Annual report 2009 - Santander

103Santander Branch Network• Growth in gross income, aided by management ofspreads and good levels of activity.• Flat costs for eight straight quarters without reducingbusiness capacity.• Non-performing loans better than the sector’saverage, because of the early measures taken and thefocus on recoveries.Gross income and expenses% variation 2009 / 2008Gross inc-0.3+1.5ExpensesEfficiency ratio(with amortisations)%38.739.42008 2009Against a backdrop of recession and the downturn in thefinancial sector, the Santander Branch Network generatedattributable profit of EUR 2,012 million in 2009, 5.5% morethan in 2008.Strategy in 2009This was due to the progress made in the main focuses ofattention: capturing and linking customers; good levels oflending and customer funds; balanced management of spreads;containment of costs without reducing the business capacity;management and strong control of credit risk quality andenhancing the quality of service.Net operating incomeMillion euros3,3003,25220082009-1.5%Attributable profitMillion euros2,0121,90720082009+5.5%Income statementThese measures resulted in net interest income 16.0% higher atEUR 4,052 million, due to the 25% rise in deposits, thecontinued good level of lending (the average balance onlydropped 3%) and the improvement in the spread on loans of0.84 p.p. The spread on deposits, however, dropped 0.30 p.p.due to accommodating the cost of funds to the downwardtrend in market interest rates.NPL ratio%2.584.38NPL coverage%7565The rest of revenues were more affected by market conditionsand the policies pursued in 2009. Total fee income and gains oncustomers’ financial transactions declined 26.9%. The mainreasons for this decline were mutual funds, structured insuranceand hedging of interest rates and exchange rates. Also,Santander remained loyal to its commitment of “Zero servicefees” for those benefiting from the “Queremos ser tu Banco”plan, a policy that has kept the tariff of fees unchanged for fiveyears. Those generated are solely the result of greater business.Gross income remained virtually unchanged at EUR 5,363million (-0.3%).Operating expenses have been stable for the last two years(+1.5%). Of note was the 0.4% reduction in personnel costs andthe fact that this has been achieved without cutting installedcapacity as the number of branches remained stable at morethan 2,900.Net operating income was 1.5% lower at EUR 3,252 million,and the efficiency ratio remained at below 40% (39.4%).Excluding amortizations, the ratio was 36.4%.2008200920082009The Santander Branch Network continued to strictly managerisk, reflected in a lower pace of growth than the market and aNPL ratio of 4.38%, which compares well with the bankingsector and even more so given that as it is a retail network itdoes not include the balances of wholesale banking whose badloans are clearly lower. Taking them into account, the NPL ratioof Banco Santander parent bank at the end of 2009 was 3.41%.The coverage for the Santander Branch Network was 65% and73% for Banco Santander.Net loan-loss provisions were EUR 481 million, 25.2% lowerthan in 2008, due to efficient management of the RecoveriesArea, created this year, and the availability of generic provisionsestablished in previous years when lending growth was higher,which offset the greater need for specific provisions during theyear.Profit before tax was EUR 2,757 million, 4.4% more than in2008, and attributable profit was EUR 2,012 million, whichcompares well with that of our competitors.Economic and Financial ReviewAnnual Report 2009