Banco Santander’s (SAN) Q3 2016 Earnings Call

Jose Antonio Alvarez – Chief Executive Officer

It´s a tough operating environment in mature markets

“We are developing the business in a very challenging environment as you know for the retail banking, with very volatile capital markets, intensified after the Brexit.”

…But emerging markets are performing much better

“…emerging markets are doing significantly better than mature markets. In those markets we are seeing a stronger growth, mainly high interest rates that allow us to generate a better revenue stream or growing revenue stream that is much more difficult to get in what we so call mature markets.”

Benign credit cycle – low provisions

“When it comes to the quality of the balance sheet, we are living in a relatively benign credit cycle, where the quality keeps improving quarter after quarter…The credit cycle…is relatively benign. You see a pretty large number on provisions, but it comes mainly from two units, the Brazil and the consumer business in the U.S., the subprime consumer business in the U.S. Aside from this, the number is relatively low corresponding to the credit cycle I mentioned before.”

Decline in loan growth in Spain

“So loan growth in Spain, more detail, well, the loan growth decrease…what is falling the most is two items, one is the doubtful loans that are falling quite rapidly, and this produces a negative, this is good news. And the second one is institutional lending is falling in a significant way

Zero to negative cost growth in emerging markets

“I would say, overall on costs that we expect the mature markets to be around zero or negative cost growth, in some markets negative, and this includes UK, Spain, Portugal and U.S. that is going to go from very high cost growth to a much more limited cost growth, if any. And in emerging markets, it’s a little bit more complex to give you an answer.”

Jose Garcia Cantera – Chief Financial Officer

Low rates are having an effect

“we are feeling the pressure of very low rates on net interest income. But we are able to more than compensate through the management of the other P&L variables.”