2013 Annual Report

10. BILLION EUROS ARE THE QUARTERLY REVENUES GENERATED BY THE GROUP Headquarters of Santander UK, London, UK 47, % WAS THE CONTRIBUTION OF LATIN AMERICA TO GLOBAL RESULTS SANTANDER IN THE WORLD SANTANDER GROUP RESULTS The Group recorded a net profit of EUR 4.4 billion in 2013. The lesser need for provisions, upon the completion of the clean-up of the real estate market in Spain, allowed a strong increase in results YoY. The economic scenario for the Santander Group business remained weak in 2013. As the year went by the global economy began to improve gradually. The developed economies especially began to show improved growth rates, whilst inflation remained at low levels, which helped keep interest rates at exceptionally low levels in the yield curve. At the same time the backdrop was created for credit recovery, although, with the exception of the American economy, this will not be reflected in the actual figures before this year. The Eurozone overcame recession and is set towards integration, especially in terms of Banking Union. Spain also had a positive growth in the 4T13, which helped restore market confidence, as evidenced by the drop in the risk premium, the spike in the Stock Exchange, and the increase in foreign investments. Commercial activity and revenues The Group credit operations fell by 2%, as the growth in emerging markets (+14%) was not sufficient to offset the drop in demand for credit in mature countries (-6%), despite the efforts to provide support to Small and Medium Enterprises (SMEs) both in Spain and in the United Kingdom. Group deposits grew by 0.1% with significant gains in market share in Spain in the last two years. Despite the still difficult environment, the Group succeeded in generating 10 billion euros in quarterly revenues - excluding the impact of exchange rates - and 39.8 billion euros in FY13. Costs remained stable in approximately 5 billion euros per quarter, with a downtrend in mature countries and an uptrend in emerging markets due to the continued expansion of networks. The Group's Efficiency ratio (49.9%) places Santander among the most efficient international banks. To that effect, the synergies from mergers in progress in both Spain and Poland started to give results and should have a larger impact in 2014 and 2015. The operating results before provisions for doubtful accounts totaled 19.9 billion euros, one of the highest among the large banks worldwide. Credit rating The NPL ratio grew to 5.6%. The NPL coverage ratio for the Group was 62%. Loan loss provisions were reduced to 10,9 billion euros (-14.1%), helped by the positive developments in Brazil. Consequently, the cost of credit (provisions/total credit) fell from 2.4% by the end of 2012 to 1.5% in December 2013. Net profit All of these trends in revenues, costs and provisions, together with reductions in the book value of real estate property, resulted in a 90.5% spike in net profit, to 4.4 billion euros. Net profit remained diversified geographically. Brazil (23%), the United Kingdom (17%), Mexico and the USA (10% each), Spain (7%), Chile, Germany and Poland (6% each), Argentina (5%), Portugal (2%), other countries in Latin America (3%) and other European countries (5%). Strength of the Balance Sheet In 2013 the Santander Group continued its efforts to reinforce its key capital and liquidity indices in a response to the difficult economic and financial environment and the new regulatory requirements. The core capital ratio rose 138 basis points to 11.71%, in accordance with BIS II criteria. Our capital breakdown places the Group in a rather comfortable position to meet the BIS III, with regulations that came into force on January 1, 2014. The weak demand for loans and the capacity of the Group to capture deposits via its commercial network allowed us to continue to improve our liquidity position in 2013. The commercial gap - i.e., the difference between loans and deposits fell by 23 billion euros and the loan-to-deposit ratio was 109% (113% by the end of 2012). Efficiency Business Focus Capital discipline and financial strength 16 Annual Report 2013 Brand Geographical diversification and subsidiary model Prudence in risks 17

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