Annual report 2009 - Santander

120Mexico• Integral risk management strengthened, particularly incredit cards.Gross income and expenses*% variation in euros 2009 / 2008Efficiency ratio(with amortisations)%• Emphasis on low cost deposits.• Selective growth in lending with improved spreads.Grossincome35.334.2• Strict control of costs, lower than in 2008.Santander is the third largest banking group in Mexico bybusiness volume, with a market share in loans of 13.4% and15.5% in savings. It has 1,093 branches (net drop of 36 duringthe year) and 8.7 million customers.Economic environmentGDP began to grow again in the third quarter of 2009 (+2.9%over the second quarter), putting an end to the shrinkage of thethree previous quarters. Partial indicators for the fourth quartershow the recovery is underway and expectations are for growthof more than 3% in 2010.Inflation eased significantly to 3.6%, almost 3 p.p. less than in2008 (6.5%). The expectations for 2010 are a rise to 5%, partlydue to the increase in VAT and in other indirect taxes sinceJanuary.Thanks to the signs of economic stabilisation and the goodoutlook for 2010, the authorities decided to begin to withdrawthe fiscal and monetary stimulus. The government approved apackage of fiscal measures, with selective rises in taxes, toreduce the budget deficit from 2.3% of GDP in 2009 to 0.7%.The central bank’s monetary policy has to reconcile vigilance ofthe possible second round effects on inflation with a still highnegative output gap, but one which will narrow as the recoveryadvances. The central bank is expected to increase interest ratesduring the second half of 2010.The pace of banking business decelerated sharply. Lending in2009 was almost flat (+2%), with consumer credit and cardsdown 19% and savings rose 8%.Strategy in 2009The strategy in 2009 was focused on strengthening thecommercial franchise through a better relationship withcustomers and increased transactions; stronger integralmanagement of risk, particularly recovery of loans in default;stabilisation of credit card business; emphasis on growth inlow cost deposits; selective growth in lending withoptimisation of spreads; leadership in granting loans undergovernment programs and strict management of investmentsand costs.-16.4* Excluding exchange rate impact: Gross income: 2008 2009-13.6 Expenses-0.2%; expenses: -3.4%Net operating incomeMillion euros1,7552008NPL ratio%1,5422009-12.1%* 6001.842008 2009Attributable profitMillion euros20084952009NPL coverage%1322008-17.6%** Excluding exchange rate impact: +1.5% * Excluding exchange rate impact: -4.8%2.412642009Offers and campaigns aimed to attract new customers wereconducted in 2009, with prizes and/or participation in draws.The campaigns included “Santander Libertadores”, “Súpercrucero”, “Mueve tu mundo” and “Santander cumple tussueños esta navidad”. In insurance, the emphasis was on thesale of SAFE, Medicash, and household and car insurance. Thefocus in lending was on payroll credit, “cheque misma línea”and consumer credit linked to credit cards.A priority activity was recovery of non-performing loans, forwhich various products were launched such as “Alíviate” forindividuals and SMEs and ad hoc programmes in SME andcompany segments.Due to the swine flu in Mexico at the beginning of May, wesupported SMEs through loans with federal governmentguarantees and offers of point-of-sales equipment andinsurance.Annual Report 2009Economic and Financial Review