03 February 2015

Q4 results

2015/02/03. Q4 results (All presentations - EN) (Financial report)

- 2014 €5,816mi net earnings against 5,800 guidance
- Q4 at 1455 down 9.3% QoQ. EPS at €0.112 for 0.131 in Q3

General remarks

  • Results coverage focuses on best statistics (bloomberg) (reuters):
    Net Q4 earnings +70% YoY.
    The QoQ comparison is at -9.3%.
    This is a new approach, and in my opinion a direct consequence of the €7.5bi capital increase reserved to instutionals (and the following 1bi+ shares crash sold by private investors in the 2 following weeks).
    Without FX, 2014 net earnings are +49.3% YoY:
    +140% Spain,
    +65% Portugal,
    +30% UK,
    +12.3% SC,
    +10.8% Latam,
    +6.9% Poland,
    -0.2% US
  • Q4 Results are better than first look:
    The volatile trading gains went from €952mi in Q3 to 620 in Q4. Removing that effect, Q4 net earnings keeps growing at around €150mi each quarter for the 4th consecutive quarter.
  • Non recurring numbers: €1.589bi in net capital gains, against same amount as on debit side: €1bi and restructuring costs, €500mi as impairment of immaterial assets. The saldo, €83mi as provisions

Conference call

  • 4 participants, 3 new figures including the chaiman (Emilio Botin was not in the previous conference calls)
  • Ana Botin is clearly an operating chairman. I wonder what is the role of the new CFO.
    My biggest hope for the Q&A was information about new strategy
    That is fully unfilled: focus organic growth, could be small acquisitions in existing markets, Pioneer still under negociation: no new information

    --> Here is the conference call transcript from seekingalpha
    In the first 4 1/2 pages, Ana Botin speaks about the new strategy
  • Empty guidance: no real figures, and at 2017 horizon!

2014 against 2013 per country

The table below shows the changes in percentage from 2013 to 2014. Green (resp. red) is positive (resp. negative). Black is neither positive nor negative: a consequence of followed policies.
ALL figures are at constants € in order to isolate from the FX changes.


  • Spain
    Net profit up 140%, due to 2 factors: (a) restructuration with 13.7% of the branches closed (and 8.3% less employees) with as consequence Opex down 6.7% and (b) Provisions down 27.6% as a result of previous years cleaning and much improving situation in Spain.
    The 2 effects will continue in 2015-2016.

    On commercial side, much happened. Interest income up 9.4%, despite loans and deposits down. Number of customers is down 11.5%!. Despite that loan market share is up (+0.9 p.p to 13.5%).

    There is a significant shift between time deposits (-22.1%) to demand deposits (+24.5%) with as consequence lower funding costs, and this reinforcing the end of deposit war.
  • UK
    Is probably the prototype of the organic growth strategy to be utilized across the group.
    Sacrifice the fees (1|2|3 account) to gain new customers and demand deposits, together with switch of loan book to higher margins  [as a specificity for UK: heavy weight of mortgage, but going down]

    The +30% in profit is as impressive as the +140% of Spain because the basis was much higher.
    It was mainly achieved by growing demand deposits by 43% in one year (to GBP51.8bi): number of current accounts from  27.9mi to 41.1mi!

    Loan book is up 1.6%. This hides big moves to higher margin segments: Consumer credit +12%, small companies +8% , mid companies: +15%, non core loans (state bonds?): -12%
  • Brazil
    Total income is down 2.9% despite loan book up 10.7% and profit up 8%.
    This includes inflation, around 6.5% in 2014.
    At constants R$, income is down 8.4%!

    There are 2 causes:
    - Serious restructuring with branches down 4.3% and employees 5.9%. Opex: +1.0%
    - Switch of the loan book to lower risk. NPL stock down 0.59 p.p. to 5.05 p.p. Mortgages are up 34.5% (and cover at most 50% of the real estate) and loans to large corporations are up 23.9%
  • Mexico
    All numbers are to look from a strong organic growth push perspective: 7.1% more branches and 14.8% more employees. Profit are suffering (-3.5% through +7.0% opex) during the process.
  • US
    is a mixed bag of 2 entities: SCUSA (very good) and Santander bank NA (very bad)
    The 47% jump of provisions comes from SCUSA growth: provision to be made at loan issuance.