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 July, 2022
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 consolidated financial statements



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January - June2022

Interim Consolidated Directors' Report

Index
BUSINESS MODEL
Other disclosures required by the Bank of Spain


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This report was approved by the board of directors on 27 July 2022, following a favourable report from the audit committee. Important information regarding this report can be found on pages 89 and 90.

Key consolidated data

BALANCE SHEET (EUR million)Jun-22Mar-22%Jun-22Jun-21%Dec-21
Total assets1,722,840 1,666,012 3.4 1,722,840 1,568,636 9.8 1,595,835 
Loans and advances to customers1,037,721 1,011,497 2.6 1,037,721 954,518 8.7 972,682 
Customer deposits973,787 957,820 1.7 973,787 894,127 8.9 918,344 
Total funds1,204,407 1,196,544 0.7 1,204,407 1,121,969 7.3 1,153,656 
Total equity97,462 99,378 (1.9)97,462 95,745 1.8 97,053 
Note: Total funds includes customer deposits, mutual funds, pension funds and managed portfolios

INCOME STATEMENT (EUR million)Q2'22Q1'22%H1'22H1'21%2021
Net interest income9,554 8,855 7.9 18,409 16,196 13.7 33,370 
Total income12,815 12,305 4.1 25,120 22,695 10.7 46,404 
Net operating income6,915 6,770 2.1 13,685 12,318 11.1 24,989 
Profit before tax3,744 4,171 (10.2)7,915 6,914 14.5 14,547 
Profit attributable to the parent2,351 2,543 (7.6)4,894 3,675 33.2 8,124 
Changes in constant euros:
Q2'22 / Q1'22: NII: +4.0%; Total income: +0.2%; Net operating income: -2.6%; Profit before tax: -14.4%; Attributable profit: -11.9%
H1'22 / H1'21: NII: +6.9%; Total income: +4.1%; Net operating income: +3.1%; Profit before taxes: +4.4%; Attributable profit: +20.8%

EPS, PROFITABILITY AND EFFICIENCY (%)Q2'22Q1'22%H1'22H1'21%2021
EPS (euros)0.131 0.141 (7.2)0.272 0.197 38.1 0.438 
RoE10.44 11.49 10.98 9.53 9.66 
RoTE13.10 14.21 13.69 11.82 11.96 
RoA0.63 0.71 0.66 0.61 0.62 
RoRWA1.76 1.95 1.86 1.66 1.69 
Efficiency ratio46.0 45.0 45.5 45.7 46.2 

UNDERLYING INCOME STATEMENT (1) (EUR million)
Q2'22Q1'22%H1'22H1'21%2021
Net interest income9,554 8,855 7.9 18,409 16,196 13.7 33,370 
Total income12,815 12,305 4.1 25,120 22,695 10.7 46,404 
Net operating income6,915 6,770 2.1 13,685 12,318 11.1 24,989 
Profit before tax3,744 4,171 (10.2)7,915 7,628 3.8 15,260 
Profit attributable to the parent2,351 2,543 (7.6)4,894 4,205 16.4 8,654 
Changes in constant euros:
Q2'22 / Q1'22: NII: +4.0%; Total income: +0.2%; Net operating income: -2.6%; Profit before tax: -14.4%; Attributable profit: -11.9%
H1'22 / H1'21: NII: +6.9%; Total income: +4.1%; Net operating income: +3.1%; Profit before tax: -4.8%; Attributable profit: +6.7%

UNDERLYING EPS AND PROFITABILITY (1) (%)
Q2'22Q1'22%H1'22H1'21%2021
Underlying EPS (euros)0.131 0.141 (7.2)0.272 0.227 19.5 0.468 
Underlying RoE 10.44 11.49 10.98 10.17 10.29 
Underlying RoTE 13.10 14.21 13.69 12.62 12.73 
Underlying RoA 0.63 0.71 0.66 0.65 0.65 
Underlying RoRWA 1.76 1.95 1.86 1.75 1.78 


January - June 2022
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3

SOLVENCY (%)Jun-22Mar-22Jun-22Jun-21Dec-21
Fully-loaded CET1 ratio12.05 12.12 12.05 11.70 12.12 
Fully-loaded total capital ratio15.95 16.15 15.95 15.42 16.41 

CREDIT QUALITY (%)Q2'22Q1'22H1'22H1'212021
Cost of credit (2)
0.83 0.77 0.83 0.94 0.77 
NPL ratio3.05 3.26 3.05 3.22 3.16 
Total coverage ratio71 69 71 73 71 

MARKET CAPITALIZATION AND SHARESJun-22Mar-22%Jun-22Jun-21%Dec-21
Shares (millions)16,794 17,341 (3.2)16,794 17,341 (3.2)17,341 
Share price (euros)2.688 3.100 (13.3)2.688 3.220 (16.5)2.941 
Market capitalization (EUR million)45,143 53,756 (16.0)45,143 55,828 (19.1)50,990 
Tangible book value per share (euros)4.24 4.29 4.24 3.98 4.12 
Price / Tangible book value per share (X)0.63 0.72 0.63 0.81 0.71 

CUSTOMERS (thousands)Q2'22Q1'22%H1'22H1'21%2021
Total customers156,896 154,762 1.4 156,896 149,497 4.9152,943 
Loyal customers26,494 25,978 2.0 26,494 24,196 9.525,548 
     Loyal retail customers24,361 23,799 2.4 24,361 22,076 10.423,359 
     Loyal SME & corporate customers2,133 2,179 (2.1)2,133 2,121 0.62,189 
Digital customers49,870 49,158 1.4 49,870 45,444 9.747,489 
Digital sales / Total sales (%)55 56 56 52 54 

OTHER DATAJun-22Mar-22%Jun-22Jun-21%Dec-21
Number of shareholders3,985,638 3,975,210 0.3 3,985,638 3,879,232 2.7 3,936,922 
Number of employees200,651 200,294 0.2 200,651 192,843 4.0 199,177 
Number of branches9,193 9,248 (0.6)9,193 9,423 (2.4)9,229 

(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 profit attributable to the parent. Further details are provided in the “Alternative performance measures” section of the appendix to this report.

For further details on 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 our 2021 Annual Financial Report, published in the CNMV on 25 February 2022, our 20-F report for the year ending 31 December 2021 filed with the SEC in the United States on 1 March 2022, as updated by the Form 6-K filed with the SEC on 8 April 2022 in order to reflect our new organizational and reporting structure, as well as the “Alternative performance measures” section of the appendix to this report.
(2) Allowances for loan-loss provisions over the last 12 months / Average loans and advances to customers over the last 12 months.

4
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January - June 2022

Business model
Group financial informationFinancial information by segmentsResponsible banking
Corporate governance
Santander share
Appendix

Our business model is based on three pillars
01. Customer focus02. Our scale03. Diversification

Deepening the relationships
with our customers

Local scale and global reach

Geographic and business diversification
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Top 3 NPS1
in 6 out of 9 markets
Top 3 in lending2
in 10 of our markets
Balanced profit distribution3
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157 mn
total customers
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1. NPS – internal benchmark of individual customers' satisfaction audited by Stiga / Deloitte in H1'22.2. Market share in lending as of March 2022 including only privately-owned banks. UK benchmark refers to the mortgage market. Digital Consumer Bank (DCB) refers to auto in Europe.3. H1'22 underlying attributable profit by region.
     Operating areas excluding Corporate Centre.
Our business model remains a source of great strength and resilience
Our corporate culture
The Santander Way remains unchanged to continue to deliver for all our 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 - June 2022
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5

Group performance

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HIGHLIGHTS OF THE PERIOD
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u
In Q2'22, attributable profit amounted to EUR 2,351 million. The quarter-on-quarter comparison was affected by regulatory charges (Single Resolution Fund and, in Poland, Institutional Protection Scheme - IPS -). Excluding the regulatory charges, profit was 5% higher compared to the previous quarter (+1% in constant euros).
u
In the first half of 2022, attributable profit rose to EUR 4,894 million, 33% more than in the first six months of 2021 (+21% in constant euros), when we recorded EUR 530 million of net charges for restructuring costs.
Underlying profit also amounted to EUR 4,894 million, 16% higher (+7% in constant euros) versus the first half of 2021 (before restructuring costs).
u
Our geographic and business diversification to some extent protects us from adverse circumstances and enables us to resiliently face the indirect impacts arising from the Russia-Ukraine conflict. Santander's presence in and exposure to Russia and Ukraine is negligible.
u
In 2022, although it is difficult to make projections in the current environment, our strategy and business model are a clear competitive advantage. Under the main scenario we are considering, we believe we will meet the Group targets for the year announced at the Group's 2021 earnings presentation.
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u
In applying the shareholder remuneration policy for 2021, the bank paid a second interim cash dividend of EUR 5.15 cents per share in May 2022 against 2021 results.
In addition, a second share buyback programme was implemented for a total amount of EUR 865 million, in which 286,309,445 own shares were acquired, equivalent to 1.7% of the bank's share capital, whose redemption was executed by the board of directors on 28 June 2022.
As a result, the total amount allocated to shareholders was around EUR 3.4 billion, equivalent to approximately 40% of the Group's underlying attributable profit in 2021.
u
The board approved a payout for 2022 of approximately 40% of underlying attributable profit, which will include both the cash dividend and the share buybacks, which are each expected to account for 50% of the payout2.
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u
TNAV per share was EUR 4.24, +9% year-on-year including the cash dividend per share paid in November 2021 and May 2022. In the quarter, TNAV per share plus dividend remained largely unchanged.
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u
Santander is the leader in renewable energy financing and mobilized close to EUR 74.4 billion between 2019 and the end of H1'22. The Group's target is to mobilize EUR 220 billion in green finance by 2030.
u
We have set three new decarbonization targets for 2030 (measured in emission reductions vs. 2019) in the energy (-29%), aviation (-33%) and steel (-32%) sectors.
u
In the first half, we granted EUR 426 million in loans through our microfinance programmes in 8 countries.
u
We were named Best Global Bank for Financial Inclusion by Euromoney, highlighting our programmes in South America and Mexico, and Best Bank for Corporate Responsibility in Central and Eastern Europe for our support to refugees from the Russia-Ukraine conflict.
(1) As % of H1'22 average share price.
(2) Implementation of the shareholder remuneration policy is subject to future corporate and regulatory decisions and approvals.
6
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January - June 2022

Group performance
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GROWTH
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u
Total customers amounted to 157 million, +7.4 million compared to June 2021. Loyal customers reached 26.5 million, 9% higher year-on-year.
u
Digital adoption continued to be key, as we now have more than 50 million digital customers, an increase of 4 million since June 2021. In H1'22, 56% of sales were made through digital channels (52% in H1'21).
u
Business volumes continued to grow in a context of uncertainty. In this environment, loans and advances to customers rose 3% in the quarter and +9% year-on-year. Customer deposits rose 2% in the quarter and +9% year-on-year. Excluding the exchange rate impact, gross loans and advances to customers excluding reverse repos were 2% higher compared to Q1'22 and +6% versus H1'21. Customer funds excluding repos increased 1% in the quarter and 4% year-on-year.
u
Greater activity, together with higher interest rates and margin management, was reflected in the 14% rise in net interest income and a 13% increase in net fee income in euros (both grew +7% in constant euros).
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PROFITABILITY
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u
The increase in profit, underpinned by the positive performance across regions, Digital Consumer Bank (DCB) and the global businesses, was reflected in higher profitability.
u
Sustained earnings per share growth, which rose 38% year-on-year to EUR 27.2 cents in H1'22 (+19% compared to H1'21 underlying EPS).
u
RoTE of 13.7%, RoRWA was 1.86%, both clearly exceeding H1'21 and FY'21 figures.
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STRENGTH
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u
Regarding credit quality, the cost of risk stood at 0.83% (0.94% in June 2021).
u
The NPL ratio was 3.05%, 21 bps lower quarter-on-quarter and -17 bps year-on-year, mainly driven by the positive performance in Europe (favoured by portfolio sales in Spain) and somewhat offset by the increases in South America.
u
Total loan-loss reserves reached EUR 24,195 million, with a coverage of 71% (+2 pp vs. Q1'22).
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u
The fully-loaded CET1 ratio was 12.05%.
In the quarter, net organic generation of 18 bps, resulting from gross organic generation of 26 bps from Q2'22 profit and an 8 bp charge for a future dividend payment. In addition, negative impacts from market performance and corporate transactions, and positive impacts from models.
January - June 2022
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7

Income statement
GRUPO SANTANDER RESULTS
Grupo Santander. Summarized income statement
EUR million
ChangeChange
Q2'22Q1'22%% excl. FXH1'22H1'21%% excl. FX
Net interest income9,554 8,855 7.9 4.0 18,409 16,196 13.7 6.9 
Net fee income (commission income minus commission expense)3,040 2,812 8.1 4.2 5,852 5,169 13.2 7.0 
Gains or losses on financial assets and liabilities and exchange differences (net)356 387 (8.0)(11.0)743 894 (16.9)(20.7)
Dividend income267 68 292.6 288.2 335 309 8.4 8.1 
Share of results of entities accounted for using the equity method179 133 34.6 30.8 312 163 91.4 80.8 
Other operating income / expenses(581)50 — — (531)(36)— — 
Total income12,815 12,305 4.1 0.2 25,120 22,695 10.7 4.1 
Operating expenses(5,900)(5,535)6.6 3.6 (11,435)(10,377)10.2 5.3 
   Administrative expenses(5,162)(4,831)6.9 3.9 (9,993)(8,996)11.1 6.1 
       Staff costs (3,085)(2,863)7.8 4.9 (5,948)(5,438)9.4 4.8 
       Other general administrative expenses (2,077)(1,968)5.5 2.3 (4,045)(3,558)13.7 8.0 
   Depreciation and amortization(738)(704)4.8 2.2 (1,442)(1,381)4.4 0.2 
Provisions or reversal of provisions(480)(455)5.5 3.9 (935)(1,490)(37.2)(38.2)
Impairment or reversal of impairment of financial assets not measured at fair value through profit or loss (net)(2,640)(2,123)24.4 17.9 (4,763)(3,804)25.2 17.2 
Impairment on other assets (net)(26)(35)(25.7)(28.2)(61)(130)(53.1)(54.5)
Gains or losses on non-financial assets and investments, net(6)— — (4)52 — — 
Negative goodwill recognized in results— — — — — — — — 
Gains or losses on non-current assets held for sale not classified as discontinued operations(19)12 — — (7)(32)(78.1)(78.1)
Profit or loss before tax from continuing operations3,744 4,171 (10.2)(14.4)7,915 6,914 14.5 4.4 
Tax expense or income from continuing operations(1,072)(1,302)(17.7)(21.9)(2,374)(2,474)(4.0)(12.8)
Profit from the period from continuing operations2,672 2,869 (6.9)(11.0)5,541 4,440 24.8 14.0 
Profit or loss after tax from discontinued operations— — — — — — — — 
Profit for the period2,672 2,869 (6.9)(11.0)5,541 4,440 24.8 14.0 
Profit attributable to non-controlling interests(321)(326)(1.5)(4.0)(647)(765)(15.4)(20.3)
Profit attributable to the parent2,351 2,543 (7.6)(11.9)4,894 3,675 33.2 20.8 
EPS (euros)0.131 0.141 (7.2)0.272 0.197 38.1 
Diluted EPS (euros)0.130 0.140 (7.2)0.271 0.196 38.1 
Memorandum items:
   Average total assets1,707,903 1,624,930 5.1 1,666,474 1,539,167 8.3 
   Average stockholders' equity90,035 88,532 1.7 89,125 82,669 7.8 


8
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January - June 2022

Income statement
Executive summary
Profit (H1'22 vs H1'21). In constant euros
Performance (H1'22 vs H1'21). In constant euros
Strong profit growth underpinned by our geographic and business diversificationProfit growth driven by higher revenue, cost control and lower minority interest and tax burden
Attributable profitTotal incomeCostsProvisions
EUR 4,894 mn+21% vs H1'21+4.1%+5.3%+18.1%
+7% vs H1'21 underlying att. profit
EfficiencyProfitability
The Group's efficiency ratio improved compared to FY'21, mainly driven by EuropeStrong improvement in our profitability ratios
GroupEuropeRoTERoRWA
45.5%48.5%13.7%1.86%
-0.7 pp vs 2021-3.7 pp vs 2021+1.9 pp+1.1 pp
1
+0.2 pp+0.1 pp
2
Changes vs H1'21
1.vs underlying RoTE
2. vs und. RoRWA
è Results performance compared to H1'21
The Group presents, both at the total level and for each of the business units, the 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 of the country units. For the Group as a whole, exchange rates had a positive impact of 7 pp in revenue and 5 pp in costs.
u Total income
Total income of EUR 25,120 million in the first half of 2022, up 11% year-on-year. Excluding the exchange rate impact, total income increased 4%. Net interest income and net fee income accounted for 97% of total income. By line:
Net interest income amounted to EUR 18,409 million, 14% higher compared to the first half of 2021. Stripping out the exchange rate impact, growth was 7%, mainly due to the increase in activity, greater volumes and higher interest rates.
By country, and at constant exchange rates, increases were recorded in the UK (+13%), Poland (+92%), Brazil (+2%), Mexico (+9%), Chile (+7%) and Argentina (+93%).

Net interest income
EUR million
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constant euros
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On the other hand, the US remained unchanged, mainly due to the Bluestem portfolio disposal in 2021 (excluding this impact, net interest income would have increased 2%). Declines in Spain (-6%, due to lower ALCO volumes and some change of mix towards mortgages) and Portugal (-8%, due to ALCO portfolio sales in H1'21).
Net fee income rose 13% year-on-year to EUR 5,852 million. Excluding the exchange rate impact, net fee income was 7% higher, driven by higher volumes and improved activity, with significant increases in high value-added products and services.
Card and point of sale turnover increased 20% and 30%, respectively, and card transactions were 18% higher. Transactional fees rose 9%.
In Wealth Management & Insurance (WM&I), net fee income from mutual funds and pensions grew 5% and insurance premiums rose 17%.
Net fee income
EUR million
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constant euros
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January - June 2022
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9

Income statement
In Santander Corporate & Investment Banking (SCIB), net fee income increased 10%, underscored by double-digit growth in the core businesses. Together, both businesses accounted for close to 50% of the Group’s total fee income (SCIB: 18%; WM&I: 30%).
By region, net fee income Europe was up 7%, supported by growth in all countries except the UK, mainly due to the transfer of its SCIB business. 1% decrease in North America, affected by the Bluestem portfolio disposal. Excluding it, fee income would have increased 4% in the region (the US would have fallen mainly due to lower fee income in SCIB). 16% increase in Mexico driven by fee income from insurance, cards and account management. +10% in South America driven by greater transactionality, with growth in all countries and +7% at Digital Consumer Bank driven by the rise in new lending.
Gains on financial transactions, accounted for 3% of total income and were 17% lower year-on-year at EUR 743 million (-21% excluding the exchange rate impact), weighed down by the falls in Spain and Portugal, due to ALCO portfolio sales recorded in 2021, and the Corporate Centre, affected by the negative impact of FX hedging, offset by the positive impact of exchange rates in the countries' results.
Dividend income was EUR 335 million in H1'22, increasing 8% in euros and constant euros.
The results of entities accounted for using the equity method rose to EUR 312 million, due to the greater contribution from Group entities in Spain and Brazil.
Other operating income recorded a loss of EUR 531 million compared to -EUR 36 million in H1'21, mainly due to the lower leasing income (approximately EUR 240 million less year-on-year), higher contribution to the SRF, higher provisions for the contribution to the BFG in Poland, where we also recorded an EUR 88 million contribution for the creation of an Institutional Protection Scheme along with several Polish local entities to strengthen the liquidity and solvency of the members of this newly established company, and impact of high inflation in Argentina.
Total income
EUR million
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constant euros
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u Costs
Operating costs amounted to EUR 11,435 million, 10% higher than H1'21 (+5% excluding the exchange rate impact), due to the sharp increase in inflation. In real terms (excluding the rise in average inflation), costs fell 4% in constant euros.
Our disciplined cost management enabled us to maintain one of the best efficiency ratios in the sector, which stood at 45.5% in H1'22, improving 0.2 pp versus June 2021 and -0.7 pp versus FY'21, mainly driven by Europe.
Our transformation plan continued to progress across countries towards a more integrated and digital operating model. This allows us to increase efficiencies and productivity with better business dynamics and improved customer service and satisfaction. The year-on-year cost trends in constant euros were as follows:
In Europe, costs were down 1%, -7% in real terms, on the back of our transformation process and operating improvement. In real terms, falls across in the region: -11% in Spain, -5% in the UK, -17% Portugal and -1% Poland. The region's efficiency ratio improved to 48.5%, an improvement of 3.9 pp versus H1'21.
In North America, costs increased 5%. In real terms, they dropped 3%. They remained stable in the US (-8% in real terms) while Mexico recorded an increase due to investments in digitalization and insourcing of employees. The efficiency ratio stood at 46.6% (+3.4 pp vs H1'21).
In South America, the rise in costs (+16%) was significantly distorted by soaring average inflation in the region (17%) which was reflected in salary agreements (salary increase in Brazil in September 2021) and greater overall expenses. In real terms, costs in Brazil remained stable, in Chile they fell 2% and rose 3% in Argentina. The efficiency ratio was 35.3% (+0.8 pp vs H1'21).
Costs at Digital Consumer Bank increased 2% affected by inflation, strategic investments and perimeter effects (Allane, TIMFin and Greece). In real terms, costs fell 3%. The efficiency ratio stood at 48.5% (-0.3 pp vs H1'21).
Operating expenses
EUR million
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constant euros
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10
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January - June 2022

Income statement
u Provisions or reversal of provisions
Provisions (net of provisions reversals) amounted to EUR 935 million (EUR 1,490 million in H1'21). This item includes the charges for restructuring costs recorded in 2021 (EUR 530 million net of tax).
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) amounted to EUR 4,763 million, 25% higher than in the same period of 2021 (+17% in constant euros). This comparison was affected by the releases recorded in the UK and the US in Q2'21, the EUR 184 million charge for CHF mortgages recorded in Poland and DCB this year and the rise in Brazil, driven by individual volumes.
u Impairment on other assets (net)
The impairment on other assets (net) stood at EUR 61 million, down from EUR 130 million in H1'21.

u Gains or losses on non-financial assets and investments (net)
-EUR 4 million was recorded in this line in H1'22 (EUR 52 million in H1'21).


Net loan-loss provisions
EUR million
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constant euros
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u Negative goodwill recognized in results
No negative goodwill was recorded in H1'22 or H1'21.
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 7 million in H1'22, compared to -EUR 32 million in H1'21.
u Profit before tax
Profit before tax was EUR 7,915 million in H1'22, 14% higher year-on-year (+4% in constant euros).
u Income tax
Total corporate income tax was EUR 2,374 million (EUR 2,474 million in H1'21).
u Attributable profit to non-controlling interests
Attributable profit to non-controlling interests amounted to EUR 647 million, down 15% year-on-year (-20% excluding the exchange rate impact), mainly due to the buyback of minority interests of SC USA in the US.
u Attributable profit to the parent
Attributable profit to the parent amounted to EUR 4,894 million in H1'22, compared to EUR 3,675 million in the same period of 2021. This represents a 33% increase in euros and +21% in constant euros, receiving an uplift from higher revenue, lower minority interests and no results outside the ordinary course of our business.
RoTE stood at 13.69% (11.82% in H1'21), RoRWA at 1.86% (1.66% in H1'21) and earnings per share stood at EUR 0.272 (EUR 0.197 in H1'21).
January - June 2022
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11

Income statement
u Underlying profit attributable to the parent
Profit attributable to the parent recorded in H1'22 was not affected by the recording of results that are outside the ordinary course of our business. As such, attributable profit and underlying profit attributable to the parent in H1'22 amounted to EUR 4,894 million.
In H1'21, profit attributable to the parent was affected by restructuring costs, mainly in the UK and Portugal. Excluding these charges from the line where they were recorded, and including them separately in the net capital gains and provisions line, adjusted profit or underlying profit attributable to the parent in H1'21 stood at EUR 4,205 million.
As a result, profit in H1'22 was 16% higher in euros and +7% in constant euros compared to the adjusted profit or underlying in the same period of 2021.
For more details, see 'Alternative Performance Measures' section in the appendix of this report.
The Group’s cost of risk (considering the last 12 months) stood at 0.83%, slightly higher than FY'21 (0.77%) when we recorded releases mainly in the second and fourth quarters.
Before recording loan-loss provisions, Grupo Santander's underlying net operating income (total income less operating expenses) was EUR 13,685 million, 11% higher year-on-year in euros, +3% excluding the FX impact. This is the highest net operating income ever recorded in a first half of a year. The performance in constant euros is detailed below.

By line:
Total income increased mainly due to net interest income (+7%) and net fee income (+7%), which maintained a positive quarterly growth trend given the greater commercial activity.
Costs were up driven by soaring inflation.
By region:
In Europe, net operating income increased 17% underscored by higher total income and lower costs.
In North America, net operating income fell 9%, -6% excluding the impact from the sale of the Bluestem portfolio, dampened by lower fee income and leasing in the US. Growth in Mexico was 9%.
In South America, net operating income growth was 7% with rises of 2% in Brazil, 17% in Chile and 88% in Argentina.
In Digital Consumer Bank, net operating income increased 3%.
In H1'22, Grupo Santander’s underlying RoTE was 13.69% (12.62% in H1'21), underlying RoRWA was 1.86% (1.75% in H1'21) and underlying earnings per share was EUR 0.272 (EUR 0.227 in H1'21).

Summarized underlying income statement
EUR millionChangeChange
Q2'22Q1'22%% excl. FXH1'22H1'21%% excl. FX
Net interest income9,554 8,855 7.94.018,409 16,196 13.76.9
Net fee income3,040 2,812 8.14.25,852 5,169 13.27.0
Gains (losses) on financial transactions (1)
356 387 (8.0)(11.0)743 894 (16.9)(20.7)
Other operating income(135)251 116 436 (73.4)(76.7)
Total income12,815 12,305 4.10.225,120 22,695 10.74.1
Administrative expenses and amortizations(5,900)(5,535)6.63.6(11,435)(10,377)10.25.3
Net operating income6,915 6,770 2.1(2.6)13,685 12,318 11.13.1
Net loan-loss provisions(2,634)(2,101)25.418.9(4,735)(3,753)26.218.1
Other gains (losses) and provisions(537)(498)7.85.7(1,035)(937)10.59.1
Profit before tax3,744 4,171 (10.2)(14.4)7,915 7,628 3.8(4.8)
Tax on profit(1,072)(1,302)(17.7)(21.9)(2,374)(2,658)(10.7)(18.4)
Profit from continuing operations2,672 2,869 (6.9)(11.0)5,541 4,970 11.52.6
Net profit from discontinued operations— — — — — — — — 
Consolidated profit2,672 2,869 (6.9)(11.0)5,541 4,970 11.52.6
Non-controlling interests(321)(326)(1.5)(4.0)(647)(765)(15.4)(20.3)
Net capital gains and provisions— — — (530)(100.0)(100.0)
Profit attributable to the parent2,351 2,543 (7.6)(11.9)4,894 3,675 33.220.8
Underlying profit attributable to the parent (2)
2,351 2,543 (7.6)(11.9)4,894 4,205 16.46.7
(1) Includes exchange differences.
(2) Excludes net capital gains and provisions.




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Income statement

è Results performance compared to the previous quarter
Underlying profit attributable to the parent and profit attributable to the parent recorded the same amount, both in Q2'22 and Q1'22, as profit was not affected by results outside the ordinary course of our business in either period.
As a result, profit in the second quarter amounted to EUR 2,351 million, an 8% decrease in euros and -12% in constant euros.
This performance was driven by the contribution to the SRF, which is usually recorded in the second quarter, in Spain, Portugal, Digital Consumer Bank and the Corporate Centre and the EUR 88 million contribution to the IPS in Poland, as previously explained.
Excluding these impacts, underlying attributable profit was 5% higher. Excluding the exchange rate impact, it rose 1%, as follows:
Total income remained broadly in line with the previous quarter (+0.2%) due to the aforementioned contributions. Excluding these contributions, total income increased 4%.



Net operating income
EUR million
leyendaconstantesa07a.gif
constant euros
chart-9462ae175c804db7b23.jpg


Net interest income was up 4% supported by higher interest rates and volumes. By region, of note was the 6% rise in Europe, driven by Poland and the UK. In North America, net interest income growth was 4%, with a positive performance both in the US and Mexico, and South America also rose 4% backed by Chile and Argentina, which offset the fall in Brazil.
Net fee income rose 4% with positive performance across regions and Digital Consumer Bank.
Gains on financial transactions dropped 11%, partly due to FX hedging.
Costs rose 4% affected by the overall increase in inflation.
Net loan-loss provisions increased 19% mainly due to Poland (CHF mortgages) and Brazil, driven by individual volumes.






Underlying profit attributable to the parent*
EUR million
leyendaconstantesa07a.gif
constant euros
chart-11ce7e14e9c842d9999.jpg
(*) Excluding net capital gains and provisions.




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13


Business model




Balance sheet
Grupo Santander. Condensed balance sheet
EUR million
Change
AssetsJun-22Jun-21Absolute%Dec-21
Cash, cash balances at central banks and other demand deposits211,276 183,091 28,185 15.4 210,689 
Financial assets held for trading 163,235 102,792 60,443 58.8 116,953 
   Debt securities41,668 34,114 7,554 22.1 26,750 
   Equity instruments10,686 13,545 (2,859)(21.1)15,077 
   Loans and advances to customers15,090 265 14,825 — 6,829 
   Loans and advances to central banks and credit institutions27,076 — 27,076 — 14,005 
   Derivatives68,715 54,868 13,847 25.2 54,292 
Financial assets designated at fair value through profit or loss16,870 61,324 (44,454)(72.5)21,493 
   Loans and advances to customers7,755 25,353 (17,598)(69.4)10,826 
   Loans and advances to central banks and credit institutions1,396 28,791 (27,395)(95.2)3,152 
   Other (debt securities an equity instruments)7,719 7,180 539 7.5 7,515 
Financial assets at fair value through other comprehensive income91,998 114,505 (22,507)(19.7)108,038 
   Debt securities82,664 103,549 (20,885)(20.2)97,922 
   Equity instruments2,131 2,751 (620)(22.5)2,453 
   Loans and advances to customers7,203 8,205 (1,002)(12.2)7,663 
   Loans and advances to central banks and credit institutions— — — — — 
Financial assets measured at amortized cost1,129,690 1,003,417 126,273 12.6 1,037,898 
   Debt securities57,520 29,038 28,482 98.1 35,708 
   Loans and advances to customers1,007,673 920,695 86,978 9.4 947,364 
   Loans and advances to central banks and credit institutions64,497 53,684 10,813 20.1 54,826 
Investments in subsidiaries, joint ventures and associates7,665 7,562 103 1.4 7,525 
Tangible assets34,640 32,678 1,962 6.0 33,321 
Intangible assets18,349 16,454 1,895 11.5 16,584 
    Goodwill13,877 12,854 1,023 8.0 12,713 
    Other intangible assets4,472 3,600 872 24.2 3,871 
Other assets49,117 46,813 2,304 4.9 43,334 
Total assets1,722,840 1,568,636 154,204 9.8 1,595,835 
Liabilities and shareholders' equity
Financial liabilities held for trading 114,406 68,982 45,424 65.8 79,469 
   Customer deposits13,799 — 13,799 — 6,141 
   Debt securities issued— — — — — 
   Deposits by central banks and credit institutions14,860 — 14,860 — 7,526 
   Derivatives67,152 52,440 14,712 28.1 53,566 
   Other18,595 16,542 2,053 12.4 12,236 
Financial liabilities designated at fair value through profit or loss40,823 54,131 (13,308)(24.6)32,733 
   Customer deposits31,463 38,005 (6,542)(17.2)25,608 
   Debt securities issued5,597 5,491 106 1.9 5,454 
   Deposits by central banks and credit institutions3,763 10,635 (6,872)(64.6)1,671 
   Other— — — — — 
Financial liabilities measured at amortized cost1,427,721 1,310,433 117,288 9.0 1,349,169 
   Customer deposits928,525 856,122 72,403 8.5 886,595 
   Debt securities issued255,049 237,739 17,310 7.3 240,709 
   Deposits by central banks and credit institutions203,511 182,770 20,741 11.3 191,992 
   Other40,636 33,802 6,834 20.2 29,873 
Liabilities under insurance contracts858 1,014 (156)(15.4)770 
Provisions8,590 10,400 (1,810)(17.4)9,583 
Other liabilities32,980 27,931 5,049 18.1 27,058 
Total liabilities1,625,378 1,472,891 152,487 10.4 1,498,782 
Shareholders' equity122,037 117,552 4,485 3.8 119,649 
   Capital stock8,397 8,670 (273)(3.1)8,670 
   Reserves (including treasury stock)108,746 105,207 3,539 3.4 103,691 
   Profit attributable to the Group 4,894 3,675 1,219 33.2 8,124 
   Less: dividends— — — — (836)
Other comprehensive income(32,526)(32,181)(345)1.1 (32,719)
Minority interests7,951 10,374 (2,423)(23.4)10,123 
Total equity97,462 95,745 1,717 1.8 97,053 
Total liabilities and equity1,722,840 1,568,636 154,204 9.8 1,595,835 
14
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Business model




Balance sheet
GRUPO SANTANDER BALANCE SHEET
Executive summary 1
Loans and advances to customers (excl. reverse repos)
Customer funds (deposits excl. repos + mutual funds)
Loans and advances to customers maintained a positive growth trend, increasing both QoQ and YoYCustomer funds maintained its growth trend, mainly backed by customer deposits
1,015+2% QoQ+6% YoY1,099+1% QoQ+4% YoY
EUR billionEUR billion
 è By segment (YoY changes):
 è By product (YoY changes):
Growth backed by individuals and large corporatesDemand deposits accounted for 65% of customer funds and mutual funds were impacted by market performance
IndividualsSMEs and corporatesCIBDemandTimeMutual funds
+7%0%+13%+3%+13%-2%
(1) Changes in constant euros
è Loans and advances to customers
Loans and advances to customers stood at EUR 1,037,721 million in June 2022, 3% higher quarter-on-quarter and +9% year-on-year.
For the purpose of analysing traditional commercial banking loans, the Group uses gross loans and advances to customers excluding reverse repos, which exceeded EUR 1 trillion (EUR 1,015,434 million). In addition, in order to facilitate the analysis of the Group's management, the comments below do not include the exchange rate impact.
In the quarter, gross loans and advances to customers, excluding reverse repos, rose 2%, with increases in all markets, as follows:
In Europe, loans grew 2%. They rose 2% in Spain, the UK and Poland while in Portugal loans were 1% higher.
In North America, growth in Mexico was 2% and 1% in the US. In the region as a whole, loans rose 1%.
In South America, loans increased 5%, with Brazil increasing 3%, Chile +5%, Argentina +17% and Uruguay +6%.
In Digital Consumer Bank (DCB) growth was 3%, with growth in Openbank of 14%.
Gross loans and advances to customers (excl. reverse repos)
EUR billion
chart-3192687af46a45c1b38a.jpg
+8 %
*
Jun-22 / Jun-21
(*) In constant EUR: +6%
Compared to June 2021, gross loans and advances to customers (excluding reverse repos and the FX impact) grew 6%, with broad-based growth across countries, as follows:
In Europe, growth was 5%. Poland rose 8% driven by corporates and institutions and CIB, Spain +7% due to individuals, private banking and institutions, the UK grew 4% backed by mortgages and Portugal increased 2% also driven by mortgages.
+7% in North America as the US grew 5% propelled by auto financing, SCIB and WM, while Mexico was up 11% with rises in most segments, except SMEs.
Growth in South America was 12%, with Argentina increasing 55% driven by auto, SMEs and corporates, Chile +11% backed by individuals, Brazil rose 9% owing to individuals and SMEs, and Uruguay recorded a 14% increase.
Digital Consumer Bank increased 4%, receiving an uplift from new lending, which rose 10% year-on-year, and increased in most countries. Openbank increased 52%.
As of June 2022, gross loans and advances to customers excluding reverse repos maintained a balanced structure: individuals (61%), SMEs and corporates (25%) and SCIB (14%).
Gross loans and advances to customers (excl. reverse repos)
% operating areas. June 2022
chart-77edc433ab7d4a9c91b.jpg


January - June 2022
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15


Business model




Balance sheet
è Customer funds
Customer deposits amounted to EUR 973,787 million in June 2022, increasing 2% quarter-on-quarter and 9% year-on-year.
The Group uses customer funds (customer deposits excluding repos, plus mutual funds) for the purpose of analysing traditional retail banking funds, which amounted to EUR 1,098,708 million in June 2022. Just as for loans and advances to customers, the comments below do not include the exchange rate impact.
In the second quarter, customer funds grew 1%, as follows:
By product, customer deposits excluding repos rose 1% while mutual funds decreased 3%.
By primary segment, customer funds rose in South America (+3%) and DCB (+2%), had no material change in Europe and declined in North America (-2%). By country, customer funds increased 18% in Argentina and 3% in Brazil, but declined 3% both in Poland and the US. The other countries remained stable.
Compared to June 2021, customer funds were up 4%, excluding the exchange rate impact:
By product, deposits excluding repos rose 5%. Demand deposits grew 3% (with rises Europe and South America and falls in North America) and time deposits were 13% higher driven by all three regions, notably North America. Mutual funds dropped 2% with widespread falls across most countries due to the impact from markets and the rising interest rate environment.
By region, customer funds increased 4% in Europe, with rises in Spain (+9%), Portugal (+5%) and Poland (+1%), while the UK decreased 3%. 3% rise in North America (the US: +3%; Mexico: +3%) and +5% South America in (Brazil: +3%; Chile: -6%; Argentina: +73%; Uruguay: +18%).
7% rise in DCB, where Openbank increased 14%.
With this performance, the weight of demand deposits as a percentage of total customer funds was 65%, time deposits accounted for 18% of the total and mutual funds 17%.
Customer funds
EUR billion
chart-2b244cdc927542f5b6b.jpg
+6 %
*
+1 %
+7 %
Total
Mutual funds
Deposits
exc. repos
Jun-22 / Jun-21
(*) In constant EUR: +4%
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 half of 2022, the Group issued:
Medium- and long-term covered bonds amounting to EUR 5,158 million and EUR 12,421 million of senior debt placed in the market.
There were EUR 5,592 million of securitizations placed in the market. Additionally, we extended the maturity of an additional EUR 160 million.
In order to strengthen the Group’s situation, issuances to meet the TLAC requirement amounted to EUR 5,091 million (EUR 4,974 million of senior non-preferred debt and EUR 117 million of subordinated debt).
Maturities of medium- and long-term debt of EUR 17,243 million.
The net loan-to-deposit ratio was 107%, the same as in June 2021. The ratio of deposits plus medium- and long-term funding to the Group’s loans was 116%, 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.
The ratings of Banco Santander, S.A. by the main rating agencies were: Fitch A- senior non-preferred debt, A senior long-term and F2/F1 senior short-term;, Moody's A2 long-term and P-1 short-term; and DBRS A High and R-1 Medium short-term. In December, Standard & Poor's (S&P) raised its long-term rating to A+ (from A) and maintained its short-term rating at A-1. Moody's, DBRS and Fitch maintained their stable outlooks. In March, S&P upgraded it to stable as a result of the sovereign's outlook upgrade.
Sometimes the methodology applied by the agencies limits a bank's rating to the sovereign rating of 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, DBRS and S&P and at the same level by Fitch, which demonstrates our financial strength and diversification.
Customer funds
% operating areas. June 2022

chart-8e07cd4b0389408c96d.jpg
16
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January - June 2022







Solvency ratios
SOLVENCY RATIOS
Executive summary
Fully-loaded capital ratioFully-loaded CET1 ratio
Fully-loaded CET1 ratio over 12% at the end of June 2022We continued to generate capital organically in the quarter, backed by profit and RWA management
capitaleng.jpg
Gross organic generation  +26 bps
Cash dividend accrual2
   -8 bps
TNAV per share
TNAV per share was EUR 4.24, in line with the previous quarter and 9% higher year-on-year including cash dividends
At the end of June 2022, the total phased-in capital ratio (applying the IFRS 9 transitional arrangements) stood at 16.18% and the phased-in CET1 ratio at 12.25%. We comfortably meet the 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 distance to the maximum distributable amount (MDA) of 307 bps and a CET1 management buffer of 340 bps.
The total fully-loaded capital ratio stood at 15.95% and the fully-loaded CET1 ratio at 12.05%.
We maintained strong net organic generation in the quarter, 18 bps, resulting from gross organic generation of 26 bps (from Q2'22 earnings and RWA management), and the -8 bps accrual for the future cash dividend payment, corresponding to 20% of Q2'22 profit.
Additionally, in the quarter there was a 5 bp reduction stemming from corporate transactions (mainly due to the increase in Ebury's stake), a 16 bp negative impact from markets (of which -13 bps from portfolio valuations) and a 3 bp positive impact from models and others.
The fully-loaded leverage ratio stood at 4.67%, and the phased-in at 4.73%, following the end of the temporary measures approved during the pandemic which permitted the exclusion of reserves with Eurosystem central banks.
Lastly, the TNAV per share ended June 2022 at EUR 4.24, in line with March 2022 including the EUR 5.15 cents cash dividend paid in May. Compared to the same period last year, TNAV per share increased 9%, including the previously mentioned dividend, and EUR 4.85 cents cash dividend paid in November 2021.
Eligible capital. June 2022
EUR million
Fully-loadedPhased-in*
CET172,964 74,091 
Basic capital81,758 82,885 
Eligible capital96,585 97,850 
Risk-weighted assets605,405 604,777 
CET1 capital ratio12.05 12.25 
Tier 1 capital ratio13.50 13.71 
Total capital ratio15.95 16.18 
Fully-loaded CET1 ratio performance
%
capital-escaleraenga.jpg
(1) Data published in Q1'22, which included the acquisition of Amherst Pierpont (completed in April 2022).
(2) Cash dividend accrual corresponding to 20% of Q2'22 profit. The implementation of the shareholder remuneration policy is subject to future corporate and regulatory decisions and approvals.
(*) The phased-in ratio includes the transitory treatment of IFRS 9, calculated in accordance with article 473 bis of the Capital Requirements Regulation (CRR2) and subsequent modifications introduced by Regulation 2020/873 of the European Union. Total phased-in capital ratios include the transitory treatment according to chapter 4, title 1, part 10 of the CRR2.
January - June 2022
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17

Risk management
RISK MANAGEMENT
Executive summary

Credit riskMarket risk
Credit quality indicators remain at contained levels even in the current environment.
Despite the uncertainty caused by the Russia-Ukraine conflict, our risk profile remained stable with a slight increase in VaR levels
Cost of risk2
NPL ratioCoverage ratioQ2'22Average
VaR
EUR 13.5 million
0.83%3.05%71%
+6 bps vs Q1'22-21 bps vs Q1'22+2 pp vs Q1'22
Structural and liquidity riskOperational risk
Robust and diversified liquidity buffer, with ratios well above regulatory requirements
Losses, by Basel categories, remained in line with the previous quarter
Liquidity Coverage Ratio (LCR)
  165% +8 pp vs Q1'22
u Russia-Ukraine conflict monitoring
As mentioned in the previous quarter, Santander's direct exposure to Russia and Ukraine is immaterial.
Nevertheless, we are continuously monitoring the geopolitical events with special focus on key indicators, as well as on the most affected customers due to the increased inflation (energy, oil and commodities prices) as a consequence of the Russia-Ukraine conflict.
The Compliance teams continue to review the correct application of the sanctions established by the international community and are carrying out assessments and analyses to provide senior management with the necessary data.
u Credit risk management
Total risk: our exposure increased to EUR 1,121,726 million, +3% vs Q1'22 and +7% year-on-year in constant euros, despite the economic slowdown caused by the rise in interest rates to reduce inflation, the disruption of global production chains as a result of covid-19 outbreaks in Asia and the impact on energy and food prices from the Russia-Ukraine conflict.
Credit impaired loans: EUR 34,259 million, 3% lower in constant compared to the previous quarter, due to portfolio sales, mainly in Spain, together with proactive risk management.
NPL ratio: 3.05%, a 21 bp decrease quarter-on-quarter and -17 bps year-on-year, explained by the positive performance in Europe and North America (-37 bps and -12 bps vs Q1’22, respectively) somewhat mitigated by the rise in South America.
Loan-loss provisions amounted to EUR 4,735 million, an 18% increase compared to the previous year in constant euros, which led to a cost of risk of 0.83% (+6 bps in the quarter), currently with no signs of deterioration despite the current inflationary scenario.
This loan-loss provisions performance, together with the aforementioned portfolio sales, brought the total loan-loss reserves to EUR 24,195 million, a 2% decrease compared to Q1’22 in constant euros.
Total coverage of credit impaired loans stood at 71% (+2 pp compared to the previous quarter). Moreover, to fully understand this value, it should be noted that a significant part of our portfolios in Spain and the UK has real estate collateral, which requires lower coverage levels.
Key metrics performance by geographic area
Loan-loss provisions1
Cost of risk (%)2
NPL ratio (%)Total coverage ratio (%)
H1'22Chg (%)
/ H1'21
H1'22Chg (bps)
/ H1'21
H1'22Chg (bps)
/ H1'21
H1'22Chg (pp)
/ Q1'21
Europe1,146 (4.3)0.37 (12)2.63 (67)50.2 1.8 
North America962 48.8 1.09 (59)2.71 43 111.4 (40.9)
South America2,333 37.8 2.97 46 5.39 102 86.9 (11.2)
Digital Consumer Bank287 (7.0)0.44 (20)2.22 97.4 (14.4)
TOTAL GROUP4,735 18.1 0.83 (11)3.05 (17)70.6 (2.2)
(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.
For more detailed information regarding the countries, please see the Alternative Performance Measures section.
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Risk management
Regarding the measures implemented to mitigate the impact of the pandemic, all moratoria programmes granted by the Group had fully expired by the end of the second quarter, with a better-than-expected performance. As for government liquidity programmes, we are closely monitoring their performance as grace periods come to an end. This type of programme was mostly granted in Spain, where 87% have now expired and credit quality is in line with expectations, with no concerning signs of deterioration.
IFRS 9 stages evolution: the distribution of the portfolio remained stable in the quarter.

Coverage ratio by stage
EUR billion
Exposure1
Coverage
Jun-22Mar-22Jun-21Jun-22Mar-22Jun-21
Stage 19989679040.5 %0.5 %0.5 %
Stage 26668708.5 %8.0 %8.2 %
Stage 334363340.1 %41.0 %42.2 %
(1) Exposure subject to impairment. Additionally, in June 2022 there is EUR 23 billion in loans and advances to customers not subject to impairment recorded at mark to market with changes through P&L (EUR 22 billion in March 2022 and EUR 26 billion in June 2021).
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 (%)
Q2'22QoQYoY
Balance at beginning of period35,670 7.3 9.8 
   Net additions2,115 (44.0)(17.4)
   Increase in scope of consolidation— — — 
   Exchange rate differences and other(247)— — 
   Write-offs(3,279)36.5 54.7 
Balance at period-end34,259 (4.0)3.0 
Loan-loss allowances24,195 (2.4)(0.2)
   For impaired assets13,739 (6.0)(2.1)
   For other assets10,456 2.8 2.4 

u Market risk
The risk associated with global corporate banking trading activity is mainly interest rate driven, focused on servicing our customers' needs and measured in daily VaR terms at 99%.
In the second quarter of 2022, the VaR fluctuated around an average value of EUR 13.5 million, reflecting our low market risk profile in an environment of high uncertainty caused by a new covid-19 outbreak in Asia, pressure from high global inflation and the Russia-Ukraine conflict. VaR rebounded slightly at the end of the period driven by increased volatility mainly due to the recent actions taken by central banks, who accelerated their policies to combat inflation. The quarter’s closing VaR was EUR 17 million. These figures remain low compared to the size of the Group’s balance sheet and activity.
Trading portfolios.(1) VaR by geographic region
EUR million
20222021
Second quarterAverageLatestAverage
Total13.5 16.6 9.1 
Europe10.2 13.3 7.9 
North America2.0 2.1 2.4 
South America7.8 10.7 6.0 
1. Activity performance in Santander Corporate & Investment Banking markets.


Trading portfolios.(1) VaR by market factor
EUR million
Second quarter 2022Min.Avg.Max.Last
VaR total10.9 13.5 18.4 16.6 
Diversification effect(8.8)(14.1)(28.0)(18.8)
Interest rate VaR9.0 11.6 17.9 16.6 
Equity VaR3.2 4.2 5.6 3.4 
FX VaR2.7 5.2 10.3 5.3 
Credit spreads VaR3.8 5.1 8.5 6.1 
Commodities VaR1.0 1.5 4.0 4.0 
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.

January - June 2022
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19

Risk management
Trading portfolios1. VaR performance

EUR million
chart-24602bd89a254e53ac3.jpg
(1) Corporate & Investment Banking performance in financial markets


u Structural and liquidity risk
Structural exchange rate risk: mainly driven by transactions in foreign currencies related to permanent financial investments, their results and related hedges. Our dynamic management of this risk seeks to limit the impact of foreign exchange rate movements on the Group's core capital ratio. In the quarter, hedging of currencies impacting this ratio remained close to 100%.
Structural interest rate risk: uncertainty over the Russia-Ukraine conflict continued to put pressure on commodity prices, reflected in persistent high levels of inflation. The Central Banks latest actions suggest a faster upward adjustment in interest rates than initially expected, causing higher market volatility. In this context, our structural debt portfolios were negatively impacted, although risk remained at comfortable levels.
Liquidity risk: the Group maintained a comfortable liquidity risk position, supported by a robust and diversified liquidity buffer, with ratios well above regulatory limits.

u Operational risk
In general, our operational risk profile remained stable in the second quarter of 2022, after a moderate increase in the first quarter. The following aspects were closely monitored during this period:
The Russia-Ukraine conflict and the compliance with international financial measures and sanctions are still a priority.
IT risks, mainly related to transformation plans due to business strategy and regulatory changes, proactive management of obsolete technology and IT services provided by third parties, in order to ensure availability for services and operations.
Regulatory compliance, due to increasing regulatory requirements (such as ESG, operational resilience, data management regulations, among others) across the Group.
Cyber threats across the financial industry, also focused on alerts derived from the Russia-Ukraine conflict, strengthening the bank's monitoring and control environment mechanisms.
Third party risk exposure, maintaining a close oversight on critical providers, focusing on their control environment including business continuity capabilities, supply chains, cyber risk management and compliance with service level agreements.
New types of fraud, mainly in online banking transactions (e.g. customer fraud) and in the loan admission processes (e.g. identity theft).
Emerging risks derived from our transformation initiatives, consumer protection in different markets and climate risk.
Regarding the second quarter performance, losses (by Basel categories) remained in line with the previous quarter.
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General background
GENERAL BACKGROUND
Grupo Santander conducted its business in the second quarter of 2022 in an environment marked by market volatility, uncertainty stemming from the Russia-Ukraine conflict and the increase in inflation related to higher commodity prices, in particular energy and food. Other factors, such as China's zero-covid strategy and its impact on global production chains, have also exacerbated these issues and together have fuelled speculation of a potential future weakening of the global economy. Against this backdrop, central banks in industrialized countries moved ahead with monetary policy normalization, while policies in Latin America continued to tighten.
Country
GDP Change1
Economic performance
eu.jpg
Eurozone
+5.4%
GDP in Q2'22 is expected to slow down due to the effect of the Russia-Ukraine conflict on business confidence, the persistence of supply issues and the rise in inflation. However, the labour market remained dynamic (unemployment rate of 6.6% in May, the lowest since the introduction of the euro). The rise in inflation concerned the ECB, who raised interest rate by 50 bps in July.
spain.jpg
Spain
+6.3%
In Q2'22, the dynamism of the labour market remained, boosted by the end of covid-19-related restrictions. All this despite the uncertainty stemming from the Russia-Ukraine conflict and the tightening of financing conditions. Inflation continued to rise to 10.2% in June.
uk.jpg
United Kingdom
+8.7%
Economic growth started to slow down in February due to higher energy and production costs, which had an impact on inflation (9.4% in June), in turn affecting households. Employment remained strong in an environment of tight labour supply (unemployment rate at 3.8%). To tackle high inflation, the BoE raised interest rates to 1.25% in June.
portugal.jpg
Portugal
+11.9%
The economy continued to expand, albeit at a slower pace, backed by both consumption and tourism. Despite rising inflation (8.7% in June) damaging purchasing power, the labour market remained robust (unemployment rate at 5.9%) and contributed to economic growth. Positive economic performance is having a favourable impact on public accounts (deficit reduction between January-April).
poland.jpg
Poland
+8.5%
Economic growth is losing momentum in Q2'22 due to the consequences of the Russia-Ukraine conflict. Government measures to support households in the face of sharp price increases (CPI of 15.5% in June) and supply cuts, as well as the strong labour market (unemployment rate at 3%) should enable economic growth to slow down gradually. The official interest rate was raised to 6.5% to tame inflation.
us.jpg
United States
+3.5%
Inflation reached 9.1% in June. Core inflation stood at 5.9% and forecasts suggest it has not yet peaked. Employment grew at a healthy pace and unemployment stood at low levels (3.5%). The Fed accelerated rate hikes (to 1.5-1.75% in June) and expects further rapid raises this year, increasing fears of recession.
mexico.jpg
Mexico
+1.8%
The recovery of GDP growth that began in early 2022 continued in Q2'22 supported by industry and services. However, greater global uncertainty and heightened inflation (8% in June) could result in a slowdown. The central bank reaffirmed its commitment to price stability and accelerated the process of interest rate hikes (125 bps in Q2'22 to 7.75%) and maintained a restrictive policy.
brazil.jpg
Brazil
+1.7%
After a positive first quarter, economic growth remained dynamic in Q2'22, with expansion in services and manufacturing and a strong labour market. Inflation started to moderate slightly in May, but remained high (11.9% in June) and the central bank raised the official rate by 150 bps in Q2'22 to 13.25% and announced at least one more hike.
chile.jpg
Chile+7.2%
GDP growth weakened in 2022 following the strong growth recorded in 2021, as the effects of fiscal and monetary impulses of the previous year faded. Soaring inflation (12.5% in June) prompted the central bank to move ahead with monetary tightening, raising the official rate by 350 bps in Q2'22 and 75 bps in July to 9.75%.
argentina.jpg
Argentina+6.0%
In the first technical review of the agreement with the IMF, Argentina met the established targets, allowing the refinancing of debt maturities with the organization. The economy showed some volatility, although economic slowdown prevailed in the last few months. Inflation remained high (5.5% monthly in Q2'22) and the central bank continued to raise the official rate (750 bps in Q2'22 to 52%).
(1) Year-on-year change for Q1'22.
January - June 2022
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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.
Santander has aligned the information in this chapter with the underlying information used internally for management reporting and with that presented in the Group's other public documents.
Santander's executive committee has been selected to be its chief operating decision maker. The Group'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 type of business. We prepare the information by aggregating the figures for 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 same general principles as those used in the Group are applied.
With the aim of increasing transparency and improving capital allocation to continue enhancing our profitability, on 4 April 2022, we announced that, starting and effective with the financial information for the first quarter of 2022, inclusive, we would carry out the following modifications to our reporting:

a. Main changes in the composition of Grupo Santander's segments announced in April 2022
The main changes, which have been applied to management information for all periods included in the consolidated financial statements, are the following:
1.Reallocation of certain financial costs from the Corporate Centre to the country units:
Further clarity in the MREL/TLAC regulation makes it possible to better allocate the cost of eligible debt issuances to the country units.
Other financial costs, primarily associated with the cost of funding the excess capital held by the country units above the Group's CET1 ratio, have been reassigned accordingly.
2.Downsizing of Other Europe.
The Corporate & Investment Banking branches of Banco Santander, S.A. in Europe and other business lines previously reported under 'Other Europe' have been now integrated into the Spain unit to reflect how the business will be managed and supervised, in line with other regions.
The Group recast the corresponding information of earlier periods considering the changes included in this section to facilitate a homogeneous comparison.
In addition to these changes, we completed the usual 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.
The above-mentioned changes have no impact on the Group’s reported consolidated financial figures.

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January - June 2022






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: 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: 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 (SC USA), the specialized business unit Banco Santander International, Santander Investment Securities (SIS) and Santander's 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: 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 (Santander Private Banking) 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 four businesses: Merchant, International Trade, Payments and Consumer.
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, adapting this management to the changes described above.
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 goodwill impairment 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 primary segments 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.
The results of our business areas presented below are provided on the basis of underlying results only and generally including the impact of foreign exchange rate fluctuations. However, for a better understanding of the changes in the performance of our business areas, we also provide and discuss the year-on-year changes to our results excluding such exchange rate impacts.
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.
January - June 2022
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23






January-June 2022
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 profit attributable to
the parent
Europe5,820 2,316 8,581 4,417 2,693 1,839 
     Spain2,015 1,475 3,937 1,994