FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of May, 2021
Commission File Number: 001-12518
 
 
Banco Santander, S.A.
(Exact name of registrant as specified in its charter)
 
 
Ciudad Grupo Santander
28660 Boadilla del Monte (Madrid) Spain
(Address of principal executive office)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F  ☒            Form 40-F  ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes  ☐            No  ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes  ☐            No  ☒







BANCO SANTANDER, S.A.
________________________

TABLE OF CONTENTS










































Part 1. Interim consolidated directors’ report
3
Part 2. Interim unaudited consolidated financial statements
90


PORTADA1ENGGESTION1.JPG



Interim Consolidated Directors' Report 2021
January - March

Index
3
BUSINESS MODEL
5
6
6
7
16
17
21
21
39
46
48
49
51
52
73
83
86
87


Key consolidated data

BALANCE SHEET (EUR million) Mar-21 Dec-20 % Mar-20 % Dec-20
Total assets 1,562,879  1,508,250  3.6  1,540,359  1.5  1,508,250 
Loans and advances to customers 939,760  916,199  2.6  935,407  0.5  916,199 
Customer deposits 882,854  849,310  3.9  815,459  8.3  849,310 
Total funds 1,095,970  1,056,127  3.8  1,006,948  8.8  1,056,127 
Total equity 92,686  91,322  1.5  106,113  (12.7) 91,322 
Note: Total funds includes customer deposits, mutual funds, pension funds and managed portfolios

INCOME STATEMENT (EUR million) Q1'21 Q4'20 % Q1'20 % 2020
Net interest income 7,956  8,019  (0.8) 8,487  (6.3) 31,994 
Total income 11,390  10,924  4.3  11,809  (3.5) 44,279 
Net operating income 6,272  5,580  12.4  6,220  0.8  23,149 
Profit before tax 3,102  1,195  159.6  1,891  64.0  (2,076)
Attributable profit to the parent 1,608  277  480.5  331  385.8  (8,771)
Changes in constant euros:
Q1'21 / Q4'20: NII: -1.7%; Total income: +3.6%; Net operating income: +12.7%; Profit before taxes: +162.6%; Attributable profit: +472.1%
Q1'21 / Q1'20: NII: +5.1%; Total income: +7.9%; Net operating income: +15.4%; Profit before taxes: +97.3%; Attributable profit: +998.0%

EPS, PROFITABILITY AND EFFICIENCY (%) Q1'21 Q4'20 % Q1'20 % 2020
EPS (euros) (2)
0.085  0.008  951.4  0.011  670.1  (0.538)
RoE 9.80  5.54  1.47  (9.80)
RoTE 12.16  6.86  2.04  1.95 
RoA 0.62  0.38  0.18  (0.50)
RoRWA 1.67  1.03  0.45  (1.33)
Efficiency ratio 44.9  47.7  47.2  47.0 

UNDERLYING INCOME STATEMENT (1) (EUR million)
Q1'21 Q4'20 % Q1'20 % 2020
Net interest income 7,956  8,019  (0.8) 8,487  (6.3) 31,994 
Total income 11,390  10,995  3.6  11,814  (3.6) 44,600 
Net operating income 6,272  5,580  12.4  6,220  0.8  23,149 
Profit before tax 3,813  2,658  43.5  1,956  94.9  9,674 
Attributable profit to the parent 2,138  1,423  50.2  377  467.1  5,081 
Changes in constant euros:
Q1'21 / Q4'20: NII: -1.7%; Total income: +2.9%; Net operating income: +8.5%; Profit before taxes: +44.3%; Attributable profit: +50.3%
Q1'21 / Q1'20: NII: +5.1%; Total income: +7.8%; Net operating income: +15.0%; Profit before taxes: +132.9%; Attributable profit: +1,015.7%

UNDERLYING EPS AND PROFITABILITY (1) (%)
Q1'21 Q4'20 % Q1'20 % 2020
Underlying EPS (euros) (2)
0.116  0.074  55.5  0.014  744.4  0.262 
Underlying RoE 10.44  6.93  1.52  5.68 
Underlying RoTE 12.96  8.59  2.11  7.44 
Underlying RoA 0.65  0.46  0.18  0.40 
Underlying RoRWA 1.77  1.24  0.46  1.06 


January - March 2021
IMAGE69.JPG
3
SOLVENCY(3) (%)
Mar-21 Dec-20 Mar-20 Dec-20
CET1 phased-in 12.30  12.34  11.58  12.34 
Phased-in total capital ratio 16.16  16.18  15.09  16.18 

CREDIT QUALITY (%) Q1'21 Q4'20 Q1'20 2020
Cost of credit (4)
1.08  1.28  1.17  1.28 
NPL ratio 3.20  3.21  3.25  3.21 
Coverage ratio 74  76  71  76 

MARKET CAPITALISATION AND SHARES Mar-21 Dec-20 % Mar-20 % Dec-20
Shares (millions) 17,341  17,341  0.0  16,618  4.3  17,341 
Share price (euros) (2)
2.897  2.538  14.1  2.126  36.3  2.538 
Market capitalisation (EUR million) 50,236  44,011  14.1  36,859  36.3  44,011 
Tangible book value per share (euros) (2)
3.84  3.79  4.03  3.79 
Price / Tangible book value per share (X) (2)
0.75  0.67  0.53  0.67 

CUSTOMERS (thousands) Mar-21 Dec-20 % Mar-20 % Dec-20
Total customers 148,641  148,256  0.3  145,702  2.0 148,256 
Loyal customers 23,428  22,838  2.6  21,453  9.2 22,838 
     Loyal individual customers 21,441  20,901  2.6  19,645  9.1 20,901 
     Loyal SME & corporate customers 1,987  1,938  2.6  1,808  9.9 1,938 
Digital customers 44,209  42,362  4.4  38,279  15.5 42,362 
Digital sales / Total sales (%) 50  45  41  44 

OTHER DATA Mar-21 Dec-20 % Mar-20 % Dec-20
Number of shareholders 3,937,711  4,018,817  (2.0) 4,043,974  (2.6) 4,018,817 
Number of employees 190,175  191,189  (0.5) 194,948  (2.4) 191,189 
Number of branches 10,817  11,236  (3.7) 11,902  (9.1) 11,236 


(1) In addition to financial information prepared in accordance with International Financial Reporting Standards (IFRS) and derived from our consolidated financial statements, this report contains certain financial measures that constitute alternative performance measures (APMs) as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority (ESMA) on 5 October 2015, and other non-IFRS measures, including the figures related to “underlying” results, which do not include the items recorded in the separate line of “net capital gains and provisions”, above the line of attributable profit to the parent. Further details are provided in the “Alternative performance measures” section of the annex to this report.
For further details of the APMs and non-IFRS measures used, including its definition or a reconciliation between any applicable management indicators and the financial data presented in the annual consolidated financial statements prepared under IFRS, please see 2020 Annual Financial Report, published in the CNMV on 23 February 2021, our 20-F report for the year ending 31 December 2020 registered with the SEC in the United States as well as the “Alternative performance measures” section of the annex to this report.
(2) Data adjusted for the capital increase in December 2020.
(3) The phased-in ratio includes the transitory treatment of IFRS 9, calculated in accordance with article 473 bis of the Capital Requirements Regulation (CRR) and subsequent modifications introduced by Regulation 2020/873 of the European Union. Additionally, the total phased-in capital ratio includes the transitory treatment according to chapter 2, title 1, part 10 of the CRR.
(4) Allowances for loan-loss provisions over the last 12 months / Average loans and advances to customers over the last 12 months.

4
IMAGE69.JPG
January - March 2021
Business model
Group financial information Financial information by segments Responsible banking
Corporate governance
Santander share 		Appendix

Our business model is based on three pillars
1. Our scale
Local scale and leadership. Worldwide reach through our global businesses
2. Customer focus
Unique personal banking relationships strengthen customer loyalty
3. Diversification
Our geographic and business diversification makes us more resilient under adverse circumstances


•Geographic diversification3
balanced between mature
and emerging markets.
ESCALACLIENTES1A.JPG
NPSTOP3ENG1A.JPG
MAPAMODELO2ENG1A.JPG
total customers in Europe
and the Americas
RANKING1A.JPG
CLIENTESMODELOENG1A.JPG
•Business diversification
between customer segments
(individuals, SMEs, mid-market
companies and large corporates)
1. Market share in lending as of December 2020 including only privately-owned banks. UK benchmark refers to the mortgage market. DCB refers to auto in Europe. 2. NPS – Customer Satisfaction internal benchmark of active customers’ experience and satisfaction audited by Stiga / Deloitte. 3. Q1'21 underlying attributable profit by region. Operating areas excluding Corporate Centre.

Our corporate culture
The Santander Way remains unchanged to continue to deliver for all our to stakeholders.

Our purpose
To help people and businesses prosper.
STAKEHOLDERSENG1A.JPG
Our aim
To be the best open financial services
platform, by acting responsibly and
earning the lasting loyalty of our
people, customers, shareholders and
communities.
Our how
Everything we do should be
Simple, Personal and Fair.



January - March 2021
IMAGE69.JPG
5
Group performance

DESTACADOS1A.JPG
HIGHLIGHTS OF THE PERIOD
u In the first quarter of 2021, we once again demonstrated the strength of our model. We delivered excellent results in an environment marked by new lockdown measures, uneven vaccine roll-outs and the expansion and adjustment of economic policy measures.
u In line with our strategy to deploy capital in the most profitable businesses, we announced our intention to make a cash offer to repurchase the outstanding shares of Santander Mexico (c. 8.3% of the share capital). The transaction is expected to have a return1 on invested capital (ROIC) of c.14% and improve Banco Santander's earnings per share (EPS)1 by around 0.8% in 2023. Expected impact on the CET1 ratio of -8 bps. The transaction is expected to be completed in the second or third quarter of 2021, following regulatory approvals.
u The board of directors has approved to pay a cash dividend against 2020 earnings, from 4 May 2021, of EUR 2.75 cents per share, the maximum allowed in accordance with the limits set by the European Central Bank (ECB) in its recommendation on 15 December 2020. This will be carried out to implement the premium distribution resolution approved at the general meeting held in October 2020.
CRECIMIENTO1A.JPG
GROWTH
u Digital adoption remains critical: we have more than 44 million digital customers (+15% year-on-year), after a 1.8 million increase in the quarter. In Q1'21, 50% of sales were made through digital channels (41% in Q1'20).
u Loyal customers rose to more than 23 million (+9% year-on-year) and represented 33% of total active customers.
u In the quarter, business volumes continued to be affected by the pandemic and high liquidity in the markets. In this environment, and excluding the exchange rate impact, loans and advances to customers remained flat quarter-on-quarter and increased 2% year-on-year. Customer funds were up 1% in the quarter and 10% year-on-year, due to the higher propensity to save of individuals and corporates.

RENTABILIDAD1A.JPG
PROFITABILITY
u Attributable profit amounted to EUR 1,608 million in the quarter, after recording EUR 530 million net of tax from expected restructuring costs for the year as a whole.
u Underlying attributable profit was EUR 2,138 million, significantly higher quarter-on-quarter and year-on-year. Compared to the first quarter of 2020, in constant euros: revenue growth (+8%) and flat costs enabled the efficiency ratio to improve to 45%. In addition, loan-loss provisions recorded its lowest figure since Q1'20.
u Increased profitability: underlying RoTE of 13.0% (2.1% in Q1'20), underlying RoRWA was 1.77% (0.46% in Q1'20) and underlying earnings per share of EUR 0.116 (EUR 0.014 in Q1'20).
FORTALEZA1A.JPG
STRENGTH
u Cost of credit improved to 1.08% (1.28% in 2020). Total loan-loss reserves in the first quarter exceeded EUR 24 bn, with the total coverage of credit impaired loans at 74%.
u The CET1 ratio was 12.30% (12.34% in December 2020), with strong organic generation of 28 bps (including a -15 bps accrual for shareholder remuneration). On the other hand, negative impacts from restructuring costs (-10 bps), markets (-9 pbs) and regulatory impacts (-13 pbs).
u TNAV per share was EUR 3.84. Including the dividend of EUR 2.75 cents per share, already deducted, growth in the quarter was 2%.
(1) Based on Bloomberg consensus estimates.
6
IMAGE69.JPG
January - March 2021
Income statement
GRUPO SANTANDER RESULTS
Grupo Santander. Summarized income statement
EUR million
Change Change
Q1'21 Q4'20 % % excl. FX Q1'20 % % excl. FX
Net interest income 7,956  8,019  (0.8) (1.7) 8,487  (6.3) 5.1 
Net fee income (commission income minus commission expense) 2,548  2,456  3.7  3.6  2,853  (10.7) 0.2 
Gains or losses on financial assets and liabilities and exchange differences (net) 651  462  40.9  40.0  287  126.8  141.3 
Dividend income 65  69  (5.8) (6.2) 57  14.0  15.3 
Share of results of entities accounted for using the equity method 76  (6) —  —  98  (22.4) (11.3)
Other operating income / expenses 94  (76) —  —  27  248.1  119.0 
Total income 11,390  10,924  4.3  3.6  11,809  (3.5) 7.9 
Operating expenses (5,118) (5,344) (4.2) (5.7) (5,589) (8.4) (0.1)
   Administrative expenses (4,435) (4,634) (4.3) (5.8) (4,860) (8.7) (0.4)
       Staff costs (2,688) (2,685) 0.1  (0.7) (2,899) (7.3) 0.4 
       Other general administrative expenses (1,747) (1,949) (10.4) (12.7) (1,961) (10.9) (1.5)
   Depreciation and amortization (683) (710) (3.8) (5.2) (729) (6.3) 1.8 
Provisions or reversal of provisions (959) (1,364) (29.7) (27.9) (374) 156.4  192.2 
Impairment or reversal of impairment of financial assets not measured at fair value through profit or loss (net) (2,056) (2,844) (27.7) (28.7) (3,934) (47.7) (41.5)
Impairment on other assets (net) (138) (160) (13.8) (11.7) (14) 885.7  905.7 
Gains or losses on non financial assets and investments, net 1  25  (96.0) (97.5) 18  (94.4) (96.4)
Negative goodwill recognised in results —  (1) (100.0) (100.0) —  —  — 
Gains or losses on non-current assets held for sale not classified as discontinued operations (18) (41) (56.1) (56.1) (25) (28.0) (29.1)
Profit or loss before tax from continuing operations 3,102  1,195  159.6  162.6  1,891  64.0  97.3 
Tax expense or income from continuing operations (1,143) (612) 86.8  91.7  (1,244) (8.1) 1.3 
Profit from the period from continuing operations 1,959  583  236.0  234.7  647  202.8  341.7 
Profit or loss after tax from discontinued operations —  —  —  —  —  —  — 
Profit for the period 1,959  583  236.0  234.7  647  202.8  341.7 
Attributable profit to non-controlling interests (351) (306) 14.7  15.3  (316) 11.1  18.1 
Attributable profit to the parent 1,608  277  480.5  472.1  331  385.8  998.0 
EPS (euros) (1)
0.085  0.008  951.4  0.011  670.1 
Diluted EPS (euros) (1)
0.085  0.008  948.6  0.011  669.7 
Memorandum items:
   Average total assets 1,526,899  1,517,201  0.6  1,536,725  (0.6)
   Average stockholders' equity 81,858  82,080  (0.3) 99,221  (17.5)
(1) Data adjusted for the capital increase in December 2020.
January - March 2021
IMAGE69.JPG
7
Income statement
Executive summary
Profit (Q1'21 vs Q1'20)
Performance (Q1'21 vs Q1'20). In constant euros
Robust growth spurred by lower provisions and an excellent quarter in SCIB Higher underlying profit driven by total income, cost control and lower provisions
Attributable profit Underlying attrib. profit Total income Costs Provisions
EUR 1,608 mn EUR 2,138 mn
EUR 331 mn in Q1'20 EUR 377 mn in Q1'20 +7.8%  + 0.1% -42.9%
Efficiency Profitability
The Group's efficiency ratio improved strongly, mainly driven by Europe Profitability improved compared to Q1'20 and FY'20, on track to deliver on our 2021 goals
Group Europe RoTE Underlying RoTE Underlying RoRWA
44.9% 49.9% 12.2% 13.0% 1.77%
q2.3 pp vs Q1'20
q 8.6 pp vs Q1'20
p10.2 pp vs Q1'20
p10.9 pp vs Q1'20
p 1.3 pp vs Q1'20

è Results performance compared to Q1'20
The Group presents, both at the total level and for each of the business units, the real changes in euros produced in the income statement, as well as variations excluding the exchange rate effect (FX), on the understanding that the latter provide a better analysis of the Group’s management. For the Group as a whole, exchange rates had a significant impact on revenue (-12 percentage points) and costs (-8 percentage points).
u Revenue
Revenue totalled EUR 11,390 million in the first quarter of 2021, down 4%. If the strong FX impact is taken out, total income increased 8%, with growth in all regions and the majority of countries, showing the strength provided by our geographic and business diversification. Net interest income and net fee income accounted for around 92% of total revenue. By line:
•Net interest income amounted to EUR 7,956 million, 6% less than in Q1'20. Stripping out the exchange rate impact, growth was 5%, mainly due to the net effect of the increase in revenue from higher lending and deposit volumes and the lower cost of the latter, and the reduction in revenue from lower interest rates in many markets.
Net interest income
EUR million
LEYENDACONSTANTESA142.GIF
constant euros
CHART-3B2006C738674812A6F1A.JPG
On the one hand, growth was recorded in the UK (+24%), through decisive management deposit repricing actions (mainly the 1I2I3 current account), as well as higher customer balances, partially offset by lower asset yields; Spain (+10%), driven by higher volumes and TLTRO; and Brazil (+6%), due to greater volumes that offset lower interest rates.
On the other hand, Mexico fell 6%, due to lower interest rates and lower portfolio volumes, and the US remained flat despite interest rate cuts.
•Net fee income fell 11% year-on-year to EUR 2,548 million. Excluding the exchange rate impact, there was no material change (+0.2%). This item was one of the most affected by the health crisis, mainly from transactional and cards fee income, together with the impact from regulatory changes to overdrafts in the UK that took effect in April 2020.
However, quarterly trends reflected continued growth since the lows reached in the second quarter of 2020.

Net fee income
EUR million
LEYENDACONSTANTESA142.GIF
constant euros
CHART-C1640B0D7E1C4F73A371A.JPG
8
IMAGE69.JPG
January - March 2021
Income statement
By business, positive performance in value-added products and services. Santander Corporate & Investment Banking surged 28% year-on-year driven by strong markets growth and positive performance in Banking businesses (GDF and GTB). Wealth Management & Insurance rose 3% (including fees ceded to the branch network). Overall, both businesses together accounted for 49% of the Group’s total (SCIB: 18%; WM&I: 31%).
By region, North America grew 7% with rises in the US and Mexico. South America rose 2%, with growth recorded in Chile and Argentina, while Brazil starts to recover. Europe down 4%, with generalized declines in all markets (except Poland), due to lower activity, along with the aforementioned regulatory changes affecting the UK. On the other hand, "Other Europe", which includes the wholesale banking business in the region, increased net fee income by 82%.
•Gains on financial transactions, accounted for 6% of total income and stood at EUR 651 million (EUR 287 million in the first quarter of 2020), strongly driven by Brazil (CIB), Portugal (ALCO portfolio sales) and the US.
•Dividend income was EUR 65 million in the first quarter, 14% higher than in the same period of 2020 (+15% excluding exchange rate effect), after the completion of several dividend payments following last years' reduction, delay or cancellation arising from the pandemic.
•The results of entities accounted for using the equity method reflected the lower contribution from the entities associated to the Group.
•Other operating income amounted to EUR 94 million (EUR 27 million in the first quarter of 2020) driven by the higher results from insurance and leasing.


Total income
EUR million
LEYENDACONSTANTESA142.GIF
constant euros
CHART-867776F6B2E841E6AEB1A.JPG

u Costs
Operating costs amounted to EUR 5,118 million, 8% lower year-on-year. Excluding the exchange rate impact, costs remained stable.
This performance reflects the successful management over the last years, as well as the impacts of additional savings measures adopted since the beginning of the crisis.
The efficiency ratio was 44.9%, 2.3 pp higher than last year, driven by overall positive performance across markets, mainly in Europe. This enabled Santander to remain one of the most efficient global banks in the world.
The trends by region and market in constant euros were as follows:
•In Europe, costs were 4% lower, making headway in our cost reduction plan for the year. Falls were recorded in Spain (-8%), the UK (-4%), and Portugal and Poland (both fell -3%). The efficiency ratio in the region improved notably to 50% (-8.6 pp).
•In North America, costs fell 1% in Mexico, driven by technology expenses and amortizations and higher inflation. In the US, they rose only 1% thanks to our disciplined expense management. Saving measures adopted in 2020 are having a positive impact in 2021, which will make funds available for new digital and business initiatives.
•Finally, in South America, the increase in costs (+5%) was greatly distorted by the very high inflation in Argentina. Excluding it, costs rose 1% in nominal terms (Brazil -3% and Chile was virtually flat). The efficiency in the region was 34.4%.
We are building a new operating model across the Group that will enable us to further accelerate transformation and, consequently, further increase productivity while improving customer experience.
Operating expenses
EUR million
LEYENDACONSTANTESA142.GIF
constant euros
CHART-9B510DA5D10F4968B7F1A.JPG
January - March 2021
IMAGE69.JPG
9
Income statement
u Provisions or reversal of provisions
Provisions (net of provisions reversals) rose to EUR 959 million (EUR 374 million in Q1'20). This line item includes charges for restructuring costs.
u Impairment or reversal of impairment of financial assets not measured at fair value through profit or loss (net)
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss (net) was EUR 2,056 million, down 48% year-on-year in euros and -42% in constant euros, mainly from additional provisions recorded in 2020 based on the IFRS 9 forward-looking view and the collective and individual assessments to reflect expected credit losses arising from covid-19.
u Impairment on other assets (net)
Impairment on other assets (net) stood at EUR 138 million. In Q1'20, this line was EUR 14 million.

Net loan-loss provisions
EUR million
LEYENDACONSTANTESA142.GIF
constant euros
CHART-D1CA7F1D464045D68E31A.JPG

u Gains or losses on non-financial assets and investments (net)
This item recorded EUR 1 million in the first quarter of 2021, compared to EUR 18 million in the same period of 2020.
u Negative goodwill recognized in results
Both in the first quarter of 2021 as in the first quarter of 2020, this line item recorded EUR 0 million.
u Gains or losses on non-current assets held for sale not classified as discontinued operations
This item, which mainly includes impairment of foreclosed assets recorded and the sale of properties acquired upon foreclosure, totalled -EUR 18 million in the first quarter, compared to -EUR 25 million in the first quarter of 2020.
u Profit before tax
Profit before tax was EUR 3,102 million in the quarter, 64% higher year-on-year (+97% excluding the exchange rate impact) spurred by growth in total income, reduced costs and lower provisions.
u Income tax
Total corporate income tax was EUR 1,143 million (EUR 1,244 million in the first quarter of 2020).
u Attributable profit to non-controlling interests
Attributable profit to non-controlling interests amounted to EUR 351 million, up 11% year-on-year (+18% excluding the exchange rate impact).
u Attributable profit to the parent
Profit attributable to the parent amounted to EUR 1,608 million in 2021, compared with EUR 331 million in the first quarter of 2020.
RoTE stood at 12.2% (2.0% in Q1'20), RoRWA of 1.67% (0.45% in Q1'20) and earnings per share stood at EUR 0.085 (EUR 0.011 in Q1'20).
10
IMAGE69.JPG
January - March 2021
Income statement
u Underlying attributable profit to the parent
Attributable profit to the parent recorded in the first quarter of 2021 and 2020 was affected by results that are outside the ordinary course of our business and distort the year-on-year comparison, and are detailed below:
•In Q1'21, this result totalled -EUR 530 million due to the recording of restructuring costs as follows: -EUR 293 million in the UK, -EUR 165 million in Portugal, -EUR 16 million in Digital Consumer Bank and -EUR 56 million in the Corporate Centre.
•In the first quarter of 2020, restructuring costs of -EUR 46 million mainly in the UK and Digital Consumer Bank.
For further information see the 'Alternative Performance Measures' section of this report.
Excluding these results from the various P&L lines where they are recorded, and incorporating them separately in the net capital gains and provisions line, the adjusted or underlying attributable profit to the parent was EUR 2,138 million in the first quarter of 2021 and EUR 377 million in the same period last year.
The Group’s cost of credit (considering the last 12 months) stood at 1.08%. Considering the last 3 months, cost of credit was 0.84%, performing better than expected, benefiting from lower provisions in most markets, mainly in the US, Brazil, the UK and Spain.
Before the recording of loan-loss provisions, the Group's underlying net operating income (total income less operating expenses) was EUR 6,272 million, a 1% increase year-on-year, which becomes a 15% rise excluding the FX impact, with the following performance of the latter by line and region:
By line:
•Total income up primarily driven by net interest income (+5%) and higher gains on financial transactions.
•Costs remained virtually unchanged, with broad-based declines across Europe and Brazil, and rose 1% in the US, Mexico, Chile and Digital Consumer Bank. Overall efficiency improvement.
By region:
•In Europe, net operating income increased 36% with rises in all markets.
•In North America, net operating income was 4% higher. By country, the US increased 13% and Mexico dropped 7%.
•In South America, growth was 12% with rises of 14% in Brazil, 16% in Chile and 7% in Argentina.
•In Digital Consumer Bank, net operating income increased 1%.
In the first quarter of 2021, the Group’s underlying RoTE was 13.0% (2.1% in Q1'20), underlying RoRWA was 1.77% (0.46% in Q1'20) and underlying earnings per share EUR 0.116 (EUR 0.014 in Q1'20).


Summarized underlying income statement
EUR million Change Change
Q1'21 Q4'20 % % excl. FX Q1'20 % % excl. FX
Net interest income 7,956  8,019  (0.8) (1.7) 8,487  (6.3) 5.1
Net fee income 2,548  2,456  3.7 3.6 2,853  (10.7) 0.2
Gains (losses) on financial transactions (1)
651  462  40.9 40.0 292  122.9 141.3
Other operating income 235  58  305.2 393.0 182  29.1 26.7
Total income 11,390  10,995  3.6 2.9 11,814  (3.6) 7.8
Administrative expenses and amortizations (5,118) (5,241) (2.3) (3.1) (5,577) (8.2) 0.1
Net operating income 6,272  5,754  9.0 8.5 6,237  0.6 15.0
Net loan-loss provisions (1,992) (2,611) (23.7) (24.8) (3,909) (49.0) (42.9)
Other gains (losses) and provisions (467) (485) (3.7) (4.9) (372) 25.5 41.6
Profit before tax 3,813  2,658  43.5 44.3 1,956  94.9 132.9
Tax on profit (1,324) (920) 43.9 45.9 (1,260) 5.1 15.6
Profit from continuing operations 2,489  1,738  43.2 43.4 696  257.6 405.5
Net profit from discontinued operations —  —  —  (100.0) —  —  — 
Consolidated profit 2,489  1,738  43.2 43.4 696  257.6 405.5
Non-controlling interests (351) (315) 11.4 12.2 (319) 10.0 16.7
Net capital gains and provisions (530) (1,146) (53.8) (53.6) (46) — —
Attributable profit to the parent 1,608  277  480.5 472.1 331  385.8 998.0
Underlying attributable profit to the parent (2)
2,138  1,423  50.2 50.3 377  467.1 1,015.7
(1) Includes exchange differences.
(2) Excludes net capital gains and provisions.


January - March 2021
IMAGE69.JPG
11
Income statement
è Results performance compared to the previous quarter
In the first quarter, attributable profit to the parent amounted to EUR 1,608 million, after recording a negative impact of -EUR 530 million, primarily from restructuring costs, in the net capital gains and provisions line.
Stripping them out, attributable profit to the parent amounted to EUR 2,138 million, notably higher than the fourth quarter of 2020 (EUR 1,423 million), which was affected by the contribution to the DGF in Spain and the Bank Levy in the UK.
By line in constant euros:

Net operating income
EUR million
LEYENDACONSTANTESA142.GIF
constant euros
CHART-C81F6F52BB4C4262AA71A.JPG

•Total income was 3% higher quarter-on-quarter, as the remarkably strong performance in gains on financial transactions and the continued recovery in net fee income (+4%), could absorb the 2% fall in net interest income, affected by some margin pressures and the lower day count.
•Costs were down 3%, mainly driven by North and South America. Conversely, costs in Europe were 2% higher and Digital Consumer Bank was flat.
•Loan-loss provisions plummeted by 25%, with broad-based falls across regions and most countries. Digital Consumer Bank also recorded sharp falls.

Underlying attributable profit to the parent*
EUR million
LEYENDACONSTANTESA142.GIF
constant euros
CHART-CA52419F58E246AC8351A.JPG
(*) Excluding net capital gains and provisions.




12
IMAGE69.JPG
January - March 2021

Business model




Balance sheet
Grupo Santander. Condensed balance sheet
EUR million
Change
Assets Mar-21 Mar-20 Absolute % Dec-20
Cash, cash balances at central banks and other demand deposits 192,925  122,456  70,469  57.5  153,839 
Financial assets held for trading 109,643  125,846  (16,203) (12.9) 114,945 
   Debt securities 39,212  28,969  10,243  35.4  37,894 
   Equity instruments 11,626  8,605  3,021  35.1  9,615 
   Loans and advances to customers 303  298  5  1.7  296 
   Loans and advances to central banks and credit institutions 2  —  2  —  3 
   Derivatives 58,500  87,974  (29,474) (33.5) 67,137 
Financial assets designated at fair value through profit or loss 61,289  67,142  (5,853) (8.7) 53,203 
   Loans and advances to customers 27,001  31,270  (4,269) (13.7) 24,673 
   Loans and advances to central banks and credit institutions 27,473  28,775  (1,302) (4.5) 21,617 
   Other (debt securities an equity instruments) 6,815  7,097  (282) (4.0) 6,913 
Financial assets at fair value through other comprehensive income 113,370  110,238  3,132  2.8  120,953 
   Debt securities 101,496  99,557  1,939  1.9  108,903 
   Equity instruments 2,793  2,291  502  21.9  2,783 
   Loans and advances to customers 9,081  8,390  691  8.2  9,267 
   Loans and advances to central banks and credit institutions —  —  —  —  — 
Financial assets measured at amortised cost 981,581  981,331  250  —  958,378 
   Debt securities 26,430  26,033  397  1.5  26,078 
   Loans and advances to customers 903,375  895,449  7,926  0.9  881,963 
   Loans and advances to central banks and credit institutions 51,776  59,849  (8,073) (13.5) 50,337 
Investments in subsidiaries, joint ventures and associates 7,693  8,610  (917) (10.7) 7,622 
Tangible assets 33,386  34,912  (1,526) (4.4) 32,735 
Intangible assets 15,990  26,583  (10,593) (39.8) 15,908 
    Goodwill 12,460  23,141  (10,681) (46.2) 12,471 
    Other intangible assets 3,530  3,442  88  2.6  3,437 
Other assets 47,002  63,241  (16,239) (25.7) 50,667 
Total assets 1,562,879  1,540,359  22,520  1.5  1,508,250 
Liabilities and shareholders' equity
Financial liabilities held for trading 71,293  100,082  (28,789) (28.8) 81,167 
   Customer deposits —  —  —  —  — 
   Debt securities issued —  —  —  —  — 
   Deposits by central banks and credit institutions —  —  —  —  — 
   Derivatives 55,935  88,121  (32,186) (36.5) 64,469 
   Other 15,358  11,961  3,397  28.4  16,698 
Financial liabilities designated at fair value through profit or loss 69,977  67,337  2,640  3.9  48,038 
   Customer deposits 49,394  44,638  4,756  10.7  34,343 
   Debt securities issued 4,538  4,287  251  5.9  4,440 
   Deposits by central banks and credit institutions 16,045  18,412  (2,367) (12.9) 9,255 
   Other —  —  —  —  — 
Financial liabilities measured at amortized cost 1,290,475  1,224,749  65,726  5.4  1,248,188 
   Customer deposits 833,460  770,821  62,639  8.1  814,967 
   Debt securities issued 240,765  257,606  (16,841) (6.5) 230,829 
   Deposits by central banks and credit institutions 189,095  170,275  18,820  11.1  175,424 
   Other 27,155  26,047  1,108  4.3  26,968 
Liabilities under insurance contracts 1,102  2,280  (1,178) (51.7) 910 
Provisions 10,881  12,335  (1,454) (11.8) 10,852 
Other liabilities 26,465  27,463  (998) (3.6) 27,773 
Total liabilities 1,470,193  1,434,246  35,947  2.5  1,416,928 
Shareholders' equity 115,620  124,139  (8,519) (6.9) 114,620 
   Capital stock 8,670  8,309  361  4.3  8,670 
   Reserves 105,342  117,161  (11,819) (10.1) 114,721 
   Attributable profit to the Group 1,608  331  1,277  385.8  (8,771)
   Less: dividends —  (1,662) 1,662  (100.0) — 
Other comprehensive income (33,154) (27,761) (5,393) 19.4  (33,144)
Minority interests 10,220  9,735  485  5.0  9,846 
Total equity 92,686  106,113  (13,427) (12.7) 91,322 
Total liabilities and equity 1,562,879  1,540,359  22,520  1.5  1,508,250 
January - March 2021
IMAGE69.JPG
13

Business model




Balance sheet
GRUPO SANTANDER BALANCE SHEET
Executive summary *
Loans and advances to customers (excl. reverse repos)
Customer funds (deposits excl. repos + mutual funds)
Credit normalization following the uptick at the beginning of the pandemic, due to high liquidity in the system Strong increase in customer funds benefiting from the higher propensity to save derived from the health crisis
924
p 0.4% QoQ
p 2% YoY
1,007
p 1% QoQ
p 10% YoY
billion billion
 è By segment (YoY change):
 è By product (YoY change):
Of note was the rise in SMEs and corporates Of note were demand deposits, which account for 66% of customer funds, reflected in the lower costs of deposits
Individuals SMEs and corporates CIB and institutions Demand Time Mutual funds
+1% +7% -3% +14% -9% +19%
(*) Changes in constant euros
Exchange rates had no impact in loans and only -1 pp in customer funds on a year-on-year basis.
è Loans and advances to customers
Gross loans and advances to customers stood at EUR 939,760 million. The Group uses gross loans and advances to customers excluding reverse repos (EUR 924,430 million) for the purpose of analyzing traditional commercial banking loans.
In the first quarter, gross loans and advances to customers excluding reverse repos rose 2%. Without the exchange rate impact, they remained flat (+0.4%), as follws:
•Balances in Europe were stable. Decreases were recorded in Spain, while the UK and Portugal remained broadly stable. Poland rose 2% and 'Other Europe' +9%.
•North America fell 2% dampened by the US, as Mexico increased 2%.
•In South America, 3% growth with all markets increasing, except Chile, that remained flat.
•Digital Consumer Bank (DCB) dropped 1% with slight falls in the main consumer finance units, except Italy and the UK.
Compared to March 2020, a 2% increase was recorded in gross loans and advances to customers excluding reverse repos. Excluding the FX impact, loans also grew 2%, as follows:
•In Europe, 2% growth with all markets increasing except Poland (-1%). Of note was growth in Portugal (+5%), driven by SMEs and mortgages, and Spain (+3%) backed by SMEs and corporates. The UK rose 1%, driven by residential mortgage activity and the government programmes for corporate customers, and "Other Europe" grew 5%, mainly SCIB.
•In North America, Mexico fell 6% as corporate loans began to normalize following the uptick at the beginning of the pandemic and the lower card activity during lockdown, and the US fell 3% affected by Puerto Rico and Bluestem portfolio disposal (+1% excluding their impacts). The region as a whole recorded a 4% decrease (-1% excluding the impact of Puerto Rico and Bluestem portfolio disposal).
•Growth in South America was 10%, with Argentina up 47% driven by SMEs and cards, Brazil +13% with positive performance in all segments and Chile +1% driven by SMEs and mortgages. Uruguay rose 6%.
•DCB declined slightly (-1%) dampened by the falls recorded in Spain, Poland and the Nordics. On the other hand, Openbank surged 29%, albeit compared to more modest figures.
Gross loans and advances to customers excluding reverse repos maintained a balanced structure: individuals (62%), SMEs and corporates (23%) and CIB (15%).
Gross loans and advances to customers (excl. reverse repos)
EUR billion
Gross loans and advances to customers (excl. reverse repos)
% operating areas. March 2021
CHART-BE6C0FBE01D74B5B8FE1A.JPG
+2  %
*
Mar-21 / Mar-20
CHART-962489D191B949588601A.JPG
(*) In constant EUR: +2%
14
IMAGE69.JPG
January - March 2021

Business model




Balance sheet
è Customer funds
Customer deposits amounted to EUR 882,854 million in March 2021. The Group uses customer funds (customer deposits excluding repos, plus mutual funds) for the purpose of analyzing traditional retail banking funds.
•In the first quarter, customer funds increased slightly to EUR 1,007,319 million, with the following performance excluding exchange rate impacts:
–By product: demand deposits rose 2% and mutual funds 3%, whilst time deposits decreased 1%.
–By primary segment: customer funds increased 1% in Europe, with 6% growth in Poland, 1% in Portugal and no material changes across other units. North America rose 4% backed by the US, and South America remained stable, as the 2% decrease in Brazil was closely matched by growth across the rest of markets. DCB rose 3%, notably Openbank (+8%).
•Compared to March 2020, customer funds were up 9%. Excluding the exchange rate impact, increase of 10%, as follows:
–By product, deposits excluding repos rose 8%. Demand deposits (+14%) increased in all markets, and time deposits fell 9%, with broad-based declines except Brazil and Argentina. Mutual funds surged 19% underpinned by net inflows and markets recovery.
–By country, customer funds rose in all regions and their respective units. Of note were the increases in Argentina (+52%), Poland (+19%), Uruguay (+15%) and Brazil and the US (+12% each). In the remaining markets, growth ranged between +10% in Spain and +1% in Mexico.
–Positive performance also in DCB, which rose 8%. Openbank increased 24%.
With this performance, the weight of demand deposits as a percentage of total customer funds rose 3 pp in the last 12 months to 66%, which resulted in a better cost of deposits.
In addition to capturing customer deposits, the Group, for strategic reasons, maintains a selective policy of issuing securities in the international fixed income markets and strives to adapt the frequency and volume of its market operations to the structural liquidity needs of each unit, as well as to the receptiveness of each market.
In the first quarter of 2021, the Group issued:
•Medium- and long-term senior debt amounting to EUR 3,428 million.
•There were EUR 4,433 million of securitizations placed in the market.
•In order to strengthen the Group’s situation, issuances to meet the TLAC requirement amounting to EUR 4,936 million, all senior non-preferred.
•Maturities of medium- and long-term debt of EUR 4,303 million.
The net loan-to-deposit ratio was 106% (115% in March 2020). The ratio of deposits plus medium- and long-term funding to the Group’s loans was 117%, underscoring the comfortable funding structure.
The Group's access to wholesale funding markets as well as the cost of issuances depends, in part, on the ratings of the rating agencies.
In the first quarter of 2021, the main rating agencies did not review their ratings for Banco Santander S.A: Fitch (long-term senior non-preferred debt at A- and short-term at F2, with a negative outlook), Moody's (A2 for long term debt and P-1 for short-term, with an stable outlook), Standard & Poor’s (A for long term debt and A-1 for short term, with a negative outlook) and DBRS (A high for long term debt and R-1 middle for short term, with an stable outlook).
While sometimes the methodology applied by the agencies limits a bank's rating to the sovereign rating assigned to the country where it is headquartered, Banco Santander, S.A. is still rated above the sovereign debt rating of the Kingdom of Spain by Moody’s and DBRS and at the same level by Fitch and S&P, which demonstrates our financial strength and diversification.

Customer funds
EUR billion
Customer funds
% operating areas. March 2021
CHART-075AB12962E64E0FB2C1A.JPG
+9  %
*
+15  %
+8  %
•Total
•Mutual funds
•Deposits
exc. repos
Mar-21 / Mar-20
CHART-050DA36EA099429BA981A.JPG

(*) In constant EUR: +10%
January - March 2021
IMAGE69.JPG
15






Solvency ratios
SOLVENCY RATIOS
Executive summary
Phased-in capital ratio* Phased-in CET1 ratio*
The phased-in CET1 ratio exceeded our 11%-12% target range, resulting in a management buffer of 345 bps In the quarter, strong organic generation and charges for shareholder remuneration and restructuring costs
CET1GRAFICOENG1A.JPG
Organic generation of +28 bps
(after a -15 bps accrual for shareholder remuneration)
Restructuring costs
 -10 bps
TNAV per share
TNAV per share was EUR 3.84. Including the dividend of EUR 2.75 cents per share, already deducted, growth in the quarter was 2%.
At the end of the quarter, the total phased-in capital ratio stood at 16.16% and the CET1 ratio (phased-in) at 12.30%. We have a strong capital base, comfortably meeting the minimum levels required by the European Central Bank on a consolidated basis (13.01% for the total capital ratio and 8.85% for the CET1 ratio). This results in a CET1 management buffer of 345 bps, compared to the pre-covid-19 buffer of 189 bps.
In the quarter, continued a strong organic capital generation of 28 bps due to underlying profit and management of risk weighted assets. This figure includes a negative impact of 15 bps for shareholder remuneration, equivalent to 40% of this quarter's underlying profit. The bank is accruing 40% of the underlying profit throughout the year for this remuneration, once supervisors allow**.
In addition, the following movements were recorded in the quarter:
•Regulatory impacts and models, -13 bps, of which -6 bps correspond to the IFRS 9 phase-out.
•Market performance, -9 bps.
•Lastly, restructuring costs had a negative impact of -10 bps.
Had the IFRS 9 transitional arrangement not been applied, the total impact on the CET1 ratio was -41 bps, leading to a fully-loaded CET1 ratio of 11.89%.
The phased-in leverage ratio stood at 5.1%, and the fully-loaded at 4.9%.
Eligible capital. March 2021
EUR million
Phased-in* Fully-loaded
CET1 69,841  67,468 
Basic capital 78,944  76,258 
Eligible capital 91,764  89,692 
Risk-weighted assets 567,797  567,342 
CET1 capital ratio 12.30  11.89 
T1 capital ratio 13.90  13.44 
Total capital ratio 16.16  15.81 

Phased-in CET1 ratio performance*
%
CET1ESCALERAENG1A.JPG
(*) The phased-in ratio includes the transitory treatment of IFRS 9, calculated in accordance with article 473 bis of the Capital Requirements Regulation (CRR) and subsequent modifications introduced by Regulation 2020/873 of the European Union. Without it, the fully-loaded ratio is 11.89%. Additionally, the Tier 1 and total phased-in capital ratios include the transitory treatment according to chapter 2, title 1, part 10 of the CRR.
(**) Subject to the board and, if applicable, the general shareholders' meeting adopting the pertinent resolutions regarding shareholder remuneration and dividend payment policy
16
IMAGE69.JPG
January - March 2021
RISK MANAGEMENT
Executive summary
Credit risk Market risk
Credit quality indicators began to show signs of normalization Market risk exposure maintained its low profile, with stable VaR levels amid reduced market uncertainty following progress on vaccination programmes
Cost of credit2
NPL ratio Coverage ratio
1.08% 3.20% 74% Q1'21 Average
Var
EUR 9.5 million
q20 bps vs Q4'20
q1bps vs Q4'20
q 2 pp vs Q4'20
Structural and liquidity risk Operational risk
We maintained a comfortable liquidity position, well above regulatory limits
Our operational risk profile continued to be stable in the first quarter of 2021, as all our subsidiaries have fully adapted their operating guidelines to the new environment
LCR 173% p 5 pp vs Q4'20
u Credit risk management
In the first quarter of 2021 the Group’s NPL ratio stood at 3.20%, showing a slight decrease compared to the previous quarter. This was mainly driven by the growth of the portfolio in SCIB, Brazil and the UK, together with the sale of credit impaired loans portfolios in Spain, in a context in which government liquidity support still play a relevant role together with improving macroeconomic projections.
Credit impaired loans amounted to EUR 32,473 million, a 2% (in constant euros) increase compared to the previous quarter.
In terms of loan-loss provisions, they amounted to EUR 1,992 million in the first quarter of 2021, after the additional amounts built last year to tackle the effects of the covid-19 crisis, reflecting the IFRS 9 forward-looking view and based on a long-term approach to the potential macroeconomic scenarios.

This figure is 25% lower than the previous quarter, following a normalization trend, and 43% lower than in the first quarter of 2020, both in constant euros.
Consequently the Group's cost of credit stood at 1.08%, a 20 bps decrease compared to the previous quarter.
Total loan-loss reserves in the first quarter stood at EUR 24,034 million, with the total coverage of credit impaired loans at 74% (+3 pp year-on-year).
A significant part of our portfolios in Spain and the UK have real estate collateral, which requires lower coverage levels.


Key metrics performance by geographic area
Loan-loss provisions 1
Cost of credit (%) 2
NPL ratio (%) Coverage ratio (%)
Q1'21 Chg (%)
/ Q4'20 		Chg (%)
/ Q1'20 		Q1'21 Chg (bps)
/ Q4'20 		Chg (bps)
/ Q1'20 		Q1'21 Chg (bps)
/ Q1'20 		Q1'21 Chg (pp)
/ Q1'20
Europe 595  (36.1) (40.3) 0.51  (7) 15  3.26  (11) 50.0  3.0 
Spain 449  (26.5) (28.6) 0.91  (10) 27  6.18  (70) 47.2  2.6 
United Kingdom 18  (82.1) (89.6) 0.21  (6) 7  1.35  36  40.5  0.8 
Portugal 35  (16.9) (56.9) 0.38  (13) 15  3.84  (72) 69.2  10.2 
Poland 68  (14.8) (24.8) 1.02  (7) 14  4.82  53  70.3  2.2 
North America 393  (49.3) (65.3) 2.34  (58) (68) 2.39  37  153.4  (16.7)
USA 165  (70.7) (81.4) 2.12  (74) (101) 2.11  11  183.2  1.7 
Mexico 228  7.5  (6.7) 3.00  (3) 31  3.21  114  95.6  (38.3)
South America 683  (6.5) (33.2) 2.81  (52) (49) 4.30  (33) 98.4  5.5 
Brazil 549  0.9  (30.6) 3.79  (55) (63) 4.42  (52) 116.5  8.5 
Chile 100  1.9  (39.5) 1.33  (17) 8  4.74  11  63.4  6.2 
Argentina 14  (79.8) (71.5) 4.55  (138) (93) 2.32  (165) 232.4  101.2 
Digital Consumer Bank 166  (20.0) (49.7) 0.69  (14) 7  2.23  2  111.4  (0.1)
Corporate Centre 154  —  — 
TOTAL GROUP 1,992  (24.8) (42.9) 1.08  (20) (9) 3.20  (5) 74.0  2.7 
(1) EUR million and % change in constant euros
(2) Allowances for loan-loss provisions over the last 12 months / Average loans and advances to customers over the last 12 months
January - March 2021
IMAGE69.JPG
17
After the efforts made by the Group to tackle the covid-19 crisis through different support measures with particular focus on moratoria programmes, etc., in the first quarter of 2021, 86% of total moratoria had already expired, showing the expected payment performance with only 5% in stage 3.
The outstanding moratoria are being closely monitored, which totalled EUR 16 bn (mainly in Spain and Portugal), of which c. EUR 7 bn will expire by the end of the second quarter.
Regarding IFRS 9 stages evolution:
•Stage 1 exposures increased by 2.4% vs. the previous quarter, mainly due to new loan originations in SCIB and Brazil.
•Exposure in stage 2 rose in this first quarter after the increase recorded last year, mostly driven by the macroeconomic deterioration caused by the pandemic.
•Stage 3 remained broadly stable.
Coverage ratio by stage
EUR billion
Exposure1
Coverage
Mar-21 Dec-20 Mar-20 Mar-21 Dec-20 Mar-20
Stage 1 885 864 891 0.5  % 0.5  % 0.6  %
Stage 2 70 69 53 8.1  % 8.5  % 8.2  %
Stage 3 32 32 33 42.5  % 43.4  % 40.8  %
(1) Exposure subject to impairment. Additionally, in March 2021 there are EUR 27 billion in loans and advances to customers not subject to impairment recorded at mark to market with changes through P&L (EUR 25 billion in December 2020 and EUR 31 in March 2020).
Stage 1: financial instruments for which no significant increase in credit risk is identified since its initial recognition.
Stage 2: if there has been a significant increase in credit risk since the date of initial recognition but the impairment event has not materialized, the financial instrument is classified in Stage 2.
Stage 3: a financial instrument is catalogued in this stage when it shows effective signs of impairment as a result of one or more events that have already occurred resulting in a loss.

Credit impaired loans and loan-loss allowances
EUR million
Change (%)
Q1'21 QoQ YoY
Balance at beginning of period 31,767  2.8  (6.0)
   Net additions 2,495  (25.2) (1.9)
   Increase in scope of consolidation —  —  — 
   Exchange rate differences and other 444  —  — 
   Write-offs (2,233) 5.5  (15.3)
Balance at period-end 32,473  2.2  (0.8)
Loan-loss allowances 24,034  (1.0) 2.9 
   For impaired assets 13,804  0.17  3.29 
   For other assets 10,230  (2.50) 2.33 


u Market risk
The global corporate banking trading activity is mainly interest rate driven, focused on servicing our customer's needs and measured in daily VaR terms at 99%.
In the first quarter, VaR closed at EUR 8.5 million, fluctuating around an average value of EUR 9.5 million. It remained stable, driven by lower market uncertainty as vaccine roll-out gained traction, although covid-19 evolution is still a concern by the end of Q1’21. These figures remain low compared to the size of the Group’s balance sheet and activity.
It should be also mentioned that there are other positions classified for accounting purposes as trading (total VaR of EUR 8.5 million at the end of March 2021).

Trading portfolios (1). VaR by geographic region
EUR million
2021 2020
First quarter Average Latest Average
Total 9.5  8.5  15.8 
Europe 7.9  8.5  10.7 
North America 2.8  2.4  5.6 
South America 4.6  4.8  8.0 
(1) Activity performance in Santander Corporate & Investment Banking markets.


Trading portfolios (1). VaR by market factor
EUR million
First quarter Min. Avg. Max. Last
VaR total 6.8  9.5  12.1  8.5 
Diversification effect (9.1) (11.5) (16.0) (10.0)
Interest rate VaR 6.8  9.5  13.1  8.2 
Equity VaR 2.4  3.0  4.4  2.7 
FX VaR 1.9  3.8  6.7  3.1 
Credit spreads VaR 2.6  3.8  7.3  3.7 
Commodities VaR 0.6  0.9  2.4  0.9 
(1) Activity performance in Santander Corporate & Investment Banking markets.
NOTE: In the North America, South America and Asia portfolios, VaR corresponding to the credit spreads factor other than sovereign risk is not relevant and is included in the interest rate factor

18
IMAGE69.JPG
January - March 2021
Trading portfolios1. VaR performance

EUR million
CHART-CB50699CBED54A8793E1A.JPG (1) Corporate & Investment Banking performance in financial markets.

u Structural and liquidity risk
•With regards to structural exchange rate risk, the Group's CET1 ratio coverage remained around 100% in order to protect it from foreign currency movements.
•Regarding structural interest rate risk, despite volatility in bond markets and the increase in interest rates amid expectations of rising inflation along the economic recovery, no material issues were detected in the quarter and it remained at comfortable levels.
•Concerning liquidity risk during the first quarter, the Group maintained a comfortable position, supported by a robust and diversified liquidity buffer, with ratios well above regulatory limits.



u Operational risk
•Overall, our operational risk profile continued to be stable during the first quarter of 2021, as the Group´s headquarters and subsidiaries have fully adapted to the new environment. The following aspects were closely monitored during this period:
–Fraud and cyber risk threats across the financial industry, and reinforcement of the control environment (i.e. patching, browsing control, data protection controls, etc.), as well as heightening monitoring as a preventive measure.
–Third party risk exposure, maintaining a close oversight on critical providers, with focus on business continuity capabilities and compliance with service level agreements.
–People risk, due to our employees return to offices and/or work from home situations, which varies across the Group´s subsidiaries. Measures have been implemented to ensure a suitable and safe work environment.
–Evolution of operational risks linked to the existing portfolios derived from government and internal aid programmes.
•As the situation continues to evolve, we are also monitoring the changes in the environment as well as the transition to digital banking in order to identify risk exposures and anticipate actions in order to reduce their impact.
•In terms of the first quarter performance, level of losses in relative terms by Basel categories were lower than in the previous quarter.

January - March 2021
IMAGE69.JPG
19
GENERAL BACKGROUND
Grupo Santander ran its business in the first quarter of 2021 in an environment marked by the resurgence of the virus and the consequent selective containment measures, the uneven vaccine roll-out and the expansion and / or adjustment of economic policy measures. More favourable medium-term expectations counterbalanced the challenging short-term horizon, which helped to maintain a relatively positive tone in markets, with more complex episodes arising from the emergence of inflationary risks in the US that caused a hike in long-term interest rates and some weakness in several emerging market currencies.
Country
GDP Change1
Economic performance
EUROZONA1A.JPG
Eurozone
-6.7%
Q1'21 indicators point to continued economic weakness, although it is expected to recover in the second half of the year. The unemployment rate did not reflect this deterioration (it remained stable) due to public employment protection programmes. Inflation has picked up so far this year (1.3% year-on-year in March) due to higher indirect taxes, higher energy prices and changes in the CPI basket.
SPAIN1A.GIF
Spain
-10.8%
The job market recorded a slight deterioration in the first months of 2021, pointing toward a contraction of GDP in Q1'21. The unemployment rate, which ended Q4'20 at 16.1%, could have risen. Inflation rose to 1.3% year-on-year in March, driven by higher energy prices (underlying inflation remained very low, at 0.3% year-on-year).
UK1A.GIF
United Kingdom
-9.8%
The resurgence of covid-19 cases led to new lockdown measures at the beginning of Q1'21, which combined with the tensions arising from the need of businesses to adapt to the new trade agreement with the EU, led to a further decline of quarterly GDP (c.1.5%). Inflation in March (0.7%) reflected the weak tone in consumption. Unemployment rate ended 2020 at 5%. The UK's official interest rate remained at 0.1%.
PORTUGAL1A.GIF
Portugal
-7.6%
After the economy's sharp slump in 2020, covid-19 surges caused the economy to stall again in Q1'21. Tighter lockdown measures will lead to a further reduction quarter-on-quarter. Unemployment rose to 7.2% in January and sluggish consumption rose inflation to 0.5% in March.
POLAND1A.GIF
Poland
-2.8%
The economic recession in 2020 was less severe than in other surrounding countries. However, demand in Q1'21 will remain weak dampened by the covid-19 rebound, but we still expect slight growth in the quarter. The unemployment rate stood at 3.1% in Q4'20, inflation remained high (3.2% in March) and Poland's central bank will keep the official interest rate at 0.1%.
USA1A.GIF
United States
-3.5%
GDP growth slowed to 4.3% quarter-on-quarter annualized in Q4'20. The unemployment rate is gradually declining (6.0% in March) and inflation began to recover (2.6% in March). Vaccines and stimulus roll-out led to a significant outlook improvement, which boosted long-term rates. The Fed remained on hold and stated that it is early to change its policy.
MEXICO1A.GIF
Mexico
-8.2%
Activity weakened in Q1'21 after the rebound in H2'20, due to the increase in covid-19 infections and the containment of exports. Mexico's central bank lowered the official interest rate to 4% (from 4.25% in Q4'20) and, thereafter, it will monitor the factors that might impact inflation, following the spike recorded in February to 4.7% (3.2% at the end of 2020) and to the climate of market uncertainty.
BRAZIL1A.GIF
Brazil
-4.1%
Economic growth recovered strongly in the second half of the year, after the contraction caused by the pandemic in the first half of 2020. The sharp increase in covid-19 cases and the reintroduction of containment measures will weigh down on Q1'21 GDP growth. Inflation rebounded (6.1% in March) and Brazil's central bank raised the official interest rate to 2.75% (2.0% in Q4'20) to prevent a deterioration in medium-term forecasts.
CHILE1A.GIF
Chile -5.8%
The late 2020 recovery trend continued in January, but it was dampened by the resurgence of the pandemic in Q1'21. However, the country's fast pace of vaccination sustains positive expectations for the coming quarters. Inflation moderated to 2.9% in March, aligned with the 3% target. Chile's official interest rate was stable (0.5%).
ARGENTINA1A.GIF
Argentina -9.9%
GDP contracted in 2020, affected by the pandemic, although it partially recovered in the second half of the year. The resurgence of covid-19 cases in early 2021 suggests a downturn in Q1'21. Inflation remained high (4.8% monthly average in March). The focus will be on the renegotiation of the IMF agreement.
(1) Year-on-year change 2020
20
IMAGE69.JPG
January - March 2021

DESCRIPTION OF SEGMENTS
We base segment reporting on financial information presented to the chief operating decision maker, which excludes certain statutory results items that distort year-on-year comparisons and are not considered for management reporting. This financial information (underlying basis) is computed by adjusting reported results for the effects of certain gains and losses (e.g. capital gains, write-downs, impairment of goodwill, etc.). These gains and losses are items that management and investors ordinarily identify and consider separately to better understand the underlying trends in the business.
Grupo Santander has aligned the information in this chapter with the underlying information used internally for management reporting and with that presented in Grupo Santander's other public documents.
Grupo Santander executive committee has been selected to be its chief operating decision maker. Grupo Santander's operating segments reflect its organizational and managerial structures. The executive committee reviews internal reporting based on these segments to assess performance and allocate resources.
The segments are split by geographic area in which profits are earned and by type of business. We prepare the information by aggregating the figures for Grupo Santander’s various geographic areas and business units, relating it to both the accounting data of the business units integrated in each segment and that provided by management information systems. The general principles applied are the same as those used in Grupo Santander, and accounting integrity is ensured.
On 9 April 2021, we announced that, starting and effective with the financial information for the first quarter of 2021, we would carry out a change in our reportable segments to reflect our new organizational and management structure.
These changes in the reportable segments aim to align the segment information with their management and have no impact on the group’s accounting figures.
a.Main changes in the composition of Grupo Santander's segments
The main changes, which have been applied to management information for all periods included in the consolidated financial statements, are the following:
Primary segments
1.Creation of the new Digital Consumer Bank (DCB) segment, which includes:
•Santander Consumer Finance (SCF), previously included in the Europe segment, and the consumer finance business in the United Kingdom, previously recorded in the country.
•Our fully digital bank Openbank and the Open Digital Services (ODS) platform, which were previously included in the Santander Global Platform segment.

2.Santander Global Platform (SGP), which incorporated our global digital services under a single unit, is no longer a primary segment. Its activities have been distributed as follows:
•Openbank and Open Digital Services (ODS), which, as mentioned above, are now included under the new Digital Consumer Bank reporting segment.
•The business recorded in Global Payment Services (Merchant Solutions -GMS-, Trade Solutions -GTS- and Consumer Solutions -Superdigital and Pago FX-) has been allocated to the three main geographic segments, Europe, North America and South America, with no impact on the information reported for each country.
Secondary segments
1.Creation of the PagoNxt segment, which incorporates simple and accessible digital payment solutions to drive customer loyalty and allows us to combine our most disruptive payment businesses into a single autonomous company, providing global technology solutions for our banks and new customers in the open market, and which has been structured into three businesses, previously included in SGP:
•Merchant Solutions: acquiring solutions for merchants.
•Trade Solutions (GTS): solutions for SMEs and companies operating internationally.
•Consumer Solutions: payment solutions for individuals, including the Superdigital platform, aimed at underbanked populations, and Pago FX, an international payment service in the open market.
2. Annual adjustment of the perimeter of the Global Customer Relationship Model between Retail Banking and Santander Corporate & Investment Banking and between Retail Banking and Wealth Management & Insurance.
3.Elimination of the Santander Global Platform reporting segment:
•Openbank and ODS are now recorded in the Retail Banking segment.
•Merchant Solutions, Trade Solutions, Superdigital and Pago FX form the new PagoNxt reporting segment.
The Group recasted the corresponding information of earlier periods considering the changes included in this section. As stated above, group consolidated figures remain unchanged.








January - March 2021
IMAGE69.JPG
21
b. Current composition of Grupo Santander segments
Primary segments
This primary level of segmentation, which is based on the Group’s management structure, comprises five reportable segments: four operating areas plus the Corporate Centre. The operating areas are:
Europe: which comprises all business activity carried out in the region, except that included in Digital Consumer Bank. Detailed financial information is provided on Spain, the UK, Portugal and Poland.
North America: which comprises all the business activities carried out in Mexico and the US, which includes the holding company (SHUSA) and the businesses of Santander Bank, Santander Consumer USA, the specialized business unit Banco Santander International, Santander Investment Securities (SIS) and the New York branch.
South America: includes all the financial activities carried out by Grupo Santander through its banks and subsidiary banks in the region. Detailed information is provided on Brazil, Chile, Argentina, Uruguay, Peru and Colombia.
Digital Consumer Bank: includes Santander Consumer Finance, which incorporates the entire consumer finance business in Europe, Openbank and ODS.
Secondary segments
At this secondary level, Grupo Santander is structured into Retail Banking, Santander Corporate & Investment Banking (SCIB), Wealth Management & Insurance (WM&I) and PagoNxt.
Retail Banking: this covers all customer banking businesses, including consumer finance, except those of corporate banking which are managed through Santander Corporate & Investment Banking, asset management, private banking and insurance, which are managed by Wealth Management & Insurance. The results of the hedging positions in each country are also included, conducted within the sphere of their respective assets and liabilities committees.
Santander Corporate & Investment Banking (SCIB): this business reflects revenue from global corporate banking, investment banking and markets worldwide including treasuries managed globally (always after the appropriate distribution with Retail Banking customers), as well as equity business.
Wealth Management & Insurance: includes the asset management business (Santander Asset Management), the corporate unit of Private Banking and International Private Banking in Miami and Switzerland and the insurance business (Santander Insurance).
PagoNxt: this includes digital payment solutions, providing global technology solutions for our banks and new customers in the open market. It is structured in three businesses: Merchant Solutions, Trade Solutions and Consumer Solutions.
In addition to these operating units, both primary and secondary segments, the Group continues to maintain the area of Corporate Centre, that includes the centralized activities relating to equity stakes in financial companies, financial management of the structural exchange rate position, assumed within the sphere of the Group’s assets and liabilities committee, as well as management of liquidity and of shareholders’ equity via issuances.
As the Group’s holding entity, this area manages all capital and reserves and allocations of capital and liquidity with the rest of businesses. It also incorporates amortization of goodwill but not the costs related to the Group’s central services (charged to the areas), except for corporate and institutional expenses related to the Group’s functioning.







The businesses included in each of the segments and business areas in this report and the accounting principles under which their results are presented here may differ from the businesses included and accounting principles applied in the financial information separately prepared and disclosed by our subsidiaries (some of which are publicly listed) which in name or geographical description may seem to correspond to the business areas covered in this report. Accordingly, the results of operations and trends shown for our business areas in this document may differ materially from those of such subsidiaries.
As described on the previous page, the results of our business areas presented below are provided on the basis of underlying results only and including the impact of foreign exchange rate fluctuations. However, for a better understanding of the actual changes in the performance of our business areas, we provide and discuss the year-on-year changes to our results excluding such impact.
On the other hand, certain figures contained in this report, including financial information, have been subject to rounding to enhance their presentation. Accordingly, in certain instances, the sum of the numbers in a column or a row in tables contained in this report may not conform exactly to the total figure given for that column or row.
22
IMAGE69.JPG
January - March 2021
January-March 2021
Main items of the underlying income statement
EUR million
Primary segments Net interest
income 		Net fee
income 		Total
income 		Net operating
income 		Profit
before tax 		Underlying
attributable
profit to
the parent
Europe 2,645  1,072  4,149  2,077  1,231  826 
     Spain 1,019  587  1,785  918  340  243 
     United Kingdom 1,001  120  1,111  459  410  294 
     Portugal 193  99  427  281  234  161 
     Poland 240  127  357  199  58  21 
     Other 192  138  469  221  189  108 
North America 2,005  451  2,768  1,620  1,207  773 
     US 1,337  241  1,902  1,154  974  616 
     Mexico 667  204  865  492  259  182 
     Other 0  7  2  (26) (26) (25)
South America 2,575  842  3,539  2,320  1,505  773 
     Brazil 1,780  632  2,521  1,799  1,154  562 
     Chile 497  95  614  378  277  153 
     Argentina 204  74  262  92  44  45 
     Other 93  41  141  51  30  14 
Digital Consumer Bank 1,056  188  1,304  703  506  291 
Corporate Centre (324) (5) (370) (449) (635) (527)
TOTAL GROUP 7,956  2,548  11,390  6,272  3,813  2,138 
Secondary segments
Retail Banking 7,472  1,709  9,536  5,378  3,190  1,836 
Corporate & Investment Banking 720  466  1,655  1,130  1,058  704 
Wealth Management & Insurance 88  297  502  281  273  197 
PagoNxt (1) 81  67  (69) (73) (72)
Corporate Centre (324) (5) (370) (449) (635) (527)
TOTAL GROUP 7,956  2,548  11,390  6,272  3,813  2,138 

Underlying attributable profit to the parent distribution* Underlying attributable profit to the parent. Q1'21
Q1'21 EUR million. % change YoY in constant euros
TARTAPAISESINGLES1A.JPG
BENEFICIOPAISESINGLES1A.JPG
(*) As a % of operating areas. Excluding the Corporate Centre.
January - March 2021
IMAGE69.JPG
23





January-March 2020
Main items of the underlying income statement
EUR million
Primary segments Net interest
income 		Net fee
income 		Total
income 		Net operating
income 		Profit
before tax 		Underlying
attributable
profit to
the parent
Europe 2,378  1,128  3,718  1,543  303  193 
     Spain 925  643  1,789  844  112  90 
     United Kingdom 820  190  1,007  321  72  52 
     Portugal 202  101  350  199  98  68 
     Poland 296  116  365  193  62  23 
     Other 134  78  207  (15) (42) (40)
North America 2,261  464  2,941  1,711  452  282 
     US 1,462  250  1,929  1,120  141  60 
     Mexico 798  211  1,007  592  311  220 
     Other 0  4  5  0  (1) 2 
South America 3,065  1,077  4,169  2,677  1,210  700 
     Brazil 2,270  869  3,137  2,133  940  517 
     Chile 448  92  553  322  160  97 
     Argentina 241  76  318  132  44  34 
     Other 106  40  162  90  67  52 
Digital Consumer Bank 1,088  192  1,291  695  404  234 
Corporate Centre (304) (9) (304) (389) (413) (1,031)
TOTAL GROUP 8,487  2,853  11,814  6,237  1,956  377 
Secondary segments
Retail Banking 8,004  2,058  10,171  5,538  1,306  693 
Corporate & Investment Banking 677  402  1,297  769  748  494 
Wealth Management & Insurance 109  308  550  313  307  222 
PagoNxt 0  94  101  5  8  (1)
Corporate Centre (304) (9) (304) (389) (413) (1,031)
TOTAL GROUP 8,487  2,853  11,814  6,237  1,956  377 
24
IMAGE69.JPG
January - March 2021

Business model




Primary segments

EUROPA5A.GIF
EUROPE Underlying attributable profit
EUR 826 mn
Executive summary (changes in constant euros)
→ We are accelerating our business transformation in One Santander in Europe to achieve superior growth with a more efficient operating model that should allow us to progress towards our medium-term underlying RoTE target of 10-12%.
→ The increase in revenue (+13%), combined with the continued cost reduction (-4%) and lower provisions (-40%), led to an underlying attributable profit of EUR 826 million (+338% year-on-year).
→ Volume growth in the last 12 months in almost all markets: loans grew +2% and customer deposits +7%, with positive trends since the beginning of the year.
Strategy
Our goal in One Santander in Europe is to create a better bank where customers and our people are more connected and deliver sustainable value for our shareholders. We aim to deliver tangible results (with a c.10-12% underlying RoTE target for the medium-term) while making progress in the long-term transformation through our action plan, defined by three main blocks:
•Grow our business by better serving our customers, focusing on capital efficient opportunities, which includes SCIB and WM&I, simplifying our mass market value proposition and improving customer experience and engaging with PagoNxt.
•Redefine how we interact with our customers, accelerating our digital agenda with one common mobile experience, re-imagining our branch network and transforming our contact centres building a common solution for the region.
•Create a common operating model, to serve our businesses through a common technology platform and automated operations, leveraging shared services and with one aligned team across Europe.
The key areas of progress by country on the quarter were:
•Spain: regarding business, we remain focused on our One Santander strategy with customer migration advancing according to plan.

Loyal customers. March 2021
Thousands. % loyal / active customers
37  % / active customers 35  % 31% 48% 55%
VINCULADOSEUROPA_ENG1A.JPG
CLIENTESPAISESA013A.JPG
10,072

Our leading app is becoming the backbone for Europe's OneApp and we progressed in the transformation of our distribution model, expanding our Smart and Workcafé branch network, together with the 4,600 Correos offices. This will enable us to continue to progress toward a mixed distribution model that combines digital and remote channels and branches, adapting to customers' preferences. All of this allowed us to make progress on our restructuring process.
•United Kingdom: we continued to increase our digital customer base and fostering mass market simplification through our customer journey. Margin management helped to deliver profitable growth, backed by operational excellence resulting from our Transform for Success programme. As part of it, in the first quarter we announced changes to our property footprint strategy to support changing needs of our customers and our people.
•Portugal: we started our transformation programme to streamline the bank and accelerate our digital agenda, leveraging Europe's OneApp. Our aim is to be simpler, more nimble and closer to customers, in a challenging environment marked by lockdowns since the beginning of the year. As a result, we were named Best Bank in Portugal in 2021 by Global Finance, which highlights our ability to meet our customers’ needs in challenging environments. We also made a headway in our restructuring plan during the first quarter to simplify our operating model.

Digital customers. March 2021
Thousands. YoY % change
+9  % YoY +9  % +7% +22% +8%
DIGITALESEUROPA_ENG1A.JPG
CLIENTESDIGITALESA013A.JPG

15,617

January - March 2021
IMAGE69.JPG
25

•Poland: we are accelerating our business transformation to deliver better customer experience with targeted plans to solve customer pain points. For example, in the first quarter we delivered new solutions, such as a simplified personal account opening process or new life and health insurance distribution. We have also started our local restructuring plans, which will be extend throughout the year.
Business performance
Gross loans and advances to customers (excluding reverse repos) increased 2% year-on-year. Growth in the UK was mainly driven by the mortgage business and in Spain due to SMEs and corporates. Commercial business activity slowed down, as a result of government aid programmes and lower demand in the past months.
Customer deposits (excluding repos) increased 7%, with growth across all countries. Mutual funds grew 29%.
Results
Underlying attributable profit in the first quarter was EUR 826 million, four times higher than the same period of 2020.
By line:
•Higher total income (13%) spurred by a very positive start of the year in the SCIB business, ALCO portfolio sales in Portugal, and strong margins management in a highly competitive, low-rate environment.
•Costs were down 4% as a result of the ongoing optimization plans in all countries, on track to deliver on our savings commitments for the region.
•Loan-loss provisions dropped 40% compared to the first quarter of 2020, which was strongly affected by covid-19 related provisions.


Business performance. March 2021
EUR billion and YoY % change in constant euros
EUROPA5A.GIF
558  +2%
EUROPA5A.GIF
675  +10%
CREDITOSEUROPA_ENG1A.JPG
RECURSOSEUROPA_ENG1A.JPG
Gross loans and advances to customers excl. reverse repos Customer deposits excl.
repos + mutual funds

By country:
•Spain: underlying attributable profit in the first quarter increased strongly mainly due to lower loan-loss provisions and a sharp cost reduction. Total income had no material change, as the positive performance in NII was somewhat offset by the decrease in net fee income, given that the first quarter of 2020 was barely affected by the covid-19 crisis.
•United Kingdom: underlying attributable profit in the first quarter was virtually 6 times higher at EUR 294 million, receiving an uplift from the strong NII performance and lower costs and provisions.
•Portugal: first quarter underlying attributable profit was 137% higher than previous year, driven by ALCO portfolio sales and lower costs and provisions.
•Poland: interest rates cuts negatively impacted net interest income year-on-year, partially offset by the positive performance in net fee income. Costs were down thanks to the efficiency measures and our restructuring plan execution. Loan-loss provisions were 25% lower. Higher provisions for potential losses related to CHF mortgages led to an underlying attributable profit decrease of 5%.
•Other Europe: SCIB had an excellent quarter across the region, more than doubling revenue versus the previous year, on the back of strong Markets results. Costs rose 14% year-on-year, while provisions remained virtually stable.
In the quarter, underlying attributable profit rose 217% with positive operating jaws and lower provisions.




Europe. Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 4,149  +12  % +13  %
Expenses -2,071  +2  % -4  %
Net operating income 2,077  +24  % +36  %
LLPs -595  -36  % -40  %
PBT 1,231  +235  % +315  %
Underlying attrib. profit 826  +217  % +338  %
26
IMAGE69.JPG
January - March 2021

ES3A.GIF
Spain Underlying attributable profit
EUR 243 mn
Commercial activity and business performance
In individuals, positive commercial dynamism in the first quarter, notably residential mortgages (new lending +17% year-on-year) and consumer finance, recovering close to pre-covid levels.
Growth was recorded in our main loyalty drivers, with double-digit increases in protection insurance, notably non-credit related premiums (+47%) and reaching record highs in net sales of funds, which enabled us to increase our loyal customer base by 6%.
Regarding the self-employed, SMEs and corporates, of note was the year-on-year increase in Factoring (+12%) and Confirming (+1%), despite the slowdown in the demand for loans and advances to customers. In transactional products, we grew our PoS customer base by 16% and increased our market share by 157 bps year-on-year.
As a result, gross loans and advances to customers (excluding reverse repos) fell slightly in the quarter (-2%), mainly driven by wholesale banking, in line with market deleveraging. On a year-on-year basis, growth was 3%, mainly due to SMEs and corporates.
Customer funds were 10% higher year-on-year, with customer deposits up 6% and mutual funds +23%, driven by sustained net positive inflows in the last 11 months.
Results
Underlying attributable profit in the first quarter amounted to EUR 243 million, 170% higher year-on-year. By line:
•Total income had no material change, with 10% growth in net interest income, but negatively affected by lower fee income (-9%) from reduced economic activity amid the pandemic.
•We continued our cost reduction efforts (-8% year-on-year), on the back of the transformation of our distribution model.
•This enabled net operating income to grow 9% year-on-year.
•Lower loan-loss provisions (-29%) following normalization in an environment in which we remained focused on proactive risk management, which enabled us to improve the cost of risk quarter-on-quarter. The NPL ratio fell to 6.18% despite the challenging economic environment.
Compared to the fourth quarter, strong profit improvement driven by lower provisions and the contribution to the DGF recorded in the previous quarter.
Spain. Underlying income statement
EUR million and % change
Q1'21 / Q4'20 / Q1'20
Revenue 1,785  +9  % 0  %
Expenses -867  -1  % -8  %
Net operating income 918  +21  % +9  %
LLPs -449  -27  % -29  %
PBT 340  —  +203  %
Underlying attrib. profit 243  —  +170  %
UK2A.GIF
United Kingdom Underlying attributable profit
EUR 294 mn
(changes in constant euros)
Commercial activity and business performance
We continue our focus on building deeper customer relationships and a seamless customer experience. Our priorities are aligned to the One Santander strategy. These include accelerated customer digital adoption, reshaping of our property footprint, faster digitalization and automation. Digital customers increased 7% and digital transactions 15% year-on-year.
Our strategic transformation programme continues. In Q1’21 we announced the proposed closure of 111 branches, reflecting the continued shift by customers towards online and mobile banking, as we rethink our workplaces.
Gross loans and advances to customers (excluding reverse repos) increased 1% compared to March 2020, with increases in mortgage lending of GPB 3.4 bn, as well as GBP 4.9 bn of government backed business loans to support customers through the pandemic, offset by reduction in our Corporate & Investment Banking business.
Customer funds were 8% greater year-on-year, with both Retail Banking and corporate deposits strongly up reflecting customer spending patterns during the covid-19 pandemic.
Results
Underlying attributable profit in the first three months of 2021 of EUR 294 million, up 470% year-on-year (in constant euros):
•Total income was up 12%, with rebound in net interest income through decisive management deposit repricing actions, mainly the 1I2I3 Current Account, as well as higher customer balances, partially offset by lower asset yields. Net interest income increase was partially offset by reduced fee income from regulatory changes to overdrafts that took effect in April 2020, and lower customer activity.
•Costs reduced 4%, continuing to reflect efficiency savings from our transformation programme. As a result, efficiency ratio improved 9.5 pp reaching 58.7%.
•Loan-loss provisions decreased significantly reflecting the impact of covid-19 provisioning in Q1’20. The cost of credit remained low (21 bps) and the NPL ratio was 1.35%, in line with our prudent approach to risk management. Underlying credit quality remains robust with low arrears and defaults.
Against the previous quarter, underlying attributable profit increased 68%. The increase was predominantly driven by lower credit impairment and also reflected the accounting for the UK Bank Levy, which is recognized annually in the fourth quarter.
United Kingdom. Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 1,111  +3  % +12  %
Expenses -652  +5  % -4  %
Net operating income 459  0  % +45  %
LLPs -18  -82  % -90  %
PBT 410  +100  % +477  %
Underlying attrib. profit 294  +68  % +470  %
January - March 2021
IMAGE69.JPG
27

PT3A.GIF
Portugal Underlying attributable profit
EUR 161 mn

Commercial activity and business performance
We continued with our transformation strategy, simplifying our processes and commercial proposition, in order to provide the best customer service:
•Strong increase in digital adoption (web and mobile). The number of digital customers increased 22% year-on-year and digital sales were higher and now account for 59% of the total.
•We launched cuenta Santander, aimed at attracting new customers, which combines a wide range of services provided under a single fee and also allows, through marginal cost, to include Mundo 123 benefits, which continued to be a key loyalty driver.
•Complete risk insurance offering for individuals and corporates, through our JV with Aegon and Mapfre.
Gross loans and advances to customers (excluding reverse repos) increased 5% year-on-year, backed by steady growth in SMEs and mortgages.
Customer funds rose 5%, with growth in demand deposits (+12%) and mutual funds (+34%), amid the low interest rate environment.
Results
Underlying attributable profit in the first quarter was 137% higher year-on-year at EUR 161 million, driven by:
•Customer revenue dropped 4% weighed down by the impact of the pandemic and lockdown measures (reflected in lower activity), together with lower interest rates. However, total income soared 22% driven by gains on financial transactions from higher ALCO portfolio sales.
•Costs dropped 3% driven by the ongoing transformation process. All these resulted in a significant efficiency improvement to 34.2% (-9 pp).
•Loan-loss provisions declined 57%. The cost of credit was 38 bps and the NPL ratio fell to 3.84% (mainly driven by moratoria).
Compared to the previous quarter, underlying attributable profit increased strongly, driven by gains on financial transactions and lower costs and provisions.

Portugal. Underlying income statement
EUR million and % change
Q1'21 / Q4'20 / Q1'20
Revenue 427  +35  % +22  %
Expenses -146  -2  % -3  %
Net operating income 281  +67  % +41  %
LLPs -35  -17  % -57  %
PBT 234  +75  % +139  %
Underlying attrib. profit 161  +69  % +137  %

PL2.GIF
Poland Underlying attributable profit
EUR 21 mn
(changes in constant euros)
Commercial activity and business performance
Retail and SME banking activity improved. We increased sales in all key products in the quarter, and among others, we achieved record net sales in mutual funds in February, as well as strong brokerage results. However, activity remained below pre-covid levels.
Regarding BCB (Business Corporate Banking), business dynamics improved year-on-year and CIB maintained its leading position in the local market.
We introduced new products and services in the quarter to improve access to credit for customers with a good risk profile.
Gross loans and advances to customers (excluding reverse repos) were down 1% year-on-year. By segment, corporates and institutions fell 6%, individuals remained flat, SMEs rose 1% and CIB increased 5%.
Deposits grew 17% year-on-year, boosted by SMEs and CIB. We continued to actively manage deposits to optimize the cost of funding.
Results
Underlying attributable profit in the first quarter amounted to EUR 21 million, down 5% year-on-year, impacted by the charge regarding Swiss franc mortgages, as net operating income after loan-loss provisions rose 40%, as follows:
•Total income rose 3%: lower net interest income (-15%), impacted by interest rate cuts, was offset by net fee income (+14%, boosted by increased transactionality, cards and securities services) and the lower contribution to the BFG.
•Costs dropped 3% mainly due to lower personnel expenses.
•Loan-loss provisions plummeted 25% due to lower charges in the SME and individual segments.
In the quarter, profit was flat, despite the BFG contribution, which is recorded in the first quarter.



Poland. Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 357  -7  % +3  %
Expenses -158  +4  % -3  %
Net operating income 199  -14  % +8  %
LLPs -68  -15  % -25  %
PBT 58  -12  % -1  %
Underlying attrib. profit 21  0  % -5  %
28
IMAGE69.JPG
January - March 2021

NORTEAMERICA4A.GIF
NORTH AMERICA Underlying attributable profit
EUR 773 mn
Executive summary (changes in constant euros)
→ In North America, the US and Mexico continue to be managed according to a teamwork culture. Synergies between countries further increased, enhancing the regional approach while implementing local priorities, leveraging each country's best practices and avoiding duplication.
→ Sharp increase in customer funds boosted by higher deposits in SBNA and the New York branch. Loans and advances to customers fell dampened by the negative economic impact from the pandemic and the Puerto Rico and Bluestem portfolio disposal.
→ Underlying attributable profit surged 205% year-on-year, driven largely by lower provisions in the US.
Strategy
In line with Grupo Santander's strategy to increase the weight of the most profitable areas:
•In 2020, we increased our stake in Santander Consumer USA (SC USA), reaching more than 80% ownership by the end of the year.
•In line with this strategy, on 26 March 2021, the Group announced that it intends to repurchase the outstanding shares of Santander México that it does not already own (8.3%). This transaction is expected to be completed in the second or third quarter of 2021, subject to regulatory approvals.
•In addition, Banco Santander International (BSI) announced a transaction to acquire USD 4.3 billion in client assets and liabilities from Indosuez Wealth Management, the global wealth management brand of Crédit Agricole group. The transaction will help to solidify BSI’s market leading position and to support the growth of one of Santander US’s most profitable businesses.
•As for our regional strategy, synergies across countries increased further as we continued to run joint initiatives that included:
•Further development of the USMX trade corridor. SCIB and Commercial Banking continued to work to deepen relationships with existing customers and increase customer attraction in both countries, which was reflected in corridor revenue growth (SCIB: +21%; Commercial Banking: +37%).
Loyal customers. March 2021
Thousands. % loyal / active customers
37  % / active customers 24% 39%
VINCULADOSNA_ENG1A.JPG
CLIENTESPAISESA013A.JPG
4,032

•Boost customer attraction and retention through loyalty strategies (such as initiatives to attract payrolls), or broadening our service and product proposition (such as the commission-free remittance service from Santander US branches to any bank in Mexico). At the same time, ongoing development of payment alternatives for the USMX trade corridor, such as Pago FX.
•Drive cultural transformation to improve customer and employee experience, by sharing best practices, such as the success in implementing loyalty programmes in Mexico and the Consumer Banking transformation plan at Santander Bank (SBNA), as well as SC USA's experience in the auto business.
•Continue to reduce duplications in the operating model, platform and architecture, leveraging our existing capabilities to optimize expenses and increase profitability via our common value proposition.
To this end, we are consolidating the intra-regional IT function: operations know-how, digitalization, hubs, front-office and back-office, and addressing common challenges, together with the integration of the regional IT platform (MEXUS).


Digital customers. March 2021
Thousands. YoY % change1
+13  % YoY +8% +15%
DIGITALESNA_ENG1A.JPG
CLIENTESDIGITALESA013A.JPG

6,308
(1) Excluding Puerto Rico disposal impact
January - March 2021
IMAGE69.JPG
29
In addition, in terms of their local priorities:
United States
After the covid-19 crisis, Santander US has continued to support its customers, employees and communities while pursuing its strategic priorities.
Santander US remains focused on customer experience and growing core customers and deposits through commercial, branch and digital transformation initiatives. It continues to leverage its deposit base to support its CRE and CIB businesses and strengthen its auto finance partnership.
The auto business is ideally positioned to benefit from the renewed demand for used vehicles through rigorous risk-adjusted originations via its dealer network, enhancing its partnership with Stellantis.
Santander US continues to demonstrate regulatory progress as the Federal Reserve terminated its 2017 Written Agreement with Santander Holding USA and the Office of the Comptroller of the Currency upgraded Santander Bank’s Community Reinvestment Act rating to “Outstanding”.
Mexico
The multichannel innovation and boost to digital channels continued to strengthen our value proposition with new products and services, allowing us to make headway with our customer attraction and loyalty strategy.
In line with our goal to enhance customer experience and the distribution model, we continued to run projects such as the increase in the number of full function ATMs to 1,411 and the transformation of 579 branches, as well as the instalment of queue management systems and dividing screens that allow for mobility and organized distribution of customers within the branches, in addition to increasing the security and privacy of customers and employees.
We signed an alliance with Honda for auto financing, in line with our aim of becoming a relevant competitor in this segment.
We continued to promote the use of digital channels through campaigns and incentive programmes to boost the activation of the electronic signature and the use of digital cards, as well as the launch of the digital debit card that can be activated through SuperWallet. Moreover, we continued with the consolidation of the Hipoteca Online platform, with more than 75% of transactions made through digital channels in the quarter.
Digital customer attraction leveraged our strategic alliances with Contpaqi and Getnet.
Business performance. March 2021
EUR billion and YoY % change in constant euros1
NORTEAMERICA4A.GIF
123  -1%
NORTEAMERICA4A.GIF
127  +11%
CREDITOSNA_ENG1A.JPG
RECURSOSNORTEAMERICA1A.JPG
Gross loans and advances to customers excl. reverse repos Customer deposits excl.
repos + mutual funds
(1) Excluding Puerto Rico and Bluestem portfolio disposal impact
Lastly, in line with our goal of offering customers new service standards to increase customer satisfaction, we developed a new service model for high income individuals, to differentiate the value proposition of its three segments: Select Black, Select and Evolution.
Business performance
Gross loans and advances to customers excluding reverse repos fell 4% year-on-year, affected by the negative economic impact arising from covid-19 and Puerto Rico and Bluestem portfolio disposal. Loan demand in the US normalized following the uptick from the pandemic.
Solid year-on-year growth in customer funds (+8%) mainly driven by deposit growth in the US and the positive performance in mutual funds in both countries.
Results
In the first three months of 2021, underlying attributable profit was 205% higher year-on-year at EUR 773 million (29% of the Group’s total operating areas):
•Total income increased 4%. Net interest income dropped 2% dampened by lower interest rates, mainly in Mexico.
These declines were closely matched by higher gains on financial transactions, leasing and net fee income (+7%).
•Costs rose at a slower pace than total income and the efficiency ratio improved to 41.5%. The reduction measures implemented in 2020 will have a positive impact in 2021, which will make funds available for new digital and business initiatives.
•Loan-loss provisions plummeted by 65%. Cost of credit improved to 2.34% (2.92% in December 2020), the NPL ratio stood at 2.39% and coverage was 153%.
Compared to the previous quarter, underlying attributable profit surged 89% primarily driven by net fee income, higher gains on financial transactions due to volatility management, cost reduction and lower provisions.
North America. Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 2,768  +3  % +4  %
Expenses -1,149  -5  % +3  %
Net operating income 1,620  +10  % +4  %
LLPs -393  -49  % -65  %
PBT 1,207  +88  % +197  %
Underlying attrib. profit 773  +89  % +205  %
30
IMAGE69.JPG
January - March 2021
US1A.GIF
United States Underlying attributable profit
EUR 616 mn
(changes in constant euros)
Commercial activity and business performance
Santander US remains focused on using its strong capital and Northeast deposit base to support its consumer and commercial customers.
The work conducted over the last few years, the resilience of its core business lines and the strength of the balance sheet allowed Santander to be uniquely positioned to benefit from improving market conditions.
As a result, auto originations increased 24% versus the first quarter of 2020. Santander US continues to leverage its strong deposit base to support prime originations and its relationship with Stellantis.
Gross loans and advances to customers (excluding reverse repos) decreased 3% year-on-year as lending growth in auto, stabilization in commercial banking and originations through the Paycheck Protection Program did not offset Puerto Rico and Bluestem portfolio disposal impacts. Excluding this impact, loans up 1%.
Customer funds (excluding repos) continued to exhibit strong year-on-year performance growing 12% boosted by demand deposits, corporate deposits and mutual funds. Excluding disposal impact, customer funds increased 17% year-on-year.
Results
Underlying attributable profit in the first quarter of 2021 was EUR 616 million, the highest contribution among all markets, following the strong year-on-year increase backed by net operating income (+13%; +19% excluding the disposals impact) and improved cost of credit. By line:
•Total income increased 8%. The lower rate environment and covid-19 continued to pressure net interest margin, but these headwinds were offset by strong net fee income, which rose 5% (18% QoQ) benefiting from capital markets and WM activity, and other operating income, which was 66% higher driven by strong mortgage originate-to-distribute activity and auto leasing.
•Disciplined expense management allowed for costs to remain virtually stable, resulting in an improvement of the efficiency ratio to 39.3% (-2.6 pp).
•Loan-loss provisions decreased 81%, as the improved macroeconomic outlook and customer loan relief led to strong credit performance in the quarter.
Compared to the previous quarter, underlying attributable profit was 144% higher due to better performance on leases as the economy starts to recover. In addition, higher net fee income and gains on financial transactions, improved costs and LLPs reduction.
United States. Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 1,902  +7  % +8  %
Expenses -748  -2  % +1  %
Net operating income 1,154  +13  % +13  %
LLPs -165  -71  % -81  %
PBT 974  +132  % +654  %
Underlying attrib. profit 616  +144  % +1,017  %
MX1A.GIF
Mexico Underlying attributable profit
EUR 182 mn
(changes in constant euros)
Commercial activity and business performance
Gross loans and advances to customers (excluding reverse repos) down 6% year-on-year, as corporate loans began to normalize following the uptick at the beginning of the pandemic. Credit cards continued to be affected by lower activity during lockdown. Nevertheless, loans to individuals grew 7%, notably mortgages (+12%).
In this regard, we made our commercial strategy a priority, with innovative products and services such as Hipoteca Plus, which rewards customer relationships and reduces interest rates if they meet certain requirements, and Hipoteca Free, Mexico's first commission- and insurance-free mortgage. We also launched a remortgage campaign for Private Banking clients, in line with our focus on customer attraction.
Customer funds grew 1%. Deposits were 2% lower, dragged down by corporates following the uptick at the beginning of the pandemic, offsetting the sharp growth recorded in individuals (+27%). Mutual funds were up 11%.
Results
Underlying attributable profit in the first quarter of 2021 of EUR 182 million, 7% lower year-on-year in constant euros:
•Total income was 4% lower impacted by the 6% fall in net interest income as a result of interest rate cuts and lower portfolio volumes. Net fee income was up 8% mainly from transactional fees, and gains on financial transactions increased driven by volatility management and a relatively low Q1'20.
•Operating expenses increased 1% in nominal terms, mainly driven by technology costs and the increase in amortizations, as personnel expenses were lower. In real terms, costs fell 3%.
•Loan-loss provisions dropped 7% despite the charges recorded for certain corporate customers.
Against the previous quarter, underlying attributable profit increased 6% primarily due to higher gains on financial transactions and lower costs (-12%).



Mexico. Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 865  -3  % -4  %
Expenses -373  -12  % +1  %
Net operating income 492  +5  % -7  %
LLPs -228  +7  % -7  %
PBT 259  +9  % -7  %
Underlying attrib. profit 182  +6  % -7  %
January - March 2021
IMAGE69.JPG
31
SUDAMERICA6A.GIF
SOUTH AMERICA Underlying attributable profit
EUR 773 mn
Executive summary (changes in constant euros)
→ We continued to progress on our strategy to strengthen connectivity across regions and enable the export of positive experiences across units, to continue capturing new business opportunities and boosting growth.
→ We remain focused on delivering profitable growth, improving customer experience and loyalty, together with cost and risk control.
→ Close to double-digit growth year-on-year in both loans and advances to customers and customer deposits, underpinned by a wide range of product and service offering.
→ Underlying attributable profit surged 41% year-on-year backed by positive total income performance and lower provisions following covid-19 related charges recorded in Q1'20.

Strategy
South America is a region with great growth potential and banking penetration opportunities. We remained focused on growing in the region backed by the recovery of activity, higher volumes, a comprehensive risk management and greater productivity.
We continued to implement work protocols in all countries to protect our employees' health, while supporting our customers through products and services to mitigate the impact of the pandemic.
We maintained our strategy of capturing synergies across business units:
•In consumer finance, Santander Brasil exported its new and used vehicle financing platform to other countries, and we started the roll-out of Cockpit in Argentina and Peru, a platform to streamline management of car dealerships. Santander Chile increased car insurance sales despite reduced financing activity; we grew the auto business and increased customer loyalty through insurance and digitalization in Colombia; and we continued to specialize in consumer credit and used vehicle financing in Peru.
•In the acquiring business, we continued to roll out Getnet in Argentina and Chile, based on the successful model of Brazil, where we announced the spin-off of Getnet in line with the Group's strategy of consolidating its global payments platform, PagoNxt, and which would transfer ownership of Getnet to Santander Brasil’s shareholders.
Loyal customers. March 2021
Thousands. % loyal / active customers
27  % / active customers 24% 43% 52% 24%
VINCULADOSSA_ENG1A.JPG
CLIENTESPAISESA013A.JPG
9,052
•Collaboration between countries continued to increase, with projects such as the joint SCIB business initiative, that seeks to consolidate and deepen relationships with multinational clients, in order to improve customer service and increase customer attraction and loyalty across countries.
•We made further progress in digitalization to enhance service quality. Digital channels are key to increase transactionality and customer loyalty. As a result, loyal and digital customers were 17% and 21% higher, respectively.
•We continued to promote inclusive and sustainable businesses, such as Prospera, our micro-credit programme, which is already implemented in Brazil, Uruguay and Peru and through which Brazil and Chile granted green loans.
The main initiatives by country were:
•Brazil: commercial activity recovered to pre-covid-19 levels spurred on by our swift implementation capacity, which was reflected in market share gains in lending, mainly in secured loans. We remained focused on capturing business opportunities: in mortgages, we hit the highest number of sales of a first quarter, we continued to increase our current account customer base and in auto we maintained our market share leadership in individuals (25%).

Digital customers. March 2021
Thousands. YoY % change
+21  % YoY +20% +31% +20% +23%
DIGITALESSA_ENG1A.JPG
CLIENTESDIGITALESA013A.JPG

21,623
32
IMAGE69.JPG
January - March 2021
On the other hand, we will continue to progress on the international expansion of Getnet and strengthen its position within PagoNxt's global strategy. We also made headway in the digitalization of products and processes to improve efficiency and optimize risk models.
•Chile: we focused on digital banking and enhancing customer service. Santander Life and Superdigital continued to attract new customers. On the other hand, we officially launched Getnet, which can be connected to other products offered by Santander Chile. Workcafé developed a new website to create a community where SMEs can sell their products directly on the platform and request assistance to launch their own website. In addition, Autocompara became the leader in insurance premium sales.
•Argentina: we continued to improve our customer care model through digital transformation, with initiatives such as the roll-out of a fully digital onboarding process, digital recoveries, and new products such as electronic cheques, comex and insurance, raking first among finance apps. We introduced new digital channels such as WhatsApp, a virtual assistant, emails and online notifications. We also progressed in building an open financial services platform through Getnet. In addition, we achieved achieved third place in the ranking of companies with more than 1,000 employees by GPTW.
•Uruguay: we continued to make progress in our technological transformation and the modernization of our channels and processes through the expansion of Santander Lockers, the launch of Car-One, a branch specialized in car loans, and the consolidation of A sola selfie in its financial entities.
•Peru: we increased deposit taking, improving its structure and cost of funding. Our auto loan financial entity reached 25% market share and continued to expand its activity in consumer loans and used vehicles financing.
•Colombia: we remained focused on corporate clients, conducting M&A advisory transactions. Regarding consumer finance, we started product marketing and digitalization through market places.


Business performance. March 2021
EUR billion and YoY % change in constant euros
SUDAMERICA6A.GIF
120  +10%
SUDAMERICA6A.GIF
150  +12%
CREDITOSSUDAMERICA1A.JPG
RECURSOSSUDAMERICA1A.JPG
Gross loans and advances to customers excl. reverse repos Customer deposits excl.
repos + mutual funds

Business performance
Gross loans and advances to customers (excluding reverse repos) increased 10% year-on-year, with double-digit rises in all country units except Chile and Uruguay.
Customer funds (excluding repos) rose 12%, growing at double-digit rates in all markets except Chile, mainly due to the strong performance of deposits (+17%), both demand and time deposits (+30% and +9%, respectively). Mutual funds rose 2%.
Results
Underlying attributable profit in the first quarter amounted to EUR 773 million, up 41% year-on-year:
•Total income increased 10% underpinned by net interest income (+8%), gains on financial transactions and, to a lesser extent, net fee income.
•Costs rose well below total income growth, largely due to in Argentina (affected by higher inflation and salary agreement). Of note was cost management in Brazil and Chile (-3% and +0.7%, respectively in nominal terms; -6% and -2% in real terms). The efficiency ratio improved 1.3 pp YoY to 34.4% enabling net operating income to increase by 12%.
•Loan-loss provisions dropped by 33% driven by covid-19 related provisions recorded in 2020. In credit quality, the NPL ratio fell to 4.30%, coverage increased 98% and the cost of credit improved to 2.81%.
By country, Brazil, Chile and Argentina recorded sharp underlying attributable profit growth due to the positive performance in total income and lower provisions. Peru increased its profit backed by higher customer revenue. Decreases were recorded in Uruguay, due to lower net interest income (interest rate cuts) and Colombia, affected by higher provisions.
Compared to the fourth quarter, net operating income after LLPs rose 11% boosted by lower costs and provisions. Conversely, underlying attributable profit fell 3%, dampened by some seasonality in total income, covid-19 related lockdowns in several countries and a higher tax burden.

South America. Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 3,539  -1  % +10  %
Expenses -1,219  -11  % +5  %
Net operating income 2,320  +5  % +12  %
LLPs -683  -6  % -33  %
PBT 1,505  +6  % +59  %
Underlying attrib. profit 773  -3  % +41  %

January - March 2021
IMAGE69.JPG
33
BR1A.GIF
Brazil Underlying attributable profit
EUR 562 mn
(changes in constant euros)
Commercial activity and business performance
We continued to make headway with our commercial strategy:
•In auto, we launched Aprova+, a competitive offer to boost vehicle sales. Troca+Troco, an alternative to improve our customer's financial situation, reached more than 11,900 contracts since its launch in Q2'20.
•In acquiring, we added new functionalities in the Way app to give our customers more autonomy.
•In mortgages, new lending in the first three months of the year surged 132% year-on-year and 101% in home equity, through Usecasa.
•In corporates, we enhanced our channels with the launch of GENTE, our collective intelligence tool.
•Within our ESG strategy, our shares were included in the Carbon Efficient Index portfolio (ICO2) by B3.
As for volumes, gross loans and advances to customers excluding reverse repos grew 13% year-on-year. Positive performance across segments, particularly in individuals and SMEs.
Customer funds increased 12% year-on-year, boosted by customer deposits excluding repos, driven by demand and time deposits (+23% and +26%, respectively). Mutual funds dropped 5%.
Results
First quarter underlying attributable profit of EUR 562 million (+47% year-on-year). Of note:
•Total income rose 8% boosted by net interest income (+6%, due to larger volumes) and higher gains on financial transactions.
•Costs dropped 3%, which enabled net operating income to rise 14% and the efficiency ratio to improve by 3.3 pp year-on-year to 28.7%.
•Net loan-loss provisions dropped 31%, due to higher provisions recorded in 2020 related to the pandemic. Cost of credit improved to 3.79%, NPL ratio to 4.42% and coverage ratio was high at 117%.
In the quarter, underlying attributable profit was 3% higher on the back of net interest income and strong cost reduction.

Brazil. Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 2,521  +2  % +8  %
Expenses -723  -16  % -3  %
Net operating income 1,799  +12  % +14  %
LLPs -549  +1  % -31  %
PBT 1,154  +12  % +66  %
Underlying attrib. profit 562  +3  % +47  %
CL1A.GIF
Chile Underlying attributable profit
EUR 153 mn
(changes in constant euros)
Commercial activity and business performance
We remained focused on increasing new customer attraction and loyalty, maintaining a strategy aimed at offering attractive returns based on our digital transformation:
•We introduced Getnet in Chile with great success, installing 13,800 PoS, of which 70% were sold digitally.
•We continued to promote our Santander Life programme, reaching more than 570,000 customers (+245% year-on-year).
•Superdigital has more than 140,000 customers, increasing 442% year-on-year.
•Regarding ESG initiatives, we issued the first sustainable bond to finance the Women SME segment.
•All these measures led to a year-on-year increase in loyal (+15%), current account (+36%) and digital customers (+31%).
In volumes, gross loans and advances to customers (excluding reverse repos) increased 1% year-on-year, as growth in SMEs and mortgages was closely matched by the fall in consumer lending and corporates.
Customer funds (excluding repos) were 5% higher, as we continued to improve the funding mix. Demand deposits rose 42% and time deposits were 30% lower. Mutual funds increased 21%.
Results
Underlying attributable profit in the first quarter amounted to EUR 153 million, 55% higher year-on-year, as follows:
•Total income increased 9% driven by the 9% climb in net interest income (higher mortgage volumes and inflation, and lower cost of deposits) and higher gains on financial transactions. Net fee income showed signs of recovery, increasing 1%.
•Costs remained broadly stable due to lower personnel expenses. As a result, the efficiency ratio improved to 38.4% (-3.3 pp year-on-year).
•Loan-loss provisions were 39% lower due to covid-19 related charges in Q1'20. Cost of credit was 1.33%. The NPL ratio stood at 4.74%.
In the quarter, profit fell 10% mainly from the impact of lower inflation in net interest income and increased tax burden.
Chile. Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 614  0  % +9  %
Expenses -236  +4  % +1  %
Net operating income 378  -3  % +16  %
LLPs -100  +2  % -39  %
PBT 277  -6  % +71  %
Underlying attrib. profit 153  -10  % +55  %
34
IMAGE69.JPG
January - March 2021
AR1A.GIF
Argentina Underlying attributable profit
EUR 45 mn
(changes in constant euros)
Commercial activity and business performance
We remained focused on the transactional business and customer service through initiatives in innovation, an enhanced customer care model, and the digital transformation of the main processes and products. This was reflected in customers and digital sales growth, and in our app, the best rated on iOS and Android. In addition, we launched various initiatives:
•Since its launch in October 2020, Getnet reached 21,000 customers.
•Santander Consumer signed several alliances and launched Cockpit.
•We made headway in ESG initiatives. We placed the first green bond issued on the primary local debt market in February.
Gross loans and advances to customers (excluding reverse repos) rose 47% year-on-year, driven by SME loans and cards. Dollar balances declined in the currency of origin.
Customer deposits (excluding repos) rose 52% year-on-year spurred by peso deposits, as foreign currency balances declined, and the 140% increase in mutual funds. The excess liquidity is placed in central bank notes.
Results
Underlying attributable profit in the first three months was EUR 45 million, 103% higher year-on-year in constant euros:
•Total income grew 26%, underpinned by net interest income, net fee income rebound and higher gains on financial transactions.
•Costs increased 40%, affected by inflation and salary agreements. Net operating income rose 7%.
•Loan-loss provisions fell 71% due to covid-19 related provisions recorded in 2020. The cost of credit improved to 4.55%, the NPL ratio to 2.32% (-165 bps year-on-year) and coverage rose to 232%.
Compared to the previous quarter, profit was 21% higher, boosted by lower costs and provisions.

Argentina. Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 262  -21  % +26  %
Expenses -171  -13  % +40  %
Net operating income 92  -31  % +7  %
LLPs -14  -80  % -71  %
PBT 44  +16  % +53  %
Underlying attrib. profit 45  +21  % +103  %

Other South America
UY1A.GIF
PE1A.GIF
CO1A.GIF
(changes in constant euros)
Uruguay
The consolidation of our business model enabled us to attract new customers and gain market share in key businesses. Gross loans and advances to customers (excluding reverse repos) were up 6%, with positive performance in retail loans. Customer deposits rose 15% boosted by demand deposits.
Underlying attributable profit in the first quarter of EUR 26 million, 11% lower year-on-year:
•Total income dropped 8% mainly driven by the fall in net interest income (significant drop in interest rates) and lower gains on financial transactions. Positive net fee income performance (+14%).
•Costs grew 4%, at a slower pace than inflation.
•Loan-loss provisions decreased 42%. Cost of credit stood at 2.00 % and coverage was 104%.
Compared to the fourth quarter, underlying attributable profit was down 18% dampened by lower net fee income and increased costs related to a higher commercial activity.
Peru
Gross loans and advances to customers excluding reverse repos rose 16% year-on-year and customer deposits were 23% higher backed by demand deposits.
First quarter underlying attributable profit amounted to EUR 12 million, +19% year-on-year:
•Total income rose 46% mainly due to customer revenue. Costs rose at a slower pace than income, improving the efficiency ratio to 28.6%.
•Loan-loss provisions rose due to preventive impairments. The NPL ratio was 0.79% and coverage stood a 178%.
Colombia
Gross loans and advances to customers excluding reverse repos rose 31% year-on-year and customer deposits +24% backed by demand and time deposits.
Underlying attributable profit in the first quarter of EUR 5 million, 9% lower year-on-year:
•Total income grew 13% driven by net interest income and gains on financial transactions. Costs increased 13% due to business development and technology expenses.
•Loan-loss provisions were higher but credit quality was maintained: the NPL ratio was 0.42%, cost of credit of 0.61% and coverage remained high (235%).
Other South America. Underlying income statement
EUR million and % change in constant euros
Net operating income Underlying attributable profit
Q1'21 / Q1'20 Q1'21 / Q1'20
Uruguay 44  -17  % 26  -11  %
Peru 25  +57  % 12  +19  %
Colombia 11  +13  % 5  -9  %
January - March 2021
IMAGE69.JPG
35
DCB DIGITAL CONSUMER BANK Underlying attributable profit
EUR 291 mn
Executive summary (changes in constant euros)
→ As a result of the health crisis, new lending fell 3% year-on-year, especially in January and February, dampened by tougher government restrictions on movement and lockdowns than in the same period of 2020, although we have seen signs of recovery in activity in March.
→ Ongoing execution of the strategic operations initiated in 2020, accelerating the combined business digitalization and beginning the path to convert single-product creditors into full customers, while maintaining high profitability and best-in-class efficiency.
→ Underlying attributable profit was EUR 291 million, improving 25% year-on-year, primarily due to lower provisions recorded in the year. Underlying ROTE remained at double-digits (12%), with a RoRWA in SCF of 2.0%.

Strategy
Santander Digital Consumer Bank is the leading digital consumer finance bank in Europe, created through the combination of Santander Consumer Finance (SCF) and Openbank's strengths: combining the scale and leadership of SCF in Europe, and Openbank’s digital capabilities. The aim is to generate synergies for both businesses:
•SCF will leverage Openbank's IT capabilities to further improve its digital operating system and provide a better service to its customers and partners (OEMs, retailers and individuals) at a lower cost.
•Openbank will be able to offer retail banking products to SCF's large customer base to expand retail capabilities across Europe with lower acquisition costs.
•SCF is Europe's consumer finance leader, present in 18 countries (16 in Europe, including the recent launch in Greece, China and Canada). SCF works through more than 130,000 associated points of sale (mainly auto dealers and retail merchants) through its growing number of agreements with OEMs and retail distribution groups.

DCB. Loan distribution
March 2021
CHART-CB37151790274C409771A.JPG
Germany
Nordics
Spain
France
The UK
Italy
Poland
Others

•Openbank is the full-service European largest digital bank. It offers current accounts, cards, loans and mortgages and state-of-the-art robo-advisor and open platform brokerage services. Openbank is currently active in Spain, the Netherlands, Germany and Portugal, and we are working on its expansion across Europe and the Americas.
Our main priorities for 2021 are to:
•Auto: strengthen our auto financing leadership position, reinforce the leasing business and develop subscription services across our footprint. We will also develop digital online channels for the future and serve customers through 75,000 dealer and OEM points of sale. We also generated around 2 million new contracts to customers in 2020 and have an EUR 90 billion loan book in Q1’21.
•Consumer Non-Auto: gain market share in consumer financing solutions leveraging our position to grow in e-commerce, checkout lending and BuyNowPayLater (BNPL), serving customers through 55,000 physical and digital points of sale. We generated close to 6 million new contracts in 2020, and a loan book of EUR 19 billion in Q1’21.
•Retail: improve digital capabilities to increase customer loyalty among our 1.5 million customer base, boosting digital banking activity, which currently has EUR 35 billion in customer funds.
•Cost reduction and simplification: accelerate digitalization to transform the business and improve efficiency. The main drivers are:
–Organizational simplification: transition from banking licenses to branches in the Western hub.
–Streamlining IT: leveraging Digital ODS Openbank’s platform, the technology and data capabilities with a Digital Banking APIs of a SaaS (Software as a Service) model.
–Redefinition of our distribution model and increased process automatization.
36
IMAGE69.JPG
January - March 2021
Thanks to all these initiatives, we have great potential for the enhancement of the Digital Consumer Bank business through our 19 million active customers, by creating stronger customer relationships while integrating Santander ESG criteria. We want to serve our current and future customers with a positive environmental impact by developing business solutions, such as: financing electric vehicles, carbon compensation services already offered in all countries; financing of electric chargers, solar panels, green heating systems, etc.
Business performance
In Q1’21, new lending dropped 3% year-on-year, impacted by lockdown measures in some countries where DCB operates, and considering that Q1'20 was virtually affected by covid-19. The largest falls were in Central Europe, especially in Germany, the Netherlands and Austria. However, demand showed signs of recovery in March, after the weak activity recorded in January and February.
In order to compensate lost revenue, several measures are being carried out including expense reductions and income initiatives in pricing and cost of funding.
The stock of loans and advances to customers excluding reverse repos was EUR 115.7 billion, slightly lower than in 2020 excluding exchange rates impact, despite the strong impact from covid-19 isolation measures in the majority of markets where DCB operates.
Of note in Q1’21 was the progress made on the following initiatives: the enhancement of our pan-European leasing proposition; the implementation of the new consumer finance solution among more than 2.000 retail points of sale in Italy, thanks to the creation of TIMFIN joint venture; and the set-up of the new Western Hub operating structure as we transition from banking licenses to branches in order to improve efficiency.



Activity
March 2021. EUR billion and % change
-1%
QoQ +3%
QoQ
116
-1% 54 +8%
YoY YoY
Gross loans and advances to customers excl. reverse repos Customer deposits excl. repos + mutual funds
Results
Underlying attributable profit in the first quarter was EUR 291 million, 25% higher year-on-year. By lines:
•Total income increased slightly compared to 2020 (+1%). Net interest income down mainly impacted by the lower portfolio in Spain and interest rate limitations in Poland, offset by higher income from operational leasing activity, following the acquisition of Sixt Leasing Germany in 2020.
•Costs remained virtually flat and fell 4% at constant perimeter. The efficiency ratio stood at 46.1% in Q1’21, slightly below the previous year. Net operating income rose 1%.
•Strong reduction in loan-loss provisions (-50%) due to the impact of covid-19 provisioning in Q1’20. Positive credit quality performance, with a cost of credit of 0.69% and an NPL ratio of 2.23%.
•By country, the largest contribution to the underlying attributable profit came from Germany (EUR 83 million), Nordic countries (EUR 57 million), the UK (50 million), France (EUR 35 million) and Italy (EUR 33 million).
Compared to the previous quarter, underlying attributable profit decreased 16% due to one-off insurance earn-outs and net portfolio sales in the quarter.






DCB. Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 1,304  -4  % +1  %
Expenses -600  0  % +1  %
Net operating income 703  -8  % +1  %
LLPs -166  -20  % -50  %
PBT 506  -10  % +26  %
Underlying attrib. profit 291  -16  % +25  %
January - March 2021
IMAGE69.JPG
37
CENTROCORPORATIVO1A.GIF
Corporate Centre Underlying attributable profit
EUR -527 mn
Executive summary
→ In the health crisis, the Corporate Centre continued to play its role supporting the Group. The progressive return of employees to the workplace was completed, with a mixture of on-site and remote working, always following health authorities recommendations, maintaining a high level of flexibility to meet individual needs.
→ The Corporate Centre’s objective is to aid the operating units by contributing value and carrying out the corporate function of oversight and control. It also carries out functions related to financial and capital management.
→ Underlying attributable loss decreased 49% compared to the first quarter of 2020, mainly due to lower costs and tax burden.

Strategy and functions
The Corporate Centre contributes value to the Group in various ways:
•Making the Group’s governance more solid, through global control frameworks and supervision.
•Fostering the exchange of best practices in management of costs and generating economies of scale. This enables us to be one of the most efficient banks.
•Contributing to the launch of projects that will be developed by our global businesses that leverage our worldwide presence to develop solutions once that can be used by all business units, generating economies of scale.
It also coordinates the relationship with European regulators and supervisors and develops functions related to financial and capital management, as follows:
•Financial Management functions:
–Structural management of liquidity risk associated with funding the Group’s recurring activity, stakes of a financial nature and management of net liquidity related to the needs of some business units.
–This activity is carried out by the different funding sources (issuances and other), always maintaining an adequate profile in volumes, maturities and costs. The price of these operations with other Group units is the market rate plus the premium which, in liquidity terms, the Group supports by immobilizing funds during the term of the operation.
–Interest rate risk is also actively managed in order to soften the impact of interest rate changes on net interest income, conducted via high credit quality, very liquid and low capital consumption derivatives.
–Strategic management of the exposure to exchange rates in equity and dynamic in the countervalue of the units’ annual results in euros. Net investments in equity are currently covered by EUR 22,394 million (mainly Brazil, the UK, Mexico, Chile, the US, Poland and Norway) with different instruments (spot, fx, forwards).
•Management of total capital and reserves: efficient capital allocation to each of the units in order to maximize shareholder return.
Results
First quarter underlying attributable loss of EUR 527 million, 49% lower than in Q1'20 (-EUR 1,031 million):
•Positive impact of EUR 632 million in the income tax line, due to the net effect from the release carried out this year and the charges recoded in the first quarter of 2020.
•Positive trend in operating expenses continued, improving 7% compared to Q1'20, driven by ongoing streamlining and simplification measures.
•On the other hand, net interest income was impacted by the increase in the liquidity buffer to strengthen our position, lower gains on financial transactions (higher gains related to foreign currency hedging in 2020) and higher provisions.
•The net loan-loss provisions line includes a charge of EUR 150 million (EUR 105 million net of tax) for the provision of an additional fund, which has not been allocated to any specific portfolio so far, due to the lack of visibility as to the timing, pace and strength of the economic recovery, given the uncertainty derived, among other reasons, from potential delays in vaccination

plans in those countries that need to accelerate its pace in order to reach high immunity levels.

Corporate Centre. Underlying income statement
EUR million
Q1'21 Q4'20 Chg. Q1'20 Chg.
Total income -370  -252  +46  % -304  +21  %
Net operating income -449  -333  +35  % -389  +15  %
PBT -635  -345  +84  % -413  +54  %
Underlying attrib. profit -527  -389  +35  -1,031  -49  %
38
IMAGE69.JPG
January - March 2021

ICONOSAN1A.GIF
Retail Banking Underlying attributable profit
EUR 1,836 mn
Executive summary
Results. (Q1'21 vs. Q1'20). % change in constant euros
Business performance. EUR bn. % change in constant euros
Profit growth driven by higher volumes and total income, improving the efficiency ratio and cost of credit Gross loans and advances to customers (excluding reverse repos) rose 2% year-on-year and customer funds +10%
Total income Costs Provisions Loans and advances to customers Customer funds
+4% -2% -49% 782
p 2% YoY
747
p 10% YoY
Customers
CLIENTESBANCACOMERCIAL_ENG1A.JPG
Commercial activity
The economic and social impacts arising from the global health crisis in the countries where we operate led us to further strengthen our commitment to our customers. Therefore, we strengthened our commercial offering by defining and launching a series of measures which ensure the necessary financial support and liquidity, such as pre-approved credit lines, payment holidays and special policies.
In addition, this situation has strengthened the implementation and development of our digital transformation strategy, focusing on our multi-channel strategy and the digitalization of processes and businesses. We are adapting channels to new business trends under a hybrid model that prioritizes digital customer service, and combines it with the activity carried out by physical branches, which are well equipped to handle the more complex operations and those that require greater advisory services from our professionals.
This personalized support, tailored to the needs of each customer, also responds to one of our main goals, which is the continuous improvement of customer care and service. This clear orientation enabled us to rank top 3 in customer satisfaction, measured by NPS, in six of our markets.
Our efforts to improve customer care and services, being one of the leaders of the digitalization process of the banking sector and meet our customers' needs, allowed us to exceed 148 million customers. The number of loyal customers increased 9% year-on-year, with growth in both individuals (+9%) and corporates (+10%). Digital customers rose 15% year-on-year, almost 6 million increase, while transactions through digital channels now account for 50% of total transactions.

Results
Underlying attributable profit in the first quarter was EUR 1,836 million, EUR 596 in the first quarter of 2020:
•Total income grew 4% driven by positive net interest income performance and higher gains on financial transactions.
•Costs decreased 2%, which enabled the efficiency ratio to improve 1.9 pp to 43.6%.
•Loan-loss provisions down 49%, as the previous year was strongly affected by covid-19 related provisions.
Retail Banking. Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 9,536  +2  % +4  %
Expenses -4,157  -4  % -2  %
Net operating income 5,378  +6  % +10  %
LLPs -1,783  -27  % -49  %
PBT 3,190  +45  % +184  %
Underlying attrib. profit 1,836  +42  % +208  %
January - March 2021
IMAGE69.JPG
39
SCIB1A.GIF
Santander Corporate & Investment Banking Underlying attributable profit
EUR 704 mn
Executive summary
Results (Q1'21 vs Q1'20). % change in constant euros
Our strategic pillars
Strong profit and profitability growth backed by total income improvement across businesses and countries
SCIBPILARESENG1A.JPG
Total income Underlying profit RoRWA
+44% +64% 2.96%
Revenue growth by business and region* Other highlights in the quarter
SCIBINGRESOSENG1A.JPG
EUROPA5A.GIF
+61%
Creation of the Digital Solutions Group
(DSG) team
Leading positions in the rankings of different products
CIBLIDER1A.GIF
NORTEAMERICA4A.GIF
+5% Structured finance Debt capital
markets (DCM) 		Equity capital markets (ECM)
SUDAMERICA6A.GIF
+41%
CIBEQUIPO-11A.GIF
MUNDO1A.GIF
EUROPA5A.GIF
SUDAMERICA6A.GIF
SUDAMERICA6A.GIF
ES3A.GIF
PT3A.GIF
ES3A.GIF
PT3A.GIF
PL2.GIF
Green Global
(*) EUR million and % change in constant euros
Strategy
SCIB continued to make headway in the execution of its strategy to strengthen its position as our clients' strategic advisor of choice, boosting specialized high value-added products and services, which enabled us to optimize the return on capital.
In line with this strategy, SCIB is focused on high growth potential sectors that require a high degree of specialization.
In 2020, SCIB created the global Environmental, Social and Governance (ESG) solutions team to support our clients in their business transformation towards more sustainable alternatives, such as renewable energies, zero carbon transition, etc.
Since its creation, the ESG team has had a significant impact, and was involved in several transactions in different sectors and markets. It is worth mentioning that in the first quarter of 2021 it led the M&A transactions of Plug Power, in which two joint ventures were created to lead the hydrogen sector, with Groupe Renault and Acciona.
In 2021, we created the DSG (Digital Solutions Group) team, to support the development and digital transformation of our current and potential customer base, in collaboration with other areas of the Group such as PagoNxt or Mouro Capital, among others.



SCIBRENAULT1A.JPG SCIBACCIONA1A.JPG
In the first quarter, SCIB received numerous awards, including the Risk Solutions House of the year by Risk.net, or the PFI Awards for the best transactions of the year both globally (Global Green Deal) and locally (Europe Green Deal, Europe Fiber Deal, APAC renewables Deal, etc.).
Regarding product positioning, SCIB held leading positions in the rankings of different products:
•In Structured Finance, SCIB ranked first globally by number of transactions, promoting renewable energies, the cornerstone of the ESG strategy.
•In DCM (Debt Capital Markets) we are the maker leaders in Latin America and Iberia, and ranked fourth by volume of corporate debt placed in Europe.
•In ECM (Equity Capital Markets) we are the leader in Iberia and Poland and second in Europe.

SCIBPREMIOSENG1A.JPG
40
IMAGE69.JPG
January - March 2021
Results (in constant euros)
As of March, underlying attributable profit amounted to EUR 704 million, 64% more than in the same period of 2020, with a broad-based growth across products compared to the same period of 2020.
Total income soared 44% year-on-year to EUR 1,655 million, backed by higher gains on financial transactions and net fee income, driven by strong growth in markets and the positive performance of the Banking businesses (GDF and GTB).
Revenue performance by business was as follows:
Markets: significant revenue growth, mainly in Europe (five times higher than Q1'20) and the Americas (+28% vs Q1'20), spurred by volatility (although somewhat more subdued than in the previous quarter) and by the client business which we have continued to support with the structuring of hedging products.
Of note was activity in sales (+15% vs Q1'20) and trading (+77% vs Q1'20) worldwide.
GDF (Global Debt Financing): GDF also recorded strong revenue growth (27% vs Q1'20) driven by Structured Finance (+22% vs Q1'20), which is in turn one of the main priorities of our ESG strategy. We expanded our sustainable financing proposition through green and sustainability-linked loans and bonds, becoming a global leader in renewable energy finance and advice, which was reflected in our position in the structured finance and DCM (Debt Capital Markets) League Tables.
GTB (Global Transactional banking): total income was 8% higher year-on-year boosted by Trade and Working Capital Solutions (+25% vs Q1'20) in Europe, North America and Brazil.
Transactional volumes in collections and payments (Cash Management) continued to bounce back benefiting from the gradual recovery of corporate activity, but still remain below pre-covid-19 levels.
CF (Corporate Finance): total income was up 13% driven by positive ECM (Equity Capital Markets) performance in Europe and Brazil.
In Brazil, Santander acted as Global Coordinator or Joint Bookrunner in nine of the 14 IPOs launched, for a total amount of BRL 14.8 billion.
As mentioned above, in M&A (Mergers & Acquisitions), Santander acted as sole financial advisor to Plug Power in the launch of a joint venture with Groupe Renault, to become a leading European player in hydrogen light-commercial vehicles, and with Acciona, for the manufacture of green hydrogen in Iberia. These are groundbreaking transactions that demonstrate our ESG advisory capabilities and commitment.
Santander also acted as advisor to GPA (Casino Group) in the spin-off of its BRL 19 billion Cash & Carry (Assaí) business. This is the first Corporate Finance transaction in the retail sector in the last 12 months and the largest in Latin America in 2021.
Operating expenses increased 8% compared to the first quarter of 2020 due to investments in products and franchises under development. However, efficiency was lower and remained a benchmark in the sector.
On the other hand, loan-loss provisions increased slightly, mainly in Poland and Mexico, due to the significant releases recorded in Q1'20.
due to the net release of provisions in some countries (Spain, Brazil) in the first quarter of 2020.
Compared to the previous quarter, underlying attributable profit doubled, benefiting from higher revenue, strong growth in Markets activity, and lower provisions.


SCIB. Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 1,655  +29  % +44  %
Expenses -526  0  % +8  %
Net operating income 1,130  +49  % +71  %
LLPs -47  -74  % +779  %
PBT 1,058  +109  % +65  %
Underlying attrib. profit 704  +108  % +64  %



January - March 2021
IMAGE69.JPG
41
WMI1A.GIF
Wealth Management & Insurance Underlying attributable profit
EUR 197 mn
Executive summary
Results (Q1'21 vs. Q1'20). % change in constant euros
Growth drivers Q1'21
We started 2021 with positive results and solid performance across our three businesses
PRIVATEBANKING1A.GIF
SAM1A.GIF
INSURANCE1A.GIF
Total fee income generated Total contribution to profit Assets under management RoRWA Net new money Net sales Fee income from non-credit-related business
+3% +1% +12% 6.87% EUR 3.3 bn EUR 1.4 bn +13%
vs Q1'20
Total contribution to profit by business Other highlights in the quarter
Constant EUR million
WMIPREMIOS1A.JPG
WMICONTRIBUCION_ENG1A.JPG
WMIEEUU1A.JPG
Acquisition of
Indosuez Wealth Management
WMINETZERO1A.JPG
WMIFUTURE1A.JPG
SAM joined the
Net Zero Asset Managers initiative
 SAM Luxembourg global platform
EUR 9.5 billion
 (+90% vs March 20)

Commercial activity
Within our strategy developed with the aim of becoming the best responsible wealth manager in Europe and Latin America, of note were:
•In Private Baking, we reached an agreement with Indosuez Wealth Management to purchase a USD 4.3 billion portfolio (EUR 3.6 billion), another step toward our goal of becoming the best global private banking platform.
Also of note was the successful launch of Future Wealth, a joint initiative with SAM, consisting of a range of thematic products regarding innovation and disruptive technologies. Since its launch in November, it reached EUR 3 billion. Activity in funds was complemented with the roll-out of several structures based on Future Wealth's subthemes in different countries.
In addition, we reached EUR 1.4 billion through the increase in the range of alternative products. We continued to expand the ESG investment range via SAM and third party products, with close to EUR 1.5 billion of assets under management, while we further enhance the continuous training of our managers and advisers, as well as tailored ESG reports for our clients.
The total volume of shared business across our markets reached EUR 7.4 billion, 35% more than in the same period of 2020, mainly driven by operations in Mexico, Chile and Miami, reflecting the success of our global platform, which was joined by Uruguay in the quarter.
Collaboration volumes
Constant EUR million
7,400
u +35%
/ Mar 20

•In Santander Asset Management we continued to improve and complete our local and global product offering. Of note was the positive performance of our Global Multi-Asset Solutions (GMAS) investment strategy. The Santander GO range continued to grow strongly (exceeding EUR 2.7 billion) together with the outstanding performance of our platform in Luxembourg, reaching EUR 9.5 billion.
The total distribution of the Future Wealth fund through SAM amounted to EUR 750 million since its launch, attracting customers mainly in Spain and International Private Banking, and, to a lesser extent, in Chile and Portugal.
We made further headway in our ESG strategy, joining the the global Net Zero Asset Managers initiative, as part of our commitment to build a more sustainable financial system and to fighting climate change. We currently have over 20 ESG products, and assets under management rose strongly to close to EUR 7 billion.
•In Insurance, our main growth driver continued to be the non-credit related business, with significant growth in most units compared to 2020. Of note were the increases recorded in Argentina (+61%), Brazil (+22%), Spain (+11%) and México (+10%). As for credit related business, net fee income remained under some pressure until volumes recover from the pandemic.
By business, the auto-related business showed solid growth in the first quarter, with overall double-digit growth across countries compared to the same period last year, notably Spain, Brazil and Argentina. We would also like to highlight the excellent performance of the Autocompara solution, where we already have 1.5 million insurance policies worldwide.


42
IMAGE69.JPG
January - March 2021
Regarding our digital strategy, we continued to increase the number of insurance policies distributed through our digital channels (+22%), which now account for 11% of the total sales volume. On the other hand, our ambitious goal of transversal growth in all products requires a precise management and profiling of customers, highly based on the use of data, to meet their protection needs in the best way possible.
Business performance
Total assets under management amounted to EUR 370 billion, 12% higher year-on-year, driven by the gradual recovery of activity since the most affected months by the health crisis in the first half of 2020.

Business performance: SAM and Private Banking
Constant EUR million
Total Assets Under Management
Funds and investment *
SAM
Private Banking
Custody of customer funds
Customer deposits
Customer loans
CHART-E561E3BB5EFC47168501A.JPG
/ Dec-20 / Mar-20
+1  % +12  %
+1  % +13  %
+1  % +10  %
+1  % +20  %
+4  % +21  %
-1  % -3  %
+3  % +9  %
Note: Total assets marketed and/or managed in 2021 and 2020.
(*) Total adjusted customer funds of private banking managed by SAM.

•In Private Banking, the volume of customer assets and liabilities grew 14% year-on-year to EUR 230 billion, induced by market improvement and the continued strong commercial activity. Net new money in the first quarter amounted to EUR 3.3 billion and net fee income was 8% higher year-on-year.
Underlying attributable profit in the first quarter was EUR 100 million, down 1% compared to the same period of 2020, dampened by the fall in net interest income driven by lower interest rates, mainly in the US and the UK.
•In SAM, total assets under management increased 10% compared to March 2020, following the recovery from the negative impact of markets driven by the covid-19 crisis. Cumulative net sales YTD remained in positive figures at EUR 1.4 billion as of March, mainly in Spain, Mexico, Luxembourg and Poland, and network commercial activity on institutions.
Total contribution to the Group's profit (including ceded fee income) was EUR 120 million, 9% lower year-on-year, mainly due to lower margins.
•In Insurance, the volume of gross written premiums in the first quarter amounted to EUR 2 billion (+11% year-on-year), despite lower loan activity derived from the crisis. Of note was the 13% growth in fee income generated by non-credit related protection business, with insurance premium sales increasing 14%.
Total contribution to profit (including ceded fee income) in the first quarter increased 5% year-on-year to EUR 303 million.
Results
Underlying attributable profit was EUR 197 million in the first quarter of 2021, down 3% year-on-year, affected by non-recurring Insurance results in 2020. Excluding this impact, profit was 8% higher:
•Total income decreased mainly driven by net interest income, dragged down by interest rate cuts in the US and the UK, margin compression in SAM and the reduction in credit related protection insurance business.
•Total fee income generated, including fees ceded to the branch network amounted to EUR 788 million (+3% year-on-year) and represented 31% of the Group's total.
Total fee income generated
EUR million
788
u 31%
/ total Group
•Operating expenses were 1% lower than in 2020, due to the optimization measures that absorbed the impact of the investments carried out.
The total contribution to the Group (including net profit and total fees generated net of taxes) was EUR 523 million in the first quarter, 1% higher than in Q1'20 (+5% excluding non-recurring insurance results in 2020).

WM&I. Total contribution to profit
EUR million and % change in constant euros
Q1'21 Q1'21
WMCONTRIB1A.JPG
523
WMCONTRIB1A.JPG
523
-7  % / Q4'20 +1  % / Q1'20


Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 502  -8  % -2  %
Expenses -220  +2  % -1  %
Net operating income 281  -15  % -3  %
LLPs -5  +11  % -8 
PBT 273  -18  % -3  %
Underlying attrib. profit 197  -18  % -3  %
January - March 2021
IMAGE69.JPG
43
PAGONXT1A.GIF
Underlying attributable profit
EUR -72 mn
Executive summary
PagoNxt
Merchant Solutions
Combining our most innovative payments businesses into a single, autonomous company:
Through the expansion of our Getnet platform to become a leading global acquirer
PAGONXTSOLUCIONES1A.JPG
SME customers in LatAm and Europe Active
merchants 		Total payments volume
> 4 million
1,125 k +14% YoY
EUR 22.5 bn +26% YoY
Trade Solutions Consumer Solutions
For SMEs & Corporates who operate internationally and want state-of-the-art digital solutions We deliver engaging payment solutions for individuals in emerging and developed markets
SME customers
who operate internationally 		Active customers
Superdigital in Brazil 		Transaction volume
Superdigital in Brazil
207,000
570,000
+16% vs Mar-20
EUR 72 mn
+30% YoY
% change of data in EUR excluding the exchange rate impact
Strategy
PagoNxt comprises three businesses which provide simple and accessible digital payment solutions to drive loyalty across individual and corporate customers. The company has invested significantly in the development of its global technology platforms which will be shared across multiple markets, bringing new business opportunities as well as efficiencies to development costs, reducing time to market, and giving customers seamless access to integrated financial services.
Digitalization of customers' payments and accessibility to our services are at the core of PagoNxt strategy, embracing Santander's goals as a responsible bank. Our wide range of merchant and trade solutions will contribute to the development of all type of businesses, helping them digitalize their operations and payments, and our consumer solutions will benefit individual´ lives through financial inclusion and domestic and international payments for all.
PagoNxt leverages Santander´s deep local knowledge in more than 20 countries, customizing its global offerings to fulfil local needs. Merchant, trade and consumer solutions are provided in partnership with Santander local banks, leveraging our existing customer base of over 148 million individual and corporate customers. Additionally, PagoNxt will directly pursue open market opportunities and revenue pools with new customer segments and in new geographies.
The roll-out of PagoNxt platforms by country is meeting the target plan. These three businesses are set to expand their footprint rapidly, jointly covering 12 countries by the end of 2021.
Merchant solutions
Getnet global franchise is already one of the top 3 acquirers in Latin America. Our global single platform strategy leverages Getnet capabilities to enable very efficient processing of in-store and ecommerce payments, and to provide best-in-class value added services in payments, not only for Santander customers but also in the open market.

Getnet continued to incorporate additional functionalities in the platform and expanded to other LatAm and European countries according to its roll out plan.
Among other innovations deployed this quarter, in Brazil Getnet continued to expand its ecommerce offering to support small businesses and corporates. In Mexico, we are extending our value proposition to ensure the complete migration of our merchants to Getnet platform. In Argentina, Getnet launched a solution for long-tail merchants and we plan to provide merchant solutions to other segments in Q4'21. In Chile, the launch of Getnet provided differential features for the local market and generated a strong demand.
LOGOGETNET1A.JPG

In Q1, Getnet completed the agreement to acquire highly-specialized technology assets and teams from the merchant payments business of Wirecard in Europe. This acquisition is reinforcing and accelerating Getnet´s growth plans in Europe.
Merchant Solutions
Active merchants Total payments volume
Thousands EUR billion
1,125 
990 +14% 22.5 
18.8 +26%
Q1'20 Q1'21 Q1'20 Q1'21

44
IMAGE69.JPG
January - March 2021
Trade solutions
PagoNxt Trade delivers simple and integrated trade, international payments and FX solutions for companies and businesses of all sizes, supporting them in their international expansion.
Santander is an experienced player in trade services, with a strong customer base of 207 k companies trading internationally, trade corridors in 13 markets, and EUR 1 bn in gross margin per year.
We are leveraging that experience to develop a new global technology platform that incorporates innovative new services, bringing Santander international flows into a single platform operating under the global brand of One Trade. The platform is being connected to all our banks, and existing clients are accessing seamlessly to the new services, which will also be available for new, open market customers.
The global roll out of our One Trade platform is well underway. As of March 2021, the platform is connected for information services to our customers in Brazil, Spain, the UK, Chile, Portugal and Colombia. We continued to roll out the platform to more geographies and to activate additional services, incorporating in Q2 the first transactional services on international payments and FX management.
ONETRADE_COMPANYXPOSITIVOXA.JPG
Consumer solutions
PagoNxt Consumer is focused on creating compelling (payment) experiences, which ensure we become embedded in consumers’ financial lives, building on Superdigital, our digital wallet solution that serves the underbanked population and the international transfers service from PagoFX.

SUPERDIGITAL1A.JPG
Our global Superdigital platform currently provides efficient transactional services and will integrate financial products to address the financial needs of underbanked consumers. The platform delivers via B2C, B2B2C and B2B solutions, and is being rolled out across 7 countries in LatAm: Brazil, Mexico, Argentina, Chile, Peru, Colombia, and Uruguay.
PagoFX completed development of its international payments platform, which provides fast, lower-cost, transparent and secure international transfers services in the open market. As of Q1, the service is available to individuals in the UK, Belgium and Spain, who can send money to more than 50 countries. We continued with the process of integrating our platform into the banks' web and mobile offerings to facilitate its use for our customers.

Consumer Solutions. Superdigital in Brazil
Active users (thousands)
570
490 +16%
         Q1'20 Q1'21
PagoNxt expected evolution in 2021
In 2021, PagoNxt will further expand its product offering and global platforms, leveraging the Group's scale and reaching out to new customers. The main priorities by business are:
•In Merchant solutions, Getnet will focus on enhancing our global acquiring platform, leveraging the Wirecard assets acquisition, and also on expanding the platform into additional countries in LatAm and Europe.
•In Trade solutions, the priorities are connecting the OneTrade platform to additional Santander customers covering our entire footprint, deploying new core functionalities in all transactional services (payments, FX and trade finance), and reaching customers beyond Santander´s customer base.
•In Consumer solutions, Superdigital will continue to promote financial inclusion, focusing on rolling out the global multi-country platform in all Santander geographies in LatAm, and also launching additional banking services in the platform. We will continue to test new alternative payment models that enable us to offer unique solutions to our clients.

Results
The first quarter underlying attributable profit decreased year-on-year to -EUR 72 million.
This fall was primarily driven by higher costs from investments in project developments, mainly in Trade and Consumer Solutions, together with the integration of Wirecard's assets into Merchant solutions in January.
Total income was lower, induced by a decline in dampened by the pandemic, pressure on margins (mainly in Brazil) and the change in mix towards the e-commerce segment, which has lower margins but greater potential for future growth. In this regard, the expected increase in the number of transactions, merchants and turnover should offset the aforementioned price reductions throughout the year.
Similar performance in the quarter-on-quarter comparison, which also includes some seasonality.


Underlying income statement
EUR million and % change in constant euros
Q1'21 / Q4'20 / Q1'20
Revenue 67  -32  % -18  %
Expenses -136  -4  % +63  %
Net operating income -69  +64  % — 
LLPs -2  +13  % -13  %
PBT -73  +58  % — 
Underlying attrib. profit -72  +31  % — 
January - March 2021
IMAGE69.JPG
45
RESPONSIBLE BANKING

Santander strives every day to contribute to the progress of people and companies in a Simple, Personal and Fair way in all that we do, to earn the confidence of our employees, customers, shareholders and society.
In order to meet our commitment to be a more responsible bank and help society address the main global challenges, we are incorporating social-environmental and good governance surrounding business decision making criteria to respond to two challenges: adapt to the new business environment and contribute to more inclusive and sustainable growth. In 2019 we set clear and ambitious goals on which we have made progress in 2020 and will continue to do so during 2021:
IMAGE1101.JPG
Santander Responsible Banking targets
More information on our goals in responsible banking can be found on our website.
BR_ENG1A.JPG


1.According to relevant external indexes in each country (Great Place to Work, Top Employer, Merco, etc.).
2.Senior positions represent 1% of total workforce.
3.Calculation of equal pay gap compares employees of the same job, level and function.
4.People (unbanked, underbanked or financially vulnerable), who are financially empowered through social investment products, services and initiatives, gain access to the financial system, receive tailored finance and increase their knowledge and resilience through financial education.
5.Includes Santander overall contribution to green finance: project finance, syndicated loans, green bonds, capital finance, export finance, advisory, structuring and other products to help our clients in the transition to a low carbon economy. Commitment from 2019 to 2030 is EUR 220 bn.
6.In those countries where it is possible to certify renewable sourced electricity for the properties occupied by the Group.
7.People supported through Santander Universities initiative (students who will receive a Santander scholarship, will achieve an internship in an SME or participate in entrepreneurship programmes supported by the bank).
8.Excluded Santander Universities and financial education initiatives.


46
IMAGE69.JPG
January - March 2021
IMAGE1101.JPG
First quarter highlights
ICONOSAN1A.JPG
Awards
☑ Euromoney named Santander as Best Private Banking in our core markets, receiving the magazine’s awards for Best Private Bank in Environmental, Social and Governance (ESG).
☑ We were awarded the Top Employer certification in Spain, Poland, the UK and Chile and six markets of Santander Consumer Finance, for which we received the Top Employers Europe 2021 certification for the fifth consecutive year.

BR21A.JPG
Environmental
♣ Santander announced its ambition to achieve net zero carbon emissions across the group by 2050. To achieve this, by 2030 the bank will align its power generation portfolio with the Paris Agreement, and has also published its first two decarbonization targets for 2030: to stop providing financial services to power generation clients with more than 10% of revenues dependent on thermal coal and eliminate all exposure to thermal coal mining worldwide. To bolster this commitment, we are a founding member of the "Net-Zero Banking Alliance" (NZBA) promoted by UNEP-FI.
♣ We continued financing green alternatives and renewable energies in our different countries, and we were named the leader in financing renewable projects in terms of number of transactions and financing volumes, by Dealogic for the fifth year running. In 2020 we reached EUR 33.8 billion of green financing, making progress toward our commitment to reach EUR 120 billion by 2025.
♣ SCIB acted as sole financial advisor to Plug Power, a company in the hydrogen industry, in the launch of a joint venture with the automotive group Renault; acted as joint sustainability coordinator for AB InBev's first sustainability-linked revolving credit facility (RCF) ever issued; and participated in the financing of the world's largest offshore wind farm, Dogger Bank Offshore Wind Farm, in the UK.
♣ In addition, Santander Asset Management has joined the global "Net Zero Asset Managers" initiative as part of its commitment to fighting climate change, and its mutual funds were recognized as the greenest of its kind in Spain by Climetrics.
♣ We announced that, by 2025, all the debit, credit pre-paid cards in Santander’s Europe region will be made of sustainable materials, strengthening our commitment to reduce our own environmental footprint.
ICONOINCLUSION1A.JPG
Social
Ü As for our diversity and inclusion goals, we ranked among the top 10 in the 2021 Bloomberg Gender-Equality Index. Santander UK introduced a talent development programme for black employees and launched its Santander Universities Black Inclusion programme to develop applicants’ financial skills.
Ü We continued to invest in the communities where we operate. Santander Universidades launched the Santander X Environmental Challenge to promote sustainable entrepreneurship, as well as the 11th edition of the Santander Women Scholarships in tandem with the London School of Economics. we also held the XVI edition of the Emprendedor X programme in Argentina, focused on fostering the entrepreneurial culture of young people.

MOLINO1A.JPG
Sustainability Indices
à We also continue to be part of several sustainability indices, providing non-financial information to markets, investors and ESG analysts.
LOGOSBANCARESPONDABLE211A.JPG


January - March 2021
IMAGE69.JPG
47
CORPORATE GOVERNANCE
A responsible bank has a solid governance model with well-defined functions, it manages risks and opportunities prudently and defines its long-term strategy looking out for the interests of all its stakeholders and society in general
GOBIERNOCORPOTATIA011A.JPG

à    2021 Ordinary general shareholders’ meeting
On 26 March, the ordinary general shareholders’ meeting of Banco Santander was held at the corporate headquarters in Boadilla del Monte (Madrid) and, in view of the situation relating to covid-19 and in accordance with section 3 of Royal Decree-Law 34/2020, of 17 November on urgent measures to support business solvency and the energy sector and in relation to tax matters, in its wording provided by Royal Decree-Law 5/2021, of 12 March, it took place exclusively by remote means, without the shareholders, proxies or guests attending physically, other than the members of the Presiding Committee (Mesa) of the General Shareholders’ Meeting (the chairman and the secretary), the CEO and the notary, and with the necessary safety and distance measures.
A total of 612,804 shareholders, present or represented, holders of 11,735,176,840 shares, attended the meeting. Therefore, the quorum was 67.674% of the share capital of Banco Santander.
The proposals of resolutions of the agenda submitted to the vote received an average of 98.3% votes in favour.
Full information on the resolutions passed at the general meeting can be found on Banco Santander’s corporate website (www.santander.com).
à    Amendment of the Bylaws
The aforementioned general meeting approved, subject to receipt of the applicable regulatory approval, the amendment of articles 18, 20, 27, 34 of the Bylaws and the introduction of a new article 34 bis, with the following purpose:
i.to give the board of directors the power to issue non-convertible debentures;
ii.to give the board of directors the power to decide on the application of compensation systems consisting of delivery of shares or rights thereto, as well as any other compensation system referenced to the value of the shares when the beneficiaries of such compensation systems are not directors of Banco Santander;
iii.to give greater flexibility to process the proxies granted and votes cast from a distance by the shareholders at the general meeting, without prejudice to the board of directors being able to reduce the advance period required for receipt thereof by the Bank prior to the date on which the general meeting is scheduled to be held, giving it the same publicity as is given to the announcement of the call to meeting; and
iv.to authorize the board of directors, when so provided by applicable legal provisions, to call shareholders’ meetings to be held by remote means only, without the physical attendance of the shareholders or their representatives.
à    Amendment of the Rules and Regulations of general shareholders' meeting
The general meeting also approved the amendment of articles 2, 8, 20 and 26 of the Rules and Regulations of the general shareholders’ meeting in order to coordinate the text of the Rules and Regulations with the amendments to the Bylaws approved by the general shareholders’ meeting, as well as to introduce a technical precision in the regulatory regulation of mechanisms for granting representation and issuing remote voting and some additional technical improvement.
à    Changes to the international advisory board’s composition
The board of directors has appointed Mr Andreas Dombret as a new member of the international advisory board of Banco Santander.
48
IMAGE69.JPG
January - March 2021
SANTANDER SHARE
The board of directors has agreed to pay a cash dividend of EUR 0.0275 per share against 2020 results from 4 May 2021, the maximum allowed in accordance with the limits set by the European Central Bank recommendation of 15 December 2020.
This dividend will be paid under the resolution for the distribution of share premium approved at the Bank’s general shareholders meeting on 27 October 2020.
àShare price performance
The Santander share is listed in five markets, in Spain, Mexico and Poland as an ordinary share, in the US as an ADR and in the UK as a CDI.
The year began with optimism following the Brexit agreement between the UK and the EU, and the approval of the US stimulus package in December. However, this optimism was tempered at the end of January by uncertainties about economic recovery due to the effects of the third wave of the pandemic and the slow progress of vaccination plans, especially in the EU.
Positive trends returned to the equities market in February, backed by the start of the corporate earnings campaign, hopes for the first impacts of the US stimulus package and the effectiveness of vaccines. At the same time, the IMF revised upwards the growth forecast for 2021, with better growth expectations for the second half of the year, thanks to the strength shown by the Chinese and US economies, and the EU recovery plan.
However, caution returned to the market due to the recent rise in long-term debt yields arising from inflation expectations that could lead to an earlier than expected tightening of monetary policy by the Fed. On the other hand, the ECB indicated at its last meeting that it would accelerate the pace of PEPP (pandemic emergency purchase programme) purchases to minimize the risk of a premature tightening of financial conditions.
As a result, the main global equity markets ended a volatile quarter with gains, with cyclical sectors being the most favoured. Thus, the banking sector recorded an overall better performance, the DJ Stoxx Banks rose 19.1% while the MSCI World Banks rose 14.4%, compared to the Ibex 35 6.3% increase and the DJ Stoxx 50 was 6.9% higher. Santander also closed in positive territory with a rise of 14.1%.

Share price
ACCION41A.JPG
ACCIN3A011A.JPG
START 31/12/2020
END 31/03/2021
€2.538 €2.897
ACCIONMAX1A.JPG
ACCIONMIN1A.JPG
Maximum 25/02/2021
Minimum 28/01/2021
€3.068 €2.375





Comparative share performance
CHART-BA42C04E95B643F49E71A.JPG

January - March 2021
IMAGE69.JPG
49
àMarket capitalization and trading
As at 31 March 2021, Santander was the second largest bank in the Eurozone by market capitalization and the 31st in the world among financial entities (EUR 50,236 million).
The share’s weighting in the DJ Stoxx Banks index was 7.2% and 13.3% in the DJ Euro Stoxx Banks. In the domestic market, its weight in the Ibex 35 as at end-March was 10.9%.
A total of 3,672 million shares were traded in the quarter for an effective value of EUR 10,291 million and a liquidity ratio of 21%.
The daily trading volume was 58 million shares with an effective value of EUR 163 million.

àShareholder base
The total number of Santander shareholders at 31 March 2021 was 3,937,711, of which 3,643,824 were European (75.72% of the capital stock) and 276,201 from the Americas (22.51% of the capital stock).
Excluding the board, which holds 1.05% of the Bank’s capital stock, retail shareholders account for 40.35% and institutional shareholders account for 58.60%.



Share capital distribution by geographic area
March 2021
The Americas Europe Other
22.51% 75.72% 1.77%
ACCIONFINALA011A.JPG
GLOBO-EUROPA21A.GIF
2nd
Bank in the Eurozone by market capitalization
EUR 50,236 million

The Santander share
March 2021
Shares and trading data
Shares (number) 17,340,641,302 
Average daily turnover (number of shares) 58,285,961 
Share liquidity (%) 21
(Number of shares traded during the year / number of shares)
Stock market indicators
Price / Tangible book value (X) 0.75
Free float (%) 99.83




Share capital distribution by type of shareholder
March 2021
CHART-73A48197D30B4E1FAC31A.JPG
Institutions
58.60%
Board *
1.05%
Retail
40.35%
(*) Shares owned or represented by directors.

50
IMAGE69.JPG
January - March 2021



2021 A P P E N D I X
ANEXOENG1A.JPG


January - March 2021
IMAGE69.JPG
51

Net fee income. Consolidated
EUR million
Q1'21 Q4'20 Change (%) Q1'20 Change (%)
Fees from services 1,414  1,378  2.6 1,705  (17.1)
Wealth management and marketing of customer funds 852  873  (2.4) 928  (8.2)
Securities and custody 282  205  37.6 220  28.2
Net fee income 2,548  2,456  3.7 2,853  (10.7)


Underlying operating expenses. Consolidated
EUR million
Q1'21 Q4'20 Change (%) Q1'20 Change (%)
Staff costs 2,688  2,666  0.8 2,899  (7.3)
Other general administrative expenses 1,747  1,873  (6.7) 1,949  (10.4)
   Information technology 495  524  (5.5) 498  (0.6)
   Communications 97  113  (14.2) 133  (27.1)
   Advertising 118  135  (12.6) 136  (13.2)
   Buildings and premises 164  164  — 210  (21.9)
   Printed and office material 19  24  (20.8) 26  (26.9)
   Taxes (other than tax on profits) 140  148  (5.4) 138  1.4
   Other expenses 714  765  (6.7) 808  (11.6)
Administrative expenses 4,435  4,539  (2.3) 4,848  (8.5)
Depreciation and amortization 683  702  (2.7) 729  (6.3)
Operating expenses 5,118  5,241  (2.3) 5,577  (8.2)

Operating means. Consolidated
Employees Branches
Mar-21 Mar-20 Change Mar-21 Mar-20 Change
Europe 67,189  71,295  (4,106) 4,108  4,912  (804)
     Spain 25,470  27,354  (1,884) 2,604  3,222  (618)
     United Kingdom 21,581  23,599  (2,018) 564  615  (51)
     Portugal 6,245  6,512  (267) 438  529  (91)
     Poland 10,306  11,034  (728) 490  535  (45)
     Other 3,587  2,796  791  12  11  1 
North America 39,727  37,648  2,079  1,947  2,048  (101)
     US 15,991  17,277  (1,286) 571  619  (48)
     Mexico 23,280  20,121  3,159  1,376  1,429  (53)
     Other 456  250  206  —  —  — 
South America 65,692  68,874  (3,182) 4,441  4,524  (83)
     Brazil 43,384  45,807  (2,423) 3,591  3,617  (26)
     Chile 10,769  11,437  (668) 335  366  (31)
     Argentina 9,070  9,290  (220) 408  438  (30)
     Other 2,469  2,340  129  107  103  4 
Digital Consumer Bank 15,830  15,434  396  321  418  (97)
Corporate Centre 1,737  1,697  40 
Total Group 190,175  194,948  (4,773) 10,817  11,902  (1,085)

Underlying net loan-loss provisions. Consolidated
EUR million
Q1'21 Q4'20 Change (%) Q1'20 Change (%)
Non-performing loans 2,299  3,015  (23.7) 4,216  (45.5)
Country-risk (1) (3) (66.7) (6) (83.3)
Recovery of written-off assets (306) (401) (23.7) (301) 1.7
Net loan-loss provisions 1,992  2,611  (23.7) 3,909  (49.0)
52
IMAGE69.JPG
January - March 2021
Loans and advances to customers. Consolidated
EUR million
Change
Mar-21 Mar-20 Absolute % Dec-20
Commercial bills 37,596  34,619  2,977  8.6 37,459 
Secured loans 517,421  499,667  17,754  3.6 503,014 
Other term loans 274,791  279,311  (4,520) (1.6) 269,143 
Finance leases 37,340  35,360  1,980  5.6 36,251 
Receivable on demand 8,578  9,418  (840) (8.9) 7,903 
Credit cards receivable 17,106  19,052  (1,946) (10.2) 19,507 
Impaired assets 31,598  31,681  (83) (0.3) 30,815 
Gross loans and advances to customers (excl. reverse repos) 924,430  909,108  15,322  1.7 904,092 
Reverse repos 38,734  49,005  (10,271) (21.0) 35,702 
Gross loans and advances to customers 963,164  958,113  5,051  0.5 939,794 
Loan-loss allowances 23,404  22,706  698  3.1 23,595 
Loans and advances to customers 939,760  935,407  4,353  0.5 916,199 


Total funds. Consolidated
EUR million
Change
Mar-21 Mar-20 Absolute % Dec-20
Demand deposits 667,513  584,015  83,498  14.3 642,897 
Time deposits 170,172  191,054  (20,882) (10.9) 171,939 
Mutual funds 169,634  148,003  21,631  14.6 164,802 
Customer funds 1,007,319  923,072  84,247  9.1 979,638 
Pension funds 15,767  14,549  1,218  8.4 15,577 
Managed portfolios 27,715  28,937  (1,222) (4.2) 26,438 
Repos 45,169  40,390  4,779  11.8 34,474 
Total funds 1,095,970  1,006,948  89,022  8.8 1,056,127 


Eligible capital (phased in) 1. Consolidated
EUR million
Change
Mar-21 Mar-20 Absolute % Dec-20
Capital stock and reserves 115,830  124,727  (8,897) (7.1) 125,449 
Attributable profit 1,608  331  1,277  386.4 (8,771)
Dividends —  —  —  — (478)
Other retained earnings (35,078) (30,166) (4,912) 16.3 (35,345)
Minority interests 6,789  6,911  (122) (1.8) 6,669 
Goodwill and intangible assets (15,682) (27,103) 11,421  (42.1) (15,711)
Other deductions (3,625) (6,285) 2,660  (42.3) (2,415)
Core CET1 69,841  68,414  1,427  2.1 69,399 
Preferred shares and other eligible T1 9,103  9,327  (224) (2.4) 9,102 
Tier 1 78,944  77,741  1,204  1.5 78,501 
Generic funds and eligible T2 instruments 12,819  11,455  1,364  11.9 12,514 
Eligible capital 91,764  89,196  2,568  2.9 91,014 
Risk-weighted assets 567,797  590,952  (23,155) (3.9) 562,580 
CET1 capital ratio 12.30 11.58 0.72 12.34
T1 capital ratio 13.90 13.16 0.75 13.95
Total capital ratio 16.16 15.09 1.07 16.18
(1) The phased-in ratio includes the transitory treatment of IFRS 9, calculated in accordance with article 473 bis of the Regulation on Capital Requirements (CRR) and subsequent amendments introduced by Regulation 2020/873 of the European Union. Without it, the fully-loaded ratio is 11.89%. Additionally, the Tier 1 and total phased-in capital ratios include the transitory treatment according to chapter 2, title 1, part 10 of the aforementioned CRR.
January - March 2021
IMAGE69.JPG
53
Europe
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 2,645  (0.9) (2.0) 11.2  12.5 
Net fee income 1,072  10.7  10.5  (5.0) (4.1)
Gains (losses) on financial transactions (1)
383  123.8  124.6  147.9  151.3 
Other operating income 49  —  —  (14.1) (18.7)
Total income 4,149  12.9  12.0  11.6  12.7 
Administrative expenses and amortizations (2,071) 2.8  1.9  (4.8) (3.8)
Net operating income 2,077  25.2  24.3  34.7  36.1 
Net loan-loss provisions (595) (35.8) (36.1) (40.7) (40.3)
Other gains (losses) and provisions (251) (32.4) (32.6) 6.4  7.5 
Profit before tax 1,231  241.3  235.4  306.9  315.0 
Tax on profit (402) 333.8  327.5  300.9  311.6 
Profit from continuing operations 829  209.4  203.7  309.9  316.6 
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 829  209.3  203.7  309.9  316.6 
Non-controlling interests (3) (79.6) (79.7) (73.7) (75.7)
Underlying attributable profit to the parent 826  223.3  217.2  329.0  338.2 
Balance sheet
Loans and advances to customers 582,033  3.3  0.9  2.3  0.7 
Cash, central banks and credit institutions 243,575  14.1  12.4  37.3  36.4 
Debt instruments 76,451  (5.9) (6.4) (3.7) (4.4)
Other financial assets 47,751  (1.2) (1.3) (21.5) (21.5)
Other asset accounts 33,892  (5.6) (6.8) (20.8) (21.4)
Total assets 983,703  4.4  2.4  5.8  4.6 
Customer deposits 596,875  2.5  0.4  10.2  8.6 
Central banks and credit institutions 190,620  14.1  13.0  18.4  18.5 
Marketable debt securities 88,090  4.6  1.3  (9.5) (11.8)
Other financial liabilities 50,542  (7.5) (7.7) (28.7) (28.8)
Other liabilities accounts 13,014  10.4  8.3  (9.1) (10.2)
Total liabilities 939,140  4.4  2.4  6.1  4.8 
Total equity 44,563  4.5  2.8  1.2  0.0 
Memorandum items:
Gross loans and advances to customers (2)
558,455  2.8  0.5  3.7  2.2 
Customer funds 674,618  2.8  1.1  11.5  10.1 
Customer deposits (3)
575,671  2.3  0.3  9.0  7.5 
 Mutual funds 98,947  6.4  6.0  28.9  28.5 
Ratios (%), operating means and customers
Underlying RoTE 8.53  5.91  6.58 
Efficiency ratio 49.9  (4.9) (8.6)
NPL ratio 3.26  (0.08) (0.11)
NPL coverage 50.01  (0.3) 3.0 
Number of employees 67,189  (2.7) (5.8)
Number of branches 4,108  (8.6) (16.4)
Number of loyal customers (thousands) 10,072  0.5  2.2 
Number of digital customers (thousands) 15,617  2.1  9.0 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
54
IMAGE69.JPG
January - March 2021
Spain
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % %
Net interest income 1,019  (4.5) 10.2 
Net fee income 587  2.4  (8.7)
Gains (losses) on financial transactions (1)
132  (26.4) (15.2)
Other operating income 45  —  (29.1)
Total income 1,785  9.3  (0.2)
Administrative expenses and amortizations (867) (0.7) (8.2)
Net operating income 918  20.9  8.7 
Net loan-loss provisions (449) (26.5) (28.6)
Other gains (losses) and provisions (129) 0.6  24.6 
Profit before tax 340  —  203.2 
Tax on profit (97) —  336.4 
Profit from continuing operations 243  —  170.2 
Net profit from discontinued operations —  —  — 
Consolidated profit 243  —  170.2 
Non-controlling interests —  —  — 
Underlying attributable profit to the parent 243  —  170.4 
Balance sheet
Loans and advances to customers 191,062  (1.6) 2.8 
Cash, central banks and credit institutions 123,441  8.7  57.2 
Debt instruments 18,551  (14.3) (24.2)
Other financial assets 2,428  (9.1) 72.5 
Other asset accounts 20,002  (10.9) (20.7)
Total assets 355,485  0.3  12.7 
Customer deposits 249,279  (0.8) 6.2 
Central banks and credit institutions 51,537  6.7  153.4 
Marketable debt securities 27,212  4.4  (7.8)
Other financial liabilities 7,326  (21.6) (18.3)
Other liabilities accounts 4,692  14.1  (24.7)
Total liabilities 340,046  0.2  13.4 
Total equity 15,439  0.8  (2.0)
Memorandum items:
Gross loans and advances to customers (2)
197,435  (1.6) 2.6 
Customer funds 322,356  0.5  9.7 
    Customer deposits (3)
249,279  (0.8) 6.2 
    Mutual funds 73,078  5.1  23.5 
Ratios (%), operating means and customers
Underlying RoTE 6.50  5.99  4.19 
Efficiency ratio 48.6  (4.9) (4.2)
NPL ratio 6.18  (0.05) (0.70)
NPL coverage 47.2  0.1  2.6 
Number of employees 25,470  (5.5) (6.9)
Number of branches 2,604  (11.4) (19.2)
Number of loyal customers (thousands) 2,697  2.0  6.4 
Number of digital customers (thousands) 5,289  1.1  8.8 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
January - March 2021
IMAGE69.JPG
55
United Kingdom
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 1,001  1.8  (1.3) 22.0  23.7 
Net fee income 120  25.1  20.4  (36.6) (35.7)
Gains (losses) on financial transactions (1)
(12) (61.4) (62.0) 211.2  215.5 
Other operating income 3  107.5  104.0  123.9  127.1 
Total income 1,111  6.0  2.7  10.4  11.9 
Administrative expenses and amortizations (652) 8.5  4.9  (5.0) (3.6)
Net operating income 459  2.7  (0.2) 43.2  45.2 
Net loan-loss provisions (18) (81.3) (82.1) (89.8) (89.6)
Other gains (losses) and provisions (31) (79.4) (79.8) (56.4) (55.8)
Profit before tax 410  105.0  99.8  468.9  476.9 
Tax on profit (116) 299.3  286.4  485.8  494.0 
Profit from continuing operations 294  71.9  67.8  462.5  470.4 
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 294  71.9  67.8  462.5  470.4 
Non-controlling interests —  (100.0) (100.0) (100.0) (100.0)
Underlying attributable profit to the parent 294  71.9  67.8  462.5  470.4 
Balance sheet
Loans and advances to customers 261,943  4.9  (0.5) 2.2  (1.8)
Cash, central banks and credit institutions 66,090  21.4  15.1  76.7  69.8 
Debt instruments 9,230  (19.9) (24.1) (45.5) (47.7)
Other financial assets 796  11.7  6.0  (27.5) (30.4)
Other asset accounts 6,786  (17.0) (21.3) (39.9) (42.3)
Total assets 344,844  6.2  0.7  6.8  2.6 
Customer deposits 241,483  4.1  (1.2) 12.3  7.9 
Central banks and credit institutions 28,981  40.8  33.5  35.4  30.1 
Marketable debt securities 52,632  2.9  (2.4) (15.6) (18.9)
Other financial liabilities 3,156  36.3  29.3  5.9  1.7 
Other liabilities accounts 3,731  (17.2) (21.5) (24.7) (27.7)
Total liabilities 329,983  6.3  0.8  7.6  3.4 
Total equity 14,861  5.0  (0.4) (8.6) (12.2)
Memorandum items:
Gross loans and advances to customers (2)
244,338  5.9  0.5  5.3  1.2 
Customer funds 235,469  5.9  0.5  12.5  8.1 
    Customer deposits (3)
227,119  6.0  0.5  12.2  7.8 
    Mutual funds 8,350  5.2  (0.2) 22.0  17.2 
Ratios (%), operating means and customers
Underlying RoTE 9.22  3.80  7.70 
Efficiency ratio 58.7  1.3  (9.5)
NPL ratio 1.35  0.11  0.36 
NPL coverage 40.47  (4.3) 0.8 
Number of employees 21,581  (2.0) (8.6)
Number of branches 564  —  (8.3)
Number of loyal customers (thousands) 4,410  (0.9) (2.9)
Number of digital customers (thousands) 6,392  2.0  7.2 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
56
IMAGE69.JPG
January - March 2021
Portugal
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % %
Net interest income 193  (1.1) (4.6)
Net fee income 99  (3.5) (2.0)
Gains (losses) on financial transactions (1)
147  —  163.6 
Other operating income (12) —  37.8 
Total income 427  34.8  21.9 
Administrative expenses and amortizations (146) (2.0) (3.5)
Net operating income 281  67.4  41.2 
Net loan-loss provisions (35) (16.9) (56.9)
Other gains (losses) and provisions (13) —  (38.0)
Profit before tax 234  75.4  138.6 
Tax on profit (72) 91.4  144.2 
Profit from continuing operations 161  69.1  136.1 
Net profit from discontinued operations —  —  — 
Consolidated profit 161  69.1  136.1 
Non-controlling interests 0  585.7  (43.1)
Underlying attributable profit to the parent 161  69.0  137.0 
Balance sheet
Loans and advances to customers 38,246  0.5  5.4 
Cash, central banks and credit institutions 7,625  31.0  48.4 
Debt instruments 9,321  (19.4) (17.8)
Other financial assets 1,465  (1.5) (5.6)
Other asset accounts 1,488  0.9  (11.6)
Total assets 58,145  (0.4) 3.8 
Customer deposits 40,073  0.5  3.1 
Central banks and credit institutions 9,591  (3.8) 20.3 
Marketable debt securities 2,500  (0.8) (25.1)
Other financial liabilities 211  (15.2) (29.7)
Other liabilities accounts 1,768  7.7  6.1 
Total liabilities 54,143  (0.2) 3.8 
Total equity 4,002  (3.3) 3.9 
Memorandum items:
Gross loans and advances to customers (2)
39,274  0.6  5.3 
Customer funds 43,678  1.3  5.0 
    Customer deposits (3)
40,073  0.5  3.1 
    Mutual funds 3,605  10.9  33.5 
Ratios (%), operating means and customers
Underlying RoTE 15.94  6.57  8.58 
Efficiency ratio 34.2  (12.8) (9.0)
NPL ratio 3.84  (0.06) (0.72)
NPL coverage 69.2  2.7  10.2 
Number of employees 6,245  (1.4) (4.1)
Number of branches 438  (8.2) (17.2)
Number of loyal customers (thousands) 816  0.6  4.4 
Number of digital customers (thousands) 970  4.3  21.7 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
January - March 2021
IMAGE69.JPG
57
Poland
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 240  (1.3) (0.5) (18.9) (14.7)
Net fee income 127  5.4  6.5  8.8  14.4 
Gains (losses) on financial transactions (1)
20  (21.7) (20.8) 140.6  153.1 
Other operating income (30) —  —  (46.3) (43.5)
Total income 357  (8.0) (7.2) (2.2) 2.8 
Administrative expenses and amortizations (158) 2.6  3.5  (7.9) (3.1)
Net operating income 199  (15.1) (14.2) 2.8  8.1 
Net loan-loss provisions (68) (15.6) (14.8) (28.5) (24.8)
Other gains (losses) and provisions (72) (17.0) (15.6) 101.3  111.7 
Profit before tax 58  (11.9) (11.7) (6.2) (1.3)
Tax on profit (33) 0.6  1.5  9.8  15.4 
Profit from continuing operations 26  (23.9) (24.3) (20.8) (16.7)
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 26  (23.9) (24.3) (20.8) (16.7)
Non-controlling interests (5) (62.2) (62.2) (47.7) (45.0)
Underlying attributable profit to the parent 21  1.1  0.2  (9.4) (4.7)
Balance sheet
Loans and advances to customers 28,199  0.6  2.3  (3.4) (1.6)
Cash, central banks and credit institutions 3,714  46.2  48.7  4.7  6.6 
Debt instruments 14,125  0.9  2.5  64.7  67.8 
Other financial assets 994  1.4  3.1  34.1  36.6 
Other asset accounts 1,320  (1.6) 0.1  (1.1) 0.7 
Total assets 48,351  3.1  4.8  11.4  13.5 
Customer deposits 36,266  4.0  5.7  14.5  16.6 
Central banks and credit institutions 2,597  (0.6) 1.0  5.4  7.3 
Marketable debt securities 2,315  9.7  11.5  (1.9) (0.1)
Other financial liabilities 927  (6.6) (5.1) 12.2  14.3 
Other liabilities accounts 1,180  (4.2) (2.6) (3.0) (1.3)
Total liabilities 43,285  3.5  5.2  12.3  14.3 
Total equity 5,066  (0.2) 1.5  4.7  6.7 
Memorandum items:
Gross loans and advances to customers (2)
29,235  0.6  2.3  (2.8) (1.0)
Customer funds 40,654  4.5  6.3  17.3  19.4 
    Customer deposits (3)
36,266  4.0  5.7  14.5  16.6 
    Mutual funds 4,387  9.1  10.8  46.8  49.5 
Ratios (%), operating means and customers
Underlying RoTE 2.54  (0.02) (0.31)
Efficiency ratio 44.3  4.6  (2.7)
NPL ratio 4.82  0.08  0.53 
NPL coverage 70.3  (0.4) 2.2 
Number of employees 10,306  (2.6) (6.6)
Number of branches 490  (2.4) (8.4)
Number of loyal customers (thousands) 2,149  1.6  7.9 
Number of digital customers (thousands) 2,812  2.0  7.8 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
58
IMAGE69.JPG
January - March 2021
Other Europe
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 192  5.7  5.6  43.0  44.9 
Net fee income 138  83.3  84.2  77.2  83.3 
Gains (losses) on financial transactions (1)
96  —  —  —  — 
Other operating income 43  7.2  8.3  (24.1) (24.7)
Total income 469  62.1  62.3  126.3  132.6 
Administrative expenses and amortizations (249) 4.4  4.9  12.0  14.0 
Net operating income 221  328.4  323.2  —  — 
Net loan-loss provisions (26) (73.5) (73.5) 14.4  16.3 
Other gains (losses) and provisions (6) (54.9) (51.5) 27.6  16.1 
Profit before tax 189  —  —  —  — 
Tax on profit (84) —  —  —  — 
Profit from continuing operations 106  —  —  —  — 
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 106  —  —  —  — 
Non-controlling interests 3  112.1  127.4  624.0  — 
Underlying attributable profit to the parent 108  —  —  —  — 
Balance sheet
Loans and advances to customers 62,584  17.0  16.1  2.2  3.5 
Cash, central banks and credit institutions 42,706  14.7  14.0  (19.2) (18.7)
Debt instruments 25,224  12.0  12.0  39.4  39.4 
Other financial assets 42,068  (0.9) (1.0) (24.9) (24.8)
Other asset accounts 4,296  74.5  70.6  31.6  35.6 
Total assets 176,877  11.8  11.3  (7.6) (7.0)
Customer deposits 29,774  22.5  22.0  39.2  40.2 
Central banks and credit institutions 97,914  14.5  13.8  (10.0) (9.2)
Marketable debt securities 3,431  45.8  45.8  —  — 
Other financial liabilities 38,921  (6.7) (6.8) (32.7) (32.7)
Other liabilities accounts 1,641  458.5  456.3  591.3  594.3 
Total liabilities 171,682  11.3  10.8  (8.7) (8.2)
Total equity 5,195  31.7  30.1  55.4  59.2 
Memorandum items:
Gross loans and advances to customers (2)
48,173  9.9  8.9  3.2  4.9 
Customer funds 32,460  5.4  5.1  26.8  27.6 
Customer deposits (3)
22,935  1.8  1.4  11.7  12.5 
    Mutual funds 9,526  15.3  15.3  88.0  88.0 
Resources
Number of employees 3,587  14.8  28.3 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
January - March 2021
IMAGE69.JPG
59
NORTH AMERICA
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 2,005  (2.5) (1.8) (11.3) (2.3)
Net fee income 451  12.3  12.8  (2.8) 7.2 
Gains (losses) on financial transactions (1)
98  740.3  662.6  44.2  58.8 
Other operating income 215  (6.9) (4.4) 45.0  57.7 
Total income 2,768  2.6  3.3  (5.9) 3.7 
Administrative expenses and amortizations (1,149) (5.5) (4.7) (6.6) 2.8 
Net operating income 1,620  9.2  9.9  (5.3) 4.3 
Net loan-loss provisions (393) (49.1) (49.3) (68.4) (65.3)
Other gains (losses) and provisions (20) (64.8) (63.9) 43.2  58.5 
Profit before tax 1,207  84.4  87.7  167.2  196.9 
Tax on profit (297) 91.9  94.9  159.9  189.0 
Profit from continuing operations 910  82.1  85.5  169.6  199.5 
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 910  82.1  85.5  169.6  199.5 
Non-controlling interests (137) 65.0  68.9  145.4  170.1 
Underlying attributable profit to the parent 773  85.5  88.8  174.4  205.4 
Balance sheet
Loans and advances to customers 122,702  1.8  (2.0) (9.4) (6.6)
Cash, central banks and credit institutions 31,414  9.6  6.0  (5.5) (5.2)
Debt instruments 38,692  0.8  (2.0) 27.8  26.8 
Other financial assets 12,075  (21.8) (23.8) (33.7) (35.5)
Other asset accounts 21,733  4.9  0.8  (6.5) (2.1)
Total assets 226,617  1.3  (2.2) (5.7) (3.9)
Customer deposits 120,090  16.7  12.6  2.0  4.2 
Central banks and credit institutions 22,942  (39.7) (41.6) (25.9) (25.8)
Marketable debt securities 38,189  4.4  0.4  (9.1) (4.9)
Other financial liabilities 13,762  (15.0) (17.1) (29.7) (31.9)
Other liabilities accounts 5,881  (2.5) (5.6) (11.8) (11.0)
Total liabilities 200,863  0.6  (2.9) (7.4) (5.8)
Total equity 25,754  7.0  3.2  10.0  13.4 
Memorandum items:
Gross loans and advances to customers (2)
122,862  1.8  (2.0) (6.9) (4.0)
Customer funds 127,263  8.3  4.5  6.1  7.9 
Customer deposits (3)
104,581  8.6  4.7  3.1  5.5 
    Mutual funds 22,683  6.8  3.5  22.0  20.5 
Ratios (%), operating means and customers
Underlying RoTE 14.31  6.55  8.97 
Efficiency ratio 41.5  (3.5) (0.3)
NPL ratio 2.39  0.16  0.37 
NPL coverage 153.4  (29.1) (16.7)
Number of employees 39,727  2.6  5.5 
Number of branches 1,947  (0.6) (4.9)
Number of loyal customers (thousands) 4,032  2.3  11.1 
Number of digital customers (thousands) 6,308  3.0  13.3 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
60
IMAGE69.JPG
January - March 2021
United States
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 1,337  (0.8) 0.2  (8.6) (0.1)
Net fee income 241  16.6  17.5  (3.6) 5.4 
Gains (losses) on financial transactions (1)
70  611.7  548.8  50.5  64.4 
Other operating income 254  7.2  10.1  48.9  62.7 
Total income 1,902  5.6  6.8  (1.4) 7.7 
Administrative expenses and amortizations (748) (3.1) (1.9) (7.5) 1.0 
Net operating income 1,154  12.1  13.3  3.0  12.6 
Net loan-loss provisions (165) (70.5) (70.7) (83.0) (81.4)
Other gains (losses) and provisions (15) (61.0) (59.6) 133.3  154.9 
Profit before tax 974  126.2  132.5  589.7  653.6 
Tax on profit (235) 132.6  138.3  454.0  505.3 
Profit from continuing operations 739  124.2  130.7  647.9  717.2 
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 739  124.2  130.7  647.9  717.2 
Non-controlling interests (122) 76.7  81.6  218.1  247.5 
Underlying attributable profit to the parent 616  136.8  143.8  922.3  1,016.9 
Balance sheet
Loans and advances to customers 91,777  0.9  (3.5) (12.2) (5.9)
Cash, central banks and credit institutions 21,214  27.7  22.2  7.3  15.0 
Debt instruments 15,154  7.6  3.0  (5.0) 1.8 
Other financial assets 3,584  (18.2) (21.7) (50.6) (47.0)
Other asset accounts 17,861  5.0  0.5  (10.2) (3.8)
Total assets 149,590  4.6  0.0  (10.7) (4.3)
Customer deposits 83,633  24.0  18.6  (0.1) 7.1 
Central banks and credit institutions 8,583  (59.1) (60.9) (52.6) (49.2)
Marketable debt securities 31,541  6.1  1.5  (12.6) (6.3)
Other financial liabilities 3,681  (15.0) (18.6) (50.3) (46.7)
Other liabilities accounts 3,475  3.1  (1.3) (18.3) (12.5)
Total liabilities 130,913  4.0  (0.5) (12.5) (6.2)
Total equity 18,677  8.6  3.9  4.5  12.0 
Memorandum items:
Gross loans and advances to customers (2)
91,408  1.0 (3.3) (9.6) (3.1)
Customer funds 85,512  11.1 6.3 4.1 11.5
    Customer deposits (3)
74,107  11.6 6.8 1.7 9.0
    Mutual funds 11,405  7.7 3.1 23.0 31.8
Ratios (%), operating means and customers
Underlying RoTE 15.56  9.01  14.01 
Efficiency ratio 39.3  (3.5) (2.6)
NPL ratio 2.11  0.07  0.11 
NPL coverage 183.2  (27.2) 1.7 
Number of employees 15,991  (0.8) (7.4)
Number of branches 571  (2.4) (7.8)
Number of loyal customers (thousands) 380  9.7  16.0 
Number of digital customers (thousands) 1,044  3.2  2.4 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
January - March 2021
IMAGE69.JPG
61
Mexico
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 667  (5.6) (5.6) (16.4) (6.4)
Net fee income 204  8.7  8.7  (3.4) 8.2 
Gains (losses) on financial transactions (1)
28  —  —  29.4  44.8 
Other operating income (34) 487.5  477.3  43.4  60.5 
Total income 865  (2.9) (2.9) (14.1) (3.9)
Administrative expenses and amortizations (373) (11.6) (11.5) (10.2) 0.6 
Net operating income 492  4.9  4.9  (16.9) (7.0)
Net loan-loss provisions (228) 7.6  7.5  (16.7) (6.7)
Other gains (losses) and provisions (5) (73.1) (73.0) (31.9) (23.8)
Profit before tax 259  8.9  8.8  (16.7) (6.7)
Tax on profit (63) 18.1  18.0  (15.0) (4.8)
Profit from continuing operations 196  6.3  6.2  (17.2) (7.3)
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 196  6.3  6.2  (17.2) (7.3)
Non-controlling interests (14) 6.2  6.2  (16.7) (6.8)
Underlying attributable profit to the parent 182  6.3  6.2  (17.3) (7.4)
Balance sheet
Loans and advances to customers 30,910  4.6  2.6  0.0  (8.4)
Cash, central banks and credit institutions 9,980  (15.8) (17.4) (25.6) (31.8)
Debt instruments 23,538  (3.2) (5.0) 64.6  50.8 
Other financial assets 8,490  (22.7) (24.1) (22.1) (28.6)
Other asset accounts 3,617  2.7  0.7  10.1  0.8 
Total assets 76,535  (4.6) (6.4) 5.1  (3.7)
Customer deposits 36,445  2.8  0.9  7.0  (2.0)
Central banks and credit institutions 14,354  (15.5) (17.0) 11.7  2.3 
Marketable debt securities 6,648  (2.9) (4.7) 12.0  2.6 
Other financial liabilities 10,054  (15.0) (16.6) (17.3) (24.2)
Other liabilities accounts 2,389  (9.1) (10.8) (0.4) (8.8)
Total liabilities 69,890  (5.2) (7.0) 3.7  (5.0)
Total equity 6,645  2.2  0.3  23.3  13.0 
Memorandum items:
Gross loans and advances to customers (2)
31,437  4.1  2.2  2.2  (6.4)
Customer funds 41,740  2.9  1.0  10.3  1.1 
    Customer deposits (3)
30,462  1.8  (0.1) 6.9  (2.1)
    Mutual funds 11,278  5.9  4.0  20.9  10.8 
Ratios (%), operating means and customers
Underlying RoTE 12.73  0.44  (3.14)
Efficiency ratio 43.1  (4.2) 1.9 
NPL ratio 3.21  0.40  1.14 
NPL coverage 95.6  (25.3) (38.3)
Number of employees 23,280  4.6  15.7 
Number of branches 1,376  0.2  (3.7)
Number of loyal customers (thousands) 3,651  1.6  10.6 
Number of digital customers (thousands) 5,110  2.2  14.9 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
62
IMAGE69.JPG
January - March 2021
Other North America
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income —  (81.1) (81.1) —  — 
Net fee income 7  (15.0) (15.0) 75.2  75.2 
Gains (losses) on financial transactions (1)
—  —  —  —  — 
Other operating income (5) —  —  —  — 
Total income 2  (72.7) (72.7) (60.8) (60.8)
Administrative expenses and amortizations (28) 29.8  29.8  384.2  384.2 
Net operating income (26) 86.1  86.1  —  — 
Net loan-loss provisions —  (87.2) (87.2) 61.8  61.8 
Other gains (losses) and provisions —  —  —  225.5  225.5 
Profit before tax (26) 85.4  85.4  —  — 
Tax on profit 1  —  —  (60.2) (60.2)
Profit from continuing operations (25) 73.3  73.3  —  — 
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit (25) 73.3  73.3  —  — 
Non-controlling interests —  448.8  448.8  190.3  190.3 
Underlying attributable profit to the parent (25) 72.4  72.4  —  — 
Balance sheet
Loans and advances to customers 16  7.5  7.5  88.2  88.2 
Cash, central banks and credit institutions 220  11.4  11.4  224.6  224.6 
Debt instruments —  (100.0) (100.0) (100.0) (100.0)
Other financial assets 1  (98.3) (98.3) (98.1) (98.1)
Other asset accounts 255  32.5  32.5  345.1  345.1 
Total assets 492  1.5  1.5  140.0  140.0 
Customer deposits 12  (31.8) (31.8) (1.3) (1.3)
Central banks and credit institutions 4  (91.1) (91.1) (33.1) (33.1)
Marketable debt securities —  —  —  —  — 
Other financial liabilities 27  20.9  20.9  14.6  14.6 
Other liabilities accounts 17  (46.1) (46.1) (6.8) (6.8)
Total liabilities 61  (50.3) (50.3) (0.2) (0.2)
Total equity 432  19.0  19.0  199.0  199.0 
Memorandum items:
Gross loans and advances to customers (2)
17  11.3  11.3  100.7  100.7 
Customer funds 12  (31.8) (31.8) (1.3) (1.3)
    Customer deposits (3)
12  (31.8) (31.8) (1.3) (1.3)
    Mutual funds —  —  —  —  — 
Resources
Number of employees 456  36.1  82.4 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
January - March 2021
IMAGE69.JPG
63
SOUTH AMERICA
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 2,575  0.3  (1.6) (16.0) 8.0 
Net fee income 842  (4.9) (5.3) (21.8) 2.4 
Gains (losses) on financial transactions (1)
205  30.0  27.8  202.7  280.6 
Other operating income (83) (5.1) (9.3) 99.8  183.3 
Total income 3,539  0.5  (1.0) (15.1) 9.5 
Administrative expenses and amortizations (1,219) (8.7) (10.7) (18.3) 4.9 
Net operating income 2,320  6.1  5.1  (13.3) 12.1 
Net loan-loss provisions (683) (2.7) (6.5) (48.4) (33.2)
Other gains (losses) and provisions (132) 143.6  116.2  (6.5) 27.6 
Profit before tax 1,505  5.2  6.2  24.3  59.4 
Tax on profit (599) 20.9  24.1  44.6  91.1 
Profit from continuing operations 905  (3.2) (3.1) 13.7  43.6 
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 905  (3.2) (3.1) 13.7  43.6 
Non-controlling interests (132) (6.4) (6.0) 37.2  59.8 
Underlying attributable profit to the parent 773  (2.6) (2.5) 10.5  41.2 
Balance sheet
Loans and advances to customers 115,576  1.6  2.9  2.4  9.5 
Cash, central banks and credit institutions 44,049  2.1  4.9  (4.1) 6.7 
Debt instruments 48,061  (2.5) —  7.5  23.3 
Other financial assets 14,402  (17.0) (17.3) (25.5) (27.6)
Other asset accounts 15,013  (1.2) 1.1  (12.7) (3.3)
Total assets 237,102  (0.7) 1.0  (1.2) 7.2 
Customer deposits 111,592  (0.2) 1.7  4.8  15.1 
Central banks and credit institutions 45,621  8.5  10.3  0.2  10.0 
Marketable debt securities 20,974  (1.4) (0.7) (22.2) (18.6)
Other financial liabilities 31,519  (11.1) (9.7) (6.0) (1.9)
Other liabilities accounts 7,520  (9.8) (7.5) (12.0) (0.9)
Total liabilities 217,226  (0.8) 0.9  (1.7) 6.6 
Total equity 19,876  0.2  2.1  4.5  14.4 
Memorandum items:
Gross loans and advances to customers (2)
120,478  1.4  2.7  2.4  9.7 
Customer funds 150,343  (1.9) 0.1  1.5  12.1 
    Customer deposits (3)
103,135  (0.2) 1.6  7.5  17.4 
    Mutual funds 47,208  (5.4) (3.0) (9.5) 1.9 
Ratios (%), operating means and customers
Underlying RoTE 19.33  (0.60) 3.42 
Efficiency ratio 34.4  (3.5) (1.3)
NPL ratio 4.30  (0.09) (0.33)
NPL coverage 98.4  1.0  5.5 
Number of employees 65,692  0.2  (4.6)
Number of branches 4,441  0.2  (1.8)
Number of loyal customers (thousands) 9,052  5.1  16.7 
Number of digital customers (thousands) 21,623  6.4  21.1 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
64
IMAGE69.JPG
January - March 2021
Brazil
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 1,780  (0.3) 2.6  (21.6) 5.8 
Net fee income 632  (6.6) (3.6) (27.3) (1.9)
Gains (losses) on financial transactions (1)
127  11.4  15.2  818.9  — 
Other operating income (18) (43.2) (36.8) 8.7  46.7 
Total income 2,521  (0.9) 2.0  (19.6) 8.4 
Administrative expenses and amortizations (723) (19.4) (16.3) (28.0) (2.9)
Net operating income 1,799  9.2  11.8  (15.7) 13.8 
Net loan-loss provisions (549) 1.7  0.9  (48.5) (30.6)
Other gains (losses) and provisions (96) 164.1  150.8  (24.4) 2.0 
Profit before tax 1,154  7.7  12.4  22.8  65.7 
Tax on profit (530) 21.5  26.4  43.8  94.1 
Profit from continuing operations 624  (1.8) 2.8  9.3  47.4 
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 624  (1.8) 2.8  9.3  47.4 
Non-controlling interests (63) (7.3) (2.5) 14.6  54.6 
Underlying attributable profit to the parent 562  (1.1) 3.4  8.7  46.7 
Balance sheet
Loans and advances to customers 63,935  (0.1) 3.9  (2.6) 13.2 
Cash, central banks and credit institutions 31,083  (1.2) 2.7  3.4  20.2 
Debt instruments 36,145  (4.0) (0.2) (4.7) 10.8 
Other financial assets 6,059  (11.9) (8.4) 3.0  19.7 
Other asset accounts 10,254  (3.3) 0.6  (17.4) (3.9)
Total assets 147,476  (2.1) 1.9  (3.0) 12.9 
Customer deposits 66,801  (4.7) (0.9) 3.4  20.3 
Central banks and credit institutions 30,212  14.7  19.3  (7.9) 7.1 
Marketable debt securities 11,514  (3.3) 0.6  (29.3) (17.7)
Other financial liabilities 21,740  (7.6) (3.9) 13.7  32.2 
Other liabilities accounts 5,049  (18.0) (14.7) (24.1) (11.8)
Total liabilities 135,316  (2.0) 2.0  (3.0) 12.8 
Total equity 12,160  (3.1) 0.8  (2.8) 13.0 
Memorandum items:
Gross loans and advances to customers (2)
67,170  (0.4) 3.6  (2.7) 13.1 
Customer funds 94,340  (6.0) (2.2) (3.9) 11.7 
    Customer deposits (3)
58,397  (5.2) (1.4) 7.7  25.2 
    Mutual funds 35,944  (7.2) (3.5) (18.3) (4.9)
Ratios (%), operating means and customers
Underlying RoTE 21.43  0.04  4.97 
Efficiency ratio 28.7  (6.6) (3.3)
NPL ratio 4.42  (0.17) (0.52)
NPL coverage 116.5  3.4  8.5 
Number of employees 43,384  0.3  (5.3)
Number of branches 3,591  0.6  (0.7)
Number of loyal customers (thousands) 6,582  3.1  16.0 
Number of digital customers (thousands) 16,604  6.7  20.1 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
January - March 2021
IMAGE69.JPG
65
Chile
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 497  0.6  (3.1) 11.0  9.3 
Net fee income 95  0.4  (3.2) 2.7  1.1 
Gains (losses) on financial transactions (1)
32  77.7  69.7  141.9  138.1 
Other operating income (10) (20.0) (22.8) 795.8  781.9 
Total income 614  3.3  (0.5) 11.2  9.5 
Administrative expenses and amortizations (236) 7.5  3.5  2.3  0.7 
Net operating income 378  0.9  (2.8) 17.5  15.7 
Net loan-loss provisions (100) 6.2  1.9  (38.5) (39.5)
Other gains (losses) and provisions (1) —  —  —  — 
Profit before tax 277  (2.8) (6.3) 73.3  70.7 
Tax on profit (55) 13.5  9.4  157.9  153.9 
Profit from continuing operations 222  (6.2) (9.5) 60.3  57.8 
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 222  (6.2) (9.5) 60.3  57.8 
Non-controlling interests (69) (5.4) (8.7) 67.7  65.1 
Underlying attributable profit to the parent 153  (6.5) (9.8) 57.1  54.7 
Balance sheet
Loans and advances to customers 40,760  3.5  0.1  11.5  0.7 
Cash, central banks and credit institutions 6,265  7.3  3.9  (32.8) (39.3)
Debt instruments 8,867  6.0  2.6  130.3  107.9 
Other financial assets 8,158  (20.2) (22.8) (38.1) (44.1)
Other asset accounts 3,105  0.9  (2.3) (9.5) (18.3)
Total assets 67,154  0.4  (2.8) 1.3  (8.6)
Customer deposits 30,435  7.3  3.8  11.9  1.0 
Central banks and credit institutions 11,374  (2.0) (5.2) 23.4  11.4 
Marketable debt securities 9,280  0.4  (2.9) (11.4) (20.0)
Other financial liabilities 8,981  (19.5) (22.2) (34.3) (40.7)
Other liabilities accounts 1,799  18.4  14.6  49.7  35.1 
Total liabilities 61,869  (0.1) (3.3) 0.2  (9.6)
Total equity 5,285  6.2  2.7  15.9  4.6 
Memorandum items:
Gross loans and advances to customers (2)
42,049  3.6  0.2  12.0  1.1 
Customer funds 39,626  4.6  1.2  16.8  5.4 
    Customer deposits (3)
30,383  7.2  3.8  12.4  1.4 
    Mutual funds 9,243  (3.1) (6.3) 34.0  20.9 
Ratios (%), operating means and customers
Underlying RoTE 17.22  (2.41) 5.41 
Efficiency ratio 38.4  1.5  (3.3)
NPL ratio 4.74  (0.05) 0.11 
NPL coverage 63.4  2.0  6.2 
Number of employees 10,769  (0.6) (5.8)
Number of branches 335  (3.2) (8.5)
Number of loyal customers (thousands) 780  2.1  14.7 
Number of digital customers (thousands) 1,723  11.4  30.9 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
66
IMAGE69.JPG
January - March 2021
Argentina
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 204  6.5  (25.6) (15.3) 29.7 
Net fee income 74  3.7  (21.1) (2.2) 49.7 
Gains (losses) on financial transactions (1)
32  182.2  85.3  38.3  111.7 
Other operating income (47) (0.6) (13.1) 117.8  233.5 
Total income 262  15.9  (20.6) (17.4) 26.4 
Administrative expenses and amortizations (171) 21.0  (13.4) (8.2) 40.5 
Net operating income 92  7.5  (31.3) (30.4) 6.6 
Net loan-loss provisions (14) (71.3) (79.8) (81.4) (71.5)
Other gains (losses) and provisions (34) 55.1  25.9  152.9  287.2 
Profit before tax 44  194.8  16.2  —  53.2 
Tax on profit 2  (42.8) 459.8  —  — 
Profit from continuing operations 46  150.8  20.3  32.7  103.1 
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 46  150.8  20.3  32.7  103.1 
Non-controlling interests —  8.6  (29.5) 22.3  87.3 
Underlying attributable profit to the parent 45  152.9  20.8  32.8  103.3 
Balance sheet
Loans and advances to customers 4,310  3.8  8.7  (3.9) 47.1 
Cash, central banks and credit institutions 3,647  19.6  25.3  7.4  64.5 
Debt instruments 1,611  (15.1) (11.1) (27.6) 10.8 
Other financial assets 65  9.7  14.8  (15.2) 29.9 
Other asset accounts 827  (0.7) 4.0  0.3  53.6 
Total assets 10,459  4.7  9.6  (5.0) 45.5 
Customer deposits 7,518  4.7  9.6  (9.5) 38.6 
Central banks and credit institutions 821  (2.3) 2.3  21.6  86.2 
Marketable debt securities 67  230.5  246.0  (23.2) 17.6 
Other financial liabilities 696  5.9  10.9  10.3  68.9 
Other liabilities accounts 324  (9.9) (5.6) (16.4) 27.9 
Total liabilities 9,426  4.1  9.0  (6.5) 43.1 
Total equity 1,033  10.9  16.1  12.3  71.9 
Memorandum items:
Gross loans and advances to customers (2)
4,544  3.4  8.3  (3.8) 47.3 
Customer funds 9,499  8.0  13.1  (0.7) 52.0 
    Customer deposits (3)
7,518  4.7  9.6  (9.5) 38.6 
    Mutual funds 1,981  22.6  28.3  56.7  139.9 
Ratios (%), operating means and customers
Underlying RoTE 20.43  1.23  2.84 
Efficiency ratio 65.0  2.7  6.5 
NPL ratio 2.32  0.21  (1.65)
NPL coverage 232.4  (42.7) 101.2 
Number of employees 9,070  (1.0) (2.4)
Number of branches 408  0.0  (6.8)
Number of loyal customers (thousands) 1,573  16.0  21.1 
Number of digital customers (thousands) 2,689  1.5  19.5 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
January - March 2021
IMAGE69.JPG
67
Other South America
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 93  (1.6) 0.2  (12.3) 4.1 
Net fee income 41  (4.3) (1.6) 2.4  17.9 
Gains (losses) on financial transactions (1)
14  (2.2) (0.2) (19.7) (6.2)
Other operating income (7) —  —  280.7  372.9 
Total income 141  (10.1) (8.2) (12.9) 2.3 
Administrative expenses and amortizations (90) 15.6  17.1  24.8  44.6 
Net operating income 51  (35.2) (33.4) (43.0) (32.2)
Net loan-loss provisions (20) 3.6  5.5  (1.0) 17.4 
Other gains (losses) and provisions (1) 276.5  279.6  (53.1) (44.1)
Profit before tax 30  (49.4) (47.8) (55.5) (47.0)
Tax on profit (16) 14.6  17.6  6.1  27.4 
Profit from continuing operations 14  (69.5) (68.5) (73.6) (68.6)
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 14  (69.5) (68.5) (73.6) (68.6)
Non-controlling interests —  267.1  282.8  234.2  234.2 
Underlying attributable profit to the parent 14  (69.1) (68.0) (73.2) (68.2)
Balance sheet
Loans and advances to customers 6,571  5.3  6.0  6.3  16.0 
Cash, central banks and credit institutions 3,055  9.0  9.6  (3.6) 5.7 
Debt instruments 1,439  3.8  4.4  108.2  123.1 
Other financial assets 121  (34.9) (34.9) (36.5) (33.7)
Other asset accounts 828  19.6  20.0  55.8  61.7 
Total assets 12,013  6.3  6.9  11.6  21.5 
Customer deposits 6,837  10.6  11.3  7.6  17.5 
Central banks and credit institutions 3,214  (0.8) (0.2) 13.3  22.8 
Marketable debt securities 114  1.4  0.8  2.0  19.5 
Other financial liabilities 103  2.1  2.5  (19.5) (14.7)
Other liabilities accounts 348  16.7  17.3  14.5  24.5 
Total liabilities 10,615  6.9  7.5  9.0  18.9 
Total equity 1,398  1.9  2.3  35.7  45.5 
Memorandum items:
Gross loans and advances to customers (2)
6,715  5.4  6.0  6.5  16.2 
Customer funds 6,878  10.5  11.2  7.6  17.5 
    Customer deposits (3)
6,837  10.6  11.3  7.6  17.5 
    Mutual funds 41  6.7  7.4  8.3  17.7 
Resources
Number of employees 2,469  5.7  5.5 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
68
IMAGE69.JPG
January - March 2021
DIGITAL CONSUMER BANK
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 1,056  (2) (2.4) (3) (2.6)
Net fee income 188  (8) (8.0) (2) (1.8)
Gains (losses) on financial transactions (1)
8  (51) (50.4) —  — 
Other operating income 51  (11) (12.2) 122  122.1 
Total income 1,304  (4) (4.3) 1  1.3 
Administrative expenses and amortizations (600) 1  0.1  1  1.0 
Net operating income 703  (7) (7.7) 1  1.5 
Net loan-loss provisions (166) (19) (20.0) (50) (49.7)
Other gains (losses) and provisions (31) —  —  —  — 
Profit before tax 506  (9) (9.8) 25  25.5 
Tax on profit (135) 1  0.2  25  25.6 
Profit from continuing operations 372  (12) (13.0) 25  25.5 
Net profit from discontinued operations —  (100) (100.0) —  — 
Consolidated profit 372  (12) (13.0) 25  25.5 
Non-controlling interests (80) 1  1.2  27  27.4 
Underlying attributable profit to the parent 291  (16) (16.2) 25  25.0 
Balance sheet
Loans and advances to customers 112,816  —  (1.4) 1  (1.3)
Cash, central banks and credit institutions 27,524  27  25.9  28  25.7 
Debt instruments 5,946  5  4.8  119  111.5 
Other financial assets 39  30  29.3  (13) (14.0)
Other asset accounts 6,381  4  2.6  25  22.6 
Total assets 152,705  4  3.0  8  5.8 
Customer deposits 53,324  4  3.0  9  7.3 
Central banks and credit institutions 47,600  15  12.9  28  25.5 
Marketable debt securities 33,696  (6) (6.9) (13) (14.2)
Other financial liabilities 1,539  12  11.4  21  18.6 
Other liabilities accounts 3,928  —  (0.8) 8  7.1 
Total liabilities 140,087  4  3.4  8  6.2 
Total equity 12,619  —  (1.1) 4  1.4 
Memorandum items:
Gross loans and advances to customers (2)
115,663  —  (1.4) 1  (1.3)
Customer funds 54,103  4  3.2  10  7.8 
    Customer deposits (3)
53,324  4  3.0  9  7.3 
    Mutual funds 779  18  18.4  72  71.9 
Ratios (%), operating means and customers
Underlying RoTE 11.99  (2.25) 2.36 
Efficiency ratio 46.1  2.0  (0.1)
NPL ratio 2.23  0.06  0.02 
NPL coverage 111.4  (1.9) (0.1)
Number of employees 15,830  (2.1) 2.6 
Number of branches 321  (9.1) (23.2)
Number of total customers (thousands) 19,273  (2) (7)
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.
January - March 2021
IMAGE69.JPG
69
CORPORATE CENTRE
Q
EUR million
Underlying income statement Q1'21 Q4'20 % Q1'20 %
Net interest income (324) (345) (6.2) (304) 6.5 
Net fee income (5) (3) 49.6  (9) (45.0)
Gains (losses) on financial transactions (1)
(44) 104  —  14  — 
Other operating income 3  (8) —  (5) — 
Total income (370) (252) 46.4  (304) 21.4 
Administrative expenses and amortizations (79) (80) (1.4) (85) (6.7)
Net operating income (449) (333) 34.9  (389) 15.3 
Net loan-loss provisions (154) (4) —  (3) — 
Other gains (losses) and provisions (33) (9) 268.9  (20) 60.4 
Profit before tax (635) (345) 83.9  (413) 53.9 
Tax on profit 108  (44) —  (524) — 
Profit from continuing operations (527) (389) 35.4  (937) (43.8)
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit (527) (389) 35.4  (937) (43.8)
Non-controlling interests —  —  (8.7) (94) — 
Underlying attributable profit to the parent (527) (389) 35.4  (1,031) (48.9)
Balance sheet
Loans and advances to customers 6,632  5,044  31.5  5,989  10.7 
Cash, central banks and credit institutions 89,695  61,173  46.6  46,314  93.7 
Debt instruments 1,450  1,918  (24.4) 1,292  12.2 
Other financial assets 2,005  1,645  21.9  3,745  (46.5)
Other asset accounts 119,024  112,807  5.5  131,526  (9.5)
Total assets 218,806  182,587  19.8  188,866  15.9 
Customer deposits 974  825  18.0  740  31.6 
Central banks and credit institutions 62,440  38,554  62.0  27,484  127.2 
Marketable debt securities 64,354  57,240  12.4  56,906  13.1 
Other financial liabilities 1,085  493  120.1  803  35.1 
Other liabilities accounts 8,106  9,443  (14.2) 8,917  (9.1)
Total liabilities 136,959  106,556  28.5  94,849  44.4 
Total equity 81,847  76,031  7.6  94,017  (12.9)
Memorandum items:
Gross loans and advances to customers (2)
6,972  5,224  33.5  6,135  13.6 
Customer funds 992  837  18.5  751  32.1 
    Customer deposits (3)
974  825  18.0  740  31.6 
    Mutual funds 18  12  49.6  11  66.5 
Resources
Number of employees 1,737  1,692  2.7  1,697  2.4 
(1) Includes exchange differences.
(2) Excluding reverse repos.
(3) Excluding repos.

70
IMAGE69.JPG
January - March 2021
RETAIL BANKING
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 7,472  (0.4) (1.2) (6.7) 4.3 
Net fee income 1,709  1.4  1.2  (17.0) (6.3)
Gains (losses) on financial transactions (1)
246  (3.4) 2.1  147.6  109.8 
Other operating income 109  —  —  —  442.9 
Total income 9,536  2.0  1.5  (6.2) 4.5 
Administrative expenses and amortizations (4,157) (2.9) (3.8) (10.2) (1.8)
Net operating income 5,378  6.1  6.0  (2.9) 9.9 
Net loan-loss provisions (1,783) (26.1) (27.4) (54.2) (48.6)
Other gains (losses) and provisions (405) (0.8) (3.5) 18.2  35.1 
Profit before tax 3,190  42.0  45.2  144.3  183.6 
Tax on profit (1,047) 60.6  66.6  142.0  191.2 
Profit from continuing operations 2,143  34.4  36.7  145.4  180.1 
Net profit from discontinued operations —  —  (100.0) —  — 
Consolidated profit 2,143  34.4  36.7  145.4  180.1 
Non-controlling interests (307) 8.9  10.1  70.2  81.3 
Underlying attributable profit to the parent 1,836  39.9  42.4  165.0  208.1 
(1) Includes exchange differences.

CORPORATE & INVESTMENT BANKING
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 720  (5.8) (7.0) 6.4  19.0 
Net fee income 466  24.1  23.0  15.9  27.9 
Gains (losses) on financial transactions (1)
412  568.2  428.7  163.2  244.2 
Other operating income 57  12.3  12.7  (5.9) (6.6)
Total income 1,655  32.1  29.1  27.6  43.9 
Administrative expenses and amortizations (526) 0.5  (0.1) (0.4) 7.7 
Net operating income 1,130  54.8  49.4  46.9  70.6 
Net loan-loss provisions (47) (74.8) (74.4) 700.9  778.6 
Other gains (losses) and provisions (25) (65.8) (63.3) 66.0  79.4 
Profit before tax 1,058  124.0  109.1  41.4  64.5 
Tax on profit (318) 138.3  121.4  44.9  70.8 
Profit from continuing operations 740  118.4  104.2  40.0  62.0 
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 740  118.4  104.2  40.0  62.0 
Non-controlling interests (36) 56.5  50.9  6.0  28.1 
Underlying attributable profit to the parent 704  122.9  107.9  42.3  64.2 
(1) Includes exchange differences.

January - March 2021
IMAGE69.JPG
71
WEALTH MANAGEMENT & INSURANCE
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income 88  (11.8) (12.5) (19.1) (11.3)
Net fee income 297  0.3  0.3  (3.8) 2.5 
Gains (losses) on financial transactions (1)
36  (15.2) (15.8) 80.8  108.2 
Other operating income 81  (24.1) (24.1) (28.4) (22.6)
Total income 502  (7.9) (8.1) (8.8) (1.7)
Administrative expenses and amortizations (220) 2.2  2.0  (6.9) (0.5)
Net operating income 281  (14.5) (14.7) (10.2) (2.7)
Net loan-loss provisions (5) 11.9  10.8  (11.0) (8.4)
Other gains (losses) and provisions (3) —  —  341.5  271.7 
Profit before tax 273  (17.6) (17.7) (11.0) (3.4)
Tax on profit (67) (17.8) (18.0) (9.6) (3.2)
Profit from continuing operations 206  (17.5) (17.6) (11.4) (3.4)
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit 206  (17.5) (17.6) (11.4) (3.4)
Non-controlling interests (9) (17.1) (16.4) (15.9) (4.0)
Underlying attributable profit to the parent 197  (17.5) (17.7) (11.2) (3.4)
(1) Includes exchange differences.

PAGONXT
Q
EUR million
/ Q4'20 / Q1'20
Underlying income statement Q1'21 % % excl. FX % % excl. FX
Net interest income (1) 129.1 216.2 — —
Net fee income 81  (20.6) (19.2) (13.0) 9.3
Gains (losses) on financial transactions (1)
1  — — (61.8) (46.3)
Other operating income (15) —  —  —  — 
Total income 67  (33.3) (32.2) (33.9) (17.6)
Administrative expenses and amortizations (136) (4.5) (3.6) 41.9 62.6
Net operating income (69) 64.8 63.8 — —
Net loan-loss provisions (2) 19.3  12.6  (35.4) (13.4)
Other gains (losses) and provisions (2) (31.9) (17.3) —  — 
Profit before tax (73) 57.9 58.0 — —
Tax on profit 1  — — — —
Profit from continuing operations (72) 31.5 31.5 — —
Net profit from discontinued operations —  —  —  —  — 
Consolidated profit (72) 31.5 31.5 — —
Non-controlling interests —  331.5 331.1 127.8 127.8
Underlying attributable profit to the parent (72) 30.9 30.9 — —
(1) Includes exchange differences.
72
IMAGE69.JPG
January - March 2021
ALTERNATIVE PERFORMANCE MEASURES (APMs)
In addition to the financial information prepared under IFRS, this consolidated directors’ report contains financial measures that constitute alternative performance measures (‘APMs’) to comply with the guidelines on alternative performance measures issued by the European Securities and Markets Authority on 5 October 2015 and non-IFRS measures.

The financial measures contained in this consolidated directors’ report that qualify as APMs and non-IFRS measures have been calculated using the financial information from Santander but are not defined or detailed in the applicable financial information framework or under IFRS and have neither been audited nor reviewed by our auditors.

We use these APMs and non-IFRS measures when planning, monitoring and evaluating our performance. We consider these APMs and non-IFRS financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period. While we believe that these APMs and non-IFRS financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute of IFRS measures. In addition, the way in which Santander defines and calculates these
APMs and non-IFRS measures may differ from the calculations and by other companies with similar measures and, therefore, may not be comparable.

The APMs and non-IFRS measures we use in this document can be categorised as follows:

Underlying results
In addition to IFRS results measures, we present some results measures which are non-IFRS measures and which we refer to as underlying measures. These underlying measures allow in our view a better year-on-year comparability as they exclude items outside the ordinary course performance of our business which are grouped in the non-IFRS line net capital gains and provisions and are further detailed on page 11 of this report.
In addition, in the section "Financial information by segments", relative to the primary and secondary segments, results are presented on an underlying basis in accordance with IFRS 8, and reconciled on an aggregate basis to our IFRS consolidated results to the consolidated financial statements, which are set out below.
Reconciliation of underlying results to statutory results
EUR million
January-March 2021
Underlying results Adjustments Statutory results
Net interest income 7,956  —  7,956 
Net fee income 2,548  —  2,548 
Gains (losses) on financial transactions (1)
651  —  651 
Other operating income 235  —  235 
Total income 11,390  —  11,390 
Administrative expenses and amortizations (5,118) —  (5,118)
Net operating income 6,272  —  6,272 
Net loan-loss provisions (1,992) —  (1,992)
Other gains (losses) and provisions (467) (711) (1,178)
Profit before tax 3,813  (711) 3,102 
Tax on profit (1,324) 181  (1,143)
Profit from continuing operations 2,489  (530) 1,959 
Net profit from discontinued operations —  —  — 
Consolidated profit 2,489  (530) 1,959 
Non-controlling interests (351) —  (351)
Attributable profit to the parent 2,138  (530) 1,608 
(1) Includes exchange differences.

Explanation of adjustments:
Restructuring costs for a net impact of -EUR 530 million: -EUR 293 million in the UK, -EUR 165 million in Portugal, -EUR 16 million in Digital Consumer Bank and -EUR 56 million in the Corporate Centre.
January - March 2021
IMAGE69.JPG
73
Reconciliation of underlying results to statutory results
EUR million
January-March 2020
Underlying results Adjustments Statutory results
Net interest income 8,487  —  8,487 
Net fee income 2,853  —  2,853 
Gains (losses) on financial transactions (1)
292  (5) 287 
Other operating income 182  —  182 
Total income 11,814  (5) 11,809 
Administrative expenses and amortizations (5,577) (12) (5,589)
Net operating income 6,237  (17) 6,220 
Net loan-loss provisions (3,909) (10) (3,919)
Other gains (losses) and provisions (372) (38) (410)
Profit before tax 1,956  (65) 1,891 
Tax on profit (1,260) 16  (1,244)
Profit from continuing operations 696  (49) 647 
Net profit from discontinued operations —  —  — 
Consolidated profit 696  (49) 647 
Non-controlling interests (319) 3  (316)
Attributable profit to the parent 377  (46) 331 
(1) Includes exchange differences.


Explanation of adjustments:
Restructuring costs for a net impact of -EUR 46 million.



74
IMAGE69.JPG
January - March 2021
Profitability and efficiency ratios
The purpose of the profitability and efficiency ratios is to measure the ratio of profit to capital, to tangible capital, to assets and to risk weighted assets, while the efficiency ratio measures how much general administrative expenses (personnel and other) and amortization costs are needed to generate revenue.
Additionally, the goodwill adjustments have been removed from the RoTE numerator as, since they are not considered in the denominator, we believe this calculation is more correct.

Ratio Formula Relevance of the metric
RoE Attributable profit to the parent This ratio measures the return that shareholders obtain on the funds invested in the Bank and as such measures the company's ability to pay shareholders.
(Return on equity)
Average stockholders’ equity 1 (excl. minority interests)
Underlying RoE Underlying attributable profit to the parent This ratio measures the return that shareholders obtain on the funds invested in the Bank excluding non-recurring results.
Average stockholders’ equity 1 (excl. minority interests)
RoTE
Attributable profit to the parent2
This indicator is used to evaluate the profitability of the company as a percentage of its tangible equity. It's measured as the return that shareholders receive as a percentage of the funds invested in the entity less intangible assets.
(Return on tangible equity)
Average stockholders' equity 1 (excl. minority interests) - intangible assets
Underlying RoTE Underlying attributable profit to the parent This indicator measures the profitability of the tangible equity of a company arising from ordinary activities, i.e. excluding results from non-recurring operations.
Average stockholders' equity 1 (excl. minority interests) - intangible assets
RoA Consolidated profit This metric measures the profitability of a company as a percentage of its total assets. It is an indicator that reflects the efficiency of the company's total funds in generating profit.
(Return on assets) Average total assets
Underlying RoA Underlying consolidated profit This metric measures the profitability of a company as a percentage of its total assets, excluding non-recurring results. It is an indicator that reflects the efficiency of the company's total funds in generating underlying profit.
Average total assets
RoRWA Consolidated profit The return adjusted for risk is a derivative of the RoA metric. The difference is that RoRWA measures profit in relation to the bank's risk weighted assets.
(Return on risk weighted assets) Average risk weighted assets
Underlying RoRWA Underlying consolidated profit This relates the consolidated profit (excluding non-recurring results) to the bank's risk weighted assets.
Average risk weighted assets
Efficiency ratio
Operating expenses 3
One of the most commonly used indicators when comparing productivity of different financial entities. It measures the amount of funds used to generate the bank's total income.
Total income
1. Stockholders’ equity = Capital and Reserves + Accumulated other comprehensive income + Attributable profit to the parent + Dividends.
2. Excluding the adjustment to the valuation of goodwill.
3. Operating expenses = Administrative expenses + amortisations.
January - March 2021
IMAGE69.JPG
75
Profitability and efficiency(1) (2) (3) (4)
Q1'21 Q4'20 Q1'20
RoE 9.80  % 5.54  % 1.47  %
Attributable profit to the parent 8,022 4,546 1,462
Average stockholders' equity (excluding minority interests) 81,858 82,080 99,221
Underlying RoE 10.44  % 6.93  % 1.52  %
Attributable profit to the parent 8,022 4,546 1,462
(-) Net capital gains and provisions -530 -1,146 -46
Underlying attributable profit to the parent 8,552 5,692 1,508
Average stockholders' equity (excluding minority interests) 81,858 82,080 99,221
RoTE 12.16  % 6.86  % 2.04  %
Attributable profit to the parent 8,022 4,546 1,462
(+) Goodwill impairment — — —
Attributable profit to the parent (excluding goodwill impairment) 8,022 4,546 1,462
Average stockholders' equity (excluding minority interests) 81,858 82,080 99,221
(-) Average intangible assets 15,892 15,802 27,721
Average stockholders' equity (excl. minority interests) - intangible assets 65,965 66,278 71,500
Underlying RoTE 12.96  % 8.59  % 2.11  %
Attributable profit to the parent 8,022 4,546 1,462
(-) Net capital gains and provisions -530 -1,146 -46
Underlying attributable profit to the parent 8,552 5,692 1,508
Average stockholders' equity (excl. minority interests) - intangible assets 65,965 66,278 71,500
RoA 0.62  % 0.38  % 0.18  %
Consolidated profit 9,426 5,797 2,734
Average total assets 1,526,899 1,517,201 1,536,725
Underlying RoA 0.65  % 0.46  % 0.18  %
Consolidated profit 9,426 5,797 2,734
(-) Net capital gains and provisions -530 -1,155 -50
Underlying consolidated profit 9,956 6,952 2,784
Average total assets 1,526,899 1,517,201 1,536,725
RoRWA 1.67  % 1.03  % 0.45  %
Consolidated profit 9,426 5,797 2,734
Average risk weighted assets 563,776 560,342 603,069
Underlying RoRWA 1.77  % 1.24  % 0.46  %
Consolidated profit 9,426 5,797 2,734
(-) Net capital gains and provisions -530 -1,155 -50
Underlying consolidated profit 9,956 6,952 2,784
Average risk weighted assets 563,776 560,342 603,069
Efficiency ratio 44.9  % 47.7  % 47.2  %
   Underlying operating expenses 5,118 5,241 5,577
      Operating expenses 5,118 5,344 5,589
      Net capital gains and provisions impact in operating expenses — -103 -12
   Underlying total income 11,390 10,995 11,814
      Total income 11,390 10,924 11,809
      Net capital gains and provisions impact in total income — 71 5
(1) Averages included in the RoE, RoTE, RoA and RoRWA denominators are calculated using 4 months' worth of data in the case of quarterly figures (from December to March in Q1 and September to December in Q4).
(2) For periods less than one year, and if there are results in the net capital gains and provisions line, the profit used to calculate RoE and RoTE is the annualized underlying attributable profit to which said results are added without annualizing.
(3) For periods less than one year, and if there are results in the net capital gains and provisions line, the profit used to calculate RoA and RoRWA is the annualized underlying consolidated profit, to which said results are added without annualizing.
(4) The risk weighted assets included in the denominator of the RoRWA metric are calculated in line with the criteria laid out in the CRR (Capital Requirements Regulation).

76
IMAGE69.JPG
January - March 2021
Efficiency ratio
Q1'21 Q1'20
%    Total income    Operating expenses %    Total income    Operating expenses
Europe 49.9  4,149  2,071  58.5  3,718  2,175 
   Spain 48.6  1,785  867  52.8  1,789  944 
   United Kingdom 58.7  1,111  652  68.1  1,007  686 
   Portugal 34.2  427  146  43.1  350  151 
   Poland 44.3  357  158  47.1  365  172 
North America 41.5  2,768  1,149  41.8  2,941  1,230 
   US 39.3  1,902  748  41.9  1,929  809 
   Mexico 43.1  865  373  41.2  1,007  415 
South America 34.4  3,539  1,219  35.8  4,169  1,492 
   Brazil 28.7  2,521  723  32.0  3,137  1,004 
   Chile 38.4  614  236  41.7  553  230 
   Argentina 65.0  262  171  58.5  318  186 
Digital Consumer Bank 46.1  1,304  600  46.1  1,291  596 





Underlying RoTE
Q1'21 Q1'20
%    Underlying attributable profit to the parent    Average stockholders' equity (excl. minority interests) - intangible assets %    Underlying attributable profit to the parent    Average stockholders' equity (excl. minority interests) - intangible assets
Europe 8.53  3,306  38,758  1.95  771  39,608 
   Spain 6.50  971  14,945  2.30  359  15,585 
   United Kingdom 9.22  1,176  12,754  1.52  209  13,758 
   Portugal 15.94  644  4,039  7.36  272  3,692 
   Poland 2.54  82  3,238  2.85  91  3,188 
North America 14.31  3,093  21,610  5.35  1,127  21,085 
   US 15.56  2,466  15,847  1.55  241  15,594 
   Mexico 12.73  727  5,715  15.87  879  5,542 
South America 19.33  3,093  16,003  15.91  2,800  17,593 
   Brazil 21.43  2,246  10,479  16.47  2,066  12,547 
   Chile 17.22  610  3,543  11.81  388  3,287 
   Argentina 20.43  181  886  17.59  136  775 
Digital Consumer Bank 11.99  1,166  9,727  9.63  935  9,710 






January - March 2021
IMAGE69.JPG
77
Credit risk indicators
The credit risk indicators measure the quality of the credit portfolio and the percentage of non-performing loans covered by provisions.
Ratio Formula Relevance of the metric
NPL ratio
(Non-performing loans)
Credit impaired loans and advances to customers, customer guarantees and customer commitments granted The NPL ratio is an important variable regarding financial institutions' activity since it gives an indication of the level of risk the entities are exposed to. It calculates risks that are, in accounting terms, declared to be credit impaired as a percentage of the total outstanding amount of customer credit and contingent liabilities.
Total Risk 1
Coverage ratio Provisions to cover impairment losses on loans and advances to customers, customer guarantees and customer commitments granted The coverage ratio is a fundamental metric in the financial sector. It reflects the level of provisions as a percentage of the credit impaired assets. Therefore it is a good indicator of the entity's solvency against client defaults both present and future.
Credit impaired loans and advances to customers, customer guarantees and customer commitments granted
Cost of Credit Allowances for loan-loss provisions over the last 12 months This ratio quantifies loan-loss provisions arising from credit risk over a defined period of time for a given loan portfolio. As such, it acts as an indicator of credit quality.
Average loans and advances to customers over the last 12 months
(1) Total risk = Total loans and advances and guarantees to customers (including credit impaired assets) + contingent liabilities granted that are credit impaired


Credit risk Mar-21 Dec-20 Mar-20
NPL ratio 3.20  % 3.21  % 3.25  %
Credit impaired loans and advances to customers customer guarantees and customer commitments granted 32,473 31,767 32,743
Total risk 1,014,552 989,456 1,008,275
Coverage ratio 74  % 76  % 71  %
Provisions to cover impairment losses on loans and advances to customers, customer guarantees and customer commitments granted 24,034 24,272 23,361
Credit impaired loans and advances to customers customer guarantees and customer commitments granted 32,473 31,767 32,743
Cost of credit 1.08  % 1.28  % 1.17  %
Underlying allowances for loan-loss provisions over the last 12 months 10,257 12,173 11,058
Allowances for loan-loss provisions over the last 12 months 10,257 12,431 11,068
Net capital gains and provisions impact in allowances for loan-loss provisions — -258 -10
Average loans and advances to customers over the last 12 months 949,230 952,358 944,853
78
IMAGE69.JPG
January - March 2021
NPL ratio
Q1'21 Q1'20
%  Credit impaired loans and advances to customers, customer guarantees and customer commitments granted    Total risk %   Credit impaired loans and advances to customers, customer guarantees and customer commitments granted    Total risk
Europe 3.26 20,451  626,457  3.37 20,654  612,840 
   Spain 6.18 13,512  218,663  6.88 14,724  214,072 
   United Kingdom 1.35 3,570  264,492  0.99 2,554  258,622 
   Portugal 3.84 1,570  40,937  4.56 1,776  38,956 
   Poland 4.82 1,527  31,701  4.29 1,387  32,368 
North America 2.39 3,191  133,655  2.02 2,936  145,575 
   US 2.11 2,106  99,838  2.00 2,238  111,853 
   Mexico 3.21 1,085  33,810  2.07 698  33,713 
South America 4.30 5,657  131,459  4.63 5,969  128,961 
   Brazil 4.42 3,283  74,342  4.93 3,809  77,202 
   Chile 4.74 2,113  44,547  4.63 1,839  39,707 
   Argentina 2.32 106  4,568  3.97 190  4,776 
Digital Consumer Bank 2.23 2,585  115,965  2.21 2,548  115,261 


Coverage ratio
Q1'21 Q1'20
%    Provisions to cover impairment losses on loans and advances to customers, customer guarantees and customer commitments granted  Credit impaired loans and advances to customers, customer guarantees and customer commitments granted %    Provisions to cover impairment losses on loans and advances to customers, customer guarantees and customer commitments granted   Credit impaired loans and advances to customers, customer guarantees and customer commitments granted
Europe 50.01 10,227  20,451  46.96 9,700  20,654 
   Spain 47.16 6,373  13,512  44.58 6,564  14,724 
   United Kingdom 40.47 1,445  3,570  39.66 1,013  2,554 
   Portugal 69.19 1,086  1,570  58.99 1,048  1,776 
   Poland 70.28 1,073  1,527  68.11 945  1,387 
North America 153.42 4,896  3,191  170.14 4,996  2,936 
   US 183.17 3,858  2,106  181.44 4,061  2,238 
   Mexico 95.56 1,036  1,085  133.89 935  698 
South America 98.40 5,567  5,657  92.89 5,545  5,969 
   Brazil 116.52 3,825  3,283  107.98 4,113  3,809 
   Chile 63.42 1,340  2,113  57.18 1,051  1,839 
   Argentina 232.37 246  106  131.20 249  190 
Digital Consumer Bank 111.41 2,881  2,585  111.56 2,843  2,548 
January - March 2021
IMAGE69.JPG
79
Cost of credit
Q1'21 Q1'20
% Underlying allowances for loan-loss provisions over the last 12 months Average loans and advances to customers over the last 12 months % Underlying allowances for loan-loss provisions over the last 12 months Average loans and advances to customers over the last 12 months
Europe 0.51 2,936  581,073  0.36 2,008  561,732 
   Spain 0.91 1,821  200,219  0.64 1,242  194,986 
   United Kingdom 0.21 517  251,856  0.14 346  254,715 
   Portugal 0.38 148  38,558  0.23 86  36,585 
   Poland 1.02 303  29,560  0.88 269  30,475 
North America 2.34 3,064  130,792  3.02 4,097  135,636 
   US 2.12 2,130  100,393  3.13 3,154  100,820 
   Mexico 3.00 933  31,064  2.69 943  35,060 
South America 2.81 3,282  116,996  3.29 4,211  127,832 
   Brazil 3.79 2,500  65,923  4.43 3,392  76,658 
   Chile 1.33 532  39,838  1.25 504  40,258 
   Argentina 4.55 165  3,636  5.48 238  4,333 
Digital Consumer Bank 0.69 793  114,564  0.63 710  113,488 

80
IMAGE69.JPG
January - March 2021
Other indicators
The market capitalization indicator provides information on the volume of tangible equity per share. The loan-to-deposit ratio (LTD) identifies the relationship between net customer loans and advances and customer deposits, assessing the proportion of loans and advances granted by the Group that are funded by customer deposits.
The Group also uses gross customer loan magnitudes excluding reverse repurchase agreements (repos) and customer deposits excluding repos. In order to analyze the evolution of the traditional commercial banking business of granting loans and capturing deposits, repos and reverse repos are excluded, as they are mainly treasury business products and highly volatile.
Ratio Formula Relevance of the metric
TNAV per share
 Tangible book value 1
This is a very commonly used ratio used to measure the company's accounting value per share having deducted the intangible assets. It is useful in evaluating the amount each shareholder would receive if the company were to enter into liquidation and had to sell all the company's tangible assets.
(Tangible equity net asset value per share)  Number of shares excluding treasury stock
Price / tangible book value per share (X)
Share price
This is one of the most commonly used ratios by market participants for the valuation of listed companies both in absolute terms and relative to other entities. This ratio measures the relationship between the price paid for a company and its accounting equity value.
TNAV per share
LTD ratio Net loans and advances to customers This is an indicator of the bank's liquidity. It measures the total (net) loans and advances to customers as a percentage of customer deposits.
(Loan-to-deposit) Customer deposits
Loans and advances (excl. reverse repos) Gross loans and advances to customers excluding reverse repos In order to aid analysis of the commercial banking activity, reverse repos are excluded as they are highly volatile treasury products.
Deposits (excl. repos) Customer deposits excluding repos In order to aid analysis of the commercial banking activity, repos are excluded as they are highly volatile treasury products.
PAT + After tax fees paid to SAN (in Wealth Management & Insurance) Net profit + fees paid from Santander Asset Management and Santander Insurance to Santander, net of taxes, excluding Private Banking customers Metric to assess Wealth Management & Insurance's total contribution to Grupo Santander profit.
(1) Tangible book value = Stockholders' equity - intangible assets

Others Mar-21 Dec-20 Mar-20
TNAV (tangible book value) per share (2)
3.84 3.79 4.03
   Tangible book value 66,476 65,568 69,795
   Number of shares excl. treasury stock (million) (2)
17,311 17,312 17,311
Price / Tangible book value per share (X) 0.75 0.67 0.53
   Share price (euros) (2)
2.897 2.538 2.126
   TNAV (tangible book value) per share (2)
3.84 3.79 4.03
Loan-to-deposit ratio 106  % 108  % 115  %
   Net loans and advances to customers 939,760 916,199 935,407
   Customer deposits 882,854 849,310 815,459
Q1'21 Q4'20 Q1'20
PAT + After tax fees paid to SAN (in WM&I) (Constant EUR million) 522.71 559.37 520.37
   Profit after tax 206 250 213
   Net fee income net of tax 317 310 307
(2) March 2020 data adjusted for the capital increase in December 2020.
January - March 2021
IMAGE69.JPG
81

Local currency measures
We make use of certain financial measures in local currency to help in the assessment of our ongoing operating performance. These non-IFRS financial measures include the results of operations of our subsidiary banks located outside the Eurozone, excluding the impact of foreign exchange. Because changes in foreign currency exchange rates do not have an operating impact on the results, we believe that evaluating their performance on a local currency basis provides an additional and meaningful assessment of performance to both management and the company’s investors.
The Group presents, at both the Group level as well as the business unit level, the real changes in the income statement as well as the changes excluding the exchange rate effect, as it considers the latter facilitates analysis, since it enables businesses movements to be identified without taking into account the impact of converting each local currency into euros.
Said variations, excluding the impact of exchange rate movements, are calculated by converting P&L lines for the different business units comprising the Group into our presentation currency, the euro, applying the average exchange rate for 2021 to all periods contemplated in the analysis.


The Group presents, at both the Group level as well as the business unit level, the changes in euros in the balance sheet as well as the changes excluding the exchange rate effect for loans and advances to customers excluding reverse repos and customer funds (which comprise deposits and mutual funds) excluding repos. As with the income statement, the reason is to facilitate analysis by isolating the changes in the balance sheet that are not caused by converting each local currency into euros.
These changes excluding the impact of exchange rate movements are calculated by converting loans and advances to customers excluding reverse repos and customer funds excluding repos, into our presentation currency, the euro, applying the closing exchange rate on the last working day of March 2021 to all periods contemplated in the analysis.
The average and period-end exchange rates for the main currencies in which the Group operates are set out in the table below.





Exchange rates: 1 euro / currency parity
Average (income statement) Period-end (balance sheet)
Q1'21 Q1'20 Mar-21 Dec-20 Mar-20
US dollar 1.204  1.102  1.174  1.227  1.096 
Pound sterling 0.873  0.861  0.852  0.898  0.886 
Brazilian real 6.597  4.889  6.629  6.373  5.700 
Mexican peso 24.514  21.898  23.981  24.438  26.177 
Chilean peso 872.443  886.223  843.574  871.819  934.656 
Argentine peso 106.777  67.819  108.004  103.159  70.546 
Polish zloty 4.545  4.321  4.634  4.559  4.551 
82
IMAGE69.JPG
January - March 2021
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
•CONSOLIDATED BALANCE SHEET
•CONSOLIDATED INCOME STATEMENT
NOTE:    The following financial information for the first three months of 2021 and 2020 (attached herewith) corresponds to the condensed consolidated financial statements prepared in accordance with the International Financial Reporting Standards.
Interim condensed consolidated balance sheet
EUR million
ASSETS Mar-21 Dec-20 Mar-20
Cash, cash balances at central banks and other deposits on demand 192,925  153,839  122,456 
Financial assets held for trading 109,643  114,945  125,846 
Non-trading financial assets mandatorily at fair value through profit or loss 4,639  4,486  4,483 
Financial assets designated at fair value through profit or loss 56,650  48,717  62,659 
Financial assets at fair value through other comprehensive income 113,370  120,953  110,238 
Financial assets at amortized cost 981,581  958,378  981,331 
Hedging derivatives 6,222  8,325  12,755 
Changes in the fair value of hedged items in portfolio hedges of interest risk 1,581  1,980  2,089 
Investments 7,693  7,622  8,610 
Joint ventures entities 1,552  1,492  1,266 
Associated entities 6,141  6,130  7,344 
Assets under insurance or reinsurance contracts 267  261  312 
Tangible assets 33,386  32,735  34,912 
Property, plant and equipment 32,406  31,772  33,972 
For own-use 12,953  13,213  14,089 
Leased out under an operating lease 19,453  18,559  19,883 
Investment property 980  963  940 
Of which : Leased out under an operating lease 866  793  806 
Intangible assets 15,990  15,908  26,583 
Goodwill 12,460  12,471  23,141 
Other intangible assets 3,530  3,437  3,442 
Tax assets 24,129  24,586  29,607 
Current tax assets 4,846  5,340  7,516 
Deferred tax assets 19,283  19,246  22,091 
Other assets 10,397  11,070  13,564 
Insurance contracts linked to pensions 163  174  186 
Inventories 6  5  5 
Other 10,228  10,891  13,373 
Non-current assets held for sale 4,406  4,445  4,914 
TOTAL ASSETS 1,562,879  1,508,250  1,540,359 
January - March 2021
IMAGE69.JPG
83
Interim condensed consolidated balance sheet
EUR million
LIABILITIES Mar-21 Dec-20 Mar-20
Financial liabilities held for trading 71,293  81,167  100,082 
Financial liabilities designated at fair value through profit or loss 69,977  48,038  67,337 
Financial liabilities at amortized cost 1,290,475  1,248,188  1,224,749 
Hedging derivatives 6,639  6,869  6,673 
Changes in the fair value of hedged items in portfolio hedges of interest rate risk 395  286  264 
Liabilities under insurance or reinsurance contracts 1,102  910  2,280 
Provisions 10,881  10,852  12,335 
Pensions and other post-retirement obligations 3,779  3,976  5,507 
Other long term employee benefits 1,590  1,751  1,273 
Taxes and other legal contingencies 2,077  2,200  2,519 
Contingent liabilities and commitments 630  700  668 
Other provisions 2,805  2,225  2,368 
Tax liabilities 8,035  8,282  9,405 
Current tax liabilities 2,111  2,349  2,588 
Deferred tax liabilities 5,924  5,933  6,817 
Other liabilities 11,396  12,336  11,121 
Liabilities associated with non-current assets held for sale —  —  — 
TOTAL LIABILITIES 1,470,193  1,416,928  1,434,246 
EQUITY
Shareholders' equity 115,620  114,620  124,139 
Capital 8,670  8,670  8,309 
Called up paid capital 8,670  8,670  8,309 
Unpaid capital which has been called up —  —  — 
Share premium 47,979  52,013  52,446 
Equity instruments issued other than capital 635  627  604 
Equity component of the compound financial instrument —  —  — 
Other equity instruments issued 635  627  604 
Other equity 158  163  171 
Accumulated retained earnings 60,293  65,583  67,594 
Revaluation reserves —  —  — 
Other reserves (3,642) (3,596) (3,580)
(-) Own shares (81) (69) (74)
Profit attributable to shareholders of the parent 1,608  (8,771) 331 
(-) Interim dividends —  —  (1,662)
Other comprehensive income (loss) (33,154) (33,144) (27,761)
Items not reclassified to profit or loss (5,354) (5,328) (3,484)
Items that may be reclassified to profit or loss (27,800) (27,816) (24,277)
Non-controlling interest 10,220  9,846  9,735 
Other comprehensive income (1,820) (1,800) (1,696)
Other items 12,040  11,646  11,431 
TOTAL EQUITY 92,686  91,322  106,113 
TOTAL LIABILITIES AND EQUITY 1,562,879  1,508,250  1,540,359 
MEMORANDUM ITEMS: OFF BALANCE SHEET AMOUNTS
Loan commitments granted 242,898  241,230  217,767 
Financial guarantees granted 12,231  12,377  12,810 
Other commitments granted 74,867  64,538  73,128 




84
IMAGE69.JPG
January - March 2021
Interim condensed consolidated income statement
EUR million
Q1'21 Q1'20
Interest income 10,753  13,208 
   Financial assets at fair value with changes in other comprehensive income 651  1,145 
   Financial assets at amortized cost 9,407  11,402 
   Other interest income 695  661 
Interest expense (2,797) (4,721)
Interest income/ (charges) 7,956  8,487 
Dividend income 65  57 
Income from companies accounted for using the equity method 76  98 
Commission income 3,306  3,765 
Commission expense (758) (912)
Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net 284  312 
   Financial assets at amortized cost 32  (23)
   Other financial assets and liabilities 252  335 
Gain or losses on financial assets and liabilities held for trading, net 1,228  3,975 
   Reclassification of financial assets from fair value with changes in other comprehensive income —  — 
   Reclassification of financial assets from amortized cost —  — 
   Other gains or (-) losses 1,228  3,975 
Gains or losses on non-trading financial assets and liabilities mandatorily at fair value
through profit or loss 		(3) (41)
   Reclassification of financial assets from fair value with changes in other comprehensive income —  — 
   Reclassification of financial assets from amortized cost —  — 
   Other gains or (-) losses (3) (41)
Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net 398  (55)
Gain or losses from hedge accounting, net 2  138 
Exchange differences, net (1,258) (4,042)
Other operating income 558  435 
Other operating expenses (494) (451)
Income from assets under insurance and reinsurance contracts 403  452 
Expenses from liabilities under insurance and reinsurance contracts (373) (409)
Total income 11,390  11,809 
Administrative expenses (4,435) (4,860)
   Staff costs (2,688) (2,899)
   Other general and administrative expenses (1,747) (1,961)
Depreciation and amortization (683) (729)
Provisions or reversal of provisions, net (959) (374)
Impairment or reversal of impairment at financial assets not measured at fair value
through profit or loss and net gains or losses on modification 		(2,056) (3,934)
   Financial assets at fair value through other comprehensive income (29) (1)
   Financial assets at amortized cost (2,027) (3,933)
Impairment of investments in subsidiaries, joint ventures and associates, net —  — 
Impairment on non-financial assets, net (138) (14)
   Tangible assets (133) (3)
   Intangible assets (4) (8)
   Others (1) (3)
Gain or losses on non financial assets and investments, net 1  18 
Negative goodwill recognized in results —  — 
Gains or losses on non-current assets held for sale not classified as discontinued operations (18) (25)
Operating profit/(loss) before tax 3,102  1,891 
Tax expense or income from continuing operations (1,143) (1,244)
Profit for the period from continuing operations 1,959  647 
Profit or loss after tax from discontinued operations —  — 
Profit for the period 1,959  647 
Profit attributable to non-controlling interests 351  316 
Profit attributable to the parent 1,608  331 
Earnings per share
Basic 0.08  0.01 
Diluted 0.08  0.01 
January - March 2021
IMAGE69.JPG
85
GLOSSARY
•Active customer: Those customers who comply with the minimum balance, income and/or transactionality requirements as defined according to the business area
•ADR: American Depositary Receipt
•ALCO: Assets and Liabilities Committee
•APM: Alternative Performance Measures
•bps: basis points
•CBILS: Coronavirus Business Interruption Loan Scheme
•CDI: CREST Depository Interest
•CET1: Core equity tier 1
•CJEU: Court of Justice of the European Union
•CLBILS: Coronavirus Large Business Interruption Loan Scheme
•CNMV: Spanish National Securities Market Commission (Comisión Nacional del Mercado de Valores)
•Covid-19: Corona Virus Disease 19
•Digital customers: Every consumer of a commercial bank’s services who has logged on to their personal online banking and/or mobile banking in the last 30 days
•EBA: European Banking Authority
•ECB: European Central Bank
•EPS: Earnings per share
•ESG: Environmental, Social and Governance
•ESMA: European Securities and Markets Authority
•FCA: Financial Conduct Authority (UK)
•Fed: Federal Reserve
•FX: Foreign Exchange
•GDP: Gross Domestic Product
•GPTW: Great Place to Work
•ICO: Insitituto de Crédito Oficial (Official Credit Institution)
•IFRS 9: International Financial Reporting Standard 9, regarding financial instruments
•IFRS 16: International Financial Reporting Standard 16, regarding leases
•Loyal customers: Active customers who receive most of their financial services from the Group according to the commercial segment that they belong to. Various engaged customer levels have been defined taking profitability into account.
•LCR: Liquidity Coverage Ratio

•NPLs: Non-performing loans
•NPS: Net Promoter Score
•P/E ratio: Price / earnings per share ratio
•PBT: Profit before tax
•POS: Point of Sale
•pp: percentage points
•PPI: Payment protection insurance
•Repos: Repurchase agreements
•RoA: Return on assets
•RoE: Return on equity
•RoRWA: Return on risk weighted assets
•RoTE: Return on tangible equity
•RWAs: Risk weighted assets
•SAM: Santander Asset Management
•SBNA: Santander Bank N.A.
•SCF: Santander Consumer Finance
•SCIB: Santander Corporate & Investment Banking
•SC USA: Santander Consumer USA
•SEC: Securities and Exchanges Commission
•SGP: Santander Global Platform
•SH USA: Santander Holdings USA, Inc.
•SMEs: Small and medium enterprises
•SPF: Simple, Personal and Fair
•SREP: Supervisory Review and Evaluation Process
•SSM: Single Supervisory Mechanism, the system of banking supervision in Europe. It comprises the ECB and the national supervisory authorities of the participating countries
•T1: Tier 1
•TLAC: The total loss-absorption capacity requirement which is required to be met under the CRD V package
•TNAV: Tangible net asset value
•TRIM: Targeted review of internal models
•VaR: Value at Risk
•WM&I: Wealth Management & Insurance
86
IMAGE69.JPG
January - March 2021
IMPORTANT INFORMATION
Non-IFRS and alternative performance measures
This report contains, in addition to the financial information prepared in accordance with International Financial Reporting Standards (“IFRS”) and derived from our financial statements, alternative performance measures (“APMs”) as defined in the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority (ESMA) on 5 October 2015 (ESMA/2015/1415en) and other non-IFRS measures (“Non-IFRS Measures”). These financial measures that qualify as APMs and non-IFRS measures have been calculated with information from Santander Group; however those financial measures are not defined or detailed in the applicable financial reporting framework nor have been audited or reviewed by our auditors. We use these APMs and non-IFRS measures when planning, monitoring and evaluating our performance. We consider these APMs and non-IFRS measures to be useful metrics for our management and investors to compare operating performance between accounting periods, as these measures exclude items outside the ordinary course performance of our business, which are grouped in the “management adjustment” line and are further detailed in Section 3.2 of the Economic and Financial Review in our Directors’ Report included in our Annual Report on Form 20-F for the year ended 31 December 2020. Nonetheless, these APMs and non-IFRS measures should be considered supplemental information to, and are not meant to substitute IFRS measures. Furthermore, companies in our industry and others may calculate or use APMs and non-IFRS measures differently, thus making them less useful for comparison purposes. For further details on APMs and Non-IFRS Measures, including its definition or a reconciliation between any applicable management indicators and the financial data presented in the consolidated financial statements prepared under IFRS, please see the 2020 Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on 26 February 2021, as well as the section “Alternative performance measures” of the annex to this Banco Santander, S.A. (“Santander”) Q1 2021 Financial Report, published as Inside Information on 28 April 2021. These documents are available on Santander’s website (www.santander.com). Underlying measures, which are included in this report, are non-IFRS measures.
The businesses included in each of our geographic segments and the accounting principles under which their results are presented here may differ from the included businesses and local applicable accounting principles of our public subsidiaries in such geographies. Accordingly, the results of operations and trends shown for our geographic segments may differ materially from those of such subsidiaries.
Forward-looking statements
Banco Santander, S.A. (“Santander”) advises that this report contains “forward-looking statements” as per the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by words like “expect”, “project”, “anticipate”, “should”, “intend”, “probability”, “risk”, “VaR”, “RoRAC”, “RoRWA”, “TNAV”, “target”, “goal”, “objective”, “estimate”, “future” and similar expressions. Found throughout this report, they include (but are not limited to) statements on our future business development, economic performance and shareholder remuneration policy. However, a number of risks, uncertainties and other important factors may cause actual developments and results to differ materially from our expectations. The following important factors, in addition to others discussed elsewhere in this report, could affect our future results and could cause materially different outcomes from those anticipated in forward-looking statements: (1) general economic or industry conditions of areas where we have significant operations or investments (such as a worse economic environment; higher volatility in the capital markets; inflation or deflation; changes in demographics, consumer spending, investment or saving habits; and the effects of the COVID-19 pandemic in the global economy); (2) exposure to various market risks (particularly interest rate risk, foreign exchange rate risk, equity price risk and risks associated with the replacement of benchmark indices); (3) potential losses from early repayments on our loan and investment portfolio, declines in value of collateral securing our loan portfolio, and counterparty risk; (4) political stability in Spain, the United Kingdom, other European countries, Latin America and the US (5) changes in legislation, regulations, taxes, including regulatory capital and liquidity requirements, especially in view of the UK exit of the European Union and increased regulation in response to financial crisis; (6) our ability to integrate successfully our acquisitions and related challenges that result from the inherent diversion of management’s focus and resources from other strategic opportunities and operational matters; and (7) changes in our access to liquidity and funding on acceptable terms, in particular if resulting from credit spreads shifts or downgrade in credit ratings for the entire group or significant subsidiaries.
Numerous factors could affect our future results and could cause those results deviating from those anticipated in the forward-looking statements. 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 of this report and are informed by the knowledge, information and views available on such date. Santander is not required to update or revise any forward-looking statements, regardless of new information, future events or otherwise.
No offer
The information contained in this report 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 this report. No investment activity should be
January - March 2021
IMAGE69.JPG
87
undertaken on the basis of the information contained in this report. In making this report 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 report 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 report 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 2000.
Historical performance is not indicative of future results
Statements about historical performance or accretion must not be construed to indicate that future performance, share price or future (including earnings per share) in any future period will necessarily match or exceed those of any prior period. Nothing in this report should be taken as a profit forecast.
Third Party Information
In particular, regarding the data provided by third parties, neither Santander, nor any of its administrators, directors or employees, either explicitly or implicitly, guarantees that these contents are exact, accurate, comprehensive or complete, nor are they obliged to keep them updated, nor to correct them in the case that any deficiency, error or omission were to be detected. Moreover, in reproducing these contents in by any means, Santander may introduce any changes it deems suitable, may omit partially or completely any of the elements of this document, and in case of any deviation between such a version and this one, Santander assumes no liability for any discrepancy.








This document is a translation of a document originally issued in Spanish. Should there be any discrepancies between the English and the Spanish versions, only the original Spanish version should be binding.

88
IMAGE69.JPG
January - March 2021

CONTRAPORTADAENG1A.JPG


INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





















Banco Santander, S.A.
and companies composing
Santander Group

Interim Condensed Consolidated
Financial Statements for the
three-month
period ended 31 March 2021

Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.




Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS AS AT 31 MARCH 2021 AND 31 DECEMBER 2020
(EUR million)
ASSETS Note 31-03-2021 31-12-2020
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEPOSITS ON DEMAND 192,925  153,839 
FINANCIAL ASSETS HELD FOR TRADING 5 109,643  114,945 
NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS 5 4,639  4,486 
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS 5 56,650  48,717 
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME 5 113,370  120,953 
FINANCIAL ASSETS AT AMORTISED COST 5 981,581  958,378 
HEDGING DERIVATIVES 6,222  8,325 
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RISK 1,581  1,980 
INVESTMENTS 7,693  7,622 
Joint ventures entities 1,552  1,492 
Associated entities 6,141  6,130 
ASSETS UNDER INSURANCE OR REINSURANCE CONTRACTS 267  261 
TANGIBLE ASSETS 7 33,386  32,735 
Property, plant and equipment 32,406  31,772 
For own-use 12,953  13,213 
Leased out under an operating lease 19,453  18,559 
Investment property 980  963 
Of which : Leased out under an operating lease 866  793 
INTANGIBLE ASSETS 8 15,990  15,908 
Goodwill 12,460  12,471 
Other intangible assets 3,530  3,437 
TAX ASSETS 24,129  24,586 
Current tax assets 4,846  5,340 
Deferred tax assets 19,283  19,246 
OTHER ASSETS 10,397  11,070 
Insurance contracts linked to pensions 163  174 
Inventories 6  5 
Other 10,228  10,891 
NON-CURRENT ASSETS HELD FOR SALE 6 4,406  4,445 
TOTAL ASSETS 1,562,879  1,508,250 


The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated balance sheet as at 31 March 2021.
92
IMAGE69.JPG


Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS AS AT 31 MARCH 2021 AND 31 DECEMBER 2020
(EUR million)
LIABILITIES Note 31-03-2021 31-12-2020
FINANCIAL LIABILITIES HELD FOR TRADING 9 71,293  81,167 
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS 9 69,977  48,038 
FINANCIAL LIABILITIES AT AMORTISED COST 9 1,290,475  1,248,188 
HEDGING DERIVATIVES 6,639  6,869 
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK 395  286 
LIABILITIES UNDER INSURANCE OR REINSURANCE CONTRACTS 1,102  910 
PROVISIONS 10,881  10,852 
Pensions and other post-retirement obligations 10 3,779  3,976 
Other long term employee benefits 10 1,590  1,751 
Taxes and other legal contingencies 10 2,077  2,200 
Contingent liabilities and commitments 14 630  700 
Other provisions 10 2,805  2,225 
TAX LIABILITIES 8,035  8,282 
Current tax liabilities 2,111  2,349 
Deferred tax liabilities 5,924  5,933 
OTHER LIABILITIES 11,396  12,336 
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE —  — 
TOTAL LIABILITIES 1,470,193  1,416,928 
SHAREHOLDERS´ EQUITY 115,620  114,620 
CAPITAL 11 8,670  8,670 
Called up paid capital 8,670  8,670 
Unpaid capital which has been called up —  — 
SHARE PREMIUM 47,979  52,013 
EQUITY INSTRUMENTS ISSUED OTHER THAN CAPITAL 635  627 
Equity component of the compound financial instrument —  — 
Other equity instruments issued 635  627 
OTHER EQUITY 158  163 
ACCUMULATED RETAINED EARNINGS 60,293  65,583 
REVALUATION RESERVES —  — 
OTHER RESERVES (3,642) (3,596)
(-) OWN SHARES (81) (69)
PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT 3 1,608  (8,771)
(-) INTERIM DIVIDENDS —  — 
OTHER COMPREHENSIVE INCOME (LOSS) (33,154) (33,144)
ITEMS NOT RECLASSIFIED TO PROFIT OR LOSS 11 (5,354) (5,328)
ITEMS THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS 11 (27,800) (27,816)
NON-CONTROLLING INTEREST 10,220  9,846 
Other comprehensive income (1,820) (1,800)
Other items 12,040  11,646 
TOTAL EQUITY 92,686  91,322 
TOTAL LIABILITIES AND EQUITY 1,562,879  1,508,250 
MEMORANDUM ITEMS: OFF BALANCE SHEET AMOUNTS 14
Loan commitments granted 242,898  241,230 
Financial guarantees granted 12,231  12,377 
Other commitments granted 74,867  64,538 

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated balance sheet as at 31 March 2021.
IMAGE69.JPG
93

Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE-MONTH PERIODS ENDED 31 MARCH 2021 AND 2020
(EUR million)
Debit (Credit)
Note 01-01-2021 a
31-03-2021 		01-01-2020 a
31-03-2020
Interest income 10,753  13,208 
   Financial assets at fair value with changes in other comprehensive income 651  1,145 
   Financial assets at amortised cost 9,407  11,402 
   Other interest income 695  661 
Interest expense (2,797) (4,721)
Interest income/ (charges) 7,956  8,487 
Dividend income 65  57 
Income from companies accounted for using the equity method 76  98 
Commission income 3,306  3,765 
Commission expense (758) (912)
Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net 284  312 
   Financial assets at amortised cost 32  (23)
   Other financial assets and liabilities 252  335 
Gain or losses on financial assets and liabilities held for trading, net 1,228  3,975 
   Reclassification of financial assets from fair value with changes in other comprehensive income —  — 
   Reclassification of financial assets from amortised cost —  — 
   Other gains or (-) losses 1,228  3,975 
Gains or losses on non-trading financial assets and liabilities mandatorily at fair value
through profit or loss 		(3) (41)
   Reclassification of financial assets from fair value with changes in other comprehensive income —  — 
   Reclassification of financial assets from amortised cost —  — 
   Other gains or (-) losses (3) (41)
Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net 398  (55)
Gain or losses from hedge accounting, net 2  138 
Exchange differences, net (1,258) (4,042)
Other operating income 558  435 
Other operating expenses (494) (451)
Income from assets under insurance and reinsurance contracts 403  452 
Expenses from liabilities under insurance and reinsurance contracts (373) (409)
Total income 11,390  11,809 
Administrative expenses (4,435) (4,860)
   Staff costs (2,688) (2,899)
   Other general and administrative expenses (1,747) (1,961)
Depreciation and amortisation (683) (729)
Provisions or reversal of provisions, net (959) (374)
Impairment or reversal of impairment at financial assets not measured at fair value
through profit or loss and net gains or losses on modification 		(2,056) (3,934)
   Financial assets at fair value through other comprehensive income (29) (1)
   Financial assets at amortised cost 5 (2,027) (3,933)
Impairment of investments in subsidiaries, joint ventures and associates, net —  — 
Impairment on non-financial assets, net (138) (14)
   Tangible assets 7 (133) (3)
   Intangible assets (4) (8)
   Others (1) (3)
Gain or losses on non financial assets and investments, net 1  18 
Negative goodwill recognised in results —  — 
Gains or losses on non-current assets held for sale not classified as discontinued operations 6 (18) (25)
Operating profit/(loss) before tax 3,102  1,891 
Tax expense or income from continuing operations (1,143) (1,244)
Profit for the period from continuing operations 1,959  647 
Profit or loss after tax from discontinued operations —  — 
Profit for the period 1,959  647 
Profit attributable to non-controlling interests 351  316 
Profit attributable to the parent 1,608  331 
Earnings per share 3
Basic 0.08  0.01 
Diluted 0.08  0.01 
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated income statement for the three-month period ended 31 March 2021.
94
IMAGE69.JPG

Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE
FOR THE THREE-MONTH PERIODS ENDED 31 MARCH 2021 AND 2020
(EUR million)
Note 01-01-2021 to 31-03-2021 01-01-2020 to 31-03-2020
CONSOLIDATED PROFIT FOR THE PERIOD 1,959  647 
OTHER RECOGNISED INCOME AND EXPENSE   (30) (4,307)
Items that will not be reclassified to profit or loss 11 6  830 
Actuarial gains and losses on defined benefit pension plans 212  2,322 
Non-current assets held for sale —  — 
Other recognised income and expense of investments in
subsidiaries, joint ventures and associates 		(7) (7)
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (13) (883)
Gains or losses resulting from the accounting for hedges of equity instruments measured at fair value through other comprehensive income, net —  — 
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (hedged item) 42  17 
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (hedging instrument) (42) (17)
Changes in the fair value of financial liabilities at fair value through profit or loss attributable to changes in credit risk (123) 6 
Income tax relating to items that will not be reclassified (63) (608)
Items that may be reclassified to profit or loss 11 (36) (5,137)
Hedges of net investments in foreign operations (effective portion) (483) 2,267 
Revaluation gains (losses) (483) 2,267 
Amounts transferred to income statement —  — 
Other reclassifications —  — 
Exchanges differences 1,496  (7,604)
Revaluation gains (losses) 1,496  (7,604)
Amounts transferred to income statement —  — 
Other reclassifications —  — 
Cash flow hedges (effective portion) (201) 970 
Revaluation gains (losses) (749) 2,452 
Amounts transferred to income statement 548  (1,482)
Transferred to initial carrying amount of hedged items —  — 
Other reclassifications —  — 
Financial assets available-for-sale — 
Revaluation gains (losses) 11 — 
Amounts transferred to income statement — 
Other reclassifications — 
Hedging instruments (items not designated) 11 —  — 
Revaluation gains (losses) —  — 
Amounts transferred to income statement —  — 
Other reclassifications —  — 
Debt instruments at fair value with changes in other comprehensive income (1,350) (923)
Revaluation gains (losses) 11 (1,118) (944)
Amounts transferred to income statement (232) (352)
Other reclassifications —  373 
Non-current assets held for sale —  — 
Revaluation gains (losses) —  — 
Amounts transferred to income statement —  — 
Other reclassifications —  — 
Share of other recognised income and expense of investments 7  (119)
Income tax relating to items that may be reclassified to profit or loss 495  272 
Total recognised income and expenses for the year 1,929  (3,660)
Attributable to non-controlling interests 331  (398)
Attributable to the parent 1,598  (3,262)
The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of recognised income and expense for the three-month period ended 31 March 2021.
IMAGE69.JPG
95

Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the
Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY
FOR THE THREE-MONTH PERIODS ENDED 31 MARCH 2021 AND 2020
(EUR million)
Capital Share premium Equity instruments issued (not capital) Other equity instruments Accumulated retained earnings Revaluation reserves Other reserves (-)
Own shares 		Profit Attributable to shareholders of the parent (-)
Interim dividends 		Other comprehensive income Non-Controlling interest Total
Other comprehensive income Other items
Balance as at 31-12-2020 8,670 52,013 627 163 65,583 — (3,596) (69) (8,771) — (33,144) (1,800) 11,646 91,322
Adjustments due to errors — — — — — — — — — — — — — —
Adjustments due to changes in
accounting policies 		— — — — — — — — — — — — — —
Opening balance as at 01-01-2021 8,670 52,013 627 163 65,583 — (3,596) (69) (8,771) — (33,144) (1,800) 11,646 91,322
Total recognised income and expense — — — — — — — — 1,608 — (10) (20) 351 1,929
Other changes in equity — (4,034) 8 (5) (5,290) — (46) (12) 8,771 — — — 43 (565)
Issuance of ordinary shares — — — — — — — — — — — — 18 18
Issuance of preferred shares — — — — — — — — — — — — — —
Issuance of other financial instruments — — — — — — — — — — — — — —
Maturity of other financial instruments — — — — — — — — — — — — — —
Conversion of financial liabilities into equity — — — — — — — — — — — — — —
Capital reduction — — — — — — — — — — — — —
Dividends — (477) — — — — — — — — — (49) (526)
Purchase of equity instruments — — — — — — — (209) — — — — — (209)
Disposal of equity instruments — — — — — — 7 197 — — — — — 204
Transfer from equity to liabilities — — — — — — — — — — — — — —
Transfer from liabilities to equity — — — — — — — — — — — — — —
Transfers between equity items — (3,557) — — (5,290) — 76 — 8,771 — — — — —
Increases (decreases) due to
business combinations 		— — — — — — — — — — — — — —
Share-based payment — — — (28) — — — — — — — — — (28)
Others increases or (-) decreases of the equity — — 8 23 — — (129) — — — — — 74 (24)
Balance as at 31-03-2021 8,670 47,979 635 158 60,293 — (3,642) (81) 1,608 — (33,154) (1,820) 12,040 92,686

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of changes in total equity
for the three-month period ended 31 March 2021.

96
IMAGE69.JPG

Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the
Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY
FOR THE THREE-MONTH PERIODS ENDED MARCH 2021 AND 2020
(EUR million)
Capital Share premium Equity instruments issued (not capital) Other equity instruments Accumulated retained earnings Revaluation reserves Other reserves (-)
Own shares 		Profit Attributable to shareholders of the parent (-)
Interim dividends 		Other comprehensive income Non-Controlling interest Total
Other comprehensive income Other items
Balance as at 31-12-2019 8,309 52,446 598 146 61,028 — (3,110) (31) 6,515 (1,662) (24,168) (982) 11,570 110,659
Adjustments due to errors — — — — — — — — — — — — — —
Adjustments due to changes in
accounting policies 		— — — — — — — — — — — — — —
Opening balance as at 01-01-2020 8,309 52,446 598 146 61,028 — (3,110) (31) 6,515 (1,662) (24,168) (982) 11,570 110,659
Total recognised income and expense — — — — — — — — 331 — (3,593) (714) 316 (3,660)
Other changes in equity — — 6 25 6,566 — (470) (43) (6,515) — — — (455) (886)
Issuance of ordinary shares — — — — — — — — — — — — 80 80
Issuance of preferred shares — — — — — — — — — — — — — —
Issuance of other financial instruments — — — — — — — — — — — — — —
Maturity of other financial instruments — — — — — — — — — — — — — —
Conversion of financial liabilities into equity — — — — — — — — — — — — — —
Capital reduction — — — — — — — — — — —
Dividends — — — — — — — — — — — — (113) (113)
Purchase of equity instruments — — — — — — — (313) — — — — — (313)
Disposal of equity instruments — — — — — — 1 270 — — — — — 271
Transfer from equity to liabilities — — — — — — — — — — — — — —
Transfer from liabilities to equity — — — — — — — — — — — — — —
Transfers between equity items — — — — 6,566 — (51) (6,515) — — — — —
Increases (decreases) due to
business combinations 		— — — — — — — — — — — — — —
Share-based payment — — — (56) — — — — — — — — — (56)
Others increases or (-) decreases of the equity — — 6 81 — — (420) — — — — — (422) (755)
Balance as at 31-03-2020 8,309 52,446 604 171 67,594 — (3,580) (74) 331 (1,662) (27,761) (1,696) 11,431 106,113

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of changes in total equity
for the three-month period ended 31 March 2021.

IMAGE69.JPG
97

.Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.
SANTANDER GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED 31 MARCH 2021 AND 2020
(EUR million)
Note 31-03-2021 31-03-2020
A. CASH FLOWS FROM OPERATING ACTIVITIES 36,923  26,461 
Profit for the period 1,959  647 
Adjustments made to obtain the cash flows from operating activities 5,484  5,907 
Depreciation and amortisation cost 683  729 
Other adjustments 4,801  5,178 
Net increase/(decrease) in operating assets 3,152  65,877 
Financial assets held-for-trading (5,285) 24,478 
Non-trading financial assets mandatorily at fair value through profit or loss 95  (395)
Financial assets at fair value through profit or loss 8,354  3,100 
Financial assets at fair value through other comprehensive income (6,090) (6,610)
Financial assets at amortised cost 9,455  37,980 
Other operating assets (3,377) 7,324 
Net increase/(decrease) in operating liabilities 32,881  86,460 
Financial liabilities held-for-trading (9,784) 27,663 
Financial liabilities designated at fair value through profit or loss 22,420  9,477 
Financial liabilities at amortised cost 23,490  49,886 
Other operating liabilities (3,245) (566)
Income tax recovered/(paid) (249) (676)
B. CASH FLOWS FROM INVESTING ACTIVITIES (1,191) (2,079)
Payments 2,077  3,024 
Tangible assets 7 1,763  1,707 
Intangible assets 309  267 
Investments 2  97 
Subsidiaries and other business units 2 3  953 
Non-current assets held for sale and associated liabilities —  — 
Other payments related to investing activities —  — 
Proceeds 886  945 
Tangible assets 7 652  451 
Intangible assets —  — 
Investments 37  21 
Subsidiaries and other business units —  329 
Non-current assets held for sale and associated liabilities 6 197  144 
Other proceeds related to investing activities —  — 
C. CASH FLOW FROM FINANCING ACTIVITIES (617) (1,396)
Payments 842  3,246 
Dividends 3 —  — 
Subordinated liabilities 389  1,763 
Redemption of own equity instruments —  — 
Acquisition of own equity instruments 209  313 
Other payments related to financing activities 244  1,170 
Proceeds 225  1,850 
Subordinated liabilities —  1,500 
Issuance of own equity instruments 11 —  — 
Disposal of own equity instruments 207  272 
Other proceeds related to financing activities 18  78 
D. EFFECT OF FOREIGN EXCHANGE RATE DIFFERENCES 3,971  (1,597)
E. NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 39,086  21,389 
F. CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 153,839  101,067 
G. CASH AND CASH EQUIVALENTS AT END OF PERIOD 192,925  122,456 
COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF PERIOD
Cash 7,195  8,363 
Cash equivalents at central banks 171,518  98,306 
Other financial assets 14,212  15,787 
Less: Bank overdrafts refundable on demand —  — 
TOTAL CASH AND CASH EQUIVALENTS AT END OF PERIOD 192,925  122,456 
In which: restricted cash —  — 

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of cash flows for the three-month period ended 31 March 2021.
98


Banco Santander, S.A. and Companies composing Santander Group

Explanatory notes to the interim condensed consolidated financial statements for the three-month period ended 31 March 2021.

1.    Introduction, basis of presentation of the interim condensed consolidated financial statements and other information

a)    Introduction
Banco Santander, S.A. ('the parent' or 'Banco Santander') is a private-law entity subject to the rules and regulations applicable to banks operating in Spain. The Bylaws and other public information of the Bank can be consulted at its registered office at Paseo de Pereda 9-12, Santander.
In addition to the operations carried on directly by it, Banco Santander is the head of a group of subsidiaries that engage in various business activities and which compose, together with it, Santander Group ('the Group' or 'Grupo Santander').
Grupo Santander's interim condensed consolidated financial statements for the three-month period ended 31 March 2021 (“interim financial statements") were authorised by Grupo Santander's directors at the board of directors meeting held on 27 April 2021. Grupo Santander's consolidated annual accounts for year 2020 were approved by shareholders at Banco Santander annual general meeting on 26 March 2021.
b)    Basis of presentation of the interim financial statements
Under Regulation (EC) n.º 1606/2002 of the European Parliament and of the Council of 19 July 2002 all companies governed by the law of an EU Member State and whose securities are admitted to trading on a regulated market of any Member State must prepare their consolidated financial statements for the years beginning on or after 1 January, 2005 in conformity with the International Financial Reporting Standards ('IFRS') previously adopted by the European Union ('EU-IFRS').In order to adapt the accounting system of Spanish credit institutions with the principles and criteria established by the IFRS adopted by the European Union ('EU-IFRS'), the Bank of Spain published circular 4/2017, dated 27 November 2017, and subsequent changes, on Public and Confidential Financial Reporting Standards and Financial Statement Formats.
The consolidated annual accounts for 2020 were approved at the board of directors meeting on 22 February 2021 in compliance with International Financial Reporting Standards as adopted by the European Union, taking into account Bank of Spain Circular 4/2017, and subsequent modifications, using the basis of consolidation, accounting policies and measurement bases described in Note 2 to the aforementioned consolidated annual accounts and, accordingly, they presented fairly Grupo Santander’s consolidated equity and consolidated financial position at 31 December 2020 and the consolidated results of its operations, and the consolidated cash flows in 2019. The aforementioned consolidated annual accounts, originally included in Grupo Santander’s Form 20-F filed with the U.S. Securities and Exchange Commission on 26 February 2021, superseded by the consolidated annual accounts included in the Form 6-K for segment recast on 14 April 2021, and these interim financial statements are also in compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS-IASB”, and together with EU-IFRS, `IFRS`).
These interim financial statements were prepared and are presented in accordance with International Accounting Standard (IAS 34), Interim Financial Reporting, for the preparation of interim condensed financial statements and contain disclosures relating to the for the three-month period ended on 31 March 2021.
In accordance with IAS 34, the interim financial statements are intended only to provide an update on the content of the latest consolidated annual accounts authorised for issue, focusing on new activities, events and circumstances occurring during the first three months, and does not duplicate information previously reported in the latest consolidated annual accounts. Consequently, these interim financial statements do not include all the information that would be required for a complete set of consolidated annual accounts prepared in accordance with IFRS and, accordingly, for a proper comprehension of the information included in these interim financial statements, they should be read together with Grupo Santander’s consolidated annual accounts for the year ended 31 December 2020.
Grupo Santander policies include presenting the interim financial statements for its use in the different markets using the Euro as its presentation currency. The amounts held in other currencies and the balances of entities whose functional currency is not the Euro, have been translated to the presentation currency in accordance with the criteria indicated in note 2.a to the consolidated annual accounts for 2020. As indicated in that Note, for practical reasons, the balance sheet amount has been converted to the closing exchange rate, the equity to the historical type, and the income and expenses have been converted by applying the average exchange rate of the period; the application of such exchange rate or that corresponding to the date of each transaction does not lead to significant differences in the interim financial statements of Grupo Santander.
IMAGE69.JPG
99

The accounting policies and methods used in preparing these interim financial statements are the same as those applied in the consolidated annual accounts for 2020 taking into account the standards and interpretations that became applicable during the first three months of 2021, which are detailed below:
- Amendment to IFRS 4 Insurance Contracts, which is aimed at extending the expiry date of the temporary exemption from applying IFRS 9 by two years (from 1 January 2021 to 1 January 2023) for entities whose activities are predominantly insurance-related. This achieves alignment with the effective date of IFRS 17 Insurance Contracts (1 January 2023). It applies from 1 January 2021.
The aforementioned amendment to accounting standards and interpretations has not had a significant effect on Grupo Santander’s financial statements.
All accounting policies and measurement bases with a material effect on the interim financial statements for 31 March 2021 were applied in their preparation.
By the time of the preparation and authorisation of these interim financial statements, there were no standards to be adopted by the European Union whose effective date of implementation by the IASB is 1 January 2021.
c)     Use of critical estimates
The consolidated results and the determination of the consolidated equity are sensitive to the accounting principles and policies, valuation criteria and estimates used by the directors of Banco Santander in preparing the interim financial statements. The main accounting principles, policies, and valuation criteria are indicated in Note 2 of the consolidated annual accounts of the year 2020, except for those indicated in these interim financial statements due to the rules that have come into effect during the first three months of the year 2021.
The interim financial statements contain estimates made by the senior management of Banco Santander and of the consolidated entities in order to quantify certain of the assets, liabilities, income, expenses and obligations reported in the consolidated entities. These estimates, which were made on the basis of the best information available, relate mainly to the following:
1.The income tax expense, which, in accordance with IAS 34, is recognised in interim periods based on the best estimate of the weighted average tax rate expected by Grupo Santander for the full financial year;
2.The impairment losses on certain assets – Financial assets at fair value through other comprehensive income, financial assets at amortised cost, non-current assets held for sale, investments in subsidiaries, joint ventures and associates, tangible assets and intangible assets;
3.The assumptions used in the calculation of the post-employment benefit liabilities and commitments and other obligations;
4.The useful life of the tangible and intangible assets;
5.The measurement of goodwill impairment arising on consolidation;
6.The calculation of provisions and the consideration of contingent liabilities;
7.The fair value of certain unquoted assets and liabilities;
8.The recoverability of deferred tax assets; and
9.The fair value of the identifiable assets acquired and the liabilities assumed in business combinations in accordance with IFRS 3.
To update the estimates described above, Grupo Santander's Management has taken into account the current situation as a result of covid-19, classified as a pandemic by the World Health Organization, which significantly affects the economic activity worldwide and, as a result, Grupo Santander's operations and financial results, and which generates uncertainty in Grupo Santander's estimates. Therefore, Grupo Santander's Management has made an assessment of the current situation according to the best information available to date, the potential impacts of covid-19 in the main estimates made and the potential impacts of covid-19 on them for the three-month period ended 31 March 2021, regarding the estimates that have not been modified during the first three months of the year are detailed in note 2 of the consolidated financial statements of 2020.
Regarding the assessment, the following aspects are highlighted:
–Calculation of the expected credit losses:
Since the start of the covid-19 health crisis last year, Grupo Santander's priority has been to ensure the health of its employees, customers and shareholders, as well as to help alleviate the economic impact of the pandemic and offer the best solutions to help our customers. The different measures that were implemented in order to manage the effects derived from covid-19 can be grouped into the following areas:
•Identification and classification of clients or groups affected or potentially affected by the pandemic.
•Granting of support measures under both government and internal programs and close monitoring of the evolution of clients subject to them, especially after their expiration, to ensure that their potential deterioration is correctly reflected in the Group's risk management.
•Recovery management activities when necessary.
100
IMAGE69.JPG

•Adaptation and reinforcement of our policies, models and processes related to estimating expected losses and classifying clients and operations in order to ensure adequate risk management and coverage under the new environment.
•Improvement and adaptation of reporting, incorporating new metrics and indicators such as those related to the evolution of the pandemic or the volume and behaviour of deferrals, thus increasing the predictive capacity in relation to the evolution of the Group's risk profile.
Additionally, the continuous interaction and coordination with the subsidiaries has been a fundamental asset in the management of this crisis. The experience obtained in the fight against the health crisis and its financial consequences in the different geographies allow us to share the best practices identified and implement in an agile and efficient way those strategies and concrete actions that have been most successful, adapted to the local reality of each market.
Regarding the moratorium measures granted, the amount is EUR 112,000 million at the end of March 2021. Of these, around 63% corresponded to residential mortgages, mainly in the United Kingdom where the portfolio has a low average loan to value (LTV) (<50%). The moratoriums granted on consumer loans (about EUR 20,000 million, which represents 18% of the total) are mainly loans for the purchase of cars. The granting of new moratoriums has slowed down since the second half of the year 2020 and the first quarter of 2021.
At least 86% of the total deferrals (about EUR 96,000 million) have already expired at the end of March 2021, showing good behaviour, with 5% of them being classified in stage 3 in accordance with IFRS 9.
In order to give continuity to all the measures adopted and the efforts made during 2020, in 2021 various actions continue to be carried out to continue providing attention and support to the Group's clients in all the geographies in which it is present. The main objective of these initiatives is to be able to carry out a more detailed and specific identification, classification and evaluation of the risks to which the Group is exposed.
These actions can be grouped under the following points:
1.Clients' monitoring
•Continue monitoring and providing solutions to those Group customers whose moratoriums have ended, as well as facilitating the restructuring of their debt to those customers with loans subject to government guarantee programs that require it. Always under strict criteria for classification and recognition of loss in accordance with our internal regulations, current regulations and supervisory recommendations.
•Continue making progress in the evaluation and classification processes of our clients at the individual level, after the different collective analyses carried out during the past year. To this end, in order to expand the information regarding their situation and credit quality,, the use of transactional information has been incorporated in the case of retail clients, and sectorial information for SMEs and companies.
•Return to normality in the calculation of provisions after the different impacts recognized during the past year. In this sense, both the progress in the individual analysis of our clients compared to the collective analyses carried out, as well as the application of a new set of scenarios instead of the long-run scenario used in 2020, according to with supervisory recommendations. In addition, factors such as the effects of covid-19 in the calibration of the parameters used in estimating provisions are being incorporated, in addition to reinforcing the existing regulatory frameworks in our subsidiaries.
2.Expected credit losses and forward-looking
•During the first quarter of 2021, the estimation of the expected losses of the different loan portfolios continued to be carried out according to the criteria applied in the previous quarters of the past financial year 2020, analyzing said losses under IFRS 9 in accordance with the recommendations of the different accounting, regulatory and supervisory bodies. They highlighted the uncertainties surrounding the economic impacts of the health crisis derived from covid-19. This was also evident in the frequent updates of the macroeconomic forecasts, with different perspectives and visions regarding the depth and duration of the crisis. Thus, the general recommendation (including the IASB, ESMA, EBA and ECB) was not to mechanistically apply the usual techniques for calculating expected losses under IFRS9, in order to prevent this variability of economic conditions from resulting in undesired volatility in the results, with its potential pro-cyclical effects on the economy. Considering these guidelines, Grupo Santander has accounted for possible expected losses based on stable long-term macroeconomic forecasts through a subsequent adjustment of the model, complemented by a collective and / or individual evaluation in order to reflect a more realistic situation, specifically to recognize credit losses. expected by assets that may have suffered a significant increase in credit risk (SICR, for its acronym in English). In the case of collective evaluation, without the need to identify which individual financial instruments suffered such SCIR. This post-model adjustment has been considered the best option to recognize the increase in expected loss, since a mechanical application of the expected credit loss (ECL) methodology in this context could generate unexpected results. Additional provisions associated with different macroeconomic scenarios were calculated using internal models; however, they have been considered as a post-model adjustment in most of the Group's units.
IMAGE69.JPG
101


•For this purpose, when estimating the impact of macroeconomic information on the calculation of provisions under IFRS 9, the Group has used macroeconomic scenarios with a long-run view. Such long-run view is generated through a stable long-term outlook, taking into account the structural deterioration caused by the pandemic. Therefore, an analysis is made for each geography as to the moment when the macroeconomic trend, represented by GDP and other relevant variants, recovers its average trend, taking into account seasonal factors applicable to each economy.
3.Additional elements
•As needed because they have not been captured under the two previous elements. This includes, among others, the analysis of sectors most affected by the pandemic if its impacts are not sufficiently captured by macroeconomic scenarios. Also the techniques of collective analysis, when the potential deterioration in a group of clients is not possible to identify it individually.
With the elements indicated above, the Group evaluates the evolution of the credit quality of its clients in each of the geographies, for the purposes of its classification in stages and consequently the calculation of the expected loss.
–Market risk: the evolution of financial markets during the first quarter of 2021 has maintained the trend of previous quarters, with a normalisation of conditions after the tensions experienced during the first half of 2020. No significant increases in volatility, reductions in liquidity or reduced access to price sources and real market transactions for an appropriate valuation of our portfolios have been observed in the main risk factors present in our portfolios. Nor have we seen greater dispersion among the various price contributors and credit spreads have maintained their downward trend in a macroeconomic environment confident of economic recovery after the crisis of the last year.
As a result, there has been no significant impact on the fair value hierarchy and most markets, underlying and maturities have maintained their classification, in line with our observability and significance criteria. Occasional increases in instruments classified as Level 3 were due to new operations or changes in the valuation of the instruments in the portfolio and not due to the application of new observability criteria for valuation sources. Reclassifications between levels have been reduced and concentrated on specific positions for which there may have been a change in observability conditions or a change in access to reliable valuation sources.
Nevertheless, the evolution of the markets, their liquidity and the observability conditions of the valuation inputs continue to be rigorously and exhaustively monitored in order to apply the criteria established in Grupo Santander for the classification of assets and liabilities measured at fair value and to anticipate any possible changes in current market conditions.
The levels of risk measured in terms of VaR in all the Grupo Santander's units are at historically low levels. During the first quarter of the year, positions in the portfolio remained low, with low use of the authorised risk limits. Grupo Santander's treasury activity continued to be concentrated in low complexity instruments and focused on providing services to our corporate clients, mainly in interest rate and FX risk factors. Although in the time window used to calculate VaR levels the high volatility scenarios observed last year due to the Covid crisis are maintained, exposure to risk is at historical lows of the last few years, approximately EUR 8.4 million (VaR 1d 99%) at the end of the quarter.
During the three-month period ended 31 March 2021, there have been no additional significant changes in the estimates made at the end of 2020, other than those indicated in this interim financial information.
d)    Contingent assets and liabilities
Note 2.o to Grupo Santander's consolidated annual accounts for the year ended 31 December 2020 includes information on the contingent assets and liabilities at that date. There were no significant changes in Grupo Santander's contingent assets and liabilities from 31 December 2020 to the date of formal preparation of these interim financial statements.
e)    Comparative information
The information in note 3.b regarding the outstanding shares on March 2020 has been restated due to the capital increase described in note 31.a of the consolidated annual accounts for year 2020 in accordance with IAS 33 Earnings per share.
Additionally, the segment information corresponding to the period ended 31 March 2020 were restated for comparative purposes in accordance with the Group's new organizational structure, as required by IFRS 8 (see note 12).
In order to interpret the changes in the balances with respect to 31 December 2020, it is necessary to take into consideration the exchange rate effect arising from the volume of foreign currency balances held by the Group in view of its geographic diversity (Note 50.b to the consolidated annual accounts for the year ended 31 December 2020) and the impact of the appreciation/ depreciation of the various currencies against the euro in the first three months of 2021: Mexican peso (1.91%), US dollar (4.51%), Brazilian real (-3.86%), Argentine peso (-4.49%), Pound sterling (5.44%), Chilean peso (3.35%) and Polish zloty (-1.62%); as well as the evolution of the average exchange rates between comparable periods: Mexican peso (-10.67%), US dollar (-8.47%), Brazilian real (-25.88%), Argentine peso (-34.68%), Pound sterling (-1.38%), Chilean peso (1.58%) and Polish zloty (-4.91%).
102
IMAGE69.JPG

f)     Seasonality of the Grupo Santander’s transactions
The business activities carried on by Grupo Santander entities, and their transactions are not cyclical or seasonal in nature. Therefore, no specific disclosures are included in these explanatory notes to the interim financial statements for the three-month period ended 31 March 2021.
g)    Materiality
In determining the note disclosures to be made on the various items in the interim financial statements or other matters, Grupo Santander, in accordance with IAS 34, took into account their materiality in relation to the interim financial statements for the three-month period ended 31 March 2021.
h)    Events after the reporting period
From 1 April 2021 until the date of approval of the interim financial statements for the three-month period ended 31 March 2021, no significant events other than those indicated in the interim financial statements have occurred.

i)     Other information
On 31 January 2020 the UK ceased to be a member of the EU, on withdrawal terms which established a transition period until 31 December 2020, during which the UK continued to be treated as an EU member state and applicable EU legislation continued to be in force. A trade deal was agreed between the UK and the EU prior to the end of the transition period and the new regulations came into force on 1 January 2021.
The trade deal, however, did not include agreements on certain areas, such as financial services and data adequacy, although a further transitional period has been agreed with respect to rules on the transfer of personal data between the EU and the UK until the end of June 2021. Since December 2020, there have been no significant changes.

2.    Grupo Santander
Appendices I, II and III to the consolidated annual accounts for the year ended 31 December 2020 provide relevant information on Grupo Santander companies at that date and on the companies accounted for under the equity method.
Also, note 3 to the aforementioned consolidated annual accounts includes a description of the most significant acquisitions and disposals of companies performed by Grupo Santander in 2020, 2019 and 2018.
The most significant transactions carried out during the first three months of 2021 or pending execution at 31 March 2021 are described below:
Tender offer for shares of Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander Mexico
On 26 March, Banco Santander, S.A. announced its intention to make a tender offer for all shares of Banco Santander Mexico, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México ("Santander México") that are not owned by Grupo Santander, representing approximately 8.3% of the share capital of Santander México.
The expected consideration for shareholders accepting the offer will be MXN 24 (approximately EUR 1) for each Santander Mexico share (and its equivalent for each American Depositary Share, securities listed on the New York Stock Exchange). If all the shares held by minority shareholders accept the offer, considering the currently envisaged, the acquisition of 8.3% would imply an investment by Banco Santander S.A. of approximately MXN 13.19 billion (approximately EUR 550 million).
The transaction is expected to close in the second or the third quarter of 2021. The beginning of the offering and the offering itself will be subject to customary conditions, including regulatory authorisation, as well as approval of the deregistration of Santander Mexico's shares on the Mexican Stock Exchange. This will require the acceptance of at least 95% of Santander Mexico's share capital at an extraordinary shareholders' meeting. Grupo Santander currently owns 91.7% of Santander Mexico.
IMAGE69.JPG
103

3.    Shareholder remuneration system and earnings per share.
a)   Shareholder remuneration system
The cash remuneration paid by Banco Santander to its shareholders in the first three months of 2021 and 2020 was as follows:
31-03-2021 31-03-2020
% of par
value 		Euros per
share 		Amount
(EUR million) 		% of par
value 		Euros per
share 		Amount
(EUR million)
Ordinary shares —  —  —  —  —  — 
Other shares (without vote, redeemable, etc.) —  —  —  —  —  — 
Total remuneration paid —  —  —  —  —  — 
Dividend paid out of profit —  —  —  —  —  — 
Dividend paid with a charge to reserves or share premium —  —  —  —  —  — 
Dividend in kind —  —  —  —  —  — 
Flexible payment —  —  —  —  —  — 

The board of directors that took place on 25 March 2021, it was agreed to pay a dividend of EUR 2.75 cents in cash per share against the 2020 financial year, charged to the share premium of an amount of 477 million euros (see Statement of Change in Equity and note 11), which will be effective as of 4 May 2021, this being the maximum amount allowed by the recommendation of the European Central Bank of 15 December 2020.

b)   Earnings per share from continuing and discontinued operations
i. Basic earnings per share
Basic earnings per share for the period are calculated by dividing the net profit attributable to Grupo Santander for the three-month period adjusted by the after-tax amount relating to the remuneration of contingently convertible preference shares recognised in equity by the weighted average number of ordinary shares outstanding during the period, excluding the average number of treasury shares held in the period.
Accordingly:
31-03-2021 31-03-2020
Profit attributable to the Parent (EUR million) 1,608  331 
Remuneration of contingently convertible preferred securities (CCPS) (EUR million) (137) (140)
1,471  191 
Of which:
Profit or Loss from discontinued operations (non controlling interest net) (EUR million) —  — 
Profit or Loss from continuing operations (CCPS net) (EUR million) 1,471  191 
Weighted average number of shares outstanding 17,311,025,179  16,604,307,679
Impact factor correction (a) —  721,926,421
Adjusted number of shares 17,311,025,179  17,326,234,099
Basic earnings per share (euros) 0.08  0.01 
Of which: from discontinued operations (euros) —  — 
                  from continuing operations (euros) 0.08  0.01 
(a) Correction factor for the capital increase on December 3, 2020 (see note 1.e).

104
IMAGE69.JPG

ii. Diluted earnings per share
Diluted earnings per share for the period are calculated by dividing the net profit attributable to Grupo Santander for the three-month period adjusted by the after-tax amount relating to the remuneration of contingently convertible preference shares recognised in equity and of perpetual liabilities contingently amortisable in their case by the weighted average number of ordinary shares outstanding during the period, excluding the average number of treasury shares and adjusted for all the dilutive effects inherent to potential ordinary shares (share options, warrants and convertible debt instruments).
Accordingly, diluted earnings per share were determined as follows:
31-03-2021 31-03-2020
Profit attributable to the Parent (EUR million) 1,608 331 
Remuneration of contingently convertible preferred securities (CCPS) (EUR million) (137) (140)
1,471 191 
Of which:
Profit or Loss from discontinued operations (non controlling interest net) (EUR million) —  — 
Profit or Loss from continuing operations (CCPS net) (EUR million) 1,471 191 
Weighted average number of shares outstanding 17,311,025,179 16,604,307,679
Dilutive effect of options/receipt of shares 46,145,981  37,686,106 
Impact factor correction (a) —  723,564,947
Adjusted number of shares 17,357,171,160  17,365,558,732 
Diluted earnings per share (euros) 0.08  0.01 
Of which: from discontinued operations (euros) —  — 
                  from continuing operations (euros) 0.08  0.01 
(a) Correction factor for the capital increase on December 3, 2020 (see note 1.e).

4.    Remuneration and other benefits paid to Banco Santander’s directors and senior managers
Note 5 to Grupo Santander’s consolidated annual accounts for the year ended 31 December 2020 details the remuneration and other benefits to members of Banco Santander’s Board of Directors and senior management in 2020.
Following is a summary of the most significant data on the remunerations and benefits for the three months ended 31 March 2021 and 2020:
Remuneration of members of the board of directors (1)
Thousand euros
31-03-2021 31-03-2020
Members of the board of directors: (2)(3)(4)(5)(6)(7)(8)(9)
Remuneration concept
Fixed salary remuneration of executive directors 1,526 1,339
Variable salary remuneration of executive directors —  — 
Directors fees 363 356
Bylaw-stipulated emoluments (annual emolument) 930 935
Other (except insurance premiums) 916 1,073
Sub-total 3,735 3,703
Transactions with shares and/or other financial instruments —  — 
3,735 3,703
(1)The notes to the consolidated annual accounts for 2021 will contain detailed and complete information on the remuneration paid to all the directors, including executive directors.
(2)Mr Rodrigo Echenique ceased to be a non-executive director on 22 December 2020.
(3)Mr Sergio Rial was appointed as executive director since 30 May 2020.
(4)Mr Luis Isasi was appointed as director since 19 May 2020.
(5)Mr Guillermo de la Dehesa ceased to be a director on 3 April 2020.
(6)Mr Ignacio Benjumea ceased to be a director on 5 May 2020.
(7)Ms Esther Giménez-Salinas ceased to be a director on 27 October 2020.
(8)Ms Gina Díez was appointed as director since 22 December 2020.
(9)Mr Ramón Martín Chávez was appointed as director since 27 October 2020.
IMAGE69.JPG
105


Other benefits of members of the board of directors
Thousand euros
31-03-2021 31-03-2020
Members of the board of directors:
Other benefits-
Advances —  — 
Loans granted 26  107 
Pension funds and plans: Endowments and/or contributions (1) 456  505 
Pension funds and plans: Accumulated rights (2) 68,169  75,348 
Life insurance premiums 677  896 
Guarantees provided for directors —  — 
(1)   These correspond to the endowments and/or contributions made during the first three months of 2021 and 2020 in respect of retirement pensions and complementary benefits for widowhood, orphanhood and permanent disability.
(2)   Corresponds to the rights accrued by the directors in matters of pensions. Additionally, former members of the board had at 31 March 2021 and 31 March 2020 rights accrued for this concept for EUR 50,918 thousands and EUR 57,804 thousands, respectively.
Remuneration of senior management (1)(2)
The table below includes the corresponding amounts related to remunerations of senior management at 31 March 2021 and 2020, excluding the executive directors:
Thousand euros
31-03-2021 31-03-2020
Senior management (1):
Total remuneration of senior management (2) 8,080  8,981 
(1)  None members of senior management ceased during the first three months of 2021 and 202.
(2)   The number of members of Banco Santander's senior management, excluding executive directors, is 18 as at 31 March 2021 (31 March 2020: 18).
The variable annual remuneration (or bonuses) received for fiscal year 2020, both for directors and the rest of senior management, were included in the information on remuneration included in the annual report for that year. Similarly, the variable remuneration attributable to the 2021 results, which will be submitted for approval by the Board of Directors at the appropriate time, will be included in the financial statements for the current year.
Funds and pension plans of senior management
Thousand euros
31-03-2021 31-03-2020
Senior management:
Pension funds: Endowments and / or contributions (1) 1,553  1,591 
Pension funds: Accumulated rights (2) 60,138  68,729 
(1)Corresponds to the allocations and/or contributions made during the first three months of 2021 and 2020 as retirement pensions.
(2)Corresponds to the rights accrued by members of senior management in the area of pensions. In addition, former members of senior management had at 31 March 2021 and 31 March 2020 rights accumulated for this same concept for EUR 160,329 thousands and EUR 167,006 thousands, respectively.



106
IMAGE69.JPG

5.    Financial assets
a)   Breakdown
The detail, by nature and category for measurement purposes, of Grupo Santander's financial assets, other than the balances relating to Cash, cash balances at central banks and other deposits on demand and Hedging derivatives, at 31 March 2021 and 31 December 2020 is as follows, presented by the nature and categories for valuation purposes:
EUR million
31-03-2021
Financial
assets held
for trading 		Non-trading
financial
assets
mandatorily
at fair value
through
profit or loss 		Financial
assets
designated
at fair value
through
profit or loss 		Financial
assets at fair
value through
other
comprehensive
income 		Financial
assets at
amortised
cost
Derivatives 58,500 
Equity instruments 11,626  3,354  2,793 
Debt instruments 39,212  740  2,721  101,496  26,430 
Loans and advances 305  545  53,929  9,081  955,151 
Central Banks —  —  8,173  —  14,255 
Credit institutions 2  —  19,300  —  37,521 
Customers 303  545  26,456  9,081  903,375 
Total 109,643  4,639  56,650  113,370  981,581 
EUR million
31-12-2020
Financial
assets held
for trading 		Non-trading
financial
assets
mandatorily
at fair value
through
profit or loss 		Financial
assets
designated
at fair value
through
profit or loss 		Financial
assets at fair
value through
other
comprehensive
income 		Financial
assets at
amortised
cost
Derivatives 67,137 
Equity instruments 9,615  3,234  2,783 
Debt instruments 37,894  700  2,979  108,903  26,078 
Loans and advances 299  552  45,738  9,267  932,300 
Central Banks —  —  9,481  —  12,499 
Credit institutions 3  —  12,136  —  37,838 
Customers 296  552  24,121  9,267  881,963 
Total 114,945  4,486  48,717  120,953  958,378 
IMAGE69.JPG
107

Following is the gross exposure of financial assets subject to impairment stages at 31 March 2021 and 31 December 2020:
EUR million
31-03-2021 31-12-2020
Impairment value correction Impairment value correction
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
Financial assets at fair value through other comprehensive income 110,588  2  51  110,641  118,150  6  50  118,206 
Debt instruments 101,501  2  6  101,509  108,903  6  6  108,915 
Loans and advances 9,087  —  45  9,132  9,247  —  44  9,291 
   Central Banks —  —  —  —  —  —  —  — 
   Credit institutions —  —  —  —  —  —  —  — 
   Customers 9,087  —  45  9,132  9,247  —  44  9,291 
Financial assets at amortised cost 905,663  67,584  31,497  1,004,744  884,892  66,170  30,670  981,732 
Debt instruments 26,196  97  402  26,695  25,889  66  395  26,350 
Loans and advances 879,467  67,487  31,095  978,049  859,003  66,104  30,275  955,382 
   Central Banks 14,255  —  —  14,255  12,499  —  —  12,499 
   Credit institutions 37,523  2  1  37,526  37,845  —  1  37,846 
   Customers 827,689  67,485  31,094  926,268  808,659  66,104  30,274  905,037 
Total 1,016,251  67,586  31,548  1,115,385  1,003,042  66,176  30,720  1,099,938 

On 31 March 2021, Grupo Santander has EUR 459 million (EUR 497 million on 31 December 2020) of exposure in impaired assets purchased with impairment, which mainly correspond to the business combinations carried out by Grupo Santander.

b)    Impairment allowances of financial assets at amortised cost portfolio
The following is the movement that has taken place, during the three-month periods ended 31 March 2021 and 2020, in the balance of provisions that cover losses due to impairment of assets which comprise the heading balance of the financial assets at amortised cost:
EUR million
31-03-2021 31-03-2020
Balance as at beginning of period 23,849  22,713 
Impairment losses charged to income for the period 2,333  4,234 
Of which:
Impairment losses charged to income 5,365  6,873 
Impairment losses reversed with a credit to income (3,032) (2,639)
Write-off of impaired balances against recorded impairment allowance (2,233) (2,635)
Exchange differences and other (327) (1,262)
Balance as at end of period 23,622  23,050 
Of which, relating to:
Impaired assets 13,883  13,551 
Other assets 9,739  9,499 
Of which:
Individually calculated 3,101  3,377 
Collectively calculated 20,521  19,673 
108
IMAGE69.JPG

Following is the movement of the loan loss provision broken down by impairment stage of loans and advances to customers recognised under 'Financial assets at amortised cost' as at 31 March 2021 and 2020:
EUR million
31-03-2021
Stage 1 Stage 2 Stage 3 Total
Impairment allowance as at beginning of period 4,252  5,672  13,647  23,571 
Transfers between stages (211) 233  1,296  1,318 
Variation due to credit risk 380  (389) 1,024  1,015 
Write-offs —  —  (2,233) (2,233)
Exchange differences and other (193) (27) (99) (319)
Carrying amount as of 31 March 2021 4,228  5,489  13,635  23,352 
EUR million
31-03-2020
Stage 1 Stage 2 Stage 3 Total
Impairment allowance as at beginning of period 3,835  4,474  13,933  22,242 
Transfers between stages (254) 27  1,488  1,261 
Variation due to credit risk 1,851  (108) 1,250  2,993 
Write-offs —  —  (2,635) (2,635)
Exchange differences and other (166) (188) (807) (1,161)
Carrying amount as of 31 March 2020 5,266  4,205  13,229  22,700 
Previously written-off assets recovered during the first three months of 2021 and 2020 amount to EUR 306 million and to EUR 301 million, respectively. Considering these amounts, the recorded impairment of financial assets at amortised cost is EUR 2,027 million and EUR 3,933 million, respectively.

c)    Impaired assets of financial assets at amortised cost portfolio
The movement during the three-month periods ended 31 March 2021 and 2020, in the balance of financial assets classified at amortised cost and considered impaired by reason for the credit risk is as follows:
EUR million
31-03-2021 31-03-2020
Balance as at beginning of period 31,168  33,184 
Net additions 2,590  2,722 
Written-off assets (2,233) (2,635)
Exchange differences and other 431  (1,054)
Balance as at end of period 31,956  32,217 

This amount, after deducting the related allowances, represents Grupo Santander's best estimate of the discounted value of the flows that are expected to be recovered from the impaired assets.
IMAGE69.JPG
109

d)     Fair value of financial assets not measured at fair value
Following is a comparison of the carrying amounts of Grupo Santander’s financial assets measured at other than fair value and their respective fair values at 31 March 2021 and 31 December 2020:
EUR million EUR million
31-03-2021 31-12-2020
Carrying
amount 		Fair 
value 		Carrying
amount 		Fair 
value
Loans and advances 955,151  962,693  Loans and advances 932,300  940,258 
Debt instruments 26,430  26,735  Debt instruments 26,078  26,532 
ASSETS 981,581  989,428  ASSETS 958,378  966,790 

The main valuation methods and inputs used in the estimation of the fair value of the financial assets of the previous table are detailed in note 50.c of the consolidated annual accounts for the year 2020.
6.    Non-current assets held for sale
The detail, by nature, of Grupo Santander’s non-current assets held for sale at 31 March 2021 and 31 December 2020 is as follows presented by nature:
EUR million
31-03-2021 31-12-2020
Tangible assets 4,406 4,445
Of which:
Foreclosed assets 4,034 4,081
Of which: Property assets in Spain 3,423 3,485
Other tangible assets held for sale 372 364
Other assets — 0
4,406 4,445
On 31 March 2021, the allowance that covers the value of the foreclosed assets represents the 47.4% of its carrying value (31 December 2020: 48.0%). The charges recorded in the first three months of 2021 and 2020 amounted to EUR 44 million and EUR 39 million, respectively, and the recoveries undergone during those periods amount to EUR 10 million and EUR 4 million, respectively.

7.   Tangible assets
a)   Changes in the period
In the first three months of 2021 and 2020, tangible assets (rights of use are not included) were acquired for EUR 1,763 million and EUR 1,707 million, respectively.
Also, in the first three months of 2021 and 2020 tangible asset items were disposed of with a carrying amount of EUR 651 million and EUR 433 million respectively, giving rise to a net gain of EUR 1 million and EUR 18 million, respectively.
b)   Property, plant and equipment purchase commitments
At 31 March 2021 and 2020, Grupo Santander did not have any significant commitments to purchase property, plant and equipment items.
c) Leasing rights
As of 31 March 2021, Grupo Santander has tangible assets under lease for the amount of EUR 2,737 million (EUR 2,837 million at 31 December 2020).
d) Tangible asset impairment
In the first quarter of 2021, EUR 120 million of tangible asset impairment was recognised in the tangible asset impairment line.
110
IMAGE69.JPG


8.    Intangible assets
The detail of Intangible Assets - Goodwill at 31 March 2021 and 31 December 2020, based on the cash-generating units giving rise thereto, is as follows:
EUR million
31-03-2021 31-12-2020
Banco Santander (Brazil) 2,991  3,109 
SAM Investment Holdings Limited 1,444  1,444 
Santander Consumer Germany 1,314  1,314 
Santander Bank Polska 1,086  1,104 
Santander Portugal 1,040  1,040 
Santander España 1,027  1,027 
Santander Consumer USA 945  904 
Santander UK 624  592 
Santander Bank National Association 620  594 
Banco Santander Chile 590  571 
Grupo Financiero Santander (Mexico) 407  399 
Santander Consumer Nordics 223  216 
Other entities 149  157 
Total Goodwill 12,460  12,471 

Note 17 to the consolidated annual accounts for the year ended 31 December 2020 includes detailed information on the procedures followed by Grupo Santander to analyse the potential impairment of the goodwill recognised with the respect to its recoverable amount and to recognise the related impairment losses, where appropriate.
The accounting standard (IAS 36) requires that a cash‑generating unit to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired.
Accordingly, based on the analysis performed of the available information on the performance of the various cash-generating units which might evidence the existence of indicators of impairment, Grupo Santander's directors concluded that in the first three months of 2021 there were no impairment losses which required recognition (see note 1.c.).

9.   Financial liabilities
a)   Breakdown
The following is a breakdown of Grupo Santander's financial liabilities, other than the balances corresponding to the Derivatives - hedge accounting heading, as of 31 March 2021 and 31 December 2020, presented by nature and categories for valuation purposes:
EUR million
31-03-2021 31-12-2020
Financial
liabilities
held for
trading 		Financial
liabilities
designated at
fair value through
profit or loss 		Financial
liabilities at
amortised cost 		Financial
liabilities
held for
trading 		Financial
liabilities
designated at
fair value through
profit or loss 		Financial
liabilities at
amortised cost
Derivatives 55,935  64,469 
Short Positions 15,358  16,698 
Deposits —  65,439  1,022,555  —  43,598  990,391 
Central banks —  6,574  122,651  —  2,490  112,804 
Credit institutions —  9,471  66,444  —  6,765  62,620 
Customer —  49,394  833,460  —  34,343  814,967 
Debt instruments —  4,538  240,765  —  4,440  230,829 
Other financial liabilities —  —  27,155  —  0  26,968 
Total 71,293  69,977  1,290,475  81,167  48,038  1,248,188 
IMAGE69.JPG
111


b)   Information on issues, repurchases or redemptions of debt instruments issued
The detail of the balance of debt instruments issued according to their nature is:
EUR million
31-03-2021 31-12-2020
Bonds and debentures outstanding 196,974  191,577 
Subordinated 21,903  21,686 
Promissory notes and other securities 26,426  22,006 
Total debt instruments issued 245,303  235,269 

The detail, at 31 March 2021 and 2020, of the outstanding balance of the debt instruments, excluding promissory notes, which at these dates had been issued by Banco Santander or any other Group entity is disclosed below. Also included is the detail of the changes in this balance in the first three months of 2021 and 2020:
EUR million
31-03-2021
Opening
balance at
01-01-21 		Perimeter Issuances or placements Repurchases or
redemptions 		Exchange
rate and other
adjustments 		Closing
balance at
31-03-21
Bonds and debentures outstanding 191,577  —  17,061  (13,819) 2,155  196,974 
Subordinated 21,686  —  —  —  217  21,903 
Bonds and debentures outstanding and subordinated liabilities issued 213,263  —  17,061  (13,819) 2,372  218,877 
EUR million
31-03-2020
Opening
balance at
01-01-20 		Perimeter Issuances or placements Repurchases or
redemptions 		Exchange
rate and other
adjustments 		Closing
balance at
31-03-20
Bonds and debentures outstanding 208,455  —  24,486  (21,740) (3,257) 207,944 
Subordinated 20,878  —  1,500  (1,500) (513) 20,365 
Bonds and debentures outstanding and subordinated liabilities issued 229,333  —  25,986  (23,240) (3,770) 228,309 

At 12 March 2020, Banco Santander proceeded to redeem early and voluntarily the entire outstanding issue of Tier 1 Contingently Convertible Preferred Participations Series I/2014, for a total nominal amount of EUR 1,500 million.
In January 2020, Banco Santander carried out a placement of contingently convertible preferred participations into newly issued ordinary shares of Banco Santander (the 'PPCCs'), excluding the pre-emptive subscription rights of its shareholders and for a nominal amount of EUR 1,500 million (the 'Issue' and the 'PPCCs').
The Issue was made at par and the remuneration of the PPCCs, the payment of which is subject to certain conditions and is also discretionary, was set at 4.375% per annum for the first six years, revised every five years thereafter by applying a margin of 453.4 basis points over the 5-year Mid-Swap Rate (5-year Mid-Swap Rate).
c)    Other issues guaranteed by Grupo Santander
At 31 March 2020 and 2021, there were no debt instruments issued by associates or non-Group third parties (unrelated) that had been guaranteed by Banco Santander or any other Group entity.

112
IMAGE69.JPG

d)   Fair value of financial liabilities not measured at fair value
Following is a comparison between the value by which Grupo Santander’s financial liabilities are recorded that are measured using criteria other than fair value and their corresponding fair value at 31 March 2021 and 31 December 2020:
EUR million
31-03-2021 31-12-2020
Carrying amount Fair value Carrying amount Fair value
Deposits 1,022,555  1,021,979  990,391  990,807 
Debt instruments 240,765  249,322  230,829  241,174 
Liabilities 1,263,320  1,271,301  1,221,220  1,231,981 

Additionally, other financial liabilities are accounted for EUR 27,155 million and EUR 26,968 million as of 31 March 2021 and 31 December 2020, respectively.
The main valuation methods and inputs used in the estimation of the fair value of the financial liabilities in the previous table are detailed in note 50.c of the consolidated annual accounts for 2020, other than those mentioned in these interim financial statements.


10.   Provisions
a)    Provisions for Pensions and other post-retirements obligations and Other long term employee benefits
The variation experienced by the balance of the Pensions and other post-retirements obligations and other long-term employee benefits from 31 December 2020 to 31 March 2021, is mainly due to lower net actuarial losses as a result of changes in actuarial assumptions (see note 11.d).
b)    Provisions for taxes and other legal contingencies and Other provisions
Set forth below is the detail, by type of provision, of the balances at 31 March 2021 and at 31 December 2020 of Provisions for taxes and other legal contingencies and Other provisions. The types of provision were determined by grouping together items of a similar nature:
EUR million
31-03-2021 31-12-2020
Provisions for taxes 591  600 
Provisions for employment-related proceedings (Brazil) 409  437 
Provisions for other legal proceedings 1,077  1,163 
Provision for customer remediation 526  395 
Regulatory framework-related provisions 49  69 
Provision for restructuring 1,264  810 
Other 966  951 
4,882  4,425 

Relevant information is set forth below in relation to each type of provision shown in the preceding table:
The provisions for taxes include provisions for tax-related proceedings.
The provisions for employment-related proceedings (Brazil) relate to claims filed by trade unions, associations, the prosecutor's office and ex-employees claiming employment rights to which, in their view, they are entitled, particularly the payment of overtime and other employment rights, including litigation concerning retirement benefits. The number and nature of these proceedings, which are common for banks in Brazil, justify the classification of these provisions in a separate category or as a separate type from the rest. The Group calculates the provisions associated with these claims in accordance with past experience of payments made in relation to claims for similar items. When claims do not fall within these categories, a case-by-case assessment is performed and the amount of the provision is calculated in accordance with the status of each proceeding and the risk assessment carried out by the legal advisers.
IMAGE69.JPG
113

The provisions for other legal proceedings include provisions for court, arbitration or administrative proceedings (other than those included in other categories or types of provisions disclosed separately) brought against Santander Group companies.
The provisions for customer remediation include the estimated cost of payments to remedy errors relating to the sale of certain products in the UK, the estimated cost of the Banco Popular Español, S.A.U. floor clauses and the estimated cost claim's cost made on CHF index-linked loan contracts in Poland. To calculate the provision for customer remediation, the best estimate of the provision made by management is used, which is based on the estimated number of claims to be received and, of these, the number that will be accepted, as well as the estimated average payment per case.
The regulatory framework-related provisions include mainly the provisions for the extraordinary contribution to Financial Services Compensation Scheme (FSCS) and the Bank Levy in the UK, and those relating to Banking Tax in Poland.
The provisions for restructuring include only the direct costs arising from restructuring processes by the various Group companies.
Qualitative information on the main litigation is provided in note 10.c.
Our general policy is to record provisions for tax and legal proceedings in which we assess the chances of loss to be probable and we do not record provisions when the chances of loss are possible or remote. We determine the amounts to be provided for as our best estimate of the expenditure required to settle the corresponding claim based, among other factors, on a case-by-case analysis of the facts and the legal opinion of internal and external counsel or by considering the historical average amount of the loss incurred in claims of the same nature. The definitive date of the outflow of resources embodying economic benefits for the Group depends on each obligation. In certain cases, the obligations do not have a fixed settlement term and, in others, they depend on legal proceedings in progress.
The changes in provisions arising from civil contingencies and legal nature are disclosed in this note.
The main changes in provisions in the first three months of 2021 are as follows:
Regarding the provisions for labor processes and others of a legal nature, Brazil has charged EUR 57 million and EUR 36 million, respectively, using provisions of EUR 78 million and EUR 102 million, respectively.
Regarding the provisions arising for customer remediation Poland has registered EUR 44 million in the three first months of the year in order to cover the mortgage portfolio in CHF.
Regarding in provisions constituted by regulatory framework, EUR 20 million in the first three months of 2021 in United Kingdom has been used (Bank Levy and FSCS). In addition, EUR 32 million have been charged and paid in the first three months of 2021 in Poland.
In addition, provisions for restructuring were charged by the Group in the quarter, mainly in the United Kingdom and Portugal.
c)    Litigation and other matters
i. Tax-related litigation
At 31 March 2021 the main tax-related proceedings concerning the Group were as follows:
•Legal actions filed by Banco Santander (Brasil) S.A. and other Group entities to avoid the application of Law 9.718/98, which modifies the basis to calculate PIS and COFINS social contribution, extending it to all the entities income, and not only to the income from the provision of services. In relation of Banco Santander (Brasil) S.A. process, in May 2015 the Federal Supreme Court (FSC) admitted the extraordinary appeal filed by the Federal Union regarding PIS, and dismissed the extraordinary appeal lodged by the Brazilian Public Prosecutor's Office regarding COFINS contribution, confirming the decision of Federal Regional Court favourable to Banco Santander (Brasil) S.A. of August 2007. The appeals filed by the other entities before the Federal Supreme Court, both for PIS and COFINS, are still pending. These claims are fully provisioned.
•Banco Santander (Brasil) S.A. and other Group companies in Brazil have appealed against the assessments issued by the Brazilian tax authorities questioning the deduction of loan losses in their income tax returns (IRPJ and CSLL) in relation to different administrative processes of various years on the ground that the requirements under the applicable legislation were not met. The appeals are pending decision in CARF. No provision was recognised in connection with the amount considered to be a contingent liability.
•Banco Santander (Brasil) S.A. and other Group companies in Brazil are involved in administrative and legal proceedings against several municipalities that demand payment of the Service Tax on certain items of income from transactions not classified as provisions of services. There are several cases in different judicial instances. A provision was recognised in connection with the amount of the estimated loss.
•Banco Santander (Brasil) S.A. and other Group companies in Brazil are involved in administrative and legal proceedings against the tax authorities in connection with the taxation for social security purposes of certain items which are not considered to be employee remuneration. There are several cases in different judicial instances. A provision was recognised in connection with the amount of the estimated loss.

114
IMAGE69.JPG

•In May 2003 the Brazilian tax authorities issued separate infringement notices against Santander Distribuidora de Títulos e Valores Mobiliarios Ltda. (DTVM, actually Santander Brasil Tecnología S.A.) and Banco Santander (Brasil) S.A. in relation to the Provisional Tax on Financial Movements (CPMF) of the years 2000 to 2002. The administrative discussion ended unfavourably for both companies, and on July 3, 2015, filed a lawsuit requesting the cancellation of both tax assessments. The lawsuit was judged unfavorably in first instance. Therefore, both plaintiffs appealed to the court of second instance. On December 2020, the appeal was decided unfavorably and is pending a motion of clarification, which could be appealed to higher courts. There is a provision recognized for the estimated loss.
•In December 2010 the Brazilian tax authorities issued an infringement notice against Santander Seguros S.A. (Brazil), currently Zurich Santander Brasil Seguros e Previdência S.A., as the successor by merger to ABN AMRO Brasil dois Participações S.A., in relation to income tax (IRPJ and CSLL) for 2005, questioning the tax treatment applied to a sale of shares of Real Seguros, S.A. The administrative discussion ended unfavourably, and the CARF decision has been appealed at the Federal Justice. As the former parent of Santander Seguros S.A. (Brasil), Banco Santander (Brasil) S.A. is liable in the event of any adverse outcome of this proceeding. No provision was recognised in connection with this proceeding as it is considered to be a contingent liability.
•In November 2014 the Brazilian tax authorities issued an infringement notice against Banco Santander (Brasil) S.A. in relation to corporate income tax (IRPJ and CSLL) for 2009 questioning the tax-deductibility of the amortisation of the goodwill of Banco ABN AMRO Real S.A. performed prior to the absorption of this bank by Banco Santander (Brasil) S.A., but accepting the amortisation performed after the merger. Actually it is appealed before the Higher Chamber of CARF. No provision was recognised in connection with this proceeding as it was considered to be a contingent liability.
•Banco Santander (Brasil) S.A. has also appealed against infringement notices issued by the tax authorities questioning the tax deductibility of the amortisation of the goodwill arising on the acquisition of Banco Comercial e de Investimento Sudameris S.A from years 2007 to 2012. No provision was recognised in connection with this matter as it was considered to be a contingent liability.
•Banco Santander (Brasil) S.A. and other companies of the Group in Brazil are undergoing administrative and judicial procedures against Brazilian tax authorities for not admitting tax compensation with credits derived from other tax concepts, not having registered a provision for such amount since it is considered to be a contingent liability.
•Banco Santander (Brasil) S.A. is involved in appeals in relation to infringement notices initiated by tax authorities regarding the offsetting of tax losses in the CSLL (‘Social Contribution on Net Income’) of year 2009. The appeal is pending decision in CARF. No provision was recognised in connection with this matter as it is considered to be a contingent liability.
•Brazilian tax authorities have issued infringement notices against Getnet Adquirência e Serviços para Meios de Pagamentos S.A and Banco Santander (Brasil) S.A. as jointly liable in relation to corporate income tax (IRPJ and CSLL) for 2014 to 2018 questioning the tax-deductibility of the amortization of the goodwill from the acquisition of Getnet Tecnologia Proces S.A., considering that the company would not have complied with the legal requirements for such amortization. A defense against the tax assessment notices was submitted. The notice related to the fiscal years 2014 and 2015 has already been appealed at the CARF, meanwhile the one related to the fiscal years of 2016 to 2018 is pending on judgment. No provision was recognized as it is considered to be a contingent liability.
The total amount for the aforementioned Brazil lawsuits that are fully provisioned is EUR 792 million, and for lawsuits that qualify as contingent liabilities is EUR 3.289 million.
•Legal action brought by Sovereign Bancorp, Inc. (currently Santander Holdings USA, Inc.) claiming its right to take a foreign tax credit for taxes paid outside the United States in fiscal years 2003 to 2005 as well as the related issuance and financing costs. On 17 July 2018, the District Court finally ruled against Santander Holdings USA, Inc. On September 5, 2019 the Federal District Court in Massachusetts entered a judgement resolving the Company’s tax liability for fiscal years 2003 to 2005, which had no effect on income. The Company has agreed to resolve the treatment of the same transactions for 2006 and 2007, consistent with the September 5, 2019 judgment. The Congressional Joint Committee on Taxation has completed its review of the proposed resolution of the 2006 and 2007 tax years, with no objection. The IRS finalized its administrative process to close-out the issue, which resulted in no impact on net income.
•Banco Santander has appealed before European Courts the Decisions 2011/5/CE of 28 October 2009, and 2011/282/UE of 12 January 2011 of the European Commission, ruling that the deduction of the financial goodwill regulated pursuant to Article 12.5 of the Corporate Income Tax Law constituted illegal State aid. On November 2018 the General Court confirmed these Decisions but these judgements have been appealed at the Court of justice of the European Union. The Advocate-General has issued his conclusions proposing the dismissal of the appeal. The dismissal of this appeal would not have effect on equity.
At the date of approval of these interim financial statements certain other less significant tax-related proceedings are also in progress.

IMAGE69.JPG
115

ii. Non-tax-related proceedings
At 31 March 2021 the main non-tax-related proceedings concerning the Group were as follows:
• Payment Protection Insurance (PPI): claims associated with the sale by Santander UK plc of payment protection insurance or PPI to its customers. At 31 March 2021, the remaining provision for PPI redress and related costs was £42m – EUR 49 million - (2020: £76m – EUR 87 million). There was no additional provision in Q1 2021.
Cumulative complaints from the inception of the PPI complaints process to 31 March 2021, regardless of the likelihood of Santander UK incurring in liability, were 4.6 million. At 31 March 2021, the outstanding activities which drive the ongoing provision requirement relate to the final aspects of complaints close-down activity and the ongoing commercial negotiation with the Official Receiver.
Although the deadline for bringing complaints has passed, customers can still commence litigation for PPI mis-selling. Provision has been made for the best estimate of any obligation to pay compensation in respect of current stock and estimated future claims. There are ongoing factual issues to be resolved regarding such litigation which may have legal consequences including the volume and quality of future litigation claims. As a result, the extent of the potential liability and amount of any compensation to be paid remains uncertain.
In relation to a specific PPI portfolio of complaints, there is a legal dispute regarding allocation of liability for pre-2005 PPI policies underwritten by two affiliates (Axa France) that Axa Group acquired from Genworth Financial International Holdings, Inc. in September 2015. The dispute involves a Santander Cards UK Limited (formerly known as GE Capital Bank Limited which was acquired by Banco Santander, S.A. from GE Capital group in 2008) which was distributor of the refer pre-2005 PPI policies and Santander Insurance Services UK Limited (the Santander Entities).
In July 2017, Santander UK plc notified Axa France that the Santander Entities did not accept liability for losses on PPI policies relating to this period, but entered in a Complaints Handling Agreement –that included a standstill agreement- agreeing to handle complaints on Axa affiliates behalf, paying these latter companies redress assessed to be due to relevant policyholders on a without prejudice basis.
After the termination of the Complaints Handling Agreement, on 30 December 2020 Axa France has provided written notice to the Santander Entities to terminate the standstill agreement. On 5 March 2021, the Santander Entities were served with a Claim Form and Brief Details of Claim by AXA France, claiming that the Santander Entities are liable to reimburse AXA France for pre-2005 PPI mis-selling losses, currently estimated at £624m (EUR 733 million). On 22 March 2021, the Santander Entities acknowledged service of the claim and notified the court of their intention to defend the claim. This dispute is at an early stage and there are ongoing factual issues to be resolved which may have legal consequences including in relation to liability. These issues create uncertainties which mean that it is difficult to reliably predict the outcome or the timing of the resolution of the matter. The regulatory and other provision includes our best estimate of the Santander group entities’ liability to the specific portfolio.
•Delforca: dispute arising from equity swaps entered into by Gaesco (now Delforca 2008, S.A.) on shares of Inmobiliaria Colonial, S.A. Banco Santander, S.A. is claiming to Delforca before the Court of Barcelona in charge of the bankruptcy proceedings, a total of EUR 66 million from the liquidation resulting from the early termination of financial transactions due to Delforca's non-payment of the equity swaps. In the same bankruptcy proceedings, Delforca and Mobiliaria Monesa have in turn claimed the Bank to repay EUR 56.8 million, which the Bank received for the enforcement of the agreed guarantee, as a result of the aforementioned liquidation. The procedure in its first instance, in which the two crossed claims will be resolved, is completed pending judgement. In 2009, Mobiliaria Monesa, S.A. (parent of Delforca) filed a civil procedure with the Courts of Santander against the Bank claiming damages that have not been specified to date. The procedure is suspended.
• Former employees of Banco do Estado de São Paulo S.A., Santander Banespa, Cia. de Arrendamiento Mercantil: a claim was filed in 1998 by the association of retired Banespa employees (AFABESP) requesting the payment of a half-yearly bonus contemplated in the by-laws of Banespa in the event that Banespa obtained a profit and that the distribution of this profit were approved by the Board of Directors. The bonus was not paid in 1994 and 1995 since Banespa had not made a profit during those years. Partial payments were made from 1996 to 2000, as approved by the Board of Directors. The relevant clause was eliminated in 2001. The Regional Labor Court and the High Employment Court ordered Santander Brasil, as successor to Banespa, to pay this half-yearly bonus for the period from 1996 to the present. On 20 March 2019, the Supreme Federal Court (STF) rejected the extraordinary appeal filed by Banco Santander Brasil. The Bank filed a rescission action to nullify the decisions of the main proceedings and suspend the execution of the judgment, which was deemed inadmissible, and its execution has been suspended until the publication of the decision. An Extraordinary Appeal in the rescission action was filed in February 2021 and is pending.
At the moment we have the legal opinion of the bank's external advisers, who have classified the risk as probable. The recorded provisions are considered sufficient to cover the risks associated with the legal claims that are being substantiated as of today.

116
IMAGE69.JPG

• “Planos Económicos”: like the rest of the banking system in Brasil, Santander Brasil has been the target of customer complaints and collective civil suits stemming from legislative changes and its application to bank deposits, fundamentally ('economic plans'). At the end of 2017, there was an agreement between regulatory entities and the Brazilian Federation of Banks (Febraban), already approved by the Supremo Tribunal Federal, with the purpose of closing the lawsuits. Discussions focused on specifying the amount to be paid to each affected client according to the balance in their notebook at the time of the Plan. Finally, the total value of the payments will depend on the number of endorsements they have made and the number of savers who have demonstrated the existence of the account and its balance on the date the indexes were changed. In November 2018, the STF ordered the suspension of all economic plan processes for two years from May 2018. On 29 May 2020, the Supremo Tribunal Federal approved the extension of the agreement for 5 additional years starting from 3 June 2020. Condition for this extension was to include in the agreement actions related to the “Collor I Plan”. The provisions recorded for the economic plan processes are considered to be sufficient.
• Floor clauses: : in consequence of the acquisition of Banco Popular, S.A.U, the Group has been exposed to a material number of transactions with floor clauses. The so-called "floor clauses" or minimum clauses are those under which the borrower accepts a minimum interest rate to be paid to the lender, regardless of the applicable reference interest rate. Banco Popular Español, S.A.U. included "floor clauses" in certain asset transactions with customers. In relation to this type of clauses, and after several rulings made by the Court of Justice of the European Union and the Spanish Supreme Court, and the extrajudicial process established by the Spanish Royal Decree-Law 1/2017, of 2 January, Banco Popular Español, S.A.U. made extraordinary provisions that were updated in order to cover the effect of the potential return of the excess interest charged for the application of the floor clauses between the contract date of the corresponding mortgage loans and May 2013. At 31 March 2020, after having processed most of the customer requests, the potential residual loss associated with ongoing court proceedings is estimated at €48M, amount which is fully covered by provisions.
• Banco Popular´s acquisition: considering the declaration setting out the resolution of Banco Popular Español, S.A.U., the redemption and conversion of its capital instruments and the subsequent transfer to Banco Santander, S.A. of the shares resulting from this conversion in exercise of the resolution instrument involving the sale of the institution's business, in the application accordance with the single resolution framework regulation referred to in Note 3 of the 2018 consolidated annual accounts, some investors have filed claims against the EU’s Single Resolution Board decision, the FROB's resolution executed in accordance to the aforementioned decision, and claims have been filed and may be filed in the future against Banco Santander, S.A. or other Santander Group companies deriving from or related to the acquisition of Banco Popular Español, S.A.U..
At this stage, it is not possible to foresee the total number of claims that could be filed by the former holders of shares and capital instruments (arising from the acquisition by investors of such shares and capital instruments of Banco Popular prior to resolution, including in particular, without limitation, the shares acquired in the context of the capital increase with pre-emptive subscription rights carried out in 2016), and their economic implications (especially considering that the decision to resolve in application of the new regulation has no precedent, and that it may be possible that future claims do not specify a specific amount, put forward new legal interpretations or involve a large number of parties).
In this respect, on 2 September 2020, the Provincial Court of La Coruña has referred a preliminary ruling to the Court of Justice of the European Union (“CJEU”) asking for the correct interpretation of Article 60(2) of Directive 2014/59/EU of the European Parliament and of the Councill, dated 15 May 2014, which establishes a framework for the restructuring and resolution of credit institutions and investment firms. This article establishes that, in cases of redemption of capital instruments in a bank resolution, no liability shall remain in relation to the amount of the instrument that has been redeemed. The judgement given by the CJEU in this case is likely to condition the outcome on the judicial proceedings that are currently open.
The estimated cost of any compensation to shareholders and bondholders of Banco Popular recognized in the 2017 accounts amounted to EUR 680 million, of which EUR 535 million were applied to the commercial loyalty program. The provisions recorded are considered sufficient to cover the risks associated with the court claims currently being dealt with. However, if additional amounts have to be paid for claims already raised with an undetermined economic interest or for new claims, this could have a significant adverse effect on the Santander Group's results and financial situation.
Likewise, the Central Court of Instruction 4 is currently conducting preliminary proceedings 42/2017, in which, amongst other things, is being investigated the following: (i) the accuracy of the prospectus for the capital increase with pre-emptive subscription rights carried out by Banco Popular in 2016; and (ii) the alleged manipulation of the share price of Banco Popular until the resolution of the bank, in June 2017. During the course of the proceedings, on 30 April 2019, the Spanish National Court, ruled in favor of Banco Santander, S.A. declaring that Banco Santander, S.A. cannot inherit Banco Popular’s potential criminal liability. This ruling was appealed before the Supreme Court who have rejected the appeal. In this procedure, Banco Santander has the status of possible subsidiary civil liability.
• German shares investigation: the Cologne Public Prosecution Office is conducting an investigation against the Bank, and other group entities based in UK - Santander UK plc, Abbey National Treasury Services plc and Cater Allen International Limited -, in relation to a particular type of tax dividend linked transactions known as cum-ex transactions.

IMAGE69.JPG
117

The Group is cooperating with the German authorities. According to the state of the investigations, the results and the effects for the Group, which may potentially include the imposition of financial penalties, cannot be anticipated. For this reason, the Bank has not recognized any provisions in relation to the potential imposition of financial penalties.
• Financial Industry Regulatory Authority (“FINRA”) Puerto Rico Arbitrations: as of 31 March 2021, Santander Securities LLC (SSLLC) had received 771 FINRA arbitration cases related to Puerto Rico Bonds issued by public and public related entities, as well as Puerto Rico closed-end funds (CEFs). The statements of claims allege, among other things, fraud, negligence, breach of fiduciary duty, breach of contract, unsuitability, over-concentration of the investments and failure to supervise. There were 80 arbitration cases that remained pending as of 31 March 2021.
As a result of various legal, economic and market factors impacting or that could impact of the value Puerto Rico bonds and CEFs, it is possible that additional arbitration claims and/or increased claim amounts may be asserted against SSLLC in future periods. The provisions recorded for these matters are considered sufficient.
• IRPH Index: a portion of our Spanish mortgage loan portfolio bears interest at a rate indexed to the “Índice de Referencia de Préstamos Hipotecarios” known as “IRPH,” which, at the time the contracts were entered into, served as reference rate for many mortgage loan agreements in Spain and was published by the Bank of Spain. Consumers in Spain have brought lawsuits against most of the Spanish banking sector alleging that the use and related disclosures of such rate did not comply with the transparency requirements of European regulation. On 14 December 2017, the Supreme Court of Spain ruled that these clauses were valid, as the IRPH is an official rate and therefore non-subject to transparency requirements. The matter was referred to the Court of Justice of the European Union through a preliminary ruling procedure. On 3 March 2020 the CJEU rendered its decision.
The CJEU ruled that, being the IRPH a valid index, national courts are entitled to examine its use on each particular contract in order to verify whether the transparency requirements have been met. When carrying out the transparency control, national courts have to take into account all the circumstances surrounding the conclusion of the particular contract, including whether essential information relating to the calculation of that rate was easily accessible and the provision of data relating to past fluctuations of the index. Finally, with regards to the effects of nullity of an IRPH index clause, the CJUE entitles national courts to substitute it with another statutory index, thus not declaring the nullity of the whole contract.
On 12 November 2020, the Supreme Court has issued four judgments applying the doctrine established by the CJUE that resolve individual appeals in which the validity of the IRPH clauses was questioned. The Court understands that in those cases there is a lack of transparency because the financial institutions had not been able to prove the delivery to the client of the information on the evolution of the index in the two years prior to the contract. However, the Supreme Court reminds that the lack of transparency does not automatically imply the invalidity of the clause, but rather it is necessary to analyze whether this lack of transparency generates abusiveness. The Supreme Court resolves that in the case of the IRPH, that specific lack of transparency does not mean that the clause is abusive to the detriment of the client, so the clause is valid and fully applicable.
Currently, the balance of the relevant mortgage indexed to IRPH loans held by the Group, equals approximately EUR 2.9 billion.
• Banco Santander has been sued in a legal proceeding in which the plaintiff alleges that a contract was concluded whereby he would be entrusted with the functions of CEO of the Bank. In the complaint, the claimant mainly requests a declaratory ruling that affirms the validity and conclusion of such contract and its enforcement together with the payment of certain amounts. If the main request is not granted, the claimant seeks compensation for a total amount of approximately EUR 112 million or, an alternative relief for other minor amounts. Banco Santander, S.A. has answered to the complaint. In this answer, it is stated that the conditions to which the appointment was subject to were not met and that the contract required by law was not concluded. Trial will take place on 19th May 2021.
• Universalpay Entidad de Pago, S.L. has filed a lawsuit against Banco Santander, S.A. for breach of the marketing alliance agreement (MAA) and in claim of quantity. The claim is processed in the Court of First Instance no. 81 of Madrid, ordinary procedure 156/2021. The MAA was originally subscribed by Banco Popular Español, S.A. and its purpose is the business of acquiring services for businesses in the Spanish market. The lawsuit is mainly based on the potential breach of clause 6 of the MAA, which establishes certain obligations of exclusivity, non-competition and customer reference. The claim is at a very early stage, and there are factual issues pending resolution, which may have legal consequences and affect eventual liability. This uncertainty makes it impossible to reliably predict the resolution of the issue, the timing or the significance of the potential impact.
•CHF Polish Mortgage Loans: On 3 October 2019, the Court of Justice of the European Union (CJEU) rendered its decision in relation to a lawsuit against an unrelated bank in Poland, with regards to unfair contractual clauses in consumer agreements, specifically the consequences of potentially unfair contractual clauses in CHF-indexed loan agreements. The CJEU has left to Polish courts the decision on whether the whole contract can be maintained once the abusive terms have been removed, which should in turn decide whether the effects of the annulment of the contract are prejudicial to the consumer. In that case, the court may only integrate the contract with default provisions of national law and decide, in accordance with those provisions, on the applicable rate.

118
IMAGE69.JPG

In December 2020, the Chairman of the Financial Supervision Authority announced a high-level proposal for voluntary settlements between banks and borrowers under which active loans based on Swiss francs would be converted into PLN loans with interest at the WIBOR rate and an appropriate margin. No details of the proposal, or legal or tax considerations, were provided as at the date of publication of these financial statements. This proposal is currently under analysis within the Bank, as well as by representatives of the financial sector in consultation with the competent authorities. Depending on the results of this analysis, the Bank will decide whether to adhere to this proposal and will proceed to include additional scenarios in the models for calculating provisions and reflect the estimated impact on their level. The Group considers that the maximum risk associated to this proposal, assuming that 100% of customers choose to convert their active loans as proposed, would amount to approximately PLN 3.5bn (EUR 768 million).
On May 2021, the Supreme Court was expected to take a position regarding the key issues in disputes concerning loans based on foreign currency, clarifying the discrepancies and unifying the court jurisprudence. The date of the planned resolution has been postponed until May.
While these two events could lead to significant changes in the level of expected provisions, in the opinion of the Management Board, as at the date of these financial statements it is not possible to reliably estimate the value of their impact on the financial position of the Group.
As of 31 March 2021, Santander Bank Polska and Santander Consumer Bank Poland have a portfolio of mortgage loans denominated in, or indexed to, CHF of approximately PLN 9,502.2 million (EUR 2 050 million). At the same date, the provision registered is PLN 802,8 million (EUR 173 million). An additional provision of EUR 44 million has been recognized during the first quarter of 2021. This provision represents the best estimate to date given the difficulty to predict the financial impact, as it is for national courts to decide the relevant issues and the process of analysing and deciding on the proposal described above has not yet been completed. Santander Bank Polska and Santander Consumer Bank Poland will continue to monitor and assess appropriateness of those provisions in the upcoming reporting periods.
The Bank and the other Group companies are subject to claims and, therefore, are party to certain legal proceedings incidental to the normal course of their business including those in connection with lending activities, relationships with employees and other commercial or tax matters.
With the information available to it, the Group considers that, at 31 March 2021, it had reliably estimated the obligations associated with each proceeding and had recognized, where necessary, sufficient provisions to cover reasonably any liabilities that may arise as a result of these tax and legal risks. Subject to the qualifications made, it also believes that any liability arising from such claims and proceedings will not have, overall, a material adverse effect on the Group’s business, financial position or results of operations.
11.   Equity
In the three-month periods ended 31 March 2021 and 2020 there were no quantitative or qualitative changes in Grupo Santander's equity other than those indicated in the condensed consolidated statements of changes in total equity.
a)    Capital
As of 31 March 2021 and 31 December 2020, the Bank's capital stock was represented by 17,340,641,302 shares, with a nominal amount of EUR 8,670 million, in both dates.
b)    Share premium
The decreased produced in the first quarter of 2021 for an amount of EUR 4,034 million has been the consequence of applying the result obtained by Banco Santander during the financial year 2020, consisting of losses of EUR 3,557 million, as reflected in the consolidated statements of changes in total equity, and the charge of the dividend for fiscal year 2020 for an amount of EUR 477 million (note 3 and consolidated statements of changes in total equity).

IMAGE69.JPG
119

c) Breakdown of other comprehensive income - Items not reclassified to profit or loss and Items that may be reclassified to profit or loss
EUR million
31-03-2021 31-12-2020
Other comprehensive income accumulated (33,154) (33,144)
   Items not reclassified to profit or loss (5,354) (5,328)
Actuarial gains or losses on defined benefit pension plans (4,861) (5,002)
Non-current assets held for sale —  — 
Share in other income and expenses recognised in investments, joint ventures and associates (10) (2)
Other valuation adjustments —  — 
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income (379) (308)
Inefficacy of fair value hedges of equity instruments measured at fair value with changes
in other comprehensive income 		—  — 
Changes in the fair value of equity instruments measured at fair valuewith changes
in other comprehensive income (hedged item) 		200  159 
Changes in the fair value of equity instruments measured at fair value with changes
in other comprehensive income (hedging instrument) 		(200) (159)
Changes in the fair value of financial liabilities measured at fair value through profit or loss
attributable to changes in credit risk 		(104) (16)
   Items that may be reclassified to profit or loss (27,800) (27,816)
Hedge of net investments in foreign operations (effective portion) (3,607) (3,124)
Exchange differences (25,460) (26,911)
Hedging derivatives (effective portion) 182  295 
Changes in the fair value of debt instruments measured at fair value with changes in other comprehensive income 1,565  2,411 
Hedging instruments (items not designated) —  — 
Non-current assets held for sale —  — 
Share in other income and expenses recognised in investments, joint ventures and associates (480) (487)

d) Other comprehensive income - Items not reclassified to profit or loss - Actuarial gains or losses on defined benefit pension plans
The changes in the balance of Other comprehensive income - Items not reclassified to profit or loss - Actuarial gains or losses on defined benefit pension plans include the actuarial gains or losses generated in the period and the return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset), less the administrative expenses and taxes inherent to the plan, and any change in the effect of the asset ceiling. Its variation is shown in the condensed consolidated statement of recognised income and expense.
During the first three months of 2021, the amount of actuarial losses (net of actuarial gains) has decreased by EUR 212 million. The main impacts are:
•Decrease of EUR 214 million in the accrued actuarial losses relating to Grupo Santander's businesses in the United Kingdom, mainly due to the change in the discount rate (increase from 1.28% to 2.02%), partially offset by the change in the inflation rate (increase from 2.95% to 3.34%) and the change in assets.
•Decrease of EUR 43 million in the accrued actuarial losses relating to Grupo Santander's businesses in Germany, mainly due to the change in the discount rate (increase from 1.17% to 1.59%).
•Decrease of EUR 39 million in the accrued actuarial losses relating to Grupo Santander's businesses in the Spain, due to the change in the discount rate (increase from 0.60% to 0.90%).
The remaining variation in the accrued actuarial gains and losses heading represents an increase of EUR 84 million, mainly as a result of the evolution of exchange rates, being the appreciation of the pound and the depreciation of the Brazilian Real the most significant.
120
IMAGE69.JPG

e) Other comprehensive income - Items not reclassified to profit or loss – Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income
Includes the net amount of unrealised fair value changes in equity instruments at fair value with changes in other comprehensive income.
Below is a breakdown of the composition of the balance as of 31 March 2021 and 31 December 2020 under “Other comprehensive income - Items not reclassified to profit or loss - Changes in the fair value of equity instruments measured at fair value with changes in other global result depending on the geographical origin of the issuer”:
EUR million
31-03-2021 31-12-2020
Revaluation gains Revaluation losses Net revaluation gains/(losses) Fair value Revaluation gains Revaluation losses Net revaluation gains/(losses) Fair value
Equity instruments
Domestic
Spain 28  (1,095) (1,067) 783  28  (849) (821) 1,032 
International
Rest of Europe 123  (74) 49  421  65  (76) (11) 314 
United States 12  (4) 8  31  7  (4) 3  25 
Latin America and rest 638  (7) 631  1,558  525  (4) 521  1,412 
801  (1,180) (379) 2,793  625  (933) (308) 2,783 
Of which:
Listed 641  (26) 615  1,594  525  (31) 494  1,424 
Unlisted 160  (1,154) (994) 1,199  100  (902) (802) 1,359 

f) Other comprehensive income - Items that may be reclassified to profit or loss – Hedges of net investments in foreign operations (effective portion) and exchange differences
Other comprehensive income - Items that may be reclassified to profit or loss - Hedges of net investments in foreign operations (effective portion) includes the net amount of the changes in value of hedging instruments in hedges of net investments in foreign operations, in respect of the portion of these changes considered to be effective hedges.
Other comprehensive income - Items that may be reclassified to profit or loss - Exchange differences includes the net amount of exchange differences arising on non-monetary items whose fair value is adjusted against equity and the differences arising on the translation to euros of the balances of the consolidated entities whose functional currency is not the euro.
The net variation of both headings recognised during the first quarter of 2021, recorded in the statement of income and expenses reflects the impact of the currencies' evolution during the year, reflecting the impacts of the appreciation of the pound sterling, US dollar, Chilean peso, Mexican peso, mainly, and on the negative side of the impact, the depreciation of the Brazilian Real (see note 1.e).

IMAGE69.JPG
121

g) Other comprehensive income – Items that may be reclassified to profit or loss – Changes in the fair value of debt instruments measured at fair value through other comprehensive income
Includes the net amount of unrealised fair value changes in debt instruments at fair value through other comprehensive income.
Below is a breakdown of the composition of the balance as of 31 March 2021 and 31 December 2020 under Other comprehensive income - Items that may be reclassified to profit or loss - Changes in the fair value of debt instruments measured at fair value through other comprehensive income depending on the type of instrument and the geographical origin of the issuer:
EUR million
31-03-2021 31-12-2020
Revaluation gains Revaluation losses Net revaluation gains/(losses) Fair value Revaluation gains Revaluation losses Net revaluation gains/(losses) Fair value
Debt instruments
    Government and central banks
debt instruments
      Spain 469  —  469  14,714  693  —  693  19,314 
      Rest of Europe 793  (37) 756  22,375  915  (69) 846  23,116 
      Latin America and rest of the world 450  (190) 260  48,756  785  (73) 712  51,026 
    Private-sector debt instruments 125  (45) 80  24,732  181  (21) 160  24,714 
1,837  (272) 1,565  110,577  2,574  (163) 2,411  118,170 


12.   Segment information (Primary segment)
Grupo Santander has aligned the information in this note with the underlying information used internally for management reporting and with that presented in Grupo Santander's other public documents.
Grupo Santander executive committee has been determined to be the chief operating decision maker. Grupo Santander's operating segments reflect its organizational and managerial structures. Grupo Santander 's executive committee reviews internal reporting based on these segments to assess performance and allocate resources.
The segments are split by geographic area in which profits are earned and type of business. Grupo Santander prepares the information by aggregating the figures for Grupo Santander’s various geographic areas and business units, relating it to both the accounting data of the units integrated in each segment and that provided by management information systems. The general principles applied are the same as those used in Grupo Santander.
On 9 April 2021, Grupo Santander has announced that, starting and effective with the financial information for the first quarter of 2021, the Group has carried out a change in our reportable segments to reflect our new reporting structure.
For Grupo Santander management purposes, the primary level of segmentation, which is based on Grupo Santander's management structure, comprises five reportable segments: four operating areas plus the Corporate Center. The operating areas are: Europe, North America, South America and Digital Consumer Bank. The operating areas of the main level segmentation are:
•Europe: which comprises all the business activities carried out in the region, except for the business included in Digital Consumer Bank. Mainly in Spain, the United Kingdom, Portugal and Poland.
•North America: which comprises all the business activities carried out in Mexico and the US, which includes the holding company (SHUSA) and the businesses of Santander Bank, Santander Consumer USA, the specialized unit Banco Santander International, Santander Investment Securities (SIS) and the New York branch.
•South America: includes all the financial activities carried out by Grupo Santander through its banks in the region, mainly in Brazil, Chile and Argentina.
•Digital Consumer Bank: includes Santander Consumer Finance, which incorporates the entire consumer finance business in Europe, Openbank and ODS.
Following is the breakdown of revenue that is deemed to be recognised under Dividend income, Commission income, Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net, Gain or losses on financial assets and liabilities held for trading, net, Gain or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss, Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net, Gain or losses from hedge accounting, net, Other operating income and Income from assets under insurance and reinsurance contracts in the accompanying consolidated income statements for the three-month period ended 31 March 2021 and 2020.
In addition to these operating units, which report by geographic area and businesses, Grupo Santander continues to maintain the area of Corporate Centre, that includes the centralized activities relating to equity stakes in financial companies, financial management of
122
IMAGE69.JPG

the structural exchange rate position, assumed within the sphere of Grupo Santander's assets and liabilities committee, as well as management of liquidity and of shareholders' equity via issuances.
This financial information (“underlying basis”) is computed by adjusting reported results for the effects of certain gains and losses (e.g.: capital gains, write-downs, etc.). These gains and losses are items that management and investors ordinarily identify and consider separately to understand better the underlying trends in the business.
Following is the reconciliation between the adjusted profit and the statutory profit corresponding to the three month period ended 31 March 2021 and 2020:
EUR million
Revenue from
 ordinary activities 		Profit Profit before taxes
Segment 31-03-2021 31-03-2020 31-03-2021 31-03-2020 31-03-2021 31-03-2020
Europe 5,591  5,846  826  192  1,231  303 
North America 3,688  4,412  773  282  1,207  452 
South America 6,098  10,229  773  700  1,505  1,210 
Digital Consumer Bank 1,614  1,611  291  234  506  404 
Corporate Centre 3  148  (525) (1,031) (635) (412)
Underlying Profit 16,994  22,246  2,138  377  3,814  1,957 
Adjustments —  —  (530) (46) (712) (66)
Statutory Profit 16,994  22,246  1,608  331  3,102  1,891 
Explanation of adjustments:
In the first three months of 2021, the impact of restructuring costs of EUR -530 million was mainly in the United Kingdom and Portugal.
In the first three months of 2020, there was a EUR -46 million impact from restructuring costs mainly in the UK and Digital Consumer Bank.
IMAGE69.JPG
123


13.   Related parties
The parties related to Grupo Santander are deemed to include, in addition to its subsidiaries, associates and jointly controlled entities, Banco Santander’s key management personnel (the members of its board of directors and the executive vice presidents, together with their close family members) and the entities over which the key management personnel may exercise significant influence or control.
Following is a detail of the transactions performed by Grupo Santander with its related parties in the first three months of 2021 and 2020, distinguishing between significant shareholders, members of Banco Santander’s board of directors, Banco Santander’s executive vice presidents, Grupo Santander entities and other related parties. Related party transactions were made on terms equivalent to those that prevail in arm’s-length transactions or, when this was not the case, the related compensation in kind was recognised:
EUR million
31-03-2021
Expenses and income Significant
shareholders 		Directors and
executives 		Group companies
or entities 		Other related
parties 		Total
Expenses:
Finance costs —  —  2  —  2 
Leases —  —  —  —  — 
Services received —  —  —  —  — 
Purchases of stocks —  —  —  —  — 
Other expenses —  —  27  —  27 
—  —  29  —  29 
Income:
Finance income —  —  20  1  21 
Dividends received —  —  —  —  — 
Services rendered —  —  —  —  — 
Sale of stocks —  —  —  —  — 
Other income —  —  290  —  290 
—  —  310  1  311 
EUR million
31-03-2021
Other transactions Significant
shareholders 		Directors and
executives 		Group companies
or entities 		Other related
parties 		Total
Financing agreements: loans and capital contributions (lender) —  (1) 896  (7) 888 
Financing agreements: loans and capital contributions (borrower) —  3  (47) (49) (93)
Guarantees provided —  —  —  —  — 
Guarantees received —  —  —  —  — 
Commitments acquired —  —  10  5  15 
Dividends and other distributed profit —  —  —  —  — 
Other transactions —  —  (43) —  (43)
124
IMAGE69.JPG

EUR million
31-03-2021
Balance closing period Significant
shareholders 		Directors and
executives 		Group companies
or entities 		Other related
parties 		Total
Debt balances:
Customers and commercial debtors —  —  —  —  — 
Loans and credits granted —  23  8,393  88  8,504 
Other collection rights —  —  925  —  925 
—  23  9,318  88  9,429 
Credit balances:
Suppliers and creditors granted —  —  —  —  — 
Loans and credits received —  23  3,453  110  3,586 
Other payment obligations —  —  84  —  84 
—  23  3,537  110  3,670 

EUR million
31-03-2020
Expenses and income Significant
shareholders 		Directors and
executives 		Group companies
or entities 		Other related
parties 		Total
Expenses:
Finance costs —  —  3  —  3 
Leases —  —  —  —  — 
Services received —  —  —  —  — 
Purchases of stocks —  —  —  —  — 
Other expenses —  —  10  —  10 
—  —  13  —  13 
Income:
Finance income —  —  38  —  38 
Dividends received —  —  —  —  — 
Services rendered —  —  —  —  — 
Sale of stocks —  —  —  —  — 
Other income —  —  292  —  292 
—  —  330  —  330 

IMAGE69.JPG
125


EUR million
31-03-2020
Other transactions Significant
shareholders 		Directors and
executives 		Group companies
or entities 		Other related
parties 		Total
Financing agreements: loans and capital contributions (lender) —  —  (419) (8) (427)
Financing agreements: loans and capital contributions (borrower) —  (14) 454  32  472 
Guarantees provided —  —  1  —  1 
Guarantees received —  —  —  —  — 
Commitments acquired —  (1) (1) —  (2)
Dividends and other distributed profit —  —  —  —  — 
Other transactions —  —  (548) —  (548)

EUR million
31-12-2020
Balance closing period Significant
shareholders 		Directors and
executives 		Group companies
or entities 		Other related
parties 		Total
Debt balances:
Customers and commercial debtors —  —  —  —  — 
Loans and credits granted —  24  7,497  95  7,616 
Other collection rights —  —  976  0  976 
—  24  8,473  95  8,592 
Credit balances:
Suppliers and creditors granted —  —  —  —  — 
Loans and credits received —  20  3,501  159  3,680 
Other payment obligations —  —  92  —  92 
—  20  3,593  159  3,772 


14.   Off-balance-sheet exposures
The off-balance-sheet exposures related to balances representing loans commitments, financial guarantees and other commitments granted (recoverables and non recoverables).
Financial guarantees granted include financial guarantees contracts such as financial bank guarantees, credit derivatives, and risks arising from derivatives granted to third parties; non-financial guarantees include other guarantees and irrevocable documentary credits.
Loan and other commitments granted include all off-balance-sheet exposures, which are not classified as guarantees provided, including loans commitment granted.
126
IMAGE69.JPG

EUR million
31-03-2021 31-12-2020
Loan commitments granted 242,898  241,230 
  Of which impaired 238  274 
Financial guarantees granted 12,231  12,377 
Of which impaired 136  124 
Bank sureties 12,212  12,358 
Credit derivatives sold 19  19 
Other commitments granted 74,867  64,538 
Of which impaired 494  548 
Other granted guarantees 35,164  33,526 
Other 39,703  31,012 
The breakdown of the off-balance sheet exposure and impairment on 31 March 2021 and 31 December 2020 by impairment stages is EUR 322,039 million and EUR 310,435 million of exposure and EUR 340 million and EUR 377 million of impairment in stage 1, EUR 7,089 million and EUR 6,764 million of exposure and EUR 160 million and EUR 182 million of impairment in stage 2, and EUR 868 million and EUR 946 million of exposure and EUR 130 million and EUR 141 million of impairment in stage 3, respectively.

15.   Average headcount and number of branches
The average number of employees at Banco Santander and Grupo Santander, by gender, in the three-month periods ended 31 March 2021 and 2020 is as follows:
Average headcount
Bank Group
31-03-2021 31-03-2020 31-03-2021 31-03-2020
Men 13,332  13,995  87,892  88,788 
Women 12,451  12,687  103,214  106,629 
25,783  26,682  191,106  195,417 

The number of branches at 31 March 2021 and 31 December 2020 is as follow:
Number of branches
Group
31-03-2021 31-12-2020
Spain 2,655  2,989 
Group 8,162  8,247 
10,817  11,236 
IMAGE69.JPG
127



16.   Other disclosures
a)    Valuation techniques for financial assets and liabilities
The following table shows a summary of the fair values, at 31 March 2021 and 31 December 2020, of the financial assets and liabilities indicated below, classified on the basis of the various measurement methods used by Grupo Santander to determine their fair value:
EUR million
31-03-2021 31-12-2020
Published price quotations in active markets (Level 1) Internal models (Levels 2 and 3) Total Published price quotations in active markets (Level 1) Internal models (Levels 2 and 3) Total
Financial assets held for trading 50,268  59,375  109,643  46,379  68,566  114,945 
Non-trading financial assets mandatorily at fair value through profit or loss 1,932  2,707  4,639  1,756  2,730  4,486 
Financial assets at fair value through profit and loss 2,290  54,360  56,650  2,509  46,208  48,717 
Financial assets at fair value through other comprehensive income 84,027  29,343  113,370  91,771  29,182  120,953 
Hedging derivatives (assets) —  6,222  6,222  —  8,325  8,325 
Financial liabilities held for trading 10,080  61,213  71,293  9,863  71,304  81,167 
Financial liabilities designated at fair value through profit or loss 2,505  67,472  69,977  2,118  45,920  48,038 
Hedging derivatives (liabilities) —  6,639  6,639  —  6,869  6,869 
Liabilities under insurance contracts —  1,102  1,102  —  910  910 

Financial instruments at fair value, determined on the basis of published price quotations in active markets (level 1), include government debt instruments, private-sector debt instruments, derivatives traded in organised markets, securitised assets, shares, short positions and fixed-income securities issued.
In cases where price quotations cannot be observed, management makes its best estimate of the price that the market would set, using its own internal models. In most cases, these internal models use data based on observable market parameters as significant inputs (level 2) and, in some cases, they use significant inputs not observable in market data (level 3).
In order to make these estimates, various techniques are employed, including the extrapolation of observable market data. The best evidence of the fair value of a financial instrument on initial recognition is the transaction price, unless the fair value of the instrument can be obtained from other market transactions performed with the same or similar instruments or can be measured by using a valuation technique in which the variables used include only observable market data, mainly interest rates.
During the first three months of 2020 and 2021, Grupo Santander did not make any material transfers of financial instruments between measurement levels other than the transfers included in level 3 table.
Grupo Santander has developed a formal process for the systematic valuation and management of financial instruments, which has been implemented worldwide across all Grupo Santander's units. The governance scheme for this process distributes responsibilities between two independent divisions: Treasury (development, marketing and daily management of financial products and market data) and Risk (on a periodic basis, validation of pricing models and market data, computation of risk metrics, new transaction approval policies, management of market risk and implementation of fair value adjustment policies). The approval of new products follows a sequence of steps (request, development, validation, integration in corporate systems and quality assurance) before the product is brought into production. This process ensures that pricing systems have been properly reviewed and are stable before they are used.
The most important products and families of derivatives, and the related valuation techniques and inputs, by asset class, are detailed in the consolidated annual accounts as at 31 December 2020.
As of 31 March 2021, the CVA (Credit Valuation Adjustment) accounted for was EUR 300,6 million (a reduction of 12.3% compared to 31 December 2020) and adjustments of DVA (Debt Valuation Adjustment) was EUR 215,8 million (a reduction of 10.0% compared to 31 December 2020). These impacts are due to the fact that credit spreads are lower than 5.0% compared to year-end due to lower volatility in the credit markets.
128
IMAGE69.JPG


Set forth below are the financial instruments at fair value whose measurement was based on internal models (levels 2 and 3) at 31 March 2021 and 31 December 2020:
EUR million EUR million
Fair values calculated using internal models at 31-03-2021(*) Fair values calculated using internal models at 31-12-2020 (*)
Level 2 Level 3 Level 2 Level 3 Valuation techniques Main inputs
ASSETS 142,972  9,035  146,468  8,543 
Financial assets held for trading 58,800  575  67,826  740 
Credit institutions 2  —  3  —  Present value method Yield curves, FX market prices
Customers (**) 303  —  296  —  Present value method Yield curves, FX market prices
Debt instruments and equity instruments 1,393  7  1,453  10  Present value method Yield curves, FX market prices
Derivatives 57,102  568  66,074  730 
Swaps 46,310  219  54,488  272  Present value method, Gaussian Copula (***) Yield curves, FX market prices, HPI, Basis, Liquidity
Exchange rate options 650  11  696  22  Black-Scholes Model Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate options 3,198  169  3,129  241  Black's Model, multifactorial advanced models interest rate Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate futures 587  —  1,069  —  Present value method Yield curves, FX market prices
Index and securities options 949  96  554  94  Black’s Model, multifactorial advanced models interest rate Yield curves, Volatility surfaces, FX & EQ market prices, Dividends, Liquidity.
Other 5,408  73  6,138  101  Present value method, Advanced stochastic volatility models and other Yield curves, Volatility surfaces, FX and EQ market prices, Dividends, Liquidity, Dividends, Correlation, HPI, Credit, Others.
Hedging derivatives 6,222  —  8,325  — 
Swaps 5,506  —  6,998  —  Present value method Yield curves, FX market prices, Basis
Interest rate options 22  —  25  —  Black-Scholes Model Yield curves, FX maket prices, Volatility surfaces, Liquidity
Other 694  —  1,302  —  Present value method, Advanced stochastic volatility models and other Yield curves, Volatility surfaces, FX market prices, Credit, Liquidity, Others
Non-trading financial assets mandatorily at fair value through profit or loss 1,281  1,426  1,796  934  Yield curves, FX and EQ market prices, Others
Equity instruments 431  991  984  505  Present value method Market price, Interest rates curves, Dividends and Others
Debt instruments 591  149  555  134  Present value method Yield curves
Loans and receivables (**) 259  286  257  295  Present value method, swap asset model & CDS Yield curves and Credit curves
Financial assets designated at fair value through profit or loss 53,913  447  45,559  649 
Central banks 8,173  —  9,481  —  Present value method Yield curves, FX market prices
Credit institutions 19,300  —  11,973  163  Present value method Yield curves, FX market prices
Customers (****) 26,438  18  24,102  19  Present value method Yield curves, FX market prices, HPI
Debt instruments 2  429  3  467  Present value method Yield curves, FX market prices
Financial assets at fair value through other comprehensive income 22,756  6,587  22,962  6,220 
Equity instruments 75  1,058  75  1,223  Present value method Market price, Interest rates curves, Dividends and Others
Debt instruments 18,788  341  18,410  206  Present value method Yield curves, FX market prices
Loans and receivables 3,893  5,188  4,477  4,791  Present value method Yield curves, FX market prices and Credit curves
LIABILITIES 135,848  578  124,098  905 
Financial liabilities held for trading 60,956  257  71,009  295 
Derivatives 54,927  257  63,920  295 
Swaps 43,996  69  51,584  81  Present value method, Gaussian Copula (***) Yield curves, FX market prices, Basis, Liquidity, HPI
Exchange rate options 679  4  724  1  Black-Scholes Model Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate options 3,746  40  4,226  49  Black-Scholes Model, multifactorial advanced models interest rate Yield curves, Volatility surfaces, FX market prices, Liquidity
Index and securities options 978  103  456  97  Black-Scholes Model Yield curves, FX market prices
Interest rate and equity futures 234  2  1,054  2  Present value method Yield curves, Volatility surfaces, FX & EQ market prices, Dividends
Other 5,294  39  5,876  65  Present value method, Advanced stochastic volatility models Yield curves, Volatility surfaces, FX & EQ market prices, Dividends, Correlation, Liquidity, HPI, Credit, Others
Short positions 6,029  —  7,089  —  Present value method Yield curves ,FX & EQ market prices, Equity
Hedging derivatives 6,639  —  6,869  — 
Swaps 5,587  —  5,821  —  Present value method Yield curves ,FX & EQ market prices, Basis
Interest rate options 12  —  13  —  Black's Model Yield curves , Volatility surfaces, FX market prices, Liquidity
Other 1,040  —  1,035  —  Present value method, Advanced stochastic volatility models and other Yield curves , Volatility surfaces, FX market prices, Credit, Liquidity, Other
Financial liabilities designated at fair value through profit or loss 67,151  321  45,310  610  Present value method Yield curves, FX market prices
Liabilities under insurance contracts 1,102  —  910  —  Present Value Method with actuarial techniques Mortality tables and interest rate curves
(*) The internal models of level 2 implement figures based on the parameters observed in the market, while Level 3 internal models uses significant inputs that are not observable in market data.
IMAGE69.JPG
129

(**)    Includes mainly short-term loans and reverse repurchase agreements with corporate customers (mainly brokerage and investment companies).
(***)    Includes credit risk derivatives with a negative net fair value of EUR -3 and EUR -4 million recognised in the interim condensed consolidated balance sheet 31 March 2021 and 31 December 2020. These assets and liabilities are measured using the Standard Gaussian Copula Model.
(****)    Includes residential mortgages to financial institutions in the United Kingdom (which are regulated and partly financed by the Government). The fair value of these loans has been obtained using observable market variables, including current market transactions of similar amount and guarantees provided by the UK Housing Association. Given that the Government is involved in these entities, credit risk spreads have remained stable and homogeneous in this sector. The results arising from the valuation model are contrasted against current market transactions.
The measurements obtained using the internal models might have been different had other methods or assumptions been used with respect to interest rate risk, to credit risk, market risk and foreign currency risk spreads, or to their related correlations and volatilities. Nevertheless, Banco Santander’s directors consider that the fair value of the financial assets and liabilities recognised in the consolidated balance sheet and the gains and losses arising from these financial instruments are reasonable.
Level 3 financial instruments
Set forth below are Grupo Santander's main financial instruments measured using unobservable market data that constitute significant inputs of the internal models (level 3):
-     Instruments in Santander UK's portfolio (loans, debt instruments and derivatives) linked to the House Price Index (HPI). Even if the valuation techniques used for these instruments may be the same as those used to value similar products (present value in the case of loans and debt instruments, and the Black-Scholes model for derivatives), the main factors used in the valuation of these instruments are the HPI spot rate, the growth rate of that rate, its volatility and mortality rates, which are not always observable in the market and, accordingly, these instruments are considered illiquid:
•The HPI spot rate: for some instruments the NSA HPI spot rate, which is directly observable and published on a monthly basis, is used. For other instruments where regional HPI rates must be used (published quarterly), adjustments are made to reflect the different composition of the rates and adapt them to the regional composition of Santander UK's portfolio.
•HPI growth rate: this is not always directly observable in the market, especially for long maturities, and is estimated in accordance with existing quoted prices. To reflect the uncertainty implicit in these estimates, adjustments are made based on an analysis of the historical volatility of the HPI, incorporating reversion to the mean.
•HPI volatility: the long-term volatility is not directly observable in the market but is estimated on the basis of more short-term quoted prices and by making an adjustment to reflect the existing uncertainty, based on the standard deviation of historical volatility over various time periods.
•Mortality rates: these are based on published official tables and adjusted to reflect the composition of the customer portfolio for this type of product at Santander UK.
-     Callable interest rate trading derivatives (Bermudan style options) where the main unobservable input is mean reversion of interest rates.
-     Derivatives of negotiation on interest rates, taking asset securitisations and with the redemption rate (CPR) as the main unobservable input as an underlying asset.
- Derivatives from trading on inflation in Spain, where volatility is not observable in the market.
- Derivatives on long-term interest rate volatility and FX where volatility is not observable in the market at the indicated term.
-     Equity volatility derivatives, specifically indices and equities, where volatility is not observable in the long term.
-    Derivatives on long-term interest rate and FX in some Latam units (mainly Brazil), where for certain underlyings it is not possible to demonstrate observability to these terms.
-     Debt instruments in Latam units linked to certain illiquid interest rates, for which there is no reasonable market observability.
-     Illiquid equity in non-trading portfolios, classified at fair value through profit or loss and at fair value through equity.
-    Syndicated loans with the HTC&S business model (Hold to collect and sale) and classified in the fair value category with changes in other accumulated global result, is not directly observable in the market, as well as the prepayment option in favour of the borrower.
The net amount recorded in the results of the first three months of 2021 resulting from the aforementioned valuation models which main inputs are unobservable market data (Level 3) amounts to EUR 112 million loss approximately (EUR 64 million profit in the first three months of 2020).
130
IMAGE69.JPG

The table below shows the effect, at 31 March 2021, on the fair value of the main financial instruments classified as Level 3 of a reasonable change in the assumptions used in the valuation. This effect was determined by applying the probable valuation ranges of the main unobservable inputs detailed in the following table:
Portfolio/Instrument Valuation technique Main unobservable inputs Range Weighted average Impacts (EUR million)
(Level 3) Unfavourable scenario Favourable scenario
Held for trading (Assets)
Derivatives
Cap&Floor Volatility option model Volatility 10% - 90% 87.66 — —
CCS Discounted Cash Flows Interest rate -0.7% - 0.7% 0.67 (0.18) 0.18
CCS Forward stimation Interest rate -5bps - 5bps 5.00 (0.11) 0.14
Convertibility curve - NDFs Offshore Forward stimation Price 0% - 2% 0.61 (0.73) 0.32
EQ Options EQ option pricing model Volatility 3.6% - 97.2% 53.46 (1.22) 1.59
FRAs Asset Swap model Interest rate 0% - 5% 2.22 (0.82) 0.65
FX Options FX option pricing model Volatility 0% - 50% 32.14 (0.38) 0.68
Inflation Derivatives Asset Swap model Inflation Swap Rate -100% - 50% 83.33 (0.65) 0.32
Inflation Derivatives Volatility option model Volatility 0% - 50% 16.62 (0.46) 0.23
IR Futures Asset Swap model Interest rate 0% - 15% 5.91 (0.98) 0.64
IR Options IR option pricing model Volatility 0% - 100% 60.47 (0.28) 0.43
IRS Asset Swap model Interest rate -6.1% - 12.7% 10.35 (0.08) 0.15
IRS Discounted Cash Flows Swap Rate 7.4% - 7.9% (2.93) (0.08) 0.03
IRS Discounted Cash Flows Credit spread 36.2bps - 92.9bps 0.04 (2.57) 1.00
IRS Prepayment modelling Prepayment rate 2.5% - 6.2% (0.02) (0.18) 0.07
Property derivatives Option pricing model HPI Forward growth rate and HPI Spot rate 0% - 5% 2.50 (8.34) 8.34
Swaptions IR option pricing model Volatility 0% - 50% 33.33 (0.17) 0.33
At Fair Value through P&L
Loans and advances to customers
Mortgage portfolio Black Scholes model HPI Forward growth rate 0% - 5% 2.50 (1.88) 1.88
Other loans Discounted Cash Flows Credit spreads 0.1% - 1.4% 0.67 (0.30) 0.30
Debt securities
Government debt Discounted Cash Flows Interest rate 0% - 10% 8.33 (5.80) 29.00
Property securities Probability weighting HPI Forward growth rate 0% - 5% 2.50 (1.29) 1.29
Mandatorily Fair Value through P&L
Loans and advances to customers
Loans Discounted Cash Flows Margin rate -100pbs - 100pbs 100.00 (12.70) 13.54
Debt securities
Government debt Discounted Cash Flows Margin rate -100pbs - 100pbs 100.00 (0.66) 0.66
Equity instruments
Equities Price Based Price 90% - 110% 0.10 (77.93) 77.93
At Fair Value through OCI
Loans and advances to customers
Loans Discounted Cash Flows Credit spread n/a  n/a (5.50) —
Loans Discounted Cash Flows Interest rate curve -0.2% - 0.2% 0.19 (0.09) 0.09


IMAGE69.JPG
131

Portfolio/Instrument Valuation technique Main unobservable inputs Range Weighted average Impacts (EUR million)
(Level 3) Unfavourable scenario Favourable scenario
Other loans Discounted Cash Flows Credit spreads 0.2% - 0.4% 0.13 (0.03) 0.03
Debt securities
Government debt Discounted Cash Flows Interest rate 1.1% - 1.3% 0.10 — —
Equity instruments
Equities Price Based Price 90% - 110% 0.10 (105.84) 105.84
Held for trading (Liabilities)
Derivatives
Cap&Floor Volatility option model Volatility 10% - 90% 30.97 (0.07) 0.05
EQ Options Option pricing model HPI Forward growth rate 0% - 5% 2.50 (2.47) 2.47
IR Options Black Scholes model Interest rate TIIE28-18bps - TIIE28-1bps  n/a — —
IRS Forward stimation Interest rate TIIE 91=TIIE28-18
IRS TIIE -5
USDMXNBASIS-5bps - TIIE 91=TIIE28-2
IRS TIIE +5
USDMXNBASIS+5bps 		 n/a (0.03) 0.06
(a)    The valuation technique, the unobservable inputs described in the column "Main observable inputs" under probable scenarios, range of variation, average value and impact resulting from valuing the position in the maximum and minimum range established are shown for each instrument.
(b)    The breakdown of impacts is shown by type of instrument and unobservable inputs
(c)    The range of variation of the unobservable inputs was estimated taking into account plausible movements of these parameters depending on the type of instrument.
(d)     Null impacts from fully hedged or back-to-back operations have not been included in this exercise.
132
IMAGE69.JPG

Lastly, the changes in the financial instruments classified as Level 3 in the first three months of 2021 were as follows:
01-01-2021 Changes 31-03-2021
EUR million Fair value calculated using internal models (Level 3) Purchases/Settlements Sales/Amortisation Changes in fair value recognized in profit or loss Changes in fair value recognised in equity Level reclassifications Other Fair value calculated using internal models (Level 3)
Financial assets held for trading 740  8  (58) (100) —  (5) (10) 575 
Debt instruments 7  2  (3) —  —  —  —  6 
Equity instruments 3  —  (2) —  —  —  —  1 
Trading derivatives 730  6  (53) (100) —  (5) (10) 568 
Swaps 272  —  —  (48) —  —  (5) 219 
Exchange rate options 22  —  (13) 2  —  —  —  11 
Interest rate options 241  —  (32) (40) —  —  —  169 
Index and securities options 94  4  (4) 12  —  (6) (4) 96 
Other 101  2  (4) (26) —  1  (1) 73 
Trading financial assets at fair value through profit or loss 649  —  (43) 20  —  (163) (16) 447 
Credit institutions 163  —  —  —  —  (163) —  — 
Loans and advances to customers 19  —  (1) (1) —  —  1  18 
Debt instruments 467  —  (42) 21  —  —  (17) 429 
Non-trading financial assets mandatorily at fair value through profit or loss 934  47  (36) (8) —  470  19  1,426 
Loans and advances to customers 295  31  (30) (10) —  —  —  286 
Debt instruments 134  —  (5) 6  —  8  6  149 
Equity instruments 505  16  (1) (4) —  462  13  991 
Financial assets at fair value through other comprehensive income 6,220  1,692  (1,156) —  (168) 15  (16) 6,587 
TOTAL ASSETS 8,543  1,747  (1,293) (88) (168) 317  (23) 9,035 
Financial liabilities held for trading 295  17  (10) 8  —  (13) (40) 257 
Trading derivatives 295  17  (10) 8  —  (13) (40) 257 
   Swaps 81  5  —  (9) —  (3) (5) 69 
   Exchange rate options 1  —  —  3  —  —  —  4 
   Interest rate options 49  6  (5) (10) —  —  —  40 
   Index and securities options 97  4  (1) 17  —  (10) (4) 103 
   Interest rate and equity futures 2  —  (1) —  —  —  1  2 
   Others 65  2  (3) 7  —  —  (32) 39 
Financial liabilities designated at fair value through profit or loss 610  —  —  16  —  (289) (16) 321 
TOTAL LIABILITIES 905  17  (10) 24  —  (302) (56) 578 
IMAGE69.JPG
133

b)    Sovereign risk with peripheral European countries
The detail at 31 March 2021 and 31 December 2020, by type of financial instrument, of Grupo Santander credit institutions’ sovereign risk exposure to Europe’s peripheral countries and of the short positions exposed to them, taking into consideration the scope established by the European Banking Authority (EBA) in the analyses performed on the capital needs of European credit institutions (See Note 50 to the consolidated annual accounts for 2020), is as follows:
Sovereign risk by country of issuer/borrower at 31 March 2021 (*)
EUR million
Debt instruments MtM Derivatives (***)
Financial assets held for trading and Financial assets designated at fair value through profit or loss Short positions Financial assets at fair value through other comprehensive income Non-trading financial assets mandatorily at fair value through profit or loss Financial assets at amortised cost Loans and advances to customers (**) Total net direct exposure Other than CDSs CDSs
Spain 7,825  (3,874) 3,298  —  993  12,366  20,608  651  — 
Portugal 174  (199) 2,296  —  554  4,185  7,010  —  — 
Italy 2,693  (743) 3,705  —  932  17  6,604  1  (1)
Ireland —  —  —  —  —  —  —  —  — 
(*)    Information prepared under EBA standards. Also, there are government debt instruments on insurance companies balance sheets amounting to EUR 13,355 million (of which EUR 11,717 million, EUR 1,253 million, EUR 383 million and EUR 2 million relate to Spain, Portugal, Italy and Ireland, respectively) and off-balance-sheet exposure other than derivatives – contingent liabilities and commitments – amounting to EUR 5,194 million (of which EUR 4,575 million, EUR 302 million and EUR 317 million to Spain, Portugal and Italy, respectively).
(**)    Presented without taking into account the valuation adjustments recognised (EUR 19 million).
(***)    "Other than CDSs" refers to the exposure to derivatives based on the location of the counterparty, irrespective of the location of the underlying. “CDSs” refers to the exposure to CDSs based on the location of the underlying.
Sovereign risk by country of issuer/borrower at 31 December 2020 (*)
EUR million
Debt instruments MtM Derivatives (***)
Financial assets held for trading and Financial assets designated at fair value through profit or loss Short positions Financial assets at fair value through other comprehensive income Non-trading financial assets mandatorily at fair value through profit or loss Financial assets at amortised cost Loans and advances to customers (**) Total net direct exposure Other than CDSs CDSs
Spain 9,765  (5,665) 7,048  —  993  12,104  24,245  546  — 
Portugal 202  (582) 4,148  —  631  4,331  8,730  —  — 
Italy 556  (307) 2,468  —  1,277  21  4,015  1  (1)
Ireland —  —  —  —  —  —  —  —  — 
(*) Information prepared under EBA standards. Also, there are government debt instruments on insurance companies balance sheets amounting to EUR 14,241 million (of which EUR 12,571 million, EUR 1,281 million, EUR 387 million and EUR 2 million relate to Spain, Portugal, Italy and Ireland, respectively) and off-balance-sheet exposure different to derivatives – contingent liabilities and commitments – amounting to EUR 6,134 million (EUR 5,509 million, EUR 345 million and EUR 280 million to Spain, Portugal and Italy, respectively).
(**)    Presented without taking into account the valuation adjustments recognised (EUR 23 million).
(***)"Other than CDSs" refers to the exposure to derivatives based on the location of the counterparty, irrespective of the location of the underlying. “CDSs” refers to the exposure to CDSs based on the location of the underlying.
134
IMAGE69.JPG

The detail of Grupo Santander’s other exposure to other counterparties (private sector, central banks and other public entities that are not considered to be sovereign risks) in the aforementioned countries at 31 March 2021 and 31 December 2020 is as follows:
Exposure to other counterparties by country of issuer/borrower at 31 March  2021 (*)
EUR million
Debt instruments Derivatives (***)
Balances with central banks Reverse repurchase agreements Financial assets held for trading and Financial assets designated at FVTPL Financial assets at fair value through other comprehensive income Non-trading financial assets mandatorily at fair value through profit or loss Financial assets at amortised cost Loans and advances to customers (**) Total net direct exposure Other than CDSs CDSs
Spain 76,660  5,051  505  819  2  222  201,511  284,770  1,538  (1)
Portugal 5,725  0  164  21  —  3,311  35,280  44,501  600  — 
Italy 272  6,485  303  495  —  120  14,580  22,255  486  (4)
Greece —  —  —  —  —  —  17  17  —  — 
Ireland —  —  37  2,562  594  4  12,529  15,726  188  — 
(*)    Also, Grupo Santander has off-balance-sheet exposure other than derivatives -contingent liabilities and commitments- amounting to EUR 76,765 million, EUR 8,373 million, EUR 4,538 million, EUR 201 million and EUR 856 million to counterparties in Spain, Portugal, Italy, Greece and Ireland, respectively.
(**)    Presented without taking into account valuation adjustments or impairment corrections (EUR 8,106 million).
(***)“Other than CDSs” refers to the exposure to derivatives based on the location of the counterparty, irrespective of the location of the underlying. “CDSs” refers to the exposure to CDSs based on the location of the underlying.
Exposure to other counterparties by country of issuer/borrower at 31 December 2020 (*)
EUR million
Debt instruments Derivatives (***)
Balances with central banks Reverse repurchase agreements Financial assets held for trading and Financial assets designated at FVTPL Financial assets at fair value through other comprehensive income Non-trading financial assets mandatorily at fair value through profit or loss Financial assets at amortised cost Loans and advances to customers (**) Total net direct exposure Other than CDSs CDSs
Spain 62,023  3,837  619  943  2  24  203,226  270,674  2,581  (4)
Portugal 3,937  0  140  22  —  2,933  34,935  41,967  685  — 
Italy 10  7,098  425  493  —  129  13,437  21,592  1,001  (4)
Greece —  —  —  —  —  —  14  14  —  — 
Ireland —  —  22  2,337  556  9  10,523  13,447  153  — 
(*)    Also, Grupo Santander has off-balance-sheet exposure other than derivatives - contingent liabilities and commitments- amounting to EUR 76,377 million, EUR 8,591 million, EUR 4,173 million, EUR 200 million and EUR 797 million to counterparties in Spain, Portugal, Italy, Greece and Ireland, respectively.
(**)    They are presented without taking into account valuation adjustments or impairment corrections (EUR 8,129 million).
(***)“Other than CDSs” refers to the exposure to derivatives based on the location of the counterparty, irrespective of the location of the underlying. “CDSs” refers to the exposure to CDSs based on the location of the underlying.

IMAGE69.JPG
135

Following is certain information on the notional amounts of the CDSs detailed in the foregoing tables at 31 March 2021 and 31 December 2020:
31-03-2021
EUR million
Notional amount Fair value
Bought Sold Net Bought Sold Net
Spain Sovereign —  —  —  —  —  — 
Other 566  309  257  (13) 12  (1)
Portugal Sovereign —  —  —  —  —  — 
Other 52  5  47  —  —  — 
Italy Sovereign 322  194  128  (3) 2  (1)
Other 217  105  112  (4) —  (4)
Greece Sovereign —  —  —  —  —  — 
Other —  —  —  —  —  — 
Ireland Sovereign —  —  —  —  —  — 
Other —  6  (6) —  —  — 

31-12-2020
EUR million
Notional amount Fair value
Bought Sold Net Bought Sold Net
Spain Sovereign —  —  —  —  —  — 
Other 546  273  273  (13) 9  (4)
Portugal Sovereign —  —  —  —  —  — 
Other 52  —  52  —  —  — 
Italy Sovereign 326  206  120  (3) 2  (1)
Other 220  11  209  (4) —  (4)






136
IMAGE69.JPG


17.   Explanation added for translation to English
These interim condensed consolidated financial statements are presented on the basis of the regulatory financial reporting framework applicable to Grupo Santander in Spain (see note 1.b).



SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Banco Santander, S.A.
Date:    5 May 2021 By: /s/ José García Cantera
Name: José García Cantera
Title: Chief Financial Officer
IMAGE69.JPG
137