Jaime Pérez Renovales Head of Organisation, Costs and Human Resources - PDF

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Jaime Pérez Renovales Head of Organisation, Costs and Human Resources Banco Santander, S.A. ( Santander ) cautions that this presentation contains forward-looking statements. These forward-looking statements

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Jaime Pérez Renovales Head of Organisation, Costs and Human Resources Banco Santander, S.A. ( Santander ) cautions that this presentation contains forward-looking statements. These forward-looking statements are found in various places throughout this presentation and include, without limitation, statements concerning our future business development and economic performance. While these forward-looking statements represent our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: (1) general market, macro-economic, governmental and regulatory trends; (2) movements in local and international securities markets, currency exchange rates and interest rates; (3) competitive pressures; (4) technological developments; and (5) changes in the financial position or credit worthiness of our customers, obligors and counterparties. The risk factors that we have indicated in our past and future filings and reports, including those with the Securities and Exchange Commission of the United States of America (the SEC ) could adversely affect our business and financial performance. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements speak only as of the date on which they are made and are based on the knowledge, information available and views taken on the date on which they are made; such knowledge, information and views may change at any time. Santander does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. The information contained in this presentation is subject to, and must be read in conjunction with, all other publicly available information, including, where relevant any fuller disclosure document published by Santander. Any person at any time acquiring securities must do so only on the basis of such person's own judgment as to the merits or the suitability of the securities for its purpose and only on such information as is contained in such public information having taken all such professional or other advice as it considers necessary or appropriate in the circumstances and not in reliance on the information contained in the presentation. In making this presentation available, Santander gives no advice and makes no recommendation to buy, sell or otherwise deal in shares in Santander or in any other securities or investments whatsoever. Neither this presentation nor any of the information contained therein constitutes an offer to sell or the solicitation of an offer to buy any securities. No offering of securities shall be made in the United States except pursuant to registration under the U.S. Securities Act of 1933, as amended, or an exemption therefrom. Nothing contained in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotion in the U.K. Financial Services and Markets Act Note: Statements as to historical performance, share price or financial accretion are not intended to mean that future performance, share price or future earnings (including earnings per share) for any period will necessarily match or exceed those of any prior year. Nothing in this presentation should be construed as a profit forecast. Note: The businesses included in each of our geographical segments and the accounting principles under which their results are presented here may differ from the businesses included in our public subsidiaries in such geographies and the accounting principles applied locally. Accordingly, the results of operations and trends shown for our geographical segments may differ materially from those disclosed locally by such subsidiaries. 1 Santander has a unique model for cost management that enables us to a superior efficiency performance Costs evolution Tight cost control and budgeting - offsetting increases derived from BAU 1, inflation, regulatory requirements, new commercial projects and perimeter modifications Positive jaws - revenue growth above cost growth ( MM) CAGR -0.2% 20,116 20,158 20,038 (1) Business as usual We leverage our global scale while keeping accountability at a local level Corporate / Global initiatives Local efficiency plans implementation Efficiency Plan Definition Global Factories and IT Systems Corporate methodology Continuous monitoring Best practices sharing Partenón, Altair and Alhambra Geoban, Isban, Produban, Aquanima, etc. Network Rationalisation Efficiency + Zero Base Plan Integration + Efficiency Plan Headquarters Rationalisation Corporate role redefinition (from 15 to 10 Divisions) Zero base Plan Strong execution culture in all local units 3 Additionally, best practices are systematically transferred to all countries (Example of best practice) Santander Group has a Global Purchasing Model that leverages global capabilities to realise savings in all units 1. Global Model Annual Purchases Plan and monthly reports Purchases consolidation / catalogues usage Global and local negotiations integration to guarantee best deals 2. Global Platform Levers Aquanima Purchasing Platform Best-in-class online negotiation technology (above 40% volume negotiated online) Impact 4.5bn purchases centrally managed Average cost savings of ~10% per year Model implementation dates 2008 (B&B, A&L) Real Estate (Altamira) Efficiency is a significant competitive advantage vs. peers Efficiency ratio 1 vs. Peers 2 Advantage vs. Peers (15 p.p.) P1 P2 Santander P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 P13 P14 P15 P16 P Santander 62 Peers (1) Expenses / Revenues in 1H 15 (2) Peer Group: Bank of America, Barclays, BBVA, BNP Paribas, Citigroup, Deutsche Bank, HSBC, ING, Intesa Sanpaolo, JP Morgan, Banco Itaú, Lloyds, Standard Chartered, Societe Generale, UBS, UniCredito, and Wells Fargo 5 Building on our principles, we adapt our cost strategy across economic cycles Phase I Growth cycle Phase II Crisis management Phase III New challenges Model implementation and integrations execution Model enhancements and cost management Model transformation Efficiency levers Roll-out of Santander model in all geographies Capture integration synergies of acquisitions Enhance Santander model Efficiency plans in all geographies Headquarters and factories rationalisation Further economies of scale Invest in commercial transformation and digital banking to guarantee a superior and sustainable efficiency model...under a new regulatory environment Limited growth of costs contributes to Positive jaws Efficiency plans allow for Flat jaws Model transformation drives Positive jaws From cost efficiencies to operational excellence 6 And we tailor it on a country basis, but with an overall Group target: Cost to Income below 45% in 2018 Revenue Growth High Moderate 2 Cost management as profitability lever 3 1 Costs as a growth enabler Investment to meet regulatory requirements Group 2018 target: Cost to Income 45% Below inflation Cost growth (real terms) Below revenue growth 7 Looking forward, investment in commercial transformation and digital banking will guarantee a superior and sustainable efficiency model Network optimisation Lean Corporate Centre Local HQ / Intermediate structures General expenses management New distribution models Further network optimisations IT infrastructure investments Innovation projects and channel enhancements Regulatory requirements 8 We expect to achieve our 2bn cost savings target, one year ahead of schedule and we have set a new target: 3bn by 2018 vs Efficiency Plan. Accumulated savings 1 ( MM) 1,000 2,000 One year ahead of schedule 1,188 1,750 2,000 3, H'15 FY Main levers Network optimisation leveraging digital banking Lean Corporate Centre: cost efficient, value adding, transparent and favouring accountability Local HQ / Intermediate structures optimisation General expenses management Original Plan Savings achieved New target (1) Gross savings calculated with a bottom up approach adding all efficiency initiatives. This Efficiency Plan is a key lever to improve our cost to income to the committed 45% 9 Key takeaways Efficient cost management has always been a top priority and distinctive capability for Santander Looking forward, investment in commercial transformation and digital banking will guarantee a superior and sustainable efficiency model In order to maintain our efficiency while investing, we are extending our Efficiency Plan: 3bn target for Target: Cost to Income below 45% 10
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