Banco Santander S A : 3rd quarter 2016 results press release

RESULTS JANUARY-SEPTEMBER 2016‌‌‌

Santander earns €4.61 billion during the first nine months of 2016

Madrid, 26 October 2016

PRESS RELEASE

Banco Santander has delivered €4,606 million in attributable profits for the first nine months of 2016, down 22.5% from the same period in 2015 due to the impact of extraordinary items announced in Q2 of this year and Q2 of 2015. Excluding extraordinary items and exchange rate movements, profits grew by 8% year on year to €4,975 million.

In the third quarter alone, the bank delivered attributable profits of €1,695 million, up 1% when compared to the same period last year. Excluding the impact of currency depreciation against the euro, attributable profits in Q3 were 7% higher than the same period last year.

Banco Santander Group Executive Chairman, Ana Botín, said:

"We have delivered strong performance during the first nine months of 2016, earning the loyalty of a further one million customers, while maintaining our position as one of the most profitable banks in our peer group.

"While the low interest rate environment within developed economies remains a challenge for parts of our business, the resilience of our business model has allowed us to continue to deliver, with our Latin American and consumer finance franchises growing particularly well throughout the year.

"There continues to be real potential for further sustainable and profitable growth and we are confident that our strategy of earning the lasting loyalty of customers, strong balance sheet, and best-in-class efficiency leave us well positioned to continue delivering for our customers, colleagues, shareholders and communities.

"We continue to grow capital ahead of our goals while also funding growth in lending and increasing dividends. Dividend yield stands at around 5%. We expect to end 2016 exceeding last year's profit, enabling us to increase our dividend per share and earnings per share."

Results Summary (9M'16 versus 9M'15 and currency neutral)

Santander has continued to progress in commercial transformation, including: mobile phone payments; next generation branches; and smart ATMs. This investment has allowed for a better customer experience with seven countries ranking in the top three within their markets for customer satisfaction.

Total income grew in a context in which most peers are registering declines.

Country summary (9M'16 versus 9M'15 and currency neutral)

In Spain the bank's priority remains to increase customer loyalty and improve service quality. The low interest rate environment continued to affect net-interest income, however, this was partly offset by good growth in fee income, strong cost control, and significant improvements in credit quality. Key metrics: Gross Income (€4,429m, -8.5%); Operating Expenses (€2,495m, -3.1%); Loan loss provisions (€500m, -40.1%); Underlying attributable profit, excluding contribution to SRF in 2Q'16 (€885m, +0.2%); Attributable profit (€785m, -11.1%).

Santander UK made good progress against its strategic targets, with 123 customers continuing to grow, strong cost discipline and good credit quality, despite uncertainty in the operating environment. Attributable profits have been impacted by the introduction in 2016 of the 8% bank corporation tax surcharge, turning the 0.3% increase in profit before tax into a decline of 11% in attributable profit. Key metrics: Gross Income (€4,391m, +1.3%); Operating Expenses (€2,284m, +0.3%); Loan loss provisions (€119m, +51.7%); Attributable profit (€1,207m, -11.1%).

In Brazil the bank has continued to see strong performance with growth in profit and income driven by good client growth, greater transactions and customer loyalty, and an increase in fee income. The change in business mix carried out in the last few years has also allowed the bank to maintain credit quality ahead of our peers. Key metrics: Gross Income (€8,133m, +6.2%);

Operating Expenses (€3,170m, +5.4%); Loan loss provisions (€2,424m, +10.9%); Attributable profit (€1,276m, +9.5%).

In the US Santander has continued to invest to improve the retail customer experience, grow our commercial bank, and meet our regulatory requirements. Revenues fell slightly and while our costs increased, the rate of increase has begun to reduce. Provisions increased during the period due to a greater level of retention of loans at Santander Consumer USA and provisions made for Oil and Gas (mainly in Q1). Key metrics: Gross Income (€5,723m, -1.4%); Operating Expenses (€2,335m, +6.5%); Loan loss provisions (€2,342m, +9.5%); Attributable profit (€381m,

-42.1%).

Good performance in all segments helped boost profits in Mexico with strong growth in both lending and deposits. The number of loyal customers increased further during the quarter and credit quality continued to improve. Key metrics: Gross Income (€2,375m, +13.4%); Operating Expenses (€950m, +8.1%); Loan loss provisions (€629m, +11.9%); Attributable profit (€460m,

+19%).

In Chile the bank continued to focus on improving the customer experience and increasing loyal customers. Attributable profits increased due to higher commercial revenues, a modest decrease in provisions and good cost control. Key metrics: Gross Income (€1,749m, +4%); Operating Expenses (€721m, +3.4%); Loan loss provisions (€382m, -0.7%); Attributable profit (€377m, +6.3%).

In Poland the bank delivered good growth in net interest income, with the business gaining market share in loans. The cost of credit improved with material reductions in non performing loans. Attributable profits were impacted by the tax on assets introduced in February 2016. Excluding this impact, profit would have grown 8%. Key metrics: Gross Income (€985m, +5%); Operating Expenses (€440m, +2.4%); Loan loss provisions (€110m, -6.9%); Attributable profit (€208m, -10.2%).

On a like-for-like basis, profits increased significantly in Portugal due to strong income growth, lower costs and a significant reduction in loan loss provisions. Income was bolstered by gains on financial transactions from the sale of portfolios and the integration of Banif. Key metrics: Gross Income (€917m, +31.5%); Operating Expenses (€455m, +20.6%); Loan loss provisions (€44m, -33.8%); Attributable profit excluding contribution to SRF in 2Q'16 (302m; +67%); Attributable profit (€293m, +62.3%).