Annual Report 2007 - Santander

SANTANDER IN 2007BANCO SANTANDER GENERATED RECORDATTRIBUTABLE PROFIT OF EUR 9,060 MILLION IN THEYEAR WHEN IT CELEBRATED ITS 150TH ANNIVERSARYProfits are growing on a sustained basis, spurred by a strong revenuegeneratingcapacity in countries and business segments. The highrecurrence of profits is underscored by the big increases in grossoperating incomeRECORD PROFITS IN 2007Banco Santander carried out itsbusiness in a varied environment, in whichthe good economic performance of themain markets where it operates wasaffected by the volatility of financialmarkets sparked by the crisis in the USsubprime mortgage market.Despite this, Banco Santanderachieved a record attributable profit ofEUR 9,060 million. Excluding the capitalgains from the sale of the stake in IntesaSanpaolo, from the pension fundmanagement institutions in Latin Americaand property in Spain, ordinaryattributable profit was 23.2% higher thanin 2006 at EUR 8,111 million.These earnings were backed by highgrowth in both geographic areas and businesssegments.• Continental Europe’s attributable profitwas EUR 4,423 million, due to stronggrowth in revenue and contained costs.• In the UK, Abbey’s profit amounted toEUR 1,201 million, thanks to a broaderrange of products and a significantimprovement in efficiency.• In Latin America, attributable profit wasEUR 2,666 million, the fruit of thebusiness effort with individualcustomers, SMEs and companies.Retail Banking generated EUR 9,339million in profit before taxes, the largestcontribution to earnings, injecting stabilityand recurrence. The other segments alsoincreased their contributions. Particularlystriking was Global Wholesale Banking(+28.4% in profit before taxes to EUR1,830 million).The Group continued to improve itsprofitability (ROE excluding capital gainsrose 1.1 p.p. to 19.6%) and efficiency(costs as a percentage of gross operatingincome stood at 44.2%, 4.4 p.p. betterthan in 2006). The ratio of non-performingloans remained a low (0.95%) andcoverage was 151%.ABN AMRO ACQUISITIONIn 2007 the consortium of BancoSantander, Royal Bank of Scotland andFortis successfully completed the takeoverof the Dutch bank ABN AMRO, the largestbanking transaction ever of its kind.The acquisition met Banco Santander’sfinancial and strategic criteria: we know thetarget market – Brazil – well, it will have apositive impact on earnings per share fromthe onset, and the return on the investmentwill exceed the Bank’s capital cost in thethird year.This operation bolsters Santander’spresence in Brazil with the acquisition ofBanco Real. Our network of 4,000 branchesand service points (2,000 of Banco Real and2,000 of Santander Brazil) make Santanderthe third largest bank by loans and thesecond by deposits in Brazil, a countrywhere we have much experience andexcellent prospects.Banco Real will be fully integrated intoGrupo Santander during 2008.Italian bank Antonveneta was alsoinitially allotted to Banco Santander, whichthen sold it to Monte dei Paschi di Siena forEUR 2,400 million more than the amountassigned at the time of the offer.The acquisition of ABN AMRO wasfinanced in the most efficient manner forour shareholders.20