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, 2019

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:

 

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):

 

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):

 

 

 

 

 

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Banco Santander, S.A.

TABLE OF CONTENTS

 

 

 

 

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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 2019 AND 31 DECEMBER 2018

(Millions of euros)

ASSETS	Note	31‑03‑2019	31‑12‑2018 (*)
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEPOSITS ON DEMAND		103,500	113,663
FINANCIAL ASSETS HELD FOR TRADING	5	98,592	92,879
NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS	5	6,661	10,730
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS	5	75,488	57,460
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME	5	116,359	121,091
FINANCIAL ASSETS AT AMORTISED COST	5	980,733	946,099
HEDGING DERIVATIVES		7,270	8,607
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RISK		1,435	1,088
INVESTMENTS		7,726	7,588
Joint ventures entities		956	979
Associated entities		6,770	6,609
ASSETS UNDER INSURANCE OR REINSURANCE CONTRACTS		332	324
TANGIBLE ASSETS	7	33,246	26,157
Property, plant and equipment		32,149	24,594
For own-use		14,771	8,150
Leased out under an operating lease		17,378	16,444
Investment property		1,097	1,563
Of which Leased out under an operating lease		786	1,195
INTANGIBLE ASSETS	8	29,114	28,560
Goodwill		25,989	25,466
Other intangible assets		3,125	3,094
TAX ASSETS		29,634	30,251
Current tax assets		6,415	6,993
Deferred tax assets		23,219	23,258
OTHER ASSETS		11,501	9,348
Insurance contracts linked to pensions		204	210
Inventories		4	147
Other		11,293	8,991
NON-CURRENT ASSETS HELD FOR SALE	6	4,560	5,426
TOTAL ASSETS		1,506,151	1,459,271

 

(*)   Presented for comparison purposes only (see Note 1.e).

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated balance sheet as at 31 March 2019.

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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 2019 AND 31 DECEMBER 2018

(Millions of euros)

LIABILITIES	Note	31‑03‑2019	31‑12‑2018 (*)
FINANCIAL LIABILITIES HELD FOR TRADING	9	67,994	70,343
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS	9	74,426	68,058
FINANCIAL LIABILITIES AT AMORTISED COST	9	1,211,981	1,171,630
HEDGING DERIVATIVES		7,273	6,363
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK		313	303
LIABILITIES UNDER INSURANCE OR REINSURANCE CONTRACTS		751	765
PROVISIONS		13,449	13,225
Pensions and other post-retirement obligations	10	5,737	5,558
Other long term employee benefits	10	1,160	1,239
Taxes and other legal contingencies	10	3,205	3,174
Contingent liabilities and commitments	14	710	779
Other provisions	10	2,637	2,475
TAX LIABILITIES		8,783	8,135
Current tax liabilities		2,699	2,567
Deferred tax liabilities		6,084	5,568
OTHER LIABILITIES		10,816	13,088
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE		-	-
TOTAL LIABILITIES		1,395,786	1,351,910
SHAREHOLDERS´ EQUITY		119,837	118,613
CAPITAL	11	8,118	8,118
Called up paid capital		8,118	8,118
Unpaid capital which has been called up		-	-
SHARE PREMIUM		50,993	50,993
EQUITY INSTRUMENTS ISSUED OTHER THAN CAPITAL		573	565
Equity component of the compound financial instrument		-	-
Other equity instruments issued		573	565
OTHER EQUITY		172	234
ACCUMULATED RETAINED EARNINGS		64,346	56,756
REVALUATION RESERVES		-	-
OTHER RESERVES		(3,962)	(3,567)
(-) OWN SHARES		(6)	(59)
PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT	3	1,840	7,810
(-) INTERIM DIVIDENDS		(2,237)	(2,237)
OTHER COMPREHENSIVE INCOME (LOSS)		(20,992)	(22,141)
ITEMS NOT RECLASSIFIED TO PROFIT OR LOSS	11	(3,469)	(2,936)
ITEMS THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS	11	(17,523)	(19,205)
NON-CONTROLLING INTEREST		11,520	10,889
Other comprehensive income		(1,137)	(1,292)
Other elements		12,657	12,181
EQUITY (*)		110,365	107,361
TOTAL LIABILITIES AND EQUITY		1,506,151	1,459,271
MEMORANDUM ITEMS: OFF BALANCE SHEET AMOUNTS	14
Loans commitment granted		221,305	218,083
Financial guarantees granted		12,265	11,723
Other commitments granted		79,472	74,389

 

(*)   Presented for comparison purposes only (see Note 1.e).

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated balance sheet as at 31 March 2019.

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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, 2019 AND 2018

(Millions of euros)

		Debit/Credit
	Note	01‑01‑2019 to 31‑03‑2019	01‑01‑2018 to 31‑03‑2018 (*)
Interest income		14,280	13,340
Financial assets at fair value with changes in other comprehensive income		1,022	963
Financial assets at amortized cost		11,987	11,525
Other interest income		1,271	852
Interest expense		(5,598)	(4,886)
Interest income/ (charges)		8,682	8,454
Dividend income		66	35
Income from companies accounted for using the equity method		153	178
Commission income		3,746	3,738
Commission expense		(815)	(784)
Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net		116	127
Financial assets at amortized cost		5	9
Other financial assets and liabilities		111	118
Gain or losses on financial assets and liabilities held for trading, net		28	449
Reclassification of financial assets from fair value with changes in other comprehensive income		-	-
Reclassification of financial assets from amortized cost		-	-
Other gains or (-) losses		28	449
Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss		131	5
Reclassification of financial assets from fair value with changes in other comprehensive income		-	-
Reclassification of financial assets from amortized cost		-	-
Other gains or (-) losses		131	5
Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net		(76)	16
Gain or losses from hedge accounting, net		(29)	(29)
Exchange differences, net		107	(73)
Other operating income		419	411
Other operating expenses		(469)	(390)
Income from assets under insurance and reinsurance contracts		882	910
Expenses from liabilities under insurance and reinsurance contracts		(856)	(896)
Total income		12,085	12,151
Administrative expenses		(5,011)	(5,151)
Staff costs		(3,006)	(3,000)
Other general administrative expenses		(2,005)	(2,151)
Depreciation and amortization		(747)	(613)
Provisions or reversal of provisions, net		(465)	(370)
Impairment or reversal of impairment at financial assets not measured at fair value through  profit or loss, net		(2,246)	(2,297)
Financial assets at fair value through other comprehensive income		(3)	(10)
Financial assets at amortized cost	5	(2,243)	(2,287)
Impairment of investments in subsidiaries, joint ventures and associates, net		-	-
Impairment on non-financial assets, net		(20)	(9)
Tangible assets		(20)	(10)
Intangible assets		(1)	-
Others		1	1
Gain or losses on non-financial assets and investments, net		219	20
Negative goodwill recognized in results		-	-
Gains or losses on non-current assets held for sale not classified as discontinued operations	6	(213)	(42)
Operating profit/(loss) before tax		3,602	3,689
Tax expense or income from continuing operations		(1,357)	(1,280)
Profit for the period from continuing operations		2,245	2,409
Profit or loss after tax from discontinued operations		-	-
Profit for the period		2,245	2,409
Profit attributable to non-controlling interests		405	355
Profit attributable to the parent		1,840	2,054
Earnings per share	3
Basic		0.10	0.12
Diluted		0.10	0.12

 

(*)   Presented for comparison purposes only (see Note 1.e).

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 2019.

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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 2019 AND 2018

(Millions of euros)

	Note	01‑01‑2019 to 31‑03‑2019	01‑01‑2018 to 31‑03‑2018 (*)
CONSOLIDATED PROFIT FOR THE PERIOD		2,245	2,409
OTHER RECOGNISED INCOME AND EXPENSE		1,304	(447)
Items that will not be reclassified to profit or loss		(530)	32
Actuarial gains and losses on defined benefit pension plans	11	(468)	235
Non-current assets held for sale		-	-
Other recognized income and expense of investments in subsidiaries, joint ventures and associates		-	-
Changes in the fair value of equity instruments measured at fair value through other comprehensive income		(118)	(98)
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)		-	-
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (hedging instrument)		-	-
Changes in the fair value of financial liabilities at fair value through profit or loss attributable to changes in credit risk		(84)	(37)
Income tax relating to items that will not be reclassified		140	(68)
Items that may be reclassified to profit or loss		1,834	(479)
Hedges of net investments in foreign operations (effective portion)	11	(733)	(115)
Revaluation gains (losses)		(733)	(115)
Amounts transferred to income statement		-	-
Other reclassifications		-	-
Exchanges differences	11	2,164	(739)
Revaluation gains (losses)		2,164	(739)
Amounts transferred to income statement		-	-
Other reclassifications		-	-
Cash flow hedges (effective portion)		(179)	(150)
Revaluation gains (losses)		(1,046)	(622)
Amounts transferred to income statement		867	472
Transferred to initial carrying amount of hedged items		-	-
Other reclassifications		-	-
Hedging instruments (items not designated)		-	-
Revaluation gains (losses)		-	-
Amounts transferred to income statement		-	-
Other reclassifications		-	-
Debt instruments at fair value with changes in other comprehensive income		720	669
Revaluation gains (losses)		835	779
Amounts transferred to income statement		(115)	(110)
Other reclassifications		-	-
Non-current assets held for sale		-	-
Revaluation gains (losses)		-	-
Amounts transferred to income statement		-	-
Other reclassifications		-	-
Share of other recognized income and expense of investments		31	(4)
Income tax relating to items that may be reclassified to profit or loss		(169)	(140)
Total recognized income and expenses		3,549	1,962
Attributable to non-controlling interests		560	324
Attributable to the parent		2,989	1,638

 

(*)   Presented for comparison purposes only (see Note 1.e).

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of recognized income and expense for the three-month period ended 31 March 2019.

 

 

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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 2019 AND 2018

(Millions of euros)

 

												Non-Controlling interest
	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	Other compressive income	Others items	Total
Balance as at 31‑12‑18 (*)	8,118	50,993	565	234	56,756	-	(3,567)	(59)	7,810	(2,237)	(22,141)	(1,292)	12,181	107,361
Adjustments due to errors	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Adjustments due to changes in accounting policies	-	-	-	-	-	-	(391)	-	-	-	-	-	-	(391)
Opening balance as at 01‑01‑18 (*)	8,118	50,993	565	234	56,756	-	(3,958)	(59)	7,810	(2,237)	(22,141)	(1,292)	12,181	106,970
Total recognized income and expense	-	-	-	-	-	-	-	-	1,840	-	1,149	155	405	3,549
Other changes in equity	-	-	8	(62)	7,590	-	(4)	53	(7,810)	-	-	-	71	(154)
Issuance of ordinary shares	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Issuance of preferred shares	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Issuance of other financial instruments	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Maturity of other financial instruments	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Conversion of financial liabilities into equity	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Capital reduction	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Dividends	-	-	-	-	-	-	-	-	-	-	-	-	(136)	(136)
Purchase of equity instruments	-	-	-	-	-	-	-	(317)	-	-	-	-	-	(317)
Disposal of equity instruments	-	-	-	-	-	-	(6)	370	-	-	-	-	-	364
Transfer from equity to liabilities	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Transfer from liabilities to equity	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Transfers between equity items	-	-	-	-	7,590	-	220	-	(7,810)	-	-	-	-	-
Increases (decreases) due to business combinations	-	-	-	-	-	-	-	-	-	-	-	-	78	78
Share-based payment	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Others increases or (-) decreases of the equity	-	-	8	(62)	-	-	(218)	-	-	-	-	-	129	(143)
Balance as at 31‑03‑19	8,118	50,993	573	172	64,346	-	(3,962)	(6)	1,840	(2,237)	(20,992)	(1,137)	12,657	110,365

 

(*)   Presented for comparison purposes only (see Note 1.e).

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 2019.

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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, 2019 AND 2018

(Millions of euros)

												Non-Controlling interest
(*)	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	Other comprehensive income	Others items	Total
Balance as at 31‑12‑17 (**)	8,068	51,053	525	216	53,437	-	(1,602)	(22)	6,619	(2,029)	(21,776)	(1,436)	13,780	106,833
Adjustments due to errors	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Adjustments due to changes in accounting policies	-	-	-	-	-	-	112	-	-	-	(291)	241	(1,533)	(1,471)
Opening balance as at 01‑01‑18 (**)	8,068	51,053	525	216	53,437	-	(1,490)	(22)	6,619	(2,029)	(22,067)	(1,195)	12,247	105,362
Total recognized income and expense	-	-	-	-	-	-	-	-	2,054	-	(416)	(31)	355	1,962
Other changes in equity	-	-	8	(13)	3,534	-	95	(14)	(6,619)	2,029	-	-	(878)	(1,858)
Issuance of ordinary shares	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Issuance of preferred shares	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Issuance of other financial instruments	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Maturity of other financial instruments	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Conversion of financial liabilities into equity	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Capital reduction	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Dividends	-	-	-	-	(968)	-	-	-	-	-	-	-	(111)	(1,079)
Purchase of equity instruments	-	-	-	-	-	-	-	(397)	-	-	-	-	-	(397)
Disposal of equity instruments	-	-	-	-	-	-	-	383	-	-	-	-	-	383
Transfer from equity to liabilities	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Transfer from liabilities to equity	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Transfers between equity items	-	-	-	-	4,502	-	88	-	(6,619)	2,029	-	-	-	-
Increases (decreases) due to business combinations	-	-	-	-	-	-	-	-	-	-	-	-	(835)	(835)
Share-based payment	-	-	-	(13)	-	-	-	-	-	-	-	-	13	-
Others increases or (-) decreases of the equity	-	-	8	-	-	-	7	-	-	-	-	-	55	70
Balance as at 31‑03‑18 (**)	8,068	51,053	533	203	56,971	-	(1,395)	(36)	2,054	-	(22,483)	(1,226)	11,724	105,466

 

(*)   See reconciliation of IAS39 31 December 2017 to IFRS9 1 January 2018 (Note 1.b of the 2018 Consolidated Annual Accounts).

(**)    Presented for comparison purposes only (see Note 1.e).

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 2019.

 

 

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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 2019 AND 2018

(Millions of euros)

	Note	31‑03‑2019	31‑03‑2018 (*)
A. CASH FLOWS FROM OPERATING ACTIVITIES		(9,493)	(18,719)
Profit for the period		2,245	2,409
Adjustments made to obtain the cash flows from operating activities		5,230	5,505
Depreciation and amortization cost		747	613
Other adjustments		4,483	4,892
Net increase/(decrease) in operating assets		32,421	18,900
Financial assets held-for-trading		4,974	(1,900)
Non-trading financial assets mandatorily at fair value through profit or loss		(4,344)	417
Financial assets at fair value through profit or loss		17,551	11,204
Financial assets at fair value through other comprehensive income		(7,055)	(2,934)
Financial assets at amortized cost		20,673	9,864
Other operating assets		622	2,249
Net increase/(decrease) in operating liabilities		15,620	(7,253)
Liabilities held-for-trading financial		(2,882)	(13,191)
Financial liabilities designated at fair value through profit or loss		5,778	(279)
Financial liabilities at amortized cost		17,101	8,192
Other operating liabilities		(4,377)	(1,975)
Income tax recovered/(paid)		(167)	(480)
B. CASH FLOWS FROM INVESTING ACTIVITIES		422	7,484
Payments		2,508	2,438
Tangible assets	7	2,231	2,137
Intangible assets		219	299
Investments		-	2
Subsidiaries and other business units	2	58	-
Non-current assets held for sale and associated liabilities		-	-
Other payments related to investing activities		-	-
Proceeds		2,930	9,922
Tangible assets	7	966	1,232
Intangible assets		-	-
Investments		211	446
Subsidiaries and other business units		70	-
Non-current assets held for sale and associated liabilities	6	1,683	8,244
Other proceeds related to investing activities		-	-
C. CASH FLOW FROM FINANCING ACTIVITIES		(2,806)	1,201
Payments		4,222	1,932
Dividends	3	1,055	968
Subordinated liabilities		2,425	437
Redemption of own equity instruments		-	-
Acquisition of own equity instruments		317	397
Other payments related to financing activities		425	130
Proceeds		1,416	3,133
Subordinated liabilities		1,056	2,750
Issuance of own equity instruments	11	-	-
Disposal of own equity instruments		360	383
Other proceeds related to financing activities		-	-
D. EFFECT OF FOREIGN EXCHANGE RATE DIFFERENCES		1,714	(288)
E. NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		(10,163)	(10,322)
F. CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		113,663	110,995
G. CASH AND CASH EQUIVALENTS AT END OF PERIOD		103,500	100,673
COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF PERIOD
Cash		8,174	7,207
Cash equivalents at central banks		80,527	78,497
Other financial assets		14,799	14,969
Less: Bank overdrafts refundable on demand		-	-
TOTAL CASH AND CASH EQUIVALENTS AT END OF PERIOD		103,500	100,673
In which: restricted cash		-	-

 

(*)   Presented for comparison purposes only (see Note 1.e).

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 2019.

 

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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.

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, 2019

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

a)  Introduction

Banco Santander, S.A. (“the Bank” 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, the Bank 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 “Santander Group”).

The Group’s interim condensed consolidated financial statements for the three-month period ended 31 March, 2019 (“interim financial statements”) were prepared and authorized by the Group’s directors at the board meeting held on 29 April, 2019. The Group’s consolidated annual accounts for 2018 were approved by the shareholders at the Bank’s annual general meeting on 12 April, 2019.

b)  Basis of presentation of the interim financial statements

Under Regulation (EC) no. 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 annual accounts for the years beginning on or after 1 January 2005 in accordance with the International Financial Reporting Standards (“IFRSs”) as previously adopted by the European Union (“EU-IFRSs”). In order to adapt the accounting system of Spanish credit institutions to these standards, the Bank of Spain issued Circular 4/2004, of 22 December, on Public and Confidential Financial Reporting Rules and Formats, which was repealed on 1 January 2018 by Bank of Spain Circular 4/2017, of 27 November 2017, and subsequent modifications.

The consolidated annual accounts for 2018 were approved at the board of directors meeting on 26 February 2019) 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 the Group’s consolidated equity and consolidated financial position at 31 December 2018 and the consolidated results of its operations, and the consolidated cash flows in 2018. The aforementioned consolidated annual accounts, which are included in the Group’s Form 20‑F filed with the U.S. Securities and Exchange Commission on March 26, 2019, 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 three-month period ended on 31 March 2019.

In accordance with IAS34, the interim financial statements are intended only to provide an update on the content of the latest consolidated annual accounts authorized for issue, focusing on new activities, events and circumstances occurring during the first quarter, 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 IFRSs and, accordingly, for a proper comprehension of the information included in these interim financial statements, they should be read together with the Group’s consolidated annual accounts for the year ended 31 December 2018.

Santander Group 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 2018. 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 the Group.

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The accounting policies and methods used in preparing these interim financial statements are the same as those applied in the consolidated annual accounts for 2018, taking into account the standards and interpretations that became applicable during the first three months of 2019, which are detailed below:

-     IFRS16 Leases

On 1 January 2019, IFRS16 Leases came effective. IFRS16 establishes the principles for the recognition, measurement, presentation and breakdown of lease contracts, with the objective of ensuring reporting information that faithfully represents the lease transactions. The Group has adopted the standard, modified and retrospectively from 1 January 2019, not restating the comparative financial statements for 2018, as permitted under the specific transitional provisions of the standard.

The adoption of IFRS16 has led to changes in the Group’s accounting policies for the recognition, measurement, presentation and breakdown of lease contracts.

The main aspects contained in the new regulations and the breakdowns relating to the impact of the adoption of IFRS16 in the Group are included below:

a)   Lease accounting policy

Since 1 January 2019, leases are recognized as right-of-use assets and the corresponding liability on the date on which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and the finance charge. The finance charge is allocated to the income statement during the term of the lease in such a way as to produce a constant periodic interest rate on the remaining balance of the liability for each year. The right-of-use asset is depreciated over the useful life of the asset or the lease term, whichever is shorter, on a straight-line basis.

Assets and liabilities arising from a lease are initially measured at present value. Lease liabilities include the net present value of the following lease payments:

 Fixed payments (including essentially fixed payments), less any lease incentive receivable,

 Variable lease payments that depend on an index or rate,

 The amounts expected to be paid by the lessee as residual value guarantees,

 The exercise price of a purchase option if the lessee is reasonably certain that it will exercise that option, and

 Lease termination penalty payments, if the term of the lease reflects the lessee’s exercise of that option.

Lease payments are discounted using the interest rate implicit in the lease. The discount rate used is the lessee’s incremental borrowing rate at the related date. For this purpose, the entity has calculated this incremental interest rate taking as reference the listed debt instruments issued by the Group; in this regard, the Group has estimated different interest rate curves depending on the currency and economic environment in which the contracts are located.

In order to construct the incremental interest rate, a methodology has been developed at the corporate level. This methodology is based on the need for each Entity to consider its economic and financial situation, for which the following factors must be considered:

 Economic and political situation (country risk).

 Credit risk of the company.

 Monetary policy.

 Volume and seniority of the company’s debt instrument issues.

The incremental interest rate is defined as the interest rate that a lessee would have to pay for borrowing, given a similar period to the duration of the lease and with similar security, the funds necessary to obtain an asset of similar value to the asset by right of use in a similar economic environment. The Group Entities have a wide stock and variety of financing instruments issued in different currencies to that of the euro (pound, dollar, etc.) that provide sufficient information to be able to determine an "all in rate" (reference rate plus adjustment for credit spread at different terms and in different currencies). In circumstances, where the leasing company has its own financing, this has been used as the starting point for determining the incremental interest rate. On the other hand, for those Group entities that do not have their own financing, the information from the financing of the consolidated subgroup to which they belong was used as the starting point for estimating the entity’s curve, analyzing other factors to assess whether it is necessary to make any type of negative or positive adjustment to the initially estimated credit spread.

Right-of-use assets are valued at cost which includes the following:

 The amount of the initial measurement of the lease liability,

 Any lease payment made at or before the start date less any lease incentive received,

 Any initial direct costs, and

 Restoration costs.

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Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in the income statement. Short-term leases are leases with a lease term less than or equal to 12 months.

b)   Recognized effects on the adoption of the standard

With the adoption of IFRS16, the Group recognized lease liabilities in relation to leases previously classified as "operating leases" under the principles of IAS17 Leases in force at 31 December 2018. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at 1 January 2019. At the date of first application, the weighted average discount rate was 4.5%, mainly due to the contribution of rented properties in Spain.

For leases previously classified as finance leases, the Group recognized the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and lease liability on the initial effective date. The measurement principles in IFRS16 apply only after that date.

The Group has considered the practical solutions defined in paragraph C10 of the standard in the application of the modified retrospective method. Such application shall be made on a contract-by-contract basis and shall not provide for the application of any of the waivers on a generalized basis.

A reconciliation between the operating lease commitments at 31 December 2018 and the lease liability recognized at 1 January 2019 is detailed below:

	Millions of euros
Operating lease commitments at 31 December 2018	8,699
Amount of operating lease commitments discounted by the Group rate	6,550
(+) Liabilities under financial leases at 31 December 2018	96
(-) Short-term leases recognized as expenses on a straight-line basis	(20)
(-) Low-value leases recognized as expenses on a straight-line basis	(2)
(-) Contracts revalued as service contracts	-
(+)/(-) Adjustments resulting from different treatment of extension and termination options	556
(+)/(-) Adjustments related to changes in the index or rate affecting variable payments	-
Lease liability at 1 January 2019	7,180

 

As a result of the entry into force of IFRS16, the impact of the first application recorded in the Group corresponds, mainly, to the recognition of assets for right of use for an amount of EUR 6,665 million, financial liabilities for an amount of EUR 7,084 million and an negative impact on the Group’s equity of EUR 391 million. The impact of the first application of IFRS16 on the ordinary capital ratio (Common Equity Tier 1 - CET 1) was -20 b.p.

-       IFRIC23 Uncertainty about the treatment of income tax - applies to the determination of taxable profit or loss, tax bases, unused tax loss carry forwards, unused tax credits and tax rates when there is uncertainty about the treatment of taxes under IAS12.

-       Amendment to IFRS9 Financial Instruments - allows entities to measure certain financial assets prepayable with a negative offset at amortized cost. These assets, which include some loans and debt securities, would have had to be measured at fair value through profit or loss.

In order to apply measurement at amortized cost, the negative offset must be ‘reasonable compensation for early termination of the contract’ and the asset must be maintained within a ‘held-to-collect’ business model.

-       Amendment to IAS28 Investments in associates and joint ventures - the amendments clarify the accounting for long-term interests in an associate or joint venture, which are essentially part of the net investment in the associate or joint venture, but to which equity accounting is not applied. Entities must account for such interest under IFRS9 Financial Instruments before applying the allocation of losses and IAS28 impairment requirements in Investments in associates and joint ventures.

-       Amendment to IAS19 Employee Benefits – clarifies the accounting of the amendments, reductions and settlements on defined benefit plans.

-       Amendment to IFRS 2015‑2017 introduces minor amendments to IFRS3, IFRS11, IAS12 and IAS23:

IFRS3: clarifies that obtaining control of a business that is a joint venture is a business combination achieved in stages.

IFRS11: clarifies that the party that obtains joint control of a business that is a joint venture should not reassess its previous interest in the joint venture.

IAS12: clarifies that the income tax consequences of dividends on financial instruments classified as equity should be recognized according to where the past transactions or events that generated distributable profits were recognized.

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IAS23: clarifies that if a specific loan remains outstanding after the related qualifying asset is ready for sale or intended use, it becomes part of generic loans.

The application of the aforementioned amendments to accounting standards and interpretations, did not have any material effects on the Group’s interim financial statements.

At the date of preparation of these interim financial statements there are no standards pending adoption by the European Union which came into force on 1 January 2019.

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 the Bank 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 2018, 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 2019.

The interim financial statements contain estimates made by the senior management of the Bank and of the consolidated entities in order to quantify certain of the assets, liabilities, income, expenses and obligations reported herein. These estimates, which were made on the basis of the best information available, relate basically to the following:

1. The income tax expense, which, in accordance with IAS34, is recognized in interim periods based on the best estimate of the weighted average tax rate expected by the Group for the full financial year;

2. The impairment losses on certain assets – Financial assets at fair value through other comprehensive income, financial assets at amortized 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 IFRS3.

In the three-month period ended 31 March 2019 there were no significant changes in the estimates made at the 2018 year-end other than those indicated in these interim financial statements.

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d)  Contingent assets and liabilities

Note 2.o to the Group’s consolidated annual accounts for the year ended 31 December 2018 includes information on the contingent assets and liabilities at that date. There were no significant changes in the Group's contingent assets and liabilities from 31 December 2018 to the date of formal preparation of these interim financial statements.

e)  Comparative information

The information for the year 2018 contained in these interim financial statements is only presented for comparison purposes with the information relating to the three-month period ended 31 March 2019, except for the effect of hyperinflation in Argentina on the three-month period ended 31 March 2018 balances in the in accordance with current legislation (see Note 1.h of the 2018 consolidated annual accounts).

In order to interpret the changes in the balances with respect to 31 December 2018, 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 51.b to the consolidated annual accounts for the year ended 31 December 2018) and the impact of the appreciation/depreciation of the various currencies against the euro in the first three months of 2019: Mexican peso (3.69%), US dollar (1.91%), Brazilian real (1.31%), Argentine peso (‑11.38%), Pound sterling (4.22%), Chilean peso (3.95%) and Polish zloty (0.02%); as well as the evolution of the average exchange rates between comparable periods: Mexican peso (5.65%), US dollar (8.22%), Brazilian real (‑6.76%), Argentine peso (‑45.30%), Pound sterling (1.27%), Chilean peso (‑2.34%) and Polish zloty (‑2.85%).

f)   Seasonality of the Group’s transactions

The business activities carried on by the Group 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 2019.

g)  Materiality

In determining the note disclosures to be made on the various items in the interim financial statements or other matters, the Group, 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 2019.

h)  Events after the reporting period

From 1 April 2019 until the approval date of the interim financial statements for the three-month period ended 31 March, 2019, the following significant events occurred at:

Offer to acquire shares of Banco Santander Mexico, S.A., Institución de Banca Multiple, Grupo Financiero Santander México

On 12 April, Banco Santander, S.A. announced its intention to make an offer to acquire all the shares of Banco Santander Mexico, S.A., Institución de Banca Multiple, Grupo Financiero Santander México ("Santander México") which are not owned by Grupo Santander, representing approximately 25% of the share capital of Santander México.

The shareholders accepting the offer will receive 0.337 newly issued shares of Banco Santander, S.A. per share of Santander México and 1.685 American Depositary Shares (ADSs) of Banco Santander, S.A. per ADS of Santander México (the "Exchange Ratio").

If all the shares held by minority shareholders accept the offer, Banco Santander, S.A. would issue approximately 572 million shares, representing 3.5% of Banco Santander’s current share capital.

The exchange offer is expected to be launched and settled in the second half of the year.

Additional Dividend

On 12 April, Banco Santander, S.A. announced that, in accordance with the resolution approved by the General Shareholders’ Meeting held today, on 2 May 2019 it will pay an additional dividend out of 2018 profit, for a gross amount of EUR 0.065 per share.

Anticipated amortization of Tier 1 preference shares

On 16 April, Banco Santander, S.A. announced its decision to carry out the optional early redemption of all outstanding Series II/2014 Non-Step-Up Non-Cumulative Contingent Convertible Perpetual Preferred Tier 1 Securities, with a nominal total value of USD 1,500 million (EUR 1,335 million) which are traded on the Global Exchange Market of the Irish Stock Exchange.

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Agreement with Crédit Agricole S.A. on the depositary and custody business

On 17 April, Banco Santander, S.A. announced that it has signed a memorandum of understanding with Crédit Agricole S.A. with the purpose of combining CACEIS and its subsidiaries (the “CACEIS Group”), which is wholly-owned by Crédit Agricole S.A., with Santander Securities Services, S.A.U. and its subsidiaries (the “S3 Group”), which is wholly-owned by Banco Santander, S.A.

Under the transaction Santander Group would contribute 100% of the S3 Group’s operations in Spain and 49.99% of its operations in Latin America to CACEIS Group, in exchange for 30.5% of the share capital and voting rights of CACEIS Group. The remaining 69.5% would continue to be held by Crédit Agricole S.A. The Latin American operations of the S3 Group would be jointly controlled by CACEIS Group and the Santander Group.

The signature of the final agreements requires prior consultation with the relevant works councils at Credit Agricole, S.A. and the CACEIS Group and, if a final agreement is reached, the completion of the transaction is expected to take place in 2019 and will be subject to customary closing conditions, including to obtaining the necessary regulatory approvals.

i)   Other information

Referendum UK

On 23 June 2016, the UK held a referendum on EU membership in which the majority voted in favor of leaving the EU. Immediately after this result, the UK and world stock and exchange markets began a period of high volatility, including a sharp devaluation of the pound. There remains a great deal of uncertainty about the UK’s exit and its future relationship with the European Union, with regard to the UK’s future trading relationship with the rest of the world. After that period, unless it is extended, the United Kingdom will no longer be part of the European Union. This negotiation period was prolonged on 21 March 2019 and 10 April 2019 and, unless a further extension is granted, UK’s membership in the EU will end no later than 31 October 2019 (unless the UK does not participate in the European elections in May 2019, in which case the UK will leave the EU on 1 June 2019). Departure of the UK from the EU may occur before 31 October if the exit agreement is ratified by the UK parliament.

There is a possibility that the UK’s membership in the EU will end at that time without reaching any agreement on the terms of its future relationship and, as at the date of this document, the exit agreement, that provides a transitional period while the future relationship is being negotiated has not been ratified by the UK parliament.

On 29 March 2017, pursuant to Article 50(2) of the Treaty on European Union, the Prime Minister of the United Kingdom notified her intention to leave the European Union. The activation of this Article initiated a two-year negotiation period to determine the terms of the United Kingdom’s exit from the European Union and the framework for the United Kingdom’s future relationship with the European Union. After that period, unless the time frame is extended, the United Kingdom will no longer be part of the European Union. This negotiation period was prolonged on 21 March 2019 and 10 April 2019 and, unless a further extension is granted, UK’s membership in the EU will terminate no later than 31 October 2019 (unless the UK does not participate in the European elections in May 2019, then it will leave the EU on the 1 June 2019). If the exit agreement is ratified by the UK parliament, UK’s departure from the EU might occur before the 31 October.

There is also the possibility that UK’s membership in the EU will end without reaching any agreement on the terms of its future relationship. Moreover, at the date of this document, the exit agreement, which provides for a transitional period while the future relationship is being negotiated, has not been ratified by the UK parliament.

The outcome of Brexit remains uncertain; however, the UK’s exit from the European Union without an agreement remains a possibility and the consensus position is that it would have a negative impact on the UK economy and its growth prospects. While it is difficult to predict the long-term effects of the UK’s imminent exit from the European Union, in the short term the situation is one of economic and political uncertainty.

Santander UK is subject to significant regulation and supervision by the European Union. Although legislation has already been passed transferring EU standards to UK standards, uncertainty persists as to the legal and regulatory environments in which the Group’s subsidiaries will operate in the UK when that country is no longer a member of the European Union, and the framework in which cross-border banking business will take place after Brexit.

At the operational level, the Group’s UK subsidiaries and other financial institutions may no longer be able to rely on the European cross-border framework for financial services and it is not clear what the alternative regime after Brexit will be. This uncertainty and the measures taken as a result of it, as well as the new or amended rules could have a significant impact on the Group’s operations, profitability and business.

The aforementioned UK political developments, together with other changes in the structure and policies of government, could lead to greater market volatility and changes in the tax, monetary and regulatory landscape in which the Group operates and could have material adverse effects on its access to capital and liquidity under acceptable conditions and, more generally, on its business, financial position and operating results. The Group’s best estimate at the date of preparation of the consolidated annual accounts has considered these circumstances in its assessment of the various affected items in the consolidated annual accounts, mainly in the recoverability of the cash-generating unit that supports Santander UK’s goodwill.

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2.   Santander Group

Appendices I, II and III to the consolidated annual accounts for the year ended 31 December 2018 provide relevant information on the Group 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 the Group in 2018, 2017 and 2016.

The most significant transactions performed during the first quarter of 2019 or pending at 31 March 2019 are as follows:

Agreement with Aegon Group as partner for several insurance services

On 3 July 2018, the Group announced that it had reached an agreement with the Aegon Group, pursuant to which it will be the partner in Spain for the life-insurance business and several branches of general insurance. Given such agreement, and the perimeter under which it will be materialized, are subject to various conditions including the termination of the current alliance between Banco Popular and its current partner, it is not possible to estimate when these transactions will be closed. These transactions are not expected to have a significant impact on the Group’s income statement.

3.   Shareholder remuneration system and earnings per share

a)   Shareholder remuneration system

The cash remuneration paid by the Bank to its shareholders in the first three months of 2019 and 2018 was as follows:

	31‑03‑19			31‑03‑18
	% of par value	Euros per share	Amount (Millions of euros)	% of par value	Euros per share	Amount (Millions of euros)
Ordinary shares	13.00%	0.065	1,055	12.00%	0.060	968
Other shares (without vote, redeemable, etc.)	-	-	-	-	-	-
Total remuneration paid	13.00%	0.065	1,055	12.00%	0.060	968
Dividend paid out of profit	13.00%	0.065	1,055	12.00%	0.060	968
Dividend paid with a charge to reserves or share premium	-	-	-	-	-	-
Dividend in kind	-	-	-	-	-	-
Flexible payment	-	-	-	-	-	-

 

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 the Group for the three-month period adjusted by the after-tax amount relating to the remuneration of contingently convertible preference shares recognized 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:

	31‑03‑19	31‑03‑18
Profit attributable to the Parent (millions of euros)	1,840	2,054
Remuneration of contingently convertible preference shares (millions of euros)	(148)	(124)
	1,692	1,930
Of which:
Profit or Loss from discontinued operations (non-controlling interest net) (millions of euros)	-	-
Profit or Loss from continuing operations (PPC net) (millions of euros)	1,692	1,930
Weighted average number of shares outstanding	16,229,286,510	16,131,707,130
Basic earnings per share (euros)	0.10	0.12
Of which: from discontinued operations (euros)	-	-
from continuing operations (euros)	0.10	0.12

 

ii. Diluted earnings per share

Diluted earnings per share for the period are calculated by dividing the net profit attributable to the Group for the three-month period adjusted by the after-tax amount relating to the remuneration of contingently convertible preference shares recognized in

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equity and of perpetual liabilities contingently amortizable 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:

	31‑03‑19	31‑03‑18
Profit attributable to the Parent (millions of euros)	1,840	2,054
Remuneration of contingently convertible preference shares (millions of euros)	(148)	(124)
Dilutive effect of changes in profit for the period arising from potential conversion of ordinary shares
	-	-
	1,692	1,930
Of which:
Profit or Loss from discontinued operations (non-controlling interest net) (millions of euros)	-	-
Profit or Loss from continuing operations (PPC net) (millions of euros)	1,692	1,930
Weighted average number of shares outstanding	16,229,286,510	16,131,707,130
Dilutive effect of options/ receipt of shares	40,726,682	49,144,617
Adjusted number of shares	16,270,013,192	16,180,851,747
Diluted earnings per share (euros)	0.10	0.12
Of which: from discontinued operations (euros)	-	-
from continuing operations (euros)	0.10	0.12

 

4.   Remuneration and other benefits paid to the Bank’s directors and senior managers

Note 5 to the Group’s consolidated financial statements for the year ended 31 December 2018 details the remuneration and other benefits to members of the Bank’s Board of Directors and senior management in 2018 and 2017.

Following is a summary of the most significant data on the remunerations and benefits for the three months ended March 31, 2019 and 2018:

Remuneration of the members of the board of directors (1)

	Thousands of euros
	31‑03‑19	31‑03‑18
Members of the board of directors:
Remuneration concept
Fixed salary remuneration of executive directors	1,724	1,439
Variable salary remuneration of executive directors	-	-
Directors fees	247	266
Bylaw-stipulated emoluments (annual emolument)	939	878
Other (except insurance premiums)	1,214	358
Sub-total	4,124	2,941
Transactions with shares and/or other financial instruments	-	-
	4,124	2,941

 

(1)    The notes to the consolidated annual accounts for 2019 will contain detailed and complete information on the remuneration paid to all the directors, including executive directors.

On 31 March 2019, the remuneration received by the executive directors reflects the transformation into the pension system, which includes the reduction of the amount of the annual contributions to the executive directors’ pension system, proportionally increasing the fixed annual salary and without any increase in the total cost to the Bank; and the elimination of the supplementary pension system in the event of death (widowhood and orphanhood) and disability, simultaneously establishing a fixed remuneration complement and improving the life insurance coverage of the executive directors, without any increase in the total cost to the Bank. The section on executive directors’ pension funds and plans below reflects this transformation in the provisions and/or contributions to pension funds.

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Other benefits of the members of the board of directors

	Thousands of euros
	31‑03‑19	31‑03‑18
Members of the board of directors:
Other benefits-
Advances	-	-
Loans granted	128	86
Pension funds and plans: Endowments and / or contributions (1)	501	1,409
Pension funds and plans: Accumulated rights (2)	76,242	75,793
Life insurance premiums	1,069	405
Guarantees provided for directors	-	-

 

(1)    These correspond to the endowments and/or contributions made during the first three months of 2019 and 2018 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. It also includes for informational purposes the rights accumulated by Mr. Rodrigo Echenique Gordillo, although these rights corresponded to Mr. Echenique before his appointment as executive director. Additionally, former members of the board had at 31 March 2019 and 31 March 2018 rights accrued for this concept for 69,503 thousand of euros and 78,565 thousand of euros, respectively.

Remuneration of senior management (1) (2)

The table below includes the corresponding amounts related to remunerations of senior management at 31 March 2019 and 2018, excluding the executive directors:

	Thousands of euros
	31‑03‑19	31‑03‑18
Senior management (1):
Total remuneration of senior management (2)	9,728	8,081

 

(1)    Remunerations regarding to members of senior management who, during the three month period ended 31 March 2019, had ceased their duties amount to EUR 99 thousand (31 March 2018: EUR 10 thousand).

(2)   The number of members of the Bank’s senior management, excluding executive directors, is 19 as at 31 March 2019 and 18 as at 31 March 2018.

The remuneration received by senior management at 31 March 2019 reflects the improvement in senior management life insurance coverage following the transformation of the pension system at the beginning of 2018. This transformation did not entail any increase in the total cost for the Bank.

The variable annual remuneration (or bonuses) received for fiscal year 2018, 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 2019 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 for senior management

	Miles de euros
	31‑03‑19	31‑03‑18
Senior management:
Pension funds: Endowments and/or contributions (1)	1,594	1,430
Pension funds: Accumulated rights (2)	69,836	67,548

 

(1)     Corresponds to the allocations and/or contributions made during the first three months of 2019 and 2018 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 2019 and 31 March 2018 rights accumulated for this same concept for EUR 168,038 thousand and EUR 187,797 thousand, respectively.

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5.   Financial assets

a)   Breakdown

The detail, by nature and category for measurement purposes, of the Group’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 2019 and 31 December 2018 is as follows, presented by nature and categories for valuation purposes:

	Millions of euros
	31‑03‑19
	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 amortized cost
Derivatives	56,207
Equity instruments	11,982	3,451		2,590
Debt instruments	30,162	2,617	3,296	111,519	39,895
Loans and advances	241	593	72,192	2,250	940,838
Central Banks	-	-	5,175	-	16,150
Credit institutions	-	-	43,075	-	41,519
Customers	241	593	23,942	2,250	883,169
Total	98,592	6,661	75,488	116,359	980,733

 

	Millions of euros
	31‑12‑18
	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 amortized cost
Derivatives	55,939
Equity instruments	8,938	3,260		2,671
Debt instruments	27,800	5,587	3,222	116,819	37,696
Loans and advances	202	1,883	54,238	1,601	908,403
Central Banks	-	-	9,226	-	15,601
Credit institutions	-	2	23,097	-	35,480
Customers	202	1,881	21,915	1,601	857,322
Total	92,879	10,730	57,460	121,091	946,099

 

Following is the gross exposure of financial assets subject to impairment stages at 31 March 2019 and 31 December 2018:

	Millions of euros
	31‑03‑19				31‑12‑18
	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	113,773	6	-	113,779	118,422	6	-	118,428
Debt instruments	111,527	-	-	111,527	116,825	-	-	116,825
Loans and advances	2,246	6	-	2,252	1,597	6	-	1,603
Central Banks	-	-	-	-	-	-	-	-
Credit institutions	-	-	-	-	-	-	-	-
Customers	2,246	6	-	2,252	1,597	6	-	1,603
Financial assets at amortized cost	917,360	52,490	34,238	1,004,088	882,661	52,295	34,333	969,289
Debt instruments	39,520	103	911	40,534	37,339	117	870	38,326
Loans and advances	877,840	52,387	33,327	963,554	845,322	52,178	33,463	930,963
Central Banks	16,150	-	-	16,150	15,601	-	-	15,601
Credit institutions	41,513	17	2	41,532	35,489	1	2	35,492
Customers	820,177	52,370	33,325	905,872	794,232	52,177	33,461	879,870
Total	1,031,133	52,496	34,238	1,117,867	1,001,083	52,301	34,333	1,087,717

 

On 31 March 2019, the Group has EUR 739 million (EUR 757 million on 31 December 2018) of exposure in impaired assets purchased with impairment, which mainly correspond to the business combinations carried out by the Group.