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SAN Banco Santander

Filed: 5 May 21, 4:01pm

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
Part 2. Interim unaudited consolidated financial statements



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Interim Consolidated Directors' Report2021
January - March

Index



Key consolidated data

BALANCE SHEET (EUR million)Mar-21Dec-20%Mar-20%Dec-20
Total assets1,562,879 1,508,250 3.6 1,540,359 1.5 1,508,250 
Loans and advances to customers939,760 916,199 2.6 935,407 0.5 916,199 
Customer deposits882,854 849,310 3.9 815,459 8.3 849,310 
Total funds1,095,970 1,056,127 3.8 1,006,948 8.8 1,056,127 
Total equity92,686 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)Q1'21Q4'20%Q1'20%2020
Net interest income7,956 8,019 (0.8)8,487 (6.3)31,994 
Total income11,390 10,924 4.3 11,809 (3.5)44,279 
Net operating income6,272 5,580 12.4 6,220 0.8 23,149 
Profit before tax3,102 1,195 159.6 1,891 64.0 (2,076)
Attributable profit to the parent1,608 277 480.5 331 385.8 (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 (%)Q1'21Q4'20%Q1'20%2020
EPS (euros) (2)
0.085 0.008 951.4 0.011 670.1 (0.538)
RoE9.80 5.54 1.47 (9.80)
RoTE12.16 6.86 2.04 1.95 
RoA0.62 0.38 0.18 (0.50)
RoRWA1.67 1.03 0.45 (1.33)
Efficiency ratio44.9 47.7 47.2 47.0 

UNDERLYING INCOME STATEMENT (1) (EUR million)
Q1'21Q4'20%Q1'20%2020
Net interest income7,956 8,019 (0.8)8,487 (6.3)31,994 
Total income11,390 10,995 3.6 11,814 (3.6)44,600 
Net operating income6,272 5,580 12.4 6,220 0.8 23,149 
Profit before tax3,813 2,658 43.5 1,956 94.9 9,674 
Attributable profit to the parent2,138 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) (%)
Q1'21Q4'20%Q1'20%2020
Underlying EPS (euros) (2)
0.116 0.074 55.5 0.014 744.4 0.262 
Underlying RoE10.44 6.93 1.52 5.68 
Underlying RoTE12.96 8.59 2.11 7.44 
Underlying RoA0.65 0.46 0.18 0.40 
Underlying RoRWA1.77 1.24 0.46 1.06 


January - March 2021
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3

SOLVENCY(3) (%)
Mar-21Dec-20Mar-20Dec-20
CET1 phased-in12.30 12.34 11.58 12.34 
Phased-in total capital ratio16.16 16.18 15.09 16.18 

CREDIT QUALITY (%)Q1'21Q4'20Q1'202020
Cost of credit (4)
1.08 1.28 1.17 1.28 
NPL ratio3.20 3.21 3.25 3.21 
Coverage ratio74 76 71 76 

MARKET CAPITALISATION AND SHARESMar-21Dec-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-21Dec-20%Mar-20%Dec-20
Total customers148,641 148,256 0.3 145,702 2.0148,256 
Loyal customers23,428 22,838 2.6 21,453 9.222,838 
     Loyal individual customers21,441 20,901 2.6 19,645 9.120,901 
     Loyal SME & corporate customers1,987 1,938 2.6 1,808 9.91,938 
Digital customers44,209 42,362 4.4 38,279 15.542,362 
Digital sales / Total sales (%)50 45 41 44 

OTHER DATAMar-21Dec-20%Mar-20%Dec-20
Number of shareholders3,937,711 4,018,817 (2.0)4,043,974 (2.6)4,018,817 
Number of employees190,175 191,189 (0.5)194,948 (2.4)191,189 
Number of branches10,817 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.

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January - March 2021

Business model
Group financial informationFinancial information by segmentsResponsible 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.
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total customers in Europe
and the Americas
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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.
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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
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5


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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.
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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.

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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).
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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.
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January - March 2021

GRUPO SANTANDER RESULTS
Grupo Santander. Summarized income statement
EUR million
ChangeChange
Q1'21Q4'20%% excl. FXQ1'20%% excl. FX
Net interest income7,956 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 income65 69 (5.8)(6.2)57 14.0 15.3 
Share of results of entities accounted for using the equity method76 (6)— — 98 (22.4)(11.3)
Other operating income / expenses94 (76)— — 27 248.1 119.0 
Total income11,390 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, net25 (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 operations3,102 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 operations1,959 583 236.0 234.7 647 202.8 341.7 
Profit or loss after tax from discontinued operations— — — — — — — 
Profit for the period1,959 583 236.0 234.7 647 202.8 341.7 
Attributable profit to non-controlling interests(351)(306)14.7 15.3 (316)11.1 18.1 
Attributable profit to the parent1,608 277 480.5 472.1 331 385.8 998.0 
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 assets1,526,899 1,517,201 0.6 1,536,725 (0.6)
   Average stockholders' equity81,858 82,080 (0.3)99,221 (17.5)
(1) Data adjusted for the capital increase in December 2020.
January - March 2021
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7

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 SCIBHigher underlying profit driven by total income, cost control and lower provisions
Attributable profitUnderlying attrib. profitTotal incomeCostsProvisions
EUR 1,608 mnEUR 2,138 mn
EUR 331 mn in Q1'20EUR 377 mn in Q1'20+7.8% + 0.1%-42.9%
EfficiencyProfitability
The Group's efficiency ratio improved strongly, mainly driven by EuropeProfitability improved compared to Q1'20 and FY'20, on track to deliver on our 2021 goals
GroupEuropeRoTEUnderlying RoTEUnderlying 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
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constant euros
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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
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constant euros
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January - March 2021

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
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constant euros
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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
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constant euros
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January - March 2021
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9

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
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constant euros
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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).
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January - March 2021

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 millionChangeChange
Q1'21Q4'20%% excl. FXQ1'20%% excl. FX
Net interest income7,956 8,019 (0.8)(1.7)8,487 (6.3)5.1
Net fee income2,548 2,456 3.73.62,853 (10.7)0.2
Gains (losses) on financial transactions (1)
651 462 40.940.0292 122.9141.3
Other operating income235 58 305.2393.0182 29.126.7
Total income11,390 10,995 3.62.911,814 (3.6)7.8
Administrative expenses and amortizations(5,118)(5,241)(2.3)(3.1)(5,577)(8.2)0.1
Net operating income6,272 5,754 9.08.56,237 0.615.0
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)25.541.6
Profit before tax3,813 2,658 43.544.31,956 94.9132.9
Tax on profit(1,324)(920)43.945.9(1,260)5.115.6
Profit from continuing operations2,489 1,738 43.243.4696 257.6405.5
Net profit from discontinued operations— — — (100.0)— — — 
Consolidated profit2,489 1,738 43.243.4696 257.6405.5
Non-controlling interests(351)(315)11.412.2(319)10.016.7
Net capital gains and provisions(530)(1,146)(53.8)(53.6)(46)
Attributable profit to the parent1,608 277 480.5472.1331 385.8998.0
Underlying attributable profit to the parent (2)
2,138 1,423 50.250.3377 467.11,015.7
(1) Includes exchange differences.
(2) Excludes net capital gains and provisions.


January - March 2021
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11

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
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constant euros
chart-ca52419f58e246ac8351a.jpg
(*) Excluding net capital gains and provisions.




12
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January - March 2021

Grupo Santander. Condensed balance sheet
EUR million
Change
AssetsMar-21Mar-20Absolute%Dec-20
Cash, cash balances at central banks and other demand deposits192,925 122,456 70,469 57.5 153,839 
Financial assets held for trading109,643 125,846 (16,203)(12.9)114,945 
   Debt securities39,212 28,969 10,243 35.4 37,894 
   Equity instruments11,626 8,605 3,021 35.1 9,615 
   Loans and advances to customers303 298 1.7 296 
   Loans and advances to central banks and credit institutions— — 
   Derivatives58,500 87,974 (29,474)(33.5)67,137 
Financial assets designated at fair value through profit or loss61,289 67,142 (5,853)(8.7)53,203 
   Loans and advances to customers27,001 31,270 (4,269)(13.7)24,673 
   Loans and advances to central banks and credit institutions27,473 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 income113,370 110,238 3,132 2.8 120,953 
   Debt securities101,496 99,557 1,939 1.9 108,903 
   Equity instruments2,793 2,291 502 21.9 2,783 
   Loans and advances to customers9,081 8,390 691 8.2 9,267 
   Loans and advances to central banks and credit institutions— — — — — 
Financial assets measured at amortised cost981,581 981,331 250 — 958,378 
   Debt securities26,430 26,033 397 1.5 26,078 
   Loans and advances to customers903,375 895,449 7,926 0.9 881,963 
   Loans and advances to central banks and credit institutions51,776 59,849 (8,073)(13.5)50,337 
Investments in subsidiaries, joint ventures and associates7,693 8,610 (917)(10.7)7,622 
Tangible assets33,386 34,912 (1,526)(4.4)32,735 
Intangible assets15,990 26,583 (10,593)(39.8)15,908 
    Goodwill12,460 23,141 (10,681)(46.2)12,471 
    Other intangible assets3,530 3,442 88 2.6 3,437 
Other assets47,002 63,241 (16,239)(25.7)50,667 
Total assets1,562,879 1,540,359 22,520 1.5 1,508,250 
Liabilities and shareholders' equity
Financial liabilities held for trading71,293 100,082 (28,789)(28.8)81,167 
   Customer deposits— — — — — 
   Debt securities issued— — — — — 
   Deposits by central banks and credit institutions— — — — — 
   Derivatives55,935 88,121 (32,186)(36.5)64,469 
   Other15,358 11,961 3,397 28.4 16,698 
Financial liabilities designated at fair value through profit or loss69,977 67,337 2,640 3.9 48,038 
   Customer deposits49,394 44,638 4,756 10.7 34,343 
   Debt securities issued4,538 4,287 251 5.9 4,440 
   Deposits by central banks and credit institutions16,045 18,412 (2,367)(12.9)9,255 
   Other— — — — — 
Financial liabilities measured at amortized cost1,290,475 1,224,749 65,726 5.4 1,248,188 
   Customer deposits833,460 770,821 62,639 8.1 814,967 
   Debt securities issued240,765 257,606 (16,841)(6.5)230,829 
   Deposits by central banks and credit institutions189,095 170,275 18,820 11.1 175,424 
   Other27,155 26,047 1,108 4.3 26,968 
Liabilities under insurance contracts1,102 2,280 (1,178)(51.7)910 
Provisions10,881 12,335 (1,454)(11.8)10,852 
Other liabilities26,465 27,463 (998)(3.6)27,773 
Total liabilities1,470,193 1,434,246 35,947 2.5 1,416,928 
Shareholders' equity115,620 124,139 (8,519)(6.9)114,620 
   Capital stock8,670 8,309 361 4.3 8,670 
   Reserves105,342 117,161 (11,819)(10.1)114,721 
   Attributable profit to the Group1,608 331 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 interests10,220 9,735 485 5.0 9,846 
Total equity92,686 106,113 (13,427)(12.7)91,322 
Total liabilities and equity1,562,879 1,540,359 22,520 1.5 1,508,250 
January - March 2021
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13

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 systemStrong 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
billionbillion
 è By segment (YoY change):
 è By product (YoY change):
Of note was the rise in SMEs and corporatesOf note were demand deposits, which account for 66% of customer funds, reflected in the lower costs of deposits
IndividualsSMEs and corporatesCIB and institutionsDemandTimeMutual 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
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January - March 2021

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
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15

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 bpsIn 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
CET169,841 67,468 
Basic capital78,944 76,258 
Eligible capital91,764 89,692 
Risk-weighted assets567,797 567,342 
CET1 capital ratio12.30 11.89 
T1 capital ratio13.90 13.44 
Total capital ratio16.16 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
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January - March 2021

RISK MANAGEMENT
Executive summary
Credit riskMarket risk
Credit quality indicators began to show signs of normalizationMarket risk exposure maintained its low profile, with stable VaR levels amid reduced market uncertainty following progress on vaccination programmes
Cost of credit2
NPL ratioCoverage ratio
1.08%3.20%74%Q1'21Average
Var
EUR 9.5 million
q20 bps vs Q4'20
q1bps vs Q4'20
q 2 pp vs Q4'20
Structural and liquidity riskOperational risk
We maintained a comfortable liquidity position, well above regulatory limitsOur 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 (%)
Q1'21Chg (%)
/ Q4'20
Chg (%)
/ Q1'20
Q1'21Chg (bps)
/ Q4'20
Chg (bps)
/ Q1'20
Q1'21Chg (bps)
/ Q1'20
Q1'21Chg (pp)
/ Q1'20
Europe595 (36.1)(40.3)0.51 (7)15 3.26 (11)50.0 3.0 
Spain449 (26.5)(28.6)0.91 (10)27 6.18 (70)47.2 2.6 
United Kingdom18 (82.1)(89.6)0.21 (6)1.35 36 40.5 0.8 
Portugal35 (16.9)(56.9)0.38 (13)15 3.84 (72)69.2 10.2 
Poland68 (14.8)(24.8)1.02 (7)14 4.82 53 70.3 2.2 
North America393 (49.3)(65.3)2.34 (58)(68)2.39 37 153.4 (16.7)
USA165 (70.7)(81.4)2.12 (74)(101)2.11 11 183.2 1.7 
Mexico228 7.5 (6.7)3.00 (3)31 3.21 114 95.6 (38.3)
South America683 (6.5)(33.2)2.81 (52)(49)4.30 (33)98.4 5.5 
Brazil549 0.9 (30.6)3.79 (55)(63)4.42 (52)116.5 8.5 
Chile100 1.9 (39.5)1.33 (17)4.74 11 63.4 6.2 
Argentina14 (79.8)(71.5)4.55 (138)(93)2.32 (165)232.4 101.2 
Digital Consumer Bank166 (20.0)(49.7)0.69 (14)7 2.23 2 111.4 (0.1)
Corporate Centre154 — — 
TOTAL GROUP1,992 (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
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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-21Dec-20Mar-20Mar-21Dec-20Mar-20
Stage 18858648910.5 %0.5 %0.6 %
Stage 27069538.1 %8.5 %8.2 %
Stage 332323342.5 %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 (%)
Q1'21QoQYoY
Balance at beginning of period31,767 2.8 (6.0)
   Net additions2,495 (25.2)(1.9)
   Increase in scope of consolidation— — — 
   Exchange rate differences and other444 — — 
   Write-offs(2,233)5.5 (15.3)
Balance at period-end32,473 2.2 (0.8)
Loan-loss allowances24,034 (1.0)2.9 
   For impaired assets13,804 0.17 3.29 
   For other assets10,230 (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
20212020
First quarterAverageLatestAverage
Total9.5 8.5 15.8 
Europe7.9 8.5 10.7 
North America2.8 2.4 5.6 
South America4.6 4.8 8.0 
(1) Activity performance in Santander Corporate & Investment Banking markets.


Trading portfolios (1). VaR by market factor
EUR million
First quarterMin.Avg.Max.Last
VaR total6.8 9.5 12.1 8.5 
Diversification effect(9.1)(11.5)(16.0)(10.0)
Interest rate VaR6.8 9.5 13.1 8.2 
Equity VaR2.4 3.0 4.4 2.7 
FX VaR1.9 3.8 6.7 3.1 
Credit spreads VaR2.6 3.8 7.3 3.7 
Commodities VaR0.6 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
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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
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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).
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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%.
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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.
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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%.
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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.
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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.
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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.
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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%).
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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
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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
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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
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January - March 2021

January-March 2021
Main items of the underlying income statement
EUR million
Primary segmentsNet interest
income
Net fee
income
Total
income
Net operating
income
Profit
before tax
Underlying
attributable
profit to
the parent
Europe2,645 1,072 4,149 2,077 1,231 826 
     Spain1,019 587 1,785 918 340 243 
     United Kingdom1,001 120 1,111 459 410 294 
     Portugal193 99 427 281 234 161 
     Poland240 127 357 199 58 21 
     Other192 138 469 221 189 108 
North America2,005 451 2,768 1,620 1,207 773 
     US1,337 241 1,902 1,154 974 616 
     Mexico667 204 865 492 259 182 
     Other(26)(26)(25)
South America2,575 842 3,539 2,320 1,505 773 
     Brazil1,780 632 2,521 1,799 1,154 562 
     Chile497 95 614 378 277 153 
     Argentina204 74 262 92 44 45 
     Other93 41 141 51 30 14 
Digital Consumer Bank1,056 188 1,304 703 506 291 
Corporate Centre(324)(5)(370)(449)(635)(527)
TOTAL GROUP7,956 2,548 11,390 6,272 3,813 2,138 
Secondary segments
Retail Banking7,472 1,709 9,536 5,378 3,190 1,836 
Corporate & Investment Banking720 466 1,655 1,130 1,058 704 
Wealth Management & Insurance88 297 502 281 273 197 
PagoNxt(1)81 67 (69)(73)(72)
Corporate Centre(324)(5)(370)(449)(635)(527)
TOTAL GROUP7,956 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
Q1'21EUR million. % change YoY in constant euros
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(*) As a % of operating areas. Excluding the Corporate Centre.
January - March 2021
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23

January-March 2020
Main items of the underlying income statement
EUR million
Primary segmentsNet interest
income
Net fee
income
Total
income
Net operating
income
Profit
before tax
Underlying
attributable
profit to
the parent
Europe2,378 1,128 3,718 1,543 303 193 
     Spain925 643 1,789 844 112 90 
     United Kingdom820 190 1,007 321 72 52 
     Portugal202 101 350 199 98 68 
     Poland296 116 365 193 62 23 
     Other134 78 207 (15)(42)(40)
North America2,261 464 2,941 1,711 452 282 
     US1,462 250 1,929 1,120 141 60 
     Mexico798 211 1,007 592 311 220 
     Other(1)
South America3,065 1,077 4,169 2,677 1,210 700 
     Brazil2,270 869 3,137 2,133 940 517 
     Chile448 92 553 322 160 97 
     Argentina241 76 318 132 44 34 
     Other106 40 162 90 67 52 
Digital Consumer Bank1,088 192 1,291 695 404 234 
Corporate Centre(304)(9)(304)(389)(413)(1,031)
TOTAL GROUP8,487 2,853 11,814 6,237 1,956 377 
Secondary segments
Retail Banking8,004 2,058 10,171 5,538 1,306 693 
Corporate & Investment Banking677 402 1,297 769 748 494 
Wealth Management & Insurance109 308 550 313 307 222 
PagoNxt0 94 101 5 8 (1)
Corporate Centre(304)(9)(304)(389)(413)(1,031)
TOTAL GROUP8,487 2,853 11,814 6,237 1,956 377 
24
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EUROPEUnderlying 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 customers35 %31%48%55%
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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%
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15,617

January - March 2021
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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
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558 +2%
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675 +10%
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Gross loans and advances to customers excl. reverse reposCustomer 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
Revenue4,149 +12 %+13 %
Expenses-2,071 +2 %-4 %
Net operating income2,077 +24 %+36 %
LLPs-595 -36 %-40 %
PBT1,231 +235 %+315 %
Underlying attrib. profit826 +217 %+338 %
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SpainUnderlying 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
Revenue1,785 +9 %%
Expenses-867 -1 %-8 %
Net operating income918 +21 %+9 %
LLPs-449 -27 %-29 %
PBT340 — +203 %
Underlying attrib. profit243 — +170 %
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United KingdomUnderlying 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
Revenue1,111 +3 %+12 %
Expenses-652 +5 %-4 %
Net operating income459 %+45 %
LLPs-18 -82 %-90 %
PBT410 +100 %+477 %
Underlying attrib. profit294 +68 %+470 %
January - March 2021
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27

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PortugalUnderlying 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
Revenue427 +35 %+22 %
Expenses-146 -2 %-3 %
Net operating income281 +67 %+41 %
LLPs-35 -17 %-57 %
PBT234 +75 %+139 %
Underlying attrib. profit161 +69 %+137 %

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PolandUnderlying 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
Revenue357 -7 %+3 %
Expenses-158 +4 %-3 %
Net operating income199 -14 %+8 %
LLPs-68 -15 %-25 %
PBT58 -12 %-1 %
Underlying attrib. profit21 %-5 %
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NORTH AMERICAUnderlying 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 customers24%39%
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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%
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6,308
(1) Excluding Puerto Rico disposal impact
January - March 2021
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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%
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recursosnorteamerica1a.jpg
Gross loans and advances to customers excl. reverse reposCustomer 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
Revenue2,768 +3 %+4 %
Expenses-1,149 -5 %+3 %
Net operating income1,620 +10 %+4 %
LLPs-393 -49 %-65 %
PBT1,207 +88 %+197 %
Underlying attrib. profit773 +89 %+205 %
30
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January - March 2021

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United StatesUnderlying 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
Revenue1,902 +7 %+8 %
Expenses-748 -2 %+1 %
Net operating income1,154 +13 %+13 %
LLPs-165 -71 %-81 %
PBT974 +132 %+654 %
Underlying attrib. profit616 +144 %+1,017 %
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MexicoUnderlying 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
Revenue865 -3 %-4 %
Expenses-373 -12 %+1 %
Net operating income492 +5 %-7 %
LLPs-228 +7 %-7 %
PBT259 +9 %-7 %
Underlying attrib. profit182 +6 %-7 %
January - March 2021
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31

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SOUTH AMERICAUnderlying 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 customers24%43%52%24%
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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%
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21,623
32
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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%
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Gross loans and advances to customers excl. reverse reposCustomer 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
Revenue3,539 -1 %+10 %
Expenses-1,219 -11 %+5 %
Net operating income2,320 +5 %+12 %
LLPs-683 -6 %-33 %
PBT1,505 +6 %+59 %
Underlying attrib. profit773 -3 %+41 %

January - March 2021
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33

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BrazilUnderlying 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
Revenue2,521 +2 %+8 %
Expenses-723 -16 %-3 %
Net operating income1,799 +12 %+14 %
LLPs-549 +1 %-31 %
PBT1,154 +12 %+66 %
Underlying attrib. profit562 +3 %+47 %
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ChileUnderlying 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
Revenue614 %+9 %
Expenses-236 +4 %+1 %
Net operating income378 -3 %+16 %
LLPs-100 +2 %-39 %
PBT277 -6 %+71 %
Underlying attrib. profit153 -10 %+55 %
34
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January - March 2021

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ArgentinaUnderlying 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
Revenue262 -21 %+26 %
Expenses-171 -13 %+40 %
Net operating income92 -31 %+7 %
LLPs-14 -80 %-71 %
PBT44 +16 %+53 %
Underlying attrib. profit45 +21 %+103 %

Other South America
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(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 incomeUnderlying attributable profit
Q1'21/ Q1'20Q1'21/ Q1'20
Uruguay44 -17 %26 -11 %
Peru25 +57 %12 +19 %
Colombia11 +13 %-9 %
January - March 2021
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35

DCBDIGITAL CONSUMER BANKUnderlying 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
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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
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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%
YoYYoY
Gross loans and advances to customers excl. reverse reposCustomer 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
Revenue1,304 -4 %+1 %
Expenses-600 %+1 %
Net operating income703 -8 %+1 %
LLPs-166 -20 %-50 %
PBT506 -10 %+26 %
Underlying attrib. profit291 -16 %+25 %
January - March 2021
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Corporate CentreUnderlying 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
Q1'21Q4'20Chg.Q1'20Chg.
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 %
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January - March 2021


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Retail BankingUnderlying 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 creditGross loans and advances to customers (excluding reverse repos) rose 2% year-on-year and customer funds +10%
Total incomeCostsProvisionsLoans and advances to customersCustomer funds
+4%-2%-49%782
p 2% YoY
747
p 10% YoY
Customers
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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
Revenue9,536 +2 %+4 %
Expenses-4,157 -4 %-2 %
Net operating income5,378 +6 %+10 %
LLPs-1,783 -27 %-49 %
PBT3,190 +45 %+184 %
Underlying attrib. profit1,836 +42 %+208 %
January - March 2021
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Santander Corporate & Investment BankingUnderlying 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
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Total incomeUnderlying profitRoRWA
+44%+64%2.96%
Revenue growth by business and region*Other highlights in the quarter
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+61%
Creation of the Digital Solutions Group
(DSG) team
Leading positions in the rankings of different products
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+5%Structured financeDebt capital
markets (DCM)
Equity capital markets (ECM)
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+41%
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Green Global
(*) EUR million and % change in constant euros