Sant Uk.10te% Regulatory News (SAN)

INVESTOR DAY

Alfredo Sáenz: "Profit will return to normal in three years"

§ "Emerging markets (Latin America and Poland) are expected to provide double-digit growth in net profit in the short and medium term."

§ "Mature markets where provisions have stabilized or are falling (the U.K., the U.S. and Santander Consumer Finance) will register single-digit increases in net profit over the next three years."

§ We expect that in 2013 and 2014 Spain and Portugal "will generate EUR 2.0 billion in excess free capital a year."

§ "The crisis has validated our business model of diversification with financially autonomous subsidiaries and strong operational integration within the Group."

London, Sept. 29, 2011 - Banco Santander Chief Executive Alfredo Sáenz said that "over the next three years, we will see a gradual normalization" of the bank's profit, which will lead to an improvement in return on equity of between 3 and 6 percentage points.

"With our solid business model and a great effort from all our units, it is within our reach to return to levels of ROE of 12-14%," he added

The recovery in profitability takes into account the high costs of new regulations and funding and will come about through a normalization of provisions in mature markets. Moreover, the current low-interest rate environment could favour future results, he added.

Sáenz was speaking at the opening of the Banco Santander Investor Day attended by more than 300 analysts and investors. At the meeting, Banco Santander senior management is presenting to the financial community the bank's outlook in the businesses and countries in which it operates. Santander Chairman Emilio Botín will close the meeting in a session on Friday.

Sáenz reviewed the Group's performance in the last four years, stating that "the crisis has validated our business model." He said that "diversification has allowed us to offset pressures in some markets with the better/strong pace of other units.The world is a tale of two types of markets: emerging and mature, and we believe we generate attractive returns in both, though in different ways. Mature markets will provide high levels of free capital which will feed dividend levels and support emerging markets growth."

Santander's emerging markets (Latin American and Poland), which currently contribute 48% of the Group's earnings, are expected to provide double-digit growth in net profit in the short to medium terms. The businesses in mature markets where provisions have stabilized or are falling (the U.K., U.S. and Santander Consumer Finance), in contrast, will register single-digit growth in net profit. Lastly, in Spain and Portugal, two mature markets where provisions continue to be high, Sáenz said he expects to see the "generation of excess free of EUR 2 billion a year in 2013 and 2014."

Alfredo Sáenz pointed out that Banco Santander "generated more accumulated profit than any other western bank during the crisis, despite being much smaller than many others in terms of revenues and capital. Moreover, the stress tests carried out by the EBA have shown that we generate more profit and pay the highest dividend in the stress scenarios."

"Our business model continues to be valid and has grown stronger during the crisis." The model is founded on seven principles:

1. Diversification is key:We have a good balance between emerging and mature economies, avoiding exposure of more than 25% of earnings to any one country.  

2. A vertical strategy: We focus on 10 large and attractive markets with a significant position in each one. Local critical mass is essential to greater profitability.

3. Focus on retail and commercial banking: This activity accounts for 76% of profit. We have more branches than any other international bank. "We will continue to shun businesses that we do not know well."

4. We are increasingly playing on international connectivity and the business derived from it. We have strong banks in Europe, Latin America and the U.S., as well as branches in Asia. We are focusing on capturing business from the flows among the regions where we operate.

5. A low risk profile, backed by a high degree of geographical diversification, with a clear view of risks and a highly collateralized loan portfolio. This means low exposure to sovereign risk and a focus on risks that we understand, in which losses can be predicted, and deep involvement of senior management. This principle and the following are not negotiable.

6. Efficiency in costs: Positive jaws (by which revenues grow more than costs) are absolutely necessary. We have been able to maintain our relative strength in efficiency compared to our competitors and we are well above the average for banks. This strength in efficiency is due to our global integration, which we exploit with three types of intra-Group synergies: Cost synergies in technology and operations; revenue synergies through shared commercial models, manufacturing of products such as insurance, asset management and treasury, and synergies in governance, which include shared models of risk management, financial control, accounting and corporate governance. .

7. Subsidiary model: Each unit is responsible for its own capital and funding.

Sáenz pointed out that the Santander subsidiary model is based on units having a strong local presence and being financially independent, but with strong operational integration within the Group. "We have a business model that allows us to have greater value than the sum of our parts," he said.

The Group's businesses can be divided into three large blocs. In each one of them, Santander is able to obtain very good results, Sáenz said.

1. Markets in which provisions are still at cyclical highs: Spain and Portugal. We will work to recover profit we have lost in the last few years. The task in these markets is to prepare for an improvement in the credit cycle, to actively manage margins, adapt the cost structure to market realities and gain profitable market share. "From 2011 to 2014 we are going to work to regain lost profit. Specific provisions show an underlying downward trend and we expect the credit cycle to start improving in 2012." We expect that in 2013 and 2014 Spain and Portugal will "generate an annual EUR 2 billion in free capital."

2. Mature markets in which provisions are stable or falling: the U.K., Germany, the Nordic countries and the U.S: We must build strong business franchises and execute the operational integration of the units in the U.K. and the U.S. In the short-term, these units will have to absorb the impact of low interest rates, regulatory costs and integration. In the medium term, they will obtain "ROE in double digits and single-digit growth in profit."

3. Emerging markets: Latin America and Poland. In the short and medium term our task is to build strong and efficient business franchises, with a balanced appetite for risk, increasing market share and growing profits by double digits.

Lastly, the CEO reviewed the main messages of each of the group's main units.