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| 8-K - 8-K - Santander Holdings USA, Inc. | q417shusair.htm |
March 30, 2018
SANTANDER HOLDINGS USA, INC.
Fixed Income Investor Presentation
Fourth Quarter and Full Year 2017
2Disclaimer
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/or policies of the Board of Governors of the Federal Reserve System
(the “Federal Reserve”), the Federal Deposit Insurance Corporation (the "FDIC"), the Office of the Comptroller of the Currency (the “OCC”) and the
Consumer Financial Protection Bureau (the “CFPB”), and other changes in monetary and fiscal policies and regulations, including interest rate policies
of the Federal Reserve, as well as in the impact of changes in and interpretations of generally accepted accounting principles in the United States of
America ("GAAP"), the failure to adhere to which could subject SHUSA to formal or informal regulatory compliance and enforcement actions; (2) the
slowing or reversal of the current U.S. economic expansion and the strength of the U.S. 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, and impact funding
sources and the ability to originate and distribute financial products in the primary and secondary markets; (5) regulatory uncertainties and changes
faced by financial institutions in the U.S. and globally arising from the U.S. presidential administration and Congress and the potential impact those
uncertainties and changes could have on SHUSA's business, results of operations, financial condition or strategy; (6) 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; (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; (8) SHUSA’s ability to effectively manage its capital and liquidity,
including approval of its capital plans by its regulators and its ability to continue to receive dividends from its subsidiaries or other investments; (9)
changes in credit ratings assigned to SHUSA or its subsidiaries; (10) the ability to manage risks inherent in our businesses, including through effective
use of systems and controls, insurance, derivatives and capital management; (11) SHUSA’s ability to manage credit risk that may increase to the extent
our loans are concentrated by loan type, industry segment, borrower type or location of the borrower or collateral; (12) 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 unexpected
costs or losses not anticipated at their initiation, and expose SHUSA to increased operational risk; (13) 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; (14) changes in customer spending or savings behavior; (15) 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; (16)
SHUSA's ability to control operational risks, data security breach risks, outsourcing risks, and the possibility of errors in quantitative models SHUSA
uses to manage its business, including as a result of cyber attacks, technological failure, human error, fraud or malice, and the possibility that SHUSA's
controls will prove insufficient, fail or be circumvented; (17) 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; (18) changes to
income tax laws and regulations; (19) acts of terrorism or domestic or foreign military conflicts; and acts of God, including natural disasters; (20) the
costs and effects of regulatory or judicial proceedings; and (21) adverse publicity and negative public opinion, whether specific to SHUSA or regarding
other industry participants or industry-wide factors, or other reputational harm.
3Disclaimer (cont.)
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”), Santander Consumer Holdings USA, Inc. (“SC”) or
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. 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.
The enhanced prudential standards mandated by Section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "DFA")(the
“Final Rule") were enacted by the Federal Reserve System (the "Federal Reserve") 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 IHC. Due to its U.S. non-branch total consolidated asset size, Santander is 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 the
Company to the Company, which became an IHC effective July 1, 2016. These subsidiaries included Santander BanCorp (“SBC”), Banco Santander
International (“BSI”), Santander Investment Securities, Inc. (“SIS”), Santander Securities LLC (“SSLLC”), as well as several other subsidiaries.
On July 1, 2017, an additional Santander subsidiary, Santander Financial Services, Inc. ("SFS"), a finance company located in Puerto Rico, was
transferred to the Company. The contribution of SFS to the Company transferred approximately $679 million of assets, which were primarily
comprised of cash and cash equivalents and loans held for sale, approximately $357 million of liabilities and approximately $322 million of equity to
the Company. Moreover, the Company is in the process of dissolving the business assets. SFS is an entity under common control of Santander;
however its results of operations, financial condition, and cash flows are immaterial to the historical financial results of the Company. As a result, the
Company has determined that it will report the results of SFS on a prospective basis beginning July 1, 2017 rather than, as required by GAAP,
retrospectively restate its financial statements for the contribution of SFS. As a result, SHUSA's net income is understated for the year ended
December 31, 2017 by $3.3 million and overstated for the year ended December 31, 2016 by $13.5 million. The Company’s net loss for the year
ended December 31, 2015 is understated by $99.9 million. SFS incurred a goodwill impairment charge of $98.3 million during the year ended
December 31, 2015. In addition, a contribution to stockholder’s equity of $322 million was recorded on July 1, 2017. These amounts are immaterial
to the overall presentation of the Company’s financial statements for each of the periods presented.
4
SHUSA is a bank holding company (“BHC”) wholly owned by Santander (NYSE: SAN)
Introduction
1SHUSA’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.
• SHUSA consists of:
• Well-established banking franchises in
the Northeast U.S. 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
• Bloomberg ticker: SOV
• Website www.santanderus.com
Santander
Bank
Santander
Consumer
USA
NYSE: SC
Santander
Puerto Rico
Banco
Santander
International
Santander
Investment
Securities
5Corporate Structure1
SHUSA is the intermediate holding company (“IHC”) for Santander’s U.S. operations
1Balances as of December 31, 2017 4Banco Santander International 7Increased from ~58.7% on 11/15/17
2Santander Bank, N.A. 5Banco Santander Puerto Rico
3Santander Consumer USA Holdings Inc. 6Santander Investment Securities
Approximately
68.1% ownership7
100% ownership
SBNA2
$74.4BN Assets
Retail Bank
SC3
$39.4BN Assets
Auto Finance
BSI4
$6.0BN Assets
Wealth Management
BSPR5
$5.1BN Assets
Retail Bank
SIS6
$1.4BN Assets
Broker Dealer
SHUSA
$128.3BN Assets
Santander
6
• Net Income for the full year 2017 was $973MM1 vs. $641MM1 for full year 2016. 2017 Net
income reflects impact of tax reform, 3Q17 hurricanes, and settlement with former SC CEO
• Continued resolution of regulatory issues as the Federal Reserve did not object to SHUSA’s 2017
capital plan and also terminated the 2014 Written Agreement with SHUSA
• SHUSA increased its ownership of SC to ~68.1% through receiving 9.6% of SC from Santander as
per prior agreement with the former SC CEO
• Significant progress toward TLAC requirement through issuance of $3.5BN in TLAC eligible debt
combined with liability management on $2.3BN non-TLAC eligible debt
• SHUSA re-established its SEC-registered shelf and regained well known seasoned issuer (WKSI)
status
• Fitch initiated coverage of SHUSA and assigned ratings of BBB+/F-2/Stable to SHUSA and SBNA
• SBNA net interest margin (NIM) has improved by 67bps YoY and is now in line with FBO peers
• SC management strengthened with Scott Powell named CEO and Juan Carlos Alvarez named CFO
FY 2017 Highlights
1Includes noncontrolling interest.
74Q 2017 Executive Summary1
Liquidity and
Funding
Capital
Balance Sheet
1Data as of December 31, 2017 unless otherwise noted.
2Includes noncontrolling interest.
3Liquidity coverage ratio.
4Common equity tier 1.
Earnings
Credit Quality
• 4Q17 net income of $284MM2; YTD net income of $973MM2
• 4Q17 results reflect net positive impact of tax law change partially offset by certain
increases in hurricane related ALLL provisions, litigation reserves and the settlement
with the former CEO at SC
• SHUSA’s balance sheet QoQ declined from $132.0BN to $128.3BN due to continued
balance sheet optimization primarily at SBNA
• In February 2018, SC completed the sale of $1.5BN prime auto loans to Santander
• Holding company held $4.7BN in high quality liquid assets (“HQLA”)
• SHUSA maintains an LCR3 in excess of regulatory requirements
• During 4Q17, SHUSA issued $1.25BN in 5 and 10-year TLAC eligible debt and also
issued $0.4BN in 2 and 3-year private placements
• In February 2018, SHUSA conducted $0.4BN tender on its 2018 and 2019 debt
• CET14 ratio of 16.38% as of 4Q17; 16.00% for Basel III fully phased-in
• In 4Q17, SHUSA continued dividend payments to Santander with $5MM paid
• In 4Q17, SC initiated its first dividend since 2014 with a dividend of $0.03 per share
• SBNA’s credit metrics are in line with large bank peers
• SC’s 2016 vintage loans continue to outperform the 2015 vintage loans on a gross and
net loss basis
8Quarterly Profitability1,2
1Net income includes noncontrolling interest.
2See Page 23 for the consolidating income statement.
SHUSA net income improved on YoY basis; 4Q17 results impacted by tax law change and non-
recurring items
Net Interest Income ($MM) Pre-Tax Pre-Provision Income/(Loss) ($MM)
Pre-Tax Income/(Loss) ($MM) Net Income/(Loss) ($MM)1
783
978 985 982
526
0
250
500
750
1,000
1,250
4Q16 1Q17 2Q17 3Q17 4Q17
1,583 1,603 1,642 1,574 1,516
0
500
1,000
1,500
2,000
4Q16 1Q17 2Q17 3Q17 4Q17
3
243
380
330
(132)
-250
-100
50
200
350
500
4Q16 1Q17 2Q17 3Q17 4Q17
30
288
164
237
284
0
100
200
300
4Q16 1Q17 2Q17 3Q17 4Q17
9
2
2
NIM and Interest Rate Risk (IRR) Sensitivity
• SHUSA remains modestly asset sensitive and ready to benefit from higher interest rates
• SBNA’s NIM has improved 67bps YoY due to balance sheet optimization actions and
disciplined deposit pricing
SHUSA IRR
(Change in annual NII for parallel rate movement)
Net Interest Margin
10
13%
5%
7%
4%
7%
5% 7%
6%
17%
2%
8%
19%
Investments
Cash
Auto Loans
19%
12%
5%
7%
5%
4%
18%
7%
2%
3%
18%
Non Interest-
Bearing
Demand
Deposits
Other Assets
C&I
CRE
Residential
Mortgage
Other
Loans
Auto Leases
Goodwill
Home
Equity
Multi-Family
$128.3BN Assets
$104.6BN Liabilities
$23.7BN Equity
Interest-
Bearing
Demand
Deposits
Secured
Structured
Financings
Equity
Other
Liabilities
FHLB
Money
Market
Certificates
of Deposit
Savings
Revolving
Credit
Facilities
Other
Borrowings
Balance Sheet Overview1,2
SHUSA’s balance sheet represents the combination of banks funded by core deposits and
an auto finance company financed with diversified funding sources
1Balances as of December 31, 2017.
2See page 22 for the consolidating balance sheet.
11Balance Sheet Trend1
Balance sheet trend reflects reduction in short-term (ST) funds, investments, and loans
offset by lower wholesale deposits, lower borrowed funds, and increased equity
1Other assets and other liabilities for 1Q17 have been adjusted by $981MM for correction of deferred tax classification. See
SHUSA 2017 Form 10-K for detail.
$10 $10 $10 $10 $11
$88 $86 $85 $83 $83
$19 $21 $21 $20 $17
$10 $9 $8 $8 $7
$11$11$11$11$11
$132
$138
2Q17
$135
4Q17
$128
4Q16 3Q171Q17
$136
Investments
ST Funds Other Assets
Leases
Gross Loans
Liabilities & EquityAssets
Assets ($BN) Liabilities and Equity ($BN) $41 $43 $41 $39
$15 $16 $16 $16 $15
$51
$24$23$23$23$22
$44
$46$47 $45
$52
2Q17
$135
3Q17
$132
$5
4Q16
$138
$5
$136
$5 $5
1Q17
$5
4Q17
$128
IB Deposits
NIB Deposits
Borrowed Funds Equity
Other Liabilities
12Balance Sheet Trend (cont.)
• Loan decline primarily due to reduction in C&I loans1
• Deposit decline reflects reduction in wholesale and brokered deposits
Liabilities & EquityAssets
$28 $27 $28 $26 $26
$26 $24 $23 $22 $22
$19 $18 $18 $18 $18
$14 $14 $14 $14 $15
$11$10$10$10$10
$93
$98
2Q17
$95
4Q17
$93
4Q16 3Q171Q17
$96
CRE
Res. Mtg Leases
Auto
C&I
Loans and Leases ($BN) Deposits ($BN)
$24 $25 $25 $25 $25
$6 $6 $6 $6
$11 $12
$9 $9 $9
$16
$5$6$7$8
$9
$6
$16$16 $15
$15
2Q17
$63
3Q17
$62
4Q16
$67 $67
1Q17 4Q17
$61
DDA NIB
DDA IB
Savings Time
MMDAOther Other
1See slide 38 for trend detail on SBNA C&I portfolio.
13
$2.1 $2.2
$4.6 $2.0
$7.1
$8.1
$4.3
$4.1
$8.3
$7.6
$15.0
$15.0
3Q17 4Q17
$2.3 $3.8
$0.7
$0.7$4.3
$4.1
$8.3 $7.6
$15.0 $15.0
3Q17 4Q17
Borrowed Funds Profile1
1As of December 31, 2017.
2Intragroup balance includes lending from SHUSA to SC which is eliminated at the consolidated level.
Holding company issuances to meet TLAC and liquidity management requirements
2
FHLB
All Other
HoldCo Debt
SC 3rd Party
SC ABS
$41.4
$39.0
SC Private Amortizing
SHUSA HOLDCO ($BN)SHUSA Consolidated ($BN)
Private Amortizing
3rd Party Revolving
Intragroup2
HoldCo Debt
$6.2
$7.1
$0.9 $0.6
$4.6
$2.0
3Q17 4Q17
FHLB
0.8%
SBNA ($BN)
Bank Debt
FHLB
$6.3
$2.6
ABS
SC ($BN)
$30.6
$31.2
Repurchase Agreement
$7.1
$8.1
3Q17 4Q17
14
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 … 2036 Perp
2
2
HoldCo Debt Profile
• As of 4Q17 HoldCo held $4.7BN in HQLA
• During 4Q17 HoldCo issued $1.0BN in new 5 year debt (due 2023) and re-tapped the 2027
debt for $0.25BN
• Subsequently in 1Q18 HoldCo conducted a $400MM tender on the 3.45% due 2018
($63MM) and the 2.70% due 2019 ($336MM)
Pref
Stock
Debt
3.45%
$0.2
$0.2 $0.2
$1.0
Sr
Debt
2.65%
$1.1
Sr
Debt
4.50%
$0.6
Sr
Debt
2.70%
$1.4
Sr
Debt
3.70%
Sr
Debt
4.40%
$1.05
$1.4
Sr
Debt
L+100
$0.7
Trust
Pfd
Tendered 1Q18$1.3
$0.3
L+100
$1.0
Sr
Debt
3.40%
15
2
2
HoldCo Issuance and TLAC Rule
1Chart does not include SHUSA private placements ($1.1BN).
• By January 2019, HoldCo expects to issue approximately $2.0BN in HoldCo debt to meet
TLAC LTD requirement
• Net increase of $1.2BN as issuances replace maturities at HoldCo and SBNA
SHUSA and SBNA Public Debt Outstanding1
$1.2BN
16
2
SHUSA capital ratios remain at the top of peers3
Capital Ratios1,2
Tier 1 Risk-Based Capital Ratio Total Risk-Based Capital Ratio
Tier 1 Leverage RatioCommon Equity Tier 1
14.5% 14.6% 14.6%
15.7%
16.4%
4Q16 1Q17 2Q17 3Q17 4Q17
12.5% 12.6%
13.0%
13.4%
14.2%
4Q16 1Q17 2Q17 3Q17 4Q17
16.1% 16.2% 16.3%
17.4% 17.8%
4Q16 1Q17 2Q17 3Q17 4Q17
18.0% 18.1% 18.1%
19.1% 19.5%
4Q16 1Q17 2Q17 3Q17 4Q17
1Capital ratios calculated under the U.S. Basel III framework on a transitional basis. On a fully phased-in basis CET1 was 16.0% as of 4Q17
2Ratios for 4Q16 and 1Q17 have not been adjusted for the correction of deferred tax calculation. Impact of the correction is projected to be immaterial (reduction
of 8-17bps). See SHUSA 2017 Form10-K for detail.
3See page 26 for comparison of SHUSA capital ratios to peers.
17
**Source: SNL Bank level data; Large Bank = BAC, COF, C, KEY, BMO, HSBA, PNC, RBS, JPM, UNB, TD, USB, and WFC
Asset Quality: SBNA
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+ days past due (“DPD”).
3ALLL = Allowance for loan and lease losses.
SBNA Asset quality metrics continue to be in line with large bank peers
0.38%
0.39% 0.41% 0.43%
0.44% 0.41%
0.41%
0.40%
0.45%0.43%
0.12% 0.15%
0.25%
0.91%
0.21%
0.44%
0.27% 0.24%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Annualized Net Charge off Ratio1
Large Banks SBNA
1.14%
1.28%
1.26% 1.22% 1.20%
1.12% 1.06% 1.02% 0.96%0.96%
1.30%
1.26%
1.16% 1.12%
1.13%
1.25%
1.06%
1.28%
0.00%
0.30%
0.60%
0.90%
1.20%
1.50%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
NPL Ratio2
Large Banks SBNA
1.26% 1.29% 1.27% 1.26% 1.22% 1.20% 1.17% 1.16% 1.13%
1.07%
1.18% 1.17% 1.16%
1.02% 1.07% 1.06% 1.06%
1.13%
0.00%
0.30%
0.60%
0.90%
1.20%
1.50%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
ALLL3 to Total Loans
Large Banks SBNA
120.0%
106.0% 109.0% 110.4% 109.0%
114.1% 120.1%
124.4% 126.8%
111.3%
90.6% 93.2%
100.2%
91.4% 94.7% 85.1%
100.3%
88.2%
0.0%
50.0%
100.0%
150.0%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Reserve Coverage (ALLL/NPL)
Large Banks SBNA
18Asset Quality: SC – Loss and Delinquency
• YoY gross charge-offs increased 20 basis points and YoY net charge-offs increased 40
basis points
• YoY delinquency increased for each delinquency bucket primarily driven by a lower
portfolio balance
SOURCE: SC Fourth Quarter and Full Year 2017 Presentation in Form 8-K filed on January 31, 2018.
See http://investors.santanderconsumerusa.com/financial-info/quarterly-results.
19Asset Quality: SC – Vintage Loss Performance
2016 vintage continues to outperform the 2015 vintage on a gross and net loss basis
SOURCE: SC Fourth Quarter and Full Year 2017 Presentation in Form 8-K filed on January 31, 2018.
See http://investors.santanderconsumerusa.com/financial-info/quarterly-results.
0%
3%
5%
8%
10%
13%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Cum
u
la
ti
ve
N
et
L
o
ss
Ra
te
Months on Book
Total Annual Vintage Cumulative Net Loss Rate
2014 2015 2016
0%
5%
10%
15%
20%
25%
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Cum
u
la
ti
ve
G
ro
ss
L
o
ss
Ra
te
Months on Book
Total Annual Vintage Cumulative Gross Loss Rate
2014 2015 2016
*Retained originations only
20
2
2
Rating Agencies
SBNA
Te S&P Moody’s Fitch
Short Term
Deposits
A-2 P-1 F-2
Senior Debt BBB+ Baa1 BBB+
Outlook Stable Stable Stable
SHUSA
S&P Moody’s Fitch
N/A N/A F-2
BBB Baa3 BBB+
Stable Stable Stable
On December 4, 2017 S&P downgraded SHUSA from BBB+ to BBB due to a
technical change in their internal methodology for assessing the U.S.
resolution structure for FBOs
On December 14, 2017 Moody’s upgraded SBNA’s long-term ratings by 1
notch from Baa2 to Baa1. SHUSA’s ratings were not impacted
On November 17, 2017, Fitch initiated coverage of SHUSA and assigned
ratings of F-2/BBB+/stable to SHUSA and SBNA
December
2017
Santander
S&P Moody’s Fitch
A-2 P-2 F-2
A- A3 A-
Stable Stable Stable
Appendix
22
2
2
Consolidating Balance Sheet
1Includes holding company eliminations, intermediate holding company (IHC) eliminations and purchase accounting marks related to SC
consolidation.
2The IHC entities are presented within "other" in SHUSA’s financial statement segment presentation due to immateriality.
3Other investment securities include trading securities.
(US $ millions) Bank SC Other(1)
IHC
Entities(2) SHUSA
Assets
Cash and cash equivalents 2,520$ 528$ (435)$ 3,907$ 6,520$
Investments available-for-sale at fair value 13,844 - 248 321 14,413
Investments held-to-maturity 1,800 - (0) - 1,800
Other investment securities(3) 602 - (0) 58 660
Loans 47,837 25,867 (372) 7,409 80,741
Less ALLL (546) (3,439) 213 (140) (3,912)
Total loans, net 47,291 22,428 (159) 7,269 76,829
Goodwill 3,403 74 967 - 4,444
Other assets 4,990 16,392 555 1,690 23,628
Total assets 74,450$ 39,422$ 1,177$ 13,245$ 128,294$
Liabilities and Stockholder's Equity
Deposits 56,864$ -$ (4,926)$ 8,893$ 60,831$
Borrowings and other debt obligations 2,576 31,160 5,057 210 39,003
Oth r liabilities 1,488 1,781 93 1,392 4,754
Total liabilities 60,928 32,941 224 10,495 104,588
Stockholder's equity including
noncontrolling interest 13,522 6,481 953 2,750 23,706
Total liabilities and stockholder's equity 74,450$ 39,422$ 1,177$ 13,245$ 128,294$
December 31, 2017
23Consolidating Income Statement
1Includes holding company activities, IHC eliminations, eliminations and purchase accounting marks related to SC consolidation.
2SHUSA net income includes non-controlling interest.
3 The IHC entities are presented within "other" in SHUSA’s financial statement segment presentation due to immateriality.
(US $ Millions) Bank SC Other
(1) IHC Entities(3)
Interest income 583$ 1,180$ 20$ 94$ 1,877$
Interest expense (86) (241) (27) (8) (362)
Net interest income 497 939 (6) 86 1,516
Fees & other income/(expense) 174 430 (34) 99 669
Equity investment income - - 28 - 28
Other non interest income (16) - (1) (2) (19)
Net revenue/(loss) 655 1,369 (14) 183 2,193
General & administrative expenses (523) (825) (80) (147) (1,575)
O her expenses (63) (6) (11) (12) (92)
Provision for credit losses (51) (562) (28) (17) (658)
Income/(loss) before taxes 18 (24) (133) 7 (132)
Income tax (expense)/benefit (75) 604 (98) (14) 417
Net income/(loss)2 (57)$ 580$ (232)$ (7)$ 284$
For the three-month period ended December 31, 2017
SHUSA
24
2
Quarterly Trended Statement of Operations
1Represents net income including noncontrolling interest.
(US $ Millions) 4Q16 1Q17 2Q17 3Q17 4Q17
Interest income 1,932$ 1,956$ 1,999$ 1,954$ $1,877
Interest expense (349) (353) (357) (380) (362)
Net interest income 1,583 1,603 1,642 1,574 1,516
Fees & other income 623 728 720 788 669
Equity investment (expense)/income (6) (2) 1 1 28
Other non interest income - 1 9 7 (19)
Net revenue 2,200 2,330 2,372 2,370 2,194
General & administrative expenses (1,353) (1,311) (1,342) (1,344) (1,575)
Other expenses (64) (41) (45) (44) (93)
Provision for credit losses (780) (735) (605) (652) (658)
Income before taxes 3 243 380 330 (132)
Income tax (expense)/benefit 27 (79) (92) (93) 417
Net income(1) 30$ 164$ 288$ 237$ $284
25Annual Profitability1
1Net income includes noncontrolling interest.
*Non-GAAP pro-forma figures exclude the following expenses for 2015: $96 MM tax provision and $4.4B goodwill impairment.
** Non-GAAP pro-forma figures exclude $96MM of tax provision that was non-recurring.
Net Interest Income ($Mn) Pre-Tax Pre-Provision Income ($Mn)
Pre-Tax Income ($Mn) Net Income ($Mn)2
1,037
7,167
425
3,935 3,471
4,873(•)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2013 2014 2015 2016 2017
1,870
6,243
6,901 6,565 6,334
2.43%
6.22%
6.11%
5.49%
5.66%
500
1,500
2,500
3,500
4,500
5,500
6,500
7,500
2013 2014 2015 2016 2017
NII Net Interest Margin
929
4,707
(3,655)
955 820 793(•)
-3,700
-2,700
-1,700
-700
300
1,300
2,300
3,300
4,300
2013 2014 2015 2016 2017
748*
3,034
(3,055)
641 973
-
(2,959)**
1,393 (*)
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
2013 2014 2015 2016 2017
26
2
Capital Ratios Peer Comparison (as of 12/31/17)
CET1 Tier 1 Risk-Based Capital
Total Risk-Based Capital Tier 1 Leverage
- - - - Peer Median Peer data from SNL
Peers: ALLY, BBT, BBVA, BMO, BNP, COF, CIT, CFG, CMA, DFS, FITB, HBAN, KEY, MTB, MUFG, RF, STI, TD
27SHUSA receipt of SC shares1,2
• On July 2, 2015, Tom Dundon stepped down as SC CEO
• In connection with Mr. Dundon’s departure, SHUSA had a call option, pending regulatory approval
and applicable law, to acquire all of the SC common stock owned by DDFS LLC, an entity solely
owned by Mr. Dundon.
• On November 15, 2017, SHUSA received the 9.6% of SC previously owned by DDFS LLC:
• Santander had previously assumed SHUSA’s call option to acquire the SC shares from DDFS LLC
• Santander exercised the call option
• Santander then contributed the shares to SHUSA
• SHUSA’s ownership of SC increased from approximately 58.7% to 68.1%
• SHUSA’s CET1 capital ratio was projected to improve by ~50bps from the transaction
• SHUSA’s other capital ratios would improve by ~8-13bps
1SHUSA Form 8-K filed November 17, 2017.
2See SHUSA 2017 Form 10-K Note 21.
28
2
2
Non-GAAP to GAAP Reconciliations
$ Millions 4Q16 1Q17 2Q17 3Q17 4Q17
SHUSA Pre-Tax Pre-Provision Income
Pre-tax income, as reported 3$ 243$ 380$ 330$ (132)$
Add back:
Provision for credit losses 780 735 605 652 658
Pre-tax pre-provision Income 783$ 978$ 985$ 982$ 526$
$ Millions
2013 2014 2015 2016 2017
SHUSA Pre-Tax Pre-Provision Income
Pre-tax income, as reported 929$ 4,707$ (3,655)$ 955$ 820$
Add back:
Provision for credit losses 108 2,460 4,080 2,980 2,650
Pre-tax pre-provision Income 1,037$ 7,167$ 425$ 3,935$ 3,471$
29
2
2
Non-GAAP to GAAP Reconciliations1
1Basel III ratios on a transition basis under the standardized approach starting in 2Q15.
$ Millions 4Q16 1Q17 2Q17 3Q17 4Q17
CET 1 to Risk-Weighted Assets
Tier 1 common 15,136$ 14,912$ 15,116$ 15,646$ 16,329$
Risk-weighted assets 104,334 102,353 103,241 99,938 99,684
Ratio 14.5% 14.6% 14.6% 15.7% 16.4%
Tier 1 Leverage(1)
Tier 1 capital 16,844$ 16,603$ 16,838$ 17,378$ 17,786$
134,534 131,648 129,913 129,728 125,648$
Ratio 12.5% 12.6% 13.0% 13.4% 14.2%
Tier 1 Risk-Based(1)
Tier 1 capital 16,844$ 16,603$ 16,838$ 17,378$ 17,786$
Risk-weighted assets 104,334 102,353 103,241 99,938 99,684$
Ratio 16.1% 16.2% 16.3% 17.4% 17.8%
Total Risk-Based(1)
Risk-based capital 18,775$ 18,508$ 18,657$ 19,083$ 19,440$
Risk-weighted assets 104,334 102,353 103,241 99,938 99,684$
Ratio 18.0% 18.1% 18.1% 19.1% 19.5%
Average total assets for leverage capital purposes
30
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)
47
113
155
200
69
0
50
100
150
200
4Q16 1Q17 2Q17 3Q17 4Q17
426
460
495 499 497
2.30%
2.62%
2.87% 2.88%
2.97%
0
100
200
300
400
500
4Q16 1Q17 2Q17 3Q17 4Q17
NII Net Interest Margin
23
86
122
166
18
0
25
50
75
100
125
150
175
4Q16 1Q17 2Q17 3Q17 4Q17 (57)(15)
70
91
117
-20
5
30
55
80
105
4Q16 1Q17 2Q17 3Q17 4Q17
31
2
2
SBNA: Quarterly Trended Statement of Operations
(US$ in Millions) 4Q16 1Q17 2Q17 3Q17 4Q17
Interest income 527$ 557$ 585$ 590$ 583$
Interest expense (101) (97) (90) (91) (86)
Net interest income 426 460 495 499 497
Fees & other income 213 197 199 210 174
Other non-interest income - - 9 7 (16)
Net revenue 639 654 703 716 655
General & administrative expenses (544) (517) (523) (495) (523)
Other expenses (48) (24) (25) (21) (63)
Release of/(provision for) credit losses (24) (27) (33) (34) (51)
Income before taxes 23 86 122 166 18
Income tax expense (38) (16) (31) (49) (75)
Net income/(loss) (15)$ 70$ 91$ 117$ (57)$
4Q16 1Q17 2Q17 3Q17 4Q17
Net interest margin 2.30% 2.62% 2.87% 2.88% 2.97%
32
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 19,115$ 2.07% 21,061$ 2.06% (1,946)$ 0.01% 22,102$ 1.18%
Loans 48,373 4.00% 48,734 3.95% (361) 0.05% 52,988 3.50%
Allowance for loan losses (517) --- (520) --- 3 --- (597) ---
Other assets 8,863 --- 9,045 --- (182) --- 10,147 ---
TOTAL ASSETS 75,834$ 3.07% 78,320$ 3.01% (2,486)$ 0.06% 84,640$ 2.50%
Interest-bearing demand deposits 8,736 0.29% 8,701 0.25% 35 0.04% 9,845 0.23%
Noninterest-bearing demand deposits 12,247 --- 12,703 --- (456) --- 11,861 ---
Savings 4,031 0.08% 4,112 0.05% (81) 0.03% 4,053 0.12%
Money market 27,482 0.55% 27,014 0.49% 468 0.06% 27,398 0.46%
Certificates of deposit 4,775 1.28% 4,827 1.15% (52) 0.13% 8,074 0.95%
Borrowed funds 3,391 2.96% 5,772 2.59% (2,381) 0.37% 8,140 2.10%
Other liabilities 1,428 --- 1,437 --- (9) --- 1,709 ---
Equity 13,744 --- 13,754 --- (10) --- 13,560 ---
TOTAL LIABILITIES & SE 75,834$ 0.45% 78,320$ 0.46% (2,486)$ -0.01% 84,640$ 0.47%
NET INTEREST MARGIN 2.97% 2.88% 0.09% 2.30%
4Q17 4Q163Q17 Change
33
2
2
SBNA: Funding – Deposits*
1Represents average quarterly balances.
*SBNA total deposits less the SHUSA cash deposit held at SBNA.
Average Total Deposit Balances
1
($Bn)
$57.5 $56.9
$55.1
$52.9 $53.2
0.39% 0.39%
0.37% 0.38%
0.43%
0.30%
0.35%
0.39%
0.44%
0.48%
0.53%
4Q16 1Q17 2Q17 3Q17 4Q17
Total Deposits Avg. Interest Cost
Average Non-Maturity Deposit Balances
1
($Bn)
$49.5 $49.8 $49.2
$48.1 $48.4
0.30%
0.30%
0.29%
0.31%
0.35%
0.20%
0.25%
0.30%
0.35%
0.40%
0.45%
0.50%
4Q16 1Q17 2Q17 3Q17 4Q17
Non Maturity Deposit Balances Avg. Interest Cost
34
2
2
SBNA: Annual Profitability
US $ millions
1See non-GAAP to GAAP reconciliation of pre-tax pre-provision income.
*- excludes one-time $96MM tax provision
Pre-Tax Pre-Provision Income1 ($MM)
Net Income ($MM)
Net Interest Income ($MM)
Pre-Tax Income ($MM)
585
453 463
365
536
0
200
400
600
800
1,000
1,200
2013 2014 2015 2016 2017
1,671 1,642 1,667
1,732
1,951
2.54%
2.57%
2.30% 2.27%
2.83%
0
500
1,000
1,500
2,000
2013 2014 2015 2016 2017
NII Net Interest Margin
538
455
328
233
391
0
200
400
600
2013 2014 2015 2016 2017
428
376
279*
152
221
0
200
400
600
2013 2014 2015 2016 2017
35
2
2
SBNA: Annual Trended Statement of Operations
(US$ in Millions) 2013 2014 2015 2016 2017
Interest income 2,294$ 2,191$ 2,206$ 2,209$ 2,315$
Interest expense 623 549 539 477 364
Net interest income 1,671 1,642 1,667 1,732 1,951
Fees & other income 652 991 1,052 939 782
Other non-interest income 9 23 18 58 (0)
Net revenue 2,332 2,656 2,737 2,729 2,733
General & administrative expenses (1,618) (1,884) (2,201) (2,160) (2,058)
Other expenses (129) (319) (73) (204) (139)
Provisions for credit losses (47) 2 (135) (132) (145)
Income before taxes 538 455 328 233 391
Income tax (expense) (110) (80) (145) (81) (170)
Net income 428$ 376$ 183$ 152$ 221$
2013 2014 2015 2016 2017
Net interest margin 2.54% 2.57% 2.30% 2.27% 2.83%
36
$2,333
$2,626
$2,376 $2,337
$2,018
$2,108
$1,969 $2,008 $2,011
4.35%
4.81%
4.36% 4.42%
3.87%
4.22%
4.01% 4.13% 4.18%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Criticized Balances Criticized Ratio
$513
$710
$687
$615
$583 $565
$613
$517
$618
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
SBNA: Asset Quality
$ MM-13% $ MM
**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.
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.
-14%
Deliquency3
NPLs1 Criticized Balances2
Texas Ratio4
0.86%
0.76% 0.75% 0.73%
0.80%
0.74% 0.72%
0.77%
0.81%
0.40% 0.43% 0.37% 0.39%
0.47%
0.41% 0.45%
0.50%
0.55%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Delinquency3
Large Banks SBNA
14.08% 14.26% 13.66% 13.11% 12.93%
12.11%
11.38% 10.97% 10.69%
8.60%
10.70% 10.30%
9.60% 9.50% 9.20% 9.00%
8.00%
8.90%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Texas Ratio4
Large Banks SBNA
37SBNA: 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 (“CRE”) is comprised of the commercial real estate and continuing care retirement communities
business segments (SREC segment included in separate graph).
US $ Billions
Mortgages Home Equity
Commercial Real Estate1
Outstandings NPLs* to Total Loans Net Charge-Offs**
$6.5 $6.4 $6.6 $6.7
$7.0 $6.8 $7.2
$7.4
$7.9
2.7% 2.6% 2.4% 2.2% 2.3% 2.3% 1.9% 1.8% 1.6%
0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.0% 0.0%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
$6.0 $5.9 $5.9 $5.9 $5.9 $5.8 $5.8 $5.7 $5.7
1.8% 1.8% 1.7% 1.7% 1.7% 1.7% 1.8% 1.8% 1.8%
0.3% 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
$4.8
$5.4 $5.5 $5.4 $5.4 $5.5 $5.4 $5.5 $5.2
0.8%
1.3% 1.4% 1.1% 1.0% 0.8% 0.5% 0.5% 0.5%
0.1% 0.2% 0.0% -0.2% -0.1% -0.2% -0.1%
0.1% 0.1%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
$10.5 $10.3 $10.1 $9.8 $9.3 $9.1 $8.8 $8.7 $8.7
0.1% 0.1% 0.1% 0.1% 0.1% 0.0% 0.0% 0.1% 0.1%
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Santander Real Estate Capital (SREC)
38
$1.7 $1.6 $1.6 $1.6 $1.6 $1.5 $1.5
$1.6 $1.6
1.8% 1.7% 1.7% 1.8% 1.9% 1.8% 1.8% 1.7% 1.7%
2.7% 2.7% 2.8% 2.9%
3.1% 3.4%
3.7% 3.8% 3.7%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
$3.0 $2.9 $2.9
$3.0 $3.1 $2.9 $3.0 $2.8 $2.8
2.6% 2.4% 2.3% 2.4% 2.3% 2.1% 2.1% 2.2% 2.3%
0.9% 1.0% 0.9% 0.8% 0.8% 0.6% 0.6% 0.6% 0.7%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
$10.0 $10.1
$9.4
$8.4
$7.9
$6.8
$5.7
$5.2
$4.7
0.2%
0.6% 0.7% 0.8%
0.0% 0.1%
1.2%
0.0%
1.3%
0.3% 0.3% 0.3% 0.3% 0.4% 0.4%
0.6%
0.7%
0.3%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
1Commercial Banking = Middle Market, Asset-based Lending, Energy Finance, Government Banking, Mortgage Warehouse, Equipment Finance & Leasing, Commercial Banking not
classified elsewhere, Financial Institutions Coverage, Institutional-Non Profit, commercial equipment vehicle finance-strategic, Chrysler Auto Finance and Footprint Dealer Floorplan.
2Other Commercial = All other Commercial Business segments.
3Other Consumer = Direct Consumer, Indirect Consumer, RV/Marine, Credit Cards, SFC, & Retail run-off.
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
Outstandings NPLs* to Total Loans Net Charge-Offs**
Other Commercial2 Other Consumer3
Global Corporate BankingCommercial Banking1
$11.4 $11.8
$12.4 $12.2 $12.0
$11.5 $11.7 $11.6 $11.6
0.5%
1.7% 1.5%
1.1% 1.3%
1.5% 1.6% 1.4%
1.7%
0.2% 0.1% 0.0%
0.1%
0.6% 0.7% 0.8% 0.8%
0.3%
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
39
2
2
SBNA: Capital Ratios1
1Capital ratios calculated under the U.S. Basel III framework on a transitional basis. On a fully phased-in basis CET1
was 17.9% as of 4Q17. See SHUSA 2017 Form 10-K.
Tier 1 Risk-Based Capital Ratio Total Risk-Based Capital Ratio
Tier 1 Leverage RatioCommon Equity Tier 1
16.2%
17.0% 17.6%
18.1% 18.2%
4Q16 1Q17 2Q17 3Q17 4Q17
12.3%
12.9% 13.4%
13.7% 13.9%
4Q16 1Q17 2Q17 3Q17 4Q17
17.4%
18.2% 18.7%
19.2% 19.4%
4Q16 1Q17 2Q17 3Q17 4Q17
16.2%
17.0%
17.6% 18.1%
18.2%
4Q16 1Q17 2Q17 3Q17 4Q17
40
2
2
SBNA: Non-GAAP to GAAP Reconciliations
$ Millions 4Q16 1Q17 2Q17 3Q17 4Q17
Tier 1 Common to Risk-Weighted Assets
Tier 1 common capital 10,006$ 10,031$ 10,154$ 10,238$ 10,015$
Risk-weighted assets 61,886 59,111 57,725 56,622 55,111
Ratio 16.2% 17.0% 17.6% 18.1% 18.2%
Tier 1 Leverage
Tier 1 capital 10,006$ 10,031$ 10,154$ 10,238$ 10,015$
81,076 77,909 75,603 74,807 72,278
Ratio 12.3% 12.9% 13.4% 13.7% 13.9%
Tier 1 Risk-Based
Tier 1 capital 10,006$ 10,031$ 10,154$ 10,238$ 10,015$
Risk-weighted assets 61,886 59,111 57,725 56,622 55,111
Ratio 16.2% 17.0% 17.6% 18.1% 18.2%
Total Risk-Based
Risk-based capital 10,759$ 10,785$ 10,786$ 10,870$ 10,669$
Risk-weighted assets 61,886 59,111 57,725 56,622 55,111
Ratio 17.4% 18.2% 18.7% 19.2% 19.4%
Average total assets for leverage capital purposes
41SBNA: Non-GAAP to GAAP Reconciliations (cont.)
1Mortgage servicing rights.
2Troubled debt restructurings.
$ Millions 4Q16 1Q17 2Q17 3Q17 4Q17
SBNA Texas Ratio
Total Equity 13,418$ 13,504$ 13,622$ 13,695$ 13,522$
Less:
Goodwill and other intangibles (excluding MSRs1) (3,664) (3,649) (3,630) (3,618) (3,602)
Preferred stock - - - - -
Add: Allowance for loan losses 533 535 521 518 546
Total equity and loss allowances for Texas Ratio 10,287$ 10,390$ 10,513$ 10,595$ 10,466$
Nonperforming assets 618$ 596$ 636$ 544$ 640$
90+ DPD accruing 3 4 5 0 0
Accruing TDRs2 353 361 308 304 289
Total nonperforming assets 974$ 961$ 949$ 848$ 929$
Texas ratio 9.5% 9.2% 9.0% 8.0% 8.9%
42
2
SBNA: Non-GAAP to GAAP Reconciliations (cont.)
$ Millions 4Q16 1Q17 2Q17 3Q17 4Q17
SBNA Pre-Tax Pre-Provision Income
Pre-tax income, as reported 23$ 86$ 122$ 166$ 18$
Add back:
(Release of)/provision for credit losses 24 27 33 34 51
Pre-tax pre-provision inc me 47$ 113$ 155$ 200$ 69$
$ Millions 2013 20 4 20 2016 2017
SBNA Pre-Tax Pre-Provision Income
Pre-tax income, as reported 538 455 328 233 391
Add back:
Provision for credit losses 47$ (2)$ 135$ 132$ 145$
Pre-tax pre-provision income 585 453 463 365 535.5
43
2
2
SC: Auto Industry Analysis
SOURCE: SC Fourth Quarter and Full Year 2017 Presentation in Form 8-K filed on January 31, 2018.
See http://investors.santanderconsumerusa.com/financial-info/quarterly-results.
1 Manheim, Inc.; Indexed to a basis of 100 at 1995 levels; JD Power Used-Vehicle Price Index (not seasonally adjusted).
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 November 31, 2017).
44
2
SC: Originations diversified across credit spectrum
SOURCE: SC Fourth Quarter and Full Year 2017 Presentation in Form 8-K filed on January 31, 2018.
See http://investors.santanderconsumerusa.com/financial-info/quarterly-results.
45SC: Asset Quality – Provisions and Reserves
QoQ allowance decreased $111 million
New volume and TDR migration1 were offset
by performance adjustment and liquidations
and other
QoQ outstanding TDR balance relatively flat
Allowance to loans ratio decreased 20 bps to 12.6% QoQ
Provision for credit losses decreased $124 million YoY
1 TDR migration – the allowance for assets classified as TDRs or “troubled debt restructuring” takes into consideration expected lifetime losses, typically requiring additional coverage
2 Explanation of quarter over quarter variance are estimates
$3,381
$3,270
$103
$80 ($90)
($204)
$3,100
$3,150
$3,200
$3,250
$3,300
$3,350
$3,400
$3,450
$3,500
$3,550
$3,600
Q3 2017 New
Volume
TDR
Migration
Performance
Adjustment
Liquidations
& Other
Q4 2017
Q3 2017 to Q4 2017 ALLL Reserve Walk
($ in millions)
$686
$635
$521 $536
$562
12.6% 12.7% 12.6%
12.8%
12.6%
12.0%
12.5%
13.0%
13.5%
14.0%
$0
$100
$200
$300
$400
$500
$600
$700
$800
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
Provision Expense and Allowance Ratio
($ in millions)
Provision for credit losses Allowance Ratio
SOURCE: SC Fourth Quarter and Full Year 2017 Presentation in Form 8-K filed on January 31, 2018.
See http://investors.santanderconsumerusa.com/financial-info/quarterly-results.
