2017 Sustainability Report #Prosper 2017 Sustainability report 2 Santander: a responsible and sustainable bank We generate stable and recurrent profit... ATTRIBUTABLE PROFIT (Millions of euros) 2016 6,204 6,619 2017 +7%* 2017/2016 * +7.4% in constant euros. Efficiency (cost-to-income) 47% 11.8% Return on tangible equity (underlying) 10.84% Fully loaded CET1 capital ratio NPL ratio 4.08% Balanced geographic diversification is the key to our stable and predictable growth UNITED STATES 4% MEXICO 7% BRAZIL 26% CHILE 6% ARGENTINA 4% SPAIN 15% SANTANDER CONSUMER FINANCE 13% POLAND 3% PORTUGAL 5% UNITED KINGDOM 16% OTHER COUNTRIES 1% Main countries Santander Consumer Finance * Including Popular (3%). Contribution to underlying Group profit, %. 3 2017 Sustainability report Ana Botín, Group Executive Chairman Our purpose is to help people and businesses prosperS …while contributing to social and economic progress in the communities where the bank operates People €12,047 million Personnel expenses1 97% Employees with permanent contracts 10 years Average length of employment Customers €848,914 million Loans outstanding (net) €473,075 million to households €288,912 million to companies €33,008 million to public administrations €53,920 million to others2 >250,000 Microbusinesses supported in Brazil and other countries Shareholders €3,540 million3 Total shareholder remuneration €88,410 million Stock market value at year-end 2017, largest in the euro zone €0.22 Dividend per share, +7%4 Communities €183 million Community investment €129 million Investment to universities €54 million Investment to programmes and projects to support communities Suppliers €7,770 million Payments to suppliers 9,104 Approved suppliers through its global procurement model 95% Local group’s suppliers Tax contribution €7,972 million Taxes paid € 4,137 million Corporate income tax €3,835 million Other own taxes paid, including social contributions 1. From Group audited accounts. 2. Including financial business activities and customer prepayments. 3. Subject to the approval of the fourth dividend against the 2017 results by the board of directors and the General Shareholders Meeting. 4. Adjusted for the July 2017 capital increase. 2017 Sustainability report 4 Milestones in 2017 EMPLOYEES 60% what we do 40% how we do it MyContribution To continue strengthening our Simple, Personal and Fair culture, we are introducing a new way of assessing our employees’ performance. The Group's employees are assessed on the basis of their level of commitment to corporate behaviours (40%) and their ability to meet their targets (60%). New corporate principles of diversity and inclusion These principles, which will provide a framework for Group policies, are complemented by strategies and initiatives in the local units. New ways of working We have created new working spaces with more open spaces and technological tools to boost teamwork. In addition, Santander continues to promote the flexiworking culture to improve the work- life balance. SHAREHOLDERS 16.6% total shareholders return Santander is the first European entity to receive the ISO certification for sustainable events management. CUSTOMERS Tuiio A new financial inclusion initiative in Santander Mexico for people with low incomes which aims to have a measurable social impact through a broad and expanding range of interconnected products (from microcredits to microinsurance, remittances, payments, etc.). Openbank has become the first fully digital Spanish bank, offering a broad value proposition with innovative features, while meeting the highest security standards. New corporate consumer protection policy In 2017, Banco Santander approved a new corporate consumer protection policy that sets specific criteria for identifying and implementing consumer protection principles. First green bond issued by the Bank in Poland Bank Zachodni WBK issued a green bond with the International Finance Corporation of €136 million with a tenor of 10 years. Cimate Finance The Bank has participated in the finance of new renewable energy projects with a total installed capacity of 3,390 MW. GOVERNANCE New mining and metals policy added to the other sectoral policies. UNEP FI pilot project Santander, together with 15 other major banks, have joined United Nations Environment Programme Finance Initiative to develop a pilot project to implement the FSB TCFD recommendations. 5 2017 Sustainability report Sustainability achievements Banco Santander was included again in the Dow Jones Sustainability Index (DJSI), where it maintains its presence since 2000. Ranked ninth worldwide, second in Europe, and first in Spain for the seventh consecutive year, the Bank was classified in the bronze category in the banking sector. Banco Santander, world leader in the Bloomberg Gender- Equality Index (GEI) With an evaluation of 93.4 points out of 100, Banco Santander took first place in this index made up of 104 participating entities from different sectors worldwide. Newsweek Green Ranking We have been ranked as the best bank in the Newsweek Green Ranking, which mainly analyzes internal environmental performance. COMMUNITIES Jader Stefanello and Fernando Ferreira, students at the Universidade Federal de Santa Maria in Brasil and winners of the Empreenda Santander 2K17 award for their Lunix Project, which deploys sensors for intelligent management of urban lighting networks. Santander X Santander X is an innovative platform that brings together all the support programmes for entrepreneurs that Banco Santander has been supporting in universities around the world for the last 20 years. Santander X aims to be a meeting place entrepreneurs. It will be the largest global ecosystem for university entrepreneurship - a shared space for international collaboration among universities, businesses and entrepreneurs, who want to make their projects a reality. It will be open to the world. ENVIRONMENT Banco Santander is firmly commited to the environment and the fight against climate change, which is reflected in various lines of action, such as the analysis of social and environmental risks in funding transactions, the development of products and services with a positive environmental impact and the measurement of its internal environmental footprint. COMMUNITY INVESTMENT 1,295 Agreements with universities and other academic institutions in 21 countries 8,731 partnerships with social institutions and entities 44,862 scholarships and grants in 2017 2.1 million people helped 43% of the electricty consumed by the Group is from renewable sources. (100% in Spain, the UK and Germany) 2016-2018 Efficiency Plan targets 100% Fulfilled a year earlier