Banco Santander S A : Hector Grisi’s speech

MR. HÉCTOR GRISI'S SPEECH

2024 ANNUAL GENERAL MEETING

That is why, before explaining the results, I would like to thank you for the trust that you, our shareholders, have in Santander. And, in particular, the trust you shown in me this first year as the Group's CEO.

I would also like to thank the more than 200,000 employees who work at Santander. A well-known American sports personality once said that "individual commitment to a group effort - that is what makes a team work, a company work or a society work". Our achievements in 2023, which I will go into now, would not have been possible without the dedication and contribution of each and every one of our professionals.

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[ 1. 2023 RESULTS: MANAGEMENT PRIORITIES]

As the Chair has already mentioned, last year we announced the beginning of a new phase of value creation for our shareholders.

The execution of our strategy enabled us to drive profitable growth for our businesses in 2023. After recording the highest result among our global peers in the fourth quarter, we ended the year with an attributable profit of more than EUR 11 billion. This is a new record profit for the Group, 15% higher than that of 2022, an 18% increase in constant euros.

We achieved all the financial targets that we had set for the year: revenue increased double digits; we ended 2023 with an efficiency ratio of 44.1% and a cost of risk of 1.18%; we increased the fully- loaded CET1 ratio to 12.3% and profitability rose, with RoTE reaching 15.1%. As a result, TNAV per share plus cash dividend per share increased 15% year-on-year.

To achieve these record results, we focused on the following management levers:

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• FIRST, THE FOCUS ON SERVICE QUALITY AND CUSTOMER GROWTH, WHICH IS REFLECTED IN HIGHER REVENUE
  Customer attraction is key in a business like ours. A larger customer base ensures greater revenue stability and lower operating costs with better risk diversification.
  Our strategy is to become the bank of choice for our customers, deepening the relationships we have with them. This way, we will be able to better capture the value of the transactional business and improve customer satisfaction.
  We already have 165 million customers. Moreover, we are continuing to work on increasing their interaction with us, which, for example, helped us to increase the number of payment transactions by 15% in 2023 to 36 billion.
  This large customer base, along with good commercial dynamics and our diversified business model, drove revenue growth. Most of this growth came from net interest income, which was a result of higher volumes in North America, South America and Consumer, and the good management of credit spreads, mainly in Europe, in an environment of higher interest rates.

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Moreover, our geographical and business diversification supported 5% net fee income growth in constant euros, outperforming our competitors, in a context of low fee growth in general.

• SECOND, EFFICIENCY IMPROVEMENT
  Despite the high inflation over the period, we were able to control costs, while investing in our transformation, technology and the development of key businesses such as the US or Consumer.
  We structurally improved the bank's efficiency to 44.1%, and we remain as one of the most efficient banks in the sector, making progress in three areas:
• • First, we continue to improve user experience through ONE Transformation, the programme that leverages simplification and automation. We are working towards implementing a common operating model in our Retail business that will help us achieve our value creation objectives.
  • Second, we are fostering the connectivity provided by our global businesses. As the Chair already mentioned, at

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Santander we have a powerful competitive advantage that very few can replicate: local leadership and global presence with common operating models which enable us to be more efficient and simpler for our customers. This combination is key to continuing to improve profitability and achieving the shareholder value creation targets we set at our Investor Day.

The expansion of our acquiring business is a good example of the benefits that connectivity provides to the Group. The implementation of Getnet in the countries where we operate allows us to start commercial relationships with new customers by offering a high quality and differential service, which also serves as a product that boosts loyalty. We have already launched the Getnet platform in five countries with great success and are working on rolling it out to other units.

• Finally, we are leveraging our global technology capabilities to capture synergies through the centralization and development of platforms and scalable products.

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The savings from our new operating model and ONE Transformation initiatives will become even more evident in the coming years.

• ANOTHER LEVER IS ACTIVE RISK MANAGEMENT, which allowed us to maintain good credit quality levels, with the cost of risk under control even in a context of rising interest rates.
  The mortgage portfolio, the largest portfolio in the Group, continued to show its strength and resilience in terms of credit quality. At the same time, we implemented new initiatives to support our customers, such as the ones we launched in the UK, Spain, Portugal and Poland.
  The auto financing portfolio performed in line with expectations, conditioned by the normalization of customer affordability, following the gradual withdrawal of public stimulus programmes in the US.
  Our personal loan and card portfolios maintained a good risk- return balance. Due to our use of early indicators, we are able to identify changes in the demand of credit quality in a very agile and effective way.

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Regarding the corporate segment, we managed to maintain a good profitable growth rate and credit profile in a context of financial deleveraging.

• LASTLY, WE MAINTAINED OUR SOLID BALANCE SHEET AND EFFICIENT CAPITAL ALLOCATION.
  Our balance sheet has a low risk profile, and our loan portfolio, which is well diversified by segment, product and country, is financed mainly by stable deposits from individuals, more than 80% of which are insured.
  During the year, deposits increased by 2% in constant euros, driven by time deposits, and mutual funds grew double digits. Total loans decreased slightly, due to the effect of higher interest rates on credit demand and early repayments, mainly in Europe. This was partly offset by positive dynamics in North America, South America and Consumer.
  On the capital side, we maintained the fully-loaded CET1 ratio above 12% every quarter, thanks to strong organic capital generation, which boosted the ratio to 12.3%.

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Key to this increase was profit generation as well as our disciplined capital allocation. We grew very selectively in portfolios with a better risk-return profile and we created a new unit, the Asset Desk, focused on asset rotation and capital optimization.

All this enabled us to increase the total shareholder remuneration

against 2023 results, split approximately equally between cash dividends and share buybacks. Including the dividend that we propose for approval at this annual general meeting, and the buyback programme that is currently underway, the remuneration will be approximately 44% higher than that charged against 2022 results.

We still believe that, at current share price levels, share buybacks are one of the best ways to invest our capital and create value for our shareholders.

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