6-K 1 financieroq223ingles.htm 6-K

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, 2023

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  ☐

---

BANCO SANTANDER, S.A.

________________________

TABLE OF CONTENTS

Item 1. January - June 2023 Half yearly financial report			1

---

---

January - June			2023

Interim consolidated directors' report

Index

KEY CONSOLIDATED DATA			3
BUSINESS MODEL			5
GROUP FINANCIAL INFORMATION			6
Group performance			6
Income statement			8
Balance sheet			14
Solvency ratios			17
Risk management			18
General background			21
FINANCIAL INFORMATION BY SEGMENTS			22
Primary segments			22
Secondary segments			40
RESPONSIBLE BANKING			47
CORPORATE GOVERNANCE			49
THE SANTANDER SHARE			50
APPENDIX			52
Financial information			53
Alternative Performance Measures			74
Interim condensed consolidated financial statements			85
Glossary			88
Important information			89
Main risks and uncertainties			91
Other disclosures required by the Bank of Spain			92

Interim condensed consolidated financial statements

This report was approved by the board of directors on 25 July 2023, following a favourable report from the audit committee. Important information regarding this report can be found on pages 89 and 90.

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Key consolidated data

BALANCE SHEET (EUR million)			Jun-23			Mar-23			%			Jun-23			Jun-22			%			Dec-22
Total assets			1,780,493			1,749,402			1.8			1,780,493			1,722,840			3.3			1,734,659
Loans and advances to customers			1,045,044			1,041,388			0.4			1,045,044			1,037,721			0.7			1,036,004
Customer deposits			1,013,778			998,949			1.5			1,013,778			957,690			5.9			1,009,722
Total funds			1,255,783			1,237,015			1.5			1,255,783			1,188,310			5.7			1,239,981
Total equity			102,044			99,490			2.6			102,044			97,462			4.7			97,585
Note: total funds includes customer deposits, mutual funds, pension funds and managed portfolios.

INCOME STATEMENT (EUR million)			Q2'23			Q1'23			%			H1'23			H1'22			%			2022
Net interest income			10,524			10,396			1.2			20,920			18,409			13.6			38,619
Total income			14,088			13,922			1.2			28,010			25,120			11.5			52,117
Net operating income			7,754			7,777			(0.3)			15,531			13,685			13.5			28,214
Profit before tax			4,258			3,832			11.1			8,090			7,915			2.2			15,250
Profit attributable to the parent			2,670			2,571			3.9			5,241			4,894			7.1			9,605
Changes in constant euros:
Q2'23 / Q1'23: NII: +1.9%; Total income: +1.3%; Net operating income: -0.5%; Profit before tax: +11.3%; Attributable profit: +4.5%.
H1'23 / H1'22: NII: +14.9%; Total income: +12.2%; Net operating income: +13.5%; Profit before tax: +2.0%; Attributable profit: +7.2%.

EPS, PROFITABILITY AND EFFICIENCY (%)			Q2'23			Q1'23			%			H1'23			H1'22			%			2022
EPS (euros)			0.16			0.15			5.4			0.31			0.27			13.4			0.54
RoE			11.56			11.38						11.47			10.98						10.67
RoTE			14.61			14.38						14.49			13.69						13.37
RoA			0.67			0.66						0.67			0.66						0.63
RoRWA			1.90			1.86						1.88			1.86						1.77
Efficiency ratio			44.3			44.1						44.2			45.5						45.8

UNDERLYING INCOME STATEMENT 1 (EUR million)			Q2'23			Q1'23			%			H1'23			H1'22			%			2022
Net interest income			10,735			10,185			5.4			20,920			18,409			13.6			38,619
Total income			14,299			13,935			2.6			28,234			25,120			12.4			52,154
Net operating income			7,965			7,790			2.2			15,755			13,685			15.1			28,251
Profit before tax			4,234			4,095			3.4			8,329			7,915			5.2			15,250
Profit attributable to the parent			2,670			2,571			3.9			5,241			4,894			7.1			9,605
Changes in constant euros:
Q2'23 / Q1'23: NII: +6.1%; Total income: +2.7%; Net operating income: +2.0%; Profit before tax: +3.6%; Attributable profit: +4.5%.
H1'23 / H1'22: NII: +14.9%; Total income: +13.1%; Net operating income: +15.2%; Profit before tax: +5.0%; Attributable profit: +7.2%.

SOLVENCY (%)			Jun-23			Mar-23						Jun-23			Jun-22						Dec-22
Fully-loaded CET1 ratio			12.2			12.2						12.2			12.0						12.0
Fully-loaded total capital ratio			15.9			15.8						15.9			15.9						15.8

CREDIT QUALITY (%)			Q2'23			Q1'23						H1'23			H1'22						2022
Cost of risk2			1.08			1.05						1.08			0.83						0.99
NPL ratio			3.07			3.05						3.07			3.05						3.08
NPL coverage ratio			68			68						68			71						68

January - June 2023						3

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

MARKET CAPITALIZATION AND SHARES			Jun-23			Mar-23			%			Jun-23			Jun-22			%			Dec-22
Shares (millions)			16,184			16,454			(1.6)			16,184			16,794			(3.6)			16,794
Share price (euros)			3.385			3.426			(1.2)			3.385			2.688			25.9			2.803
Market capitalization (EUR million)			54,783			56,371			(2.8)			54,783			45,143			21.4			47,066
Tangible book value per share (euros)			4.57			4.41						4.57			4.24						4.26
Price / Tangible book value per share (X)			0.74			0.78						0.74			0.63						0.66

CUSTOMERS (thousands)			Q2'23			Q1'23			%			H1'23			H1'22			%			2022
Total customers			163,756			161,155			1.6			163,756			154,402			6.1			159,844
Active customers			99,472			99,261			0.2			99,472			97,806			1.7			99,190
Loyal customers			27,948			27,464			1.8			27,948			26,511			5.4			27,456
Digital customers			52,517			51,919			1.2			52,517			49,871			5.3			51,471
Digital sales / Total sales (%)			56.0			54.7						55.3			55.5						55.1

OTHER DATA			Jun-23			Mar-23			%			Jun-23			Jun-22			%			Dec-22
Number of shareholders			3,802,161			3,881,758			(2.1)			3,802,161			3,985,638			(4.6)			3,915,388
Number of employees			212,409			210,169			1.1			212,409			200,651			5.9			206,462
Number of branches			8,823			8,993			(1.9)			8,823			9,193			(4.0)			9,019

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 factors that are outside the ordinary course of our business, or have been reclassified within the underlying income statement. 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 their 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 2022 Annual Financial Report, published in the CNMV on 28 February 2023, our 20-F report for the year ending 31 December 2022 filed with the SEC in the United States on 1 March 2023 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						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Our business model is based on three pillars

01. Customer focus

02. Our scale

03. Diversification

Digital bank with branches

Local and global scale

Geographic and business diversification. Solid and diversified balance sheet

Transform our business and operating model through our global technology initiatives to build a digital bank with branches that provides access to financial services for our customers through several channels.

In-market scale in each of our core markets in volumes combined with our global scale support greater profitability and provide a competitive advantage over local peers.

Our well-balanced diversification between developing and mature markets, as well as between business and customer segments, delivers recurrent pre-provision profit with low volatility.

Top 3 NPS1

Top 3 in lending2 in 9 of our markets

Contribution to Group profit3

in 5 markets

164 mn total customers

99 mn active customers

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.
			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.

1.NPS – internal benchmark of individual customers' satisfaction audited by Stiga/Deloitte in H1'23.

2.Market share in lending as of March 2023 including only privately-owned banks. Digital Consumer Bank (DCB) refers to auto in Europe.

3.H1'23 attributable profit by region. Operating areas excluding the Corporate Centre.

January - June 2023						5

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Group performance

Highlights of the period

			PROFIT

						u			In Q2 2023, attributable profit amounted to EUR 2,670 million, 4% more than in the previous quarter and 14% more than in Q2 2022 (+17% in constant euros).
						u			In H1 2023, attributable profit was EUR 5,241 million, 7% higher than in the same period in 2022 (+7% in constant euros) and 12% higher if we exclude the temporary levy on revenue obtained in Spain and DCB in Q1 2023.
						u			Sustained earnings per share growth, which rose 13% compared to H1 2022 to EUR 30.8 cents, boosted by the share buybacks in the last 12 months.

			VALUE CREATION

						u			Profitability improved in the quarter and year-on-year, with RoTE of 14.5%, compared to 13.7% in first half of 2022, supported by double-digit revenue growth.
						u			The acceleration of structural changes towards a simpler and more integrated model through One Transformation, which we are expanding across the Group, is driving efficiency and profitable growth.
						u			The efficiency ratio was 44.2%, improving 1.3 pp compared to H1 2022, driven mainly by Europe where it decreased 6.6 pp.
						u			The AGM approved a final cash dividend of EUR 5.95 cents per share, paid on 2 May 2023. The total cash dividend against 2022 results was EUR 11.78 cents per share, 18% more than in 2021. This payment was complemented by two already executed share buyback programmes, amounting to EUR 1.9 billion. The bank has repurchased close to 7% of its outstanding shares since November 2021.
						u			Together, the shareholder remuneration against 2022 results was EUR 3,842 million1, equivalent to approximately 40% of the underlying profit in 2022.
						u			In 2023, the board approved the new shareholder remuneration policy, increasing payout from 40% in 2022 to 50% of attributable profit2 in 2023.
						u			As of June 2023, TNAV per share was EUR 4.57. Including the last two cash dividends against 2022 results (EUR 5.83 cents and EUR 5.95 cents), TNAV + dividend per share increased 11% since June 2022 (+4% quarter-on-quarter).

1.Including the cash dividend and the share buyback programmes.

2.Target payout is c.50% of Group reported profit (excluding non-cash, non-capital ratios impact items), distributed approximately 50% in cash dividends and 50% in share buybacks. Execution of the shareholder remuneration policy is subject to future corporate and regulatory decisions and approvals.

6						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Group performance

			GROWTH

						u			Total customers amounted to 164 million, 9 million more than in June 2022.
						u			Active customers reached 99 million, increasing 2 million in the last 12 months. We have 52.5 million digital customers, a 5% increase year-on-year.
						u			Business volumes reflect the impact that the economic and interest rate environment are having on customer behaviour. Loans and advances to customers increased 1% year-on-year. They remained flat in constant euros as the rise in North America, South America and DCB was offset by the reduction in Europe (lower business demand and mortgage prepayments). Customer funds rose 5% year-on-year (+4% in constant euros, having increased EUR 3,370 million in the last quarter). Deposits increased both in individuals and SCIB, with a stable structure where approximately 75% are transactional1.
						u			Positive sensitivity to higher interest rates, margin management and higher customer activity were reflected in the 14% rise in net interest income and 4% increase in net fee income (+15% and +5%, respectively, in constant euros).
						u			Global businesses, PagoNxt and Auto accounted for 39% of revenue and 42% of net fee income.

			STRENGTH

						u			Credit quality remained robust driven by the good performance in employment in all regions. The NPL ratio stood at 3.07%, 2 bps higher than June 2022. Total loan-loss reserves reached EUR 23,902 million, resulting in a total coverage ratio of impaired assets of 68%.
						u			Group's cost of risk stood at 1.08% (1.05% in March 2023 and 0.83% in June 2022). The CoR in the UK (0.11%), DCB (0.54%) and Mexico (2.13%) were up from low levels, Poland is impacted by CHF mortgages, in the US (1.57%) normalization is slower and performing better than expected, and CoR in Brazil (4.74%) decreased slightly in the quarter.
						u			The fully-loaded CET1 ratio ended the quarter at 12.2%. In the quarter, there were 21 bps of gross organic generation and an 11 bp charge for a future cash dividend payment against Q2 2023 results2 (in line with the 50% target payout), while we invest in profitable growth opportunities. In addition, new lending had a RoRWA of 2.9%, equivalent to an RoTE above 15%.

			LIQUIDITY

						u			Solid liquidity position with regulatory ratios well above the 100% minimum requirement. The Group liquidity coverage ratio (LCR) in the first quarter increased slightly to 158%.
						u			The liquidity buffer, comprising high quality liquid assets (HQLAs), exceeded EUR 317 billion in June 2023, of which 97% were level 1. EUR 204 billion of the total liquidity buffer was in cash4, equivalent to around 20% of our deposit base.
1. Deposits from individuals and SMEs plus other operational corporate deposits.
2. The implementation of the shareholder remuneration policy is subject to future corporate and regulatory decisions and approvals.
3. Provisional data.
4. Cash, central banks reserves and deposit facility with central banks.

January - June 2023						7

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Income statement

			GRUPO SANTANDER RESULTS

Grupo Santander. Summarized income statement
EUR million
									Change												Change
			Q2'23			Q1'23			%			% excl. FX			H1'23			H1'22			%			% excl. FX
Net interest income			10,524			10,396			1.2			1.9			20,920			18,409			13.6			14.9
Net fee income1			3,060			3,043			0.6			0.8			6,103			5,852			4.3			5.2
Gains or losses on financial assets and liabilities and exchange differences2			587			715			(17.9)			(14.3)			1,302			743			75.2			88.2
Dividend income			319			63			—			—			382			335			14.0			13.7
Share of results of entities accounted for using the equity method			170			126			34.9			33.3			296			312			(5.1)			(6.1)
Other operating income/expenses3			(572)			(421)			35.9			64.2			(993)			(531)			87.0			157.4
Total income			14,088			13,922			1.2			1.3			28,010			25,120			11.5			12.2
Operating expenses			(6,334)			(6,145)			3.1			3.7			(12,479)			(11,435)			9.1			10.6
Administrative expenses			(5,517)			(5,356)			3.0			3.6			(10,873)			(9,993)			8.8			10.2
Staff costs			(3,358)			(3,245)			3.5			3.8			(6,603)			(5,948)			11.0			12.1
Other general administrative expenses			(2,159)			(2,111)			2.3			3.1			(4,270)			(4,045)			5.6			7.4
Depreciation and amortization			(817)			(789)			3.5			4.4			(1,606)			(1,442)			11.4			13.2
Provisions or reversal of provisions			(688)			(642)			7.2			7.1			(1,330)			(935)			42.2			52.3
Impairment or reversal of impairment of financial assets not measured at fair value through profit or loss (net)			(2,936)			(3,301)			(11.1)			(11.9)			(6,237)			(4,763)			30.9			29.9
Impairment on other assets (net)			(70)			(22)			218.2			241.3			(92)			(61)			50.8			53.4
Gains or losses on non-financial assets and investments, net			251			26			—			—			277			(4)			—			—
Negative goodwill recognized in results			—			—			—			—			—			—			—			—
Gains or losses on non-current assets held for sale not classified as discontinued operations			(53)			(6)			—			—			(59)			(7)			742.9			818.3
Profit or loss before tax from continuing operations			4,258			3,832			11.1			11.3			8,090			7,915			2.2			2.0
Tax expense or income from continuing operations			(1,314)			(967)			35.9			35.3			(2,281)			(2,374)			(3.9)			(4.5)
Profit from the period from continuing operations			2,944			2,865			2.8			3.2			5,809			5,541			4.8			4.8
Profit or loss after tax from discontinued operations			—			—			—			—			—			—			—			—
Profit for the period			2,944			2,865			2.8			3.2			5,809			5,541			4.8			4.8
Profit attributable to non-controlling interests			(274)			(294)			(6.8)			(8.0)			(568)			(647)			(12.2)			(13.3)
Profit attributable to the parent			2,670			2,571			3.9			4.5			5,241			4,894			7.1			7.2
EPS (euros)			0.16			0.15			5.4						0.31			0.27			13.4
Diluted EPS (euros)			0.16			0.15			5.4						0.31			0.27			13.2
Memorandum items:
Average total assets			1,766,099			1,742,316			1.4						1,754,207			1,666,474			5.3
Average stockholders' equity			92,383			90,353			2.2						91,368			89,125			2.5

NOTE: The summarized income statement groups some lines of the consolidated income statement on page 87 as follows:
1.‘Commission income’ and ‘Commission expense’.
2.‘Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net’; ‘Gain or losses on financial assets and liabilities held for trading, net’; ‘Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss’; ‘Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net’; ‘Gain or losses from hedge accounting, net’; and ‘Exchange differences, net’.
3.‘Other operating income’; ‘Other operating expenses’; ’Income from assets under insurance and reinsurance contracts’; and ‘Expenses from liabilities under insurance and reinsurance contracts’.

8						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Income statement

Executive summary

Profit

Performance

Record half-year profit following Q2 which maintained growth trends

Trends seen at the beginning of the year continued: revenue growth, improved efficiency and controlled cost of risk

Attributable profit

Total income

Costs

Provisions

EUR 5,241 mn

+7% in euros

+12%

+9%

+22%

in euros

+7% in constant euros

+13%

+11%

+21%

in constant euros

Efficiency

Profitability

The Group's efficiency ratio improved driven by Europe

Profitability continued to improve

Group

Europe

RoTE

RoRWA

44.2%

41.9%

14.5%

1.88%

-1.3 pp

-6.6 pp

+0.8 pp

+0.02 pp

Changes vs. H1 2022.

Results performance compared to H1 2022

The Group presents, both at the total Group level and for each of the business units, the changes in euros registered 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 negative impact of 1 pp in revenue and costs.

Total income

Total income amounted to EUR 28,010 million, up 12% compared to H1 2022. In constant euros, total income also increased 12%. Net interest income and net fee income accounted for 96% of total income. By line:

•Net interest income amounted to EUR 20,920 million, 14% higher than H1 2022. Stripping out the exchange rate impact, growth was 15%, mainly due to greater volumes in some countries, higher interest rates and margin management.

By region and in constant euros, of note was the net interest income growth across Europe (+32%), due to the strong positive sensitivity to interest rate rises in our balance sheet in euros. By country: +57% in Spain, +11% in the UK, +69% in Portugal and +35% in Poland.

NII increased 4% in North America, driven mainly by Mexico (+12%) while it remained flat in the US.

Net interest income
EUR million
			constant euros

It was up 6% in South America. Year-on-year volume increases and higher interest rates were not reflected in growth in all countries due to the negative sensitivity to rate rises in Brazil and Chile.

NII increased 3% at DCB, as higher volumes offset the initial negative impact from higher interest rates, and the Corporate Centre recorded lower losses due to higher remuneration of the liquidity buffer.

•Net fee income increased 4% compared to H1 2022, reaching EUR 6,103 million. In constant euros, it was 5% higher.

By region, net fee income in North America and South America rose 7% and 16%, respectively. It decreased 3% in Europe due to lower credit volumes and commercial campaigns.

Our scale and global businesses, together with our financing capabilities in auto and payments, generated greater activity for our country units and the Group, which was reflected in net fee income growth. These business represented 42% of the Group's total net fee income.

In Santander Corporate & Investment Banking (SCIB), net fee income increased 15%, with widespread growth across its core businesses.

Net fee income
EUR million
			constant euros

January - June 2023						9

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Income statement

Net fee income from payments was also strong, increasing 14% in PagoNxt, with total payments volumes increasing 25% year-on-year.

In Wealth Management & Insurance (WM&I), total net fee income generated (including fees ceded to the commercial network) increased 2%, affected by slower growth and a change in mix in AuMs in Asset Management. On the other hand, there were good performances in Insurance and Private Banking.

In Auto, net fee income increased 4% driven by the good performance in Brazil and Mexico partially offset by the regulatory change capping fees in Germany. In the quarter, the trend improved (+7%).

•Gains on financial transactions stood at EUR 1,302 million (EUR 743 million in the first half of 2022), driven mainly by SCIB, DCB and lower losses in the Corporate Centre (driven by higher negative results from the FX hedge in H1 2022).

•Dividend income was EUR 382 million (EUR 335 million in H1 2022).

•The results of entities accounted for using the equity method also remained stable (EUR 296 million compared to EUR 312 million in H1 2022).

•Other operating income recorded a loss of EUR 993 million (compared to a EUR 531 million loss in H1 2022), owing to the hyperinflation adjustment in Argentina and lower leasing income in the US. This line was affected by the EUR 224 million charge related to the temporary levy in Spain and DCB recorded in Q1 2023.

In summary, total income increased in all regions, DCB and global businesses. The Corporate Centre also increased, due to the higher liquidity buffer remuneration and the lower negative impact from the FX hedge.

Total income
EUR million
			constant euros

Costs

Operating expenses amounted to EUR 12,479 million, 9% higher than H1 2022 (+11% in constant euros), due to the increase in inflation. In real terms (excluding the impact of average inflation), costs fell 1% in constant euros.

Our cost management continued to focus on improving the efficiency ratio, and as a result we remained among the most efficient banks in the world. The efficiency ratio stood at 44.2% at the end of H1 2023, a 1.3 pp improvement on the first half of 2022 and 1.6 pp better than full-year 2022.

Our transformation plan, One Transformation, continued to progress across our footprint, reflected in greater operating productivity, and better business dynamics.

The cost trends by region and market in constant euros were as follows:

•In Europe, costs were up 7%. In real terms, costs decreased 2%, with falls in the UK (-5%), Spain (-1%) and Portugal (-2%), whereas costs increased 3% in Poland due to the very competitive labour market and the impact from investments in digitalization. The region's efficiency ratio stood at 41.9%, improving almost 7 pp year-on-year.

•In North America, costs increased 8%. In real terms, they were up 1%, due to investments in digitalization and technology and other transformation initiatives underway. The efficiency ratio stood at 47.7%.

•In South America, the rise in costs (+20%) was significantly distorted by soaring average inflation in the region (21% due to 96% inflation in Argentina) which was reflected in salary increases, directly linked to inflation. In real terms, costs remained stable. The efficiency ratio was 39.1%, maintaining our position as a leader in the sector.

•Digital Consumer Bank's costs were 7% higher due to inflation, strategic transformational investments and business growth. In real terms, costs fell 1%. The efficiency ratio stood at 49.4%.

Operating expenses
EUR million
			constant euros

10						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Income statement

Provisions or reversal of provisions

Provisions (net of provisions reversals) amounted to EUR 1,330 million (EUR 935 million in H1 2022) mainly driven by the UK, Poland and Brazil.

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 6,237 million (EUR 4,763 million in H1 2022).

This comparison was mainly affected by the provisions resulting from the charges in Poland for CHF mortgages, the increase in the US (due to normalization) and higher provisions recorded in Brazil.

Impairment on other assets (net)

The impairment of other assets (net) was EUR 92 million, compared to an impairment of EUR 61 million in H1 2022.

Gains or losses on non-financial assets and investments (net)

Net gains on non-financial assets and investments were EUR 277 million in H1 2023 (loss of EUR 4 million in H1 2022).

Net loan-loss provisions
EUR million
			constant euros

Negative goodwill recognized in results

No negative goodwill was recorded in the first half of 2023 or 2022.

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, recorded a EUR 59 million loss in H1 2023 (EUR 7 million loss in H1 2022).

Profit before tax

Profit before tax was EUR 8,090 million in H1 2023, +2% year-on-year. In constant euros, it also increased 2%, affected by higher loan-loss provisions and impairments and the temporary levy, offsetting the good top line performance (double-digit growth in total income minus costs).

Income tax

Total income tax was EUR 2,281 million (EUR 2,374 million in H1 2022).

Profit attributable to non-controlling interests

Profit attributable to non-controlling interests amounted to EUR 568 million, down 12% year-on-year (-13% in constant euros), due to South America and DCB.

Profit attributable to the parent

Profit attributable to the parent amounted to EUR 5,241 million in H1 2023, compared to EUR 4,894 million in H1 2022. These results do not fully reflect profit performance due to the temporary levy mentioned in other sections of the report.

RoTE stood at 14.5% (13.7% in H1 2022), RoRWA at 1.88% (1.86% in H1 2022) and earnings per share stood at EUR 0.31 (EUR 0.27 in H1 2022).

January - June 2023						11

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Income statement

Underlying profit attributable to the parent

Profit attributable to the parent and underlying profit were the same in the first half of 2023 (EUR 5,241 million), as profit was not affected by results that fell outside the ordinary course of our business, but there was a reclassification of certain items under some headings of the underlying income statement to better understand the business trends. These items recorded are:

•The temporary levy on revenue in Spain in the first quarter of 2023, totalling EUR 224 million, which was moved from total income to other gains (losses) and provisions.

•Provisions to strengthen the balance sheet in Brazil in the first quarter of 2023, totalling EUR 235 million, net of tax and minority interests.

In the first half of 2022, profit attributable to the parent and underlying profit were also the same (EUR 4,894 million), as profit was not affected by results that fell outside the ordinary course of our business.

For more details, see the 'Alternative Performance Measures' section in the appendix of this report.

Attributable profit and underlying profit increased 7% in euros and constant euros compared to the first half of 2022.

This growth was mainly boosted by solid revenue performance, which increased 12% (+13% in constant euros) compared to the first half of 2022, and the efficiency improvement, which stood at 44.2%.

Santander's net operating income was EUR 15,755 million, 15% higher year-on-year. In constant euros, it rose 15% as follows:

•In Europe, net operating income increased 39% with strong improvements in all markets, boosted by revenue growth (+23%) and efficiency gains.

•In North America, net operating income rose 3%. It decreased 9% in the US (mainly due to lower leasing income and higher costs) and was up 22% in Mexico, owing to stronger net interest income and net fee income.

•In South America, net operating income decreased 3%, driven by further falls in net interest income in both Brazil and Chile. Net interest income increased strongly in Argentina and Uruguay.

•In Digital Consumer Bank, net operating income increased 3%. Revenue growth was driven net interest income and higher leasing income and gains on financial transactions. Costs rose due to strategic transformation investments and business growth, as already mentioned.

•In the Corporate Centre, net operating income increased EUR 395 million, driven by the improvement of net interest income (higher liquidity buffer remuneration) and gains on financial transactions (FX hedge costs in 2022).

Net loan-loss provisions continued with the normalization that began last year, rising 22% (+21% in constant euros). This growth was reflected in an increase in the cost of risk to 1.08%, in line with the Group's target for the year.

Summarized underlying income statement
EUR million									Change												Change
			Q2'23			Q1'23			%			% excl. FX			H1'23			H1'22			%			% excl. FX
Net interest income			10,735			10,185			5.4			6.1			20,920			18,409			13.6			14.9
Net fee income			3,060			3,043			0.6			0.8			6,103			5,852			4.3			5.2
Gains (losses) on financial transactions 1			587			715			(17.9)			(14.3)			1,302			743			75.2			88.2
Other operating income			(83)			(8)			—			—			(91)			116			—			—
Total income			14,299			13,935			2.6			2.7			28,234			25,120			12.4			13.1
Administrative expenses and amortizations			(6,334)			(6,145)			3.1			3.7			(12,479)			(11,435)			9.1			10.6
Net operating income			7,965			7,790			2.2			2.0			15,755			13,685			15.1			15.2
Net loan-loss provisions			(2,898)			(2,873)			0.9			0.0			(5,771)			(4,735)			21.9			21.1
Other gains (losses) and provisions			(833)			(822)			1.3			1.4			(1,655)			(1,035)			59.9			68.6
Profit before tax			4,234			4,095			3.4			3.6			8,329			7,915			5.2			5.0
Tax on profit			(1,264)			(1,230)			2.8			2.4			(2,494)			(2,374)			5.1			4.5
Profit from continuing operations			2,970			2,865			3.7			4.1			5,835			5,541			5.3			5.2
Net profit from discontinued operations			—			—			—			—			—			—			—			—
Consolidated profit			2,970			2,865			3.7			4.1			5,835			5,541			5.3			5.2
Non-controlling interests			(300)			(294)			2.0			0.5			(594)			(647)			(8.2)			(9.5)
Profit attributable to the parent			2,670			2,571			3.9			4.5			5,241			4,894			7.1			7.2

1. Includes exchange differences.

12						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Income statement

Underlying results performance compared to the previous quarter

Underlying profit attributable to the parent and profit attributable to the parent were also the same (EUR 2,670 million) in Q2 2023, as profit was not affected by results outside the ordinary course of our business. However, Q2 2023 was affected by the reversal of a tax liability release recorded in Brazil in Q1 2023. After taxes and minority interests, the negative impact was EUR 235 million and was recorded in the other gains (losses) and provisions line.

This profit includes the EUR 205 million (net of tax) contribution to the Single Resolution Fund (SRF), which is usually recorded in the second quarter in Spain, Portugal, Digital Consumer Bank and the Corporate Centre and the banking tax in Portugal (EUR 38 million).

As such, quarter-on-quarter profit growth was 4%.

In constant euros, profit increased 4%. The performance of the main lines of the income statement was as follows:

•Total income rose in the quarter (+3%) due to good dynamics in all regions:

–Net interest income was up 6%, impacted by the positive sensitivity to higher interest rates in our balance sheet in the recent months, mainly in Europe (+9%). NII increased 9% in South America driven by Argentina and Uruguay, and 1% in North America driven by Mexico.

Net operating income
EUR million
			constant euros

–Net fee income rose 1%, driven by the good performance in South America, North America and DCB, which offset the decreases in Europe (seasonal effect in SCIB).

–Other income decreased due to both gains on financial transactions (very high in Q1 2023), and charges related to the SRF contribution.

•Operating expenses increased 4%, with increases mainly in South America due to Argentina.

•Net loan-loss provisions were stable in the quarter, decreasing in the US, Spain, the UK and Chile and increasing in Poland, Brazil and DCB.

•Other gains (losses) and provisions recorded a negative result of EUR 833 million. In the first quarter of 2023, the loss was EUR 822 million, which included the temporary levy charge of EUR 224 million in Spain.

Profit attributable to the parent
EUR million
			constant euros

January - June 2023						13

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Balance sheet

Grupo Santander. Condensed balance sheet
EUR million
									Change
Assets			Jun-23			Jun-22			Absolute			%			Dec-22
Cash, cash balances at central banks and other demand deposits			207,546			211,276			(3,730)			(1.8)			223,073
Financial assets held for trading			183,834			163,235			20,599			12.6			156,118
Debt securities			55,823			41,668			14,155			34.0			41,403
Equity instruments			13,349			10,686			2,663			24.9			10,066
Loans and advances to customers			11,051			15,090			(4,039)			(26.8)			9,550
Loans and advances to central banks and credit institutions			35,998			27,076			8,922			33.0			28,097
Derivatives			67,613			68,715			(1,102)			(1.6)			67,002
Financial assets designated at fair value through profit or loss1			15,441			16,870			(1,429)			(8.5)			14,702
Loans and advances to customers			6,782			7,755			(973)			(12.5)			6,642
Loans and advances to central banks and credit institutions			627			1,396			(769)			(55.1)			673
Other (debt securities an equity instruments)			8,032			7,719			313			4.1			7,387
Financial assets at fair value through other comprehensive income			86,756			91,998			(5,242)			(5.7)			85,239
Debt securities			76,010			82,664			(6,654)			(8.0)			75,083
Equity instruments			1,729			2,131			(402)			(18.9)			1,941
Loans and advances to customers			8,714			7,203			1,511			21.0			8,215
Loans and advances to central banks and credit institutions			303			—			303			—			—
Financial assets measured at amortized cost			1,180,302			1,129,690			50,612			4.5			1,147,044
Debt securities			91,559			57,520			34,039			59.2			73,554
Loans and advances to customers			1,018,497			1,007,673			10,824			1.1			1,011,597
Loans and advances to central banks and credit institutions			70,246			64,497			5,749			8.9			61,893
Investments in subsidiaries, joint ventures and associates			7,679			7,665			14			0.2			7,615
Tangible assets			34,159			34,640			(481)			(1.4)			34,073
Intangible assets			19,528			18,349			1,179			6.4			18,645
Goodwill			14,126			13,877			249			1.8			13,741
Other intangible assets			5,402			4,472			930			20.8			4,904
Other assets2			45,248			49,117			(3,869)			(7.9)			48,150
Total assets			1,780,493			1,722,840			57,653			3.3			1,734,659
Liabilities and shareholders' equity
Financial liabilities held for trading			134,888			114,406			20,482			17.9			115,185
Customer deposits			19,921			13,799			6,122			44.4			12,226
Debt securities issued			—			—			—			—			—
Deposits by central banks and credit institutions			30,356			14,860			15,496			104.3			15,553
Derivatives			62,259			67,152			(4,893)			(7.3)			64,891
Other			22,352			18,595			3,757			20.2			22,515
Financial liabilities designated at fair value through profit or loss			36,220			24,726			11,494			46.5			40,268
Customer deposits			27,297			15,366			11,931			77.6			31,143
Debt securities issued			5,684			5,597			87			1.6			5,427
Deposits by central banks and credit institutions			3,239			3,763			(524)			(13.9)			3,698
Other			—			—			—			—			—
Financial liabilities measured at amortized cost			1,446,882			1,427,721			19,161			1.3			1,423,858
Customer deposits			966,560			928,525			38,035			4.1			966,353
Debt securities issued			285,869			255,049			30,820			12.1			274,912
Deposits by central banks and credit institutions			149,348			203,511			(54,163)			(26.6)			145,534
Other			45,105			40,636			4,469			11.0			37,059
Liabilities under insurance contracts			17,584			16,955			629			3.7			16,426
Provisions			8,389			8,590			(201)			(2.3)			8,149
Other liabilities3			34,486			32,980			1,506			4.6			33,188
Total liabilities			1,678,449			1,625,378			53,071			3.3			1,637,074
Shareholders' equity			127,258			122,037			5,221			4.3			124,732
Capital stock			8,092			8,397			(305)			(3.6)			8,397
Reserves (including treasury stock)4			113,925			108,746			5,179			4.8			107,709
Profit attributable to the Group			5,241			4,894			347			7.1			9,605
Less: dividends			—			—			—			—			(979)
Other comprehensive income			(33,789)			(32,526)			(1,263)			3.9			(35,628)
Minority interests			8,575			7,951			624			7.8			8,481
Total equity			102,044			97,462			4,582			4.7			97,585
Total liabilities and equity			1,780,493			1,722,840			57,653			3.3			1,734,659

NOTE: The condensed balance sheet groups some lines of the consolidated balance sheet on pages 85 and 86 as follows:
1.'Non-trading financial assets mandatorily at fair value through profit or loss' and 'Financial assets designated at fair value through profit or loss'.
2.‘Hedging derivatives’; ‘Changes in the fair value of hedged items in portfolio hedges of interest risk’; 'Assets under insurance or reinsurance contracts'; ‘Tax assets’; ‘Other assets’; and 'Non-current assets held for sale’.
3.‘Hedging derivatives’; ‘Changes in the fair value of hedged items in portfolio hedges of interest rate risk’; ‘Tax liabilities’; ‘Other liabilities’; and ‘Liabilities associated with non-current assets held for sale‘.
4.‘Share premium’; ‘Equity instruments issued other than capital’; ‘Other equity’; ‘Accumulated retained earnings’; ‘Revaluation reserves’; ‘Other reserves’; and ‘Own shares (-)’.

14						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Balance sheet

			GRUPO SANTANDER BALANCE SHEET

Executive summary

Gross loans and advances to customers (excl. reverse repos)

Customer funds (deposits excl. repos + mutual funds)

Credit performance reflects the impact of the macroeconomic environment and rising interest rates on customer behaviour

Customer funds continued to grow year-on-year. Stable quarter with a recovery in balances from individuals

Gross loans and advances to customers (excl. reverse repos)

Customer funds (deposits excl. repos + mutual funds)

1,022

-0.5% QoQ

1,134

+0.3% QoQ

EUR billion

+0.1% YoY

EUR billion

+4.2% YoY

è By segment:

è By product:

Year-on-year growth in individuals offset by lower corporate demand

Deposits increased 4% year-on-year due to a sharp increase in time deposits driven by higher interest rates

Individuals

SMEs and corporates

CIB

Demand

Time

Mutual funds

+2%

-2%

-4%

-7%

+47%

+4%

Note: changes in constant euros.

Loans and advances to customers

Loans and advances to customers stood at EUR 1,045,044 million as at 30 June 2023, having increased 0.4% in the quarter and +0.7% in the last 12 months.

For the purpose of analysing traditional commercial banking loans, the Group uses gross loans and advances to customers excluding reverse repos (EUR 1,022,191 million). Additionally, 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, decreased 0.5%, as follows:

•2% decline in Europe with falls across all countries, due to higher interest rates, higher prepayment volumes and lower loans in CIB.

•Loans in North America increased, driven by Mexico (+2%) while they remained stable in the US.

•In South America, loans increased 1%, up 32% in Argentina and 5% in Uruguay, but they remained flat in Brazil and Chile.

•Loans at Digital Consumer Bank (DCB) increased 1%, growing at Santander Consumer Finance (+1%) and Openbank (+5%).

Gross loans and advances to customers (excl. reverse repos)
EUR billion

+1		%	1a
Jun-23 / Jun-22

1. In constant EUR: +0.1%.

Compared to June 2022, gross loans and advances to customers (excluding reverse repos and in constant euros) remained stable, as follows:

•In Europe, volumes decreased 5% due to falls in most countries: -6% in Spain and -4% in Portugal, mainly due to lower corporate loans and mortgage prepayments, and -4% in the UK, affected by the impact of high interest rates on the mortgage market. They remained stable in Poland.

•Loans rose 5% in North America. In the US they increased 6% propelled by CIB, Multifamily and auto financing, while Mexico was up 3% driven by the increase in loans to individuals.

•Growth in South America was 8%. In Argentina, lending increased 116% driven by consumer lending, SMEs, and CIB. In Brazil, loans climbed 6% driven by the positive performance in corporates and institutions. In Chile, they increased 4%, driven by mortgages. In Uruguay, they rose 11%.

•At DCB, volumes increased 8%, with generalized growth across countries. Openbank loans rose 13%.

As at June 2023, gross loans and advances to customers excluding reverse repos maintained a balanced structure between individuals (62%), SMEs and corporates (25%) and CIB (13%).

Gross loans and advances to customers (excl. reverse repos)
% operating areas. June 2023

January - June 2023						15

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Balance sheet

Customer funds

Customer deposits amounted to EUR 1,013,778 million in June 2023, increasing 1% quarter-on-quarter and +6% 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 1,134,116 million in June 2023. The comments below do not include the exchange rate impact.

•In the quarter, customer funds increased EUR 3,370 million in constant euros, as follows:

–By product, customer deposits excluding repos increased EUR 2,825 million and mutual funds rose EUR 545 million.

–By primary segment, customer funds remained practically stable in the three regions and increased in DCB. By country, customer funds grew in Poland, Mexico and Argentina which were offset by declines in Portugal, the US and Brazil.

•Compared to June 2022, customer funds were up 4% in constant euros:

–By product, customer deposits excluding repos were up 4%. There was a strong increase in time deposits (+47%), growing significantly across all markets (except in Portugal) to the detriment of demand deposits which fell 7% with declines in most countries, except in Mexico and Argentina. Mutual funds increased 4%.

–Customer funds increased 7% in South America (+3% in Brazil, +5% in Chile and +107% in Argentina) and rose 10% in North America (+11% in the US and +8% in Mexico). They rose 2% in Europe due to the increases in Spain (+3%) and Poland (+10%), that more than offset the 8% decrease in Portugal (public sector financing instruments impact). In the UK, they remained stable.

–Positive performance also in DCB, whose funds increased 11%.

With this performance, the weight of demand deposits as a percentage of total customer funds was 59%, while time deposits accounted for 24% of the total and mutual funds 17%.

Customer funds
EUR billion

+5		%	1a
+5		%
+5		%
•Total
• Mutual funds
•Deposits exc. repos
Jun-23 / Jun-22

1. 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 2023, the Group issued:

•Medium- and long-term senior debt placed in the market of EUR 10,730 million and covered bonds amounting to EUR 7,375 million (including the first ECA covered bond placed in the market).

•There were EUR 6,828 million of securitizations placed in the market.

•TLAC eligible instruments issued amounted to EUR 4,455 million (of which EUR 2,955 million was senior non-preferred and EUR 1,500 million was subordinated debt).

•Maturities of medium- and long-term debt totalled EUR 13,175 million.

The net loan-to-deposit ratio was 103% (108% in June 2022). The ratio of deposits plus medium- and long-term funding to the Group’s loans was 121%, underscoring the comfortable funding structure. The liquidity coverage ratio (LCR) was an estimated 158% in June (152% in March 2023).

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 confirmed its A2 long-term and P-1 short-term ratings in July and maintained its stable outlook above the rating of the Kingdom of Spain; Standard & Poor's (S&P) A+ long-term rating and A-1 short-term rating; and DBRS A High and R-1 Medium short-term. DBRS and Fitch maintained their stable outlooks, above the sovereign's outlook, while S&P also maintained its outlook but in line with the sovereign.

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 2023

16						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Solvency ratios

			SOLVENCY RATIOS

Executive summary

Fully-loaded capital ratio

Fully-loaded CET1 ratio

Fully-loaded CET1 ratio exceeded 12% at the end of June 2023

We continued to generate capital organically in the quarter, backed by profit

Fully-loaded CET1 performance (%)

Gross organic generation

+21 bps

Cash dividend accrual1

11 bps

TNAV per share

TNAV per share was EUR 4.57, increasing 11% year-on-year including both cash dividends per share paid in November 2022 and May 20231.

At the end of June 2023, the total phased-in capital ratio (applying the IFRS 9 transitional arrangements) stood at 16.0% and the phased-in CET1 ratio at 12.3%. We comfortably meet the levels required by the European Central Bank on a consolidated basis (estimated 13.3% for the total capital ratio and 9.1% for the CET1 ratio)2. This results in a distance to the maximum distributable amount (MDA) of 270 bps and a CET1 management buffer of 316 bps.

The total fully-loaded capital ratio stood at 15.9% and the fully-loaded CET1 ratio at 12.2%.

In the quarter, there were 21 bps of gross organic generation and an 11 bp charge for a future cash dividend payment against the profit achieved in the second quarter of 2023 (in line with a 50% target payout). We remain focused on profitable growth, reflected in an average front book RoTE above 15% in the first six months of the year.

There was a negative 7 bp impact from the repurchase of minority interests in Mexico and the MCE Bank Germany acquisition.

Lastly, the TNAV per share ended June 2023 at EUR 4.57. If we include the two cash dividends paid against 2022 (EUR 11.78 cents paid in November 2022 and May 2023), TNAV plus cash dividend per share increased 11% in the last twelve months.

Lastly, the fully-loaded leverage ratio stood at 4.79%, and the phased-in at 4.81%.

Eligible capital. June 2023
EUR million
			Fully-loaded			Phased-in
CET1			77,216			77,628
Basic capital			86,072			86,485
Eligible capital			100,539			101,154
Risk-weighted assets			631,021			631,149
			%			%
CET1 capital ratio			12.2			12.3
Tier 1 capital ratio			13.6			13.7
Total capital ratio			15.9			16.0

Fully-loaded CET1 ratio performance
%

Note: 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.

1.The implementation of the shareholder remuneration policy is subject to future corporate and regulatory decisions and approvals.

2.According to recent a resolution draft from Banco de España, our D-SIB buffer is expected to increase from 1% to 1.25% from January 2024 following a change in methodology. Institutions must hold capital at the consolidated level for the higher of the G-SIB and D-SIB requirements. Santander currently applies a 1% CET1 surcharge, globally (G-SIB) and locally (D-SIB), as they are both set at 1%.

January - June 2023						17

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Risk management

			RISK MANAGEMENT

Executive summary

Credit risk

Market risk

Credit quality indicators are under pressure from the current uncertain environment, but remain within expected levels

Our risk profile was stable at the end of the quarter, despite a few upticks in VaR at over the period

Cost of risk

NPL ratio

Coverage ratio

Average VaR

1.08%

3.07%

68%

Q2'23

EUR 12 million

+3 bps vs. Q1'23

+2 bps vs. Q1'23

0 pp vs. Q1'23

Structural and liquidity risk

Operational risk

Robust and diversified liquidity buffer, with ratios well above regulatory requirements

Our operational risk profile slightly deteriorated in the second quarter, mainly due to certain legal cases

Liquidity Coverage Ratio (LCR)

158

%

+6 pp vs. Q1'23

The current environment continued to be characterized by market volatility, inflation gradually decreasing but still at high levels, and the ongoing geopolitical tensions.

The decline in inflation and energy prices, together with slower interest rate rises by central banks, easing supply chains, the reopening of the Chinese economy and a buoyant labour market, suggest that GDP will remain resilient.

However, a gradual slowdown in the level of global activity is expected in the second half of 2023 and in the first half of 2024 as a result of restrictive fiscal and monetary policies, while inflation eases towards levels in line with official targets.

Credit risk management1

In the second quarter of 2023, credit impaired loans increased slightly compared to the previous quarter, up to EUR 34,949 million, mainly driven by the credit impaired loans balance increases in Mexico (+9%), the US (+7%), Poland (+5%) and Chile (+4%), while they decreased in Spain (-3%) and Brazil (-4%).

Total risk was EUR 1,137,823 million, in line with the previous quarter, having increased in South America and DCB, and decreased in Europe and North America.

The NPL ratio was 3.07%, in line with previous quarter (3.05%).

Loan-loss provisions amounted to EUR 5,771 million in the first half of the year, +21% year-on-year and stable in the quarter. This year-on-year comparison was affected by the higher provisions in Poland (related to CHF mortgages), the US (due to normalization) and in Brazil (due to loan portfolio growth, mainly by retail). The cost of risk stood at 1.08%, performing in line with our target.

Total loans-loss reserves were flat compared to the first quarter of 2023, at EUR 23,902 million, resulting in a total coverage of credit impaired loans of 68%, stable in the with last quarter. In addition, 60% of the Group's portfolio is secured, and, in particular, the mortgage portfolios in Spain and the UK require lower coverage levels.

			Key metrics performance by geographic area
						Loan-loss provisions2									Cost of risk (%)3									NPL ratio (%)									Total coverage ratio (%)
						H1'23			Chg (%) / H1'22						H1'23			Chg (bps) / H1'22						H1'23			Chg (bps) / H1'22						H1'23			Chg (p.p.) / H1'22
			Europe			1,289			13						0.42			5						2.35			(28)						51.1			0.9
			North America			1,530			51						1.70			61						3.23			52						90.0			(21.5)
			South America			2,541			9						3.32			34						5.88			50						77.8			(9.1)
			Digital Consumer Bank			415			48						0.54			11						2.04			(19)						94.5			(3.0)
			TOTAL GROUP			5,771			21						1.08			25						3.07			2						68.4			(2.2)

1. Changes in constant euros.

2.EUR million and % change in constant euros.

3.Provisions to cover losses due to impairment of loans in the last 12 months / average customer loans and advances of the last 12 months.

For more detailed information regarding the countries, please see the Alternative Performance Measures section.

18						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Risk management

The Group closely monitors the government liquidity programmes that were launched during the pandemic (mainly concentrated in Spain) as the grace periods expire, with no worrying signs of deterioration to date.

The Group is also closely following the measures adopted by the governments in Spain, Portugal, Poland and the UK, that are aimed at relieving the mortgage payment burden for vulnerable customers following the increase in interest rates.

IFRS 9 stages evolution: the distribution of the portfolio remained stable in the quarter.

Coverage ratio by stage
EUR billion
			Exposure1												Coverage
			Jun-23			Mar-23			Jun-22						Jun-23			Mar-23			Jun-22
Stage 1			1,011			1,005			998						0.4		%	0.4		%	0.5		%
Stage 2			75			72			66						7.2		%	7.4		%	8.5		%
Stage 3			35			34			34						41.0		%	40.1		%	40.1		%

1. Exposure subject to impairment. Additionally, in June 2023 there was EUR 18 billion in loans and advances to customers not subject to impairment recorded at mark to market with changes through P&L (EUR 17 billion in March 2023 and EUR 23 billion in June 2022).

Stage 1: financial instruments for which no significant increase in credit risk has been 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 (%)
			Q2'23			QoQ			YoY
Balance at beginning of period			34,445			(0.7)			(3.4)
Net additions			3,145			(2.6)			48.7
Increase in scope of consolidation			(45)			—			—
Exchange rate differences and other			465			63.7			—
Write-offs			(3,061)			(18.2)			(6.6)
Balance at period-end			34,949			1.5			2.0
Loan-loss allowances			23,902			2.2			(1.2)
For impaired assets			14,326			3.8			4.3
For other assets			9,576			(0.1)			(8.4)

Market risk

The risk associated with global corporate banking trading activity is mainly driven by potential interest rate movements, is focused on servicing our customers' needs and measured in daily VaR terms at 99%.

In the second quarter, VaR fluctuated around an average value of EUR 12 million. It increased moderately and temporarily in the second half of the quarter as a result of the increased volatility in the markets due to the debt ceiling negotiation in the US and the volatility events at the end of the first quarter, which is included in the calculation model. VaR by market factor continued to be mainly impacted by interest rate risk. 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
			2023									2022
Second quarter			Average			Last						Average
Total			12.1			13.1						13.5
Europe			9.4			8.9						10.2
North America			3.5			3.1						2.0
South America			8.5			9.0						7.8

1. Activity performance in Santander Corporate & Investment Banking markets.

Trading portfolios.1 VaR by market factor
EUR million
Second quarter 2023			Min.			Avg.			Max.			Last
VaR total			7.5			12.1			19.3			13.1
Diversification effect			(8.6)			(12.9)			(18.2)			(13.6)
Interest rate VaR			8.9			12.3			17.1			11.3
Equity VaR			1.5			2.8			6.2			5.5
FX VaR			2.3			5.5			8.0			6.0
Credit spreads VaR			2.7			3.2			3.9			3.2
Commodities VaR			0.7			1.2			2.3			0.7

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 2023						19

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Risk management

Trading portfolios1. VaR performance
EUR million

1. Corporate & Investment Banking performance in financial markets.

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: in the second quarter, inflation continued to trend downwards, although it is still at high levels according to central bank targets. The pressure on interest rates in the market continued, albeit softer, given that the market expects the tightening cycle of central banks' restrictive policies could end later this year if inflation continues on its downward path. In this context, our structural debt portfolios performed well. Despite high market volatility during the period, risk remained at comfortable levels.

Liquidity risk: the Group maintained its comfortable liquidity risk position, supported by a robust and diversified liquidity buffer, with ratios well above regulatory limits.

Operational risk

Our operational risk profile deteriorated slightly in the second quarter of 2023, due to certain legal cases in Europe and Latin America.

In terms of results, operational risk losses increased compared to the last quarter. During this period the following aspects were closely monitored:

•IT risks arising from transformation plans related to business strategy and development of digital capabilities.

•Regulatory compliance due to increasing regulatory requirements (such as ESG, operational resilience, data management regulations) as well as increasing supervisory activity.

•External fraud, mainly in online banking transactions (i.e. customer fraud) and in the loans admissions processes (i.e. identity theft).

•Financial Crime Compliance monitoring and compliance with international financial measures and programme updates in some subsidiaries.

•Cyber threats across the financial industry, strengthening the Group's monitoring and control environment mechanisms.

•Third-party risk exposure, maintaining close oversight of critical providers, focusing on their control environment (business continuity capabilities, supply chains, cyber risk management and compliance with service level agreements).

20						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

General background

			GENERAL BACKGROUND

Grupo Santander conducted its business in the second quarter of 2023 in an environment marked by market volatility, slowing but still high inflation and continuing geopolitical tensions. In response, the major central banks continued to raise interest rates to try to contain inflation and anchor medium-term expectations in line with their respective targets. We expect this process to gradually decelerate global activity during the second half of 2023 and the first half of 2024, while restoring inflation to levels compatible with official targets.

Country						GDP Change1			Economic performance
			Eurozone			+1.1%			The economy entered into recession in Q1 2023, although the situation was very different across countries: the contraction was due to Germany, the Netherlands and Ireland, while France, Spain and Italy grew. Inflation declined, as did core inflation, but the ECB is concerned that it is moving too slowly towards its target. The ECB therefore continued to raise interest rates (the deposit facility rate reached 3.5%).
			Spain			+4.2%			Spain returned to its pre-pandemic GDP level in the quarter, with GDP continuing to grow driven by external demand, but consumption fell again (-1.3%). Employment growth was very positive, but started to decelerate and the unemployment rate increased to 13.3%, affected by seasonality. In June, inflation decreased (1.9%) driven by food prices. Core inflation also decreased, but at slower rate.
			United Kingdom			+0.2%			The economy avoided recession by growing in Q1 2023, but activity deteriorated throughout the quarter. There was solid employment growth along with an increase in labour supply, which kept the unemployment rate at 3.8%. Core inflation remained high (6.9% in June), which, together with rising wages (7.4% in May), led the Bank of England to raise rates 50 bps to 5%.
			Portugal			+2.5%			The solid Q1 2023 growth is likely to slow down in an environment of lower household purchasing power, due to inflation and higher interest rates. The labour market, with very low levels of unemployment (unemployment rate at 7.2%), is fuelling higher wage increases which underpin inflationary pressures (5.3% core inflation in June).
			Poland			-0.3%			GDP fell in the quarter due to the contraction in consumption. The economy is expected to gradually improve based on indications from retail sales, business and consumer confidence indices and the labour market (unemployment rate of 2.9%). Inflation fell to 11.5% in June and, if the downward trend continues, the central bank could start cutting interest rates in the third quarter.
			United States			+1.8%			The economy in Q1 2023 grew in line with its potential, driven by private consumption. Macroeconomic indicators suggest growth remained firm in Q2 2023 and the labour market is gradually rebalancing. Inflation is abating, though core inflation remains high (4,8% in June), which led the Federal Reserve to suggest that there could be further interest rate rises.
			Mexico			+3.7%			The start of 2023 continued to surprise on the upside with strong growth in investment, services consumption and exports. Inflation is easing more quickly than expected, however core inflation remained elevated. The central bank halted the official rate rise cycle (at 11.25%), indicating it would remain stable for an extended period of time, to ensure inflation converges towards its target.
			Brazil			+4.0%			The economy has been growing strongly since the beginning of the year, driven by a good harvest and the strength of the services sector and employment (the unemployment rate is at historic lows). Inflation continued to soften (3.2% in June) and the central bank maintained the official rate at 13.75%, but eased its tone suggesting that the first rate cut could be near.
			Chile			-0.6%			The economy continued on its adjustment path, although the external demand contribution remained positive. Inflation is already showing clear signs of moderation (7.6% in June), with 2-year expectations anchored at 3%. The central bank maintained the official rate at 11.25%, but indicated that it could begin to cut it soon if the economy and inflation continue their current trends.
			Argentina			+1.3%			The economy showed positive growth in Q1 2023, but with significant weakening of expectations due to the severe drought, which reduces soybean exports, which have a large weight in the total, putting pressure on the exchange rate of the Argentine peso. Inflation picked up (to a 7.4% in monthly average increase in Q2 2023) and the central bank raised the official rate to 97%.

1. Year-on-year average change for Q1 2023.

January - June 2023						21

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

			DESCRIPTION OF SEGMENTS

We base segment reporting on financial information presented to the chief operating decision maker, which excludes certain statutory result items considered outside the ordinary course of our business (e.g. capital gains, write-downs, impairment of goodwill) or reclassifies certain items under some headings of the underlying (or "adjusted") income statement to better understand the underlying business trends.

Santander has aligned the information in this chapter with the 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 or by 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 information provided by management information systems. The same general principles as those used in the Group are applied.

In 2023, Santander maintained the criteria applied in 2022, with two exceptions.

In the secondary segments: usual annual perimeter adjustment of the Global Customer Relationship Model between Commercial Banking and Santander Corporate & Investment Banking and between Commercial Banking and Wealth Management & Insurance.

In the Group's financial statements: as a result of the implementation from 1 January 2023 of the amendments to IFRS 17 (new general accounting standard for insurance contracts), the Group retrospectively performed a reclassification in the balance sheet to 'Liabilities under insurance or reinsurance contracts', related to the different treatment established by this new standard for the components of an insurance contract. This reclassification was made in the corresponding segments.

For comparative purposes, the 2022 data has been restated to include these changes.

In terms of the operating segment structure, the Group maintained the two levels of segmentation applied in 2022.

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, the New York branch and Santander US Capital Markets (SanCap), following the merger of Santander Investment Securities and Amherst Pierpont Securities.

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 Open Digital Services (ODS).

22						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

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 and 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 includes 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 into 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 Corporate Centre, which 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 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 other businesses. It does not incorporate 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 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 explained on the previous page, the results of our business areas presented below are provided on the basis of underlying results only and include 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. Certain figures contained in this report, 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 2023						23

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

January-June 2023
Main items of the underlying income statement
EUR million
Primary segments			Net interest income			Net fee income			Total income			Net operating income			Profit before tax			Profit attributable to the parent
Europe			7,565			2,244			10,464			6,081			3,888			2,536
Spain			3,161			1,413			5,113			3,074			1,679			1,132
United Kingdom			2,583			167			2,759			1,395			1,127			818
Portugal			575			235			824			559			484			321
Poland			1,209			289			1,509			1,105			657			321
Other			37			140			259			(52)			(59)			(57)
North America			4,931			1,077			6,417			3,357			1,739			1,346
US			2,901			390			3,624			1,825			762			667
Mexico			2,027			663			2,763			1,600			1,048			760
Other			3			23			30			(68)			(71)			(81)
South America			6,477			2,395			9,037			5,504			2,376			1,458
Brazil			4,285			1,675			6,281			4,073			1,410			823
Chile			727			316			1,229			708			531			330
Argentina			1,138			282			1,029			508			308			252
Other			327			122			499			214			127			53
Digital Consumer Bank			2,040			394			2,658			1,344			928			521
Corporate Centre			(94)			(7)			(342)			(531)			(601)			(620)
TOTAL GROUP			20,920			6,103			28,234			15,755			8,329			5,241
Secondary segments
Retail Banking			18,501			3,865			21,985			12,339			5,091			3,269
Corporate & Investment Banking			1,612			1,172			4,353			2,843			2,779			1,876
Wealth Management & Insurance			869			626			1,717			1,156			1,136			819
PagoNxt			31			446			521			(52)			(77)			(103)
Corporate Centre			(94)			(7)			(342)			(531)			(601)			(620)
TOTAL GROUP			20,920			6,103			28,234			15,755			8,329			5,241

Profit attributable to the parent distribution1
H1 2023

1. As a % of operating areas. Excluding the Corporate Centre.

Profit attributable to the parent. H1 2023
EUR million. % change YoY

Flags
Europe
North America
South America
Digital Consumer Bank						DCB
Global businesses

Var			Var2
+74		%	+74		%
+11		%	+16		%
+43		%	+43		%
+55		%	+55		%
-39		%	-39		%
+39		%	+23		%
-40		%	-40		%
-16		%	-19		%
+73		%	+271		%
-9		%	-7		%
+22		%	+28		%
+70		%	+70		%
0		%	+4		%

    2. Changes in constant euros.

24						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

January-June 2022
Main items of the underlying income statement
EUR million
Primary segments			Net interest income			Net fee income			Total income			Net operating income			Profit before tax			Profit attributable to the parent
Europe			5,820			2,316			8,581			4,417			2,693			1,839
Spain			2,015			1,475			3,937			1,994			904			652
United Kingdom			2,418			202			2,633			1,285			995			736
Portugal			340			245			613			363			327			225
Poland			894			268			1,090			751			444			207
Other			152			126			307			25			23			18
North America			4,483			937			5,780			3,088			2,061			1,578
US			2,877			394			3,665			1,984			1,378			1,090
Mexico			1,606			529			2,096			1,166			747			546
Other			0			14			19			(62)			(64)			(58)
South America			6,427			2,175			8,933			5,780			3,165			1,946
Brazil			4,421			1,600			6,393			4,442			2,270			1,365
Chile			1,038			222			1,357			868			646			391
Argentina			732			264			821			345			168			145
Other			236			90			362			126			82			44
Digital Consumer Bank			2,032			425			2,573			1,325			1,010			572
Corporate Centre			(353)			(1)			(747)			(926)			(1,014)			(1,040)
TOTAL GROUP			18,409			5,852			25,120			13,685			7,915			4,894
Secondary segments
Retail Banking			16,747			3,789			20,675			11,662			6,053			4,018
Corporate & Investment Banking			1,712			1,029			3,602			2,311			2,280			1,537
Wealth Management & Insurance			298			655			1,192			686			660			482
PagoNxt			5			379			398			(50)			(64)			(104)
Corporate Centre			(353)			(1)			(747)			(926)			(1,014)			(1,040)
TOTAL GROUP			18,409			5,852			25,120			13,685			7,915			4,894

January - June 2023						25

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

			EUROPE			Underlying attributable profit
						EUR 2,536 mn
Executive summary → We continue to accelerate our business transformation to achieve higher growth and a more efficient operating model which should allow us to further improve profitability and increase RoTE. → Commercial activity was affected by the economic slowdown, interest rates rises and inflation. Loans decreased 5% YoY, driven by lower corporate demand and despite a slight recovery in mortgages in recent months. Unsecured personal loans were stable. Customer deposits increased 1% year-on-year, supported by strong growth in wholesale banking in Spain and retail deposits in the UK. → Underlying attributable profit (EUR 2,536 million) rose 38% (+40% in constant euros), with strong revenue growth, mainly from net interest income, which was able to absorb higher costs, the temporary levy on revenue earned in Spain and higher provisions in Poland due to the CHF portfolio.

Strategy

We maintain our aim of creating a better bank, that our customers and employees feel a deep connection with while creating value for shareholders and society, and continued to contribute to the achievement of the Group's strategy and results.

Last year we made significant progress in our financial results and transformation projects. This year, we are accelerating this further with the aim of becoming the best bank in each country by leveraging the combination of our local leadership with our pan-European and global businesses. We are focusing on the following pillars:

•Customer centric: grow our active customer base through better customer service and experience.

•Simplification and automation: enhance efficiency through a common operating model in the region.

•Network contribution: grow our global business revenue by increasing connectivity across the region.

•Customer activity: improving loyalty through a value proposition for individuals and SMEs.

•Disciplined capital allocation: improve pricing discipline and risk management.

This enables us to achieve sustainable growth and greater profitability and shareholder value creation.

Key developments by country:

•Spain: we focused on profitable and sustainable growth and increasing the customer base. We improved the service quality, further automated and digitalized processes and developed a simpler value proposition for retail and specialized for high-value segments, boosting collaboration between segments at both the local and global level. We maintained our proactive risk management in a complex macroeconomic environment.

•United Kingdom: we focused on managing the spread between assets and liabilities. Our transformation programme continues to provide efficiency improvements through the simplification and digitalization of processes. The loan portfolio remains low risk, as it mainly comprises mortgages with an average LTV around 51% and with only 6% of the portfolio with an LTV above 80%.

•Portugal: we continued to execute our strategy to grow in the most profitable segments. We increased our active and digital customers and improved our service quality.

•Poland: we remained focused on improving our market position, especially in corporates, investment funds and CIB. We continued to develop our digital capabilities, simplify our processes and boost customer attraction and sales. Strong revenue growth and the improvement in efficiency allowed us to absorb the higher Swiss franc mortgage provisions and maintain profitable growth.

															Spain						UK						Portugal						Poland
			Thousands						45,944						14,681						22,372						2,888						5,787
Total customers			YoY change						+2%						+5%						+1%						-4%						+3%
			Thousands						28,356						8,129						13,878						1,800						4,382
Active customers			YoY change						+2%						+5%						0%						+4%						+3%

26						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

Additionally, in the quarter we continued to make progress in our regional transformation, advancing on the five value creation pillars, in line with the Group's strategy, through the following projects:

•One Transformation is progressing in Spain, with positive impacts on KPIs such as digital channel usage or data-based decisions.

•Our common app is live in three of our countries, and a pilot version is available in the UK. We are working on the first common One Web developments.

•We continue to advance in tech convergence and shared services, with several support function hubs already live (e.g. cyber risk, ESG, FCC, costs) and defining new ones for operations and technology.

•We further enhanced our Everyday Banking proposition (both adding new features to our initial one and also defining a specialized version for customers under the age of 18), we are working on our loan pre-approval capacities and we are looking to grow our SME franchise by focusing on specialized services for high-growth companies.

•We continue growing our Multi-Europeans business (total revenue increased by 71% YoY).

Business performance

Total customers increased 941,000 year-on-year. 64% of this growth was due to the increase in active customers, which were up in all countries except in United Kingdom where they remained stable. Of note was the good performance in Spain in both total (738,000 more year-on-year) and active customers, which increased 5% to over 8 million.

Commercial activity was affected by a macroeconomic environment characterized by rising interest rates and high inflation which especially affected demand for mortgages and long-term credit for corporates. However, in the last few months we saw a slight recovery in new mortgage volumes. As a result, loans and advances to customers fell 4% year-on-year. In gross terms, excluding reverse repurchase agreements and in constant euros the fall was 5%.

Customer deposits increased 3% year-on-year. Excluding repos and in constant euros, they rose 1%, supported by strong growth in wholesale banking, especially in Spain, and in retail deposits in the UK, mainly as a result of the savings products launched during the first half of the year. This led to an improvement in the already comfortable liquidity position.

Europe. Business performance. June 2023
EUR billion and YoY % change in constant euros
						564			-5%																		703			+2%

Gross loans and advances to customers excl. reverse repos

Customer deposits excl. repos + mutual funds

Mutual funds increased 3% compared to June 2022 in constant euros, mainly driven by strong growth in Private Banking, Portugal and Poland, where we increased our market share. We also began to see a recovery in sales of this type of product in the first six months as volumes increased 6% year-to-date.

Results

Attributable profit in the first half of 2023 was EUR 2,536 million, 38% higher than in the same period of 2022. In constant euros, it rose 40%, as follows:

•Total income grew 23% mainly driven by net interest income which rose 32%, reflecting margin management and positive balance sheet sensitivity to higher interest rates and a strong increase in CIB results.

•Costs increased by 7%, impacted by high inflation rates and investments in technology and digitalization. In real terms, costs decreased 2%. The efficiency ratio improved by 6.6 pp to 41.9%.

•Net loan-loss provisions increased 13% mainly driven by higher provisions in Poland due to the CHF mortgage portfolio. Underlying credit quality performance remained robust in the region and the cost of risk remained around 40 basis points.

•Other gains (losses) and provisions included the temporary levy on revenue earned in Spain (EUR 202 million for the fully year) and was recorded in its entirety in the first quarter. Excluding this impact, profit increased 51% in constant euros.

In the quarter, attributable profit increased 13% in euros, +12% in constant euros, driven by improvement in net interest income, cost control and the positive effect of having recorded the aforementioned temporary levy on revenue in Spain in the first quarter.

These effects are partially offset by contributions to the Single Resolution Fund in some of our countries during the second quarter, and a decrease in investment banking results due to seasonality.

Europe. Underlying income statement

EUR million and % change

/

Q1'23

/

H1'22

Q2'23

%

excl. FX

H1'23

%

excl. FX

Revenue

5,293

+2

+1

10,464

+22

+23

Expenses

-2,215

+2

+1

-4,382

+5

+7

Net operating income

3,078

+2

+1

6,081

+38

+39

LLPs

-646

+1

0

-1,289

+12

+13

PBT

2,042

+11

+9

3,888

+44

+46

Attributable profit

1,347

+13

+12

2,536

+38

+40

Detailed financial information on page 55

January - June 2023						27

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

			Spain			Underlying attributable profit
						EUR 1,132 mn

Commercial activity and business performance

We continued to increase our customer base (+362k in the year to date), having achieved seven consecutive quarters of positive net growth. Both payroll and PoS transaction volumes rose above the market.

In individuals, we experienced slight growth in new mortgage lending compared to the previous quarter in an environment characterized by rising interest rates and high inflation, which is impacting consumer finance. In corporate lending, short-term financing was in line with the first quarter, while long-term financing improved somewhat without fully recovering second quarter 2022 levels.

Loans and advances to customers fell 8% year-on-year. In gross terms and excluding reverse repurchase agreements, they decreased 6%, in line with the market, mainly affected by mortgage prepayments and the lower demand for long-term financing from corporates.

Customer deposits increased 5% year-on-year. In gross terms, excluding repos, growth was 3%, boosted by time deposits. Off-balance sheet funds consolidated their positive trend this year with 2% growth in the quarter, driven by positive inflows into mutual funds, pension plans and savings insurance.

Results

Attributable profit in the first half of 2023 amounted to EUR 1,132 million, 74% higher than H1 2022. By line:

•Total income was up 30% propelled by growth in net interest income, the result of higher interest rates and customer base growth. Net fee income decreased in asset management due to higher demand for fixed income products and lower average volumes. Net fee income rose significantly in payments and CIB.

•Costs increased 5% affected by high inflation, however, in real terms, costs decreased 1% and the efficiency ratio improved 9.5 percentage points compared to H1 2022, reaching 39.9%.

•Net loan-loss provisions remained flat, supported by active risk management.

Compared to the first quarter of 2023, attributable profit increased 43%. Net interest income plus net fee income grew 7%, costs increased 1% and LLPs fell 6%. Additionally, we recorded the contribution to the Single Resolution Fund (EUR 131 million before tax) in the quarter and the aforementioned temporary bank levy (EUR 202 million) in Q1.

			Spain. Underlying income statement
			EUR million and % change
						Q2'23			/ Q1'23						H1'23			/ H1'22
			Revenue			2,566			+1						5,113			+30
			Expenses			-1,025			+1						-2,039			+5
			Net operating income			1,540			0						3,074			+54
			LLPs			-389			-6						-803			0
			PBT			940			+27						1,679			+86
			Attributable profit			666			+43						1,132			+74
			Detailed financial information on page 56

			United Kingdom			Underlying attributable profit
						EUR 818 mn

Commercial activity and business performance

Our transformation programme continues to deliver efficiency improvements through the simplification and digitalization of key processes.

We are increasing the use of digital channels with 76% of refinanced mortgage loans processed online and 91% of new current accounts opened through digital channels. We are pleased to be supporting the new Mortgage Charter, in addition to measures that we already had in place. The launch of Edge Up, our new and competitive current account, and the broadening of our savings proposition demonstrates our ongoing commitment to improving the products we offer to our customers.

Loans and advances to customers were 2% lower year-on-year. In gross terms, excluding reverse repurchase agreements and in constant euros they decreased 4%, impacted by cost of living pressures and higher customer rates, which resulted in demand.

Customer deposits fell 2% year-on-year. Excluding repurchase agreements and in constant euros, they increased by 1%. We saw lower balances in current accounts offset by higher customer savings accounts. Mutual funds decreased 4%.

Results

In the first half of 2023, attributable profit was EUR 818 million, increasing 11% versus the same period of 2022. In constant euros, profit rose 16%, by line:

•Total income was up 9%, driven by strong net interest income from margin management in a rising interest rate environment.

•Costs rose 5% due to high inflation, though in real terms costs decreased 5%. The efficiency ratio was 49.4%, improving 1.8 pp versus H1 2022.

•Net loan-loss provisions totalled EUR 103 million, decreasing 14%. Credit fundamentals remained stable with cost of risk at just 11 basis points.

In the quarter, attributable profit rose 5% in constant euros as a consequence of lower net credit losses. Revenue and costs remained broadly flat.

United Kingdom. Underlying income statement

EUR million and % change

/

Q1'23

/

H1'22

Q2'23

%

excl. FX

H1'23

%

excl. FX

Revenue

1,391

+2

0

2,759

+5

+9

Expenses

-689

+2

+1

-1,363

+1

+5

Net operating income

702

+1

0

1,395

+9

+13

LLPs

-44

-26

-27

-103

-17

-14

PBT

585

+8

+6

1,127

+13

+18

Attributable profit

423

+7

+5

818

+11

+16

Detailed financial information on page 57

28						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

			Portugal			Underlying attributable profit
						EUR 321 mn

Commercial activity and business performance

We continued to execute our profitable growth strategy supported by our business model transformation and focus on customer satisfaction. The number of loyal and digital customers grew further, while we remained focused on growing in the most profitable segments.

Loans and advances to customers fell 5% year-on-year. In gross terms, excluding reverse repos they decreased 4%. The volume dynamics were conditioned by the rising interest rate environment, which is reflected in lower new lending, early mortgage repayments, and in corporates, amortizations of state-backed credit facilities.

Customer deposits (both, including and excluding repos) fell 9% year-on-year, due to lower balances in demand products as a result of higher rates offered in public sector financing instruments. Mutual funds performed well in the quarter and increased 5% year-on-year.

Results

Attributable profit in the first half of 2023 was EUR 321 million, 43% more year-on-year.

•Total income increased 34% driven by the boost from higher interest rates on net interest income, which grew 69%. Net fee income fell, due to the new regulation in the country related to the early amortization of mortgages and lower new lending.

•High inflation continued to put upward pressure on costs, though they continued to fall in real terms. The efficiency ratio improved 8.7 percentage points compared to H1 2022, reaching 32.1%.

•Credit quality remained strong. The NPL ratio continued at low levels and the cost of risk was only 10 basis points.

Compared to the previous quarter, profit decreased 21% affected by regulatory costs recorded this quarter (SRF contribution, banking sector contribution and the banking sector solidarity tax) and the change in fee regulation. Underlying business dynamics remained solid, with double-digit net interest income growth, flat costs and provisions at very low levels.

			Portugal. Underlying income statement
			EUR million and % change
						Q2'23			/ Q1'23						H1'23			/ H1'22
			Revenue			419			+3						824			+34
			Expenses			-132			0						-265			+6
			Net operating income			286			+5						559			+54
			LLPs			-20			+51						-34			+214
			PBT			223			-14						484			+48
			Attributable profit			142			-21						321			+43
			Detailed financial information on page 58

			Poland			Underlying attributable profit
						EUR 321 mn

Commercial activity and business performance

We continue to focus on our strategic priorities: total experience (customers and employees) delivering substantial growth in the number of active customers in all segments, improve digital transformation and simplification, and profitable business growth.

We boosted our transformation programme with the ongoing digitalization in electronic banking (iBiznes24), credit process (CLP platform) and cloud-based CRM. We became the first bank based in Poland to complete the implementation of the Electronic Banking Internet Communication Standard (EBICS) platform and in CIB we released a new functionality in the GTS service and acted as coordinator for the most relevant market operations.

Loans and advances to customers grew 6% year-on-year. In gross terms, excluding reverse repurchase agreements and FX impact, growth was flat as greater demand in CIB, consumer lending and in corporates was offset by reductions in mortgages, despite a pick up in new lending in recent months.

Customer deposits increased 15%, +9% excluding repos and in constant euros, supported by higher deposits from individuals, corporates and CIB. Mutual funds increased 20%.

Results

Attributable profit in the first half of 2023 amounted to EUR 321 million. Compared to the same period in 2022, profit grew 55%. In constant euros profit also rose 55%, as follows:

•Total revenue was 38% higher, primarily due to the increase in NII (+35%) driven by strict cost of funding management and increased lending spreads in a high interest rate environment. Net fee income increased 7%.

•Costs remain under very tight control despite high inflation and pressure on cost of services and, in particular, on personnel costs, which led to a 19% increase in total costs (+3% in real terms). Despite this, efficiency improved to 26.8%, delivering 47% growth in net operating income.

•Net loan-loss provisions grew (+69%) impacted by higher provisions to increase coverage of the CHF mortgage portfolio as a result of increasing number of lawsuits.

Profit compared to the previous quarter decreased 11%, primarily due to the above mentioned CHF mortgage provisions, as the top line of the income statement continued to show strength, with 3% revenue growth and controlled costs (+1%).

Poland. Underlying income statement

EUR million and % change

/

Q1'23

/

H1'22

Q2'23

%

excl. FX

H1'23

%

excl. FX

Revenue

780

+7

+3

1,509

+38

+38

Expenses

-207

+5

+1

-405

+19

+19

Net operating income

573

+8

+4

1,105

+47

+47

LLPs

-191

+26

+22

-343

+70

+69

PBT

321

-4

-8

657

+48

+48

Attributable profit

155

-7

-11

321

+55

+55

Detailed financial information on page 59

January - June 2023						29

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

			NORTH AMERICA			Underlying attributable profit
						EUR 1,346 mn
Executive summary → In North America, we continue to target segments with proven competitive advantages and promote strong Group network contributions in Mexico and the US while rationalizing businesses and products with limited scale and profitability to generate efficiencies and profitable growth. → Loans and advances to customers increased 5% year-on-year in constant euros driven by growth in both the US and Mexico. Customer funds rose 10% in constant euros, boosted by higher time deposits. → Underlying attributable profit in Q2 2023 rose to EUR 719 million, +15% quarter-on-quarter (+13% in constant euros) driven by revenue growth and lower LLPs. In H1 2023, profit was EUR 1,346 million, down 15% year-on-year (-19% in constant euros) mainly due to LLP normalization in the US, which more than offset the positive performance in Mexico.

Strategy

We increased synergies across the region to optimize cooperation and bring value to both markets, by:

•Providing a compelling value proposition by taking advantage of our global connectivity, adopting best practices and maximizing the benefits of our global platforms.

•Boosting sustainable profitability levels through loyalty strategies and a refined tailored service and product proposition for a better customer experience.

•Leveraging network contributions of both countries and the Group. Through our MEXUS initiative, we are consolidating T&O operations know-how, digitalization, hubs, front-office and back-office, among others:

–US: we are modernizing platforms to build a digital-first omnichannel experience and simplifying product offerings.

–Mexico: we are simplifying the bank by streamlining our products and processes while strengthening our digital capabilities to better compete with the best-in-class.

Additionally, in line with our strategy to deploy capital to the most profitable businesses, in Q2 2023:

•Santander US distributed an additional USD 1 billion of dividends, bringing the total distributed in H1 2023 to USD 1.25 billion. SHUSA’s regulatory Stress Capital Buffer (SCB) supports our planned capital actions.

•In February, the Group increased its shareholding in Banco Santander México to 99.98% and subsequently delisted it from the Mexican and New York Stock Exchanges in May.

Santander US and México released their 2022 ESG Reports which highlight our responsible banking strategy, achievements and commitments. We are focusing on expanding and implementing sustainable finance opportunities within our businesses. In the US, we announced a new Community Plan, which includes investments in small businesses and community development. In Mexico:

•CIB was the placement agent for the Central American Bank for Economic Integration's social bond issuance.

•Tuiio and the Secretary of Security of the State of Mexico began a workshop, to provide basic financial education for inmates.

•We signed the first agreement with the International Finance Corporation (IFC) to promote sustainable construction practices, which will enable us to offer customers free advice from their experts to obtain sustainable construction certifications.

In terms of local priorities:

United States

In the US, we continue to focus on a complementary mix of scalable businesses that deliver profitable growth and have strong Group network contributions, such as Auto and Multifamily. Our business model is focused on four core segments (Consumer, Commercial, CIB and Wealth Management) and four key pillars:

•Simplification: rationalize businesses and products with limited scale and profitability and exit non-core portfolios.

															United States						Mexico
			Thousands						24,957						4,410						20,335
Total customers			YoY change						+3%						-5%						+5%
			Thousands						14,127						4,031						9,933
Active customers			YoY change						0%						-6%						+2%

30						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

•Transformation: leverage Group digital and data capabilities to modernize, drive scalability and lower cost to serve.

•Network contribution: leverage the Group's network to drive top line growth and achieve synergies.

•Profitable growth: support growth across businesses while maintaining disciplined capital management.

In Consumer, we saw stable deposit balances as we continue to simplify products, processes and services. Auto credit performance continued to normalize but is outperforming initial expectations given consumer and used car price resilience.

In Commercial, we generated steady revenue growth with stable deposit balances. Profitable loan growth and tight credit underwriting continue across all portfolios.

CIB produced a strong quarterly performance materializing SanCap expanded capabilities and developing new value-added and capital-light solutions.

In WM, assets under management (AuMs) and revenue rose, supported by strong commercial activity and the higher rate environment.

Mexico

We have begun our transformation plan with the ambition to become the best bank in terms of customer experience, double the bank´s size and triple profit in the coming years supported by: (i) customer acquisition, (ii) simplification and automation, (iii) investment in talent and (iv) an enhanced digital offering.

In credit cards, we increased placements through innovative solutions such as gamification in the app to increase credit limits for customers with little credit experience, a pre-sales event with a high-level artist and the Unique Rewards offering (a loyalty programme for the high-income segment).

In consumer, we continue to explore new segments and improve digital communication. We are promoting early customer engagement by digitally granting payroll loans when they open their account.

In mortgages, all products, launches and offers are now digitally processed. We were the first bank to cut mortgage rates, reducing the offer for the high-income segment by 60 basis points to 8.85%.

North America. Business performance. June 2023

EUR billion and YoY % change in constant euros

160

+5%

168

+10%

Gross loans and advances to customers excl. reverse repos

Customer deposits excl. repos + mutual funds

In auto, we increased personalized attention, sped up formalization times through digital specialists and launched plans with preferred conditions for groups such as universities, payroll or high-income.

In SMEs, we continued with strategic alliances through tailored offers for chambers of commerce and state governments. We also continued to promote our main acquiring products (G-Mini, G-Advance, G-Smart and G-Store).

Business performance

Loans and advances to customers grew 7% year-on-year. In gross terms, excluding reverse repurchase agreements and in constant euros, they rose 5% boosted by mortgages, credit cards, auto and payroll loans in Mexico and by CIB, Multifamily and Auto in the US.

Customer deposits grew 13% year-on-year. Excluding repos and in constant euros, growth was also 13% driven by inflows of time deposits that were incentivized by competitive interest rates to attract new customers and deposits and foster customer loyalty.

Results

Attributable profit during the first six months of 2023 was EUR 1,346 million, down 15%. In constant euros, profit fell 19%:

•Total income increased 5%, driven by net interest income (+4%, supported by the higher interest rate environment and loan growth) and net fee income (+7%, mainly driven by credit cards and insurance in Mexico). Gains on financial transactions rose in the period while other operating income fell due to lower leasing income in the US.

•Costs grew 8%, impacted by inflation (+1% in real terms), investments in technology and digitalization and higher personnel costs.

•Net loan-loss provisions grew 51% reflecting the normalization process in the retail portfolios. Nevertheless, asset quality remains robust in both countries.

Compared to Q1 2023, attributable profit increased 13% in constant euros due to higher net fee income and gains on financial transactions, and lower LLPs in the US.

North America. Underlying income statement

EUR million and % change

/

Q1'23

/

H1'22

Q2'23

%

excl. FX

H1'23

%

excl. FX

Revenue

3,276

+4

+3

6,417

+11

+5

Expenses

-1,560

+4

+3

-3,060

+14

+8

Net operating income

1,716

+5

+3

3,357

+9

+3

LLPs

-722

-11

-11

-1,530

+59

+51

PBT

925

+14

+12

1,739

-16

-20

Attributable profit

719

+15

+13

1,346

-15

-19

Detailed financial information on page 61

January - June 2023						31

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

			United States			Underlying attributable profit
						EUR 667 mn

Commercial activity and business performance

We sustained focus on delivering profitable growth in our core segments while transforming and simplifying our businesses across the US.

Loans and advances to customers increased 4% compared to June 2022. In gross terms, excluding reverse repurchase agreements and in constant euros they grew 6% driven by CIB, Multifamily and Auto.

Customer deposits increased 8% over the same period. Excluding repos and in constant euros they grew 13%, driven by time deposits (both retail and CIB). Deposit costs continued to rise as expected.

Customer deposit balances remained fairly stable throughout H1 2023, supported by a diversified, retail-oriented deposit base. At SBNA, around 60% of deposits are from retail and small businesses (flat on last quarter) and we continue to have a high percentage of FDIC insured deposits (c.65%). Liquidity, interest rate and capital management practices are aligned with Group objectives and global systemically important bank (G-SIBs) standards.

Results

Attributable profit in the first half of 2023 was EUR 667 million (39% lower than H1 2022). In constant euros, profit also fell 39% due to higher funding costs and anticipated LLP normalization:

•Total income decreased 2% driven by lower capital market activity, lower gains on lease disposition and home lending exit. NII was flat as the benefit from higher loan balances and yields were offset by rising deposit and wholesale funding costs.

•Transformation initiatives are allowing us to contain costs (-0.5% in real terms), despite inflation and investments in our global business.

•Net loan-loss provisions increased 67% as credit continues to normalize but better than initially expected given consumer and used car price resilience which support favourable late-stage delinquency payments.

In the second quarter, attributable profit rose 24% as total income remained stable (despite funding costs pressuring NII) and LLPs performed better than expected (-22%).

			United States. Underlying income statement
			EUR million and % change
									/			Q1'23									/			H1'22
						Q2'23			%			excl. FX						H1'23			%			excl. FX
			Revenue			1,797			-2			0						3,624			-1			-2
			Expenses			-887			-3			-1						-1,799			+7			+6
			Net operating income			910			-1			+1						1,825			-8			-9
			LLPs			-438			-23			-22						-1,005			+69			+67
			PBT			417			+21			+22						762			-45			-45
			Attributable profit			367			+22			+24						667			-39			-39
			Detailed financial information on page 62

			Mexico			Underlying attributable profit
						EUR 760 mn

Commercial activity and business performance

We strengthened our position in value-added products to increase customer loyalty. We maintained a solid performance in our individual loan portfolio.

Our continued focus on individuals is reflected in our consolidated position in auto, remaining the third largest player in the market with a 17% market share, while we continue to post double-digit year-on-year growth in credit cards and payroll loans.

Loans and advances to customers increased 17% year-on-year. In gross terms, excluding reverse repos and in constant euros, they rose 3% driven by loans to individuals (mortgages +7%, credit cards +23%, auto +37% and payroll +21%). Lending to corporates and institutions increased 2%, though declined 6% in SMEs and 15% in CIB.

Customer deposits grew 27% year-on-year. Excluding repos and in constant euros, they rose 11% driven by term deposits on the back of a higher interest rate environment. Mutual funds remained relatively stable.

Results

Attributable profit in the first half of the year was EUR 760 million, 39% higher than the same period in 2022. In constant euros, it rose 23% as follows:

•Total income up 17%, driven by net interest income (+12%) as the result of higher volumes and interest rates, net fee income (+11%) and higher gains on financial transactions.

•Costs increased 11%, reflecting investments in technology and digitalization related to the transformation plan. Still, the efficiency ratio improved by 2.3 percentage points to 42.1%.

•Net loan-loss provisions were up 26% mainly reflecting individual loan portfolio growth.

Compared to the first quarter, attributable profit increased 8% given the good performance of core revenue which offset the increases in LLPs and costs.

Mexico. Underlying income statement

EUR million and % change

/

Q1'23

/

H1'22

Q2'23

%

excl. FX

H1'23

%

excl. FX

Revenue

1,463

+13

+8

2,763

+32

+17

Expenses

-623

+15

+11

-1,163

+25

+11

Net operating income

840

+11

+6

1,600

+37

+22

LLPs

-284

+19

+14

-523

+42

+26

PBT

543

+8

+4

1,048

+40

+24

Attributable profit

401

+12

+8

760

+39

+23

Detailed financial information on page 63

32						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

			SOUTH AMERICA			Underlying attributable profit
						EUR 1,458 mn
Executive summary → We are focused on increasing the value we bring to the Group and moving forward to become the most profitable bank in each of the countries in which we operate in the region while promoting synergies across our global and regional businesses. → We have a solid customer base (73.1 million), having increased 7.4 million year-on-year backed by higher transactionality, while strengthening our risk model in a complex environment. → Year-on-year growth in both gross loans and advances to customers and customer deposits, as we seek to become the leading bank in inclusive and sustainable businesses through differential value propositions. → Underlying attributable profit decreased 25% year-on-year (-23% in constant euros) to EUR 1,458 million due to the increase in costs and LLPs, which was partially offset by revenue growth.

Strategy

We remained focused on accelerating our global business growth:

•In consumer finance, we continued to strengthen our leadership position in the region by automating and scaling our operations. We are also working to optimize funding costs and to close agreements with the main Original Equipment Manufacturers (OEMs) in the market.

•In payment methods, we further increased our active card portfolio and accelerated efficiency, as part of our commitment to increase our contribution to the Group's results. Among other initiatives, we are implementing a global card platform and improving our already efficient operating model. Getnet continues its successful implementation in the different countries in the region.

•In CIB, we continued to make headway in our ambition to become the leading CIB operator in most of the products and countries in which we operate, moving towards a common offering for the region. We are expanding our capabilities in Markets and Corporate Finance and strengthening our franchises in Peru and Colombia. We continued to grow our Multi-Latin business (total income rose 72% year-on-year).

•In ESG, we are driving Green Finance activity, supporting our customers in green transition, improving our value proposition and fostering regional synergies. We continue to expand our microfinance businesses Prospera and Surgir across the region. As a result, in Chile Latin Trade named us one of the Five Most Sustainable Firms in Latin America.

Additionally, Euromoney recognized us as the Best Bank in Latin America.

The main initiatives by country were:

In Brazil, we continue to expand our businesses based on:

•Customer focus, offering simple, complete and tailor-made solutions to improve customer experience and satisfaction.

•Invest in strategic businesses, especially in WM&I, where we maintained our investment expansion plan with AAA (Associate Allocation Advisor) and the full acquisition of Toro. In Corporates, we progressed in the development of a best-in-class platform. In Payments, we signed an agreement with a production company, Live Nation, to expand our presence in the country's cultural sector and we remained market leaders in private vehicles in Auto.

•Sales channels, with an omnichannel strategy, focused on both sales and after-sales that allow us to serve customers where, when and how they want through physical (commercial network, Prospera, external network), digital and remote channels.

•A unique horizontal culture that promotes diversity, meritocracy, and a technological culture with the consolidation of F1RST (a company focused on technology and innovation) and the launch of Tools Digital Services (aimed at excellence in solutions and services).

															Brazil						Chile						Argentina						Other South America
			Thousands						73,138						63,305						3,737						4,565						1,532
Total customers			YoY change						+11%						+13%						-7%						+4%						+27%
			Thousands						38,414						31,853						2,186						3,172						1,202
Active customers			YoY change						+2%						+2%						+5%						-2%						+11%

January - June 2023						33

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

Chile: we remained focused on being a digital bank with branches. In payment methods, we have become one of the leaders in the acquiring market, with a market share exceeding 9% of transactions and 219.000 PoS with Getnet. We grew our SME customer base and expanded services offered to auto, agriculture and Multi-Latin customers. In ESG, we continued to grow our Green Finance lending.

Argentina: we continued to improve our value offering and level of service, which allowed us to maintain our first place in customer satisfaction in terms of NPS. We also maintained our leadership in market share in the transactional business. We expanded our ESG offering, creating alliances to support SMEs and companies in their green transition. And, in 2023, we won back our first place position as the Best Bank to Work for in the Country, according to GPTW.

Uruguay: we continued to be the leading privately-owned bank, driven by the good performance of the Soy Santander offer, for opening accounts, issuing cards and for increasing retail customer loyalty.

We are increasing our market share in loans and deposits, helped by good commercial dynamics. In consumer finance, we launched the Mi Auto offer with great success, granting more than 3,000 operations in the first two months since its launch. In the case of SMEs, we continued to consolidate our joint offer with Getnet, incorporating 2,118 new establishments.

Peru: we remained in the top 3 investment banks in the country and leaders in syndicated loans and Debt Capital Markets. We remained market leaders in auto with a 30% market share. In addition, our NeoAuto platform continued to grow, with 1.7 million monthly visits and more than 680 thousand users. Surgir, our microfinance company, covers 101 districts through a 100% digital service model.

Colombia: we continued to offer sustainable and inclusive financial solutions, we maintained our participation in the most relevant operations for the country's development, with joint offers from CIB and Corporates.

We also continued to grant loans to entrepreneurs, of note was Prospera, our microcredit business, which is present in 635 municipalities. In consumer finance, we consolidated our position in new and used auto loans, focus on digitalization and risk control.

South America. Business performance. June 2023

EUR billion and YoY % change in constant euros

165

+8%

196

+7%

Gross loans and advances to customers excl. reverse repos

Customer deposits excl. repos + mutual funds

Business performance

Loans and advances to customers rose 11% year-on-year. Gross loans and advances to customers (excluding reverse repos and in constant euros) increased 8% year-on-year, with rises in all countries, except Peru.

Customer deposits were 9% higher year-on-year. Excluding the exchange rate impact and repos, customer deposits rose 8%, backed by time deposits (+16% year-on-year) which more than offset the decrease in demand deposits (-5%). Mutual funds were up 7% in constant euros.

Results

Attributable profit in the first half of 2023 amounted to EUR 1,458 million, down 25% year-on-year. In constant euros, it decreased 23%, as follows:

•Total income increased 5%, driven by net interest income and net fee income (+6% and +16%, respectively) and the rise in gains on financial transactions (+32%).

•Costs were 20% higher, in line with inflation, due to management efforts made in the period.

•Net loan-loss provisions increased 9%, in line with volume growth. The cost of risk was 3.32% (also 3.32% in December 2022).

By country, of note was the growth of attributable profit in Argentina, Uruguay, Peru and Colombia, which did not fully offset the decreases in Brazil and Chile, affected by the impact on margins (due to the negative sensitivity to interest rate rises) and higher costs in Brazil. These effects were partly offset by net fee income growth in both countries.

Compared to the first quarter of 2023, the increase in net operating income (6% in constant euros) driven by higher revenue (net interest income, net fee income and gains on financial transactions), was not reflected in profit (-11%) due to higher costs (mainly in Argentina) and provisions.

			South America. Underlying income statement
			EUR million and % change
									/			Q1'23									/			H1'22
						Q2'23			%			excl. FX						H1'23			%			excl. FX
			Revenue			4,634			+5			+7						9,037			+1			+5
			Expenses			-1,810			+5			+8						-3,534			+12			+20
			Net operating income			2,823			+5			+6						5,504			-5			-3
			LLPs			-1,309			+6			+5						-2,541			+9			+9
			PBT			1,128			-10			-6						2,376			-25			-24
			Attributable profit			668			-15			-11						1,458			-25			-23
			Detailed financial information on page 65

34						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

			Brazil			Underlying attributable profit
						EUR 823 mn

Commercial activity and business performance

Our strategy remained customer focused, with an ongoing digital transformation to improve customer experience.

We continued to prioritize growth in strategic businesses. In WM&I, we acquired the remaining stake we did not already own in Toro Investimentos (37.5%). We made progress in our expansion plan with AAA, having reached our target of 1,300 advisors in 75 cities in the quarter. In SAM, AuMs performed better than the market, in Private Banking we increased our market share in the year, and in Insurance, premiums reached BRL 5.2 billion.

In Corporates, we reached 1.3 million active customers. In SMEs, we opened 45,000 accounts per month. In cards, 97% of new cards were issued to customers with an account at the bank. In Auto, we focused on profitability and asset quality and new lending outgrew the market in payrolls. In Agro, our portfolio amounted to more than BRL 42.1 billion, including agro titles.

Loans and advances to customers rose 11% year-on-year. Gross loans and advances to customers, excluding reverse repos and in constant euros grew 6%, due to individuals, SMEs and corporates.

Customer deposits increased 12% year-on-year. Excluding the exchange rate impact and repos, they were up 6% driven by time deposits (+11%) which more than offset the 9% fall in demand deposits. Mutual funds decreased 1% in constant euros and as a result, customer funds rose 3% in constant euros.

Results

In the first half of 2023, attributable profit amounted to EUR 823 million, -40% year-on-year. In constant euros, profit also decreased 40%, as follows:

•Total income decreased 3%,boosted by net interest income (-4%), due to the effect of lower spreads, in line with our strategy focused on customers with better risk profile, and to negative sensitivity to interest rate rises. Net fee income increased 4%.

•Costs rose 12%, strongly impacted by inflation, salary agreements and costs related to higher business growth. The efficiency ratio remained at good levels (35.1%).

•Net loan-loss provisions increased 6%, in line with loan portfolio growth (mainly retail), bringing the cost of risk to 4.74% (4.84% in March 2023).

Compared to the previous quarter, net operating income increased 3% due to net interest income stabilization. This increase is not reflected in profit as it was affected by the reversal in Q2 2023 of a tax liability release recorded in Q1 2023.

			Brazil. Underlying income statement
			EUR million and % change
									/			Q1'23									/			H1'22
						Q2'23			%			excl. FX						H1'23			%			excl. FX
			Revenue			3,224			+5			+2						6,281			-2			-3
			Expenses			-1,127			+4			+1						-2,207			+13			+12
			Net operating income			2,096			+6			+3						4,073			-8			-9
			LLPs			-1,129			+9			+6						-2,163			+7			+6
			PBT			645			-16			-19						1,410			-38			-38
			Attributable profit			354			-25			-28						823			-40			-40
			Detailed financial information on page 66

			Chile			Underlying attributable profit
						EUR 330 mn

Commercial activity and business performance

In Chile, we pursued our goal of being a digital bank with branches, through a constant innovation process, such as the launch of WorkCafé Expresso, where our customers can carry out their monetary transactions, with a more efficient and secure service.

In addition, we continued to develop Más Lucas, to complement our Life offering, a new demand and savings account, which should allow us to increase our presence in the mass-market segments. We also made progress in improving our digital channels to increase our service quality.

Consumer credit grew faster than the industry, driven by credit card business. In corporate lending, we achieved significant growth in our SME customer base, driven by the joint offer with Getnet. Finally, we continued to make progress in Green Finance loans under a very ambitious plan.

Loans and advances to customers increased 16% year-on-year. Gross loans and advances to customers, excluding reverse repurchase agreements and in constant euros, were 4% higher, boosted by individuals (+11%).

Customer deposits rose 10% year-on-year. Excluding the exchange rate impact and repurchase agreements, customer deposits remained flat, as the decrease in demand deposits (-15%) was offset by the growth in time deposits (+21%). Mutual funds rose 21% in constant euros, and total customer funds increased 5%.

Results

Attributable profit in the first half of 2023 was EUR 330 million, 16% lower year-on-year. In constant euros, profit fell 19%, as follows:

•Total income fell 13% driven by the drop in net interest income (-32%), linked to the negative sensitivity to interest rate rises. This decline was partially offset by the excellent performance of net fee income, which grew 38% driven by the increase in loyalty and transactionality, and gains on financial transactions (+51%).

•Costs rose 3%, well below average inflation (12%) and the efficiency ratio was 42.4%.

•Net loan-loss provisions decreased 4%, and cost of risk was 0.88%.

In the quarter, profit increased 20% in constant euros, driven by the good performance in net fee income, higher gains on financial transactions and lower provisions, which offset higher costs and lower net interest income.

			Chile. Underlying income statement
			EUR million and % change
									/			Q1'23									/			H1'22
						Q2'23			%			excl. FX						H1'23			%			excl. FX
			Revenue			623			+3			+3						1,229			-9			-13
			Expenses			-266			+5			+5						-521			+6			+3
			Net operating income			356			+1			+1						708			-18			-21
			LLPs			-86			-27			-27						-203			-1			-4
			PBT			286			+17			+17						531			-18			-21
			Attributable profit			180			+20			+20						330			-16			-19
			Detailed financial information on page 67

January - June 2023						35

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

			Argentina			Underlying attributable profit
						EUR 252 mn

Commercial activity and business performance

In the quarter, management focused on increasing the country's contribution to the Group, mainly through global businesses.

We continued to improve our customer service and our value proposition, which enabled us to remain in first place in customer satisfaction in terms of NPS.

In payments, we are the second largest company as measured by payment processing and we maintained our leading market share in transactional business. In Consumer, we boosted consumer credit and maintained our leadership in auto loans, with a 21% market share. In ESG, we expanded our value proposition, highlighting our partnerships to support companies in their green transition.

Loans and advances to customers were up 2% year-on-year. In gross terms, excluding reverse repos and the exchange rate impact, they rose 116% year-on-year, driven by consumer credit, SMEs, corporates and CIB.

Customer deposits decreased 12% year-on-year. Excluding repos and the exchange rate impact, customer deposits rose 88%, boosted by time deposits (+133%). Mutual funds were 166% higher. As a result, total customer funds increased 107% in constant euros.

These high growth rates, as well as results, were impacted by high inflation in the country.

Results

Attributable profit in the first half of 2023 was EUR 252 million, 73% higher year-on-year. In constant euros, profit was 271% higher. By line:

•Total income grew 168%, underpinned by net interest income (+233%), net fee income (+129%) and gains on financial transactions (+264%). All of these more than offset the greater negative effect from the hyperinflation adjustment (in other operating income).

•Costs increased well below revenue. The efficiency ratio stood at 50.7%, improving 7.4 pp year-on-year, and net operating income rose 215%.

•Net loan-loss provisions increased 188%, rising from low levels in the last period. The cost of risk stood at 3.46%.

In the first quarter, profit increased 23% in constant euros, due to the solid performance in net interest income, net fee income and gains on financial transactions, which more than offset the growth in costs, impacted by inflation.

Argentina. Underlying income statement

EUR million and % change

/

Q1'23

/

H1'22

Q2'23

%

excl. FX

H1'23

%

excl. FX

Revenue

528

+5

+53

1,029

+25

+168

Expenses

-272

+9

+58

-522

+9

+134

Net operating income

256

+2

+49

508

+47

+215

LLPs

-54

+26

+79

-97

+34

+188

PBT

129

-28

+12

308

+83

+292

Attributable profit

113

-19

+23

252

+73

+271

Detailed financial information on page 68

Other South America

Uruguay

Gross loans and advances to customers were up 11% year-on-year, excluding reverse repurchase agreements and in constant euros. Customer deposits excluding repos fell 3% due to demand deposits.

Attributable profit in the first half of 2023 was EUR 84 million, up 41% year-on-year and +30% in constant euros, as follows:

•Total income was up 32% boosted by net interest income (following interest rate rises) and net fee income.

•Costs rose (impacted by inflation) well below revenue. As a result, the efficiency ratio improved 7.2 pp to 37.7%.

•Net loan-loss provisions rose, as the normalization that began in previous quarters continued rising from low levels in previous years. The cost of risk remained low (1.84%) and the NPL ratio stood at 2.58%.

Compared to the previous quarter, attributable profit rose 10% in constant euros, driven by the performance in net interest income and cost management.

Peru

Gross loans and advances to customers excluding reverse repos and the exchange rate impact decreased 3% year-on-year and customer deposits (excluding repos and in constant euros) increased 2%, driven by demand deposits (+10%).

In the first half of 2023, attributable profit was EUR 40 million, 24% higher year-on-year. In constant euros, growth was 22%, as follows:

•Total income rose 33%, boosted by the good performance of our core business lines. Costs rose 24%, mostly driven by the launch of new businesses and inflation but the efficiency ratio improved 2.4 pp to 34.9%.

•Net loan-loss provisions increased, though the cost of risk remained low (0.97%).

Colombia

Gross loans and advances to customers (excluding reverse repos and in constant euros) were 5% higher year-on-year. Deposits (excluding repos) rose 21% in constant euros due to time deposits (+78%).

In the first half of 2023, attributable profit was EUR 14 million, 11% higher year-on-year. In constant euros, profit was 29% higher:

•Total income grew 35% (net fee income and gains on financial transactions) and costs rose 28% due to inflation and the development of new business lines.

•Net loan-loss provisions were 164% higher, due to the growth in Auto and Prospera businesses. However, the cost of risk remained low (0.59%).

Other South America. Underlying income statement

EUR million and % change

Net operating income

Attributable profit

/

H1'22

/

H1'22

H1'23

%

excl. FX

H1'23

%

excl. FX

Uruguay

178

+62

+49

84

+41

+30

Peru

78

+40

+38

40

+24

+22

Colombia

31

+24

+43

14

+11

+29

36						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

			DIGITAL CONSUMER BANK			Underlying attributable profit
						EUR 521 mn
Executive summary → The operating environment remained complex in 2023 as inflation and rising interest rates are denting consumer appetite. In this context, new lending rose 5% year-on-year in constant euros (+6% in auto). → We continued to reinforce our auto leadership with new strategic alliances, leasing and subscription. We completed the agreement with Stellantis in April and new leasing contracts increased 19% year-on-year. In non-auto, we continued upscaling our BNPL business. → Underlying attributable profit amounted to EUR 521 million, a 9% fall year-on-year (-7% in constant euros) driven by negative NII sensitivity to interest rate rises and the temporary levy on revenue earned in Spain. In this environment, we are focusing on new business pricing and profitability, increasing customer deposits, operating efficiency and cost of risk.

Strategy

Digital Consumer Bank (DCB) is the leading consumer finance bank in Europe in scale and profitability as it leverages Santander Consumer Finance's (SCF) auto and non-auto consumer finance footprint in Europe and Openbank’s technology stack.

SCF is Europe's consumer finance leader, present in 18 countries (16 in Europe plus China and Canada) and works through more than 130,000 associated points of sale. It provides value propositions to its customers and partners to enhance their sales capacity by financing their products and developing advanced technologies to give them a competitive edge.

SCF aims to become the best-in-class auto financing and digital mobility service provider in Europe.

Openbank is the largest 100% digital bank in Europe. It offers current accounts, cards, loans, mortgages, a state-of-the-art robo-advisor service 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.

Openbank's tech stack and product building capabilities, such as Zinia (BNPL), should allow us to exceed our customers' expectations.

DCB’s vision is to offer competitive financing solutions to maintain our European leadership in profitability and scale in Auto & Consumer Lending by leveraging the advantage of our proprietary platforms in Mobility and BNPL. Our strategy in 2023 is focused on accelerating transformation to boost future growth.

Digital Consumer Bank. Loan distribution
June 2023

									Germany
									France
									Nordics
									Spain
									Italy
									UK
									Poland
									Others

Our main priorities for 2023 are to:

•Secure leadership in global digital consumer lending by:

–Auto: progressing with strategic initiatives to build a world-class digital offering in mobility; aid OEMs' transformation journeys with online lending, leasing (both financial and operational) and subscription offerings; and provide our partners with innovative finance and sale solutions on dealer websites and in auto marketplaces.

–Consumer (Non-Auto): gaining market share through specialization and with tech platforms that build on our leadership in Europe through Zinia, our buy now, pay later (BNPL) service, checkout lending, credit cards and direct loans.

–Digital Bank: increasing loyalty among our Openbank and SC Germany retail customers and boosting digital banking.

•Continue the transformation of our operating model to defend our best-in-class efficiency through: (i) single IT platforms, (ii) a simpler operational structure, and (iii) automation and process redesign.

•Growth by progressing in transformational projects. In auto, through our new Stellantis partnership, the acquisition of MCE Bank Germany, opportunities with OEMs in addition to launch of our new leasing platform. In consumer, through the full transition to Zinia tech stack and branding, and the execution of pan-European agreements, with integrators and with global tech companies.

•Reduce sensitivity to rising interest rates with greater deposit acquisition and faster loan repricing. Moreover, we are driving an originate-to-distribute model to increase balance sheet mobilization and make the business more capital light.

We continue to support the green transformation of European mobility. In 2023, we aim to exceed the 150k new battery electric vehicles financed in 2022, while developing other new initiatives that are quickly spreading across Europe: electric chargers, solar panels, green heating systems, e-bikes, etc.

We were recognized as a Top Employer or Great Place to Work (GPTW) in four countries.

January - June 2023						37

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

Business performance

After a difficult environment in 2022, DCB is still facing a complex 2023. Some of the impacts include: (i) the change of TLTRO contractual conditions, (ii) rising interest rates temporarily compressing margins while our loan book reprices, and (iii) normalization from a very low cost of risk towards the average across the cycle and additional provisioning for our CHF mortgage portfolio in Poland.

However, new lending volumes are starting to pick up in Europe following a very weak 2022. DCB's new lending increased 5% year-on-year (+6% in auto), having achieved significant growth in 2022 despite a shrinking market.

In Auto, our leasing solutions and commercial focus generated a greater than 19% year-on-year increase in the number of leasing contracts. We continued to develop our proprietary leasing platform for Europe with the ambition of disrupting the market by building organic capabilities.

Our Auto Subscription Service offers flexible subscriptions from one month and up. Our platform-based business has two models: (i) Wabi, our direct-to-consumer owned brand, is already live in Spain, Norway and Germany and will expand to other countries in the coming years; and (ii) Ulity, a white label solution for OEMs and Service Car companies launched in June 2022. Through Ulity we have already entered into relevant agreements with pan-European ride-hailing services (RHS) and OEMs.

In H1, we renewed our partnership with Stellantis in Europe, which will allow us to consolidate our position as their main financing partner. We aim to grow our Stellantis brand portfolio by c.30% to EUR 40 billion by 2026.

In BNPL, Zinia continues to achieve outstanding results with 5.2 million contracts since its launch and more than 56,000 retail merchants connected.

The joint venture with TIMFin, the leading Italian telecommunication company, has more than 1.9 million contracts since launch as well as >5,800 active points of sale and >2,500 connected merchants.

Activity

EUR billion and % change in constant euros

+1%

QoQ

+2%

QoQ

128

+8%

65

+11%

YoY

YoY

Gross loans and advances to customers excl. reverse repos

Customer deposits excl. repos + mutual funds

The stock of loans and advances to customers increased 7% year-on-year. In gross terms, excluding reverse repos and in constant euros they rose 8% year-on-year to EUR 128 billion (76% is auto).

Customer deposits increased 8% in euros, +9% excluding repos and in constant euros, to EUR 62 billion. We have launched several initiatives to accelerate customer deposit growth, resulting in a EUR 5.1 billion (in constant euros) increase even after selling the JV with Stellantis in Germany in Q2 2023.

Our recourse to wholesale funding remained strong and diversified.

Results

Attributable profit in the second quarter was EUR 521 million, 9% down year-on-year in euros. In constant euros, profit fell 7% (-3% excluding the impact of the temporary levy in Spain):

•Total income increased 5%. To neutralize the negative sensitivity to rising rates we are actively repricing loans, focusing on the most profitable segments and increasing customer deposits so that they become the main funding source. As a result NII rose 3%.

Net fee income declined 7%, impacted by new insurance regulation capping fees in Germany. Gains on financial transactions along with other operating income considerably increased, supported by leasing income.

•Costs increased 7%, mainly affected by strategic transformation investments, business growth and inflation. In real terms costs fell 1%. Net operating income increased 3% and the efficiency ratio stood at 49.4%.

•Net loan-loss provisions increased 48%, coming from a low base in 2022. Credit quality remained robust. The cost of risk remains low (0.54%) but is normalizing and the NPL ratio improved to 2.04%.

•By country, the largest contribution to attributable profit came from Nordic countries (EUR 137 million), the UK (EUR 96 million), France (94 million) and Germany (EUR 84 million).

Compared to the previous quarter, attributable profit increased 14% driven by higher net fee income and lower costs. In the quarter, we recorded the contribution to the SRF, while in Q1 2023 we had the negative impact of the temporary levy on revenue earned in Spain.

			Digital Consumer Bank. Underlying income statement
			EUR million and % change
									/			Q1'23									/			H1'22
						Q2'23			%			excl. FX						H1'23			%			excl. FX
			Revenue			1,315			-2			-2						2,658			+3			+5
			Expenses			-655			-1			0						-1,314			+5			+7
			Net operating income			660			-3			-3						1,344			+1			+3
			LLPs			-222			+15			+16						-415			+45			+48
			PBT			481			+7			+8						928			-8			-7
			Attributable profit			277			+14			+14						521			-9			-7
			Detailed financial information on page 70

38						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Primary segments

			Corporate Centre			Underlying attributable profit
						-EUR 620 mn
Executive summary → The Corporate Centre continued to support the Group. → The Corporate Centre’s objective is to define, develop and coordinate the Group's strategy and aid the operating units by contributing value and carrying out the corporate oversight and control function. It also carries out functions related to financial and capital management. → Lower underlying attributable loss compared to H1 2022 due to higher liquidity buffer remuneration and lower negative impact from foreign currency hedging.

Strategy and functions

The Corporate Centre contributes value to the Group, through the following functions, among others:

•Through global control frameworks and supervision.

•Fostering the exchange of best practices in cost management, which enables us to be one of the most efficient banks.

•Collaborating in the definition and execution of the global strategy, competitive development operations and projects that ensure we meet the business plan.

•Contributing to the launch of projects that will be developed by our global businesses aimed at leveraging our worldwide presence to generate economies of scale.

•Ensuring open and constructive communication with shareholders, analysts, investors, bondholders, rating agencies and other market players.

•Adding value to countries and divisions by encouraging the exchange of best practises, driving and managing innovative global initiatives and defining corporate policies, all in the field of communication, marketing and sustainability.

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 and stakes of a financial nature. In June 2023, the liquidity buffer exceeded EUR 317 billion.

This activity is carried out by the diversification of funding sources (issuances and other), maintaining an adequate profile in volumes, maturities and costs.

The price of these operations with other Group units is the market rate that includes all liquidity concepts (which the Group supports by immobilizing funds during the term of the operation) and regulatory requirements (TLAC/MREL).

–Interest rate risk is also actively managed in order to dampen 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 exposure to exchange rates in equity and dynamic management of the FX hedge countervalue related to the units’ next twelve months results in euros. Net investments in equity are currently hedged, EUR 16,102 million (mainly in Mexico, the UK and Brazil) with different FX instruments (spot or forwards).

•Management of total capital and reserves: team responsible for the Group's capital analysis, adequacy and management. Its functions include: coordination with subsidiaries, monitoring returns to maximize shareholder returns, setting solvency targets and capital contributions, and monitoring the capital ratio in both regulatory and economic terms, and efficient capital allocation to the units.

Results

In the first half of 2023, attributable loss of EUR 620 million was 40% lower than in H1 2022 (-EUR 1,040 million) because:

•Net interest income improved EUR 259 million, driven by higher liquidity buffer remuneration as a result of rising interest rates.

•Higher gains on financial transactions (EUR 182 million better), due to lower negative FX hedging impacts.

•Lastly, other results and provisions were down slightly.

			Corporate Centre. Underlying income statement
			EUR million and % change
						Q2'23			Q1'23			Chg.						H1'23			H1'22			Chg.
			Total income			-218			-124			+75%						-342			-747			-54%
			Net operating income			-312			-219			+43%						-531			-926			-43%
			PBT			-341			-260			+31%						-601			-1,014			-41%
			Attributable profit			-341			-279			+22%						-620			-1,040			-40%
			Detailed financial information on page 71

January - June 2023						39

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Secondary segments

			Retail Banking			Underlying attributable profit
						EUR 3,269 mn

Executive summary

Results. (H1'23 vs. H1'22). % change in constant euros

Business performance. EUR bn. % change in constant euros

Profit decreased as the growth in revenue was offset by higher costs and provisions

Continued growth in asset and liability volumes

Total income

Costs

Provisions

Loans and advances to customers

Customer funds

+7%

+9%

+21%

857

+1% YoY

825

+2% YoY

Customers

Commercial activity

In the last few years, we initiated our operating and business model transformation, focused on process digitalization and product simplification. Our goal is to guarantee personalized and tailored support, in order to respond to one of our main priorities; the continuous improvement of our service.

This transformation of our operating and business model is aimed at becoming a digital bank with branches, where customers are at the centre of our strategy.

Increasing digitalization allows us to simplify our offering and automate our operations and improve the front-end (what the customer uses) and back-end (i.e. the bank's operating systems) operations. This will allow us to reduce the cost to serve while improving customer experience.

This improvement allows our teams in the offices to dedicate more time to offer a more personalized service, especially for those financial decisions that are more important or require more advice from our professionals.

The outstanding work carried out for the SME segment, coupled with personalized service and financial and non-financial support, was recognized by Euromoney, which named Santander as the World's Best Bank for SMEs.

These service quality, digitalization and multichannel initiatives enabled us to reach 164 million customers in the Group, having increased by more than 9 million in the last 12 months. Active customers grew 2% and digital customers +5%.

Gross loans and advances to customers excluding reverse repos and the exchange rate impact rose 1% year-on-year and customer funds (excluding repos and in constant euros) increased 2%.

Results

Attributable profit in the first half of 2023 was EUR 3,269 million, 19% lower year-on-year. In constant euros, it decreased 20%, as follows:

•Total income grew 7% driven by higher net interest income (+11%) and net fee income (+3%).

•Costs increased 9%, impacted by inflation. Net operating income grew 5% and the efficiency ratio stood at 43.9%.

•Net loan-loss provisions rose 21%, mainly driven by the increases related to cost of risk normalization in North America.

•Impact of the temporary levy on revenue in Spain recorded in the first quarter.

Retail Banking. Underlying income statement

EUR million and % change

/

Q1'23

/

H1'22

Q2'23

%

excl. FX

H1'23

%

excl. FX

Revenue

11,206

+4

+4

21,985

+6

+7

Expenses

-4,891

+3

+3

-9,646

+7

+9

Net operating income

6,315

+5

+4

12,339

+6

+5

LLPs

-2,877

-1

-2

-5,776

+22

+21

PBT

2,683

+11

+11

5,091

-16

-17

Attributable profit

1,718

+11

+10

3,269

-19

-20

Detailed financial information on page 72

40						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Secondary segments

			Santander Corporate & Investment Banking			Underlying attributable profit
						EUR 1,876 mn

Executive summary

Results. (H1'23 vs. H1'22). % change in constant euros

Our aim and strategic priorities

Strong profit growth underpinned by our geographic and business diversification

Total income

Underlying attributable profit

+24%

+28%

Efficiency ratio

RoTE

34.7%

29.2%

Revenue growth by business and region

Other highlights in the quarter

+16%

+34%

+28%

Strategy

2023 began with instability in the financial sector caused by the difficulties faced by some financial institutions in the US and Europe, which led to market volatility and continued uncertainty (relating to higher funding costs, liquidity restrictions and high inflation). Moreover, geopolitical tensions fuel offshoring plans that will determine investments and require supply chain financing solutions.

In this context, SCIB has continued to make progress in implementing its strategy to transform its business and position itself as the strategic advisor to its clients, offering high value-added, specialized products and services with a particular focus on energy transition and digital transformation.

Our objectives are to double the size of our US franchise focusing on strengthening our advisory capabilities, mainly in those sectors with the greatest growth potential such as energy transition, technology or healthcare; continue the globalization of the Markets business with focus on institutional investors and in the US, improving our global platform for FX and Over-the-Counter (OTC) derivatives in the main commodity markets; and accelerate the rotation of assets to optimize profitability.

During the first half of the year, SCIB completed the merger of Amherst Pierpont Securities (APS) and Santander Investment Securities (SIS). The new entity, named Santander US Capital Markets LLC (SanCap), is a key element in the reorganization and globalization of SCIB's Markets business and in the franchise's growth in the US.

In terms of relevant transactions in the second quarter, in ESG the Export Finance operation for the development of two battery manufacturing gigafactories in Europe and the US. In ESG Sustainable Tech, taking advantage of SCIB's hydrogen expertise and strong execution capabilities in France, we acted as exclusive financial advisor to Forvia and Michelin in the sale of a substantial stake in Symbio to Stellantis, the largest hydrogen transaction worldwide.

Also, SCIB supported the Spanish solar energy company Bruc Energy with a EUR 200 million Equity Bridge Loan. Finally, of note are SCIB's mandates to structure financing for hydrogen and sustainable aviation fuel (SAF) projects.

In the Digital Solutions Group (DSG) sector, Santander acted as the sole global coordinator in Poland for the sale of shares in an international provider of trading and investment technology solutions specialized in the OTC financial market.

In digital transformation, in the second quarter 2023, SCIB became a shareholder of Komgo, the world's largest trade finance network for banks and corporates. SCIB will benefit from Komgo's technology to improve communication between customers and banks, and its agility to deploy solutions in the trade finance and commodities space, driving the digitalization process of large multinationals.

In H1 2023, SCIB created a partnership with Allianz Trade (an insurer) and Two (a B2B e-commerce payments platform fintech) to offer our clients a new receivables solution. This pioneering alliance will allow customers to maintain their 30- or 60-day B2B invoice payment habits within the e-commerce environment, replicating the extended buy now, pay later retail model.

January - June 2023						41

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Secondary segments

Results

Attributable profit in the first half of 2023 amounted to EUR 1,876 million (32% of the Group's total operating areas), 22% higher than in H1 2022. In constant euros, profit rose 28%, with significant growth across core businesses and gaining market share.

In H1 2023, revenue amounted to EUR 4,353 million and grew 21% year-on-year. In constant euros, revenue rose 24% with all regions growth more than 15%. Performance by business was as follows:

•Global markets: revenue was 22% higher year-on-year with a solid first half driven by good management of market volatility.

Europe and Asia performed well in a complex macroeconomic environment. Securities Finance, Credit and Equity Derivatives were the top performers.

In Latin America, revenue grew at double-digit rates. In Mexico, the first long-term repo operation with Millenium stands out. In Brazil, the electricity and commodities desks achieved excellent results, showing the added value of the Markets area.

In the US, the activity continues to be strong with focus on SanCap, highlighting the performance of the interest rate derivatives business as well as solid growth in Securities Finance, Exchange Traded Derivatives, Over-the-Counter and Fixed Income Rates. There was notable demand from the corporate segment and Financial Sponsors.

•Global Debt Financing: total income was 14% greater than in H1 2022. In Structured Finance the results continued to rise, positioning us in the top 3 of the mandated lead arranger (MLA) ranking in Europe and holding the second position globally for renewable transactions. During the last few months, the relevant syndication transactions in the infrastructure space was completed.

Excellent results in Debt Capital Markets (DCM) as it remained very active in Europe and Latin America, positioning itself as a leader in dollar-denominated issuance for European and Latin American companies. Some of the most relevant transactions were with AT&T and EDF.

In Securitizations, total income increased more than 40% year-on-year, following the upward trend in the first quarter.

•Global Transactional Banking increased revenue by 42% year-on-year. Cash Management continued last year's upward trend, providing our customers with innovative products and services that facilitate the digitalization and simplification of their businesses with an end-to-end vision of their value chain.

In Trade & Working Capital Solutions, of note was the first Inventory Finance and massive invoice deduction in the US.

Export Finance increased its portfolio and maintained leadership in the ESG industry through innovative structures, such as the Green Investment Policy launched by the Spanish ECA (CESCE). In the period, Santander was named among the "Perfect 10 Deals of the Year 2022" by TXF in renewables, rail transport and most innovative operation categories.

•Corporate Finance: solid performance, with Equity Capital Markets (ECM) growing at double digits.

In the Telecommunication, Media, Technology industry, SCIB advised Global Infrastructure Partners on its EUR 16 billion acquisition of Vantage Towers .

In Energy, SCIB consolidated its position in the renewable energy sector in Europe and Latin America, with the sale of a renewable energy portfolio by Ardian to Naturgy, and the sale of a stake in an operating portfolio by Bruc Energy to Interogo Holding.

Finally, SCIB strengthened its presence in the offshore wind energy sector by advising DGE on the sale of a stake in the UK Morey East offshore wind farm to Inpex.

In Consumer Retail Healthcare, SCIB continued to expand its franchise through the most important transactions in the sector. Of note were the advisory services provided to Heineken in the minority acquisition of Poland's Grupa Zywiec, the BRL 4.1 billion acquisition of Assai in Brazil, and the PLN 1.5 billion ABB and Pepco deal in Poland.

SCIB continued to be a benchmark player in the infrastructure sector, both in Europe and Latin America. This quarter, SCIB advised the Canadian pension fund CPPIB on the acquisition of a 25% stake of FCC Environmental, and Sacyr in the sale of their Environmental division to Morgan Stanley.

Operating expenses increased 18% year-on-year due to investments in products and franchises under development. However, at 34.7%, efficiency was well below the sector.

Low need for loan-loss provisions in H1 2023, compared to releases in 2022 in Europe and Brazil.

Compared to the previous quarter, revenue growth was slightly lower, due to some seasonality and the SRF contribution (EUR 109 million before tax). Attributable profit decreased 5% in constant euros.

			SCIB. Underlying income statement
			EUR million and % change
									/			Q1'23									/			H1'22
						Q2'23			%			excl. FX						H1'23			%			excl. FX
			Revenue			2,147			-3			-1						4,353			+21			+24
			Expenses			-772			+5			+5						-1,510			+17			+18
			Net operating income			1,375			-6			-5						2,843			+23			+27
			LLPs			-31			—			—						-3			—			—
			PBT			1,320			-10			-8						2,779			+22			+26
			Attributable profit			899			-8			-5						1,876			+22			+28
			Detailed financial information on page 72

42						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Secondary segments

			Wealth Management & Insurance			Underlying attributable profit
						EUR 819 mn

Executive summary

Results. (H1'23 vs. H1'22). % change in constant euros

Revenue1

Fee income as % of total Group 2

AuMs

RoTE

Net new money

Net sales

Fee income

+25%

30%

+10%

89%

EUR 6,391 mn

EUR 3,219 mn

EUR 873 mn

CAL: EUR 285 bn

AuMs: EUR 207 bn

+8% vs. June 2022

Total contribution to profit by business

Other highlights of the period

PB customers

SRI3 AuMs

Gross written premiums

+10% vs. June 2022

EUR 58.6 bn

EUR 6.3 bn

PB Network AuMs

EUR 50.0 bn +10%

+95%

+11%

1. Including fees generated by Asset Management and Insurance ceded to the commercial network. If not included, +44%.

3. Socially Responsible Investments.

2. Including fee income ceded to commercial network.

Commercial activity

We continued to work to become the best responsible Wealth & Protection Manager in Europe and the Americas, being one of the Group's growth drivers with 30% growth year-on-year in the contribution to Group profit. In June, Euromoney recognized us as Latin America's Best Bank for Wealth Management.

•In Private Banking, we continued to leverage our global platform to enable customers to benefit from our scale and international presence and providing tailored solutions, making it easy for them to move from one region of the Group to another. In terms of collaboration, we remained leaders in investment flow between Latin America, Europe and the US, managing network business volumes (cross-border business between markets) of EUR 50 billion.

Our collaboration business with SCIB continued to increase, especially in Spain, Brazil and Mexico. In the first half of the year, it generated EUR 86 million of revenue, 12% higher year-on-year.

We continued to widen our value proposition and to innovate in our product range. We had a particular focus on alternative products, structured products, secured lending and socially responsible products (ESG).

In alternative products, we have EUR 2.7 billion in total commitments. In the period, we expanded our product range, seeking opportunities for our customers using the most suitable products in each region.

In Spain, during the second quarter, the focus was on the marketing of a venture capital fund and a venture capital company, managed by Santander Asset Management, which invests in innovative companies in the field of energy transition: Santander Innoenergy Climate Fund.

In Miami and Geneva, following the launch of Berilo II (debt feeder to Bain Capital's GSS 2022 fund), we launched a new fund of funds to take advantage of the Private Equity investment opportunity.

Our discretionary portfolio management offering now represents 10% of total assets under management (AuMs), growing EUR 1,088 million in the first half of the year, mainly in Spain and Portugal.

Our real estate investment service, which is capturing a large part of investment flows between Latin America, Europe and the US, reached a total volume of EUR 120 million in transactions in the first half of the year.

Our work was recognized by Euromoney as the Best Private Bank in Latin America, as well as the Best International Private Bank in Mexico, Argentina, Brazil, Peru, Uruguay, Poland and Portugal. In addition to the Best Global Private Bank in Cybersecurity and Digital Portfolio Management in Europe by the Professional Wealth Management magazine, a Financial Times publication. The scope of these awards demonstrates the value of the combination of Santander Private Banking's global platform with local knowledge and presence in each of the markets in which it operates.

•In Santander Asset Management (SAM), commercial activity recovered, following market instability in 2022. However, the shift towards fixed income is reducing the average portfolio margins. We continued to be the global product platform of choice for our retail banks, with more than EUR 548 million in total distribution fees generated, in line with the previous year despite lower margins.

In Spain, we developed the discretionary portfolio management model and launched two new funds whose advisory services are delegated to entities such as BlackRock (U.S. equities) and Fidelity (Asia).

The range of alternative products aimed primarily at our institutional clients and family offices is becoming increasingly robust. In the alternatives business, we launched 22 vehicles globally, with EUR 2 billion committed. Our main strategies include Private Debt, Infrastructure, Trade Finance and Real Estate, including Santander Alternative Leasing fund, named among the three most profitable alternative funds in Spain in 2022.

January - June 2023						43

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Secondary segments

We made further headway with our ESG strategy. We offer 113 ESG products globally and assets under management amounted to EUR 40.5 billion. We managed to position ourselves among the top 5 fund managers that improved the most between 2020 and 2022 in the ShareAction ranking of responsible investment, and we were the only Spanish fund manager in it. In addition, Mexico recently joined Spain, Portugal, the UK, Germany, Chile and BPI in launching the Santander Prosperity fund in partnership with RED, named Best Product Innovation in The Global Private Banker Innovation Awards 2023.

Our efforts to continue improving and offering the best investment solutions were recognized through several awards in the period, for example, in Spain we won the best fixed income manager and in the UK the best multi-asset manager. In Chile, we were the fund manager that received the most recognitions at the Salmón awards.

•In Insurance, we maintained a healthy growth rate in premiums (+11%), mainly in the savings business.

Savings insurance sales were particularly strong in Europe, mainly as a result of the good commercial activity of unit-linked insurance in Spain. Of note was the launch of a health product in the UK with BUPA, a leading global healthcare provider. In Portugal, we continued with the business transformation, for example, we digitalized the Home product sales process.

In the Americas, the diversification of the non-credit insurance business continued strongly with growth in new sales. We completed the Savings offering with a new Unit Linked product (diversified insurance fund) in Mexico. In Brazil and Argentina, we launched products with special benefits for women.

The motor vehicle insurance business grew 17%. Our Autocompara platform, operative in Argentina, Brazil, Chile, Mexico and Uruguay, reached 1.4 million active policies. In SMEs, fees grew 12%.

Business performance: SAM and Private Banking

Constant EUR billion

Total assets under management
Funds and investment*
- SAM
- Private Banking
Custody of customer funds
Customer deposits
Customer loans

/ Mar-23			/ Jun-22
+3		%	+10		%
+2		%	+4		%
+4		%	+7		%
-1		%	+5		%
+9		%	+26		%
0		%	+6		%
+2		%	0		%

Note: Total assets marketed and/or managed in 2023 and 2022.

* Total adjusted private banking customer funds managed by SAM.

Business performance

Total assets under management amounted to EUR 440 billion, 10% higher year-on-year, driven by intense commercial activity.

•In Private Banking, the volume of customer assets and liabilities (CAL) stood at EUR 285 billion, 12% higher than in June 2022. Net new money amounted to EUR 6,391 million. Net profit in H1 2023 was EUR 617 million, twice that of the same period in 2022, primarily backed by net interest income and commercial activity improvement. Clients increased 10% to more than 250,750.

•SAM's total assets under management was EUR 207 billion, up 7% compared to June 2022, recovering from last year's fall. Net sales were positive in the period reaching EUR 3.2 billion, reversing 2022 trend. SAM’s contribution to the Group's profit was EUR 271 million,

-6% year-on-year, due to even lower average volumes and lower margins as a result of a shift towards fixed income products.

•In Insurance, the volume of gross written premiums in H1 2023 amounted to EUR 6,252 million (+11% year-on-year). Total fee income rose 8%. The total contribution to profit stood at EUR 749 million, +8% year-on-year.

Results

The total contribution to the Group this year (including net profit and total fees generated net of tax) was EUR 1,637 million, up 30% year-on-year.

Attributable profit in the first half of 2023 was EUR 819 million, 70% higher year-on-year. In constant euros, it was also 70% higher:

•Total income increased 44%, mainly driven by higher net interest income.

•Total fee income generated, including ceded to the commercial network, amounted to EUR 1,832 million and represented 30% of the Group's total fee income, a 2% increase year-on-year, despite the market impact on volumes and margins.

Total fee income generated

Constant EUR million

1,832

〉

2%

30%

vs. H1'22

/ total Group

•Operating expenses were 11% higher year-on-year, due to investments and higher costs related to increased commercial activity.

Compared to the previous quarter, underlying attributable profit rose 18% in constant euros, driven by the positive performance in total income.

Overall, the second quarter was very positive as we continued to grow at double-digit rates on a consolidated basis despite the macroeconomic environment.

Total contribution to profit

EUR million and % change in constant euros

Q2'23

H1'23

864

1,637

+12

%

/ Q1'23

+30

%

/ H1'22

WM&I. Underlying income statement

EUR million and % change

/

Q1'23

/

H1'22

Q2'23

%

excl. FX

H1'23

%

excl. FX

Revenue

887

+7

+7

1,717

+44

+44

Expenses

-283

+2

+2

-561

+11

+11

Net operating income

604

+10

+10

1,156

+68

+68

LLPs

15

—

—

16

—

—

PBT

607

+15

+15

1,136

+72

+72

Attributable profit

442

+17

+18

819

+70

+70

Detailed financial information on page 73

44						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Secondary segments

						Underlying attributable profit
						-EUR 103 mn

Executive summary

Revenue performance

Our business

Solid revenue growth1

Merchants

International Trade

Payments

+27% H1'23 vs. H1'22

Global payments solutions for all merchant segments

International trading solutions for  business

Wholesale account-to-account payment solutions

Our main strategic priorities

Main growth drivers

•Scaling up our global technology platform •Accelerating our commercial growth •Pursuing the open market opportunity

Merchants Total Payments Volume1

Merchant number of transactions

+25% vs. H1'22

+32% vs. H1'22

1. Constant EUR million.

Strategy

PagoNxt aims to achieve a global leadership position in payments through our distinctive, holistic and customer-centric value proposition. We are a one-of-a-kind paytech business providing customers with a wide range of innovative payments and integrated value-added services.

We focus on several strategic and high-growth business segments:

•Merchants: providing global and integrated acquiring, processing and value-added solutions for physical and e-commerce merchants.

•International Trade: delivering specialized cross-border trading solutions (payments, FX, cash management, trade finance) for businesses, in a large and global market yet to be fully digitalized.

•Payments: providing wholesale account-to-account payments processing and instant connectivity to schemes in multiple geographic areas through a highly scalable model.

PagoNxt's technology platform and specialist teams serve Grupo Santander's payments needs and additionally cater for open market opportunities beyond Santander's business, delivering complete solutions for millions of businesses and individuals.

PagoNxt runs an efficient global operating model, extending across three core regions (Europe, South America and North America) and adopting bank-grade security and compliance embedded in our customer products.

PagoNxt's strategy is anchored on the following key levers:

•Scaling up our global, cloud-native, secure and efficient platform. We operate a connected, real-time, flexible and highly scalable technology platform that is fully cloud and API based to ensure access to PagoNxt's features through a single integration. We process and generate insights to help our customers and their businesses leverage the full power of data and make data-driven decisions.

•Accelerating commercial growth by continuing to strengthen our international commerce and trade ecosystem, offerings and distribution through Santander's commercial platforms, with a focus on SMEs.

•Maximizing the open market opportunity through direct commercialization and distribution partnerships (with integrated software vendors and others), increasing our market penetration in Europe, South America and North America and extending our footprint to additional strategic countries.

January - June 2023						45

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Secondary segments

Business performance

Our global Merchant franchise, under the Getnet brand, reached EUR 95.4 billion Total Payments Volume (TPV) in H1 2023, 25% higher than H1 2022 (in constant euros). Revenue grew by 16% year-on-year (+12% in constant euros).

The growth in TPV was spread across our main regions. Getnet Brazil's TPV increased 15% in H1 versus previous year enabled by our propositions for SMEs and tailor-made solutions for large accounts and new verticals. Getnet Mexico's TPV grew by 31% in H1 2023 leveraging our new global platform which continues to be enhanced with new value added services. Getnet Europe showed a year-on-year TPV growth of 32% due to positive commercial dynamics both in the Spanish and Portuguese markets.

In the last quarter, we continued to make progress in our journey to consolidate Getnet as a fully-licensed acquirer across Europe and Latin America by offering e-commerce and PoS solutions and Value-Added Services, developing propositions for SMEs and multinationals and building a deep understanding of the banking channel and experience in partnerships.

Some highlights in H1 2023 were:

•Delivery of new global solutions (e.g. working capital), new Value-Added Services (e.g. dynamic currency conversion, tap on phone) and new vertical specific propositions (e.g. airlines processing capabilities and solutions for restaurants) on the global merchant platform.

•Continued deployment of the franchise through the launch of Getnet Portugal and acquiring services in Argentina.

•Commercial development through actively targeting strategic opportunities in the open market expanding our distribution channels beyond Santander networks and through the addition of a number of new core large corporates across markets.

Merchants

Number of Transactions

Total Payments Volume

Millions

Constant EUR billion

+32%

4.4

+25%

95.4

3.3

76.6

H1'22

H1'23

H1'22

H1'23

Ebury continues to make great progress in delivering its strategy of becoming a global SME transaction banking leader. It has continued to show strong performance in its B2B offerings targeting the open market, driven mainly by FX services. Ebury´s management priorities are continuing to develop its customer value proposition (e.g. new FX capabilities, mobile app development) and expanding into new areas.

Our One Trade platform, which offers international services (including payments, FX and trade finance) for Santander customers, replacing the local systems with a single, common and interconnected technology solution, also continued to show increased activity. All key modules are now operational: OneTradeView (a tool that allows customers to view all accounts with Santander regardless of location), International Payments (already fully rolled out in Spain and already reaching around 8,000 active customers), FX (i.e. digital service for SMEs to handle FX flows) and Trade Finance. Additionally, a new direct offering of pay-in and pay-out capabilities through an e-money vehicle w launched in H1 focusing on the open market.

PagoNxt made significant progress in H1 2023 in its roadmap to become Santander´s wholesale payments processing provider, centralizing all types of payments (except cards). A significant volume of payments in Spain has already been migrated, becoming one of the largest A2A payments processors in the Eurozone.

Results

Attributable profit in the first half of 2023 amounted to -EUR 103 million, compared to -EUR 104 million in the first half of 2022.

Total income was EUR 521 million, a 31% increase year-on-year (+27% in constant euros), backed by the increase in business activity and volumes across regions especially in our Merchant (Getnet) and Trade (Ebury) businesses.

PagoNxt. Revenue performance

Constant EUR million

521

+27%

409

H1'22

H1'23

In the period, costs reflected the ongoing investment plans to develop and implement global technology.

Compared to the first quarter, profit improved to -EUR 48 million from -EUR 55 million.

			PagoNxt. Underlying income statement
			EUR million and % change
									/			Q1'23									/			H1'22
						Q2'23			%			excl. FX						H1'23			%			excl. FX
			Revenue			277			+14			+12						521			+31			+27
			Expenses			-295			+6			+6						-573			+28			+27
			Net operating income			-18			-48			-40						-52			+4			+18
			LLPs			-6			-5			-5						-12			+11			+10
			PBT			-34			-20			-13						-77			+19			+31
			Attributable profit			-48			-13			-9						-103			0			+4
			Detailed financial information on page 73

46						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

			RESPONSIBLE BANKING

TARGETS

We continue to make progress in our ESG agenda, working towards the fulfilment of our public targets:

More information available at www.santander.com/en/our-approach.

Definitions in Alternative Performance Measures chapter and Glossary.

Note: Not taxonomy.

1.Starting Jan-23. Does not include financial education. Data not audited.

HIGHLIGHTS

•Our Climate Finance Report 2022-June 2023 follows the framework established by the Taskforce on Climate-related Financial Disclosures (TCFD) and incorporates developments such as the Glasgow Financial Alliance for Net Zero (GFANZ) transition guidelines to disclose the progress in our transition plan and in the integration of climate-related risks and opportunities, in particular, in sectors with decarbonization targets.

•We won Euromoney's World's Best Bank for Financial Inclusion award for the third consecutive year.

•At the V International Meeting of Rectors held in Valencia on 10 May, we announced that we will invest EUR 400 million to promote education, employability and entrepreneurship between 2023-2026.

Of note among the implemented ESG initiatives were:

E			Environmental

•In line with our target to facilitate EUR 120 billion in green finance by 2025 and EUR 220 billion by 2030, we have mobilized EUR 98.6 billion in green finance since we set our target in 2019.

•The volume of AuMs in socially responsible investments was EUR 58.6 billion.

•As part of our commitment to support our customers towards a green transition, more than 21 million cards were made from recycled materials, which allowed us to reduce the use of 189 tonnes of plastic per year.

•We hosted the CDP Europe annual meeting, an international non-profit organization specializing in environmental impact, which brought together the sustainability managers of Spain's leading companies.

•Santander España promoted sustainable mobility for its employees through the installation of 502 electric chargers, well above (x17) the number of chargers established by regulatory requirements.

•We signed our first agreement with International Finance Corporation (IFC) to promote sustainable building practices in Mexico to support energy and environmental efficiency. It is an Excellence in Design for Greater Efficiencies (EDGE) certification, which recognizes a structure or building as sustainable.

•We partnered with CBRE to contribute to the decarbonization of the real estate sector in Spain by providing advice and funding to improve the energy efficiency of buildings.

January - June 2023						47

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

S			Social

•We further strengthened our financial inclusion proposition. Since January, we reached 900.000 people in relation to our goal of reaching 5 million between 2023 and 2025.

•In June, we celebrated the 15th "Euros from your Paycheck" contest in Spain, chaired by Her Majesty the Queen and the Group's Chair, Ana Botín. This is a programme to promote social projects sponsored by employees and is subject to an internal voting system. A total of 2,600 employees participated and nearly EUR 700,000 was raised.

•Through the Santander Consumer USA Foundation, we will provide USD 7 million worth of technology equipment to low-income households in Arizona.

•In Mexico, we agreed with the Secretary of Economic Development of Oaxaca (SEDECO) to provide more than EUR 80 million this year to foster financial inclusion among more than 1,000 SMEs in the region. In addition, 25,000 Mexican farmers benefited from our financial education programme called “Cultivando mi futuro financiero”.

•In Poland, through the "We Will Double Your Impact" campaign, we allocated around EUR 225,000 to develop the helpline managed by the Empowering Children Foundation.

G			Governance

•The Board remuneration policy, which includes ESG issues for the executive directors with a 20% weighting, was approved with 90.78% support at the AGM.

•This quarter, we published the ESG reports of Brazil, Chile, Mexico, Portugal and the US.

H1 2023 AWARDS

•We won the award for Most Impressive Bank for ESG Capital Markets in Latin America at the Bond Awards 2023, organized by GlobalCapital.

•In Brazil, the Exame Magazine named us The Best of ESG 2023.

•Responsible Business Forum recognized us for the responsible practices of Santander in Poland and its foundation in the report "Responsible Business in Poland 2022: good practices". In addition, the "Diversity IN Check" tool, which measures diversity management in organizations, included the bank for its inclusive work environment.

•We were awarded in the US with the SAS Global Hackathon in the banking sector for the development of an online carbon footprint tracker to measure the impact from customers.

•In Mexico, we were included in the Top 5 of the Super Companies 2023 Ranking by TOP Companies, which selects the best companies to work for. In addition, the Mexican Institute of Finance Executives awarded us with the Gender Equality Award 2023.

•In Uruguay, we were acknowledged by the Great Place to Work ranking as one of the best companies to work for.

•In the UK, our partnership with Alzheimer's Society won five new awards recognizing the work done to help both customers and the community.

48						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

			CORPORATE GOVERNANCE

Reduction of the share capital by 1.64% in regard to shareholder remuneration applicable to 2022 results

The board of directors reduced the Bank's share capital in the amount of EUR 134,924,476.50 by cancelling 269,848,953 of its own shares. These own shares represent 1.64% of share capital prior to the capital reduction and were acquired in the buyback programme carried out between March and April 2023 as part of the shareholder remuneration charged against 2022 results. The capital reduction, which was approved by the general shareholders’ meeting on 31 March 2023, obtained the required ECB’s approval on 27 June and was registered in the Commercial Registry of Cantabria on 30 June. Consequently, Article 5 of the Bylaws was amended to reflect that the Bank’s share capital is set at EUR 8,092,073,029.50, comprising 16,184,146,059 shares that have a nominal value of EUR 0.50 per share, which belong to the same class and accord the same rights.

The four share buyback programmes against 2021 and 2022 earnings and the related share capital reductions have resulted in the redemption of almost 7% of the Bank's shares (1,156,495,243 shares) since November 2021.

Changes in the organizational structure of the Group's Senior Management

On 26 April, the Bank announced the appointment of Christiana Riley as regional head of North America, effective on 1 October. Ms Riley will lead all the businesses in the US and Mexico, with the respective country heads reporting to her. Most recently, she was regional head for Deutsche Bank in the Americas.

In addition, on 7 June, the board of directors appointed Daniel Barriuso Group Chief Transformation Officer, subject to the necessary regulatory approval being obtained. Mr Barriuso had been our Global Chief Information Security Officer (Global CISO).

Finally, on 15 June, the Bank announced the appointment of Pedro Castro e Almeida as regional head for Europe to succeed António Simões. Mr Simões will depart from the Group on 1 September, when this appointment will take effect. Mr Castro e Almeida, who will continue as CEO of Santander Portugal, will be responsible for the businesses in Europe and leading transformation in the region, with the country heads of Spain, the United Kingdom and Poland reporting to him.

Changes to the international advisory board’s composition

On 24 April, Carolyn Everson joined the international advisory board of Banco Santander. Ms Everson is a director at The Coca-Cola Company and at The Walt Disney Company. She has extensive experience in technology and media companies.

January - June 2023						49

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

			SANTANDER SHARE

In application of the shareholder remuneration policy for 2022, the bank paid a second cash dividend of EUR 5.95 cents per share against 2022 results in May.

Likewise, and in application of the shareholder remuneration policy for 2022, a second share buyback programme was carried out March and April 2023 for EUR 921 million, representing 1.64% of the share capital. The shares acquired were amortized and the corresponding capital reduction was executed under the terms explained in the corporate governance section.

After carrying out both actions, total shareholder remuneration against 2022 results was EUR 3,842 million, approximately 40% of 2022 underlying profit.

The shareholder remuneration policy the board approved for the 2023 results is a payout of approximately 50% of the Group's net reported profit (excluding non-cash, non-capital ratios impact items), distributed approximately as 50% in cash dividend and 50% in share buybacks. The execution of the shareholder remuneration policy is subject to future corporate and regulatory approvals.

Share price performance

The second quarter of 2023 was again characterized by inflationary pressures, which, despite having declined, remain persistently high. The main central banks continued to rise interest rates, albeit at different speeds.

The Federal Reserve, after a 25 bp increase in May, paused raising rates in June to properly assess their impact on the economy, leaving rates at 5.25%.

The European Central Bank, eased its rate up by 25 bps at each of its last two meetings to 4.00%, while the Bank of England surprised the market with a 50 bp rise to 5.00% at the June meeting, following the acceleration in core inflation.

In this context, the main central banks maintained that it is too early to say that their ceiling was reached and predicted possible rises in the following meetings.

All in all, the global economy remained resilient, with better prospects for 2023 than forecast at the beginning of the year, mainly due to strength in US household spending, lower gas prices in Europe, the reopening of China, the end of the global covid-19 health emergency announced by the World Health Organization in May, and the robustness of the labour market in many economies.

The European financial sector maintained a positive performance after first quarter turbulence, mainly due to the isolated crises suffered by some American banks, which subsequently affected Credit Suisse, and to the uncertainty in the debt ceiling negotiations in the US.

The Santander share price ended the quarter with a positive return of 21%, outperforming the market in relative terms. In the banking sector, EuroStoxx Banks was up 12%, DJ Stoxx Banks increased 11% and MSCI World Banks decreased slightly 0.2%. The other main indices closed up, Ibex 35 +17% and DJ Stoxx 50 +10%.

Share price
START 30/12/2022									END 30/06/2023
€2.803									€3.385
Maximum 07/03/2023									Minimum 03/01/2023
€3.873									€2.812

Comparative share performance

50						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Market capitalization and trading

As at 30 June 2023, Banco Santander’s market capitalization of EUR 54,783 million1 was the second largest in the eurozone and 27th largest in the world among financial institutions.

The share’s weighting in the DJ Stoxx Banks index was 6.7% and 11.6% in the DJ Euro Stoxx Banks. In the domestic market, its weight in the Ibex 35 as at end March was 11.1%.

A total of 6,585 million shares were traded in the period for an effective value of EUR 21,880 million and a liquidity ratio of 40%.

The daily trading volume was 51.8 million shares with an effective value of EUR 172 million.

Shareholder base

The total number of Santander shareholders at 30 June 2023 was 3,802,161, of which 3,349,755 were European (73.23% of the capital stock) and 440,853 from the Americas (25.42% of the capital stock).

Excluding the board, which holds 1.15% of the bank’s capital stock, retail shareholders accounted for 42.74% and institutional shareholders accounted for 56.11%.

Share capital distribution by geographic area
June 2023
The Americas			Europe			Other
25.42%			73.23%			1.35%
Source: Banco Santander, S.A Shareholder register.

			2nd			Bank in the eurozone by market capitalization
			EUR 54,783 million1

The Santander share
June 2023
Shares and trading data
Shares (number)			16,184,146,059
Average daily turnover (number of shares)			51,847,418
Share liquidity (%)			40
(Number of shares traded during the year / number of shares)
Stock market indicators
Price / Tangible book value (X)			0.74
Free float (%)			99.91

1.After cancelling the shares from the second share buyback programme against 2022 results.

Share capital distribution by type of shareholder
June 2023

			Institutions
			56.11%
			Board *
			1.15%
			Retail
			42.74%

* Shares owned or represented by directors.

January - June 2023						51

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

2023 A P P E N D I X

52						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Group financial information

Net fee income. Consolidated
EUR million
			Q2'23			Q1'23			Change (%)			H1'23			H1'22			Change (%)
Fees from services			1,747			1,844			(5.3)			3,591			3,369			6.6
Wealth management and marketing of customer funds			1,032			924			11.7			1,956			1,927			1.5
Securities and custody			281			275			2.2			556			556			—
Net fee income			3,060			3,043			0.6			6,103			5,852			4.3

Underlying operating expenses. Consolidated
EUR million
			Q2'23			Q1'23			Change (%)			H1'23			H1'22			Change (%)
Staff costs			3,358			3,245			3.5			6,603			5,948			11.0
Other general administrative expenses			2,159			2,111			2.3			4,270			4,045			5.6
Information technology			605			642			(5.8)			1,247			1,161			7.4
Communications			105			103			1.9			208			208			—
Advertising			163			136			19.9			299			265			12.8
Buildings and premises			196			177			10.7			373			359			3.9
Printed and office material			27			20			35.0			47			47			—
Taxes (other than tax on profits)			146			149			(2.0)			295			280			5.4
Other expenses			917			884			3.7			1,801			1,725			4.4
Administrative expenses			5,517			5,356			3.0			10,873			9,993			8.8
Depreciation and amortization			817			789			3.5			1,606			1,442			11.4
Operating expenses			6,334			6,145			3.1			12,479			11,435			9.1

Operating means. Consolidated
			Employees												Branches
			Jun-23			Jun-22			Change						Jun-23			Jun-22			Change
Europe			66,819			63,579			3,240						3,103			3,178			(75)
Spain			26,679			26,272			407						1,884			1,921			(37)
United Kingdom			22,163			20,320			1,843						445			450			(5)
Portugal			4,977			4,977			—						377			386			(9)
Poland			10,682			10,468			214						389			413			(24)
Other			2,318			1,542			776						8			8			—
North America			45,657			43,779			1,878						1,814			1,859			(45)
US			14,250			14,943			(693)						443			486			(43)
Mexico			30,280			28,236			2,044						1,371			1,373			(2)
Other			1,127			600			527						—			—			—
South America			81,413			75,588			5,825						3,543			3,786			(243)
Brazil			58,505			53,743			4,762						2,772			2,936			(164)
Chile			9,928			9,921			7						259			306			(47)
Argentina			8,233			8,514			(281)						362			407			(45)
Other			4,747			3,410			1,337						150			137			13
Digital Consumer Bank			16,624			15,894			730						363			370			(7)
Corporate Centre			1,896			1,811			85
Total Group			212,409			200,651			11,758						8,823			9,193			(370)

.

Underlying net loan-loss provisions. Consolidated
EUR million
			Q2'23			Q1'23			Change (%)			H1'23			H1'22			Change (%)
Non-performing loans			3,412			3,223			5.9			6,635			5,397			22.9
Country-risk			1			(1)			—			0			1			(100.0)
Recovery of written-off assets			(515)			(349)			47.6			(864)			(663)			30.3
Net loan-loss provisions			2,898			2,873			0.9			5,771			4,735			21.9

January - June 2023						53

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Group financial information

Loans and advances to customers. Consolidated
EUR million
									Change
			Jun-23			Jun-22			Absolute			%			Dec-22
Commercial bills			53,596			57,171			(3,575)			(6.3)			56,688
Secured loans			566,991			563,525			3,466			0.6			565,609
Other term loans			293,360			288,070			5,290			1.8			290,031
Finance leases			36,831			39,139			(2,308)			(5.9)			39,833
Receivable on demand			14,229			13,244			985			7.4			11,435
Credit cards receivable			23,889			21,884			2,005			9.2			22,704
Impaired assets			33,295			32,402			893			2.8			32,888
Gross loans and advances to customers (excl. reverse repos)			1,022,191			1,015,435			6,756			0.7			1,019,188
Reverse repos			45,999			45,738			261			0.6			39,500
Gross loans and advances to customers			1,068,190			1,061,173			7,017			0.7			1,058,688
Loan-loss allowances			23,146			23,452			(306)			(1.3)			22,684
Loans and advances to customers			1,045,044			1,037,721			7,323			0.7			1,036,004

Total funds. Consolidated
EUR million
									Change
			Jun-23			Jun-22			Absolute			%			Dec-22
Demand deposits			670,106			717,516			(47,410)			(6.6)			710,232
Time deposits			270,609			181,323			89,286			49.2			236,099
Mutual funds			193,401			183,773			9,628			5.2			184,054
Customer funds			1,134,116			1,082,612			51,504			4.8			1,130,385
Pension funds			14,352			14,250			102			0.7			14,021
Managed portfolios			34,252			32,597			1,655			5.1			32,184
Repos			73,063			58,851			14,212			24.1			63,391
Total funds			1,255,783			1,188,310			67,473			5.7			1,239,981

Eligible capital (phased-in) 1. Consolidated
EUR million
									Change
			Jun-23			Jun-22			Absolute			%			Dec-22
Capital stock and reserves			121,643			117,619			4,023			3.4			116,956
Attributable profit			5,241			4,894			347			7.1			9,605
Dividends			(1,310)			(979)			(331)			33.9			(1,921)
Other retained earnings			(31,882)			(32,506)			624			(1.9)			(35,068)
Minority interests			6,702			6,971			(269)			(3.9)			7,416
Goodwill and intangible assets			(17,878)			(17,084)			(794)			4.6			(17,182)
Other deductions			(4,887)			(4,825)			(62)			1.3			(5,604)
Core CET1			77,628			74,091			3,537			4.8			74,202
Preferred shares and other eligible tier 1			8,856			8,794			63			0.7			8,831
Tier 1			86,485			82,885			3,600			4.3			83,033
Generic funds and eligible tier 2 instruments			14,669			14,958			(289)			(1.9)			14,359
Eligible capital			101,154			97,843			3,310			3.4			97,392
Risk-weighted assets			631,149			604,977			26,171			4.3			609,266
CET1 capital ratio			12.3			12.2			0.1						12.2
Tier 1 capital ratio			13.7			13.7			0.0						13.6
Total capital ratio			16.0			16.2			(0.2)						16.0

1. 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.

54						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

EUROPE																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			3,968			10.3			9.1						7,565			30.0			32.0
Net fee income			1,076			(7.9)			(8.4)						2,244			(3.1)			(2.8)
Gains (losses) on financial transactions 1			130			(62.6)			(62.7)						477			29.1			29.1
Other operating income			119			103.5			106.2						177			133.5			134.9
Total income			5,293			2.4			1.4						10,464			21.9			23.3
Administrative expenses and amortizations			(2,215)			2.2			1.4						(4,382)			5.3			6.5
Net operating income			3,078			2.5			1.4						6,081			37.7			39.2
Net loan-loss provisions			(646)			0.6			(0.4)						(1,289)			12.4			12.9
Other gains (losses) and provisions			(389)			(24.6)			(25.1)						(905)			56.5			58.2
Profit before tax			2,042			10.6			9.5						3,888			44.4			46.4
Tax on profit			(614)			6.4			5.4						(1,191)			58.2			60.3
Profit from continuing operations			1,428			12.6			11.3						2,697			39.0			41.0
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			1,428			12.6			11.3						2,697			39.0			41.0
Non-controlling interests			(81)			1.7			(2.0)						(161)			58.3			57.9
Profit attributable to the parent			1,347			13.3			12.2						2,536			37.9			40.0
Balance sheet
Loans and advances to customers			582,186			0.1			(1.1)						582,186			(4.5)			(4.7)
Cash, central banks and credit institutions			195,592			0.0			(1.0)						195,592			(16.5)			(16.6)
Debt instruments			96,922			13.3			12.2						96,922			46.6			44.9
Other financial assets			51,191			6.0			5.9						51,191			8.8			8.9
Other asset accounts			25,168			(5.9)			(6.5)						25,168			(13.5)			(13.7)
Total assets			951,058			1.4			0.3						951,058			(3.5)			(3.8)
Customer deposits			629,383			1.4			0.2						629,383			3.2			2.7
Central banks and credit institutions			115,902			(0.7)			(1.6)						115,902			(33.4)			(33.3)
Marketable debt securities			75,492			(0.9)			(2.3)						75,492			4.7			4.5
Other financial liabilities			59,436			10.9			10.6						59,436			2.3			2.3
Other liabilities accounts			29,091			(1.0)			(1.4)						29,091			6.8			6.4
Total liabilities			909,305			1.5			0.3						909,305			(3.4)			(3.7)
Total equity			41,753			1.0			(0.4)						41,753			(6.1)			(6.6)
Memorandum items:
Gross loans and advances to customers 2			563,951			(0.4)			(1.6)						563,951			(4.3)			(4.6)
Customer funds			703,203			1.3			0.2						703,203			2.0			1.6
Customer deposits 3			603,590			0.8			(0.4)						603,590			1.8			1.4
Mutual funds			99,613			4.8			4.4						99,613			3.1			2.8
Ratios (%), operating means and customers
RoTE			14.21			1.41									13.51			4.71
Efficiency ratio			41.9			(0.1)									41.9			(6.6)
NPL ratio			2.35			0.00									2.35			(0.28)
NPL coverage ratio			51.1			(0.2)									51.1			0.9
Number of employees			66,819			0.2									66,819			5.1
Number of branches			3,103			(1.0)									3,103			(2.4)
Number of total customers (thousands)			45,944			0.4									45,944			2.1
Number of active customers (thousands)			28,356			0.5									28,356			2.2

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

January - June 2023						55

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

Spain															Q
EUR million
						/ Q1'23									/ H1'22
Underlying income statement			Q2'23			%						H1'23			%
Net interest income			1,701			16.5						3,161			56.9
Net fee income			661			(12.0)						1,413			(4.3)
Gains (losses) on financial transactions 1			72			(72.4)						332			54.7
Other operating income			132			76.0						206			(10.9)
Total income			2,566			0.7						5,113			29.9
Administrative expenses and amortizations			(1,025)			1.2						(2,039)			4.9
Net operating income			1,540			0.5						3,074			54.2
Net loan-loss provisions			(389)			(6.3)						(803)			(0.4)
Other gains (losses) and provisions			(212)			(44.2)						(591)			109.1
Profit before tax			940			27.2						1,679			85.8
Tax on profit			(274)			0.6						(547)			117.3
Profit from continuing operations			666			42.7						1,132			73.6
Net profit from discontinued operations			—			—						—			—
Consolidated profit			666			42.7						1,132			73.6
Non-controlling interests			0			29.3						0			(17.2)
Profit attributable to the parent			666			42.7						1,132			73.6
Balance sheet
Loans and advances to customers			246,187			(1.0)						246,187			(7.6)
Cash, central banks and credit institutions			111,829			2.8						111,829			(24.9)
Debt instruments			57,770			17.2						57,770			82.5
Other financial assets			46,278			3.7						46,278			9.9
Other asset accounts			17,553			(2.1)						17,553			(5.4)
Total assets			479,618			2.2						479,618			(5.5)
Customer deposits			313,364			0.8						313,364			4.7
Central banks and credit institutions			48,379			7.6						48,379			(47.9)
Marketable debt securities			27,116			(1.3)						27,116			6.2
Other financial liabilities			52,888			12.5						52,888			3.1
Other liabilities accounts			20,754			(4.3)						20,754			12.5
Total liabilities			462,501			2.3						462,501			(5.2)
Total equity			17,117			(0.2)						17,117			(14.5)
Memorandum items:
Gross loans and advances to customers 2			237,685			(1.6)						237,685			(6.2)
Customer funds			373,727			(0.3)						373,727			2.6
Customer deposits 3			298,757			(0.8)						298,757			2.9
Mutual funds			74,971			1.7						74,971			1.1
Ratios (%), operating means and customers
RoTE			15.77			4.69						13.43			6.82
Efficiency ratio			40.0			0.2						39.9			(9.5)
NPL ratio			3.11			(0.08)						3.11			(0.72)
NPL coverage ratio			50.7			0.5						50.7			1.3
Number of employees			26,679			(1.4)						26,679			1.5
Number of branches			1,884			(1.3)						1,884			(1.9)
Number of total customers (thousands)			14,681			1.3						14,681			5.3
Number of active customers (thousands)			8,129			2.0						8,129			5.5

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

56						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

United Kingdom																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			1,300			1.3			(0.2)						2,583			6.8			11.1
Net fee income			84			2.1			0.6						167			(17.3)			(14.0)
Gains (losses) on financial transactions 1			7			—			—						7			(42.7)			(40.4)
Other operating income			—			—			—						2			145.4			155.3
Total income			1,391			1.7			0.1						2,759			4.8			9.0
Administrative expenses and amortizations			(689)			2.2			0.7						(1,363)			1.1			5.2
Net operating income			702			1.1			(0.5)						1,395			8.6			12.9
Net loan-loss provisions			(44)			(26.0)			(27.4)						(103)			(17.5)			(14.2)
Other gains (losses) and provisions			(73)			(21.2)			(22.6)						(165)			—			4.0
Profit before tax			585			7.9			6.3						1,127			13.3			17.8
Tax on profit			(162)			10.2			8.6						(309)			19.3			24.1
Profit from continuing operations			423			7.0			5.4						818			11.2			15.6
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			423			7.0			5.4						818			11.2			15.6
Non-controlling interests			—			—			—						—			—			—
Profit attributable to the parent			423			7.0			5.4						818			11.2			15.6
Balance sheet
Loans and advances to customers			253,681			0.7			(1.6)						253,681			(2.3)			(2.5)
Cash, central banks and credit institutions			64,683			(2.7)			(5.0)						64,683			(0.9)			(1.1)
Debt instruments			8,712			7.6			5.2						8,712			41.0			40.7
Other financial assets			1,074			153.9			148.1						1,074			87.0			86.6
Other asset accounts			2,362			(36.1)			(37.6)						2,362			(55.2)			(55.3)
Total assets			330,514			0.0			(2.3)						330,514			(1.9)			(2.1)
Customer deposits			233,644			1.7			(0.7)						233,644			2.0			1.8
Central banks and credit institutions			35,918			(6.7)			(8.8)						35,918			(21.9)			(22.1)
Marketable debt securities			43,257			(2.4)			(4.7)						43,257			0.3			0.1
Other financial liabilities			3,108			(14.5)			(16.5)						3,108			3.2			2.9
Other liabilities accounts			2,011			45.5			42.1						2,011			5.2			5.0
Total liabilities			317,938			0.1			(2.2)						317,938			(1.6)			(1.8)
Total equity			12,576			(2.8)			(5.1)						12,576			(9.0)			(9.2)
Memorandum items:
Gross loans and advances to customers 2			242,113			0.1			(2.2)						242,113			(3.5)			(3.7)
Customer funds			229,868			2.0			(0.4)						229,868			0.6			0.4
Customer deposits 3			222,634			2.1			(0.3)						222,634			0.7			0.5
Mutual funds			7,234			(0.2)			(2.5)						7,234			(4.3)			(4.5)
Ratios (%), operating means and customers
RoTE			14.19			0.63									13.87			3.09
Efficiency ratio			49.6			0.3									49.4			(1.8)
NPL ratio			1.32			0.05									1.32			0.15
NPL coverage ratio			32.0			(1.2)									32.0			(1.0)
Number of employees			22,163			1.4									22,163			9.1
Number of branches			445			(0.2)									445			(1.1)
Number of total customers (thousands)			22,372			(0.1)									22,372			0.7
Number of active customers (thousands)			13,878			(0.5)									13,878			(0.2)

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

January - June 2023						57

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

Portugal															Q
EUR million
						/ Q1'23									/ H1'22
Underlying income statement			Q2'23			%						H1'23			%
Net interest income			314			20.3						575			68.8
Net fee income			111			(10.2)						235			(3.9)
Gains (losses) on financial transactions 1			3			(66.8)						12			(72.7)
Other operating income			(9)			—						2			—
Total income			419			3.4						824			34.4
Administrative expenses and amortizations			(132)			0.1						(265)			5.6
Net operating income			286			4.9						559			54.2
Net loan-loss provisions			(20)			51.4						(34)			214.5
Other gains (losses) and provisions			(42)			—						(41)			68.7
Profit before tax			223			(14.3)						484			47.9
Tax on profit			(81)			0.7						(162)			60.1
Profit from continuing operations			142			(21.0)						322			42.4
Net profit from discontinued operations			—			—						—			—
Consolidated profit			142			(21.0)						322			42.4
Non-controlling interests			—			194.2						(1)			(8.2)
Profit attributable to the parent			142			(21.2)						321			42.6
Balance sheet
Loans and advances to customers			37,765			(1.5)						37,765			(4.6)
Cash, central banks and credit institutions			9,276			(4.3)						9,276			(20.9)
Debt instruments			7,903			(0.7)						7,903			(1.0)
Other financial assets			1,141			1.1						1,141			(18.0)
Other asset accounts			1,371			1.6						1,371			(2.5)
Total assets			57,456			(1.7)						57,456			(7.4)
Customer deposits			36,598			(1.9)						36,598			(8.9)
Central banks and credit institutions			8,532			(11.3)						8,532			(16.1)
Marketable debt securities			3,983			22.5						3,983			47.6
Other financial liabilities			308			1.5						308			8.1
Other liabilities accounts			4,542			(2.2)						4,542			(8.1)
Total liabilities			53,964			(2.1)						53,964			(7.4)
Total equity			3,492			4.4						3,492			(8.7)
Memorandum items:
Gross loans and advances to customers 2			38,741			(1.4)						38,741			(4.5)
Customer funds			40,550			(1.3)						40,550			(7.7)
Customer deposits 3			36,598			(1.9)						36,598			(8.9)
Mutual funds			3,952			4.4						3,952			4.5
Ratios (%), operating means and customers
RoTE			16.53			(4.37)						18.71			6.99
Efficiency ratio			31.6			(1.0)						32.1			(8.7)
NPL ratio			3.09			0.05						3.09			(0.24)
NPL coverage ratio			81.8			1.5						81.8			7.5
Number of employees			4,977			0.4						4,977			0.0
Number of branches			377			0.0						377			(2.3)
Number of total customers (thousands)			2,888			(0.7)						2,888			(4.4)
Number of active customers (thousands)			1,800			0.8						1,800			4.3

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

58						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

Poland																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			623			6.4			2.6						1,209			35.3			34.9
Net fee income			144			(0.7)			(4.3)						289			7.8			7.5
Gains (losses) on financial transactions 1			4			(83.9)			(86.0)						30			(46.6)			(46.7)
Other operating income			9			—			—						(19)			(85.3)			(85.4)
Total income			780			7.1			3.3						1,509			38.4			38.1
Administrative expenses and amortizations			(207)			5.0			1.2						(405)			19.4			19.1
Net operating income			573			7.9			4.1						1,105			47.0			46.7
Net loan-loss provisions			(191)			26.3			22.2						(343)			69.8			69.4
Other gains (losses) and provisions			(61)			38.2			33.8						(105)			(0.3)			(0.6)
Profit before tax			321			(4.5)			(8.0)						657			48.0			47.6
Tax on profit			(85)			(4.0)			(7.5)						(173)			28.7			28.4
Profit from continuing operations			236			(4.6)			(8.2)						484			56.4			56.0
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			236			(4.6)			(8.2)						484			56.4			56.0
Non-controlling interests			(81)			0.7			(3.0)						(162)			59.3			58.9
Profit attributable to the parent			155			(7.2)			(10.7)						321			55.0			54.6
Balance sheet
Loans and advances to customers			32,146			7.1			1.5						32,146			6.3			0.3
Cash, central banks and credit institutions			8,831			1.2			(4.0)						8,831			133.7			120.5
Debt instruments			13,340			15.4			9.5						13,340			2.5			(3.3)
Other financial assets			618			23.3			16.9						618			(26.6)			(30.7)
Other asset accounts			1,758			8.1			2.5						1,758			2.6			(3.2)
Total assets			56,693			8.1			2.5						56,693			14.3			7.9
Customer deposits			42,148			6.9			1.4						42,148			15.3			8.8
Central banks and credit institutions			4,548			16.7			10.6						4,548			(2.1)			(7.6)
Marketable debt securities			1,136			3.7			(1.6)						1,136			45.2			37.0
Other financial liabilities			1,232			14.6			8.7						1,232			6.2			0.2
Other liabilities accounts			1,478			5.7			0.2						1,478			(8.1)			(13.3)
Total liabilities			50,541			7.8			2.3						50,541			12.9			6.5
Total equity			6,151			10.7			5.0						6,151			27.2			20.0
Memorandum items:
Gross loans and advances to customers 2			32,984			7.2			1.7						32,984			6.5			0.5
Customer funds			46,129			7.9			2.3						46,129			16.2			9.7
Customer deposits 3			42,148			7.0			1.4						42,148			15.3			8.8
Mutual funds			3,982			18.8			12.6						3,982			27.3			20.1
Ratios (%), operating means and customers
RoTE			16.41			(3.14)									17.93			4.23
Efficiency ratio			26.5			(0.5)									26.8			(4.3)
NPL ratio			3.74			0.08									3.74			0.29
NPL coverage ratio			74.0			(1.2)									74.0			(2.0)
Number of employees			10,682			0.6									10,682			2.0
Number of branches			389			(1.0)									389			(5.8)
Number of total customers (thousands)			5,787			0.7									5,787			3.2
Number of active customers (thousands)			4,382			0.8									4,382			3.3

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

January - June 2023						59

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

Other Europe
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			30			343.8			374.5						37			(75.8)			(75.9)
Net fee income			75			15.3			16.0						140			11.9			11.2
Gains (losses) on financial transactions 1			44			(13.5)			(12.9)						96			127.6			125.7
Other operating income			(12)			691.7			690.6						(14)			14.8			13.8
Total income			137			12.9			14.1						259			(15.7)			(16.2)
Administrative expenses and amortizations			(161)			7.8			8.4						(311)			10.0			9.5
Net operating income			(24)			(14.3)			(16.2)						(52)			—			—
Net loan-loss provisions			(2)			(37.3)			(37.9)						(6)			230.2			229.1
Other gains (losses) and provisions			(1)			(6.9)			(6.7)						(2)			—			—
Profit before tax			(27)			(16.4)			(18.1)						(59)			—			—
Tax on profit			(11)			—			—						1			—			—
Profit from continuing operations			(38)			89.2			85.8						(59)			—			—
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			(38)			89.2			85.8						(59)			—			—
Non-controlling interests			1			(41.9)			(41.9)						2			133.1			133.1
Profit attributable to the parent			(38)			97.7			93.9						(57)			—			—
Balance sheet
Loans and advances to customers			12,408			(0.7)			(0.2)						12,408			(8.4)			(4.5)
Cash, central banks and credit institutions			972			(49.5)			(49.4)						972			(79.0)			(78.3)
Debt instruments			9,196			6.0			6.1						9,196			25.8			26.4
Other financial assets			2,079			30.9			31.5						2,079			(2.1)			1.8
Other asset accounts			2,123			(1.5)			(1.3)						2,123			(1.6)			0.5
Total assets			26,778			(0.2)			0.1						26,778			(10.1)			(7.4)
Customer deposits			3,629			25.1			25.8						3,629			(26.1)			(23.2)
Central banks and credit institutions			18,525			(6.2)			(5.9)						18,525			(8.5)			(6.0)
Marketable debt securities			—			—			—						—			—			—
Other financial liabilities			1,901			20.5			21.0						1,901			(18.1)			(15.1)
Other liabilities accounts			306			12.0			12.1						306			(7.2)			(6.7)
Total liabilities			24,361			(0.5)			(0.2)						24,361			(12.4)			(9.8)
Total equity			2,417			3.2			3.5						2,417			22.7			27.3
Memorandum items:
Gross loans and advances to customers 2			12,428			(0.6)			(0.2)						12,428			(8.4)			(4.5)
Customer funds			12,928			34.2			34.5						12,928			1.0			2.5
Customer deposits 3			3,454			26.5			27.3						3,454			(27.1)			(24.2)
Mutual funds			9,474			37.3			37.3						9,474			17.5			17.5
Resources
Number of employees			2,318			6.0									2,318			50.3

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

60						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

NORTH AMERICA																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			2,483			1.4			0.6						4,931			10.0			4.4
Net fee income			555			6.5			4.5						1,077			14.9			6.7
Gains (losses) on financial transactions 1			161			132.1			131.3						230			90.8			84.9
Other operating income			77			(25.1)			(22.6)						179			(25.3)			(23.9)
Total income			3,276			4.3			3.4						6,417			11.0			5.4
Administrative expenses and amortizations			(1,560)			4.0			3.4						(3,060)			13.6			8.1
Net operating income			1,716			4.5			3.4						3,357			8.7			3.0
Net loan-loss provisions			(722)			(10.7)			(10.9)						(1,530)			59.0			50.6
Other gains (losses) and provisions			(69)			272.6			264.5						(88)			34.1			21.3
Profit before tax			925			13.5			11.5						1,739			(15.6)			(19.9)
Tax on profit			(205)			17.4			14.6						(380)			(18.2)			(22.6)
Profit from continuing operations			719			12.5			10.7						1,359			(14.8)			(19.1)
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			719			12.5			10.7						1,359			(14.8)			(19.1)
Non-controlling interests			(1)			(94.2)			(96.5)						(14)			(26.6)			(35.2)
Profit attributable to the parent			719			14.6			12.9						1,346			(14.7)			(18.9)
Balance sheet
Loans and advances to customers			175,013			(1.6)			(2.4)						175,013			6.9			7.2
Cash, central banks and credit institutions			42,231			(0.5)			(2.6)						42,231			20.1			17.4
Debt instruments			49,389			4.4			2.2						49,389			9.4			4.9
Other financial assets			12,890			(16.5)			(18.9)						12,890			(7.6)			(12.3)
Other asset accounts			22,703			0.4			(0.3)						22,703			(4.9)			(3.7)
Total assets			302,226			(1.1)			(2.4)						302,226			7.2			6.2
Customer deposits			174,405			0.6			(0.4)						174,405			12.9			12.7
Central banks and credit institutions			37,101			2.0			(0.4)						37,101			19.6			14.4
Marketable debt securities			37,911			(2.6)			(3.4)						37,911			(6.9)			(6.1)
Other financial liabilities			20,418			(16.9)			(19.1)						20,418			(1.9)			(7.0)
Other liabilities accounts			6,552			(3.4)			(5.1)						6,552			(3.1)			(4.5)
Total liabilities			276,387			(1.3)			(2.6)						276,387			8.9			7.8
Total equity			25,839			0.5			(0.8)						25,839			(8.1)			(8.4)
Memorandum items:
Gross loans and advances to customers 2			159,959			1.8			0.8						159,959			5.5			5.3
Customer funds			167,944			0.8			(0.5)						167,944			11.1			9.8
Customer deposits 3			139,858			1.9			0.8						139,858			13.2			12.5
Mutual funds			28,086			(4.5)			(6.5)						28,086			2.1			(2.1)
Ratios (%), operating means and customers
RoTE			11.69			1.24									11.08			(1.09)
Efficiency ratio			47.6			(0.1)									47.7			1.1
NPL ratio			3.23			0.28									3.23			0.52
NPL coverage ratio			90.0			(4.9)									90.0			(21.5)
Number of employees			45,657			1.1									45,657			4.3
Number of branches			1,814			(1.6)									1,814			(2.4)
Number of total customers (thousands)			24,957			0.0									24,957			3.0
Number of active customers (thousands)			14,127			0.3									14,127			(0.1)

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

January - June 2023						61

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

United States																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			1,436			(2.0)			(0.6)						2,901			0.8			(0.3)
Net fee income			200			5.7			7.1						390			(1.1)			(2.2)
Gains (losses) on financial transactions 1			70			53.1			54.9						115			17.3			16.0
Other operating income			91			(28.5)			(27.3)						218			(26.3)			(27.1)
Total income			1,797			(1.7)			(0.3)						3,624			(1.1)			(2.2)
Administrative expenses and amortizations			(887)			(2.8)			(1.4)						(1,799)			7.0			5.8
Net operating income			910			(0.5)			0.9						1,825			(8.0)			(9.0)
Net loan-loss provisions			(438)			(22.9)			(21.6)						(1,005)			69.3			67.5
Other gains (losses) and provisions			(55)			—			—						(57)			374.0			368.8
Profit before tax			417			20.6			22.2						762			(44.7)			(45.3)
Tax on profit			(50)			9.1			10.6						(95)			(66.8)			(67.2)
Profit from continuing operations			367			22.4			24.0						667			(38.8)			(39.5)
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			367			22.4			24.0						667			(38.8)			(39.5)
Non-controlling interests			—			—			—						—			—			—
Profit attributable to the parent			367			22.4			24.0						667			(38.8)			(39.5)
Balance sheet
Loans and advances to customers			129,511			(3.4)			(2.9)						129,511			3.9			8.5
Cash, central banks and credit institutions			20,887			1.2			1.7						20,887			(2.2)			2.1
Debt instruments			22,650			(3.2)			(2.8)						22,650			1.7			6.2
Other financial assets			5,584			11.7			12.2						5,584			(4.7)			(0.5)
Other asset accounts			17,200			(0.7)			(0.2)						17,200			(11.6)			(7.7)
Total assets			195,831			(2.3)			(1.8)						195,831			1.1			5.6
Customer deposits			122,218			(2.7)			(2.2)						122,218			7.9			12.7
Central banks and credit institutions			16,260			2.0			2.5						16,260			10.8			15.7
Marketable debt securities			29,334			(0.5)			0.0						29,334			(9.7)			(5.7)
Other financial liabilities			8,755			(5.7)			(5.3)						8,755			1.6			6.1
Other liabilities accounts			3,590			(5.0)			(4.6)						3,590			(19.3)			(15.7)
Total liabilities			180,158			(2.1)			(1.7)						180,158			3.8			8.5
Total equity			15,673			(4.2)			(3.7)						15,673			(22.2)			(18.7)
Memorandum items:
Gross loans and advances to customers 2			113,437			(0.1)			0.3						113,437			1.7			6.2
Customer funds			107,743			(1.6)			(1.1)						107,743			6.1			10.9
Customer deposits 3			95,596			1.0			1.5						95,596			8.6			13.4
Mutual funds			12,146			(18.0)			(17.6)						12,146			(10.1)			(6.1)
Ratios (%), operating means and customers
RoTE			9.46			1.97									8.46			(3.04)
Efficiency ratio			49.3			(0.6)									49.6			3.8
NPL ratio			3.46			0.32									3.46			0.82
NPL coverage ratio			85.6			(5.9)									85.6			(35.4)
Number of employees			14,250			(1.7)									14,250			(4.6)
Number of branches			443			(6.3)									443			(8.8)
Number of total customers (thousands)			4,410			(1.1)									4,410			(5.4)
Number of active customers (thousands)			4,031			(1.3)									4,031			(5.6)

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

62						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

Mexico																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			1,045			6.3			2.2						2,027			26.2			11.9
Net fee income			344			7.5			3.4						663			25.5			11.3
Gains (losses) on financial transactions 1			91			276.0			266.6						115			434.1			373.4
Other operating income			(16)			(37.4)			(40.6)						(42)			(29.2)			(37.2)
Total income			1,463			12.5			8.3						2,763			31.8			16.8
Administrative expenses and amortizations			(623)			15.3			11.0						(1,163)			25.1			10.9
Net operating income			840			10.6			6.4						1,600			37.2			21.5
Net loan-loss provisions			(284)			18.7			14.3						(523)			42.4			26.2
Other gains (losses) and provisions			(13)			(22.4)			(25.9)						(29)			(44.0)			(50.3)
Profit before tax			543			7.8			3.7						1,048			40.3			24.3
Tax on profit			(141)			7.5			3.4						(272)			50.1			33.0
Profit from continuing operations			402			7.9			3.8						775			37.2			21.6
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			402			7.9			3.8						775			37.2			21.6
Non-controlling interests			(1)			(91.6)			(93.8)						(15)			(21.1)			(30.1)
Profit attributable to the parent			401			11.8			7.6						760			39.2			23.4
Balance sheet
Loans and advances to customers			45,447			3.7			(1.0)						45,447			16.5			3.5
Cash, central banks and credit institutions			21,004			(2.3)			(6.7)						21,004			55.6			38.2
Debt instruments			26,739			11.8			6.8						26,739			17.0			3.9
Other financial assets			7,171			(30.5)			(33.6)						7,171			(9.4)			(19.5)
Other asset accounts			5,200			4.1			(0.6)						5,200			24.4			10.5
Total assets			105,561			1.0			(3.6)						105,561			20.7			7.2
Customer deposits			51,987			9.3			4.3						51,987			26.8			12.6
Central banks and credit institutions			20,659			1.9			(2.8)						20,659			27.4			13.2
Marketable debt securities			8,577			(9.5)			(13.6)						8,577			4.4			(7.3)
Other financial liabilities			11,529			(24.0)			(27.4)						11,529			(4.1)			(14.8)
Other liabilities accounts			2,896			(1.5)			(5.9)						2,896			28.0			13.7
Total liabilities			95,649			0.2			(4.3)						95,649			20.0			6.6
Total equity			9,913			8.8			3.8						9,913			28.2			13.9
Memorandum items:
Gross loans and advances to customers 2			46,458			6.7			1.9						46,458			16.3			3.3
Customer funds			60,001			5.3			0.5						60,001			21.5			7.9
Customer deposits 3			44,062			4.0			(0.7)						44,062			24.5			10.6
Mutual funds			15,940			9.1			4.1						15,940			13.9			1.2
Ratios (%), operating means and customers
RoTE			17.81			(0.17)									17.89			2.08
Efficiency ratio			42.6			1.0									42.1			(2.3)
NPL ratio			2.60			0.22									2.60			(0.35)
NPL coverage ratio			106.3			(2.2)									106.3			22.1
Number of employees			30,280			2.2									30,280			7.2
Number of branches			1,371			0.0									1,371			(0.1)
Number of total customers (thousands)			20,335			0.3									20,335			5.0
Number of active customers (thousands)			9,933			1.0									9,933			2.3

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

January - June 2023						63

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

Other North America
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			3			506.6			506.6						3			—			—
Net fee income			11			(7.9)			(7.9)						23			66.0			66.0
Gains (losses) on financial transactions 1			—			(86.7)			(86.7)						(1)			—			—
Other operating income			2			49.0			49.0						4			(15.2)			(15.2)
Total income			16			18.9			18.9						30			54.6			54.6
Administrative expenses and amortizations			(50)			8.0			8.0						(97)			20.0			20.0
Net operating income			(34)			3.6			3.6						(68)			9.3			9.3
Net loan-loss provisions			(1)			(69.4)			(69.4)						(2)			67.2			67.2
Other gains (losses) and provisions			(1)			841.0			841.1						(1)			28.0			26.7
Profit before tax			(36)			1.3			1.3						(71)			10.8			10.7
Tax on profit			(14)			—			—						(12)			—			—
Profit from continuing operations			(50)			51.2			51.2						(83)			40.6			40.6
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			(50)			51.2			51.2						(83)			40.6			40.6
Non-controlling interests			0			(65.1)			(65.1)						2			99.0			99.0
Profit attributable to the parent			(49)			55.7			55.7						(81)			39.7			39.7
Balance sheet
Loans and advances to customers			55			24.0			24.0						55			32.0			32.0
Cash, central banks and credit institutions			339			6.7			6.7						339			10.4			10.4
Debt instruments			0			—			—						0			(4.5)			(4.5)
Other financial assets			135			12.6			12.6						135			(21.1)			(21.1)
Other asset accounts			304			2.5			2.5						304			25.0			25.0
Total assets			834			7.0			7.0						834			9.1			9.1
Customer deposits			200			(0.5)			(0.5)						200			9.2			9.2
Central banks and credit institutions			181			16.7			16.7						181			38.8			38.9
Marketable debt securities			—			—			—						—			—			—
Other financial liabilities			134			6.0			6.0						134			(19.8)			(19.8)
Other liabilities accounts			66			2.1			2.1						66			27.9			27.9
Total liabilities			580			6.2			6.2						580			9.2			9.2
Total equity			253			9.0			9.0						253			9.1			9.1
Memorandum items:
Gross loans and advances to customers 2			63			20.9			20.9						63			40.5			40.5
Customer funds			200			(0.5)			(0.5)						200			9.2			9.2
Customer deposits 3			200			(0.5)			(0.5)						200			9.2			9.2
Mutual funds			0			—			—						0			—			—
Resources
Number of employees			1,127			6.3									1,127			87.8

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

64						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

SOUTH AMERICA																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			3,314			4.8			9.0						6,477			0.8			5.8
Net fee income			1,229			5.4			7.5						2,395			10.1			16.3
Gains (losses) on financial transactions 1			405			25.6			35.7						727			20.1			31.9
Other operating income			(314)			27.0			82.0						(561)			104.0			361.6
Total income			4,634			5.2			7.2						9,037			1.2			4.9
Administrative expenses and amortizations			(1,810)			5.0			8.5						(3,534)			12.1			20.3
Net operating income			2,823			5.3			6.4						5,504			(4.8)			(3.0)
Net loan-loss provisions			(1,309)			6.3			4.6						(2,541)			8.9			9.4
Other gains (losses) and provisions			(386)			92.3			96.2						(587)			108.6			157.9
Profit before tax			1,128			(9.6)			(6.4)						2,376			(24.9)			(24.0)
Tax on profit			(328)			(6.1)			(4.4)						(678)			(24.5)			(24.4)
Profit from continuing operations			800			(10.9)			(7.2)						1,698			(25.1)			(23.8)
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			800			(10.9)			(7.2)						1,698			(25.1)			(23.8)
Non-controlling interests			(132)			21.9			20.4						(240)			(25.6)			(27.2)
Profit attributable to the parent			668			(15.4)			(11.1)						1,458			(25.1)			(23.2)
Balance sheet
Loans and advances to customers			156,813			3.0			1.0						156,813			11.4			7.6
Cash, central banks and credit institutions			59,964			1.4			(0.7)						59,964			17.4			16.2
Debt instruments			67,991			14.2			12.3						67,991			14.5			13.3
Other financial assets			21,499			1.5			1.1						21,499			(10.6)			(18.1)
Other asset accounts			19,027			0.7			(1.7)						19,027			1.5			(0.6)
Total assets			325,294			4.6			2.7						325,294			10.6			7.4
Customer deposits			146,848			2.4			0.9						146,848			9.0			8.2
Central banks and credit institutions			52,989			12.1			9.4						52,989			11.5			6.1
Marketable debt securities			41,457			7.2			4.3						41,457			27.7			20.4
Other financial liabilities			46,255			4.4			2.2						46,255			1.7			(3.8)
Other liabilities accounts			11,670			(1.1)			(2.0)						11,670			7.9			3.0
Total liabilities			299,218			4.8			2.8						299,218			10.4			7.0
Total equity			26,076			1.8			0.5						26,076			13.3			12.2
Memorandum items:
Gross loans and advances to customers 2			164,768			3.0			0.9						164,768			11.4			7.5
Customer funds			196,365			2.0			0.5						196,365			8.2			7.3
Customer deposits 3			134,125			3.5			2.2						134,125			8.1			7.6
Mutual funds			62,241			(1.1)			(3.0)						62,241			8.4			6.7
Ratios (%), operating means and customers
RoTE			12.68			(2.59)									13.96			(6.83)
Efficiency ratio			39.1			(0.1)									39.1			3.8
NPL ratio			5.88			(0.11)									5.88			0.50
NPL coverage ratio			77.8			1.5									77.8			(9.1)
Number of employees			81,413			2.1									81,413			7.7
Number of branches			3,543			(3.0)									3,543			(6.4)
Number of total customers (thousands)			73,138			3.6									73,138			11.2
Number of active customers (thousands)			38,414			0.5									38,414			2.3

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

January - June 2023						65

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

Brazil																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			2,180			3.5			0.1						4,285			(3.1)			(3.9)
Net fee income			858			5.1			1.6						1,675			4.7			3.7
Gains (losses) on financial transactions 1			169			33.5			29.6						296			(11.7)			(12.5)
Other operating income			16			96.0			91.1						24			(32.1)			(32.7)
Total income			3,224			5.4			2.0						6,281			(1.8)			(2.6)
Administrative expenses and amortizations			(1,127)			4.4			0.9						(2,207)			13.1			12.1
Net operating income			2,096			6.0			2.6						4,073			(8.3)			(9.1)
Net loan-loss provisions			(1,129)			9.2			5.7						(2,163)			7.3			6.4
Other gains (losses) and provisions			(323)			81.3			76.5						(501)			218.9			216.1
Profit before tax			645			(15.8)			(18.9)						1,410			(37.9)			(38.4)
Tax on profit			(232)			(6.9)			(10.1)						(481)			(36.0)			(36.6)
Profit from continuing operations			413			(20.1)			(23.1)						929			(38.8)			(39.4)
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			413			(20.1)			(23.1)						929			(38.8)			(39.4)
Non-controlling interests			(59)			24.3			20.5						(106)			(30.9)			(31.5)
Profit attributable to the parent			354			(24.6)			(27.5)						823			(39.7)			(40.2)
Balance sheet
Loans and advances to customers			94,818			4.9			0.2						94,818			10.7			6.3
Cash, central banks and credit institutions			47,994			7.7			2.8						47,994			27.3			22.2
Debt instruments			46,891			17.8			12.4						46,891			13.8			9.3
Other financial assets			7,692			21.2			15.7						7,692			(7.8)			(11.5)
Other asset accounts			14,226			1.5			(3.1)						14,226			6.3			2.0
Total assets			211,621			8.4			3.5						211,621			13.6			9.1
Customer deposits			97,167			5.5			0.7						97,167			12.3			7.8
Central banks and credit institutions			31,460			16.6			11.3						31,460			13.7			9.2
Marketable debt securities			29,312			9.8			4.8						29,312			31.1			25.9
Other financial liabilities			30,710			10.5			5.5						30,710			8.7			4.4
Other liabilities accounts			6,188			10.3			5.3						6,188			1.7			(2.3)
Total liabilities			194,837			8.7			3.8						194,837			14.0			9.5
Total equity			16,784			5.1			0.4						16,784			9.2			4.9
Memorandum items:
Gross loans and advances to customers 2			101,052			4.9			0.1						101,052			10.7			6.3
Customer funds			131,063			4.1			(0.7)						131,063			7.6			3.3
Customer deposits 3			84,625			7.5			2.7						84,625			10.3			6.0
Mutual funds			46,438			(1.7)			(6.2)						46,438			2.9			(1.2)
Ratios (%), operating means and customers
RoTE			10.01			(4.09)									12.04			(9.42)
Efficiency ratio			35.0			(0.4)									35.1			4.6
NPL ratio			7.00			(0.34)									7.00			0.66
NPL coverage ratio			82.7			3.2									82.7			(9.6)
Number of employees			58,505			3.2									58,505			8.9
Number of branches			2,772			(2.6)									2,772			(5.6)
Number of total customers (thousands)			63,305			3.8									63,305			12.7
Number of active customers (thousands)			31,853			0.4									31,853			2.2

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

66						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

Chile																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			356			(3.9)			(3.8)						727			(29.9)			(32.4)
Net fee income			163			6.6			6.8						316			42.8			37.8
Gains (losses) on financial transactions 1			97			20.1			20.3						179			56.1			50.6
Other operating income			5			427.1			427.7						7			—			—
Total income			623			2.7			2.9						1,229			(9.4)			(12.6)
Administrative expenses and amortizations			(266)			4.7			4.9						(521)			6.4			2.7
Net operating income			356			1.2			1.4						708			(18.4)			(21.3)
Net loan-loss provisions			(86)			(26.8)			(26.7)						(203)			(0.9)			(4.4)
Other gains (losses) and provisions			16			58.4			58.6						26			—			—
Profit before tax			286			17.0			17.2						531			(17.8)			(20.7)
Tax on profit			(34)			2.9			3.1						(67)			(22.5)			(25.2)
Profit from continuing operations			252			19.2			19.4						464			(17.1)			(20.0)
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			252			19.2			19.4						464			(17.1)			(20.0)
Non-controlling interests			(73)			18.2			18.4						(134)			(20.3)			(23.1)
Profit attributable to the parent			180			19.6			19.8						330			(15.7)			(18.7)
Balance sheet
Loans and advances to customers			45,591			(1.5)			0.0						45,591			16.2			3.7
Cash, central banks and credit institutions			6,545			(11.6)			(10.3)						6,545			(10.5)			(20.1)
Debt instruments			13,460			3.1			4.7						13,460			24.3			10.9
Other financial assets			13,414			(7.3)			(5.9)						13,414			(13.2)			(22.5)
Other asset accounts			2,786			(5.8)			(4.3)						2,786			(18.1)			(26.9)
Total assets			81,795			(2.8)			(1.3)						81,795			7.3			(4.3)
Customer deposits			30,797			(2.9)			(1.4)						30,797			9.9			(1.9)
Central banks and credit institutions			15,345			3.7			5.3						15,345			6.3			(5.1)
Marketable debt securities			11,371			1.0			2.6						11,371			20.4			7.4
Other financial liabilities			14,111			(7.3)			(5.9)						14,111			(11.8)			(21.3)
Other liabilities accounts			4,391			(14.7)			(13.4)						4,391			13.6			1.4
Total liabilities			76,015			(2.7)			(1.2)						76,015			5.9			(5.5)
Total equity			5,780			(4.4)			(2.9)						5,780			28.7			14.8
Memorandum items:
Gross loans and advances to customers 2			46,914			(1.5)			0.0						46,914			16.2			3.6
Customer funds			41,011			(1.1)			0.4						41,011			17.2			4.6
Customer deposits 3			30,616			(2.5)			(1.0)						30,616			12.2			0.1
Mutual funds			10,395			3.3			4.9						10,395			35.1			20.5
Ratios (%), operating means and customers
RoTE			18.33			3.67									16.46			(6.29)
Efficiency ratio			42.8			0.8									42.4			6.3
NPL ratio			4.9			0.2									4.9			0.2
NPL coverage ratio			56.2			(3.0)									56.2			(4.2)
Number of employees			9,928			(1.8)									9,928			0.1
Number of branches			259			(5.8)									259			(15.4)
Number of total customers (thousands)			3,737			0.5									3,737			(7.2)
Number of active customers (thousands)			2,186			0.5									2,186			5.0

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

January - June 2023						67

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

Argentina																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			606			13.9			63.8						1,138			55.5			232.7
Net fee income			145			5.7			53.8						282			6.9			128.8
Gains (losses) on financial transactions (1)			109			26.3			79.1						195			70.0			263.9
Other operating income			(332)			30.5			84.3						(586)			102.8			333.9
Total income			528			5.4			53.3						1,029			25.3			168.2
Administrative expenses and amortizations			(272)			8.8			57.5						(522)			9.4			134.1
Net operating income			256			2.0			49.2						508			47.3			215.3
Net loan-loss provisions			(54)			26.0			78.7						(97)			34.4			187.7
Other gains (losses) and provisions			(74)			145.5			226.2						(104)			(1.4)			111.0
Profit before tax			129			(27.8)			12.4						308			83.3			292.4
Tax on profit			(16)			(59.6)			(26.8)						(55)			149.4			433.7
Profit from continuing operations			113			(18.9)			23.4						253			73.4			271.1
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			113			(18.9)			23.4						253			73.4			271.1
Non-controlling interests			0			20.0			71.4						(1)			58.4			238.9
Profit attributable to the parent			113			(19.0)			23.3						252			73.4			271.2
Balance sheet
Loans and advances to customers			6,207			7.6			32.8						6,207			1.8			117.8
Cash, central banks and credit institutions			2,912			(33.0)			(17.4)						2,912			(19.4)			72.4
Debt instruments			5,027			17.4			44.9						5,027			11.4			138.5
Other financial assets			40			(38.3)			(23.8)						40			13.6			143.1
Other asset accounts			1,022			8.7			34.0						1,022			(3.8)			105.8
Total assets			15,207			(1.3)			21.8						15,207			(0.7)			112.4
Customer deposits			9,914			(8.6)			12.8						9,914			(12.1)			88.1
Central banks and credit institutions			1,738			94.2			139.5						1,738			141.8			417.6
Marketable debt securities			148			(0.7)			22.5						148			(5.5)			102.2
Other financial liabilities			960			6.0			30.7						960			0.4			114.8
Other liabilities accounts			519			6.8			31.8						519			29.8			177.8
Total liabilities			13,278			0.0			23.3						13,278			(1.7)			110.3
Total equity			1,930			(9.0)			12.2						1,930			6.6			128.1
Memorandum items:
Gross loans and advances to customers 2			6,394			7.4			32.5						6,394			0.9			116.0
Customer funds			14,309			(7.3)			14.3						14,309			(3.5)			106.6
Customer deposits 3			9,914			(8.2)			13.2						9,914			(12.1)			88.1
Mutual funds			4,395			(5.1)			17.0						4,395			24.1			165.5
Ratios (%), operating means and customers
RoTE			31.37			1.55									30.66			9.72
Efficiency ratio			51.4			1.6									50.7			(7.4)
NPL ratio			1.92			(0.15)									1.92			(0.55)
NPL coverage ratio			163.1			(6.2)									163.1			(8.0)
Number of employees			8,233			(0.8)									8,233			(3.3)
Number of branches			362			(5.2)									362			(11.1)
Number of total customers (thousands)			4,565			2.7									4,565			4.4
Number of active customers (thousands)			3,172			0.5									3,172			(1.7)

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

68						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

Other South America
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			172			11.4			10.4						327			38.3			33.2
Net fee income			62			5.6			4.3						122			34.9			31.1
Gains (losses) on financial transactions 1			29			3.4			0.4						57			39.6			41.3
Other operating income			(4)			67.8			68.1						(7)			19.4			18.3
Total income			259			8.4			7.1						499			37.9			33.8
Administrative expenses and amortizations			(145)			4.1			3.0						(284)			20.6			18.6
Net operating income			114			14.6			13.0						214			70.5			61.3
Net loan-loss provisions			(40)			5.2			4.2						(78)			89.1			81.1
Other gains (losses) and provisions			(6)			103.2			103.3						(9)			285.4			252.7
Profit before tax			68			16.2			14.2						127			55.1			46.1
Tax on profit			(47)			63.4			61.8						(76)			94.6			89.3
Profit from continuing operations			21			(29.0)			(31.2)						51			19.3			9.3
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			21			(29.0)			(31.2)						51			19.3			9.3
Non-controlling interests			0			(63.1)			(63.1)						2			96.8			96.7
Profit attributable to the parent			22			(30.4)			(32.5)						53			20.9			10.8
Balance sheet
Loans and advances to customers			10,198			3.5			(1.6)						10,198			4.3			4.6
Cash, central banks and credit institutions			2,513			(10.0)			(13.9)						2,513			3.2			2.9
Debt instruments			2,613			8.9			4.5						2,613			(7.4)			(8.7)
Other financial assets			353			18.2			12.4						353			60.7			60.8
Other asset accounts			994			1.3			(0.8)						994			11.0			11.0
Total assets			16,671			2.1			(2.5)						16,671			3.2			3.1
Customer deposits			8,970			2.7			(1.6)						8,970			1.5			0.6
Central banks and credit institutions			4,446			(3.1)			(8.7)						4,446			(5.5)			(3.9)
Marketable debt securities			627			10.6			6.8						627			26.2			24.3
Other financial liabilities			474			19.7			14.5						474			58.4			58.9
Other liabilities accounts			572			2.4			(1.1)						572			21.7			20.9
Total liabilities			15,089			1.7			(3.0)						15,089			1.9			1.8
Total equity			1,583			6.6			2.6						1,583			17.5			17.0
Memorandum items:
Gross loans and advances to customers 2			10,408			3.7			(1.5)						10,408			4.4			4.7
Customer funds			9,982			2.8			(1.5)						9,982			1.0			0.0
Customer deposits 3			8,970			2.7			(1.6)						8,970			1.5			0.6
Mutual funds			1,013			2.9			(0.6)						1,013			(3.5)			(5.3)
Resources
Number of employees			4,747			2.4									4,747			39.2

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

January - June 2023						69

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

DIGITAL CONSUMER BANK																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			1,011			(1.7)			(1.3)						2,040			0.4			2.6
Net fee income			203			6.4			6.4						394			(7.2)			(6.8)
Gains (losses) on financial transactions 1			27			(10.4)			(10.3)						57			213.2			217.5
Other operating income			74			(20.5)			(20.4)						166			70.4			71.3
Total income			1,315			(2.1)			(1.7)						2,658			3.3			5.2
Administrative expenses and amortizations			(655)			(0.6)			(0.3)						(1,314)			5.3			7.3
Net operating income			660			(3.4)			(3.1)						1,344			1.4			3.2
Net loan-loss provisions			(222)			15.0			15.8						(415)			44.5			48.0
Other gains (losses) and provisions			43			—			—						(1)			(97.3)			(97.3)
Profit before tax			481			7.4			7.7						928			(8.1)			(6.6)
Tax on profit			(116)			5.1			5.1						(227)			(2.8)			(1.6)
Profit from continuing operations			364			8.2			8.6						701			(9.7)			(8.2)
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			364			8.2			8.6						701			(9.7)			(8.2)
Non-controlling interests			(87)			(6.3)			(6.5)						(180)			(12.0)			(11.6)
Profit attributable to the parent			277			13.7			14.4						521			(8.9)			(6.9)
Balance sheet
Loans and advances to customers			125,448			1.1			1.0						125,448			7.4			8.7
Cash, central banks and credit institutions			16,593			5.8			5.9						16,593			14.6			16.4
Debt instruments			5,239			(24.5)			(24.7)						5,239			(33.1)			(33.0)
Other financial assets			163			(7.6)			(7.9)						163			21.6			21.7
Other asset accounts			9,256			2.9			2.7						9,256			21.4			22.0
Total assets			156,699			0.5			0.4						156,699			6.7			7.9
Customer deposits			61,962			2.1			2.2						61,962			7.7			9.0
Central banks and credit institutions			38,548			(5.0)			(5.5)						38,548			(2.1)			(1.2)
Marketable debt securities			36,155			2.7			2.8						36,155			16.5			17.8
Other financial liabilities			2,323			35.8			35.1						2,323			37.7			37.8
Other liabilities accounts			5,105			2.6			2.6						5,105			10.2			11.2
Total liabilities			144,094			0.7			0.6						144,094			7.3			8.5
Total equity			12,606			(1.2)			(1.4)						12,606			0.2			2.1
Memorandum items:
Gross loans and advances to customers 2			127,891			1.1			1.0						127,891			7.2			8.5
Customer funds			65,423			2.4			2.5						65,423			9.5			10.8
Customer deposits 3			61,962			2.1			2.2						61,962			7.7			9.0
Mutual funds			3,461			6.7			6.7						3,461			56.6			56.6
Ratios (%), operating means and customers
RoTE			11.74			1.85									10.79			(1.20)
Efficiency ratio			49.8			0.7									49.4			0.9
NPL ratio			2.04			(0.01)									2.04			(0.19)
NPL coverage ratio			94.5			0.9									94.5			(3.0)
Number of employees			16,624			(0.1)									16,624			4.6
Number of branches			363			0.0									363			(1.9)
Number of total customers (thousands)			19,717			(0.6)									19,717			1.7

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

70						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

CORPORATE CENTRE																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			Q1'23			%						H1'23			H1'22			%
Net interest income			(42)			(52)			(19.2)						(94)			(353)			(73.5)
Net fee income			(3)			(3)			(1.1)						(7)			(1)			615.3
Gains (losses) on financial transactions 1			(135)			(54)			148.4						(189)			(371)			(49.0)
Other operating income			(37)			(15)			153.1						(52)			(22)			141.9
Total income			(218)			(124)			75.0						(342)			(747)			(54.2)
Administrative expenses and amortizations			(95)			(95)			—						(189)			(179)			5.6
Net operating income			(312)			(219)			42.6						(531)			(926)			(42.6)
Net loan-loss provisions			1			3			(75.3)						4			(5)			—
Other gains (losses) and provisions			(30)			(44)			(32.4)						(74)			(82)			(10.5)
Profit before tax			(341)			(260)			31.2						(601)			(1,014)			(40.7)
Tax on profit			—			(19)			—						(19)			(26)			(29.0)
Profit from continuing operations			(341)			(279)			22.4						(620)			(1,040)			(40.4)
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			(341)			(279)			22.4						(620)			(1,040)			(40.4)
Non-controlling interests			—			—			—						—			—			—
Profit attributable to the parent			(341)			(279)			22.4						(620)			(1,040)			(40.4)
Balance sheet
Loans and advances to customers			5,583			5,680			(1.7)						5,583			7,087			(21.2)
Cash, central banks and credit institutions			107,118			94,047			13.9						107,118			108,644			(1.4)
Debt instruments			7,827			8,105			(3.4)						7,827			6,928			13.0
Other financial assets			1,003			783			28.1						1,003			522			91.9
Other asset accounts			127,867			129,786			(1.5)						127,867			129,429			(1.2)
Total assets			249,398			238,400			4.6						249,398			252,610			(1.3)
Customer deposits			1,181			1,127			4.8						1,181			928			27.3
Central banks and credit institutions			45,181			38,891			16.2						45,181			69,730			(35.2)
Marketable debt securities			100,538			97,787			2.8						100,538			84,309			19.2
Other financial liabilities			1,284			1,259			2.0						1,284			287			347.7
Other liabilities accounts			8,042			6,367			26.3						8,042			9,063			(11.3)
Total liabilities			156,226			145,431			7.4						156,226			164,317			(4.9)
Total equity			93,172			92,969			0.2						93,172			88,292			5.5
Memorandum items:
Gross loans and advances to customers 2			5,623			5,704			(1.4)						5,623			7,172			(21.6)
Customer funds			1,181			1,127			4.8						1,181			928			27.3
Customer deposits 3			1,181			1,127			4.8						1,181			928			27.3
Mutual funds			—			—			—						—			—			—
Resources
Number of employees			1,896			1,940			(2.3)						1,896			1,811			4.7

1. Includes exchange differences.

2. Excluding reverse repos.

3. Excluding repos.

January - June 2023						71

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

RETAIL BANKING																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			9,524			6.1			6.5						18,501			10.5			11.4
Net fee income			1,965			3.4			3.6						3,865			2.0			3.3
Gains (losses) on financial transactions 1			(75)			161.7			133.6						(104)			—			—
Other operating income			(207)			197.4			498.0						(276)			258.6			—
Total income			11,206			4.0			3.8						21,985			6.3			6.8
Administrative expenses and amortizations			(4,891)			2.9			3.4						(9,646)			7.0			8.8
Net operating income			6,315			4.8			4.1						12,339			5.8			5.2
Net loan-loss provisions			(2,877)			(0.7)			(1.7)						(5,776)			21.9			21.1
Other gains (losses) and provisions			(755)			5.3			5.4						(1,472)			68.8			80.2
Profit before tax			2,683			11.4			10.6						5,091			(15.9)			(17.1)
Tax on profit			(745)			15.4			14.8						(1,390)			(8.8)			(9.6)
Profit from continuing operations			1,938			9.9			9.0						3,701			(18.3)			(19.6)
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			1,938			9.9			9.0						3,701			(18.3)			(19.6)
Non-controlling interests			(220)			3.8			2.1						(432)			(15.5)			(16.8)
Profit attributable to the parent			1,718			10.7			10.0						3,269			(18.6)			(19.9)

1. Includes exchange differences.

CORPORATE & INVESTMENT BANKING																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			774			(7.6)			(2.9)						1,612			(5.8)			(2.6)
Net fee income			554			(10.5)			(10.1)						1,172			14.0			15.3
Gains (losses) on financial transactions 1			765			(1.2)			1.4						1,538			82.9			95.1
Other operating income			54			—			—						30			46.3			(53.9)
Total income			2,147			(2.7)			(1.2)						4,353			20.8			23.5
Administrative expenses and amortizations			(772)			4.5			5.5						(1,510)			17.0			17.6
Net operating income			1,375			(6.3)			(4.5)						2,843			23.0			26.9
Net loan-loss provisions			(31)			—			—						(3)			—			—
Other gains (losses) and provisions			(25)			(31.2)			(31.3)						(61)			5.7			3.3
Profit before tax			1,320			(9.6)			(7.9)						2,779			21.9			25.9
Tax on profit			(359)			(14.1)			(14.2)						(777)			21.2			21.2
Profit from continuing operations			961			(7.8)			(5.3)						2,002			22.2			27.9
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			961			(7.8)			(5.3)						2,002			22.2			27.9
Non-controlling interests			(61)			(5.8)			(7.7)						(126)			24.7			23.6
Profit attributable to the parent			899			(7.9)			(5.2)						1,876			22.0			28.2

1. Includes exchange differences.

72						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Financial information by segment

WEALTH MANAGEMENT & INSURANCE																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			456			10.5			10.9						869			191.8			197.4
Net fee income			317			2.7			4.0						626			(4.5)			(4.1)
Gains (losses) on financial transactions 1			37			19.7			25.0						68			17.7			20.0
Other operating income			77			(0.2)			(5.1)						154			(14.8)			(19.6)
Total income			887			7.0			7.3						1,717			44.1			43.9
Administrative expenses and amortizations			(283)			1.6			1.9						(561)			11.0			10.8
Net operating income			604			9.7			10.1						1,156			68.4			68.4
Net loan-loss provisions			15			—			—						16			—			—
Other gains (losses) and provisions			(12)			(47.7)			(47.5)						(35)			76.5			77.5
Profit before tax			607			14.8			15.2						1,136			72.2			72.2
Tax on profit			(145)			8.9			9.8						(279)			91.4			93.1
Profit from continuing operations			462			16.7			17.0						857			66.8			66.4
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			462			16.7			17.0						857			66.8			66.4
Non-controlling interests			(20)			5.6			3.1						(38)			20.4			18.6
Profit attributable to the parent			442			17.3			17.7						819			69.8			69.5

1. Includes exchange differences.

PAGONXT																					Q
EUR million
						/			Q1'23									/			H1'22
Underlying income statement			Q2'23			%			% excl. FX						H1'23			%			% excl. FX
Net interest income			22			138.0			133.5						31			568.5			567.9
Net fee income			228			4.4			2.3						446			17.7			14.4
Gains (losses) on financial transactions 1			(4)			(42.4)			(43.2)						(12)			808.4			815.1
Other operating income			31			34.3			33.8						55			265.8			259.7
Total income			277			13.8			11.7						521			31.0			27.5
Administrative expenses and amortizations			(295)			6.3			5.6						(573)			28.0			26.5
Net operating income			(18)			(48.0)			(40.5)						(52)			4.0			17.8
Net loan-loss provisions			(6)			(4.9)			(5.2)						(12)			10.9			10.3
Other gains (losses) and provisions			(10)			352.1			345.3						(13)			244.6			248.1
Profit before tax			(34)			(20.2)			(13.3)						(77)			18.8			30.5
Tax on profit			(14)			(4.3)			(8.0)						(29)			(20.9)			(24.3)
Profit from continuing operations			(48)			(16.1)			(11.9)						(105)			4.5			9.0
Net profit from discontinued operations			—			—			—						—			—			—
Consolidated profit			(48)			(16.1)			(11.9)						(105)			4.5			9.0
Non-controlling interests			—			—			—						2			—			—
Profit attributable to the parent			(48)			(13.3)			(8.9)						(103)			(0.3)			3.7

1. Includes exchange differences.

January - June 2023						73

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Alternative performance measures

			ALTERNATIVE PERFORMANCE MEASURES (APMs)

In addition to the financial information prepared under IFRS, this consolidated directors’ report contains financial measures that constitute alternative performance measures (APMs) to comply with the guidelines on alternative performance measures issued by the European Securities and Markets Authority on 5 October 2015 and non-IFRS measures.

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

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

other companies with similar measures and, therefore, may not be comparable.

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

Underlying results

In addition to IFRS results measures, we present some results measures which are non-IFRS and which we refer to as underlying measures. These measures allow in our view a better year-on-year comparability given that they exclude items outside the ordinary performance of our business (e.g. capital gains, write-downs, impairment of goodwill) or certain line items have been reclassified in the underlying ("adjusted") income statement, as their impact on profit is zero, to facilitate comparisons with prior quarters and better understand the trends in the business.

In addition, in the section "Financial information by segment", relative to the primary and secondary segments, results are only presented on an underlying basis in accordance with IFRS 8, and reconciled on an aggregate basis to our IFRS consolidated results to the consolidated financial statements, which are set out below.

Reconciliation of underlying results to statutory results
EUR million
			January-June 2023
			Statutory results			Adjustments			Underlying results
Net interest income			20,920			—			20,920
Net fee income			6,103			—			6,103
Gains (losses) on financial transactions 1			1,302			—			1,302
Other operating income			(315)			224			(91)
Total income			28,010			224			28,234
Administrative expenses and amortizations			(12,479)			—			(12,479)
Net operating income			15,531			224			15,755
Net loan-loss provisions			(6,245)			474			(5,771)
Other gains (losses) and provisions			(1,196)			(459)			(1,655)
Profit before tax			8,090			239			8,329
Tax on profit			(2,281)			(213)			(2,494)
Profit from continuing operations			5,809			26			5,835
Net profit from discontinued operations			—			—			—
Consolidated profit			5,809			26			5,835
Non-controlling interests			(568)			(26)			(594)
Profit attributable to the parent			5,241			—			5,241

1. Includes exchange differences.

Explanation of adjustments:
1.			Temporary levy on revenue in Spain in the first quarter, totalling EUR 224 million, which was moved from total income to other gains (losses) and provisions.
2.			Provisions to strengthen the balance sheet in Brazil in the first quarter, totalling EUR 235 million, net of tax and non-controlling interests (EUR 474 million recorded in net loan-loss provisions, EUR 213 million positive impact in tax and EUR 26 million in non-controlling interests).

74						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Alternative performance measures

Reconciliation of underlying results to statutory results
EUR million
			January-June 2022
			Statutory results			Adjustments			Underlying results
Net interest income			18,409			—			18,409
Net fee income			5,852			—			5,852
Gains (losses) on financial transactions 1			743			—			743
Other operating income			116			—			116
Total income			25,120			—			25,120
Administrative expenses and amortizations			(11,435)			—			(11,435)
Net operating income			13,685			—			13,685
Net loan-loss provisions			(4,735)			—			(4,735)
Other gains (losses) and provisions			(1,035)			—			(1,035)
Profit before tax			7,915			—			7,915
Tax on profit			(2,374)			—			(2,374)
Profit from continuing operations			5,541			—			5,541
Net profit from discontinued operations			—			—			—
Consolidated profit			5,541			—			5,541
Non-controlling interests			(647)			—			(647)
Profit attributable to the parent			4,894			—			4,894

1. Includes exchange differences.

January - June 2023						75

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Alternative performance measures

Profitability and efficiency ratios

The purpose of the profitability and efficiency ratios is to measure the ratio of profit to capital, to tangible capital, to assets and to risk- weighted assets, while the efficiency ratio measures how much general administrative expenses (personnel and other) and amortization costs are needed to generate revenue.

Additionally, the goodwill adjustments have been removed from the RoTE numerator as, since they are not considered in the denominator, we believe this calculation is more correct.

Ratio

Formula

Relevance of the metric

RoE

Profit attributable to the parent

This ratio measures the return that shareholders obtain on the funds invested in the bank and as such measures the company's ability to pay shareholders.

(Return on equity)

Average stockholders’ equity 1 (excl. minority interests)

RoTE

Profit attributable to the parent2

This indicator is used to evaluate the profitability of the company as a percentage of its tangible equity. It's measured as the return that shareholders receive as a percentage of the funds invested in the entity less intangible assets.

(Return on tangible equity)

Average stockholders' equity 1 (excl. minority interests) - intangible assets

RoA

Consolidated profit

This metric measures the profitability of a company as a percentage of its total assets. It is an indicator that reflects the efficiency of the company's total funds in generating profit.

(Return on assets)

Average total assets

RoRWA

Consolidated profit

The return adjusted for risk is a derivative of the RoA metric. The difference is that RoRWA measures profit in relation to the bank's risk-weighted assets.

(Return on risk weighted assets)

Average risk-weighted assets

Efficiency ratio

Operating expenses 3

One of the most commonly used indicators when comparing productivity of different financial entities. It measures the amount of funds used to generate the bank's total income.

Total income

1. Stockholders’ equity = Capital and Reserves + Accumulated other comprehensive income + Profit attributable to the parent + Dividends.

2. Excluding the adjustment to the valuation of goodwill.

3. Operating expenses = Administrative expenses + amortizations.

76						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Alternative performance measures

Profitability and efficiency (1) (2)			Q2'23			Q1'23			H1'23			H1'22
(EUR million and %)
RoE			11.56		%	11.38		%	11.47		%	10.98		%
Profit attributable to the parent			10,680			10,284			10,482			9,789
Average stockholders' equity (excluding minority interests)			92,383			90,353			91,368			89,125
RoTE			14.61		%	14.38		%	14.49		%	13.69		%
Profit attributable to the parent			10,680			10,284			10,482			9,789
(+) Goodwill impairment			—			—			—			—
Profit attributable to the parent (excluding goodwill impairment)			10,680			10,284			10,482			9,789
Average stockholders' equity (excluding minority interests)			92,383			90,353			91,368			89,125
(-) Average intangible assets			19,282			18,821			19,051			17,630
Average stockholders' equity (excl. minority interests) - intangible assets			73,101			71,532			72,317			71,495
RoA			0.67		%	0.66		%	0.67		%	0.66		%
Consolidated profit			11,883			11,458			11,671			11,082
Average total assets			1,766,099			1,742,316			1,754,207			1,666,474
RoRWA			1.90		%	1.86		%	1.88		%	1.86		%
Consolidated profit			11,883			11,458			11,671			11,082
Average risk-weighted assets			624,529			617,031			620,790			597,276
Efficiency ratio			44.3		%	44.1		%	44.2		%	45.5		%
Underlying operating expenses			6,334			6,145			12,479			11,435
Operating expenses			6,334			6,145			12,479			11,435
Net capital gains and provisions impact on operating expenses			—			—			—			—
Underlying total income			14,299			13,935			28,234			25,120
Total income			14,088			13,922			28,010			25,120
Net capital gains and provisions impact on total income			211			13			224			—
1.Averages included in the RoE, RoTE, RoA and RoRWA denominators are calculated using the monthly average over the period, which we believe should not differ materially from using daily balances.
2.The risk-weighted assets included in the denominator of the RoRWA metric are calculated in line with the criteria laid out in the CRR (Capital Requirements Regulation).

January - June 2023						77

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Alternative performance measures

Efficiency ratio
(EUR million and %)
			H1'23									H1'22
			%			Operating expenses			Total income			%			Operating expenses			Total  income
Europe			41.9			4,382			10,464			48.5			4,164			8,581
Spain			39.9			2,039			5,113			49.4			1,943			3,937
United Kingdom			49.4			1,363			2,759			51.2			1,348			2,633
Portugal			32.1			265			824			40.9			251			613
Poland			26.8			405			1,509			31.1			339			1,090
North America			47.7			3,060			6,417			46.6			2,692			5,780
US			49.6			1,799			3,624			45.9			1,682			3,665
Mexico			42.1			1,163			2,763			44.4			930			2,096
South America			39.1			3,534			9,037			35.3			3,153			8,933
Brazil			35.1			2,207			6,281			30.5			1,951			6,393
Chile			42.4			521			1,229			36.0			489			1,357
Argentina			50.7			522			1,029			58.0			477			821
Digital Consumer Bank			49.4			1,314			2,658			48.5			1,248			2,573

RoTE
(EUR million and %)
			H1'23									H1'22
			%			Profit attributable to the parent			Average stockholders' equity (excl. minority interests) - intangible assets			%			Profit attributable to the parent			Average stockholders' equity (excl. minority interests) - intangible assets
Europe			13.51			5,071			37,547			8.80			3,677			41,777
Spain			13.43			2,264			16,856			6.62			1,305			19,711
United Kingdom			13.87			1,636			11,795			10.78			1,472			13,649
Portugal			18.71			642			3,432			11.73			451			3,842
Poland			17.93			642			3,583			13.70			415			3,027
North America			11.08			2,691			24,293			12.17			3,156			25,935
US			8.46			1,334			15,759			11.50			2,180			18,952
Mexico			17.89			1,520			8,497			15.81			1,092			6,904
South America			13.96			2,916			20,886			20.80			3,891			18,712
Brazil			12.04			1,646			13,670			21.46			2,730			12,719
Chile			16.46			660			4,011			22.74			783			3,443
Argentina			30.66			504			1,645			20.93			291			1,389
Digital Consumer Bank			10.79			1,042			9,656			11.99			1,144			9,538

78						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Alternative performance measures

Credit risk indicators

The credit risk indicators measure the quality of the credit portfolio and the percentage of non-performing loans covered by provisions.

Ratio

Formula

Relevance of the metric

NPL ratio (Non-performing loans)

Credit impaired loans and advances to customers, customer guarantees and customer commitments granted

The NPL ratio is an important variable regarding financial institutions' activity since it gives an indication of the level of risk the entities are exposed to. It calculates risks that are, in accounting terms, declared to be credit impaired as a percentage of the total outstanding amount of customer credit and contingent liabilities.

Total Risk 1

Total coverage ratio

Total allowances to cover impairment losses on loans and advances to customers, customer guarantees and customer commitments granted

The total coverage ratio is a fundamental metric in the financial sector. It reflects the level of provisions as a percentage of the credit impaired assets. Therefore it is a good indicator of the entity's solvency against customer defaults both present and future.

Credit impaired loans and advances to customers, customer guarantees and customer commitments granted

Cost of risk

Allowances for loan-loss provisions over the last 12 months

This ratio quantifies loan-loss provisions arising from credit risk over a defined period of time for a given loan portfolio. As such, it acts as an indicator of credit quality.

Average loans and advances to customers over the last 12 months

1. Total risk = Total loans and advances and guarantees to customers (including credit impaired assets) + contingent liabilities granted that are credit impaired.

Credit risk (I)			Jun-23			Mar-23						Jun-22
(EUR million and %)
NPL ratio			3.07		%	3.05		%				3.05		%
Credit impaired loans and advances to customers, customer guarantees and customer commitments granted			34,949			34,445						34,259
Gross loans and advances to customers registered under the headings “financial assets measured at amortized cost” and "financial assets designated at fair value through profit or loss" classified in stage 3 (OCI), excluding POCI (Purchased or Originated Credit Impaired)			33,045			32,353						32,100
POCI exposure (Purchased or Originated Credit Impaired) that is additionally impaired			251			301						303
Customer guarantees and customer commitments granted classified in stage 3			1,643			1,783						1,846
Doubtful exposure of loans and advances to customers at fair value through profit or loss			10			8						10
Total risk			1,137,823			1,128,501						1,121,726
Impaired and non-impaired gross loans and advances to customers			1,068,190			1,063,996						1,061,172
Impaired and non-impaired customer guarantees and customer commitments granted			69,633			64,505						60,554

January - June 2023						79

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Alternative performance measures

Credit risk (II)			Jun-23			Mar-23						Jun-22
(EUR million and %)
Total coverage ratio			68		%	68		%				71		%
Total allowances to cover impairment losses on loans and advances to customers, customer guarantees and customer commitments granted			23,902			23,388						24,195
Total allowances to cover impairment losses on loans and advances to customers measured at amortized cost and designated at fair value through OCI			23,146			22,608						23,452
Total allowances to cover impairment losses on customer guarantees and customer commitments granted			756			780						743
Credit impaired loans and advances to customers, customer guarantees and customer commitments granted			34,949			34,445						34,259
Gross loans and advances to customers registered under the headings “financial assets measured at amortized cost” and "financial assets designated at fair value through profit or loss" classified in stage 3 (OCI), excluding POCI (Purchased or Originated Credit Impaired)			33,045			32,353						32,100
POCI exposure (Purchased or Originated Credit Impaired) that is additionally impaired			251			301						303
Customer guarantees and customer commitments granted classified in stage 3			1,643			1,783						1,846
Doubtful exposure of loans and advances to customers at fair value through profit or loss			10			8						10
Cost of risk			1.08		%	1.05		%				0.83		%
Underlying allowances for loan-loss provisions over the last 12 months			11,545			11,281						8,417
Allowances for loan-loss provisions over the last 12 months			12,019			11,755						8,417
Net capital gains and provisions impact in allowances for loan-loss provisions			-474			-474						—
Average loans and advances to customers over the last 12 months			1,070,729			1,070,927						1,010,282

NPL ratio
(EUR million and %)
			H1'23									H1'22
			%			Credit impaired loans and advances to customers, customer guarantees and customer commitments granted			Total risk			%			Credit impaired loans and advances to customers, customer guarantees and customer commitments granted			Total risk
Europe			2.35			14,941			634,775			2.63			17,264			656,029
Spain			3.11			8,853			284,263			3.83			11,565			301,693
United Kingdom			1.32			3,358			255,287			1.17			3,046			261,116
Portugal			3.09			1,253			40,503			3.33			1,410			42,310
Poland			3.74			1,382			36,921			3.45			1,162			33,640
North America			3.23			6,144			189,962			2.71			4,811			177,452
US			3.46			4,825			139,641			2.64			3,551			134,761
Mexico			2.60			1,307			50,258			2.95			1,260			42,646
South America			5.88			10,550			179,365			5.39			8,720			161,884
Brazil			7.00			7,730			110,472			6.34			6,364			100,389
Chile			4.95			2,460			49,733			4.70			2,032			43,271
Argentina			1.92			129			6,693			2.48			159			6,422
Digital Consumer Bank			2.04			2,612			128,246			2.22			2,664			119,753

80						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Alternative performance measures

NPL coverage ratio
(EUR million and %)
			H1'23									H1'22
			%			Total allowances to cover impairment losses on loans and advances to customers, customer guarantees and customer commitments granted			Credit impaired loans and advances to customers, customer guarantees and customer commitments granted			%			Total allowances to cover impairment losses on loans and advances to customers, customer guarantees and customer commitments granted			Credit impaired loans and advances to customers, customer guarantees and customer commitments granted
Europe			51.1			7,628			14,941			50.2			8,665			17,264
Spain			50.7			4,487			8,853			49.4			5,713			11,565
United Kingdom			32.0			1,073			3,358			32.9			1,004			3,046
Portugal			81.8			1,025			1,253			74.3			1,047			1,410
Poland			74.0			1,022			1,382			76.0			883			1,162
North America			90.0			5,527			6,144			111.4			5,362			4,811
US			85.6			4,130			4,825			121.0			4,298			3,551
Mexico			106.3			1,389			1,307			84.1			1,060			1,260
South America			77.8			8,209			10,550			86.9			7,580			8,720
Brazil			82.7			6,395			7,730			92.3			5,876			6,364
Chile			56.2			1,382			2,460			60.4			1,227			2,032
Argentina			163.1			210			129			171.1			272			159
Digital Consumer Bank			94.5			2,467			2,612			97.4			2,596			2,664

Cost of risk
(EUR million and %)
			H1'23									H1'22
			%			Underlying allowances for loan-loss provisions over the last 12 months			Average loans and advances to customers over the last 12 months			%			Underlying allowances for loan-loss provisions over the last 12 months			Average loans and advances to customers over the last 12 months
Europe			0.42			2,539			599,861			0.37			2,237			604,293
Spain			0.62			1,614			258,503			0.79			2,043			259,039
United Kingdom			0.11			294			258,274			-0.02			-52			249,120
Portugal			0.10			40			39,803			-0.05			-21			40,194
Poland			1.87			581			31,037			0.95			288			30,398
North America			1.70			3,106			182,848			1.09			1,584			145,667
US			1.57			2,155			137,686			0.78			856			110,316
Mexico			2.13			944			44,223			2.05			726			35,430
South America			3.32			5,249			158,215			2.97			4,092			137,575
Brazil			4.74			4,565			96,257			4.26			3,507			82,420
Chile			0.88			397			45,236			0.89			364			41,056
Argentina			3.46			157			4,530			3.07			164			5,324
Digital Consumer Bank			0.54			672			123,516			0.44			506			116,090

January - June 2023						81

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Alternative performance measures

Other indicators

The market capitalization indicator provides information on the volume of tangible equity per share. The loan-to-deposit ratio (LTD) identifies the relationship between net customer loans and advances and customer deposits, assessing the proportion of loans and advances granted by the Group that are funded by customer deposits.

The Group also uses gross customer loan magnitudes excluding reverse repurchase agreements (repos) and customer deposits excluding repos. In order to analyse the evolution of the traditional commercial banking business of granting loans and capturing deposits, repos and reverse repos are excluded, as they are mainly treasury business products and highly volatile.

Ratio

Formula

Relevance of the metric

TNAV per share

Tangible book value 1

This is a very commonly used ratio used to measure the company's accounting value per share having deducted the intangible assets. It is useful in evaluating the amount each shareholder would receive if the company were to enter into liquidation and had to sell all the company's tangible assets.

(Tangible equity net asset value per share)

Number of shares excluding treasury stock

Price / tangible book value per share (X)

Share price

This is one of the most commonly used ratios by market participants for the valuation of listed companies both in absolute terms and relative to other entities. This ratio measures the relationship between the price paid for a company and its accounting equity value.

TNAV per share

LTD ratio

Net loans and advances to customers

This is an indicator of the bank's liquidity. It measures the total (net) loans and advances to customers as a percentage of customer deposits.

(Loan-to-deposit)

Customer deposits

Loans and advances (excl. reverse repos)

Gross loans and advances to customers excluding reverse repos

In order to aid analysis of the commercial banking activity, reverse repos are excluded as they are highly volatile treasury products.

Deposits (excl. repos)

Customer deposits excluding repos

In order to aid analysis of the commercial banking activity, repos are excluded as they are highly volatile treasury products.

PAT + After tax fees paid to SAN (in Wealth Management & Insurance)

Net profit + fees paid from Santander Asset Management and Santander Insurance to Santander, net of taxes, excluding Private Banking customers

Metric to assess Wealth Management & Insurance's total contribution to Grupo Santander profit.

1. Tangible book value = Stockholders' equity (excl. minority interests) - intangible assets.

Others			Jun-23			Mar-23			Jun-23			Jun-22
(EUR million and %)
TNAV (tangible book value) per share			4.57			4.41						4.24
Tangible book value			73,941			71,683						71,162
Number of shares excl. treasury stock (million)			16,170			16,266						16,791
Price / Tangible book value per share (X)			0.74			0.78						0.63
Share price (euros)			3.385			3.426						2.688
TNAV (tangible book value) per share			4.57			4.41						4.24
Loan-to-deposit ratio			103		%	104		%				108		%
Net loans and advances to customers			1,045,044			1,041,388						1,037,721
Customer deposits			1,013,778			998,949						957,690
			Q2'23			Q1'23			H1'23			H1'22
PAT + After tax fees paid to SAN (in WM&I) (Constant EUR million)			864			773			1,637			1,258
Profit after tax			462			395			857			515
Net fee income net of tax			402			378			779			743

% change YoY operating expenses

82						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Alternative performance measures

Local currency measures

We make use of certain financial measures in local currency to help in the assessment of our ongoing operating performance. These non-IFRS financial measures include the results of operations of our subsidiary banks located outside the eurozone, excluding the impact of foreign exchange. Because changes in foreign currency exchange rates do not have an operating impact on the results, we believe that evaluating their performance on a local currency basis provides an additional and meaningful assessment of performance to both management and the company’s investors.

The Group presents, at both the Group level as well as the business unit level, the real changes in the income statement as well as the changes excluding the exchange rate effect, as it considers the latter facilitates analysis, since it enables businesses movements to be identified without taking into account the impact of converting each local currency into euros.

Said variations, excluding the impact of exchange rate movements, are calculated by converting income statement lines for the different business units comprising the Group into our presentation currency, the euro, applying the average exchange rate for H1 2023 to all periods contemplated in the analysis.

The Group presents, at both the Group level as well as the business unit level, the changes in euros in the balance sheet as well as the changes excluding the exchange rate effect for loans and advances to customers excluding reverse repos and customer funds (which comprise deposits and mutual funds) excluding repos. As with the income statement, the reason is to facilitate analysis by isolating the changes in the balance sheet that are not caused by converting each local currency into euros.

These changes excluding the impact of exchange rate movements are calculated by converting loans and advances to customers excluding reverse repos and customer funds excluding repos, into our presentation currency, the euro, applying the closing exchange rate on the last working day of June 2023 to all periods contemplated in the analysis.

The average and period-end exchange rates for the main currencies in which the Group operates are set out in the table below.

Exchange rates: 1 euro / currency parity
			Average (income statement)									Period-end (balance sheet)
			H1'23			H1'22						Jun-23			Mar-23			Jun-22
US dollar			1.080			1.092						1.091			1.086			1.045
Pound sterling			0.876			0.842						0.858			0.878			0.860
Brazilian real			5.478			5.527						5.255			5.504			5.473
Mexican peso			19.623			22.142						18.719			19.606			21.073
Chilean peso			870.824			902.582						874.022			860.680			979.495
Argentine peso			226.761			122.552						279.984			226.979			130.825
Polish zloty			4.623			4.634						4.436			4.677			4.702

Impact of inflation rate on the variations of operating expenses

Santander presents, for both the Group and the business units included in the primary segments, the changes in operating expenses, as well as the changes excluding the exchange rate effect, and the changes of the latter excluding the effect of average inflation over the last twelve months. The reason is that the two latter facilitate analysis for management purposes.

Inflation is calculated as the arithmetic average of the last twelve months for each country and, for the regions, as the weighted average of each country comprising the region's inflation rate, weighted by each country's operating expenses in the region. The table below shows the cost changes in constant euros, the average inflation rates calculated as indicated and the cost changes in real terms, i.e. in constant euros and excluding average inflation of the last twelve months.

			Operating expenses: % change year-on-year
						In constant EUR			Average inflation last 12 months			In real terms
			Europe			6.5			8.5			-2.0
			Spain			4.9			6.2			-1.3
			United Kingdom			5.2			9.8			-4.7
			Portugal			5.6			7.8			-2.2
			Poland			19.1			15.9			3.2
			North America			8.1			6.7			1.4
			US			5.8			6.3			-0.5
			Mexico			10.9			7.4			3.5
			South America			20.3			20.7			-0.4
			Brazil			12.1			6.0			6.2
			Chile			2.7			11.8			-9.1
			Argentina			134.1			96.0			38.1
			Digital Consumer Bank			7.3			8.4			-1.1
			Total Group			10.6			11.6			-1.0

January - June 2023						83

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Alternative performance measures

ESG indicators

Metric

Definition

Jun-23

Green finance raised and facilitated (EUR mn)

Nominal amount of PF, PF Advisory, PF bonds, Green bonds, ECA, M&A, ECM transactions classified by SCFS panel and reported in the League Tables since the beginning of the exercise.

98,600

Sustainable Responsible Investments AuM (EUR mn)

Volume of assets under management classified as article 8 - promoting ESG objectives - and 9 - with explicit sustainability objectives - of the SFDR regulation (EU Reg. 2019/2088). Includes assets managed by Santander Asset Management (SAM), third-party funds and SAM funds managed with equivalent criteria in those geographies where SFDR does not apply (mainly Latin America).

58,600

Note: Not taxonomy.

84						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Condensed consolidated financial statements

			CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

•CONSOLIDATED BALANCE SHEET

•CONSOLIDATED INCOME STATEMENT

NOTE:			The following financial information for the first six months of 2023 and 2022 (attached herewith) corresponds to the condensed consolidated financial statements prepared in accordance with the International Financial Reporting Standards.
			As a result of the implementation from 1 January 2023 of the amendments to IFRS 17 (new general accounting standard for insurance contracts), the Group has performed retrospectively a reclassification in the balance sheet to 'Liabilities under insurance or reinsurance contracts', related to the different treatment established by this new standard for the components of an insurance contract.

Interim condensed consolidated balance sheet
EUR million
ASSETS			Jun-23			Dec-22			Jun-22
Cash, cash balances at central banks and other deposits on demand			207,546			223,073			211,276
Financial assets held for trading			183,834			156,118			163,235
Non-trading financial assets mandatorily at fair value through profit or loss			5,796			5,713			5,845
Financial assets designated at fair value through profit or loss			9,645			8,989			11,025
Financial assets at fair value through other comprehensive income			86,756			85,239			91,998
Financial assets at amortized cost			1,180,302			1,147,044			1,129,690
Hedging derivatives			7,532			8,069			6,735
Changes in the fair value of hedged items in portfolio hedges of interest risk			(4,711)			(3,749)			(1,769)
Investments			7,679			7,615			7,665
Joint ventures entities			1,935			1,981			1,971
Associated entities			5,744			5,634			5,694
Assets under insurance or reinsurance contracts			243			308			310
Tangible assets			34,159			34,073			34,640
Property, plant and equipment			33,118			33,044			33,621
For own-use			13,718			13,489			13,513
Leased out under an operating lease			19,400			19,555			20,108
Investment property			1,041			1,029			1,019
Of which : Leased out under an operating lease			872			804			838
Intangible assets			19,528			18,645			18,349
Goodwill			14,126			13,741			13,877
Other intangible assets			5,402			4,904			4,472
Tax assets			29,840			29,987			29,025
Current tax assets			8,793			9,200			8,293
Deferred tax assets			21,047			20,787			20,732
Other assets			9,193			10,082			10,981
Insurance contracts linked to pensions			97			104			128
Inventories			10			11			7
Other			9,086			9,967			10,846
Non-current assets held for sale			3,151			3,453			3,835
TOTAL ASSETS			1,780,493			1,734,659			1,722,840

January - June 2023						85

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Condensed consolidated financial statements

Interim condensed consolidated balance sheet
EUR million
LIABILITIES			Jun-23			Dec-22			Jun-22
Financial liabilities held for trading			134,888			115,185			114,406
Financial liabilities designated at fair value through profit or loss			36,220			40,268			24,726
Financial liabilities at amortized cost			1,446,882			1,423,858			1,427,721
Hedging derivatives			10,288			9,228			9,269
Changes in the fair value of hedged items in portfolio hedges of interest rate risk			(309)			(117)			(94)
Liabilities under insurance or reinsurance contracts			17,584			16,426			16,955
Provisions			8,389			8,149			8,590
Pensions and other post-retirement obligations			2,284			2,392			2,525
Other long term employee benefits			859			950			1,071
Taxes and other legal contingencies			2,558			2,074			2,242
Contingent liabilities and commitments			756			734			743
Other provisions			1,932			1,999			2,009
Tax liabilities			9,648			9,468			10,085
Current tax liabilities			3,164			3,040			2,853
Deferred tax liabilities			6,484			6,428			7,232
Other liabilities			14,859			14,609			13,720
Liabilities associated with non-current assets held for sale			—			—			—
TOTAL LIABILITIES			1,678,449			1,637,074			1,625,378
EQUITY
Shareholders' equity			127,258			124,732			122,037
Capital			8,092			8,397			8,397
Called up paid capital			8,092			8,397			8,397
Unpaid capital which has been called up			—			—			—
Share premium			44,373			46,273			46,273
Equity instruments issued other than capital			704			688			672
Equity component of the compound financial instrument			—			—			—
Other equity instruments issued			704			688			672
Other equity			196			175			151
Accumulated retained earnings			74,112			66,702			66,698
Revaluation reserves			—			—			—
Other reserves			(5,413)			(5,454)			(5,038)
(-) Own shares			(47)			(675)			(10)
Profit attributable to shareholders of the parent			5,241			9,605			4,894
(-) Interim dividends			—			(979)			—
Other comprehensive income (loss)			(33,789)			(35,628)			(32,526)
Items not reclassified to profit or loss			(4,956)			(4,635)			(3,809)
Items that may be reclassified to profit or loss			(28,833)			(30,993)			(28,717)
Non-controlling interest			8,575			8,481			7,951
Other comprehensive income			(1,484)			(1,856)			(2,090)
Other items			10,059			10,337			10,041
TOTAL EQUITY			102,044			97,585			97,462
TOTAL LIABILITIES AND EQUITY			1,780,493			1,734,659			1,722,840
MEMORANDUM ITEMS: OFF BALANCE SHEET AMOUNTS
Loan commitments granted			283,903			274,075			275,865
Financial guarantees granted			14,401			12,856			12,881
Other commitments granted			113,266			92,672			91,195

86						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Condensed consolidated financial statements

Interim condensed consolidated income statement
EUR million
			H1'23			H1'22
Interest income			49,922			30,869
Financial assets at fair value through other comprehensive income			3,629			2,211
Financial assets at amortized cost			37,503			26,073
Other interest income			8,790			2,585
Interest expense			(29,002)			(12,460)
Interest income/ (charges)			20,920			18,409
Dividend income			382			335
Income from companies accounted for using the equity method			296			312
Commission income			8,277			7,792
Commission expense			(2,174)			(1,940)
Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net			22			233
Financial assets at amortized cost			6			28
Other financial assets and liabilities			16			205
Gain or losses on financial assets and liabilities held for trading, net			263			718
Reclassification of financial assets at fair value through other comprehensive income			—			—
Reclassification of financial assets from amortized cost			—			—
Other gains (losses)			263			718
Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss			26			(15)
Reclassification of financial assets at fair value through other comprehensive income			—			—
Reclassification of financial assets from amortized cost			—			—
Other gains (losses)			26			(15)
Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net			(194)			756
Gain or losses from hedge accounting, net			108			128
Exchange differences, net			1,077			(1,077)
Other operating income			480			819
Other operating expenses			(1,504)			(1,461)
Income from assets under insurance and reinsurance contracts			414			1,349
Expenses from liabilities under insurance and reinsurance contracts			(383)			(1,238)
Total income			28,010			25,120
Administrative expenses			(10,873)			(9,993)
Staff costs			(6,603)			(5,948)
Other general and administrative expenses			(4,270)			(4,045)
Depreciation and amortization			(1,606)			(1,442)
Provisions or reversal of provisions, net			(1,330)			(935)
Impairment or reversal of impairment of financial assets not measured at fair value through profit or loss and net gains and losses from modifications			(6,237)			(4,763)
Financial assets at fair value through other comprehensive income			6			(1)
Financial assets at amortized cost			(6,243)			(4,762)
Impairment of investments in subsidiaries, joint ventures and associates, net			—			—
Impairment on non-financial assets, net			(92)			(61)
Tangible assets			(78)			(24)
Intangible assets			(5)			(29)
Others			(9)			(8)
Gain or losses on non-financial assets and investments, net			277			(4)
Negative goodwill recognized in results			—			—
Gains or losses on non-current assets held for sale not classified as discontinued operations			(59)			(7)
Operating profit/(loss) before tax			8,090			7,915
Tax expense or income from continuing operations			(2,281)			(2,374)
Profit/(loss) for the period from continuing operations			5,809			5,541
Profit/( loss) after tax from discontinued operations			—			—
Profit/(loss) for the period			5,809			5,541
Profit attributable to non-controlling interests			568			647
Profit/(loss) attributable to the parent			5,241			4,894
Earnings/(losses) per share
Basic			0.31			0.27
Diluted			0.31			0.27

January - June 2023						87

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Glossary

			GLOSSARY

•Active customer: Those customers who comply with the minimum balance, income and/or transactionality requirements as defined according to the business area

•ADR: American Depositary Receipt

•ALCO: Assets and Liabilities Committee

•APIs: Application Programming Interface

•APM: Alternative Performance Measures

•APS: Amherst Pierpont Securities

•AuMs: Assets under management

•bn: Billion

•BNPL: Buy now, pay later

•bps: basis points

•CDI: CREST Depository Interest

•CET1: Common Equity Tier 1

•CHF: Swiss francs

•CIB: Corporate & Investment Banking

•CNMV: Spanish National Securities Market Commission (Comisión Nacional del Mercado de Valores)

•Costs in real terms: variations excluding the effect of average inflation over the last twelve months

•DCB: Digital Consumer Bank

•DGF: Deposit guarantee fund

•Digital customers: Every consumer of a commercial bank’s services who has logged on to their personal online banking and/or mobile banking in the last 30 days

•ECB: European Central Bank

•EPS: Earnings per share

•ESG: Environmental, Social and Governance

•ESMA: European Securities and Markets Authority

•Fed: Federal Reserve

•Financial inclusion: Number of people who are unbanked, underbanked, in financial difficulty, with difficulties in accessing credit who, through the Group's products and services, are able to access the financial system or receive tailored finance. Financially underserved groups are defined as people who do not have a current account, or who have an account but obtained alternative (non-bank) financial services in the last 12 months. Beneficiaries of various programs are included in the quantification process only once in the entire period. Only new empowered people are counted, taking as a base year those existing since 2019. 

•FX: Foreign Exchange

•GDP: Gross Domestic Product

•IFRS 9: International Financial Reporting Standard 9, regarding financial instruments

•IMF: International Monetary Fund

•IPO: Initial Public Offering

•LCR: Liquidity Coverage Ratio

•LLPs: Loan-loss provisions

•Loyal customers: Active customers who receive most of their financial services from the Group according to the commercial segment that they belong to. Various engaged customer levels have been defined taking profitability into account

•MDA: Maximum Distributable Amount

•mn: Million

•NII: Net Interest Income

•NPLs: Non-performing loans

•NPS: Net Promoter Score

•PBT: Profit before tax

•PoS: Point of Sale

•pp: percentage points

•QoQ: Quarter-on- quarter

•Repos: Repurchase agreements

•RoA: Return on assets

•RoE: Return on equity

•RoRWA: Return on risk-weighted assets

•RoTE: Return on tangible equity

•RWAs: Risk-weighted assets

•SAM: Santander Asset Management

•SBNA: Santander Bank N.A.

•SCF: Santander Consumer Finance

•SCIB: Santander Corporate & Investment Banking

•SC USA: Santander Consumer USA

•SEC: Securities and Exchanges Commission

•SHUSA: Santander Holdings USA, Inc.

•SMEs: Small and medium enterprises

•SRF: Single resolution fund

•TLAC: The total loss-absorption capacity requirement which is required to be met under the CRD V package

•TLTRO: Targeted longer-term refinancing operations

•TNAV: Tangible net asset value

•VaR: Value at Risk

•WM&I: Wealth Management & Insurance

•YoY: Year-on-year

88						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Important Information

			IMPORTANT INFORMATION

Non-IFRS and alternative performance measures

This report contains financial information prepared according to International Financial Reporting Standards (IFRS) and taken from our consolidated financial statements, as well as 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. The APMs and non-IFRS measures were calculated with information from Grupo Santander; however, they are neither defined or detailed in the applicable financial reporting framework nor audited or reviewed by our auditors. We use these APMs and non-IFRS measures when planning, monitoring and evaluating our performance. We consider them to be useful metrics for our management and investors to compare operating performance between periods. Nonetheless, the APMs and non-IFRS measures are supplemental information; their purpose is not to substitute IFRS measures. Furthermore, companies in our industry and others may calculate or use APMs and non-IFRS measures differently, thus making them less useful for comparison purposes. APMs using ESG labels have not been calculated in accordance with the Taxonomy Regulation or with the indicators for principal adverse impact in SFDR. For further details on APMs and Non-IFRS Measures, including their definition or a reconciliation between any applicable management indicators and the financial data presented in the consolidated financial statements prepared under IFRS, please see the 2022 Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission (the SEC) on 1 March 2023 (https://www.santander.com/content/dam/santander-com/en/documentos/informacion-sobre-resultados-semestrales-y-anuales-suministrada-a-la-sec/2023/sec-2022-annual-20-f-2022-en.pdf), as well as the section “Alternative performance measures” of this Banco Santander, S.A. (Santander) Q2 2023 Financial Report, published on 26 July 2023 (https://www.santander.com/en/shareholders-and-investors/financial-and-economic-information#quarterly-results). Underlying measures, which are included in this document, are non-IFRS measures.

The businesses included in each of our geographic segments and the accounting principles under which their results are presented here may differ from the businesses included and local applicable accounting principles of our public subsidiaries in such geographies. Accordingly, the results of operations and trends shown for our geographic segments may differ materially from those of such subsidiaries.

Non-financial information

This report contains, in addition to financial information, non-financial information (NFI), including environmental, social and governance-related metrics, statements, goals, commitments and opinions.

NFI is included to comply with Spanish Act 11/2018 on non-financial information and diversity and to provide a broader view of our impact. NFI is not audited nor reviewed by an external auditor. NFI is prepared following various external and internal frameworks, reporting guidelines and measurement, collection and verification methods and practices, which are materially different from those applicable to financial information and are in many cases emerging and evolving. NFI is based on various materiality thresholds, estimates, assumptions, judgments and underlying data derived internally and from third parties. NFI is thus subject to significant measurement uncertainties, may not be comparable to NFI of other companies or over time or across periods and its inclusion is not meant to imply that the information is fit for any particular purpose or that it is material to us under mandatory reporting standards. NFI is for informational purposes only and without any liability being accepted in connection with it except where such liability cannot be limited under overriding provisions of applicable law.

Forward-looking statements

Santander hereby warns that this report contains “forward-looking statements” as per the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such statements can be understood through words and expressions like “expect”, “project”, “anticipate”, “should”, “intend”, “probability”, “risk”, “VaR”, “RoRAC”, “RoRWA”, “TNAV”, “target”, “goal”, “objective”, “estimate”, “future”, “commitment”, “commit”, “focus”, “pledge” and similar expressions. They include (but are not limited to) statements on future business development, shareholder remuneration policy and NFI. However, risks, uncertainties and other important factors may lead to developments and results to differ materially from those anticipated, expected, projected or assumed in forward-looking statements. The following important factors (and others described elsewhere in this report and other risk factors, uncertainties or contingencies detailed in our most recent Form 20-F and subsequent 6-Ks filed with, or furnished to, the SEC), as well as other unknown or unpredictable factors, could affect our future development and results and could lead to outcomes materially different from what our forward-looking statements anticipate, expect, project or assume: (1) general economic or industry conditions (e.g., an economic downturn; higher volatility in the capital markets; inflation; deflation; changes in demographics, consumer spending, investment or saving habits; and the effects of the war in Ukraine or the COVID-19 pandemic in the global economy) in areas where we have significant operations or investments; (2) climate-related conditions, regulations, policies, targets and weather events; (3) exposure to various market risks (e.g., risks from interest rates, foreign exchange rates, equity prices and new benchmark indices); (4) potential losses from early loan repayment, collateral depreciation or counterparty risk; (5) political instability in Spain, the UK, other European countries, Latin America and the US; (6) legislative, regulatory or tax changes (including regulatory capital and liquidity requirements), especially in view of the UK´s exit from the European Union and increased regulation prompted by financial crises; (7) acquisition integration challenges arising from deviating management’s resources and attention from other strategic opportunities and operational matters; (8) our own decisions and actions including those affecting or changing our practices, operations, priorities, strategies, policies or procedures; (9) uncertainty over the scope of actions that may be required by us, governments and others to achieve goals relating to climate, environmental and social matters, as well as the evolving nature of underlying science and industry and governmental standards and regulations; and (10) changes affecting our access to liquidity and funding on acceptable terms, especially due to credit spread shifts or credit rating downgrades for the entire group or core subsidiaries.

January - June 2023						89

---

Key consolidated data Business model

Group financial information

Financial information by segment

Responsible banking Corporate governance Santander share

Appendix

Important Information

Forward looking statements are based on current expectations and future estimates about Santander’s and third-parties’ operations and businesses and address matters that are uncertain to varying degrees, including, but not limited to developing standards that may change in the future; plans, projections, expectations, targets, objectives, strategies and goals relating to environmental, social, safety and governance performance, including expectations regarding future execution of Santander’s and third-parties’ energy and climate strategies, and the underlying assumptions and estimated impacts on Santander’s and third-parties’ businesses related thereto; Santander’s and third-parties’ approach, plans and expectations in relation to carbon use and targeted reductions of emissions; changes in operations or investments under existing or future environmental laws and regulations; and changes in government regulations, regulatory requirements and internal policies, including those related to climate-related initiatives.

Forward-looking statements are aspirational, should be regarded as indicative, preliminary and for illustrative purposes only, speak only as of the date of this report, are informed by the knowledge, information and views available on such date and are subject to change without notice. Santander is not required to update or revise any forward-looking statements, regardless of new information, future events or otherwise, except as required by applicable law.

Not a securities offer

This report and the information it contains does not constitute an offer to sell nor the solicitation of an offer to buy any securities.

Past performance does not indicate future outcomes

Statements about historical performance or growth rates must not be construed as suggesting that future performance, share price or results (including earnings per share) will necessarily be the same or higher than in a previous period. Nothing in this report should be taken as a profit and loss forecast.

Third Party Information

In this report, Santander relies on and refers to certain information and statistics obtained from publicly-available information and third-party sources, which it believes to be reliable. Neither Santander nor its directors, officers and employees have independently verified the accuracy or completeness of any such publicly-available and third-party information, make any representation or warranty as to the quality, fitness for a particular purpose, non-infringement, accuracy or completeness of such information or undertake any obligation to update such information after the date of this report. In no event shall Santander be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for inaccuracies or errors in, or omission from, such publicly-available and third-party information contained herein. Any sources of publicly-available information and third-party information referred or contained herein retain all rights with respect to such information and use of such information herein shall not be deemed to grant a license to any third party.

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

90						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Main risks and uncertainties

MAIN RISKS AND UNCERTAINTIES

At the date of preparation of this management report, Grupo Santander considers that the following important factors, in addition to others discussed elsewhere in this report, could affect the Group, its activity, the sector in which it operates or the environment in which it conducts its business, its results, its financial, economic or equity position, or its ability to meet its requirements:

•general economic or industry conditions (e.g., an economic downturn; higher volatility in the capital markets; inflation; deflation; changes in demographics, consumer spending, investment or savings habits; and the effects of the war in Ukraine or the covid-19 pandemic in the global economy) in areas where we have significant operations or investments;

•climate-related conditions, regulations, targets and weather events;

•exposure to various market risks (e.g., risks from interest rates, foreign exchange rates, equity prices and new benchmark indices);

•potential losses from early loan repayments, collateral depreciation or counterparty risk;

•political instability in Spain, the UK, other European countries, Latin America and the US;

•legislative, regulatory or tax changes (including regulatory capital and liquidity requirements), especially in view of the UK´s exit from the European Union and increased regulation prompted by financial crises;

•acquisition integration challenges arising from deviating management’s resources and attention from other strategic opportunities and operational matters;

•our own decisions and actions including those affecting or changing our practices, operations, priorities, strategies, policies or procedures;

•uncertainty over the scope of actions that may be required by the Group, governments and others to achieve goals relating to climate, environmental and social matters, as well as the evolving nature of underlying science and industry and governmental standards and regulations; and

•changes affecting our access to liquidity and funding on acceptable terms, especially due to credit spread shifts or credit rating downgrades for the entire Group or core subsidiaries.

Of note in the Group's main business areas:

Europe: the main threat we see is related to inflation, with monetary policy being less effective than expected. This may be the result of both expansionary fiscal policies, as well as high inflation being sustained for longer which may end up affecting medium-term expectations. The ECB could decide to raise interest rates well above the neutral level, triggering a more prolonged financial and industrial crisis. In addition, divergences in the implementation of fiscal policy and rising interest rate cycle, could generate sharp differences in risk premiums among countries, and provoke some tensions between member countries.

North America: interest rate rises, commodity price trends and international relations with China and Russia are the main drivers that could jeopardize growth. Following the failures of some regional banks in the US earlier this year, the financial sector has proved resilient, but some risks remain associated with price developments in the commercial real estate sector. There could still be additional corrections in the fixed-income markets that affect companies' refinancing capacity. Also, geopolitical tensions could negatively affect the US economy. As for Mexico, the main risks we find are linked to the commodity price cycle due to its dependence on the oil sector.

South America: is the region facing the most heterogeneous and exogenous risks. The cycle of interest rate increases in the US could increase investors' risk aversion, negatively affecting fixed-income prices and the exchange rates of their currencies. In addition, these economies are highly dependent on commodity exports, so a fall in global demand would negatively affect the countries' balance of payments, causing some imbalances. Some countries have increased their levels of debt, increasing uncertainty about the sustainability of their debt.

Digital Consumer Bank: as in Europe, our consumer division's main risk is related to inflation in the Monetary Union and the effectiveness of monetary policy to control it. In addition, the auto segment is more exposed to commodity prices, and an upward commodity price cycle could reduce agents' ability to purchase new vehicles.

These are not the only risks that the bank may face. Other unknown risks or those not considered relevant at this time, may materialize in the future.

Our geographic and business diversification protects us to some extent from adverse circumstances and enables us to resiliently face them. Although it is difficult to make estimations in the current environment, our strategy and business model are a clear competitive advantage.

January - June 2023						91

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Other disclosures required by the Bank of Spain

OTHER DISCLOSURES REQUIRED BY THE BANK OF SPAIN

Disclosures required under Bank of Spain Circular 6/2012 on sector and geographic concentration of risk

Concentration of risk

The breakdown at 30 June 2023 of the concentration of the Group's risk, by activity and geographic location of counterparties, is as follows:

Million euros			30-06-2023
			Total			Spain			Rest of the European Union			America			Rest of the world
Central banks and Credit institutions			371,956			92,351			68,752			120,990			89,863
Public sector			199,301			49,254			42,366			97,571			10,110
Of which:
Central government			169,676			35,785			37,120			87,120			9,651
Other central government			29,625			13,469			5,246			10,451			459
Other financial institutions (financial business activity)			160,244			15,971			45,396			57,556			41,321
Non-financial companies and individual entrepreneurs (non-financial business activity) (broken down by purpose)			457,679			110,709			100,787			184,332			61,851
Of which:
Construction and property development			22,378			3,195			3,847			8,378			6,958
Civil engineering construction			5,426			2,402			1,415			1,467			142
Large companies			284,635			50,056			58,774			129,578			46,227
SMEs and individual entrepreneurs			145,240			55,056			36,751			44,909			8,524
Households – other (broken down by purpose)			568,341			90,472			99,171			148,209			230,489
Of which:
Residential			359,932			63,425			36,267			48,787			211,453
Consumer loans			188,345			17,049			60,853			94,196			16,247
Other purposes			20,064			9,998			2,051			5,226			2,789
Total			1,757,521			358,757			356,472			608,658			433,634

(*)  For the purpose of this table, the definition of risk includes the following public balance sheet items: loans and advances to credit institutions, deposits at central banks, loans and advances to customers, debt securities, capital instruments, trading derivatives, hedging derivatives, equity investments and guarantees extended.

92						January - June 2023

---

Key consolidated data Business model

Group financial information

Financial information by segments

Responsible banking Corporate governance Santander share

Appendix

Other disclosures required by the Bank of Spain

			Million euros (*)
									Secured loans
									Net exposure						Loan-to-value (a)
			Total			Unsecured loans			Of which: Mortgage collateral			Of which: Other collateral			Less than or equal to 40%			Greater than 40% and less than or equal to 60%			Greater than 60% and less than or equal to 80%			Greater than 80% and less than or equal to 100%			Greater than 100%
Public sector			24,025			23,672			201			152			100			71			21			143			18
Other financial institutions (financial business activity)			85,337			28,071			2,422			54,844			3,190			1,112			540			51,667			757
Non-financial corporations and individual entrepreneurs (non-financial business activity) (broken down by purpose)			349,718			195,121			74,944			79,653			35,258			27,401			21,903			47,137			22,898
Of which:
Construction and property development			19,912			1,279			17,889			744			6,210			6,292			1,706			2,432			1,993
Civil engineering construction			3,016			2,020			204			792			97			120			158			571			50
Large companies			191,350			126,373			22,997			41,980			16,299			7,713			6,378			25,162			9,425
SMEs and individual entrepreneurs			135,440			65,449			33,854			36,137			12,652			13,276			13,661			18,972			11,430
Households – other (broken down by purpose)			566,430			112,522			367,102			86,806			104,869			127,118			131,075			55,178			35,668
Of which:
Residential			359,798			1,406			357,871			521			95,941			116,986			117,010			25,797			2,658
Consumer loans			187,364			106,160			2,371			78,833			5,194			7,674			11,447			24,614			32,275
Other purposes			19,268			4,956			6,860			7,452			3,734			2,458			2,618			4,767			735
Total			1,025,510			359,386			444,669			221,455			143,417			155,702			153,539			154,125			59,341
Memorandum item
Refinanced and restructured transactions			25,334			11,585			8,525			5,224			3,530			2,052			3,288			3,361			1,518

(*)  In addition, the Group has granted customer prepayments amounting to EUR 19,534 million; therefore, the total amount of credits and customer prepayments amounts to EUR 1,045,044 million.

(**) Includes fair value impairment and losses net balance due to credit risk.

January - June 2023						93

---

Banco Santander, S.A.

and companies composing

Grupo Santander

Interim Condensed Consolidated

Financial Statements for the six-month

period ended 30 June 2023

Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework

applicable to the Group in Spain (see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.

The interim consolidated financial statements included herein have not been audited or reviewed in accordance with Public Company Accounting Oversight Board (PCAOB) standards of the United States.

---

Interim condensed consolidated financial statements

Index

			Page
Condensed consolidated balance sheet			96
Condensed consolidated income statements			98
Condensed consolidated statements of recognised income and expense			99
Condensed consolidated statements of changes in total equity			100
Condensed consolidated statements of cash flows			102
Explanatory notes to the interim condensed consolidated financial statements
Note 1: Introduction, basis of presentation of the interim condensed consolidated financial statements and other information			103
Note 2: Grupo Santander			106
Note 3: Shareholder remuneration system and earnings per share			107
Note 4: Remuneration and other benefits paid to Banco Santander's directors and senior managers			108
Note 5: Financial assets			110
Note 6: Non-current assets held for sale			113
Note 7: Tangible assets			113
Note 8: Intangible assets			114
Note 9: Financial liabilities			115
Note 10: Provisions			116
Note 11: Equity			124
Note 12: Segment information (primary segment)			126
Note 13: Related parties			127
Note 14: Off-balance-sheet exposures			130
Note 15: Average headcount and number of branches			130
Note 16: Other disclosures			131
Note 17: Explanation added for translation to English			146

January - June 2023						95

---

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

GRUPO SANTANDER

CONDENSED CONSOLIDATED BALANCE SHEETS AS AT 30 JUNE 2023 AND 31 DECEMBER 2022

(EUR million)

ASSETS			Note			30-06-2023			31-12-2022 (*)
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEPOSITS ON DEMAND						207,546			223,073
FINANCIAL ASSETS HELD FOR TRADING			5			183,834			156,118
NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS			5			5,796			5,713
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS			5			9,645			8,989
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME			5			86,756			85,239
FINANCIAL ASSETS AT AMORTISED COST			5			1,180,302			1,147,044
HEDGING DERIVATIVES						7,532			8,069
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RISK						(4,711)			(3,749)
INVESTMENTS						7,679			7,615
Joint venture entities						1,935			1,981
Associated entities						5,744			5,634
ASSETS UNDER INSURANCE OR REINSURANCE CONTRACTS						243			308
TANGIBLE ASSETS			7			34,159			34,073
Property, plant and equipment						33,118			33,044
For own-use						13,718			13,489
Leased out under an operating lease						19,400			19,555
Investment properties						1,041			1,029
Of which : Leased out under an operating lease						872			804
INTANGIBLE ASSETS						19,528			18,645
Goodwill			8			14,126			13,741
Other intangible assets						5,402			4,904
TAX ASSETS						29,840			29,987
Current tax assets						8,793			9,200
Deferred tax assets						21,047			20,787
OTHER ASSETS						9,193			10,082
Insurance contracts linked to pensions						97			104
Inventories						10			11
Other						9,086			9,967
NON-CURRENT ASSETS HELD FOR SALE			6			3,151			3,453
TOTAL ASSETS						1,780,493			1,734,659

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

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated balance sheet as at 30 June 2023.

96						January - June 2023

---

Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain

(see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.

GRUPO SANTANDER

CONDENSED CONSOLIDATED BALANCE SHEETS AS AT 30 JUNE 2023 AND 31 DECEMBER 2022

(EUR million)

LIABILITIES			Note			30-06-2023			31-12-2022 (*)
FINANCIAL LIABILITIES HELD FOR TRADING			9			134,888			115,185
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS (**)			9			36,220			40,268
FINANCIAL LIABILITIES AT AMORTISED COST			9			1,446,882			1,423,858
HEDGING DERIVATIVES						10,288			9,228
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK						(309)			(117)
LIABILITIES UNDER INSURANCE OR REINSURANCE CONTRACTS (**)						17,584			16,426
PROVISIONS						8,389			8,149
Pension and other post-retirement obligations			10			2,284			2,392
Other long term employee benefits			10			859			950
Taxes and other legal contingencies			10			2,558			2,074
Contingent liabilities and commitments			14			756			734
Other provisions			10			1,932			1,999
TAX LIABILITIES						9,648			9,468
Current tax liabilities						3,164			3,040
Deferred tax liabilities						6,484			6,428
OTHER LIABILITIES						14,859			14,609
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE						—			—
TOTAL LIABILITIES						1,678,449			1,637,074
SHAREHOLDERS´ EQUITY						127,258			124,732
CAPITAL			11			8,092			8,397
Called up paid capital						8,092			8,397
Unpaid capital which has been called up						—			—
SHARE PREMIUM						44,373			46,273
EQUITY INSTRUMENTS ISSUED OTHER THAN CAPITAL						704			688
Equity component of the compound financial instrument						—			—
Other equity instruments issued						704			688
OTHER EQUITY						196			175
ACCUMULATED RETAINED EARNINGS						74,112			66,702
REVALUATION RESERVES						—			—
OTHER RESERVES						(5,413)			(5,454)
(-) OWN SHARES						(47)			(675)
PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT			3			5,241			9,605
(-) INTERIM DIVIDENDS						—			(979)
OTHER COMPREHENSIVE INCOME (LOSS)			11			(33,789)			(35,628)
ITEMS NOT RECLASSIFIED TO PROFIT OR LOSS						(4,956)			(4,635)
ITEMS THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS						(28,833)			(30,993)
NON-CONTROLLING INTEREST						8,575			8,481
Other comprehensive income						(1,484)			(1,856)
Other items						10,059			10,337
TOTAL EQUITY						102,044			97,585
TOTAL LIABILITIES AND EQUITY						1,780,493			1,734,659
MEMORANDUM ITEMS: OFF BALANCE SHEET AMOUNTS			14
Loan commitments granted						283,903			274,075
Financial guarantees granted						14,401			12,856
Other commitments granted						113,266			92,672

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

(**)See impact of IFRS 17 as at 31 December 2022 (see Note 1.b).

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated balance sheet as at 30 June 2023.

January - June 2023						97

---

Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain

(see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.

GRUPO SANTANDER

CONDENSED CONSOLIDATED INCOME STATEMENTS

FOR THE FIRST SIX MONTHS ENDED 30 JUNE 2023 AND 2022

(EUR million)

						(Debit) / Credit
			Note			01-01-2023 to 30-06-2023			01-01-2022 to 30-06-2022 (*)
Interest income						49,922			30,869
Financial assets at fair value through other comprehensive income						3,629			2,211
Financial assets at amortised cost						37,503			26,073
Other interest income						8,790			2,585
Interest expense						(29,002)			(12,460)
Interest income/ (charges)						20,920			18,409
Dividend income						382			335
Income from companies accounted for using the equity method						296			312
Commission income						8,277			7,792
Commission expense						(2,174)			(1,940)
Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net						22			233
Financial assets at amortised cost						6			28
Other financial assets and liabilities						16			205
Gain or losses on financial assets and liabilities held for trading, net						263			718
Reclassification of financial assets at fair value through other comprehensive income						—			—
Reclassification of financial assets at amortized cost						—			—
Other gains (losses)						263			718
Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss						26			(15)
Reclassification of financial assets at fair value through other comprehensive income						—			—
Reclassification of financial assets at amortized cost						—			—
Other gains (losses)						26			(15)
Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net						(194)			756
Gain or losses from hedge accounting, net						108			128
Exchange differences, net						1,077			(1,077)
Other operating income						480			819
Other operating expenses						(1,504)			(1,461)
Income from assets under insurance and reinsurance contracts						414			1,349
Expenses from liabilities under insurance and reinsurance contracts						(383)			(1,238)
Total income						28,010			25,120
Administrative expenses						(10,873)			(9,993)
Staff costs						(6,603)			(5,948)
Other general and administrative expenses						(4,270)			(4,045)
Depreciation and amortisation cost						(1,606)			(1,442)
Provisions or reversal of provisions, net						(1,330)			(935)
Impairment or reversal of impairment of financial assets not measured at fair value through profit or loss and net gains and losses from modifications						(6,237)			(4,763)
Financial assets at fair value through other comprehensive income						6			(1)
Financial assets at amortised cost			5			(6,243)			(4,762)
Impairment of investments in subsidiaries, joint ventures and associates, net						—			—
Impairment on non-financial assets, net						(92)			(61)
Tangible assets						(78)			(24)
Intangible assets						(5)			(29)
Others						(9)			(8)
Gain or losses on non financial assets and investments, net						277			(4)
Negative goodwill recognised in results						—			—
Gains or losses on non-current assets held for sale not classified as discontinued operations			6			(59)			(7)
Operating profit/(loss) before tax						8,090			7,915
Tax expense or income from continuing operations						(2,281)			(2,374)
Profit/(loss) for the period from continuing operations						5,809			5,541
Profit/( loss) after tax from discontinued operations						—			—
Profit/(loss) for the period						5,809			5,541
Profit attributable to non-controlling interests						568			647
Profit/(loss) attributable to the parent						5,241			4,894
Earnings/(losses) per share			3
Basic						0.31			0.27
Diluted						0.31			0.27

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

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated income statement

for the six-month period ended 30 June 2023.

98						January - June 2023

---

Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain

(see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.

GRUPO SANTANDER

CONDENSED CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE

FOR THE FIRST SIX MONTHS ENDED 30 JUNE 2023 AND 2022

(EUR million)

						(Debit) / Credit
			Note			01-01-2023 to 30-06-2023			01-01-2022 to 30-06-2022 (*)
CONSOLIDATED PROFIT/(LOSS) FOR THE PERIOD						5,809			5,541
OTHER RECOGNISED INCOME AND EXPENSE						2,091			214
Items that will not be reclassified to profit or loss			11			(489)			433
Actuarial gains and losses on defined benefit pension plans						(402)			843
Non-current assets held for sale						—			—
Other recognised income and expense of investments in subsidiaries, joint ventures and associates						(5)			(1)
Changes in the fair value of equity instruments measured at fair value through other comprehensive income						(201)			(334)
Gains or losses resulting from the accounting for hedges of equity instruments measured at fair value through other comprehensive income, net						—			—
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (hedged item)						(41)			37
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (hedging instrument)						41			(37)
Changes in the fair value of financial liabilities at fair value through profit or loss attributable to changes in credit risk						(50)			123
Income tax relating to items that will not be reclassified						169			(198)
Items that may be reclassified to profit or loss			11			2,580			(219)
Hedges of net investments in foreign operations (effective portion)			11			(1,527)			(1,693)
Revaluation gains (losses)						(1,527)			(1,693)
Amounts transferred to income statement						—			—
Other reclassifications						—			—
Exchange differences			11			3,094			4,462
Revaluation gains (losses)						3,056			4,462
Amounts transferred to income statement						38			—
Other reclassifications						—			—
Cash flow hedges (effective portion)						596			(2,604)
Revaluation gains (losses)						(1,318)			(942)
Amounts transferred to income statement						1,914			(1,662)
Transferred to initial carrying amount of hedged items						—			—
Other reclassifications						—			—
Hedging instruments (items not designated)						—			—
Revaluation gains (losses)						—			—
Amounts transferred to income statement						—			—
Other reclassifications						—			—
Debt instruments at fair value with changes in other comprehensive income						790			(1,804)
Revaluation gains (losses)						782			(2,411)
Amounts transferred to income statement						8			(190)
Other reclassifications						—			797
Non-current assets held for sale						—			—
Revaluation gains (losses)						—			—
Amounts transferred to income statement						—			—
Other reclassifications						—			—
Share of other recognised income and expense of investments						88			139
Income tax relating to items that may be reclassified to profit or loss						(461)			1,281
Total recognised income and expenses for the year						7,900			5,755
Attributable to non-controlling interests						937			664
Attributable to the parent						6,963			5,091

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

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of recognised income and expense for the six-month period ended 30 June 2023.

January - June 2023						99

---

Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain

(see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.

GRUPO SANTANDER

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY
FOR THE FIRST SIX MONTHS ENDED 30 JUNE 2023 AND 2022

(EUR million)

			Capital			Share premium			Equity instruments issued (not capital)			Other equity instruments			Accumulated retained earnings			Revaluation reserves			Other reserves			(-)  Own shares			Profit Attributable to shareholders of the parent			(-)  Interim dividends			Other comprehensive income			Non-Controlling interest						Total
																																				Other comprehensive income			Other items
Balance as at 12-31-2022 (*)			8,397			46,273			688			175			66,702			—			(5,454)			(675)			9,605			(979)			(35,628)			(1,856)			10,337			97,585
Adjustments due to errors			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Adjustments due to changes in  accounting policies			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Opening balance as at 01-01-2023 (*)			8,397			46,273			688			175			66,702			—			(5,454)			(675)			9,605			(979)			(35,628)			(1,856)			10,337			97,585
Total recognised income and expense			—			—			—			—			—			—			—			—			5,241			—			1,722			369			568			7,900
Other changes in equity			(305)			(1,900)			16			21			7,410			—			41			628			(9,605)			979			117			3			(846)			(3,441)
Issuance of ordinary shares			—			—			—			—			—			—			—			—			—			—			—			—			1			1
Issuance of preferred shares			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Issuance of other financial instruments			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Maturity of other financial instruments			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Conversion of financial liabilities into equity			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Capital reduction			(305)			(1,900)			—			—			—			—			305			1,900			—			—			—			—			—			—
Dividends			—			—			—			—			(963)			—			—			—			—			—			—			—			(436)			(1,399)
Purchase of equity instruments			—			—			—			—			—			—			—			(1,723)			—			—			—			—			—			(1,723)
Disposal of equity instruments			—			—			—			—			—			—			11			451			—			—			—			—			—			462
Transfer from equity to liabilities			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Transfer from liabilities to equity			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Transfers between equity items			—			—			—			—			8,373			—			136			—			(9,605)			979			117			3			(3)			—
Increases (decreases) due to business combinations			—			—			—			—			—			—			—			—			—			—			—			—			(304)			(304)
Share-based payment			—			—			—			(66)			—			—			—			—			—			—			—			—			—			(66)
Others increases or (-) decreases of the equity			—			—			16			87			—			—			(411)			—			—			—			—			—			(104)			(412)
Balance as at 30-06-2023			8,092			44,373			704			196			74,112			—			(5,413)			(47)			5,241			—			(33,789)			(1,484)			10,059			102,044

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

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of changes in total equity

for the six-month period ended 30 June 2023.

100						January - June 2023

---

Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain

(see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.

GRUPO SANTANDER

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY

FOR THE FIRST SIX MONTHS ENDED 30 JUNE 2023 AND 2022

(EUR million)

			Capital			Share premium			Equity instruments issued (not capital)			Other equity instruments			Accumulated retained earnings			Revaluation reserves			Other reserves			(-)  Own shares			Profit Attributable to shareholders of the parent			(-)  Interim dividends			Other comprehensive income			Non-Controlling interest						Total
																																				Other comprehensive income			Other items
Balance as at 12-31-2021 (*)			8,670			47,979			658			152			60,273			—			(4,477)			(894)			8,124			(836)			(32,719)			(2,104)			12,227			97,053
Adjustments due to errors			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Adjustments due to changes in  accounting policies			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Opening balance as at 01-01-2022 (*)			8,670			47,979			658			152			60,273			—			(4,477)			(894)			8,124			(836)			(32,719)			(2,104)			12,227			97,053
Total recognised income and expense			—			—			—			—			—			—			—			—			4,894			—			197			17			647			5,755
Other changes in equity			(273)			(1,706)			14			(1)			6,425			—			(561)			884			(8,124)			836			(4)			(3)			(2,833)			(5,346)
Issuance of ordinary shares			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Issuance of preferred shares			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Issuance of other financial instruments			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Maturity of other financial instruments			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Conversion of financial liabilities into equity			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Capital reduction			(273)			(1,706)			—			—			—			—			273			1,706			—			—			—			—			—			—
Dividends			—			—			—			—			(869)			—			—			—			—			—			—			—			(367)			(1,236)
Purchase of equity instruments			—			—			—			—			—			—			—			(1,173)			—			—			—			—			—			(1,173)
Disposal of equity instruments			—			—			—			—			—			—			6			351			—			—			—			—			—			357
Transfer from equity to liabilities			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Transfer from liabilities to equity			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Transfers between equity items			—			—			—			—			7,294			—			(1)			—			(8,124)			836			(4)			(3)			3			1
Increases (decreases) due to business combinations			—			—			—			—			—			—			—			—			—			—			—			—			31			31
Share-based payment			—			—			—			(42)			—			—			—			—			—			—			—			—			—			(42)
Others increases or (-) decreases of the equity			—			—			14			41			—			—			(839)			—			—			—			—			—			(2,500)			(3,284)
Balance as at 30-06-2022 (*)			8,397			46,273			672			151			66,698			—			(5,038)			(10)			4,894			—			(32,526)			(2,090)			10,041			97,462

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

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of changes in total equity

for the six-month period ended 30 June 2023.

January - June 2023						101

---

Translation of interim condensed consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain

(see Notes 1 and 17). In the event of a discrepancy, the Spanish-language version prevails.

GRUPO SANTANDER

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FIRST SIX MONTHS ENDED 30 JUNE 2023 AND 2022

(EUR million)

			Note			30-06-2023			30-06-2022 (*)
A. CASH FLOWS FROM OPERATING ACTIVITIES						(11,895)			7,386
Profit/(loss) for the period						5,809			5,541
Adjustments made to obtain the cash flows from operating activities						13,720			11,307
Depreciation and amortisation cost						1,606			1,442
Other adjustments						12,114			9,865
Net increase/(decrease) in operating assets						45,762			90,128
Financial assets held-for-trading						23,291			36,879
Non-trading financial assets mandatorily at fair value through profit or loss						120			226
Financial assets at fair value through profit or loss						647			(5,133)
Financial assets at fair value through other comprehensive income						(1,819)			(15,752)
Financial assets at amortised cost						26,151			65,608
Other operating assets						(2,628)			8,300
Net increase/(decrease) in operating liabilities						15,842			83,182
Financial liabilities held-for-trading						16,830			29,376
Financial liabilities designated at fair value through profit or loss (**)						(4,202)			11,212
Financial liabilities at amortised cost						4,132			41,445
Other operating liabilities (**)						(918)			1,149
Income tax recovered/(paid)						(1,504)			(2,516)
B. CASH FLOWS FROM INVESTING ACTIVITIES						(2,498)			(1,652)
Payments						6,832			6,016
Tangible assets			7			4,705			4,387
Intangible assets						954			676
Investments						25			109
Subsidiaries and other business units			2			1,148			844
Non-current assets held for sale and associated liabilities						—			—
Other payments related to investing activities						—			—
Proceeds						4,334			4,364
Tangible assets			7			2,737			2,961
Intangible assets						—			—
Investments						374			138
Subsidiaries and other business units						838			729
Non-current assets held for sale and associated liabilities			6			385			536
Other proceeds related to investing activities						—			—
C. CASH FLOW FROM FINANCING ACTIVITIES						(2,358)			(7,123)
Payments						4,623			7,604
Dividends			3			963			869
Subordinated liabilities						748			1,693
Redemption of own equity instruments						—			—
Acquisition of own equity instruments						1,723			1,173
Other payments related to financing activities						1,189			3,869
Proceeds						2,265			481
Subordinated liabilities						1,654			113
Issuance of own equity instruments			11			—			—
Disposal of own equity instruments						467			360
Other proceeds related to financing activities						144			8
D. EFFECT OF FOREIGN EXCHANGE RATE DIFFERENCES						1,224			1,976
E. NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS						(15,527)			587
F. CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD						223,073			210,689
G. CASH AND CASH EQUIVALENTS AT END OF PERIOD						207,546			211,276
COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF PERIOD
Cash						8,195			8,568
Cash equivalents at central banks						186,134			191,065
Other financial assets						13,217			11,643
Less: Bank overdrafts refundable on demand
TOTAL CASH AND CASH EQUIVALENTS AT END OF PERIOD						207,546			211,276
In which: restricted cash						—			—

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

(**) See impact of IFRS 17 as at 31 of December 2022 (see Note 1.b).

The accompanying explanatory Notes 1 to 17 are an integral part of the condensed consolidated statement of recognised income and expense for the six-month period ended 30 June 2023.

102						January - June 2023

---

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

Explanatory notes to the interim condensed consolidated financial statements for the first six months ended 30 June 2023.

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

a)    Introduction

Banco Santander, S.A. ('the parent' or 'Banco Santander') is a private-law entity subject to the rules and regulations applicable to banks operating in Spain. The Bylaws and other public information of the Bank can be consulted at its registered office at Paseo de Pereda 9 -12, Santander.

In addition to the operations carried on directly by it, Banco Santander is the head of a group of subsidiaries that engage in various business activities and which compose, together with it, Grupo Santander ('Santander' or 'The Group').

Grupo Santander's interim condensed consolidated financial statements ('interim financial statements') for the first six months ended 30 June 2023 were authorised and approved by Grupo Santander's directors at the board of directors meeting held on 25 July 2023. Grupo Santander's consolidated annual accounts for year 2022 were approved by shareholders at Banco Santander annual general meeting on 31 March 2023.

b)    Basis of presentation of the interim financial statements

Under Regulation (EC) n.º 1606/2002 of the European Parliament and of the Council of 19 July 2002 all companies governed by the law of an EU Member State and whose securities are admitted to trading on a regulated market of any Member State must prepare their consolidated financial statements for the years beginning on or after 1 January, 2005 in conformity with the International Financial Reporting Standards ('IFRS') previously adopted by the European Union ('EU-IFRS'). In order to adapt the accounting system of Spanish credit institutions with the principles and criteria established by the IFRS adopted by the European Union ('EU-IFRS'), the Bank of Spain published circular 4/2017, dated 27 November 2017, and subsequent changes, on Public and Confidential Financial Reporting Standards and Financial Statement Formats.

The consolidated annual accounts for 2022 were authorised at the board of directors meeting on 27 February 2023 in compliance with International Financial Reporting Standards as adopted by the European Union, taking into account Bank of Spain Circular 4/2017, and subsequent modifications, using the basis of consolidation, accounting policies and measurement bases described in Note 2 to the aforementioned consolidated annual accounts and, accordingly, they presented fairly Grupo Santander’s consolidated equity and consolidated financial position at 31 December 2022 and the consolidated results of its operations, and the consolidated cash flows in 2022. The aforementioned consolidated annual accounts, which are included in Grupo Santander’s Form 20-F filed with the U.S. Securities and Exchange Commission on 1 March 2023, and these interim financial statements are also in compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IFRS-IASB', and together with EU-IFRS, 'IFRS').

These interim financial statements were prepared and are presented in accordance with International Accounting Standard (IAS 34), Interim Financial Reporting, for the preparation of interim financial statements in accordance with the provisions of article 12 of Royal Decree 1362/2007 taking into account the requirements of Circular 3/2018, of June 28, of the Securities and Exchange Commission (CNMV). These interim financial statements will be included in the Half-Yearly Financial Information corresponding to the first half of 2023 that the Group presents in accordance with the aforementioned Circular 3/2018.

In accordance with IAS 34, the interim financial statements are intended only to provide an update on the content of the latest consolidated annual accounts authorised for issue, focusing on new activities, events and circumstances occurring during the first six months, and does not duplicate information previously reported in the latest consolidated annual accounts. Consequently, these interim financial statements do not include all the information that would be required for a complete set of consolidated annual accounts prepared in accordance with IFRS and, accordingly, for a proper comprehension of the information included in these interim financial statements, they should be read together with Grupo Santander’s consolidated annual accounts for the year ended 31 December 2022.

Grupo Santander policies include presenting the interim financial statements for its use in the different markets using the Euro as its presentation currency. The amounts held in other currencies and the balances of entities whose functional currency is not the Euro, have been translated to the presentation currency in accordance with the criteria indicated in Note 2.a to the consolidated annual accounts for 2022. As indicated in that note, for practical reasons, the balance sheet amount has been converted to the closing exchange rate, the equity to the historical type, and the income and expenses have been converted by applying the average exchange rate of the period; the application of such exchange rate or that corresponding to the date of each transaction does not lead to significant differences in the interim financial statements of Grupo Santander.

January - June 2023						103

---

The accounting policies and methods used in preparing these interim financial statements are the same as those applied in the consolidated annual accounts for 2022 taking into account the standards and interpretations with effective application date during the first six months of 2023, which are detailed below:

–IFRS 17 Insurance Contracts and amendments to IFRS 17: new general accounting standard for insurance contracts, which includes the recognition, measurement, presentation and disclosure of information. Insurance contracts combine financial and service provision features that, in many cases, generate variable long- term cash flows. To properly reflect these characteristics, IFRS 17 combines the measurement of future cash flows with the recording of the contract result during the period in which the service is provided, presents separately the financial results from the results for the provision of the service and allows entities, through the choice of an accounting policy option, to recognize the financial results in the income statement or in other comprehensive income. Applicable retrospectively from 1 January 2023.

The Group has carried out a project to implement IFRS 17 with all affected Group entities and has drawn up an accounting policy that establishes the accounting criteria for recording insurance contracts. Grupo Santander concluded the analysis of the effects of this new standard without having identified material equity impacts in its interim financial statements due to the application of said standard, except for a reclassification of the balance sheet to the heading 'Liabilities covered by insurance or reinsurance contracts', registered at 1 January 2023, of a portfolio of products for an amount of approximately EUR 16 billion, derived from the different treatment that this new standard establishes for the components of an insurance contract.

–The amendments to IAS 1 Presentation of Financial Statements require companies to disclose material information about their accounting policies rather than their significant accounting policies. Applicable from 1 January 2023.

–The amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors clarifies how to distinguish changes in accounting policies, which are generally applied retrospectively, from changes in accounting estimates, which are generally applied prospectively. Applicable from 1 January 2023.

–The amendments to IAS 12 Income Taxes require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. In addition, entities should recognise deferred tax assets (to the extent that it is probable that they can be utilised) and deferred tax liabilities at the beginning of the earliest comparative period for all deductible and taxable temporary differences associated with:

•Right-of-use assets and lease liabilities.

•Decommissioning, restoration and similar liabilities, and the corresponding amounts recognised as part of the cost of the related assets.

The cumulative effect of recognising these adjustments is recognised in retained earnings, or another component of equity, as appropriate. Applicable from 1 January 2023.

By the time of the preparation of these interim financial statements, there is an amendment to IAS 12 that was approved by the IASB on 23 May 2023 with an effective date of 1 January 2023, and that is pending adoption by the European Union for the current exercise.

–The amendments to IAS 12 Income Taxes applies to income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two model rules published by the Organisation for Economic Co-operation and Development (OECD), including tax law that implements qualified domestic minimum top-up taxes described in those rules. The amendment includes the mandatory and temporary exception to the recognition and breakdown of deferred tax assets and liabilities derived from said Pillar Two model rules (applicable from the date of publication of the amendment) and establishes additional information requirements, differentiating between whether said tax law has entered into force (applicable from the date of publication of the amendment), or said tax law is enacted or substantially enacted, in which case the information requirements will be necessary for the annual periods beginning on or after 1 January 2023 (without any information requirement in the intermediate periods).

Banco Santander has not applied the aforementioned exception since there are no tax laws for the implementation of the model rules of Pillar Two in force in the financial year 2023 for the geographies in which the Group operates.

The aforementioned amendments to accounting standards have not had a significant effect on Grupo Santander’s financial statements, except for what was disclosed before.

All accounting policies and measurement bases with a material effect on the interim financial statements for 30 June 2023 were applied in their preparation.

104						January - June 2023

---

c)     Use of critical estimates

The consolidated results and the determination of the consolidated equity are sensitive to the accounting principles and policies, valuation criteria and estimates used by the directors of Banco Santander in preparing the interim financial statements. The main accounting principles, policies, and valuation criteria are indicated in Note 2 of the consolidated annual accounts of the year 2022, except for those indicated in these interim financial statements due to the rules that have come into effect during the first six months of the year 2023.

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

1.The income tax expense, which is recognised in interim periods based on the best estimate of the weighted average tax rate expected by Grupo Santander for the full financial year;

2.The impairment losses on certain assets – financial assets at fair value through other comprehensive income, financial assets at amortised cost, non-current assets held for sale, investments in subsidiaries, joint ventures and associates, tangible assets and intangible assets;

3.The assumptions used in the calculation of the post-employment benefit liabilities and commitments and other obligations;

4.The useful life of the tangible and intangible assets;

5.The measurement of goodwill impairment arising on consolidation;

6.The calculation of provisions and the consideration of contingent liabilities;

7.The fair value of certain unquoted assets and liabilities;

8.The recoverability of deferred tax assets; and

9.The fair value of the identifiable assets acquired and the liabilities assumed in business combinations in accordance with IFRS 3.

To update the previous estimates, the Group's management has taken into account the current macroeconomic scenario and the situation of the war in Ukraine, as well as the challenges derived from the inflationary scenario, the recent turbulence in the world banking sector, mainly due to the bankruptcy of some regional banks in the United States, a specific case of a merger in Europe, which has contributed to generate greater uncertainty and volatility in the markets.

The Group's management has evaluated in particular the uncertainties caused by the current environment in relation to credit, liquidity and market risks, taking into account the best available information, to estimate the impact on the credit portfolio's impairment provision, and in the debt instruments' interest rates and valuation.

During the first six months ended 30 June 2023, there have been no additional significant changes in the estimates made at the end of 2022, other than those indicated in these interim financial statements.

d)    Contingent assets and liabilities

Note 2.o to Grupo Santander's consolidated annual accounts for the year ended 31 December 2022 includes information on the contingent assets and liabilities at that date. There were no significant changes in Grupo Santander's contingent assets and liabilities from 31 December 2022 to the date of formal preparation of these interim financial statements.

e)   Comparative information

The information for the year 2022 contained in these interim financial statements is only presented for comparison purposes with the information relating to the six-month period ended 30 June 2023.

The comparative information in the balance sheet as at 31 December 2022 has been restated due to retrospective application of IFRS 17 (see Note 1.b).

In order to interpret the changes in the balances with respect to 31 December 2022, it is necessary to take into consideration the exchange rate effect arising from the volume of foreign currency balances held by the Group in view of its geographic diversity (Note 50.b to the consolidated annual accounts for the year ended 31 December 2022) and the impact of the appreciation/depreciation of the various currencies against the euro in the first six months of 2023: Mexican peso (11.15%), US dollar (-2.16%), Brazilian real (7.51%), Pound sterling (3.35%), Chilean peso (4.02%) and Polish zloty (5.60%); as well as the evolution of the average exchange rates between comparable periods: New Mexican peso (12.84%), US dollar (1.11%), Brazilian real (0.89%), Pound sterling (-3.86%), Chilean peso (3.65%) and Polish zloty (0.25%).

January - June 2023						105

---

f)     Seasonality of the Grupo Santander’s transactions

The business activities carried on by Grupo Santander entities, and their transactions are not cyclical or seasonal in nature. Therefore, no specific disclosures are included in these explanatory notes to the interim financial statements for the first six months ended 30 June 2023.

g)    Materiality

In determining the note disclosures to be made on the various items in the interim financial statements or other matters, Grupo Santander, in accordance with IAS 34, took into account their materiality in relation to the interim financial statements for the first six months ended 30 June 2023.

h) Other information

On 28 December 2022, the law establishing a temporary levy on credit institutions and financial credit establishments was published in Spain. On 1 January 2023, an amount of 224 million euros was recorded under the heading "Other operating expenses" in the profit and loss account in accordance with IFRIC 21 due to this new tax.

i)    Events after the reporting period

From July 1, 2023 and up to the date of formulation of these interim financial statements corresponding to the first six months of 2023, there have been no relevant events other than those indicated in the interim financial statements.

2.    Grupo Santander

Appendices I, II and III to the consolidated annual accounts for the year ended 31 December 2022 provide relevant information on Grupo Santander companies at that date and on the companies accounted for under the equity method.

Also, Note 3 to the aforementioned consolidated annual accounts includes a description of the most significant acquisitions and disposals of companies performed by Grupo Santander in 2022, 2021 and 2020.

The most significant transactions carried out during the first six months of 2023 or pending execution at 30 June 2023 are described below:

Tender offer for shares of Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México

On 21 October 2022, Banco Santander, S.A. ('Banco Santander'), announced that it intended to make concurrent cash tender offers to acquire all of the shares of Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México ('Santander México') in Mexico (Shares) and the United States (American Depositary Shares ('ADS')), which were not owned by Grupo Santander, which amounted to approximately 3.76% of Santander México's share capital.

The offers were launched on 7 February 2023 and were originally scheduled to close on 8 March 2023. On 1 March 2023, Banco Santander announced its decision to extend the expiration date of the offers so that they could be concluded on 10 April 2023. Finally, after the offers' closing, 3.6% of the capital has accepted the offer, which raised the Group's stake in Santander México from 96.2% to 99.8%.

Shareholders who participated in the offerings received 24.52 Mexican pesos (approximately 1.20 euro) per Share and US$ 6.6876 in cash for each ADS (i.e., the equivalent in United States dollars of 122.6 Mexican pesos in cash for each ADS at the dollar/Mexican peso exchange rate on the expiration date of April 10, 2023), which corresponded to the book value of the Santander México share according to the quarterly report of Santander México corresponding to the fourth quarter of the year 2022 in accordance with applicable legislation, with a total disbursement by Banco Santander of approximately EUR 300 million.

The operation has led to an increase of EUR 13 million in Reserves and a decrease of EUR 313 million in minority interests.

Once the offers were concluded and settled, Banco Santander proceeded to: (i) withdraw the ADSs from the listing on the New York Stock Exchange (“NYSE”) and the Shares from the registry before the Securities and Exchange Commission ('SEC') in the United States and; (ii) cancel the registration of the Shares in the National Securities Registry of the National Banking and Securities Commission ('CNBV'') and withdraw the listing of the Shares in the Mexican Stock Exchange, S.A.B. de C.V. ('BMV'). Said cancellation was approved by the extraordinary general shareholders' meeting of Santander México held on 30 November 2022, with the favourable vote of the holders of the shares that represent more than 95% of the shares of Santander México, as required by the Mexican Securities Market Law.

Pursuant to Mexican law, on 12 May 2023, Banco Santander and Santander México have established a trust (the “Repurchase Trust”), to which the holders of the Shares that remain outstanding after the conclusion of the offers, to sell said Shares to the repurchase trust, at the same cash price that would have been paid to them in the Mexican offer with respect to the same.

106						January - June 2023

---

3.    Shareholder remuneration system and earnings per share

a)   Shareholder remuneration system

The cash remuneration paid by Banco Santander to its shareholders in the first six months of 2023 and 2022 was as follows:

			30-06-2023									30-06-2022
			% of par value			Euros per share			Amount (EUR million)			% of par value			Euros per share			Amount (EUR million)
Ordinary shares			11.90		%	0.0595			963			10.30		%	0.0515			869
Other shares (without vote, redeemable, etc.)			—			—			—			—			—			—
Total remuneration paid			11.90		%	0.0595			963			10.30		%	0.0515			869
Dividend paid out of profit			11.90		%	0.0595			963			10.30		%	0.0515			869
Dividend paid with a charge to reserves or share premium			—			—			—			—			—			—
Dividend in kind			—			—			—			—			—			—
Flexible payment			—			—			—			—			—			—

The general meeting of shareholders approved on 31 March 2023 the payment of a complementary dividend in cash charged to the results of the financial year 2022, agreed at the board of directors on 27 February 2023, of EUR 5.95 cents per share that was effective as of 2 May 2023.

Likewise, the general meeting of shareholders approved the implementation of a share repurchase program agreed by this board of directors for a maximum amount of EUR 921 million, which began on 1 March 2023 until 12 May 2023.

At the board of directors held on 24 February 2022, it was agreed to pay a dividend of EUR 5.15 cents in cash per share corresponding to the year 2021, which became effective on 2 May 2022. It also approved the implementation of a share repurchase program charged to the results of the 2021 financial year for a maximum amount of 865 million, completed in May 2022.

b)   Earnings per share from continuing and discontinued operations

i. Basic earnings per share

Basic earnings per share for the period are calculated by dividing the net profit attributable to Grupo Santander for the first six months adjusted by the after-tax amount relating to the remuneration of contingently convertible preference shares recognised in equity by the weighted average number of ordinary shares outstanding during the period, excluding the average number of treasury shares held in the period.

Accordingly:

			30-06-2023			30-06-2022
Profit attributable to the Parent (EUR million)			5,241			4,894
Remuneration of contingently convertible preferred securities (CCPS) (EUR million)			(229)			(292)
			5,012			4,602
Of which:
Profit or Loss from discontinued operations (non controlling interest net) (EUR million)			—			—
Profit or Loss from continuing operations (CCPS net) (EUR million)			5,012			4,602
Weighted average number of shares outstanding			16,279,041,269			16,947,764,566
Basic earnings per share (euros)			0.31			0.27
Of which: from discontinued operations (euros)			—			—
from continuing operations (euros)			0.31			0.27

January - June 2023						107

---

ii. Diluted earnings per share

Diluted earnings per share for the period are calculated by dividing the net profit attributable to Grupo Santander for the first six months adjusted by the after-tax amount relating to the remuneration of contingently convertible preference shares recognised in equity and of perpetual liabilities contingently amortisable in their case by the weighted average number of ordinary shares outstanding during the period, excluding the average number of treasury shares and adjusted for all the dilutive effects inherent to potential ordinary shares (share options, warrants and convertible debt instruments).

Accordingly, diluted earnings per share were determined as follows:

			30-06-2023			30-06-2022
Profit attributable to the Parent (EUR million)			5,241			4,894
Remuneration of contingently convertible preferred securities (CCPS) (EUR million)			(229)			(292)
			5,012			4,602
Of which:
Profit or Loss from discontinued operations (non controlling interest net) (EUR million)			—			—
Profit or Loss from continuing operations (CCPS net) (EUR million)			5,012			4,602
Weighted average number of shares outstanding			16,279,041,269			16,947,764,566
Dilutive effect of options/receipt of shares			67,704,709			48,431,475
Adjusted number of shares			16,346,745,978			16,996,196,041
Diluted earnings per share (euros)			0.31			0.27
Of which: from discontinued operations (euros)			—			—
from continuing operations (euros)			0.31			0.27

4.    Remuneration and other benefits paid to Banco Santander’s directors and senior managers

Note 5 to Grupo Santander’s consolidated annual accounts for the year ended 31 December 2022 details the remuneration and other benefits to members of Banco Santander’s Board of Directors and senior management in 2022.

Following is a summary of the most significant data on the remunerations and benefits for the first six months ended 30 June 2023 and 2022:

Remuneration of members of the board of directors (1)

			EUR thousand
			30-06-2023			30-06-2022
Members of the board of directors: (2)
Remuneration concept
Fixed salary remuneration of executive directors			3,136			2,859
Variable salary remuneration of executive directors			—			—
Directors fees			628			525
Bylaw-stipulated emoluments (annual emolument)			2,113			1,890
Other			1,407			1,317
Sub-total			7,284			6,591
Transactions with shares and/or other financial instruments			—			—
			7,284			6,591

(1)The Notes to the consolidated annual accounts for 2023 will contain detailed and complete information on the remuneration paid to all the directors, including executive directors.

(2)Mr. Jose Antonio Álvarez stepped down as Vice chair and CEO Executive Director on 31 December 2022. Designated as Vice chair Non - executive Director 1 January 2023.    

Mr. Héctor Grisi was designated member of the board on 1 January 2023.

Mr. Germán de la Fuente was designated member of the board on 1 April 2022.

Mr. Glenn Hutchings was designated member of the board on 20 December 2022.

Mr. Álvaro Cardoso de Souza stepped down as member of the board on 1 April 2022.

Mr. Ramón Martín Chávez Márquez stepped down as member of the board on 1 July 2022.

Mr. Sergio Agapito Lires Rial stepped down as member of the board on 31 December 2022.

108						January - June 2023

---

Other benefits of members of the board of directors

			EUR thousand
			30-06-2023			30-06-2022
Members of the board of directors
Other benefits
Advances			—			—
Loans granted			144			133
Pension funds and plans: Endowments and/or contributions (1)			1,055			946
Pension funds and plans: Accumulated rights (2)			66,792			64,895
Life insurance premiums			563			769
Guarantees provided for directors			—			—

(1)   These correspond to the endowments and/or contributions made during the first six months of 2023 and 2022 in respect of retirement pensions, widowhood, orphanhood and permanent disability.

(2)   Corresponds to the rights accrued by the directors in matters of pensions. Additionally, former members of the board had at 30 June 2023 and 30 June 2022 rights accrued for this concept for EUR 46,275 thousand and EUR 48,388 thousand, respectively.

Remuneration of senior management (1)(2)

The table below includes the corresponding amounts related to remunerations of senior management at 30 June 2023 and 2022, excluding the executive directors:

			EUR thousand
			30-06-2023			30-06-2022
Senior management (1)
Total remuneration of senior management (2)			12,761			13,978

(1)Remunerations received during the first six months by members of the senior management who ceased in their functions by 30 June 2023, amounted to EUR 511 thousand. During the first six months of 2022, no member of senior management terminated their duties.

(2)   The number of members of Banco Santander's senior management, excluding executive directors, is 14 as at 30 June 2023 (15 persons at 30 June 2022 ).

The variable annual remuneration (or bonuses) received for fiscal year 2022, both for directors and the rest of senior management, were included in the information on remuneration included in the annual report for that year. Similarly, the variable remuneration attributable to the 2023 results, which will be submitted for approval by the Board of Directors at the appropriate time, will be included in the financial statements for the current year.

Funds and pension plans of senior management

			EUR thousand
			30-06-2023			30-06-2022
Senior management (1)
Pension funds: Endowments and / or contributions (2)			2,550			2,808
Pension funds: Accumulated rights (3)			55,451			56,222

(1)Contributions made during the first six months to members of the senior management who ceased in their functions by 30 June 2023, amounted to EUR 108 thousand. During the first six months of 2022, no member of senior management terminated their duties

(2)Corresponds to the allocations and/or contributions made during the first six months of 2023 and 2022 as retirement pensions.

(3)Corresponds to the rights accrued by members of senior management in the area of pensions. In addition, former members of senior management had at 30 June 2023 and 30 June 2022 rights accumulated for this same concept for EUR 90,401 thousand and EUR 113,060 thousand, respectively.

January - June 2023						109

---

5.    Financial assets

a)   Breakdown

The detail, by nature and category for measurement purposes, of Grupo Santander's financial assets, other than the balances relating to Cash, cash balances at central banks and other deposits on demand and Hedging derivatives, at 30 June 2023 and 31 December 2022 is as follows, presented by the nature and categories for valuation purposes:

			EUR million
			30-06-2023
			Financial assets held for trading			Non-trading financial  assets  mandatorily  at fair value  through profit or loss			Financial  assets  designated  at fair value  through profit or loss			Financial  assets at fair  value through  other  comprehensive income			Financial  assets at  amortised cost
Derivatives			67,613
Equity instruments			13,349			4,055						1,729
Debt instruments			55,823			888			3,089			76,010			91,559
Loans and advances			47,049			853			6,556			9,017			1,088,743
Central Banks			12,406			—			—			—			17,871
Credit institutions			23,592			1			626			303			52,375
Customers			11,051			852			5,930			8,714			1,018,497
Total			183,834			5,796			9,645			86,756			1,180,302

			EUR million
			31-12-2022
			Financial assets held for trading			Non-trading financial  assets  mandatorily  at fair value  through profit or loss			Financial  assets  designated  at fair value  through profit or loss			Financial  assets at fair  value through  other  comprehensive income			Financial  assets at  amortised cost
Derivatives			67,002
Equity instruments			10,066			3,711						1,941
Debt instruments			41,403			1,134			2,542			75,083			73,554
Loans and advances			37,647			868			6,447			8,215			1,073,490
Central Banks			11,595			—			—			—			15,375
Credit institutions			16,502			—			673			—			46,518
Customers			9,550			868			5,774			8,215			1,011,597
Total			156,118			5,713			8,989			85,239			1,147,044

110						January - June 2023

---

Following is the gross exposure of financial assets subject to impairment stages at 30 June 2023 and 31 December 2022:

			EUR million
			30-06-2023												31-12-2022
			Gross amount												Gross amount
			Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
Financial assets at fair value through other comprehensive income			84,841			160			97			85,098			83,118			184			24			83,326
Debt instruments			76,015			—			6			76,021			75,087			—			6			75,093
Loans and advances			8,826			160			91			9,077			8,031			184			18			8,233
Credit institutions			303			—			—			303			—			—			—			—
Customers			8,523			160			91			8,774			8,031			184			18			8,233
Financial assets at amortised cost			1,097,848			71,743			33,395			1,202,986			1,070,025			66,588			32,997			1,169,610
Debt instruments			91,254			125			442			91,821			73,297			75			398			73,770
Loans and advances			1,006,594			71,618			32,953			1,111,165			996,728			66,513			32,599			1,095,840
Central Banks			17,871			—			—			17,871			15,375			—			—			15,375
Credit institutions			52,369			13			—			52,382			46,523			1			—			46,524
Customers			936,354			71,605			32,953			1,040,912			934,830			66,512			32,599			1,033,941
Total			1,182,689			71,903			33,492			1,288,084			1,153,143			66,772			33,021			1,252,936

On 30 June 2023, Grupo Santander has EUR 671 million (EUR 322 million on 31 December 2022) of exposure in impaired assets purchased with impairment, of which EUR 251 million still show signs of impairment, which mainly correspond to the business combinations carried out by Grupo Santander.

b)    Impairment allowances of financial assets at amortised cost portfolio

The following is the movement that has taken place, during the first six months ended 30 June 2023 and 2022, in the balance of provisions that cover losses due to impairment of assets which comprise the heading balance of the financial assets at amortised cost:

			EUR million
			30-06-2023			30-06-2022
Balance as at beginning of period			22,888			23,164
Impairment losses charged to income for the period			6,843			5,255
Of which:
Impairment losses charged to income			11,225			9,720
Impairment losses reversed with a credit to income			(4,382)			(4,465)
Perimeter change			(37)			—
Write-off of impaired balances against recorded impairment allowance			(6,831)			(5,682)
Exchange differences and other			492			937
Balance as at end of period			23,355			23,674
Of which, relating to:
Impaired assets			14,271			13,707
Other assets			9,084			9,967
Of which:
Individually calculated			2,858			2,719
Collectively calculated			20,497			20,955

January - June 2023						111

---

Following is the movement of the loan loss provision broken down by impairment stage of loans and advances to customers recognised under 'Financial assets at amortised cost' as at 30 June 2023 and 30 June 2022:

			EUR million
			30-06-2023
			Stage 1			Stage 2			Stage 3			Total
Impairment allowance as at beginning of period			3,611			5,124			13,931			22,666
Transfers between stages			(454)			355			3,767			3,668
Variation due to credit risk			605			(377)			2,891			3,119
Write-offs			—			—			(6,801)			(6,801)
Exchange differences and other			88			97			249			434
Carrying amount at end of period			3,850			5,199			14,037			23,086

			EUR million
			30-06-2022
			Stage 1			Stage 2			Stage 3			Total
Impairment allowance as at beginning of period			4,182			5,224			13,546			22,952
Transfers between stages			(455)			381			2,618			2,544
Variation due to credit risk			473			(447)			2,695			2,721
Write-offs			—			—			(5,682)			(5,682)
Exchange differences and other			249			324			332			905
Carrying amount at end of period			4,449			5,482			13,509			23,440

Previously written-off assets recovered during the first six months of 2023 and 2022 amount to EUR 864 million and to EUR 662 million, respectively. In addition, during the first six months of 2023 EUR 264 million were recognized for losses in the income statement due to renegotiation or contractual modifications mainly due to the CHF mortgage portfolio in Poland (EUR 169 million during the first six months of 2022). Considering these amounts, the recorded impairment of financial assets at amortised cost is EUR 6,243 million and EUR 4,762 million during the first six months of 2023 and 2022, respectively.

c)  Impaired assets of financial assets at amortised cost portfolio

The movement during the first six months ended 30 June 2023 and 2022, in the balance of financial assets classified at amortised cost and considered impaired by reason for the credit risk is as follows:

			EUR million
			30-06-2023			30-06-2022
Balance as at beginning of period			33,269			31,848
Net additions			6,480			5,710
Written-off assets			(6,831)			(5,682)
Perimeter Changes			(45)			—
Exchange differences and other			773			850
Balance at end of period			33,646			32,726

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

112						January - June 2023

---

d)    Guarantees received

Following is the breakdown of the value of the guarantees received to ensure the collection of the financial assets that comprise the heading of financial assets at amortized cost, distinguishing between real guarantees and other guarantees at 30 June 2023 and 31 December 2022:

			EUR million
			30-06-2023			31-12-2022
Real guarantees value			632,794			627,337
Of which: Impaired			12,028			11,846
Other guarantees value			93,967			96,645
Of which: Impaired			2,227			2,029
Total value of the guarantees received			726,761			723,982

e)  Fair value of financial assets not measured at fair value

Following is a comparison of the carrying amounts of Grupo Santander’s financial assets measured at other than fair value and their respective fair values at 30 June 2023 and 31 December 2022:

			EUR million
			30-06-2023						31-12-2022
			Carrying amount			Fair  value			Carrying amount			Fair  value
Loans and advances			1,088,743			1,067,336			1,073,490			1,053,703
Debt instruments			91,559			89,085			73,554			70,373
ASSETS			1,180,302			1,156,421			1,147,044			1,124,076

The main valuation methods and inputs used in the estimation of the fair value of the financial assets of the previous table are detailed in Note 50.c of the consolidated annual accounts for the year 2022.

6.    Non-current assets held for sale

The detail, by nature, of Grupo Santander’s non-current assets held for sale at 30 June 2023 and 31 December 2022 is as follows presented by nature:

			EUR million
			30-06-2023			31-12-2022
Tangible assets			3,125			3,435
Of which:
Foreclosed assets			2,912			3,101
Of which: Property assets in Spain			2,335			2,596
Other tangible assets held for sale			213			334
Other assets			26			18
			3,151			3,453

The balance of the provisions at 30 June 2023 is EUR 3,173 million (EUR 3,425 million at 31 December 2022). The charges recorded in the first six months of 2023 and 2022 amounted to EUR 63 million and EUR 100 million, respectively, and the recoveries undergone during those periods amount to EUR 16 million and EUR 33 million, respectively.

January - June 2023						113

---

7.   Tangible assets

a)   Changes in the period

In the first six months of 2023 and 2022, tangible assets (rights of use are not included) were acquired for EUR 4,705 million and EUR 4,387 million, respectively.

Likewise, in the first six months of 2023 and 2022 tangible asset items were disposed of with a carrying amount of EUR 2,713 million and EUR 2,965 million, generating a net profit of EUR 24 million (net loss of EUR 4 million in the first semester of 2022).

b)   Property, plant and equipment purchase commitments

At 30 June 2023 and 2022, Grupo Santander did not have any significant commitments to purchase property, plant and equipment items.

c) Leasing rights

As of 30 June 2023, Grupo Santander has tangible assets under lease for the amount of EUR 2,384 million (EUR 2,413 million at 31 December 2022).

8.    Intangible assets

The detail of Intangible Assets - Goodwill at 30 June 2023 and 31 December 2022, based on the cash-generating units giving rise thereto, is as follows:

			EUR million
			30-06-2023			31-12-2022
Banco Santander (Brazil)			3,756			3,503
SAM Investment Holdings Limited			1,444			1,444
Santander Consumer Germany			1,304			1,304
Santander Bank Polska			1,135			1,075
Santander Portugal			1,040			1,040
Santander US Auto			1,016			1,039
Santander España			998			998
Santander Holding USA (ex. Auto)			824			844
Santander UK			619			599
Banco Santander - Chile			570			548
Grupo Financiero Santander (Mexico)			522			469
Ebury Partners			308			298
Santander Consumer Nordics			199			215
Other entities			391			365
Total Goodwill			14,126			13,741

During the first semester of 2023 there has been an increase in goodwill of EUR 385 million mainly due to exchange differences (see Note 11), which in accordance with current regulations, have been recorded with a credit to the heading Other comprehensive income - Items that can be reclassified in results- Foreign currency translation of equity through the Statement of recognized income and expenses.

Note 17 of the consolidated annual accounts for the year ended 31 December 2022 includes detailed information on the procedures followed by Grupo Santander to analyse the potential impairment of the goodwill recognised with the respect to its recoverable amount and to recognise the related impairment losses, where appropriate.

In accordance with IAS 36, a Cash Generating Unit (CGU) to which goodwill has been assigned should be subjected to an annual impairment test as long as there are signs of impairment.

In accordance with all mentioned before and the analysis made of the information available on the evolution of the different cash-generating units that could reveal the existence of indications of impairment, the directors of the Grupo Santander have concluded that during the first six months of 2023, there were no triggers that required the recording of impairments.

114						January - June 2023

---

9.   Financial liabilities

a)   Breakdown

The following is a breakdown of Grupo Santander's financial liabilities, other than the balances corresponding to the Derivatives - hedge accounting heading, as of 30 June 2023 and 31 December 2022, presented by nature and categories for valuation purposes:

			EUR million
			30-06-2023									31-12-2022
			Financial liabilities held for trading			Financial liabilities designated at fair value through profit or loss			Financial liabilities at amortised cost			Financial liabilities held for trading			Financial liabilities designated at fair value through profit or loss (*)			Financial liabilities at amortised cost
Derivatives			62,259									64,891
Short Positions			22,352									22,515
Deposits			50,277			30,536			1,115,908			27,779			34,841			1,111,887
Central banks			16,216			829			58,644			5,757			1,740			76,952
Credit institutions			14,140			2,410			90,704			9,796			1,958			68,582
Customer			19,921			27,297			966,560			12,226			31,143			966,353
Debt instruments			—			5,684			285,869			—			5,427			274,912
Other financial liabilities			—			—			45,105			—			—			37,059
Total			134,888			36,220			1,446,882			115,185			40,268			1,423,858

(*) See impact of IFRS 17 as at 31 December 2022 (see Note 1.b)

b)   Information on issues, repurchases or redemptions of debt instruments issued

The detail of the balance of debt instruments issued according to their nature is:

			EUR million
			30-06-2023			31-12-2022
Bonds and debentures outstanding			217,735			211,597
Subordinated			26,864			25,717
Promissory notes and other securities			46,954			43,025
Total debt instruments issued			291,553			280,339

The detail, at 30 June 2023 and 2022, of the outstanding balance of the debt instruments, excluding promissory notes, which at these dates had been issued by Banco Santander or any other Group entity is disclosed below. Also included is the detail of the changes in this balance in the first six months of 2023 and 2022:

			EUR million
			30-06-2023
			Opening balance at 01-01-23			Perimeter			Issuances or placements			Repurchases or redemptions			Exchange rate and other adjustments			Closing balance at 06-30-23
Bonds and debentures outstanding			211,597			(1,467)			34,438			(28,534)			1,701			217,735
Subordinated			25,717			—			1,500			(36)			(317)			26,864
Bonds and debentures outstanding and subordinated liabilities issued			237,314			(1,467)			35,938			(28,570)			1,384			244,599

			EUR million
			30-06-2022
			Opening balance at 01-01-22			Perimeter			Issuances or placements			Repurchases or redemptions			Exchange rate and other adjustments			Closing balance at 06-30-22
Bonds and debentures outstanding			194,362			—			33,800			(27,376)			3,837			204,623
Subordinated			25,938			—			113			(853)			635			25,833
Bonds and debentures outstanding and subordinated liabilities issued			220,300			—			33,913			(28,229)			4,472			230,456

January - June 2023						115

---

At 23 May 2023, Banco Santander, S.A. carried out an issue of subordinated bonds for an amount of EUR 1,500 million at a term of 10 years and 3 months. The issue coupon was fixed at 5.75% per year for the first 5 years and 3 months, with an option to redeem in August 2028, revising the coupon, in the event of non-amortization, even a margin of 285 points more the 5-year Euro Swap rate.

At 25 April 2022, Banco Santander, S.A. proceeded to prepay all the Tier 1 Contingently Convertible Preferred Securities with ISIN code XS1602466424 and common code 160246642 in circulation, for a total nominal amount of 750 million euros and which trade on the Irish Stock Market 'Global Exchange Market' (the 'PPCC').

c)    Other issues guaranteed by Grupo Santander

At 30 June 2023 and 2022, there were no debt instruments issued by associates or non-Group third parties (unrelated) that had been guaranteed by Banco Santander or any other Group entity.

d)   Fair value of financial liabilities not measured at fair value

Following is a comparison between the value by which Grupo Santander’s financial liabilities are recorded that are measured using criteria other than fair value and their corresponding fair value at 30 June 2023 and 31 December 2022:

			EUR million
			30-06-2023						31-12-2022
			Carrying amount			Fair value			Carrying amount			Fair value
Deposits			1,115,908			1,114,308			1,111,887			1,108,918
Debt instruments			285,869			276,186			274,912			263,191
Liabilities			1,401,777			1,390,494			1,386,799			1,372,109

Additionally, other financial liabilities are accounted for EUR 45,105 million and EUR 37,059 million as of 30 June 2023 and 31 December 2022, respectively.

The main valuation methods and inputs used in the estimation of the fair value of the financial liabilities in the previous table are detailed in Note 50.c of the consolidated annual accounts for 2022, other than those mentioned in these interim financial statements.

10.   Provisions

a)    Provisions for Pensions and other post-retirements obligations and Other long term employee benefits

The variation experienced by the balance of the Pensions and other post-retirements obligations and other long-term employee benefits from 31 December 2022 to 30 June 2023, is mainly due to benefit payments and premiums or contributions (see Note 11.d).

b)    Provisions for taxes and other legal contingencies and Other provisions

Set forth below is the detail, by type of provision, of the balances at 30 June 2023 and at 31 December 2022 of Provisions for taxes and other legal contingencies and Other provisions. The types of provision were determined by grouping together items of a similar nature:

			EUR million
			30-06-2023			31-12-2022
Provisions for taxes			741			679
Provisions for employment-related proceedings (Brazil)			475			301
Provisions for other legal proceedings			1,342			1,094
Provision for customer remediation			385			349
Provision for restructuring			659			641
Other			888			1,009
			4,490			4,073

Relevant information is set forth below in relation to each type of provision shown in the preceding table:

The provisions for taxes include provisions for tax-related proceedings.

116						January - June 2023

---

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

The provisions for other legal proceedings include provisions for court, arbitration or administrative proceedings (other than those included in other categories or types of provisions disclosed separately) brought against Grupo Santander companies.

The provisions for customer remediation include mainly the estimated cost of payments to remedy errors relating to the sale of certain products in the UK, as well as the estimated amount related to the floor clauses of Banco Popular Español, S.A.U. To calculate the provision for customer remediation, the best estimate of the provision made by management is used, which is based on the estimated number of claims to be received and, of these, the number that will be accepted, as well as the estimated average payment per case.

The provisions for restructuring include only the costs arising from restructuring processes carried out by the various Group companies.

Lastly, the Other heading contains very atomized and individually insignificant provisions, such as the provisions to cover the operational risk of the different offices of the Group.

Qualitative information on the main litigation is provided in Note 10.c.

The Group's general policy is to record provisions for tax and legal proceedings in which the Group assesses the chances of loss to be probable and the Group does not record provisions when the chances of loss are possible or remote. Grupo Santander determines the amounts to be provided for as its best estimate of the expenditure required to settle the corresponding claim based, among other factors, on a case-by-case analysis of the facts and the legal opinion of internal and external counsel or by considering the historical average amount of the loss incurred in claims of the same nature. The definitive date of the outflow of resources embodying economic benefits for the Group depends on each obligation. In certain cases, the obligations do not have a fixed settlement term and, in others, they depend on legal proceedings in progress.

The changes in provisions arising from civil contingencies and legal nature are disclosed in this note.

The main changes in provisions in the first six months of 2023 are as follows:

With respect to provisions for labour and other legal proceedings, in Brazil, provisions of EUR 257 million and EUR 115 million were recorded, making payments of EUR 116 million and EUR 87 million, respectively.

With respect to provisions for customer compensation, and based on the best information available, the gross amount of mortgage leans denominated and indexed to foreign currencies in Poland has been adjusted, in accordance with IFRS 9, by the new estimated cash flows, as described in Note 10 c.

c)    Litigation and other matters

i. Tax-related litigation

At 30 June 2023 the main tax-related proceedings concerning the Group were as follows:

•Legal actions filed by Banco Santander (Brasil) S.A. and other Group entities to avoid the application of Law 9.718/98, which modifies the basis to calculate Programa de Integraçao Social (PIS) and Contribuição para Financiamento da Seguridade Social (COFINS), extending it to all the entities income, and not only to the income from the provision of services. In relation of Banco Santander (Brasil) S.A. process, in 2015 the Federal Supreme Court (FSC) admitted the extraordinary appeal filed by the Federal Union regarding PIS, and dismissed the extraordinary appeal lodged by the Brazilian Public Prosecutor's Office regarding COFINS contribution, confirming the decision of Federal Regional Court favourable to Banco Santander (Brasil) S.A. of August 2007. The Federal Supreme Court also admitted the appeals related to the other Group entities both for PIS and COFINS. On June 13, 2023, the Federal Supreme Court  ruled unfavorably two cases through General Repercussion (Theme 372), including Banco Santander (Brasil), S.A. case. The Bank will file a new appeal, considering the possible loss as a contingent liability. The other Group entities have recognized a provision for the estimated loss regarding both PIS and Cofins.

•Banco Santander (Brasil) S.A. and other Group companies in Brazil have appealed against the assessments issued by the Brazilian tax authorities questioning the deduction of loan losses in their income tax returns (Imposto sobre a Renda das Pessoas Jurídicas - IRPJ - and Contribuçao Social sobre o Lucro Liquido -CSLL-) in relation to different administrative processes of various years on the ground that the requirements under the applicable legislation were not met. The appeals are pending decision in the administrative Court, the Conselho Adminisitrativo de Recursos Fiscais (CARF). No provision was recognised in connection with the amount considered to be a contingent liability.

January - June 2023						117

---

•Banco Santander (Brasil) S.A. and other Group companies in Brazil are involved in administrative and legal proceedings against several municipalities that demand payment of the Service Tax on certain items of income from transactions not classified as provisions of services. There are several cases in different judicial instances. A provision was recognised in connection with the amount of the estimated loss.

•Banco Santander (Brasil) S.A. and other Group companies in Brazil are involved in administrative and legal proceedings against the tax authorities in connection with the taxation for social security purposes of certain items which are not considered to be employee remuneration. There are several cases in different judicial instances. A provision was recognised in connection with the amount of the estimated loss.

•In May 2003 the Brazilian tax authorities issued separate infringement notices against Santander Distribuidora de Títulos e Valores Mobiliarios, Ltda. (DTVM, actually Santander Brasil Tecnología S.A.) and Banco Santander (Brasil) S.A. in relation to the Provisional Tax on Financial Movements (Contribuição Provisória sobre Movimentação Financeira) of the years 2000 to 2002. The administrative discussion ended unfavourably for both companies, and on July 3, 2015, filed a lawsuit requesting the cancellation of both tax assessments. The lawsuit was judged unfavourably in first instance. Therefore, both plaintiffs appealed to the court of second instance. On December 2020, the appeal was decided unfavourably. Against the judgment, the bank filed a motion for clarification which has not been accepted. Currently it is appealed to higher courts. There is a provision recognized for the estimated loss.

•In December 2010 the Brazilian tax authorities issued an infringement notice against Santander Seguros S.A. (Brazil), currently Zurich Santander Brasil Seguros e Previdência S.A., as the successor by merger to ABN AMRO Brasil dois Participações S.A., in relation to income tax (IRPJ and CSLL) for 2005, questioning the tax treatment applied to a sale of shares of Real Seguros, S.A. The administrative discussion ended unfavourably, and the CARF decision has been appealed at the Federal Justice. As the former parent of Santander Seguros S.A. (Brasil), Banco Santander (Brasil) S.A. is liable in the event of any adverse outcome of this proceeding. No provision was recognised in connection with this proceeding as it is considered to be a contingent liability.

•In November 2014 the Brazilian tax authorities issued an infringement notice against Banco Santander (Brasil) S.A. in relation to corporate income tax (IRPJ and CSLL) for 2009 questioning the tax-deductibility of the amortisation of the goodwill of Banco ABN AMRO Real S.A. performed prior to the absorption of this bank by Banco Santander (Brasil) S.A., but accepting the amortisation performed after the merger. Actually it is appealed before the Higher Chamber of CARF. No provision was recognised in connection with this proceeding as it was considered to be a contingent liability.

•Banco Santander (Brasil) S.A. has also appealed against infringement notices issued by the tax authorities questioning the tax deductibility of the amortisation of the goodwill arising on the acquisition of Banco Comercial e de Investimento Sudameris S.A from years 2007 to 2012. No provision was recognised in connection with this matter as it was considered to be a contingent liability.

•Banco Santander (Brasil) S.A. and other companies of the Group in Brazil are undergoing administrative and judicial procedures against Brazilian tax authorities for not admitting tax compensation with credits derived from other tax concepts, not having registered a provision for the amount considered to be a contingent liability.

•Banco Santander (Brasil) S.A. is involved in appeals in relation to infringement notices initiated by tax authorities regarding the offsetting of tax losses in the CSLL of year 2009. The appeal is pending decision in CARF. No provision was recognised in connection with this matter as it is considered to be a contingent liability.

•Banco Santander (Brasil) S.A. filed a suspensive judicial measure aiming to avoid the withholding income tax (Imposto sobre a Renda Retido na Fonte - IRRF), on payments derived from technology services provided by Group foreign entities. A favorable decision was handed down and an appeal was filed by the tax authority at the Federal Regional Court, where it awaits judgment. No provision was recognized as it is considered to be a contingent liability

•Brazilian tax authorities have issued infringement notices against Getnet Adquirência e Serviços para Meios de Pagamento S.A and Banco Santander (Brasil) S.A. as jointly liable in relation to corporate income tax (IRPJ and CSLL) for 2014 to 2018 questioning the tax-deductibility of the amortization of the goodwill from the acquisition of Getnet Tecnologia Proces S.A., considering that the company would not have complied with the legal requirements for such amortization. A defense against the tax assessment notices were submitted, and the appeal is pending decision in CARF. No provision was recognized as it is considered to be a contingent liability.

The total amount for the aforementioned Brazil lawsuits that are fully provisioned is EUR 807 million, and for lawsuits that qualify as contingent liabilities is EUR 5,440 million.

•Banco Santander appealed before European Courts the Decisions 2011/5/CE of 28 October 2009 (First Decision), and 2011/282/UE of 12 January 2011 (Second Decision) of the European Commission, ruling that the deduction of the financial goodwill regulated pursuant to Article 12.5 of the Corporate Income Tax Law constituted illegal State aid. On October 2021 the Court of Justice definitively confirmed these Decisions. The dismissal of the appeal, that only affects these two decisions, had no impact on results.

At the date of approval of these interim financial statements certain other less significant tax-related proceedings are also in progress.

118						January - June 2023

---

ii. Non-tax-related proceedings

At 30 June 2023 the main non-tax-related proceedings concerning the Group were as follows:

•Payment Protection Insurance (PPI): The dispute relates to the liability for PPI mis-selling complaints relating to pre-2005 PPI policies that two entities of AXA Group (hereinafter, AXA France) acquired from Genworth Financial International Holdings, Inc. (Genworth) in September 2015. The dispute involves Santander Cards UK Limited (formerly known as GE Capital Bank Limited which was acquired by Banco Santander, S.A. from GE Capital group in 2008) which was the distributor of the policies in dispute and Santander Insurance Services UK Limited (the Santander Entitites).

In July 2017, the Santander Entities notified AXA France that they did not accept liability for losses on PPI policies relating to the relevant period. Santander UK plc entered into a Complaints Handling Agreement (CHA) with AXA France pursuant to which it agreed to handle complaints on their behalf, and AXA France agreed to pay redress assessed to be due to relevant policyholders on a without prejudice basis. A standstill agreement was entered into between the Santander Entities and AXA France as a condition of the CHA.

In July 2020, Genworth announced that it had agreed to pay AXA SA circa GBP 624 million in respect of PPI mis-selling losses in settlement of the related dispute concerning obligations under the sale and purchase agreement pursuant to which Genworth sold AXA France to AXA SA. The CHA between Santander UK plc and AXA France terminated on 26 December 2020. On 30 December 2020, AXA France provided written notice to the Santander Entities to terminate the standstill agreement. During 2021, AXA France commenced litigation against the Santander Entities seeking recovery of GBP 636 million (EUR 741.3 million) (plus interest) and any further losses relating to pre-2005 PPI.

Judgment in respect of the Santander Entities application for AXA France’s claim to be struck out/summarily dismissed, was handed down by the Commercial Court on 12 July 2022. In summary, the High Court of Justice Business and Property Courts of England and Wales - Commercial Court upheld a significant part of the Santander Entities’ strike-out application and required AXA France to re-plead a significant portion of its other pleadings.

AXA France updated the amount of losses claimed from GBP 636 million (EUR 741.3 million) to GBP 670 million (EUR 780.9 million) (plus interest) in their Re-Amended Particulars of Claim dated 2 December 2022 (RAPOC). On 31 January 2023, the Santander Entities filed their Defence to the RAPOC and an Additional Claim. In response, AXA France has conceded its claim for charges paid to Santander Entities pursuant to the CHA, reducing the overall value of its claim from GBP 670 million (EUR 780.9 million) to GBP 552 million (EUR 643.4 million) (plus interest) and has agreed to the requested rectification. AXA France filed its Re-Re-Amended Particulars of Claim on 29 June 2023.

Overall, there remains significant uncertainty as to how the dispute will be resolved. There are ongoing factual issues to be resolved which may have legal consequences including in relation to liability. These issues create uncertainties which mean that it is difficult to reliably predict the outcome of the matter. These provisions represent the best estimate as of 30 June 2023.

In addition, and in relation to PPI more generally the PPI provision includes an amount relating to legal claims challenging the Financial Conduct Authority’s (FCA) industry guidance on the treatment of the Plevin judgment and of recurring non-disclosure assessments. This provision is based on current stock levels, future projected claims, and average redress. There remains a risk that volumes received in future may be higher than forecast. The actual cost of customer compensation could differ from the amount provided. It is not currently practicable to provide an estimate of the risk and amount of any further financial impact.

•Motor Finance Broker Commissions: following the FCA Motor Market review in 2021, Santander Consumer UK (plc) has received a number of claims and complaints in respect of its historical commission arrangements. Santander Consumer (UK) plc is monitoring industry developments for potential liabilities for claims related to the use of discretionary commission models prior to the Motor Market review. While it is possible that certain costs will be incurred in relation to existing or future such claims or complaints, it is not considered that a legal or constructive obligation has been established that would require a provision to be recorded at this stage as it is currently not possible to predict their ultimate outcome including the materiality of any financial impacts (if any).

•Delforca: dispute arising from equity swaps entered into by Gaesco (now Delforca 2008, S.A.) on shares of Inmobiliaria Colonial, S.A. Banco Santander, S.A. is claiming to Delforca before the Court of Barcelona in charge of the bankruptcy proceedings, a total of EUR 66 million from the liquidation resulting from the early termination of financial transactions due to Delforca's non-payment of the equity swaps. In the same bankruptcy proceedings, Delforca and Mobiliaria Monesa have in turn claimed the Bank to repay EUR 57 million, which the Bank received for the enforcement of the agreed guarantee, as a result of the aforementioned liquidation. On 16 September 2021 the Commercial Court Number 10 of Barcelona has ordered Delforca to pay the Bank EUR 66 million plus EUR 11 million in interest and has dismissed the claims filed by Delforca. This decision has been appealed by Delforca, Mobiliaria Monesa and the bankruptcy administrator. On 1 June 2023, the appeal hearing took place. It is currently pending resolution by the Provincial Court

Separately, Mobiliaria Monesa, S.A. (parent of Delforca) filed in 2009 a civil procedure with the Courts of Santander against the Bank claiming damages that have not been specified to date. The procedure is suspended.

January - June 2023						119

---

•Former employees of Banco do Estado de São Paulo S.A., Santander Banespa, Cia. de Arrendamiento Mercantil: claim initiated in 1998 by the association of retired Banespa employees (AFABESP) requesting the payment of a half-yearly bonus contemplated in the by-laws of Banespa in the event that Banespa obtained a profit, and that the distribution of this profit were approved by the Board of Directors. The bonus was not paid in 1994 and 1995 since Banespa had not made a profit during those years. Partial payments were made from 1996 to 2000, as approved by the Board of Directors. The relevant clause was eliminated in 2001. The Tribunal Regional do Trabalho (Regional Labour Court) and the High Employment Court (TST) ordered Santander Brazil, as successor to Banespa, to pay this half-yearly bonus for the period from 1996 to the present. On 20 March 2019, the Supreme Federal Court (STF) rejected the extraordinary appeal filed by Santander Brazil.

Santander Bank Brazil filed a rescissory action before the TST to nullify the decisions of the main proceedings and suspend the execution of the judgment, which was deemed inadmissible, therefore its execution was suspended. The rescissory action was dismissed and a motion for clarification was filed, due to the absence of an explicit argument to deny the rescissory action filed by Santander Brazil. After the decision of the motion for clarification, Santander Brazil filed an extraordinary appeal in the rescissory action in February 2021, which was denied in an interlocutory decision in June 2021 by the TST. As Santander Brazil understands there is a conflict between the TST decision and the doctrine set by the STF, Santander Brazil appealed this decision. This appeal is pending.

In August 2021, a first instance court ruled that the enforcement of the TST decision shall be carried out individually, at the jurisdiction pertaining to each person. AFABESP appealed this decision. In December 2021, the Regional Labor Court denied the appeal filed by AFABESP. This decision has not been appealed by AFABESP, and therefore it has become firm.

Santander Brazil external advisers have classified the risk as probable. The recorded provisions are considered sufficient to cover the risks associated with the legal claims that are being substantiated as of 30 June 2023.

•'Planos Económicos': like the rest of the banking system in Brazil, Santander Brazil has been the target of customer complaints and collective civil suits stemming mainly from legislative changes and its application to bank deposits ('economic plans'). At the end of 2017, an agreement between regulatory entities and the Brazilian Federation of Banks (Febraban) with the purpose of closing the lawsuits was reached and was approved by the Supremo Tribunal Federal. Discussions focused on specifying the amount to be paid to each affected client according to the balance in their notebook at the time of the Plan. Finally, the total value of the payments will depend on the number of adhesions there may be and the number of savers who have demonstrated the existence of the account and its balance on the date the indexes were changed. In November 2018, the STF ordered the suspension of all economic plan proceedings for two years from May 2018. On 29 May 2020, the STF approved the extension of the agreement for 5 additional years starting from 3 June 2020. Condition for this extension was to include in the agreement actions related to the 'Collor I Plan'. On 20 June 2023, the provision recorded for the economic plan proceedings amounts to EUR 238.2 million.

•Floor clauses: as a consequence of the acquisition of Banco Popular Español, S.A.U. (Banco Popular), the Group has been exposed to a material number of transactions with floor clauses. The so-called "floor clauses" are those under which the borrower accepts a minimum interest rate to be paid to the lender, regardless of the applicable reference interest rate. Banco Popular included "floor clauses" in certain asset-side transactions with customers. In relation to this type of clauses, and after several rulings made by the Court of Justice of the European Union and the Spanish Supreme Court, and the extrajudicial process established by the Spanish Royal Decree-Law 1/2017, of 20 January, Banco Popular made provisions that were updated in order to cover the effect of the potential return of the excess interest charged for the application of the floor clauses between the contract date of the corresponding mortgage loans and May 2013. On 30 June 2023, after having processed most of the customer requests, the potential residual loss associated with ongoing court proceedings is estimated at EUR 55.5 million, amount which is fully covered by provisions.

•Banco Popular´s acquisition: After the declaration of the resolution of Banco Popular, some investors filed claims against the EU’s Single Resolution Board decision, and the FROB's resolution executed in accordance with the aforementioned decision. Likewise, numerous appeals were filed against Banco Santander, S.A. alleging that the information provided by Banco Popular was erroneous and requesting from Banco Santander, S.A. the restitution of the price paid for the acquisition of the investment instruments or, where appropriate, the corresponding compensation.

In relation to these appeals, on the one hand, the General Court of the European Union (GCUE) selected 5 appeals from among all those filed before the European courts by various investors against the European institutions and processed them as pilot cases. On 1 June 2022, the GCUE has rendered five judgements in which it has completely dismissed the appeals, (i) supporting the legality of the resolution framework applied to Banco Popular, (ii) confirming the legality of the action of the European institutions in the resolution of Banco Popular and (iii) rejecting, in particular, all the allegations that there were irregularities in the sale process of Banco Popular to Banco Santander, S.A. four of these judgments have been appealed before the Court of Justice of the European Union (CJEU). In all the appeals the rejoinder stage has concluded.

120						January - June 2023

---

On the other hand, in relation to the lawsuits initiated by investors directly against Banco Santander, S.A. derived from the acquisition of Banco Popular, on 2 September 2020, the Provincial Court of La Coruña submitted a preliminary ruling to the CJEU in which it asked for the correct interpretation of the Article 60, section 2 of Directive 2014/59/EU of the European Parliament and of the Council of 15 May, establishing a framework for the restructuring and resolution of credit institutions and investment services companies. Said article establishes that, in the cases of redemption of capital instruments in a bank resolution, no liability will subsist in relation to the amount of the instrument that has been redeemed. On 5 May 2022, the CJEU has rendered its judgement confirming that Directive 2014/59/EU of the European Parliament and of the Council does not allow that, after the total redemption of the shares of the share capital of a credit institution or an investment services company subject to a resolution procedure, the shareholders who have acquired shares within the framework of a public subscription offer issued by said company before the start of such a resolution procedure, exercise against that entity or against its successor, an action for liability for the information contained in the prospectus, under Directive 2003/71/EC of the European Parliament and of the Council, or an action for annulment of the subscription contract for those shares, which, taking into account its retroactive effects, gives rise to the restitution of the equivalent value of said shares, plus the interest accrued from the date of execution of said contract. In respect to this judgement, in December 2022 the Spanish Supreme Court submitted three preliminary rulings before the CJEU in respect of its applicability to subordinated bonds amortized with the resolution and to subordinated obligations and/or preferred shares converted into shares before resolution.

Separately, the Central Court of Instruction 4 is currently conducting preliminary proceedings 42/2017, in which, amongst other things, is being investigated the following: (i) the accuracy of the prospectus for the capital increase with subscription rights carried out by Banco Popular in 2016; and (ii) the alleged manipulation of the share price of Banco Popular until the resolution of the bank, in June 2017. During the course of the proceedings, on 30 April 2019, the Spanish National Court, ruled in favour of Banco Santander, S.A. declaring that Banco Santander, S.A. cannot inherit Banco Popular’s potential criminal liability. This ruling was appealed before the Supreme Court, which rejected it. In these proceedings, Banco Santander, S.A. could potentially be subsidiarily liable for the civil consequences. In view of the CJEU ruling of 5 May 2022, the Bank has requested confirmation of the exclusion of its subsidiary civil liability status in this criminal proceeding. On 26 July 2022, the Court has rejected this request stating that it is a matter to be determined at a later procedural time. This decision has been confirmed on appeal by the Chamber of the National Court by sentence of 5 October 2022. The instruction expired on 29 April 2023. Therefore, the Court now must issue the resolution putting an end to the investigation.

The estimated cost of any compensation to shareholders and bondholders of Banco Popular recognized in the 2017 accounts amounted to EUR 680 million, of which EUR 535 million were applied to the commercial loyalty program. The CJEU judgement of 5 May represents a very significant reduction in the risk associated with these claims.

•German shares investigation: the Cologne Public Prosecution Office is conducting an investigation against the Bank, and other group entities based in UK - Santander UK plc, Santander Financial Services Plc and Cater Allen International Limited, in relation to a particular type of tax dividend linked transactions known as cum-ex transactions.

The Group is cooperating with the German authorities. According to the state of the investigations, the result, and the effects for the Group, which may potentially include the imposition of material financial penalties, cannot be anticipated. For this reason, the Bank has not recognized any provisions in relation to the potential imposition of financial penalties.

•Banco Santander, S.A. was sued in a legal proceeding in which the plaintiff alleges that the Bank breached his contract as CEO of the institution. In the lawsuit, the claimant mainly requested a declaratory ruling that upholds the existence, validity and effectiveness of such contract and its enforcement together with the payment of certain amounts. If the main request is not granted, the claimant sought a compensation for a total amount of approximately EUR 112 million or, an alternative relief for other minor amounts. Banco Santander, S.A. answered to the legal action stating that the conditions to which the appointment of that position was subject to were not met; that the executive services contract required by law was not concluded; and that in any case, the parties could terminate the contract without any justified cause. On 17 May 2021, the plaintiff reduced his claims for compensation to EUR 61.9 million.

On 9 December 2021, the Court upheld the claim and ordered the Bank to compensate the claimant in the amount of EUR 67.8 million. By court order of 13 January 2022, the Court corrected and supplemented its judgment, reducing the total amount to be paid by the Bank to EUR 51.4 million and clarifying the part of this amount (buy out) was to be paid under the terms of the offer letter, i.e., entirely in Banco Santander shares, within the deferral period for this type of remuneration at the plaintiff's former employer and subject to the performance metrics or parameters of the plan in force at the Bank, which was that of 2018. As explained in note 5 of the report of the consolidated annual accounts for the year 2022, the degree of performance of these objectives was 33.3%.

The Bank filed an appeal against the judgment before the Madrid Court of Appeal, which was opposed by the plaintiff. At the same time, the plaintiff filed an application for provisional enforcement of the judgment in the first instance court. A court order was issued ordering enforcement of the judgment, and the Bank deposited in the court bank account the full amount provisionally awarded to the claimant, including interest, for an approximate sum of EUR 35.5 million, within the voluntary compliance period.

January - June 2023						121

---

On 6 February 2023, Banco Santander was notified of the judgment of 20 January 2023 by which the Madrid Court of Appeal partially upheld the appeal filed by the Bank. The judgment has reduced the amount to be paid by EUR 8 million, which, to the extent that this amount was already paid in the provisional partial enforcement of the judgement of first instance court, must be returned to the Bank together with other amounts for interest, which the appeal judgement also rejects. The plaintiff deposited circa EUR 9.6 million. This amount was received by the Bank on 11 July 2023.

On 11 April 2023, the Bank filed an extraordinary appeal for procedural infringement and an appeal in cassation against the Madrid Court of Appeal’s judgment before Spanish Supreme Court. Existing provisions cover the estimated risk of loss.

•Universalpay Entidad de Pago, S.L. (Upay) has filed a lawsuit against Banco Santander, S.A. for breach of the marketing alliance agreement (MAA) and claim payment (EUR 1,050 million). The MAA was originally entered into by Banco Popular and its purpose is the rendering of acquiring services (point of sale payment terminals) for businesses in the Spanish market. The lawsuit was mainly based on the potential breach of clause 6 of the MAA, which establishes certain obligations of exclusivity, non-competition and customer referral. On 16 December 2022, the Court ruled in favour of the Bank and dismissed the plaintiff's claim in its entirety. The decision has been appealed before the Provincial Court of Madrid and the bank has filed its opposition to Upay’s appeal.

Considering the decision at first instance and following the analysis carried out by the Bank's external lawyers, with the best information available to date, it is considered that no provision needs to be registered.

•CHF Polish Mortgage Loans: on 3 October 2019, the CJEU rendered its decision in relation to a judicial proceeding against an unrelated bank in Poland considering that certain contractual clauses in CHF-Indexed loan agreements were abusive. The CJEU has left to Polish courts the decision on whether the whole contract can be maintained once the abusive terms have been removed, which should in turn decide whether the effects of the annulment of the contract are prejudicial to the consumer. In case of maintenance of the contract, the court may only integrate the contract with subsidiary provisions of national law and decide, in accordance with those provisions, on the applicable rate.

In 2021, the Supreme Court was expected to take a position regarding the key issues in disputes concerning loans based on foreign currency, clarifying the discrepancies and unifying case law. The Supreme Court met several times, with the last session taking place on 2 September 2021. However, the resolution was not adopted and instead, the Supreme Court referred questions to the CJEU on constitutional issues of the Polish judiciary system. No new date for consideration of the issue has been set and no comprehensive decision by the Supreme Court of the issue is expected in the near future. In the absence of a comprehensive position of the Supreme Court, it is difficult to expect a full unification of judicial decisions, and decisions of the Supreme Court and CJEU issued on particular issues may be important for shaping further case law on CHF matters.

On 15 June 2023, the CJEU issued its judgment in Case C-520/21, in which it confirmed that it is national law that is relevant to determine the effect of cancellation of a contract - respecting the principles arising from Directive 93/13/EEC. According to the ruling of the CJEU in that case, the bank's claims in excess of the repayment of the nominal amount of the loan's principal and, as the case may be, the payment of default interest are contrary to the objectives of Directive 93/13/EEC if they were to lead to a profit analogous to the one it intended to make from the performance of the contract and thus eliminate the deterrent effect.

At the same time, the CJEU ruled that, under European law, there is no obstacle to the consumer being able to claim compensation from the bank beyond the return of the instalments paid, but at the same time stipulated that such a claim should be evaluated in light of all the circumstances of the case, so that the consumer's possible benefits from the cancellation of the contract do not exceed what is necessary to restore the factual and legal situation in which he would have been without entering into the defective contract and do not constitute an excessive sanction for the entrepreneur (principle of proportionality).

The case law of national courts implementing the CJEU rulings (including the recent ruling of 15 June 2023), and the possible position of the Supreme Court will be crucial for the final assessment of the legal risk related to this matter.

At the date of these interim financial statements, it is not possible to predict the Supreme Court’s and CJEU decisions on individual cases. Santander Bank Polska and Santander Consumer Bank Poland estimate legal risk using a model which considers different possible outcomes and regularly monitor court rulings on foreign currency loans to verify changes in case law practice.

As of 30 June 2023, Santander Bank Polska S.A. and Santander Consumer Bank S.A. maintain a portfolio of mortgages denominated in or indexed to CHF for an approximate gross amount of PLN 6,844.4 million (EUR 1,543 million). As of 1 January 2022, in accordance with IFRS 9 and based on the new best available information, the accounting methodology was adapted so that the gross carrying amount of mortgage loans denominated and indexed in foreign currencies is reduced by the amount in which the estimated cash flows are not expected to cover the gross amount of loans, including as a result of legal controversies relating to these loans. In the absence of exposure or insufficient gross exposure, a provision according to IAS 37 is recorded.

122						January - June 2023

---

As of the same date, the total value of adjustment to gross carrying amount in accordance with IFRS9 as well as the provisions recorded under IAS37, amount to PLN 4,003.1 million (EUR 902.4 million). PLN 3,437.6 million (EUR 775 million) corresponds to adjustment to gross carrying amount under IFRS9 and PLN 565.5 million (EUR 127.4 million) to provisions recognized in accordance with IAS37. The adjustment to gross carrying amount in accordance with IFRS9 in the first half of 2023 amounted to PLN 755.6 million (EUR 163.4 million), and the additional provisions under IAS37 amounted to PLN 180 million (EUR 38.9 million). Other costs related to the dispute amounted to PLN 213.9 million (EUR 46.3 million). These provisions represent the best estimate as of 30 June 2023. Santander Bank Polska and Santander Consumer Bank Poland will continue to monitor and assess appropriateness of those provisions.

In December 2020, the Chairman of the Polish Financial Supervision Authority (KNF) presented a proposal for voluntary settlements between banks and borrowers under which CHF loans would be retrospectively settled as PLN loans bearing an interest rate based on WIBOR plus margin. KNF continues to support the concept of offering such settlements by banks after the verdict of the CJEU on 15 June 2023. The Bank has prepared settlement proposals which consider both the key elements of conversion of home loans indexed to CHF, as proposed by the KNF Chairman, and the conditions defined internally by the Bank. The proposals are being presented to customers. This is reflected in the model which is currently used to calculate legal risk provisions.

•Banco Santander Mexico: dispute regarding a testamentary trust constituted in 1994 by Mr. Roberto Garza Sada in Banca Serfin (currently Santander Mexico) in favor of his four sons in which he affected shares of Alfa, S.A.B. de C.V. (respectively, Alfa and the Trust). During 1999, Mr. Roberto Garza Sada instructed Santander México in its capacity as trustee to transfer 36,700,000 shares from the Trust's assets to his sons and daughters and himself. These instructions were ratified in 2004 by Mr. Roberto Garza Sada before a Notary Public.

Mr. Roberto Garza Sada passed away on 14 August 2010 and subsequently, in 2012, his daughters filed a complaint against Santander Mexico alleging it had been negligent in its trustee role. The lawsuit was dismissed at first instance in April 2017 and on appeal in 2018. In May 2018, the plaintiffs filed an appeal (recurso de amparo) before the First Collegiate Court of the Fourth Circuit based in Nuevo León, which ruled in favor of the plaintiffs on 7 May 2021, annulling the 2018 appeal judgment and condemning Santander Mexico to the petitions claimed, consisting of the recovery of the amount of 36,700,000 Alfa shares, together with dividends, interest and damages.

Santander Mexico has filed various constitutional review and appeals against the recurso de amparo referred to above, which have been dismissed by the Supreme Court of Justice of the Nation. As of this date, an amparo review filed by the Bank is pending to be resolved in the Collegiate Courts in the State of Nuevo León, thus the judgment is not final. On 29 June 2022, Santander México, within the framework of the amparo review filed by the Bank, requested the First Collegiate Court in Civil Matters of the Fourth Circuit of Nuevo León the recusal of two of the three Magistrates who rendered against Santander Mexico, which has been resolved in favour of Santander Mexico. Plaintiffs have requested the recusal of the third Magistrate who ruled with a dissenting vote against the recurso de amparo referred above and this has been resolved in favour of Plaintiffs.

Santander México believes that the actions taken should prevail and reverse the decision against it. The impact of a potential unfavorable resolution for Santander México will be determined in a subsequent proceeding and will also depend on the additional actions that Santander México may take in its defense, so it is not possible to determine it at this time. At the current stage of the proceedings, the provisions recorded are considered sufficient to cover the risks deriving from this claim.

•URO Property Holdings, SOCIMI SA: on 16 February 2022, legal proceedings were commenced in the Commercial Court of London against Uro Property Holdings SOCIMI SA (Uro), a subsidiary of Banco Santander, S.A., by BNP Paribas Trust Corporation UK Limited (BNP) in its capacity as trustee on behalf of certain bondholders and beneficiaries of security rights. The litigation concerns certain terms of a financing granted to Uro which was supported by a bond issue in 2015. The claimant seeks a declaration by the Court and a monetary award against Uro, in connection with an additional premium above the nominal value of the financing repayment because of Uro having lost its status as SOCIMI (Sociedad Anónima Cotizada de Inversión Inmobiliaria), such loss causing the prepayment of the bond issue and, in the opinion of the claimant BNP, also the obligation to pay the additional premium by Uro. Uro denies being liable to pay that additional premium and filed its defense statement and a counterclaim against the claimant. The trial hearing has been scheduled for November and December 2024. Furthermore, Uro filed a summary judgement application for BNP's claim to be dismissed before trial. The dismissal of this application by the Commercial Court has been confirmed by the Appeal Court. It is estimated that the maximum loss associated with this possible contingency, amounts to approximately EUR 250 million.

Banco Santander, S.A. and the other Group companies are subject to claims and, therefore, are party to certain legal proceedings incidental to the normal course of their business including those in connection with lending activities, relationships with employees and other commercial or tax matters additional to those referred to here.

With the information available to it, the Group considers that, at 30 June 2023, it had reliably estimated the obligations associated with each proceeding and had recognized, where necessary, sufficient provisions to cover reasonably any liabilities that may arise as a result of these tax and legal risks. Those cases in which provisions have been registered but are not disclosed are justified on the basis that it would be prejudicial to the proper defense of the Group. Subject to the qualifications made, the Group believes that any liability arising from such claims and proceedings will not have, overall, a material adverse effect on the Group’s business, financial position, or results of operations.

January - June 2023						123

---

11.   Equity

In the first six month period ended 30 June 2023 and 2022 there were no quantitative or qualitative changes in Grupo Santander's equity other than those indicated in the condensed consolidated statements of changes in total equity.

a)    Capital

Banco Santander's share capital at 30 June 2023 and 31 December 2022 consisted of EUR 8,092 million and 8,397, respectively, represented by 16,184,146,059 and 16,794,401,584 shares of EUR 0.50 of nominal value each, respectively, and all of them of a unique class and series.

On 21 March 2023, there was a capital reduction amounting to EUR 170 million through the redemption of 340,406,572 shares, corresponding to the share buyback program for the year 2022 ended in January 2023.

Likewise, on 30 June 2023, Banco Santander has decreased its capital by an amount of EUR 135 million through the redemption of 269,848,953 shares, corresponding to the share buyback program carried out between March and May 2023.

Both operations have not entailed the return of contributions to the shareholders as Banco Santander was the owner of the redeemed shares.

b)    Share premium

Includes the amount paid by the bank's shareholders in capital issues in excess of par value.

As a result of the capital reductions described in Note 11.a, during the first half of 2023 the share premium has been reduced by an amount of 1,595 million euros, corresponding to the difference between the purchase value of the shares amortized (1,900 million euros) and the nominal value of said shares (305 million euros).

Likewise, in accordance with the applicable legislation, a reserve for amortized capital has been allocated with a charge to the share premium for an equal amount to the nominal value of said amortized shares (305 million euros).

c) Breakdown of other comprehensive income - Items not reclassified to profit or loss and Items that may be reclassified to profit or loss

			EUR million
			30-06-2023			31-12-2022
Other comprehensive income accumulated			(33,789)			(35,628)
Items not reclassified to profit or loss			(4,956)			(4,635)
Actuarial gains or losses on defined benefit pension plans			(4,036)			(3,945)
Non-current assets held for sale			—			—
Share in other income and expenses recognised in investments, joint ventures and associates			3			10
Other valuation adjustments			—			—
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income			(859)			(672)
Inefficacy of fair value hedges of equity instruments measured at fair value with changes in other comprehensive income			—			—
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income (hedged item)			252			293
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income (hedging instrument)			(252)			(293)
Changes in the fair value of financial liabilities measured at fair value through profit or loss attributable to changes in credit risk			(64)			(28)
Items that may be reclassified to profit or loss			(28,833)			(30,993)
Hedge of net investments in foreign operations (effective portion)			(8,322)			(6,750)
Exchange differences			(17,580)			(20,420)
Hedging derivatives (effective portion)			(2,118)			(2,437)
Changes in the fair value of debt instruments measured at fair value with changes in other comprehensive income			(563)			(1,002)
Hedging instruments (items not designated)			—			—
Non-current assets held for sale			—			—
Share in other income and expenses recognised in investments, joint ventures and associates			(250)			(384)

124						January - June 2023

---

d) Other comprehensive income - Items not reclassified to profit or loss - Actuarial gains or losses on defined benefit pension plans

The balance of the heading Other accumulated comprehensive income - Items not reclassified to profit or loss - Actuarial gains or losses on defined benefit pension plans, includes the actuarial gains or losses and the return on the assets assigned to the plan, less administration costs and plan's own taxes, and any change in the effects of the asset limit, excluding amounts included in net interest on net defined benefit liability (asset). Its variation is shown in the consolidated condensed statement of recognized income and expense.

During the first six months of 2023, the amount of actuarial losses (net of actuarial gains) has increased by EUR 402 million. The main impacts are:

•Increase of EUR 182 million in the cumulative actuarial losses relating to the Group´s businesses in the UK, mainly due to the performance of the asset portfolio, partially offset by the variation in the discount rate used in the obligations (increase from 4.88% to 5.28%).

•Increase of 134 million euros in accumulated actuarial losses corresponding to the Group's businesses in Brazil, due to the variation in the discount rate (decrease from 9.44% to 8.71% in the main pension plans, and decrease from 9.46% to 8.73% in the main medical plan), to short-term inflation and the performance of the asset portfolio.

•Decrease of EUR 21 million in the cumulative actuarial losses relating to the Group's businesses in Portugal, mainly due to the good performance of the asset portfolio.

•Decrease of EUR 13 million in the cumulative actuarial losses relating to the Group´s businesses in Spain, mainly due to the discount rate variation (increase from 3.80% to 4.00%).

The other modification in accumulated actuarial profit or losses is an increase of EUR 120 million as a result of the evolution of exchange rates and other movements.

e) Other comprehensive income - Items not reclassified to profit or loss – Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income

Includes the net amount of unrealised fair value changes in equity instruments at fair value with changes in other comprehensive income.

Below is a breakdown of the composition of the balance as of 30 June 2023 and 31 December 2022 under 'Other comprehensive income - Items not reclassified to profit or loss - Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income' depending on the geographical origin of the issuer:

			EUR million
			30-06-2023												31-12-2022
			Revaluation gains			Revaluation losses			Net revaluation gains/(losses)			Fair value			Revaluation gains			Revaluation losses			Net revaluation gains/(losses)			Fair value
Equity instruments
Domestic
Spain			31			(1,172)			(1,141)			251			30			(926)			(896)			500
International
Rest of Europe			110			(67)			43			271			84			(60)			24			225
United States			18			—			18			24			15			—			15			29
Latin America and rest			309			(88)			221			1,183			244			(59)			185			1,187
			468			(1,327)			(859)			1,729			373			(1,045)			(672)			1,941
Of which:
Listed			311			(138)			173			1,191			246			(113)			133			1,200
Unlisted			157			(1,189)			(1,032)			538			127			(932)			(805)			741

January - June 2023						125

---

f) Other comprehensive income - Items that may be reclassified to profit or loss – Hedges of net investments in foreign operations (effective portion) and exchange differences

Other comprehensive income - Items that may be reclassified to profit or loss - Hedges of net investments in foreign operations (effective portion) includes the net amount of the changes in value of hedging instruments in hedges of net investments in foreign operations, in respect of the portion of these changes considered to be effective hedges.

Other comprehensive income - Items that may be reclassified to profit or loss - Exchange differences includes the net amount of exchange differences arising on non-monetary items whose fair value is adjusted against equity and the differences arising on the translation to euros of the balances of the consolidated entities whose functional currency is not the euro.

The net variation of both headings recognised during the first six months of 2023 in the interim condensed consolidated statement of recognised income and expenses, reflects the impact of the evolution of the currencies during the year, reflecting mainly the strong appreciation of the Brazilian real, Pound sterling and Mexican peso, and in the negative side the impact of the depreciation of the US dollar (see Note 1.e). Of this variation, a capital gain of EUR 392 million corresponds to the valuation at the closing exchange rate of goodwill for the first six months of 2023 (see Note 8).

g) Other comprehensive income – Items that may be reclassified to profit or loss – Changes in the fair value of debt instruments measured at fair value through other comprehensive income

Includes the net amount of unrealised fair value changes in debt instruments at fair value through other comprehensive income.

Below is a breakdown of the composition of the balance as of 30 June 2023 and 31 December 2022 under Other comprehensive income - Items that may be reclassified to profit or loss - Changes in the fair value of debt instruments measured at fair value through other comprehensive income depending on the type of instrument and the geographical origin of the issuer:

			EUR million
			30-06-2023												31-12-2022
			Revaluation gains			Revaluation losses			Net revaluation gains/(losses)			Fair value			Revaluation gains			Revaluation losses			Net revaluation gains/(losses)			Fair value
Debt instruments
Issued by public Public-sector
Spain			110			(1)			109			9,544			26			(1)			25			9,312
Rest of Europe			355			(140)			215			18,607			268			(199)			69			17,593
Latin America and rest of the world			177			(843)			(666)			40,351			196			(937)			(741)			40,873
Issued by Private-sector
Spain			82			(3)			79			6,277			—			(24)			(24)			5,727
Rest of Europe			12			(56)			(44)			5,157			11			(68)			(57)			5,203
Latin America and rest of the world			27			(283)			(256)			5,091			16			(290)			(274)			4,590
			763			(1,326)			(563)			85,027			517			(1,519)			(1,002)			83,298

12.   Segment information (Primary segment)

Grupo Santander has aligned the information in this note with the underlying information used internally for management reporting and with that presented in Grupo Santander's other public documents.

Grupo Santander's 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 type of business. The information is prepared by aggregating the figures for Santander’s various geographic areas and business units, relating it to both the accounting data of the units integrated in each segment and that provided by management information systems. The same general principles as those used in Grupo Santander are applied.

Following is the breakdown of revenue that is deemed to be recognised under Dividend income, Commission income, Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net, Gain or losses on financial assets and liabilities held for trading, net, Gain or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss, Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net, Gain or losses from hedge accounting, net, Other operating income and Income from assets under insurance and reinsurance contracts in the accompanying consolidated income statements for the first six months ended 30 June 2023 and 2022.

126						January - June 2023

---

In addition to these operating units, which report by geographic area and businesses, Grupo Santander continues to maintain the area of Corporate Centre, that includes the centralized activities relating to equity stakes in financial companies, financial management of the structural exchange rate position, assumed within the sphere of Grupo Santander's assets and liabilities committee, as well as management of liquidity and of shareholders' equity via issuances.

This financial information ('underlying basis') is computed by adjusting reported results for the effects of certain gains and losses (e.g.: capital gains, write-downs, etc.). These gains and losses are items that management and investors ordinarily identify and consider separately to understand better the underlying trends in the business.

Following is the reconciliation between the adjusted profit and the statutory profit corresponding to the first six months ended 30 June 2023 and 2022:

			EUR million
			Revenue from  ordinary activities						Profit before taxes						Profit
Segment			30-06-2023			30-06-2022			30-06-2023			30-06-2022			30-06-2023			30-06-2022
Europe			19,391			13,649			3,888			2,693			2,536			1,839
North America			13,966			8,154			1,739			2,061			1,346			1,578
South America			20,461			17,613			2,376			3,165			1,458			1,946
Digital Consumer Bank			4,761			3,395			928			1,010			521			572
Corporate Centre			1,121			173			(602)			(1,014)			(620)			(1,041)
Underlying Profit			59,700			42,984			8,329			7,915			5,241			4,894
Adjustments			—			—			(239)			—			—			—
Statutory Profit			59,700			42,984			8,090			7,915			5,241			4,894

113.   Related parties

The parties related to Grupo Santander are deemed to include, in addition to its subsidiaries, associates and joint ventures, Banco Santander’s key management personnel (the members of its board of directors and the executive vice presidents, together with their close family members) and the entities over which the key management personnel may exercise significant influence or control.

Following is a detail of the transactions performed by Grupo Santander with its related parties in the first six months of 2023 and 2022, distinguishing between significant shareholders, members of Banco Santander’s board of directors, Banco Santander’s executive vice presidents, Grupo Santander entities and other related parties. Related party transactions were made on terms equivalent to those that prevail in arm’s-length transactions or, when this was not the case, the related compensation in kind was recognised:

			EUR million
			30-06-2023
Expenses and income			Significant shareholders			Directors and executives			Group companies or entities			Other related parties			Total
Expenses
Finance costs			—			—			79			—			79
Leases			—			—			—			—			—
Services received			—			—			—			—			—
Purchases of stocks			—			—			—			—			—
Other expenses			—			—			57			—			57
			—			—			136			—			136
Income
Finance income			—			—			188			3			191
Dividends received			—			—			—			—			—
Services rendered			—			—			—			—			—
Sale of stocks			—			—			—			—			—
Other income			—			—			709			1			710
			—			—			897			4			901

January - June 2023						127

---

			EUR million
			30-06-2023
Other transactions			Significant shareholders			Directors and executives			Group companies or entities			Other related parties			Total
Financing agreements: loans and capital contributions (lender)			—			2			376			(199)			179
Financing agreements: loans and capital contributions (borrower)			—			—			(29)			7			(22)
Guarantees provided			—			—			—			680			680
Guarantees received			—			—			—			—			—
Commitments acquired			—			—			51			3			54
Dividends and other distributed profit			—			1			—			10			11
Other transactions			—			—			36			—			36

			EUR million
			30-06-2023
Balance closing period			Significant shareholders			Directors and executives			Group companies or entities			Other related parties			Total
Debt balances:
Customers and commercial debtors			—			—			—			—			—
Loans and credits granted			—			13			9,687			256			9,956
Other collection rights			—			—			969			—			969
			—			13			10,656			256			10,925
Credit balances:
Suppliers and creditors granted			—			—			—			—			—
Loans and credits received			—			21			3,210			115			3,346
Other payment obligations			—			—			358			—			358
			—			21			3,568			115			3,704

			EUR million
			30-06-2022
Expenses and income			Significant shareholders			Directors and executives			Group companies or entities			Other related parties			Total
Expenses
Finance costs			—			—			16			—			16
Leases			—			—			—			—			—
Services received			—			—			—			—			—
Purchases of stocks			—			—			—			—			—
Other expenses			—			—			197			—			197
			—			—			213			—			213
Income
Finance income			—			—			71			—			71
Dividends received			—			—			—			—			—
Services rendered			—			—			—			—			—
Sale of stocks			—			—			—			—			—
Other income			—			—			683			1			684
			—			—			754			1			755

128						January - June 2023

---

			EUR million
			30-06-2022
Other transactions			Significant shareholders			Directors and executives			Group companies or entities			Other related parties			Total
Financing agreements: loans and capital contributions (lender)			—			—			715			26			741
Financing agreements: loans and capital contributions (borrower)			—			9			362			40			411
Guarantees provided			—			—			—			—			—
Guarantees received			—			—			—			—			—
Commitments acquired			—			—			(12)			(2)			(14)
Dividends and other distributed profit			—			1			—			9			10
Other transactions			—			—			(106)			—			(106)

			EUR million
			31-12-2022
Balance closing period			Significant shareholders			Directors and executives			Group companies or entities			Other related parties			Total
Debt balances:
Customers and commercial debtors			—			—			—			—			—
Loans and credits granted			—			13			9,311			455			9,779
Other collection rights			—			—			946			—			946
			—			13			10,257			455			10,725
Credit balances:
Suppliers and creditors granted			—			—			—			—			—
Loans and credits received			—			22			3,239			109			3,370
Other payment obligations			—			—			372			—			372
			—			22			3,611			109			3,742

January - June 2023						129

---

14.   Off-balance-sheet exposures

The off-balance-sheet exposures related to balances representing loans commitments, financial guarantees and other commitments granted (recoverables and non recoverables).

Financial guarantees granted include financial guarantees contracts such as financial bank guarantees, credit derivatives, and risks arising from derivatives granted to third parties; non-financial guarantees include other guarantees and irrevocable documentary credits.

Loan and other commitments granted include all off-balance-sheet exposures, which are not classified as guarantees provided, including loans commitment granted.

			EUR million
			30-06-2023			31-12-2022
Loan commitments granted			283,903			274,075
Of which impaired			509			653
Financial guarantees granted			14,401			12,856
Of which impaired			538			521
Bank sureties			14,355			12,813
Credit derivatives sold			46			43
Other commitments granted			113,266			92,672
Of which impaired			607			608
Other granted guarantees			53,651			50,508
Other			59,615			42,164

The breakdown of the off-balance sheet exposure and impairment on 30 June 2023 and 31 December 2022 by impairment stages is EUR 402,019 million and EUR 370,729 million of exposure and EUR 332 million and EUR 331 million of impairment in stage 1, EUR 7,897 million and EUR 7,092 million of exposure and EUR 184 million and EUR 191 million of impairment in stage 2, and EUR 1,654 million and EUR 1,782 million of exposure and EUR 240 million and EUR 212 million of impairment in stage 3, respectively.

15.   Average headcount and number of branches

The average number of employees at Banco Santander and Grupo Santander, by gender, in the first six months ended 30 June 2023 and 2022 is as follows:

Average headcount
			Bank						Group
			30-06-2023			30-06-2022			30-06-2023			30-06-2022
Men			12,260			11,867			97,353			90,747
Women			11,732			11,355			112,663			109,055
			23,992			23,222			210,016			199,802

The number of branches at 30 June 2023 and 31 December 2022 is as follow:

Number of branches
			Group
			30-06-2023			31-12-2022
Spain			1,936			1,966
Group			6,887			7,053
			8,823			9,019

130						January - June 2023

---

16.   Other disclosures

a) Valuation techniques for financial assets and liabilities

The following table shows a summary of the fair values, at 30 June 2023 and 31 December 2022, of the financial assets and liabilities indicated below, classified on the basis of the various measurement methods used by Grupo Santander to determine their fair value:

			EUR million
			30-06-2023									31-12-2022
			Published price quotations in active markets (Level 1)			Internal models (Levels 2 and 3)			Total			Published price quotations in active markets (Level 1)			Internal models (Levels 2 and 3)			Total
Financial assets held for trading			61,089			122,745			183,834			45,014			111,104			156,118
Non-trading financial assets mandatorily at fair value through profit or loss			1,738			4,058			5,796			1,800			3,913			5,713
Financial assets at fair value through profit and loss			2,491			7,154			9,645			1,976			7,013			8,989
Financial assets at fair value through other comprehensive income			65,596			21,160			86,756			64,216			21,023			85,239
Hedging derivatives (assets)			—			7,532			7,532			—			8,069			8,069
Financial liabilities held for trading			15,195			119,693			134,888			16,237			98,948			115,185
Financial liabilities designated at fair value through profit or loss (*)			147			36,073			36,220			212			40,056			40,268
Hedging derivatives (liabilities)			—			10,288			10,288			—			9,228			9,228
Liabilities under insurance contracts (*)			—			17,584			17,584			—			16,426			16,426

(*) See impact of IFRS 17 as at 31 December 2022 (see Note 1.b).

The financial instruments at fair value determined on the basis of published price quotations in active markets (level 1) include government debt securities, private-sector debt securities, derivatives traded in organised markets, securitised assets, shares, short positions and fixed-income securities issued.

In cases where price quotations cannot be observed, management makes its best estimate of the price that the market would set, using its own internal models. In most cases, these internal models use data based on observable market parameters as significant inputs (level 2) and, in cases, they use significant inputs not observable in market data (level 3). In order to make these estimates, various techniques are employed, including the extrapolation of observable market data. The best evidence of the fair value of a financial instrument on initial recognition is the transaction price, unless the fair value of the instrument can be obtained from other market transactions performed with the same or similar instruments or can be measured by using a valuation technique in which the variables used include only observable market data, mainly interest rates.

During the first six months of 2023 and 2022, Grupo Santander did not make any material transfers of financial instruments between measurement levels other than the transfers included in level 3 table.

Grupo Santander has developed a formal process for the systematic valuation and management of financial instruments, which has been implemented worldwide across all the Group’s units. The governance scheme for this process distributes responsibilities between two independent divisions: Treasury (development, marketing and daily management of financial products and market data) and Risk (on a periodic basis, validation of pricing models and market data, computation of risk metrics, new transaction approval policies, management of market risk and implementation of fair value adjustment policies).

The approval of new products follows a sequence of steps (request, development, validation, integration in corporate systems and quality assurance) before the product is brought into production. This process ensures that pricing systems have been properly reviewed and are stable before they are used.

The most important products and families of derivatives, and the related valuation techniques and inputs, by asset class, are detailed in the consolidated annual accounts as at 31 December 2022.

As of 30 June 2023, the CVA (Credit Valuation Adjustment) accounted for was EUR 299 million (a decrease of 14.8% compared to 31 December 2022) and adjustments of DVA (Debt Valuation Adjustment) was EUR 364 million (no changes compared to the end of December 2022). The reduction in CVA is due to the decrease in the credit markets.

January - June 2023						131

---

Set forth below are the financial instruments at fair value whose measurement was based on internal models (levels 2 and 3) at 30 June 2023 and 31 December 2022:

			EUR million						EUR million
			Fair values calculated using internal models at 30-06-2023 (*)						Fair values calculated using internal models at 31-12-2022 (*)
			Level 2			Level 3			Level 2			Level 3			Valuation techniques			Main inputs
ASSETS			152,661			9,988			142,832			8,290
Financial assets held for trading			121,705			1,040			110,721			383
Central banks (**)			12,405			—			11,595			—			Present value method			Yield curves, FX market prices
Credit institutions (**)			23,592			—			16,502			—			Present value method			Yield curves, FX market prices
Customers (**)			10,906			145			9,550			—			Present value method			Yield curves, FX market prices
Debt instruments and equity instruments			7,804			414			6,537			43			Present value method			Yield curves, FX market prices
Derivatives			66,998			481			66,537			340
Swaps			52,475			217			54,367			139			Present value method, Gaussian Copula			Yield curves, FX market prices, HPI, Basis, Liquidity
Exchange rate options			1,229			3			916			4			Black-Scholes Model			Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate options			4,083			29			2,681			39			Black's Model, multifactorial advanced models interest rate			Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate futures			29			—			113			—			Present value method			Yield curves, FX market prices
Index and securities options			339			85			354			48			Black’s Model, multifactorial advanced models interest rate			Yield curves, Volatility surfaces, FX & EQ market prices, Dividends, Liquidity
Other			8,843			147			8,106			110			Present value method, Advanced stochastic volatility models and others			Yield curves, Volatility surfaces, FX and EQ market prices, Dividends, Liquidity, Dividends, Correlation, HPI, Credit, Others
Hedging derivatives			7,531			1			8,069			—
Swaps			6,828			1			6,687			—			Present value method			Yield curves, FX market prices, Basis
Interest rate options			2			—			2			—			Black Model			Yield curves, FX market prices, Volatility surfaces
Other			701			—			1,380			—			Present value method, Advanced stochastic volatility models and others			Yield curves, Volatility surfaces, FX market prices, Credit, Liquidity, Others
Non-trading financial assets mandatorily at fair value through profit or loss			2,146			1,912			2,080			1,833
Equity instruments			970			1,347			643			1,269			Present value method			Yield curves, Market price, Dividends and Others
Debt instruments			551			337			809			325			Present value method			Yield curves
Loans and receivables			625			228			628			239			Present value method, swap asset model and CDS			Yield curves and Credit curves
Financial assets designated at fair value through profit or loss			6,737			417			6,586			427
Credit institutions			626			—			673			—			Present value method			Yield curves, FX market prices
Customers (***)			5,925			5			5,769			5			Present value method			Yield curves, FX market prices, HPI
Debt instruments			186			412			144			422			Present value method			Yield curves, FX market prices
Financial assets at fair value through other comprehensive income			14,542			6,618			15,376			5,647
Equity instruments			11			496			9			700			Present value method			Yield curves,Market price, Dividends and Others
Debt instruments			11,373			263			11,869			229			Present value method			Yield curves, FX market prices
Loans and receivables			3,158			5,859			3,498			4,718			Present value method			Yield curves, FX market prices and Credit curves
LIABILITIES			182,818			820			163,733			925
Financial liabilities held for trading			119,291			402			98,533			415
Central banks (**)			16,216			—			5,759			—			Present value method			FX market prices, Yield curves
Credit institutions (**)			14,140			—			9,796			—			Present value method			FX market prices, Yield curves
Customers			19,921			—			12,226			—			Present value method			FX market prices, Yield curves
Derivatives			61,567			402			64,147			415
Swaps			47,317			133			51,191			235			Present value method, Gaussian Copula			Yield curves, FX market prices, Basis, Liquidity, HPI
Exchange rate options			1,182			—			769			—			Black Model, multifactorial advanced models interest rate			Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate options			4,524			22			3,268			19			Black-Scholes Model			Yield curves, Volatility surfaces, FX market prices
Index and securities options			599			63			591			42			Black-Scholes Model			Yield curves, FX market prices, Liquidity
Interest rate and equity futures			32			—			807			—			Present value method			Yield curves, Volatility surfaces, FX & EQ market prices, Dividends, Correlation, Liquidity, HPI
Other			7,913			184			7,521			119			Present value method, Advanced stochastic volatility models and others			Yield curves, Volatility surfaces, FX & EQ market prices, Dividends, Correlation, HPI, Credit, Others
Short positions			7,447			—			6,605			—			Present value method			Yield curves ,FX market prices, Equity
Hedging derivatives			10,235			53			9,214			14
Swaps			8,598			53			8,142			14			Present value method			Yield curves ,FX market prices, Basis
Other			1,637			—			1,072			—			Present value method, Advanced stochastic volatility models and others			Yield curves, Volatility surfaces, FX market prices, Credit, Liquidity and others
Financial liabilities designated at fair value through profit or loss (****)			36,073			—			39,905			151			Present value method			Yield curves, FX market prices
Liabilities under insurance contracts (****)			17,219			365			16,081			345			Present Value Method with actuarial techniques			Mortality tables and yield curves

132						January - June 2023

---

(*) The internal models of level 2 implement figures based on the parameters observed in the market, while level 3 internal models uses significant inputs that are not observable in market data.

(**)    Includes mainly short-term loans/deposits and repurchase/reverse repurchase agreements with corporate customers (mainly brokerage and investment companies).

(***) Includes mainly structured loans to corporate clients.

(****) See impact of IFRS 17 as at 31 December 2022 (see Note 1.b).

Level 3 financial instruments

Set forth below are the Group’s main financial instruments measured using unobservable market data as significant inputs of the internal models (level 3):

•HTC&S (Hold to collect and sale) syndicated loans classified in the fair value category with changes in other comprehensive income, where the cost of liquidity is not directly observable in the market, as well as the prepayment option in favour of the borrower.

•Illiquid equity instruments in non-trading portfolios, classified at fair value through profit or loss and at fair value through equity.

•Instruments in Santander UK’s portfolio (loans, debt instruments and derivatives) linked to the House Price Index (HPI). Even if the valuation techniques used for these instruments may be the same as those used to value similar products (present value in the case of loans and debt instruments, and the Black-Scholes model for derivatives), the main factors used in the valuation of these instruments are the HPI spot rate, the growth and volatility thereof, and the mortality rates, which are not always observable in the market and, accordingly, these instruments are considered illiquid.

•Callable interest rate derivatives (Bermudan-style options) where the main unobservable input is mean reversion of interest rates.

•Trading derivatives on interest rates, taking as an underlying asset titling and with the amortization rate (CPR, Conditional prepayment rate) as unobservable main entry.

•Derivatives from trading on inflation in Spain, where volatility is not observable in the market.

•Equity volatility derivatives, specifically indices and equities, where volatility is not observable in the long term.

•Derivatives on long-term interest rate and FX in some units (mainly South America) where for certain underlyings it is not possible to demonstrate observability to these terms.

•Debt instruments referenced to certain illiquid interest rates, for which there is no reasonable market observability.

The measurements obtained using the internal models might have been different if other methods or assumptions had been used with respect to interest rate risk, to credit risk, market risk and foreign currency risk spreads, or to their related correlations and volatilities. Nevertheless, the Bank’s directors consider that the fair value of the financial assets and liabilities recognised in the interim condensed consolidated balance sheet and the gains and losses arising from these financial instruments are reasonable.

The net amount recorded in the results of the first six months of 2023 arising from models whose significant inputs are unobservable market data (level 3) amounted to EUR 178 million profit (EUR 19 million in the first six months of 2022).

January - June 2023						133

---

The table below shows the effect, at 30 June 2023 and 31 December 2022, on the fair value of the main financial instruments classified as Level 3 of a reasonable change in the assumptions used in the valuation. This effect was determined by applying the probable valuation ranges of the main unobservable inputs detailed in the following table:

30-06-2023
Portfolio/Instrument			Valuation technique			Main unobservable inputs			Range			Weighted average			Impacts (EUR million)
(Level 3)															Unfavourable scenario			Favourable scenario
Financial assets held for trading
Loans and advances to customers
Repos/Reverse repos			Others			Long-term repo spread			n.a.			n.a.			(0.04)			0.00
Debt securities
Corporate debt			Discounted Cash Flows			Credit spread			0% - 10%			5.04%			(1.51)			1.54
Corporate debt			Price based			Market price			85% - 115%			100.00%			0.00			0.00
Government debt			Discounted Cash Flows			Discount curve			0% - 8%			3.93%			(8.25)			7.97
Derivatives
CCS			Discounted Cash Flows			Interest rate			(1.4)% - 1.4%			0.00%			0.00			0.00
CCS			Forward estimation			Interest rate			(6)bp - 6bp			2.32bp			(0.04)			0.07
EQ Options			EQ option pricing model			Volatility			0% - 90%			61.30%			(0.38)			0.84
EQ Options			Local volatility			Volatility			10% - 90%			50.00%			(1.91)			1.91
FRAs			Asset Swap model			Interest rate			0% - 6%			2.71%			(0.94)			0.78
Inflation Derivatives			Asset Swap model			Inflation Swap Rate			0% - 10%			3.41%			(0.29)			0.15
IR Options			IR option pricing model			Volatility			0% - 60%			35.82%			(0.26)			0.38
IRS			Asset Swap model			Interest rate			0% - 15%			9.20%			(0.05)			0.08
IRS			Discounted Cash Flows			Credit spread			1.1% - 5.8%			3.67%			(1.80)			1.95
IRS			Discounted Cash Flows			Swap rate			8.2% - 8.7%			8.44%			(0.54)			0.53
IRS			Forward estimation			Interest rate			(6)bp - 6bp			0.12bp			(0.04)			0.05
IRS			Others			Others			5% - n.a			n.a			(0.69)			0.28
IRS			Prepayment modelling			Prepayment rate			3.1% - 5.7%			4.33%			0.00			0.16
Others			Forward estimation			Price			0% - 2%			0.62%			(0.46)			0.20
Property derivatives			Option pricing model			Growth rate			(5)% - 5%			0.00%			(4.08)			4.08
Financial assets designated at fair value through profit or loss
Loans and advances to customers
Loans			Discounted Cash Flows			Credit spreads			0.1% - 2%			1.05%			(0.15)			0.15
Mortgage portfolio			Black Scholes model			Growth rate			(5)% - 5%			0.00%			(0.47)			0.47
Repos/Reverse repos			Others			Repo curve			4.8bp - 6.7bp			5.63bp			0.00			0.00

134						January - June 2023

---

30-06-2023
Portfolio/Instrument			Valuation technique			Main unobservable inputs			Range			Weighted average			Impacts (EUR million)
(Level 3)															Unfavourable scenario			Favourable scenario
Debt securities
Other debt securities			Others			Inflation Swap Rate			0% - 8%			3.88%			(4.51)			4.24
Non-trading financial assets mandatorily at fair value through profit or loss
Debt securities
Property securities			Probability weighting			Growth rate			5% - 5%			0%			(0.47)			0.47
Equity instruments
Equities			Price Based			Price			90% - 110%			100%			(134.66)			134.66
Financial assets at fair value through other comprehensive income
Loans and advances to customers
Loans			Discounted Cash Flows			Credit spread			n.a			n.a			(22.17)			0.00
Loans			Discounted Cash Flows			Interest rate curve			8% - 9%			8.60%			(0.86)			0.86
Loans			Discounted Cash Flows			Margin of a reference portfolio			(1)bp - 1bp			0bp			(22.80)			22.80
Loans			Forward estimation			Credit spread			1.68% - 2.7%			1.68%			(0.68)			0.00
Debt securities
Corporate debt			Discounted Cash Flows			Margin of a reference portfolio			(1)bp - 1bp			0bp			(0.52)			0.52
Government debt			Discounted Cash Flows			Interest rate			(1.9)% - 0.1%			(0.87)%			(0.01)			0.01
Equity instruments
Equities			Price Based			Price			90% - 110%			100.00%			(49.63)			49.63
Financial liabilities held for trading
Derivatives
Cap&Floor			Volatility option model			Volatility			10% - 90%			32.37%			(0.77)			0.30

January - June 2023						135

---

31-12-2022
Portfolio/Instrument			Valuation technique			Main unobservable inputs			Range			Weighted average			Impacts (EUR million)
(Level 3)															Unfavourable scenario			Favourable scenario
Financial assets held for trading
Debt securities
Corporate debt			Discounted Cash Flows			Credit spread			0% - 20%			10.07%			(1.38)			1.40
Corporate debt			Price based			Market price			85% - 115%			100.00%			—			—
Government debt			Discounted Cash Flows			Discount curve			0% - 10%			4.92%			(8.34)			8.07
Derivatives
CCS			Discounted Cash Flows			Interest rate			(0.70)% - 0.70%			0.00%			—			—
CCS			Forward estimation			Interest rate			(4)bp - 4bp			0.42bp			(0.06)			0.07
CDS			Discounted Cash flows			Credit Spread			14.90bp - 42.10bp			21.99bp			(0.05)			0.02
EQ Options			EQ option pricing model			Volatility			0% - 90%			61.30%			(0.23)			0.48
EQ Options			Local volatility			Volatility			10% - 90%			50.00%			(1.05)			1.05
FRAs			Asset Swap model			Interest rate			0% - 6%			2.71%			(1.16)			0.95
Fx Swap			Others			Others			n.a.			n.a			(1.37)			1.37
Inflation Derivatives			Asset Swap model			Inflation Swap Rate			0% - 10%			3.41%			(0.21)			0.11
Inflation Derivatives			Volatility option model			Volatility			0% - 40%			17.37%			(0.14)			0.11
IR Options			IR option pricing model			Volatility			0% - 60%			35.82%			(0.30)			0.44
IRS			Asset Swap model			Interest rate			0% - 15%			9.20%			(0.05)			0.08
IRS			Discounted Cash Flows			Credit spread			1.25% - 6.29%			3.89%			(2.25)			2.47
IRS			Discounted Cash Flows			Swap rate			8.6% - 9.1%			8.84%			(0.02)			0.03
IRS			Forward estimation			Interest rate			(6)pb - 6pb			0.13bp			(0.04)			0.04
IRS			Others			Others			5% - n.a			n.a			(11.58)			—
IRS			Prepayment modelling			Prepayment rate			2.5% - 6.2%			4.17%			(0.06)			0.05
Others			Forward estimation			Price			0% - 2%			0.62%			(0.53)			0.24
Property derivatives			Option pricing model			Growth rate			(5)% - 5%			0.00%			(5.75)			5.75
Financial assets designated at fair value through profit or loss
Loans and advances to customers
Loans			Discounted Cash Flows			Credit spreads			0.1% - 2%			1.05%			(0.18)			0.18
Mortgage portfolio			Black Scholes model			Growth rate			(5)% - 5%			0.00%			(0.79)			0.79
31-12-2022

136						January - June 2023

---

Portfolio/Instrument

Valuation technique

Main unobservable inputs

Range

Weighted average

Impacts (EUR million)

(Level 3)

Unfavourable scenario

Favourable scenario

Debt securities

Other debt securities

Others

Inflation Swap Rate

0% - 10%

4.74%

(4.25)

3.83

Non-trading financial assets mandatorily at fair value through profit or loss

Debt securities

Corporate debt

Discounted Cash Flows

Margin of a reference portfolio

(1)bp - 1bp

0.01bp

(0.33)

0.33

Corporate debt

Probability weighting

Growth rate

(5)% - 5%

0.00%

(0.68)

0.68

Equity instruments

Equities

Price Based

Price

90% - 110%

100.00%

(126.87)

126.87

Financial assets at fair value through other comprehensive income

Loans and advances to customers

Loans

Discounted Cash Flows

Credit spread

n.a.

n.a

(24.10)

—

Loans

Discounted Cash Flows

Interest rate curve

0.8% - 1.0%

0.88%

(0.08)

0.08

Loans

Discounted Cash Flows

Margin of a reference portfolio

(1)bp - 1bp

0bp

(17.51)

17.51

Loans

Forward estimation

Credit spread

2.56% - 3.40%

2.56%

(0.49)

—

Debt securities

Government debt

Discounted Cash Flows

Interest rate

(0.4)% - 1.6%

0.63%

(0.01)

0.01

Equity instruments

Equities

Price Based

Price

90% - 110%

100.00%

(70.04)

70.04

Financial liabilities held for trading

Derivatives

Cap&Floor

Volatility option model

Volatility

10% - 90%

40.73%

(0.29)

0.18

Financial liabilities designated at fair value through profit or loss

Loans and advances to customers

Repos/Reverse repos

Others

Long-term repo spread

n.a.

n.a.

(0.13)

—

January - June 2023						137

---

Lastly, the changes in the financial instruments classified as level 3 in the first six months of 2023 and 2022 were as follows:

			01-01-2023			Changes																		30-06-2023
EUR million			Fair value calculated using internal models (Level 3)			Purchases/Settlements			Sales/Amortisation			Changes in fair value recognized in profit or loss			Changes in fair value recognised in equity			Level reclassifications			Other			Fair value calculated using internal models (Level 3)
Financial assets held for trading			383			198			(72)			77			—			303			151			1,040
Customers			—			—			—			(1)			—			—			146			145
Debt instruments			42			52			(4)			1			—			316			6			413
Equity instruments			1			—			—			—			—			—			—			1
Trading derivatives			340			146			(68)			77			—			(13)			(1)			481
Swaps			139			—			(3)			93			—			—			(12)			217
Exchange rate options			4			—			—			(1)			—			—			—			3
Interest rate options			39			—			—			(10)			—			—			—			29
Index and securities options			48			52			—			3			—			(23)			5			85
Other			110			94			(65)			(8)			—			10			6			147
Hedging derivatives (Assets)			—			—			—			—			—			1			—			1
Swaps			—			—			—			—			—			1			—			1
Financial assets designated at fair value through profit or loss			427			—			—			(40)			—			—			30			417
Loans and advances to customers			5			—			—			—			—			—			—			5
Debt instruments			422			—			—			(40)			—			—			30			412
Non-trading financial assets mandatorily at fair value through profit or loss			1,833			163			(116)			48			—			—			(16)			1,912
Loans and advances to customers			239			59			(63)			(16)			—			—			9			228
Debt instruments			325			32			(25)			3			—			—			2			337
Equity instruments			1,269			72			(28)			61			—			—			(27)			1,347
Financial assets at fair value through other comprehensive income			5,647			4,197			(3,595)			—			(222)			505			86			6,618
Loans and advances to customers			4,718			4,196			(3,590)			—			23			473			39			5,859
Debt instruments			229			—			(3)			—			(1)			32			6			263
Equity instruments			700			1			(2)			—			(244)			—			41			496
TOTAL ASSETS			8,290			4,558			(3,783)			85			(222)			809			251			9,988
Financial liabilities held for trading			415			304			(101)			(91)			—			(118)			(7)			402
Trading derivatives			415			304			(101)			(91)			—			(118)			(7)			402
Swaps			235			104			(70)			(25)			—			(97)			(14)			133
Exchange rate options			—			24			(24)			—			—			—			—			—
Interest rate options			19			7			(1)			(3)			—			—			—			22
Index and securities options			42			38			(6)			3			—			(21)			7			63
Others			119			131			—			(66)			—			—			—			184
Hedging derivatives (Liabilities)			14			—			—			3			—			36			—			53
Swaps			14			—			—			3			—			36			—			53
Financial liabilities designated at fair value through profit or loss (*)			151			—			(5)			1			—			—			(147)			—
Liabilities covered by insurance and reinsurance contracts (*)			345			—			—			(6)			—			—			26			365
TOTAL LIABILITIES			925			304			(106)			(93)			—			(82)			(128)			820

(*) See impact of IFRS 17 as at 31 December 2022 (see Note 1.b).

138						January - June 2023

---

			01-01-2022			Changes																		30-06-2022
EUR million			Fair value calculated using internal models (Level 3)			Purchases/Settlements			Sales/Amortisation			Changes in fair value recognized in profit or loss			Changes in fair value recognised in equity			Level reclassifications			Other			Fair value calculated using internal models (Level 3)
Financial assets held for trading			537			29			(9)			(52)			—			(2)			14			517
Debt instruments			22			—			—			1			—			—			5			28
Equity instruments			2			—			—			(1)			—			—			—			1
Trading derivatives			513			29			(9)			(52)			—			(2)			9			488
Swaps			224			—			—			5			—			—			(13)			216
Exchange rate options			12			—			(9)			11			—			—			(1)			13
Interest rate options			182			—			—			(98)			—			(1)			—			83
Index and securities options			41			—			—			1			—			—			(40)			2
Other			54			29			—			29			—			(1)			63			174
Financial assets designated at fair value through profit or loss			418			—			(3)			4			—			—			75			494
Credit institutions			—			—			—			—			—			—			—			—
Loans and advances to customers			18			—			(3)			(2)			—			—			—			13
Debt instruments			400			—			—			6			—			—			75			481
Non-trading financial assets mandatorily at fair value through profit or loss			1,865			112			(218)			110			—			(29)			105			1,945
Loans and advances to customers			268			20			(67)			40			—			—			58			319
Debt instruments			366			—			(25)			(3)			—			(29)			2			311
Equity instruments			1,231			92			(126)			73			—			—			45			1,315
Financial assets at fair value through other comprehensive income			4,847			4,962			(5,187)			—			(191)			205			69			4,705
Loans and advances to customers			3,880			4,960			(5,177)			—			(17)			137			5			3,788
Debt instruments			146			—			(1)			—			9			—			63			217
Equity instruments			821			2			(9)			—			(183)			68			1			700
TOTAL ASSETS			7,667			5,103			(5,417)			62			(191)			174			263			7,661
Financial liabilities held for trading			160			84			(61)			42			—			(14)			—			211
Trading derivatives			160			84			(61)			42			—			(14)			—			211
Swaps			44			15			(5)			80			—			—			(13)			121
Exchange rate options			7			6			(14)			1			—			—			—			—
Interest rate options			26			42			(20)			(16)			—			—			—			32
Index and securities options			67			—			(2)			—			—			—			(65)			—
Interest rate and equity futures			—			—			—			—			—			—			—			—
Others			16			21			(20)			(23)			—			(14)			78			58
Financial liabilities designated at fair value through profit or loss (*)			151			—			(2)			1			—			—			—			150
Liabilities covered by insurance and reinsurance contracts (*)			318			—			(97)			—			—			—			48			269
TOTAL LIABILITIES			629			84			(160)			43			—			(14)			48			630

(*) See impact of IFRS 17 as at 31 December 2022 (see Note 1.b)

January - June 2023						139

---

b) Refinancing and restructured transactions

The following terms are used with the meanings specified below:

•Refinancing transaction: transaction that is granted or used, for reasons relating to current or foreseeable financial difficulties of the borrower, to repay one or more of the transactions granted to it, or through which the payments on such transactions are brought fully or partially up to date, in order to enable the borrowers of the cancelled or refinanced transactions to repay their debt (principal and interest) because they are unable, or might foreseeably become unable, to comply with the conditions thereof in due time and form.

•Restructured transaction: transaction with respect to which, for economic or legal reasons relating to current or foreseeable financial difficulties of the borrower, the financial terms and conditions are modified in order to facilitate the payment of the debt (principal and interest) because the borrower is unable, or might foreseeably become unable, to comply with the aforementioned terms and conditions in due time and form, even if such modification is envisaged in the agreement.

For maximum guarantees amount, we will consider as follows:

•Real guarantees: the appraisal amount or valuation amount of the real guarantees received; for each transaction it cannot be higher than the covered amount of exposure.

140						January - June 2023

---

			30-06-2023
			Total																					Of which: impaired
			Without real guarantee						With real guarantee															Without real guarantee						With real guarantee
															Maximum amount of the actual collateral that can be considered																					Maximum amount of the actual collateral that can be considered
Amounts in million euros, except number of transactions in units			Number of transactions			Gross amount			Number of operations			Gross amount			Mortgage guarantee			Other guarantees			Impairment of accumulated value or accumulated losses in fair value due to credit risk			Number of transactions			Gross amount			Number of operations			Gross amount			Mortgage guarantee			Other guarantees			Impairment of accumulated value or accumulated losses in fair value due to credit risk
Credit entities			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Public sector			10,578			364			36			5			2			—			3			9			3			9			—			—			—			3
Other financial institutions and: individual shareholder			1,197			168			1,034			347			72			129			74			622			69			660			158			19			48			58
Non financial institutions and individual shareholder			304,058			8,550			60,027			7,652			4,377			1,750			3,504			160,329			3,050			39,771			4,260			2,371			861			3,010
Of which: Financing for constructions and property development			16,476			138			2,111			528			421			37			169			9,867			88			1,281			260			194			15			145
Other warehouses			5,782,449			6,877			513,622			9,589			4,807			3,741			4,637			3,098,609			3,020			267,646			4,492			1,887			1,805			3,441
Total			6,098,282			15,959			574,719			17,593			9,258			5,620			8,218			3,259,569			6,142			308,086			8,910			4,277			2,714			6,512
Financing classified as non-current assets and disposable groups of items that have been classified as held for sale			—			—			—			—			—			—			—			—			—			—			—			—			—			—

January - June 2023						141

---

			31-12-2022
			Total																					Of which: impaired
			Without real guarantee						With real guarantee															Without real guarantee						With real guarantee
															Maximum amount of the actual collateral that can be considered																					Maximum amount of the actual collateral that can be considered
Amounts in million euros, except number of transactions in units			Number of transactions			Gross amount			Number of operations			Gross amount			Mortgage guarantee			Other guarantees			Impairment of accumulated value or accumulated losses in fair value due to credit risk			Number of transactions			Gross amount			Number of operations			Gross amount			Mortgage guarantee			Other guarantees			Impairment of accumulated value or accumulated losses in fair value due to credit risk
Credit entities			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Public sector			6,679			227			31			7			2			—			6			7			2			13			5			2			—			5
Other financial institutions and: individual shareholder			1,210			321			785			339			88			86			61			641			9			620			135			22			6			55
Non financial institutions and individual shareholder			312,934			9,578			60,003			8,419			4,790			1,834			3,912			174,300			3,178			39,479			4,890			2,741			886			3,439
Of which: Financing for constructions and property development			15,578			125			1,890			570			423			48			208			10,325			78			1,255			335			213			33			188
Other warehouses			5,878,455			5,790			492,232			9,492			4,835			3,502			4,287			3,735,412			2,911			246,751			4,055			1,917			910			3,122
Total			6,199,278			15,916			553,051			18,257			9,715			5,422			8,266			3,910,360			6,100			286,863			9,085			4,682			1,802			6,621
Financing classified as non-current assets and disposable groups of items that have been classified as held for sale			—			—			—			—			—			—			—			—			—			—			—			—			—			—

142						January - June 2023

---

c) Real estate business – Spain

i) Portfolio of home purchase loans to families

Home purchase loans granted to families in Spain on 30 June 2023 amounted to EUR 61,606 million (EUR 63,688 million at 31 December 2022). Of which mortgage guarantees are 99.63%:

			Million euros
			30-06-2023						31-12-2022
			Gross Amount			Of which: impaired			Gross Amount			Of which: impaired
Home purchase loans to families			61,606			987			63,688			1,088
- Without mortgage guarantee			229			14			288			24
- With mortgage guarantee			61,377			973			63,400			1,064

The risk profile of the home purchase mortgage loan portfolio in Spain remained at a medium-low level, with limited prospects of additional impairment:

•Principal is repaid on all mortgages from the start.

•Early repayment is common so the average life of the transaction is well below that of the contract.

•High quality of collateral concentrated almost exclusively in financing the first home.

•Average affordability rate at the end of June stood at 29%.

•94.04% of the portfolio has a LTV below 80%, calculated as total risk/latest available house appraisal.

			30-06-2023
			Gross amount in books on the amount of the last appraisal (loan to value)
Million euros			Less than or equal to 40%			More than 40% or less than 60%			More than 60% and less than 80%			More than 80% and less or equal to 100%			More than 100%			Total
Gross amount			18,444			20,765			18,512			2,523			1,133			61,377
Of which: impaired			142			193			204			167			267			973

			31-12-2022
			Gross amount in books on the amount of the last appraisal (loan to value)
Million euros			Less than or equal to 40%			More than 40% or less than 60%			More than 60% and less than 80%			More than 80% and less or equal to 100%			More than 100%			Total
Gross amount			17,877			20,617			20,225			3,294			1,387			63,400
Of which: impaired			132			192			220			181			339			1,064

ii) Financing construction and property development

At 30 June 2022 and 31 December 2022 the financing amount related to construction and real estate business in Spain amounted to EUR 2,246 million and EUR 2,283 million net of allowances, respectively.

			30-06-2023
Million euros			Gross amount			Excess of gross exposure over maximum recoverable amount of effective collateral			Specific allowance
Financing for construction and property development recognised by the Group's credit institutions (including land) (business in Spain)			2,282			209			36
Of which: watchlist/ impaired			75			8			26
Memorandum items: Written-off assets			376

January - June 2023						143

---

			31-12-2022
Million euros			Gross amount			Excess of gross exposure over maximum recoverable amount of effective collateral			Specific allowance
Financing for construction and property development recognised by the Group's credit institutions (including land) (business in Spain)			2,327			211			44
Of which: watchlist/ impaired			94			21			33
Memorandum items: Written-off assets			487

			30-06-2023			31-12-2022
Million euros			Carrying amount
Memorandum items:
Total loans and advances to customers excluding the public sector (business in Spain) (book value)			243,814			250,702
Total consolidated assets (Total business) (book value)			1,780,493			1,734,659
Impairment losses and provision for exposure classified as normal (business in Spain)			1,247			1,311

At the end 30 June 2023 and 31 December 2022 the concentration of this portfolio was as follows:

			Loans: gross amount
Million euros			30-06-2023			31-12-2022
1. Without mortgage guarantee			36			42
2. With mortgage guarantee			2,246			2,285
2.1 Completed buildings			951			1,138
2.1.1 Residential			528			674
2.1.2 Other			423			464
2.2 Buildings and other constructions under construction			1,273			1,110
2.2.1 Residential			1,216			1,103
2.2.2 Other			57			7
2.3 Land			22			37
2.3.1 Developed consolidated land			14			25
2.3.2 Other land			8			12
Total			2,282			2,327

144						January - June 2023

---

d) Foreclosed real estate assets

The following table shows the breakdown at 30 June 2023 and 31 December 2022 of the foreclosed assets for the Spanish business:

			30-06-2023
Million euros			Gross carrying amount			Valuation Adjustments			Of which: Impairment losses since time of the foreclosure			Carrying amount
Property assets arising from financing provided to construction and property development companies			5,241			2,941			2,162			2,300
Of which:
Completed Buildings			1,210			630			522			580
Residential			262			126			102			136
Other			948			504			420			444
Buildings under construction			92			48			36			44
Residential			11			8			5			3
Other			81			40			31			41
Land			3,939			2,263			1,604			1,676
Developed Land			1,245			664			403			581
Other land			2,694			1,599			1,201			1,095
Property assets from home purchase mortgage loans to households			533			229			157			304
Other foreclosed property assets			148			72			56			76
Total property assets			5,922			3,242			2,375			2,680

			31-12-2022
Million euros			Gross carrying amount			Valuation Adjustments			Of which: Impairment losses since time of the foreclosure			Carrying amount
Property assets arising from financing provided to construction and property development companies			5,587			3,097			2,275			2,490
Of which:
Completed Buildings			1,456			713			583			743
Residential			341			157			127			184
Other			1,115			556			456			559
Buildings under construction			92			44			32			48
Residential			25			7			4			18
Other			67			37			28			30
Land			4,039			2,340			1,660			1,699
Developed Land			1,286			689			415			597
Other land			2,753			1,651			1,245			1,102
Property assets from home purchase mortgage loans to households			659			274			190			385
Other foreclosed property assets			176			80			61			96
Total property assets			6,422			3,451			2,526			2,971

Additionally, Grupo Santander has participation in entities holding real estate assets foreclosed or received in payment of debts for an amount of EUR 185 million, mainly in Project Quasar Investments 2017, S.L. (EUR 155 million), and capital instruments foreclosed or received in payment of debts for an amount of EUR 14 million.

January - June 2023						145

---

e) Solvency information

The Group commands a solvency position above the levels required by regulators and by the European Central bank. At 30 June 2023, at a consolidated level, the Group must maintain a minimum capital ratio of 9.14% of CET1 fully loaded (4.5% being the requirement for Pillar I, 0.89% being the requirement for Pillar II, 2.5% being the requirement for capital conservation buffer, 1% being the requirement for G-SIB and 0.25% being the requirement for anti-cyclical capital buffer).

Grupo Santander must also maintain a minimum capital ratio of 10.94% of Tier 1 fully loaded and a minimum total ratio of 13.33% fully loaded.

At 30 June 2023, the Group has a capital ratio regulatory CET1 of 12.30% and a total ratio of 16.03%, the CET1 fully loaded is 12.24%.

Capital ratio

			30-06-2023			31-12-2022
Capital coefficients
Level 1 ordinary eligible capital (EUR million)			77,628			74,202
Level 1 additional eligible capital (EUR million)			8,856			8,831
Level 2 eligible capital (EUR million)			14,669			14,359
Risk-weighted assets (EUR million)			631,149			609,266
Level 1 ordinary capital coefficient (CET 1)			12.30		%	12.18		%
Level 1 additional capital coefficient (AT1)			1.40		%	1.45		%
Level 1 capital coefficient (TIER1)			13.70		%	13.63		%
Level 2 capital coefficient (TIER 2)			2.33		%	2.36		%
Total capital coefficient			16.03		%	15.99		%

Leverage

			30-06-2023			31-12-2022
Leverage
Tier 1 capital (EUR million)			86,485			83,033
Exposure (EIR million)			1,796,203			1,750,626
Leverage ratio			4.81		%	4.74		%

17.   Explanation added for translation to English

These interim condensed consolidated financial statements are presented on the basis of the regulatory financial reporting framework applicable to Grupo Santander in Spain (see Note 1.b).

146						January - June 2023

---

---

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			Banco Santander, S.A.
Date:    28 July 2023			By:			/s/ José García Cantera
			Name:			José García Cantera
			Title:			Chief Financial Officer