361
Total Nonperforming Assets 1,113$ 1,114$ 1,007$ 974$ 961$
Texas Ratio 10.7% 10.6% 9.5% 9.5% 9.2%
35
2
2
SBNA: Non-GAAP to GAAP Reconciliations (cont.)
$ Millio s 1Q16 2Q16 3Q16 4Q16 1Q17
SBNA Pre-Tax Pre-Provision Income
Pre-tax (loss)/income, as reported (20)$ 104$ 126$ 23$ 87$
Add back:
Provision for/(Release of) credit losses 120 - (12) 24 27
Pre-Tax Pre-Provision Income 100$ 104$ 114$ 47$ 114$
36
44.9%
53.4%
51.1%
35%
40%
45%
50%
55%
60%
65%
70%
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
SC Auction Only Recovery Rate SC Auction Plus Recovery Rate (Quarterly)7.5%
Max 13.3%
Min 2.8%
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Feb-07 Feb-09 Feb-11 Feb-13 Feb-15 Feb-17
Subprime
4.3%
Max 5.4%
Min 1.6%
Feb-07 Feb-09 Feb-11 Feb-13 Feb-15 Feb-17
Subprime
85
90
95
100
105
110
115
120
125
110
115
120
125
130
Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
Manheim (Left Axis) NADA (Right Axis)
SC: AUTO INDUSTRY ANALYSIS
Used Vehicle Indices1
Manheim: Seasonally Adjusted NADA: Not Seasonally Adjusted
1 Manheim, Inc.; Indexed to a basis of 100 at 1995 levels; National Automotive Dealers Association (NADA)
2 Auction Only - includes all auto-related recoveries including inorganic/purchased receivables from auction lanes only
2 Auction Plus – Per the financial statements includes insurance proceeds, bankruptcy/deficiency sales, and timing impacts
3 Standard & Poor’s Rating Services (ABS Auto Trust Data – two-month lag on data, as of February 28, 2017)
SC Recovery Rates2
Industry Net Loss Rates3
Nonprime
SE
V
ER
IT
Y
C
R
ED
IT
Industry 60+ Day Delinquency Rates3
Nonprime
SOURCE: SC First Quarter 2017 Presentation, April 26, 2017.
See http://investors.santanderconsumerusa.com/financial-info/quarterly-results
37 SC: DISCIPLINED LOAN UNDERWRITING CONTINUED IN 1Q17
1 Approximate FICOs
2 Includes some capital lease originations
Auto origination decreases (YoY) driven by disciplined underwriting in a competitive market
($ in Millions) Q1 2017 Q4 2016 Q1 2016 QoQ YoY
Total Core Retail Auto 2,198$ 2,010$ 2,614$ 9% (16%)
Chrysler Capital Loans (<640)1 833 768 1,242 8% (33%)
Chrysler Capital Loans (≥640)1 755 775 1,307 (3%) (42%)
Total Chrysler Capital Retail 1,588$ 1,543$ 2,549$ 3% (38%)
Total Leases2 1,602 973 1,619 65% (1%)
Total Auto Originations 5,388$ 4,526$ 6,782$ 19% (21%)
Total Personal Lending - 190 - N/A N/A
Total Originations 5,388$ 4,717$ 6,782$ 14% (21%)
Asset Sales 931$ 1,381$ 1,729$ (33%) (46%)
Serviced for Others Portfolio 11,015$ 11,945$ 14,235$ (8%) (23%)
Average Managed Assets 51,230$ 52,039$ 52,962$ (2%) (3%)
Three Months Ended Originations % Variance
SOURCE: SC First Quarter 2017 Presentation, April 26, 2017.
See http://investors.santanderconsumerusa.com/financial-info/quarterly-results
38
2
2
SOURCE: SC First Quarter 2017 Presentation, April 26, 2017.
See http://investors.santanderconsumerusa.com/financial-info/quarterly-results
4% 3% 2% 2% 2%
14% 13% 12% 11% 12%
15%
12% 13% 15% 18%
22%
20% 23% 24%
25%
13%
13%
14% 15%
13%
32%
40% 35%
32% 30%
1Q16 2Q16 3Q16 4Q16 1Q17
Originations by Credit (RIC only)
($ in mi llions)
>640
600-640
540-599
<540
No FICO
Commercial
51% 57% 56% 53% 47%
49% 43% 44% 47% 53%
1Q16 2Q16 3Q16 4Q16 1Q17
New/Used Originations
($ in mi llions)
Used
New
1 Loans to commercial borrowers; no FICO score obtained
Originations <640 decreased approximately $840 million YoY
Mix relatively constant on a percentage basis
Higher proportion of used vehicles originated in 2017, up
4% YoY
Average loan balances on originations down YoY, reflecting
larger percentage of used vehicles and lower loan-to-values
Average loan balance
in dollars
$21,745 $21,929 $21,482 $21,488 $20,193
$3,723 $3,861 $3,553 $5,162 $3,787
$3,723 $3,861 $3,553 $5,162 $3,787
1
$2,657 $3,499
SC: Originations Exhibit Higher Credit Quality
39
2
2
SC: Asset Quality – Provisions and Reserves
$660
$512
$610
$686
$635
12.0%
12.6%
12.4%
12.6%
12.7%
11.6%
11.8%
12.0%
12.2%
12.4%
12.6%
12.8%
$0
$100
$200
$300
$400
$500
$600
$700
$800
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
Provis ion Expense and Allowance Ratio
($ in mi llions)
Provision for credit losses Allowance Ratio
$3,422
$171
$128 $10 ($278)
$3,453
$3,000
$3,100
$3,200
$3,300
$3,400
$3,500
$3,600
$3,700
$3,800
Q4 2016 New
Volume
TDR
Migration
Performance
Adjustment
Liquidations
& Other
Q1 2017
Q4 2016 to Q1 2017 ALLL Reserve Walk2
($ in mi llions)
Allowance to loans ratio increased to 12.7% QoQ, primarily
driven by the increased balance of loans classified as TDRs
and the denominator effect of slower portfolio growth
Provision for credit losses decreased YoY primarily driven
by lower allowance for credit loss offset by higher net
credit loss
QoQ allowance increased $31 million
New volume and troubled debt restructuring (“TDR”)
migration1 were offset by liquidations and other
1 TDR migration – the allowance for assets classified as TDRs takes into consideration expected lifetime losses, typically requiring additional coverage
2 Explanation of quarter over quarter variance are estimates
SOURCE: SC First Quarter 2017 Presentation, April 26, 2017.
See http://investors.santanderconsumerusa.com/financial-info/quarterly-results
