2004 financial and business results - Santander

Abbey
Business Strategy
and Financial
Results 2004
London, February, 2005

Disclaimer
Banco Santander Central Hispano, S.A. is currently in the process of obtaining a secondary listing on the London Stock
Exchange. Pursuant to the rules of the UK Listing Authority, where a profit forecast or estimate is made, the principal
assumptions upon which the issuer has based its forecast or estimate must be stated, and such forecast or estimate
must be examined and reported on by the issuer’s auditors and by the listing sponsor. In practice, such a process
would materially affect the time schedule of the listing and, accordingly, precludes us from publishing any profit forecast
or estimate. As such, nothing in this presentation constitutes or should be construed as constituting a profit forecast.
This document does contain certain “forward-looking statements” with respect to certain plans of Abbey National plc
(“Abbey”) and its current goals, plans, expectations and assumptions relating to its future financial condition,
performance and results. By their nature, all forward-looking statements involve risk and uncertainty because they
relate to future events and circumstances, which are beyond Abbey’s control. These include, among other things, UK
domestic and global economic and business conditions, market-related risks such as fluctuations in interest rates and
exchange rates, the policies and actions of regulatory authorities, the impact of competition, inflation / deflation, the
timing, impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the
impact of tax and other legislation and other regulations in the jurisdictions in which Abbey and its affiliates operate. As
a result, Abbey’s actual future financial condition, performance and results may differ materially from the plans, goals,
and expectations set forth in Abbey’s forward-looking statements.

Highlights
2004 results
return to profit despite £564m of restructuring charges
trading performance impacted by spread decline and business
disruption in half 2, but with credit quality remaining very strong
main areas of risks now resolved
Key priority is improving sales productivity and performance
across all channels, investing in infrastructure and people
leveraging existing product range and customer relationships
Outlook for 2005 in slower growth markets
IAS impacts at an estimated (5)% of earnings
targeting broadly flat underlying PFS trading revenues
£150m reduction in trading expenses
non-trading charges in the range of £230 - £250m
3

Agenda
Macroeconomic environment
2004 financial and business results
IFRS restatements
Strategic update
4

UK economic outlook stable, and stronger than Eurozone
GDP growth strong, but expected to slow
slightly in 2005
3.9
2.2
1.8
2000 2001 2002 2003 2004 2005
base rates increased in late 2003 and early
2004, but remain at historically low levels
5.96
5.13
4.00
2000 2001 2002 2003 2004 2005
Sources: ONS, Bank of England, Abbey forecasts (all graphs stated as %)
2.2
3.69
3.1
4.38
2.6
4.75
inflation is expected to increase, but still
below target rate of 2%
0.8
1.2
1.3
2000 2001 2002 2003 2004 2005
1995
unemployment has fallen, and is now
stabilising
8.8
1996
8.3
1997
7.2
1998
6.3 6.1
1999
2000
5.6
1.4
2001
4.9
2002
1.3
5.2 5.0 4.8
2003
2004
1.9
2005
4.7
5

Stable economy should support the housing market
£bn
20%
10%
0%
substantial assets underpin debt levels
3,165
1989
1990
742
1991
Interest payments as percentage of
disposable income
1992
2,964
1993
819
1994
1995
2,737
1996
1997
934
Sources: ONS, Bank of England, ODPM, Abbey forecasts
1998
1999
2,992
2000
1,061
2001
2002
3,128
2000 2001 2002 2003 2004F
Financial assets Household liabilities
2003
2004
1,176
2005
8.4
mortgages still a growing market
10.2
14.2
14.7
13.2
2000 2001 2002 2003 2004 2005
affordability remains very healthy soft landing in house prices expected
%
%
30
20
10
0
1999 Q1
-10
Q3
2000 Q1
Q3
2001 Q1
Q3
2002 Q1
Q3
2003 Q1
Q3
2004 Q1
Q3
2005 Q1
9.5
Q3
6

UK PFS remains a profitable and growing market
%
45
40
35
30
25
20
15
10
5
0
10.3
consumer loan growth strong savings market growth
10.6
11.4
2000 2001 2002 2003 2004 2005
SME borrowing and deposits growth
2002 Q4 2003 Q1 2003 Q2 2003 Q3 2003 Q4 2004 Q1 2004 Q2
7.9
8.6
Term Lending Overdrafts Deposits
Sources: ONS, Bank of England, BBA, Abbey forecasts
6.5
%
£bn
6.0
7.3
7.5
2000 2001 2002 2003 2004 2005
71.9
69.1
9.3
Investments / Pensions
69.6
61.4
8.4
67.4
70.7
2000 2001 2002 2003 2004 2005
6.0
7

Agenda
macroeconomic environment
2004 financial and business results
IFRS restatements
strategic update
8

Abbey returns to profit
£m 2004 2003
PFS trading PBT 814
1,021
Non-trading charges (564)
(786)
PFS profit before tax 250
235
PBU profit before tax 23
(921)
Abbey profit before tax 273 (686)
Net attributable profit / (loss) 32
(759)
£m 2004 2003 % Var
Net interest income 1,470
1,709 (14)
Non interest income 1,130 1,080 +5
Total revenue 2,600 2,789 (7)
Operating expenses (1,599) (1,577) (1)
Provisions (187) (191) +2
PFS Trading PBT 814 1,021 (20)
decline in trading results largely due to spread narrowing, with fee income more robust
and cost growth restrained to below inflation
Abbey’s results continue to be affected by restructuring charges
PBU now in profit and exit nearing completion
9

10
Turnaround in trading results delayed by takeover activity
£m Half 1
2004
Banking & Savings 353
Investment &
Protection
115
Half 2
2004
FY
2004
General Insurance 36 34 70
FY
2003
Financial Markets 75 128 203 140 +45
Group
Infrastructure
Trading PBT
(111)
468
292
50
(158)
645
165
(269)
876
239
73
(307)
%
Var
(26)
(31)
(4)
n/a
346 814 1,021 (20)
second half trading PBT also impacted by a
number of unusual items
588
433
H1 03 H2 03 H1 04 H2 04
second half revenues boosted by strong Financial Markets result, release of unused
reassurance reserves, offset by negative life experience variances
provisions in half 2 include a £117m general provisions write-back relating to mortgages,
more than offset by a £154m provision for other liabilities (including potential mis-selling
risk)
£ m
468
346

Spread pressure starting to decline
£ m
214
408
split of operating income (excluding Abbey Financial Markets)
198
437
233
400
212
438
205
371
203
412
258
173
335 332
Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04
Net interest income Non interest income
net interest income showing signs of stabilisation in the second half
stronger second half performance in terms of fee income, despite £(48) million of negative
life experience variances
11

Balance sheet growth across range of PFS
reasonable asset growth despite low
market share
£ bn
£ bn
87.8
90.9
2003 2004
2.9
+3.5%
Mortgage asset
+17.2%
UPL asset
3.4
2003 2004
targeting profitable deposit flow, and
growing bank account liability
£ bn
£ bn
60.5
61.9
2003 2004
4.3
+2.3%
Deposits
+4.7%
4.5
2003 2004
Abbey Bank a/c liability
12

Increased focus on value in mortgage lending
%
% split of lending in 2003
53
35
13
Market Abbey
FTB Home Mover Remortgage
% market share H1
2003
First time buyer
48
35
17
H2
2003
%
% split of lending in 2004
50
37
13
Market Abbey
FTB Home Mover Remortgage
Q1
2004
Q2
2004
40
42
18
Q3
2004
11.7 14.2 13.9 10.8 11.7
Home Mover 9.8 10.0
9.7
8.6
Remortgage 9.8 10.2
9.5
9.1
Source: CML, figures are based on value of gross advances excluding further advances, buy-to-let and unidentified lending
average new business margins 13 bps higher than in 2003, with second half new
business margins 20 bps higher than the same period last year
10.6
6.3
13
Q4
2004
12.9
11.7
7.2

Savings performance improving
turnaround in deposit flows after weak
first quarter
£ bn
0.3
-1.2
0.2
1.2 1.2
Q4 03 Q1 04 Q2 04 Q3 04 Q4 04
turnaround in Quarter 2 accelerated in Half 2
£ m
strengthening branch performance and
focus on profitable accounts
810
-914
665
-773
576 557
-540
-313
Q1 2004 Q2 2004 Q3 2004 Q4 2004
Acquisition Back Book
branch performance is strengthening, with new profitable acquisition accounts offsetting
the outflow from back-book accounts
second half inflows have also been driven by a competitive cahoot offering
14

Robust sales performance across banking range
000’s
80
99
92
104
Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004
000’s
bank account openings robust
despite lower marketing
credit card openings improving in
half 2
46
40
49
Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004
60
95
49
£ m
gross UPL lending up 26% on 2003
despite system limitations
360
676
430
456
536
Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004
bank account openings robust despite
lower marketing spend, with a marked
improvement in youth account openings
gross unsecured lending up 26% on
2003, balances up 17% ahead of new
branch systems going live Q4 2004
improved second half performance on
credit cards reflecting competitive
offering
15

Investment sales showing signs of stabilising
43
26
32
Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004
106
investment new business
(annualised equivalent)
£ m £ m
000’s
general insurance new policy sales
93
98
Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004
94
28
91
33
33
protection new business sales
(annualised equivalent)
31
25
Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004
new business is stabilising after
adjusting for seasonal impacts, but not
yet showing signs of improvement
investment sales continue to be
hampered by with-profits overhang
protection and general insurance sales
have been adversely impacted by
weak mortgage sales and low levels of
authorised sales staff
22
19
16

PFS banking spread decline is slowing
%
split of asset and liability spreads in
recent years
0.95%
0.92%
H1 03 H2 03 H1 04 H2 04
Asset spread Liability spread
0.65%
0.77%
Total PFS banking spread
(restated) (1)
PFS banking spread in line with expectations
asset spread impacted by reduction in PRC
income, combined with a lower average SVR
balance
£0.5 bn reduction in SVR asset in H2 is
significantly less than in prior periods
pressure on liability spreads, with attrition of
back book liability partially offset by profitable
inflows and spread widening taken after base
rate changes in the first half
limited further decline in the spread expected
from the second half level of 1.42%
17
H1 03 H2 03 H1 04 H2 04
1.87% 1.69% 1.54% 1.42%
(1) The reported PFS Banking Spread has been restated to adjust for the disposal of asset finance businesses and correction of consolidation items

Non-interest income robust with signs of improvement
£m 2004 2003 % Var
Mortgage fees receivable 180 163
Savings commissions 28 47
-40
Banking fees 230 217
+6
Investment & Protection (1) 171 214 -20
General Insurance 114 126 -10
Abbey Financial Markets 291 223
+30
Group Infrastructure 116 90
+29
Trading PFS non-interest income 1,130 1,080
+5
before release of unused reassurance reserves, mortgage fee income is lower reflecting
lower mortgage volumes
increased banking fees reflect changes to fee structure implemented mid 2004
(1) A large part of the income of the Investment and Protection segment is accounted for using embedded value methodology
18
+10

Life contribution impacted by assumption changes
£m 2004 2003
New business contribution to EV 45 45
Expected return 206 215
Experience variances and changes in assumptions (58) (58)
Trading embedded value earnings 192 202
Non-embedded value earnings (12) 40
Trading profit before tax 180 242
new business contribution to EV flat, with volume reductions offset by margin
improvements in Scottish Provident
expected return lower due to impact of reduction in risk discount rate from 8.5% to 7.5%,
offset by earnings on the former contingent loan being reported as part of EV (previously
reported as part of NII pre repayment)
experience variances and assumption changes include £(50) million in relation to modelling
and reserving assumptions in Scottish Provident
19

Cost base held broadly flat
fluctuation in expenses reflect
marketing campaigns & project spend
£ m
45
311
45
361 327 371
404 411 416 404
H1 03 H2 03 H1 04 H2 04
Salary General expenses Depreciation
40
41
Headcount levels relatively stable
throughout 2004
Full time
equivalent
24,813
25,245
25,346
24,389 24,299
FY 03 Q1 04 Q2 04 Q3 04 Q4 04
including costs netted of income as part of EV accounting, the trading cost base was
held flat as targeted
headcount numbers exclude FTE outsourced to India - as at December 2004, these
totalled c.567 FTE
20

Provisions charge impacted by one-off items
£m 2004 2003
Mortgages (120)
Bank account 63
39
Unsecured personal loans 79
61
Other (incl. credit cards) 12
22
Total PFS bad debt provisions 34 130
Provisions for contingent liabilities 153 61
Total PFS provisions charge 187 191
mortgage provisions include a £117 million write-back of general provisions bringing Abbey’s
accounting policies closer to new IAS methodology
underlying growth in provisions for bad debts driven by asset growth in UPL, and fraud write-offs
in relation to bank accounts
provisions for contingent liabilities includes a £154m provisions for other liabilities, including
potential mis-selling risk – which in addition to the £50 million provision raised in 2003,
significantly reducing the likelihood of further provisions being required
21
8

Mortgage lending quality is excellent
cases
mortgages - 3 month plus arrears
8,200
7,200
6,900
7,000
8,000
FY 03 Q1 04 Q2 04 Q3 04 FY 04
properties
419
-2.4%
properties in possession
325
-31%
2002 2003 2004
288
mortgages – avg LTV of new business
%
%
62 62 62
-200bps
60 60
Q4 03 Q1 04 Q2 04 Q3 04 Q4 04
mortgages – average LTV of stock
50
-500bps
2003 2004
45
22

PBU ahead of schedule, no further losses expected
£bn
Dec 2004 Dec 2003
Asset RWA Asset
RWA
Debt securities - - 1.0
0.4
Loan portfolio 0.4 0.4
2.0
1.7
Leasing businesses 3.4 2.7
4.7
3.0
Private equity - -
0.4
0.3
Other - -
0.2
-
Wholesale Banking 3.8 3.1
8.3
5.4
First National 0.9
2.1
(1) 0.9 2.4
European Banking & other - -
1.9
1.2
PBU 4.0
12.3
(2) 4.7 9.0
(1) First National comprises the Motor Finance and Litigation Funding businesses
(2) The table excludes International Life assets of £0.3bn (December 2003: £0.3bn) for which there are no risk weighted assets
23

Non-trading charges - overview
£ m 2004 2003
Embedded value charges and rebasing:
Investment assumptions and other variances (3) (70)
“Realistic” balance sheet related adjustments 24 (373)
Total embedded value charges and rebasing 21 (443)
Re-organisation costs:
- cost reduction & change programme (459) (174)
- asset write-downs (106) (141)
Total re-organisation expenses (565) (315)
Goodwill (20) (28)
additional charges and provisions of c. £243 million included in half 2 in relation to
acquisition by Santander and accounting adjustments required as a result of the business
decisions made since completion
charges include redundancy costs and asset write-downs
24

Capital ratios
Dec
2004
Risk asset ratio (%) 12.0%
Dec
2003
Total tier 1 capital (£m) 5,828
6,203
Total tier 1 capital ratio (%) 10.4%
10.1%
Equity tier 1 ratio (%) 7.0%
6.9%
Banking equity tier 1 ratio 4.4%
(1) (%) 4.7%
RWA by business (£bn)
Personal Financial Services 52.2
52.2
Portfolio Business Unit 4.0 9.0
Total RWAs 56.2 61.2
(1) Illustrative ratio applying equity against investment in life companies in the same proportion as against banking assets
Credit ratings
Standard & Poors A+ / stable (long-term), A-1 (short-term)
Moodys Aa3 / stable (long-term), P-1 (short-term)
Fitch AA- / stable (long-term), F1+ (short-term)
25
13.3%

Shareholder invested capital in Life (1)
£m Dec
2004
26
Dec
2003
Discounted value of future profits 1,540
1,605
Net assets held by the LTBF 1,428
1,236
Embedded value asset 2,968
2,841
Net assets held by the SHF 997
1,051
Total invested in Life Assurance businesses 3,965
3,892
the movement in the year primarily relates to the post-tax impact of embedded value
earnings
at June 2004, 25% of invested capital related to the closed with profits business and
close to 40% supported the ongoing business, with the remainder not allocated to
specific products
(1) Pro-forma on a CP 195 basis

Conclusion
PFS Trading revenues (£bn)
Spread decline and poor sales
reflected in revenues
2,990
2,789
2,600
2002 2003 2004
PFS efficiency (trading cost:income ratio)
%
Revenue pressure coupled with
cost base leading to
worsening OE:OI
52.7
56.5
61.5
2002 2003 2004
PFS NPL as a % of loans & advances
1.06
Underlying asset quality
is excellent
0.77
0.82
2002 2003 2004
PFS return on equity (trading)
Targeting improvement from low
start point
14.4 14.22
12.08
2002 2003 2004
27

Agenda
macroeconomic environment
2004 financial and business results
IFRS restatements
strategic update
28

IFRS – summary of impact on 2004 earnings / equity
£m PBT impact
Statutory
IAS 19 – pensions
PBT impact
Combined Stat and
proforma
1 1
IAS 16 and 17 – leasing (1)
(1)
(162)
IAS 38 – software capitalisation (109)
(109)
-
IFRS 2 – stock option expensing -
-
(46)
IFRS 4 / IAS 39 – life investment products -
12
(85)
IAS 39 – non-trading derivatives n/a
see notes
(199)
IAS 39 – credit provisions n/a (136)
3
IAS 39 – investment debt and equity securities n/a see notes
52
IAS 39 – fees and commissions n/a (34)
(35)
IAS 39 – de-recognition of liabilities n/a (9)
(154)
IAS 32 – preference shares n/a
(97)
62
Other 5
(6)
(25)
Total pre-tax impact of IFRS adjustments (104) (379)
(1,783)
IAS 12 – deferred tax 21 21
(40)
Tax effect of above adjustments 28 84
494
Total post-tax impact of IFRS adjustments (55) (274)
(1,329)
a significant element of the 2004 impact not ongoing
the impact on ongoing trading PBT is estimated to be in the range of (5)% (excluding the preference
share reclassification).
29
Equity
Impact
(1,194)

IFRS – explanation of impacts
IAS 19 Pensions
basis of valuation similar to FRS17, with any surplus or deficit recognised on the
balance sheet
PBT impact not material since increased pension charge after applying discount rate to
liabilities is offset in 2004 by adding back the release of existing SSAP24 accruals
regulatory capital treatment - the IAS equity adjustment substituted with a capital
charge based contributions above servicing cost over the next five years
the ongoing PBT impact will not be material due to the level of FTE reductions being
forecast following the Grupo Santander acquisition
IAS 16 & 17 – Property, plant and equipment and leasing
changes the basis of depreciation and income recognition for operating leases and finance
leases respectively
PBT impact reflects offset of a c.£31 million charge relating to operating leases, and a c.£30
million credit for finance leases (driven by disposals)
on an ongoing basis, the operating lease adjustment will be consistent with 2004, and the
finance lease benefit lower given absence of 2004 level of disposals
30

IFRS – explanation of impacts
IAS 38 – Software capitalisation
internally generated software to be capitalised and amortised rather than expensed
P&L charge driven by the impairment of this capitalised amount following the Grupo
Santander acquisition and well documented IT upgrade that will follow
on an ongoing basis, following this impairment, a minimal impact to the P&L expected
IAS 12 – Deferred taxation
equity impact following need to tax provision in respect of revalued assets, in this case
largely Porterbrook
IFRS 2 – Share based payments
treatment of share options granted to staff by subsidiaries in the shares of the parent is
still being finalised by IFRIC
present guidance is that a subsidiary should treat such options as “cash settled”
the profit and loss treatment of this change is yet to be clarified, but the cumulative
effect has been included as an equity adjustment
31

IFRS – explanation of impacts
IFRS 4 / IAS 39 – Life investment products
all life products to be classified as either investment or insurance contracts
investment products accounted for under IAS 39, with DVFP not recognised and replaced
with deferred acquisition costs (DAC). DAC likely to be significantly lower than DVFP
insurance products to retain embedded value accounting for the time being
no statutory restatement of 2004 P&L required for changes to embedded value accounting
the impact is relatively small which reflects current view that most of the existing book does
contain an element of insurance risk - however, industry consensus is still being finalised
IAS 39 – Credit provisions
provision only allowed when there is objective evidence of impairment of the loan – general
provisions not allowed
proforma adjustment to earnings largely reflects the lower starting position for credit
provisions that would have existed had IAS been adopted prior to 2004 and does not
necessarily reflect the level of ongoing provisions
greater ongoing volatility expected in P&L as portfolio provision levels will be more closely
linked to changes in the economic climate
32

IFRS – explanation of impacts
IAS 39 – non-trading derivatives
derivatives recognised at fair value, with changes in valuation impacting the P&L
hedge accounting permissibility is more restricted under IAS 39
no restatement of 2004 P&L required
the Abbey hedging model has been changed to minimise the impacts of IAS 39
standard likely to result in modest ongoing earnings volatility
IAS 39 – Investment, debt and equity securities
investment and debt securities valued at market value, rather than cost
no restatement of 2004 P&L required
standard likely to result in modest ongoing earnings volatility
33

IFRS – explanation of impacts
IAS 39 – Fees and commissions
all interest, interest-related fees and costs are deferred and recognised in income over the
expected life of the loan on an effective interest rate basis
no restatement of 2004 P&L required
multiple factors will influence the effective interest rate on an ongoing basis, including
macroeconomic factors, front-end fee levels and channel mix
ongoing P&L impact should be slightly lower than the 2004 proforma adjustment
IAS 39 – De-recognition of liabilities
liabilities can only be de-recognised once legally extinguished
no restatement of 2004 P&L required
equity charge reflects reinstating of certain liabilities (including unclaimed dividends and
dormant account balances) to their original contractual value
standard is not expected to have any impact on 2005 earnings relative to 2004
34

IFRS – explanation of impacts
IAS 39 – Preference shares
preference shares classified as debt, and coupon payments reflected as interest payable
P&L impact represents this adjustment (note: net attributable income neutral),
equity adjustment comprises the translation of Abbey USD preference shares to local
currency based on the year-end rate, rather than historic rate
IFRS 3 / IAS 38 – Goodwill and other intangible assets
goodwill not amortised, but tested for impairment annually
minimal overall P&L impact as the reversing of the goodwill charge is partially offset by
amortisation of other identified intangibles
IAS 27 - Consolidation
where control exists, line-by-line consolidation required
application would result in the balance sheet gross-up in 2004 of £15 bn of securitised
assets, and £27 bn of life assurance assets
35

Agenda
macroeconomic environment
2004 financial and business results
IFRS restatements
strategic update
36

New look for Abbey to reflect new ownership
Aligned with global identity used across 40 countries
shows that Abbey is now part of a powerful group
strongest elements of both brands brought together:
heritage and familiarity of the Abbey name
Santander’s corporate flame icon – a symbol of strength, stability and
leadership
Abbey will continue to focus on the customer
aim to make banking a more valuable, better & easier experience
37

Key priorities for Abbey in 2005…
revenue
costs
stabilise revenue trends & position for
revenue growth from 2006
improve sales performance and productivity
significant cost base reductions in 2005
regulatory a strong focus on risk and compliance
New team to meet the challenge…
new management structure already in place
new executive team with relevant experience almost complete
ensure disruption to the business is minimised in 2005
38

Sales performance and productivity
39

Abbey has a strong customer franchise
18 million customers, 13.3 million active customers
more than 6 million hold more than one product
broad geographical spread of customer relationships, with a bias
to the south, which is the fastest growing area
strong representation amongst the wealthiest age group, 30-49,
a key target group
Need to improve both cross-selling and retention
Abbey is ranked 2 nd in acquiring new customers, but has a
high level of leavers
Abbey has lowest share of its customer spend on financial services
40

Scope for significant improvement…
Declining share in mortgages Declining stock share in savings
12.1
9.3
11.7 11.5
8.6
9.9
10.4
2001 2002 2003 2004
Stock share Net Lending
Low market shares in other areas
7.3
3.0
Current account UPLs Investments General Insurance
1.1
4.0
3.0
8.0
7.5
7.6
2.2
2001 2002 2003 2004
declining stock share in both mortgages
and savings during buoyant market
conditions
with the exception of Scottish
Provident, Abbey has failed to grow its
market shares in other PFS areas,
despite its customer franchise and
brand strength
…across full range of PFS
7.1
1.6
6.8
2.3
41

Santander’s vibrant sales culture …
Santander has a proven business
model and track record
product innovation
understanding local markets
and customer needs
strong retail sales
management and
accountability
using technology to improve
efficiency and drive revenue
growth
EUR million; 2003 - 2004 Y-O-Y growth
Santander
Retail
Banking
Banesto
Portugal
Strong European retail banking
performance in 2004
Santander
Consumer
Finance
3,639
1,720
910
1,307
42
+6.1%
+8.9%
+6.8%
+27.4%
… delivers revenue growth across all of its channels

Branches – re-establish Abbey’s high street franchise
right places,
right number
room to
improve sales
productivity
investing in
our people &
processes
726 branches well distributed across the UK
75% in the right locations
rebranding and refurbishment from May 2005
branches generate only 20% of mortgage lending,
15% of unsecured lending and 50% of general
insurance sales
increase the number of staff dedicated to sell by
30%
reduce unacceptable levels of turnover
increase productivity and sales focus, including
new incentive scheme and minimum performance
standards
43

Telephone – a strong starting position
existing sales
capability is
strong
room to
improve
service
operations
single platform
for sales &
service
*25 Call Centres in total as some are both service and sales sites.
operating from 9 sites, employing c.2,200 staff,
taking c.12 million calls per year
generates 13% of mortgage lending, 63% of
unsecured and 38% of general insurance
scope to improve interaction with branches
operating from 20 sites, employing c. 3,700 staff,
taking c.40 million calls per year*
service levels improved in 2004
introducing sales lead generation in 2005
reduce number of UK call centres
implement a single, efficient, group-wide telephone
infrastructure
centres to sell across wider range of products
44

Intermediaries –1 st choice for intermediaries
Abbey for
Intermediaries
well
established
more focus on
IFA needs
Abbey’s goals
sales force of more than 600, relationships with
c.95% of target intermediary firms
generates 65% of mortgage lending, 15% of GI,
80% of protection & 20% of investments
best in class service performance
improve response times
products tailored exclusively for intermediary
market
build on our top three position in mortgages
leading player in other products including
recapturing market share through Scot Prov
increase value through retention
45

Mortgages
Competing more effectively, and increased focus on retention
currently not competing in c.25% of the gross lending market
New segments
Multi-brand
Tailored offers
Cross Sales &
Retention
expand / enter higher margin segments such as
large loans, buy-to-let, new build and
commercial mortgages
pilot using the cahoot brand
for the IFA channel to meet the specific needs
of intermediaries and customers
mortgage volumes key to driving general
insurance and protection
more effective retention activity, including
increased focus from call centres
tailoring of products will improve retention & value
46

Savings and Investments
Focusing on profitable savings new business
performance affected by low branch productivity and back-book attrition
Core midmargin
range
of products
Structured
investment
offers
Electronic
channels
47
range already established, with a strong
performance in 2004 to offset back-book
aim to capture significant market share of Child
Trust Fund in 2005
re-launching competitive investment range from
March through all channels
including capital guaranteed products using
Abbey Financial Markets’ structuring skills
maintain a range of competitive online products
for savers

Other PFS markets – growing our share
Unsecured
Personal
Loans
Bank
accounts
Protection
and GI
Financial
Markets
SME
new branch system live from Q4 2004
tactical promotional pricing strategy
targeting existing customers
continued growth
aiming to deliver an industry-leading switcher
service
investment in new general insurance platforms
and servicing complete
increasing cross-sales across all channels
profitable, with strong team focusing on niche
markets including structured products
steady growth in business banking
priority in 2005 is to grow presence in high
margin commercial mortgages
48

Revenue growth summary
2004 affected by significant change
re-organisation, regulatory, acquisition
Significant opportunity with large customer base
need to improve cross-sales and retention
Need to improve sales productivity across all channels
more customer-facing staff, more staff dedicated to selling
single platform for telephone sales and service
committed to growing our intermediary business
increased focus on sales management and accountability
Core product range is well established
compete more aggressively
49

Significant cost base reductions
50

Significant cost base reductions
Where we’re starting from…
Abbey / UK Banks Cost / Income ratio
Abbey 62
Nrock
HBOS
Lloyds
A&L
RBOS
Barclays
33
40
47
49
50
59
Grupo Santander’s proven track record
62
57
56
54
52
49
47
1998 1999 2000 2001 2002 2003 2004
Based on most recent results and management estimates of the PFS components of the peer group
51

Acceleration of cost programme
Revised breakdown of pre-tax gross
annualised cost savings £m*
69
77
IT Customer
operations
10
44 200
Sales Other Phase 1
(end 2006)
100
Phase 2
(2007)
300
Total cost
savings
£200m of short-term cost savings originally targeted for end of 2006
targeting £150m reduction in costs in 2005, instead of original £100m
52

Phase 1 - work is already underway
Short term activity
headcount reductions:
3,000 roles to go by year end, with 2,000 affected told by end of Q1
site closures:
extend and accelerate site reduction programme in 2005
project rationalisation:
non-essential project spend cut by 60%, without damaging revenues
new cost management and procurement process in place
Medium term activity
major project: team in place with ten workstreams
focus is business and process re-engineering
53

Phase 2 - rollout of Partenon
Existing Abbey systems are inefficient and hold back the bank
multiple IT systems for different products replicate customer
information, prevent a single customer view
hinder product development
increase cost of IT and operations
Partenon, Santander’s IT platform, solves these issues
Partenon is a single integrated system for products, back office
operations and management information
Partenon gives Abbey a long term, competitive advantage, and will
deliver a run rate £100m of savings by the end of 2007, with longer-
term benefits more than the £100m
detailed plans in place for system rollout from end of 2006
54

Roadmap for the next 3 years
invest in distribution
deliver short-term cost
reduction initiatives
building revenue growth
momentum
improve productivity and
efficiency with Partenon
2005 2006
2007
55

Tangible and measurable improvements in 2005
People
Channels
Financials
reduced new joiner turnover
Increased number of employees dedicated to selling
3,000 roles removed by end of 2005
improvements in sales performance across all channels
improved market share trends across range of PFS
successful new product launches
acceleration of site reduction
stabilise underlying PFS trading revenue trends
accelerate cost savings, with a reduction of £150m
in 2005, more than the original £100m targeted
reduction in re-organisation costs
56

Contact us
Investor
Relations
Telephone
Email
Website
Ciudad Grupo Santander
Edificio Pereda, 1 st floor
Avda de Cantabria s/n
Madrid
Spain
+34 (0)91 259 65 20
+34 (0)91 259 65 15
+34 (0)91 259 65 17
+34 (0)91 259 65 18
investor@gruposantander.com
www.gruposantander.com
Abbey
2 Triton Square
Regent’s Place
London NW1 3AN
United Kingdom
+44 (0)20 7756 4182
+44 (0)20 7756 4181
+44 (0)20 7756 4184
IR@abbey.com
www.abbey.com
On 12 November 2004, Grupo Santander acquired Abbey National plc (Abbey). Grupo Santander is Spain’s largest financial group and the 9th largest worldwide by market capitalisation.
It has a presence in 40 countries, with 130,000 employees serving more than 35 million customers through a network of 10,000 branches. It is the largest financial services group in Latin
America, and has the third largest consumer finance business in Europe. The bank focuses on retail banking, which makes up 85% of revenues, but also offers a wide range of banking
and financial services.
Disclaimer
This document contains certain “forward-looking statements” with respect to certain plans of Abbey National plc (“Abbey”) and its current goals, plans, expectations and assumptions
relating to its future financial condition, performance and results. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and
circumstances, which are beyond Abbey’s control. These include, among other things, UK domestic and global economic and business conditions, market-related risks such as
fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition, inflation / deflation, the timing, impact and other uncertainties
of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation and other regulations in the jurisdictions in which Abbey and its affiliates
operate. As a result, Abbey’s actual future financial condition, performance and results may differ materially from the plans, goals, and expectations set forth in Abbey’s forward-looking
statements.
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