Annual report 2009 - Santander

106Santander Consumer Finance• Solid revenues from improved spreads, the lower costof financing and the rise in fee income.Gross income and expenses% variation 2009 / 2008Efficiency ratio(with amortisations)%+26.7+25.0• Strict management of costs and reduction instructures.28.0+9.6• Higher net operating income absorbed the largerprovisions, which are in the process of being stabilised.27.6+2.7GrossGross• Active management of the business portfolio: entry ofincome Expenses income Expensesnew units and portfolios and discontinuation of others.2008 2009w/o perimeterIncome statementAttributable profit was EUR 632 million, 9.2% less than in 2008.This was due to the difficult macroeconomic and businessenvironment in various countries. The decline in profits,however, was sharply reduced (-19.7% in the first half over thesame period of 2008) after a good second half. The profit in thefourth quarter was 10.3% higher than in the same period of2008 and all of it was recurring income (net operating incomeafter provisions was 26.5% higher year-on-year). There werethree factors behind this:• Solid revenues (+25.0%), due to the positive impact of newincorporations and the notable organic growth in net interestincome and fee income (+13% on a like-for-like basis). Thisreflects the active management of spreads (average spread onloans: +75 b.p.), more adjusted to the rise in risk premiums invarious markets and taking advantage of the lower cost ofwholesale financing, as well as the rise in cross-selling with afurther increase in fees from insurance business.• Strong containment of expenses: on a like-for-like basis, theyincreased 2.7%. Including incorporations, they rose 26.7%, aslower pace than in the first half (+33.6%) and partly due tothe integration progress. The efficiency ratio remained ataround 28% and net operating income grew 24.3% (+13%without incorporations).• High cost of credit because of the deterioration of theeconomic environment and of credit quality. Net loan-lossprovisions rose 41.4% and 28% excluding incorporations.However, the greater stability of provisions in the last fewquarters (those in the fourth quarter were 3% lower than inthe same period of 2008) enabled net operating income toabsorb the increase in provisions. Net operating income afterprovisions ended 0.5% higher than in 2008 (-10.5% in thefirst half).The evolution of provisions reflected the efforts in admission andrecoveries in all units, which led to sharp reductions in net NPLentries (54% lower in the fourth quarter than in the same periodof 2008).Net operating incomeMillion euros2,39520082,9762009NPL ratio%4.182008+24.3%5.392009Attributable profitMillion euros69620086322009NPL coverage%-9.2%The NPL ratio at the end of 2009 was better than envisaged atthe beginning of the year (5.39% compared to 4.18% in 2008)and coverage was higher at 97% (86% in 2008).The results differed from country to country. Of note wasGermany, which generates the largest profits, whosecontribution to the Group was 9% higher than in 2008 becauseof the new incorporations and good management of revenuesand costs which offset the higher provisions in the new entities.Santander Consumer Finance USA registered the largest rise inattributable profit (+41.2% in dollars) and made the area’ssecond largest contribution. This was due to the drive inrevenues via commercial agreements, both from the acquisitionof portfolios of greater quality with significant discounts as wellas management of others, control of costs and experience andagility in recoveries against a backdrop of contained organicgrowth.862008972009Annual Report 2009Economic and Financial Review