Resumen Spanish Banks

Equity Research Spanish banks
Banks: Neutral 17 March 2011
Report
Rating Price*
(EUR)
TP Upside
(EUR) (%) Delenda Carthago (Problem acknowledged?)
Santander + 8.3 10.8 30
BBVA = 8.8 10 13
Popular - 4.33 4.00 (8)
Banco Sabadell - 3.15 2.60 (17)
► Investment recommendations
Banesto - 6.8 6.8 (0) We initiate coverage on the Spanish banking system with an Outperform rating on
Bankinter - 4.88 3.50 (28)
Banco Pastor - 3.50 3.00 (14) Santander (TP EUR10.75), Neutral rating on BBVA (TP EUR10.00) and
* Priced at 14 March 2011
Underperform ratings on Popular (TP EUR4.00), Sabadell (TP EUR2.60), Banesto
(TP EUR6.75), Bankinter (TP EUR3.50) and Pastor (TP EUR3.00). The domestic
banks are trading at an average 0.9x 2011 P/TBV (for an expected ROTE of 6%) and
at 15.0x 2011E adj. P/E. SAN and BBVA are trading at an average 1.4x 2011E P/TBV
(for an expected ROTE of 17%) and at an average of 8.5x 2011E adj. P/E.
► Many of the problems plaguing the financial system are being addressed
Spain’s banks are tackling many of the weaknesses that were exposed by the
financial crisis, while laws have been passed to strengthen solvency and allow Cajas
in need of capital to tap private investors.
► The concentration process might backfire on the Cajas
We estimate that the lower profits related to the loss in market share and the cost of
reducing payrolls could be as large as all the help received by the Fund for Orderly
Bank Restructuring (EUR11.5bn). In our view the system might need EUR26bn in
extra capital (beyond the funds already committed) for a total EUR55bn bail-out.
► No reason to turn optimistic on any domestic Spanish banks
Spain’s banks might find 2011 the most challenging year since the beginning of the
Sector relative to DJ STOXX50 crisis. Economic growth will be soft and unemployment high, while the banks might be
500
hit with impairments and have profitability levels unlikely to surpass the cost of capital.
► Only SAN merits an Outperform rating. BBVA rated Neutral
400
Santander offers diversified growth with a resilient business model, one of the highest
ROTE of any European bank, comfortable liquidity and decent solvency levels. BBVA
300
might be affected by the dilution embedded in the acquisition of Garanti and by
questions around the long term strategy.
200
Santiago López Díaz, CFA banks@exanebnpparibas.com

100
(+34)91 114 83 10
santiago.lopez-diaz@exane.com
0
Jan 08 Jan 09 Jan 10 Jan 11
Relative to DJ STOXX50 (rebased) Banks
www.exanebnpparibas-equities.com
Please refer to important disclosures

at the end of this report.
Contents
Investment Case _________________________________________ 3
Valuation _______________________________________________ 7
Still a fragile economic environment _________________________ 12
The Investment Case. The Financial system___________________ 20
The large (not so Spanish) banks ___________________________ 37

Santander story still looks attractive ______________________________________ 37
Cajas. We still have a problem _____________________________ 47

Where are we now? __________________________________________________ 47
Capital needs. Is that all? ______________________________________________ 54
Santander _____________________________________________ 57
Santander story looks attractive _________________________________________ 57
BBVA _________________________________________________ 60
Neutral on BBVA’s shares _____________________________________________ 60
Popular________________________________________________ 63
Better solvency but limited profitability ____________________________________ 63
Banco Sabadell _________________________________________ 66

GUI integration during 2011 ____________________________________________ 66
Banesto _______________________________________________ 69
Pressure on earnings _________________________________________________ 69
Bankinter ______________________________________________ 72
Capital increase _____________________________________________________ 72
Banco Pastor ___________________________________________ 75

Exposure to problematic sectors_________________________________________ 75
2 Spanish banks
Investment Case
Cato the Elder (a Roman Consul, 234BC-149BC) was said to always end his speeches
with some variation of the expression “Carthago delenda est” (Carthage must be
destroyed) even if he had not been discussing Carthage. His purpose was to remind the
Romans that their number one priority was to destroy the city that almost annihilated
Rome around 215BC. As we all know, Carthage was indeed destroyed (in 146BC), thus
settling the problem forever. Similarly, anybody writing about Spanish banks over the past
few years could have finished with “We need to acknowledge the problems”.
It is undeniable that since the beginning of the crisis four years ago steps have been
taken to address the most pressing problems confronting Spain’s financial system. The
situation is completely different today. Institutions have written down part of their loans,
strengthened their capital and improved funding. The financial system has provisioned
an amount equivalent to 10% of GDP to deal with deteriorating credit quality.
Spain’s financial system has embarked on the most important restructuring in its history
to improve efficiency and smooth banks’ access to the funding markets. A new law
strengthens solvency and allows Cajas in search of capital to accept investment from
private investors. Those institutions that do not reach the new levels of capital required
also have the alternative of receiving funds from the FROB.
Having said that, we see no reason to turn optimistic on any of the domestic Spanish
banks we cover. Spain’s banks might find 2011 the most challenging year since the
beginning of the crisis. Economic growth will be soft and unemployment high, while the
country’s banks will face impairments related to credit losses, a mortgage bubble and
profitability levels unlikely to surpass the cost of capital in the medium term. Downside
is more limited now that the companies have better capital ratios and after the 60%
decline in the share prices over the past three years, but we remain cautious even
though domestic bank shares are trading at an average 0.9x 2011E P/TBV.
The Spanish economy is still very vulnerable, in our opinion, despite signs of
improvement in certain indicators. The EU expects Spain to grow below the EU average
for at least four years in a row and below the annual 2.0% growth threshold we deem
necessary for the country to create jobs. Growth in economies like Germany is likely to
positively affect the Spanish economy, as will some of the austerity measures recently
taken, which go in the right direction. However:
Private sector debt could cloud the economic outlook: The ECB’s negative real
interest rate policy paved the way for economic growth but fuelled the private credit
bubble. Households and companies borrowed excessively and their debt levels swelled
to record highs (116% of GDP). We estimate that private sector debt as a % of GDP
might decline by at least 20 full percentage points over the next 3-5 years. Spanish
Government debt as a % of GDP seems to be manageable (70% by the end of 2011)
but refinancing costs are likely to be quite sensitive to Spanish country risk
Unemployment remains Spain’s biggest and most intractable problem: The

unemployment rate has surpassed 20% three times during the past 25 years and has
averaged 16.4% since 1980. The unemployment rate has tripled in three years to
20.3% (in 1.3m families all the members are unemployed and 2.1m people have been
unemployed for more than a year) and the country has experienced a 2.1m reduction in
the number of employed since 2007). The size of the informal economy is big, but in-
depth reform is needed to enhance labour market flexibility.
3 Spanish banks
Figure 1: A third-world rate of unemployment
Spain: Monthly increase in registered unemployed (000) Spain: Unemployment Rate
25%
200
20.3%
150 131 20%
100
68 15%
50
10%
0
(50) 5%
1Q80
2Q81
3Q82
4Q83
1Q85
2Q86
3Q87
4Q88
1Q90
2Q91
3Q92
4Q93
1Q95
2Q96
3Q97
4Q98
1Q00
2Q01
3Q02
4Q03
1Q05
2Q06
3Q07
4Q08
1Q10
Series1
(100)
May 05
May 06
May 07
May 08
May 09
May 10
Jan 05
Sep 05
Jan 06
Sep 06
Jan 07
Sep 07
Jan 08
Sep 08
Jan 09
Sep 09
Jan 10
Sep 10
Jan 11
Source: INE, Ministry of Labour
A major de-leveraging effort is needed. The loan book in Spain multiplied by 3.5x
from 2000-2007; during this time, lending to developers increased 12.5x, a 37% annual
average rate. Loan growth turned negative in August 2009 and is likely, in our view, to
remain at depressed levels in the short to medium term.
We believe that house prices are still 25% overvalued. Mortgage rates have been
negative in real terms during the past two years, which has helped to maintain the
bubble given that 100% of Spain’s mortgages are floating rate indexed (the affordability
index has improved from 42% of disposable income to 26.5%). House price to income
ratios (6.6 years) and nationwide rental yields (implying a 26.5x P/E) remain quite
expensive in absolute and relative terms (25% above the 1995-2008 average). We also
estimate a 1.1m oversupply of houses (four years of sales at the current pace) and we
are concerned about tail risk given that 16% of all the mortgages issued between 2005-
2007 had a LTV>80% and 3.9% of all the residential mortgages have a LTV>100%.
NPLs are still an issue. NPL formation is slowing but we believe reported numbers do
not reflect the system’s true credit quality. 1) Should all the provisions available in
Spain be allocated to the developer exposure, they would cover just 20% of the risk to
the sector; 2) some of the harsh assumptions in the July Stress Test might actually
materialise and minor variations in the expected losses versus expectations could have
serious implications for the solvency of some institutions.
Figure 2: Something is not adding up

Loans to real estate developers Construction sector and developer loans: NPL ratio
20% 250% 14%
17%
18%
12%
16% 200%
10%
14%
168% 8%
12% 150%
10% 6%
8% 100%
4%
6%
2%
4% 50%
2% 0%
Mar 99
Mar 00
Mar 01
Mar 02
Mar 03
Mar 04
Mar 05
Mar 06
Mar 07
Mar 08
Mar 09
Mar 10
0% 0%
Sep-83
Jun-87
Sep-88
Sep-98
Dec-84
Dec-89
Jun-92
Sep-93
Dec-94
Jun-97
Dec-99
Jun-02
Sep-03
Dec-04
Jun-07
Sep-08
Dec-09
Mar-86
Mar-91
Mar-96
Mar-01
Mar-06
Developer NPL ratio Construction NPL ratio
As a % of total loans (LHS) as a % of equity (RHS)
Source: Bank of Spain
4 Spanish banks
The liquidity and capital positions have improved and seem to be manageable
among the listed banks, although costs are likely to remain high. The deposit war
is easing and the net lending from the ECB has been reduced. More than 50% of the
outstanding medium and long term debt matures after 2013 (with less than 3.0% of
liabilities maturing p.a.). The LTD ratio has improved by 38pp during the past three
years but uncertainties surrounding the country risk and volatility in the wholesale
funding markets could clearly put Spanish institutions under severe stress.
According to our estimates, banks could have core Tier 1 ratios approaching 10.0% by
2013, which seems reasonable considering the impairment charges booked, the capacity
to absorb additional losses and a moderate 53bp average deduction related to Basle 3.
According to our estimates, the ROTE on the major listed banks is likely to decline
by close to 40% during the next three years versus the 2007-2010 period. We expect
ROTE to average 10.0% (7.6% among domestic banks), below the cost of capital (except
for SAN and BBVA). Revenue generation is likely to be negatively affected by a lower
contribution from ALCO portfolios (10% of NII) and by generic provisions. After releasing
EUR4.2bn of generics during 2010 (equivalent to 53% of the PBT), there are only
EUR2.5bn of generics left, and these might last less than two quarters.
The crisis has triggered the largest banking restructuring ever seen in Spain with the
original 45 Cajas giving way to 17 groups. The recent legal changes aim to reinforce
solvency and to facilitate the entrance of private investors. Core capital of 8% will be
required (10% under certain circumstances) and those banks that cannot increase their
capital on the market (they have until September to do so) could apply to the FROB.
The final numbers are unknown but the most extensive process of concentration in the
history of the country is likely to be, in our opinion, the most expensive too:
a) As we are in uncharted waters, unusually large losses are a possibility. We
estimate that if the Expected Losses in the construction and developer book are 100bp
worse than the current stress test estimates and 50bp worse in the rest of the portfolio,
Cajas could need EUR6bn in provisions, equivalent to close to 10% of their equity.
b) The concentration process might backfire. A 20% reduction in the Cajas’
capacity (5,000 branches) would imply a very significant loss in market share.
Assuming spreads are maintained, every 1% loss in market share implies, according to
our calculations, a 7% reduction in after tax profits. More importantly, restructuring
costs are underestimated, in our opinion. The cost of having employees take early
retirement, incurred as part of the SAN and BBVA mergers with Central Hispano and
Argentaria, represented 19% and 15% respectively of the two groups’ consolidated net
income for five years. Restructuring the Cajas is likely to be significantly more
expensive. We expect an 18% reduction in the number of employees (24,000 people)
with a potential cost of EUR7bn. If we combine the two effects (10% loss in market
share and 18% reduction in employees), the amount represents EUR11bn, similar to all
the help provided by the FROB and equivalent to 2-3 years of profits.
c) On March 10th the Bank of Spain disclosed that 12 institutions would need
to raise EUR15.1bn in capital to comply with the new capital requirements.
However we estimate that the system might need an additional EUR26bn (beyond
the funds already committed) for a total bail-out of the Cajas of EUR55bn. The key
point, in our opinion, is to find out what the right level of capital (and provisions) might
be to restore confidence among international institutional investors (note that we say
institutional, not domestic retail investors) so an investment in a local bank might
become a credible option. The issue is not the capital needed to survive, in our view,
but the capital position on a going concern basis that promotes private investment.
5 Spanish banks
We believe the SAN story still looks attractive and it is the only company we rate
as Outperform. The company offers 1) diversified growth with a resilient business
model. We expect EUR31bn in profits in the 2011-2013 period, with nine different
business areas contributing more than 5% each to the bottom line (Spain represents
less than 20% of valuation), 2) we estimate an average 19% ROTE in the 2011-2013
period (with an average annual Tangible Equity per share growth of 9% and a 7.2%
dividend yield), 3) comfortable liquidity and solvency. Santander has average maturities
of 1.7% of total assets pa from 2011-2015 and a EUR100bn discount capacity available
at central banks. We expect SAN to accumulate 45bps of core capital per year and
estimate a 9.3% core Tier 1 capital ratio by the end of 2013 after absorbing a 75bp hit
related to Basle 3.
The story is not immune to a double dip scenario and to an increase in risk aversion to
emerging markets, and we see some potential problems: 1) credit risk is concentrated
in markets that have credit quality pressure (70% of the loan book is in Continental
Europe and the UK), 2) the bank only has EUR768m of generic provisions left in Spain
and 3) capital allocation and long-term strategy could be an issue given that the
acquisition-led business model is highly capital intensive.
We rate BBVA Neutral. Turkey is quite an interesting medium-term option but it is

dilutive in the short term. Additional synergies in an already efficient and profitable bank
might be marginally more difficult to achieve and the path to control is still some years
away. The long-term potential of the market is significant and BBVA might diversify its
earnings mix, but concerns about the embedded dilution and what appears to be a
relatively rich valuation might impact the share price.
Going forward, we expect the bank to report EUR16.1bn in profits in the 2011-2013
period (with Spain representing 25%-30% and Latam and Turkey 60%) with an
average ROTE close to 16%. The company is reporting a slowdown in NPL
formation, has no major liquidity issues and could accumulate 66bp of core capital pa
over the next three years for an 11.6% ratio by the end of 2013 (enough to deal with
a Basel III impact of 60bp).
We believe, however, that the unusually high rates of return of 2004-2008 are likely to
decline by 40% and we expect EPS to fall by 11% in 2011 due to the acquisition of
Garanti. In our view the major medium-term problem for the share price is related to the
corporate strategy, as some of the bank’s major strategic decisions over the past few
years could be questioned, like the creation of the US franchise (2% return on capital
employed after four years), the exit of the Brazilian market and the failure to close the
acquisition of BNL after launching a tender offer in 2005.
6 Spanish banks
Valuation
Figure 3: Spanish Banks Valuation Table.

Limited upside
Current Target P/TBV 2011E 3Y TE Adj. P/E 3Y EPS 2011E
Rating Price Price Upside 2010 2011E 2012E ROTE CAGR 2010 2011E 2012E CAGR GDY
Santander Outperform 8.30 10.75 30% 1.6 1.5 1.3 19% 9% 8.6 8.1 6.9 9% 7.2%
BBVA Neutral 8.80 10.00 14% 1.5 1.3 1.2 16% 11% 7.9 8.8 7.8 2% 4.8%
Popular Underperform 4.33 4.00 -8% 0.9 0.9 0.8 7% 4% 11.1 13.0 10.9 5% 5.0%
Sabadell Underperform 3.15 2.60 -18% 1.0 1.0 1.0 6% 1% 11.8 16.5 11.8 3% 3.6%
Banesto Underperform 6.80 6.75 -1% 0.9 0.8 0.8 8% 6% 10.2 10.3 8.3 15% 4.9%
Bankinter Underperform 4.88 3.50 -28% 1.1 1.0 1.0 6% 3% 15.3 18.7 16.7 6% 3.0%
Pastor Underperform 3.50 3.00 -14% 0.7 0.7 0.7 4% 4% 14.6 16.7 10.6 11% 1.2%
Average -4% 1.1 1.0 1.0 10% 5% 11.3 13.2 10.4 7% 4.2%
Source: Exane BNP Paribas estimates. Numbers and multiples consider a fully diluted number of shares
Figure 4: SAN's 1yr forward valuation

€10.75 per share valuation
Equity Net Profit Return on PV per Implicit Implicit
RWA Allocated 2013E All. Equity COE Valuation share (€) P/E13 P/BV 13 % Total
Continental Europe 307,057 27,206 3,927 14.4% 11.6% 33,830 3.6 8.6 1.2 32%
Santander 84,734 7,202 1,211 16.8% 11.5% 10,528 1.1 8.7 1.5 10%
Banesto 69,667 5,922 408 6.9% 11.5% 3,546 0.4 8.7 0.6 3%
Consumer Finance 68,558 6,513 1,030 15.8% 11.5% 8,953 0.9 8.7 1.4 9%
Portugal 28,170 2,535 432 17.0% 11.9% 3,632 0.4 8.4 1.4 3%
Other 55,929 5,034 846 16.8% 11.8% 7,171 0.8 8.5 1.4 7%
UK 103,475 8,795 2,254 25.6% 11.0% 20,490 2.2 9.1 2.3 20%
Latam 211,806 20,647 6,919 33.5% 11.9% 58,176 6.2 8.4 2.8 56%
Brazil 129,036 12,258 4,269 34.8% 11.8% 36,175 3.8 8.5 3.0 35%
Mexico 26,855 2,551 1,053 41.3% 11.8% 8,923 0.9 8.5 3.5 9%
Chile 29,081 2,617 957 36.6% 11.8% 8,114 0.9 8.5 3.1 8%
Other 26,834 3,220 640 19.9% 12.9% 4,964 0.5 7.8 1.5 5%
Sovereign 46,687 3,968 624 15.7% 11.5% 5,422 0.6 8.7 1.4 5%
Operating areas 669,025 60,617 13,723 22.6% 11.7% 117,918 12.5 8.6 1.9 113%
Corporate activities 58,620 11,893 -2,234 -18.8% 11.5% -13,402 -1.4 6.0 -1.1 -13%
Total 727,644 72,510 11,490 15.8% 11.7% 104,516 11.1 9.1 1.4 100%
Implied Value 2013 104,516

Per Share 11.57
1 yr. Forward NPV 9.49
NPV 2011-12 DPS 1.26
Target Price 10.75
Source: Exane BNP Paribas estimates
Figure 5: SAN’s net income estimates by business unit

2011E-2013E net income estimates by operating unit
(EURm) 2008 2009 2010 2011e 2012e 2013e
Continental Europe 4,668 5,031 3,885 3,815 3,873 3,927
Santander 1,907 2,005 1,243 1,181 1,193 1,211
Banesto 694 738 419 398 402 408
Consumer Finance 696 629 811 908 981 1,030
Portugal 531 531 456 420 426 432
Other 840 1,128 957 909 872 846
UK 1,247 1,726 1,985 2,084 2,188 2,254
Latin America 3,609 3,833 4,804 5,657 6,283 6,919

Brazil 1,769 2,167 2,836 3,403 3,811 4,269
Mexico 600 495 682 832 957 1,053
Chile 545 563 683 806 887 957
Other 695 609 603 615 628 640
Sovereign - -25 424 560 594 624
Operating areas 9,523 10,565 11,099 12,116 12,938 13,723

Total 8,876 8,943 8,181 9,015 10,864 11,490
Source: Exane BNP Paribas estimates, company data. Total includes negative results in the corporate centre
7 Spanish banks
Figure 6: BBVA's 1 yr forward valuation
€10.00 per share Valuation
Equity Net Profit Return on PV per Implicit Implicit
RWA Allocated 2013E All. Equity COE Valuation share (€) P/E13 P/BV 13 % Total
Spain and Portugal 134,703 11,450 1,759 15.4% 11.5% 15,294 3.2 8.7 1.3 29%
Mexico 48,904 4,646 2,376 51.1% 11.5% 20,658 4.3 8.7 4.4 39%
Banks 39,652 3,767 1,926 51.1% 16,750 3.5 8.7 32%
Pension and insurance 9,253 879 449 51.1% 3,908 0.8 8.7 7%
South America 33,619 3,698 1,108 30.0% 12.0% 9,232 1.9 8.3 2.5 17%
Banks 26,194 2,881 863 30.0% 7,193 1.5 8.3 14%
Pension and insurance 7,426 817 245 30.0% 2,039 0.4 8.3 4%
USA 37,491 3,187 412 12.9% 11.0% 3,748 0.8 9.1 1.2 7%
Wholesale and AM 79,079 8,303 994 12.0% 12.0% 8,282 1.7 8.3 1.0 16%
Corporate 46,629 4,896 586 12.0% 4,884 1.0 9%
Global markets 12,321 1,294 155 12.0% 1,290 0.3 2%
Other 20,129 2,114 253 12.0% 2,108 0.4 4%
Turkey 16,000 1,760 552 31.4% 12.4% 4,454 0.9 8.1 2.5 8%
Corporate centre 9,892 8,652 -1,281 11.5% -8,645 -1.8 -16%
Group 359,689 41,696 5,920 14.2% 11.6% 53,023 11.2 9.0 1.3 100%
Implied Value 2013 53,023

Per Share 11.15
1 yr. Forward NPV 9.15
NPV 2011-12 DPS 0.86
Target Price 10.00
Figure 7: BBVA’s net income estimates by business unit

2011E-2013E net income estimates by business unit
(EURm) 2008 2009 2010 2011e 2012e 2013e

Spain and Portugal 2,565 2,275 2,070 1,760 1,724 1,759
Mexico 1,938 1,357 1,707 2,033 2,251 2,376
Banks 1,733 1,117 1,390 1,668 1,834 1,926
Pension and insurance 210 246 317 365 416 449
South America 727 780 889 993 1,049 1,108
Banks 689 678 732 783 822 863
Pension and insurance 67 137 191 210 227 245
USA 211 -950 236 318 382 412
Wholesale and AM 773 852 950 949 967 994
Corporate 353 421 506 532 558 586
Global markets 129 283 142 146 150 155
Turkey 465 511 552
Group 5,020 4,210 4,606 4,769 5,443 5,920
Figure 8: Domestic Banks Valuation

Returns below the cost of capital
POP SAB BTO BKT PAS
DPS (€)
2011E 0.22 0.11 0.33 0.15 0.04
2012E 0.26 0.16 0.41 0.17 0.07
2013E 0.30 0.17 0.50 0.22 0.07
2014E 0.39 0.19 0.55 0.24 0.06
2015E 0.39 0.21 0.56 0.25 0.07
2020E (€m)
T. Equity 11,637 7,841 8,916 3,638 3,026
RoTE 9.2% 9.1% 8.8% 7.6% 6.4%
Ke 11.5% 11.5% 11.5% 11.5% 11.5%
Implied P/TBV 0.8 0.8 0.8 0.7 0.6
T. Equity Value 9,285 6,215 6,858 2,417 1,684
Expected value of dividends 4,532 3,062 3,272 1,263 781
1 yr forward NPV Valuation (€m) 6,289 4,114 4,637 1,657 1,018
Per Share (€) 4.00 2.60 6.75 3.50 3.00
8 Spanish banks
We value all the Spanish banks using a sustainable Return on Tangible Equity (ROTE)
approach. We adjust earnings to eliminate extraordinaries and non banking
subsidiaries and consider any excess / deficit of capital plus dividends. We then value
equity assuming a zero rate of growth beyond our explicit forecast period as the market
is unwilling to give banks credit for such development. Our SOTP approach for SAN
and BBVA is based on sustainable Returns by division.
The sector is trading at an average of 1.0x P/TBV, but we expect returns below the cost
of capital for the next three years for the domestic banks. We estimate that only SAN
and BBVA will be able to beat their cost of capital in the short to medium term.
An index of the pure domestic banks has outperformed the SX7P over the past 10
years. Most of the outperformance was related to the evolution during the bubble years.
In absolute terms, domestic banks have declined by 40% over the past decade.
Figure 9: Historical P/E and PBV

Banco Popular Banco Sabadell
12m P/E 12m P/BV 12m P/E 12m P/BV
5.0x 18.0x 4.0x
16.0x 4.5x
3.5x
16.0x
4.0x
14.0x 3.0x
3.5x
14.0x
12.0x 2.5x
3.0x
2.5x 12.0x 2.0x

10.0x
2.0x
1.5x
10.0x
8.0x 1.5x
1.0x
1.0x
6.0x 8.0x
0.5x
0.5x
4.0x 0.0x 6.0x 0.0x

Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
P / BVPS (rhs) P/E (lhs) P / BVPS (rhs) P/E (lhs)
Source: Exane BNP Paribas, Factset

Bankinter Banco Pastor
6.0x 5.0x
32.0x
4.5x
5.0x 26.0x
4.0x
27.0x
3.5x
4.0x
21.0x
3.0x
22.0x
3.0x 2.5x
16.0x 2.0x
17.0x
2.0x
1.5x
12.0x 11.0x 1.0x

1.0x
0.5x
7.0x 0.0x 6.0x 0.0x

Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10
Source: Exane BNP Paribas, Factset

Banesto Current Valuation versus 10 Year Historical Average
12m P/E 12m P/BV Current 10Y Historical Avg. Diff. Versus Hist. Avg.
18.0x 4.0x
P/E P/Bv P/E P/Bv P/E P/Bv
16.0x 3.5x Popular 11.7 0.7 11.8 2.3 -1% -70%
3.0x Bankinter 14.1 0.8 16.2 2.3 -13% -65%
14.0x
Sabadell 16.2 0.8 13.0 1.5 25% -47%
2.5x
12.0x Pastor 14.0 0.6 14.1 1.6 -1% -63%
2.0x
Banesto 9.0 0.8 11.3 1.8 -20% -56%
10.0x
1.5x Average 13.0 0.7 13.3 1.9 -2% -60%
8.0x
1.0x
6.0x 0.5x
4.0x 0.0x
Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10
P / BVPS (rhs) P/E (lhs)
Source: Exane BNP Paribas, Factset-consensus
9 Spanish banks
The domestic banks we cover are trading at an all time low in terms of Price to Book,
but that does not mean the stocks are cheap. It is true that the P/BV multiple stands
61% below the historical average but the ROE has declined, on average, in the same
proportion. Domestic banks trade, on average, at a 3% premium versus the past 10
years average in terms of P/E, and more importantly, a similar premium is also
maintained should we compare the ROTE with the P/TBV (see the figure below)
Figure 12: Domestic Spanish Banks Relative Evolution

Spanish Local banks versus SX7P Domestic Spanish Banks ROTE / P/TBV
200
14.0
180
160 13.0
140
12.0
120
100 11.0
80
60
10.0
40
9.0
20
- 8.0
Apr 01
Oct 01
Apr 02
Oct 02
Apr 03
Oct 03
Apr 04
Oct 04
Apr 05
Oct 05
Apr 06
Oct 06
Apr 07
Oct 07
Apr 08
Oct 08
Apr 09
Oct 09
Apr 10
Oct 10
7.0
SX7P Local Banks Index
6.0
5.0
Jul 06
Oct 06
Jan 07
Apr 07
Jul 07
Oct 07
Jan 08
Apr 08
Jul 08
Oct 08
Jan 09
Apr 09
Jul 09
Oct 09
Jan 10
Apr 10
Jul 10
Oct 10
Jan 11
Source: Exane BNP Paribas
Both SAN and BBVA have outperformed the SX7P over the past 10 years (although
SAN is the only bank to have posted a positive total return). The two companies are
trading at an average of 1.4x 2011 P/TBV with expect returns above 17%, according to
our estimates. Comparing the current P/TBV with the expected ROTE we see that both
companies are trading close to their historical averages.
Figure 13: SAN and BBVA relative evolution. Historical P/E and PBV
Santander BBVA
19.0x 5.0x 21.0x 5.0x
4.5x 19.0x 4.5x

17.0x
4.0x 17.0x 4.0x
15.0x
3.5x 3.5x
15.0x
13.0x
3.0x 3.0x
13.0x
11.0x 2.5x 2.5x
11.0x
2.0x 2.0x
9.0x
9.0x
1.5x 1.5x
7.0x
1.0x 7.0x 1.0x
5.0x 5.0x
0.5x 0.5x
3.0x 0.0x 3.0x 0.0x

Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10
Source: Exane BNP Paribas
10 Spanish banks
Figure 14: SAN and BBVA relative performance
SAN and BBVA versus SX7P (10 years) SAN and BBVA:ROTE / P/TBV
160 30.0
140
25.0
120
20.0
100
80
15.0
60
10.0
40
20 5.0
Jan 05
Apr 05
Jul 05
Jan 06
Apr 06
Jul 06
Jan 07
Apr 07
Jul 07
Jan 08
Apr 08
Jul 08
Jan 09
Apr 09
Jul 09
Jan 10
Apr 10
Jul 10
Jan 11
Oct 05
Oct 06
Oct 07
Oct 08
Oct 09
Oct 10
-
Jan 00
Jul 00
Jan 01
Jul 01
Jan 02
Jul 02
Jan 03
Jul 03
Jan 04
Jul 04
Jan 05
Jul 05
Jan 06
Jul 06
Jan 07
Jul 07
Jan 08
Jul 08
Jan 09
Jul 09
Jan 10
Jul 10
Jan 11
SAN BBVA
SX7P SAN BBVA
Source: Exane BNP Paribas, Bloomberg
Figure 15: EPS estimates versus consensus

Slightly below consensus
Exane EPS Versus Consensus
Company 2011e 2012e 2011 2012
SAN 1.00 1.18 -1% 2%
BBVA 1.01 1.14 -2% -5%
POP 0.34 0.41 4% -4%
SAB 0.20 0.27 7% 3%
BTO 0.66 0.82 -4% 0%
BKT 0.26 0.29 -11% -13%
PAS 0.21 0.33 -2% 5%
Average -2% -2%
Figure 16: Spanish banks at a glance

Main 2011E ratios
2011E SAN BBVA POP SAB BTO BKT PAS
P&L
2011e vs 2010 Growth
Loans (gross) 5.6% 2.5% 1.0% 1.3% -0.3% 0.8% 0.2%
NII 3.8% 1.5% -7.7% 6.8% -7.8% -7.1% -4.6%
Operating Profit 4.4% 0.7% -11.7% -4.7% -8.7% -8.8% -5.7%
EPS (stated) 6.9% -10.7% -17.7% -29.2% -0.7% -18.2% -11.9%
NIM 2.62% 2.57% 1.84% 1.69% 1.38% 0.96% 1.58%
Cost Income 43% 43% 42% 55% 42% 62% 53%
Risk Premium (bp end period) 130 130 140 109 90 44 85
ROA 0.7% 0.8% 0.4% 0.3% 0.4% 0.3% 0.2%
ROTE (stated) 18.6% 16.1% 7.1% 6.4% 8.3% 5.9% 4.4%
BALANCE SHEET
LTD (gross ex repos) 124% 152% 162% 156% 149% 217% 189%
Loans / Assets 60% 62% 78% 76% 63% 77% 75%
Deposits / Liabilities 52% 50% 47% 57% 44% 36% 54%
RWA / Assets 51% 59% 73% 63% 55% 56% 60%
NPL ratio 4.1% 5.0% 6.6% 6.6% 5.5% 3.6% 7.0%
Coverage 69% 60% 43% 54% 61% 62% 49%
Core Capital 9.0% 10.1% 9.5% 8.9% 8.6% 8.4% 10.2%
Tier 1 10.2% 11.0% 9.7% 10.1% 9.6% 9.1% 12.4%
PRODUCTIVITY
Employees / Branch 12.6 14.5 6.9 7.4 5.1 12.6 6.9
Business / employee (€m) 9 7 12 14 16 15 10
11 Spanish banks
Santander
Banks Spain
Outperform
Target price EUR10.8 (+30%)
Sector rating Neutral
Price (14 March 2011)

Market cap./Free float (EURbn)
EUR8.3
74.8/73.6
Santander story looks attractive
3m avg. volume (EURm) 542.7
Reuters/Bloomberg SAN.MC/SAN SM
Financial data 12/10 12/11e 12/12e 12/13e ► SAN offers diversified structural growth with a resilient
Adjusted EPS (EUR) 0.96 1.02 1.20 1.24
Reported EPS (EUR) 0.94 1.00 1.18 1.22 business model
EPS - IBES (EUR) 0.94 1.07 1.26 1.39 We expect the company to report EUR31bn in profits in the 2011-
BVPS (EUR) 8.51 8.94 9.47 10.01
Tangible BVPS (EUR) 5.22 5.66 6.21 6.78 2013 period with 9 different business each representing more than
DVPS (EUR) 0.60 0.60 0.72 0.76
5% of the bottom line.
Net att. profit rep. (EURm) 8,181 9,015 10,864 11,490
Net att. profit adj. (EURm) 8,418 9,227 11,064 11,690
Tangible BV (EUR) 46,021 51,092 57,406 64,080 ► The bank has high profitability levels and Tangible Equity
ROTE adj. (%) 19.1 19.0 20.4 19.2
Equity Tier 1 Ratio (%) 8.8 9.0 9.5 10.0 per share growth
We estimate an average 19% ROTE in the 2011-2013 period and
Stockmarket ratios* 12/10 12/11e 12/12e 12/13e
P/E (x) 9.8 8.1 6.9 6.7
a 9% p.a. Tangible Equity per share growth over the next three
P/BVPS (x) 1.11 0.93 0.87 0.83 years
P/Tangible BVPS (x) 1.81 1.46 1.33 1.22
- High (x) 2.30 1.65 - -
- Low (x) 1.40 1.31 - -
Net yield (%) 6.4 7.2 8.7 9.2
► Comfortable solvency and liquidity
Payout (%) 62.3 58.6 60.3 61.7 Liquidity seems manageable with average p.a. medium and long
* Yearly average price for FY ended 12/10
term maturities of 1.7% of total assets from 2011-2015 and we
Performance* (%) 1w 1m 3m 12m estimate the company could close 2013 with a core capital ratio
Absolute 0 (5) 0 (17) above 9.0% after consider the potential impact of Basle 3.
Rel. Banks 1 (0) (1) (13)
Rel, DJ STOXX50 3 0 2 (19)
* In listing currency, with dividend reinvested
Price relative to DJ STOXX50
► Some issues to monitor
20 We are concerned about the concentration in problematic markets
and pressure on earnings and, more importantly, about the capital
allocation and the long term strategy if size is pursued at the
15
expense of shareholder value creation.
10
0
Relative to DJ STOXX50 Santander
Santiago López Díaz, CFA

(+34)91 114 83 10
57 Spanish banks
Price at 14 Mar. 11 / Target Price
EUR8.3 / EUR10.8 +30% SANTANDER (Outperform)
Reuters / Bloom berg: SAN.MC / SAN SM Analys t: Santiago López Díaz (+34)91 114 83 10 Banks (Neutral) - Spain
Com pany Highlights EURm
14.0
Market capitalisation 74,785
Free float 73,589
11.0 Target P rice
3m average volume 543
Pe rform ance (*) 1m 3m 12m 9.0
A bsolute (5%) 0% (17%)
Rel. Sector (0%) (1%) (13%)
7.0
Rel. DJ STOXX50 0% 2% (19%)
12m Hi/Lo (EUR) : 10.8 -23% / 7.3 +13%
CAGR 2000/2011 2011/2013 5.0
EPS restated (**) 8% 10%
Book value 6% 6%
3.8
P rice 1.4*B o o k Val. Relative to D J ST OXX50
Price (yearly avg from Dec. 00 to Dec. 10) 10.4 9.6 7.4 6.8 8.1 9.2 11.4 13.0 10.4 8.6 9.4 8.3 8.3 8.3
PER SHARE DATA (EUR) De c. 00 De c. 01 De c. 02 De c. 03 De c. 04 De c. 05 De c. 06 De c. 07 De c. 08 De c. 09 De c. 10 De c. 11e De c. 12e De c. 13e
No of shares year end, basic, (m) 4,560.00 4,659.00 4,768.40 4,768.40 6,254.30 6,254.30 6,254.30 6,743.13 8,482.89 8,717.66 8,817.95 9,030.95 9,243.95 9,456.95
No of shares (avg), diluted, restated f or treasury stock 4,205.81 4,564.16 4,727.96 4,768.40 4,950.40 6,254.30 6,254.30 6,407.99 7,315.93 8,613.50 8,744.12 9,013.20 9,226.20 9,439.20
Reported EPS 0.5 0.5 0.5 0.5 0.7 1.0 1.2 1.4 1.2 1.0 0.9 1.0 1.2 1.2
A djusted EPS 0.5 0.5 0.5 0.5 0.7 0.9 1.1 1.3 1.2 1.1 1.0 1.0 1.2 1.2
% change 0.0% 13.1% (6.2%) 8.2% 24.6% 34.0% 27.0% 20.3% (8.8%) (11.7%) (10.4%) 6.3% 17.1% 3.3%
Book value (BV PS) 4.6 4.9 5.0 5.3 5.5 6.4 7.2 8.2 6.8 7.9 8.5 8.9 9.5 10.0
Tangible BV PS 1.5 2.3 2.6 3.4 2.6 3.5 4.2 5.6 4.2 4.8 5.2 5.7 6.2 6.8
Net dividend 0.3 0.3 0.3 0.3 0.3 0.4 0.5 0.7 0.6 0.6 0.6 0.6 0.7 0.8
STOCKMARKET RATIOS (x) YEARLY AV ERAGE PRICES for e nd De c. 00 to De c. 10 De c. 05 De c. 06 De c. 07 De c. 08 De c. 09 De c. 10 De c. 11e De c. 12e De c. 13e
P / E adjusted 22.9 18.6 15.3 13.1 12.5 10.6 10.3 9.7 8.6 8.0 9.8 8.1 6.9 6.7
P / E relative to DJ STOXX50 (%) 113% 77% 69% 82% 89% 80% 92% 89% 64% 69% 92% 83% 79% 81%
P / GOP 8.05 6.75 5.96 5.32 6.27 6.47 6.25 5.61 4.01 3.22 3.46 3.00 2.89 2.86
P / BV PS 2.28 1.95 1.47 1.30 1.48 1.45 1.59 1.59 1.54 1.09 1.11 0.93 0.87 0.83
P / Tangible BV PS 6.76 4.12 2.85 2.02 3.18 2.61 2.68 2.31 2.48 1.77 1.81 1.46 1.33 1.22
High (x) 7.60 4.97 3.78 2.58 3.50 2.95 3.15 2.49 3.24 2.47 2.30 1.65
Low (x) 5.96 2.78 1.76 1.38 2.82 2.37 2.31 2.09 1.22 0.82 1.40 1.31
Net yield (%) 2.6% 3.0% 3.9% 4.4% 4.1% 4.5% 4.6% 5.0% 6.1% 7.0% 6.4% 7.2% 8.7% 9.2%
Payout (%) 60.0% 56.0% 59.7% 57.9% 51.1% 47.7% 47.0% 48.8% 52.0% 55.9% 62.3% 58.6% 60.3% 61.7%
Payout on NA P reported (%) 50.9% 53.0% 60.7% 55.3% 45.7% 41.9% 42.9% 46.0% 52.1% 57.8% 64.1% 60.0% 61.4% 62.8%
P & L HIGHLIGHTS (EURm ) Sw itch to IFRS data from FY e nde d 12/05 De c. 04 De c. 05 De c. 06 De c. 07 De c. 08 De c. 09 De c. 10 De c. 11e De c. 12e De c. 13e
Net interest income 7,865 9,708 8,885 7,517 7,172 10,334 12,084 14,882 21,579 26,299 29,224 30,323 31,937 33,052
Net f ees and commissions 4,013 4,622 4,289 4,171 4,727 6,256 7,223 8,040 9,204 9,080 9,734 10,069 10,404 10,682
Trading prof it 702 685 356 999 1,100 1,562 2,180 2,998 2,666 3,423 2,606 2,658 2,711 2,766
Other income 1,179 1,070 753 849 999 1,181 1,129 1,174 869 580 485 469 460 470
Total Re ve nue s 13,759 16,086 14,284 13,535 13,999 19,333 22,615 27,095 34,318 39,381 42,049 43,519 45,513 46,970
Personnel costs (4,451) (5,258) (4,522) (4,049) (4,221) (5,619) (6,004) (6,510) (7,908) (8,450) (9,330) (9,518) (9,757) (10,052)
Other operating costs (2,965) (3,374) (3,027) (2,595) (2,513) (3,787) (4,092) (4,475) (5,985) (6,374) (6,926) (7,100) (7,279) (7,499)
Depreciation and amortisation (excl. goodw ill) (900) (987) (890) (763) (834) (1,017) (1,151) (1,268) (1,400) (1,596) (1,940) (1,998) (2,058) (2,099)
Total cos ts (8,316) (9,619) (8,438) (7,407) (7,568) (10,424) (11,247) (12,253) (15,293) (16,421) (18,196) (18,616) (19,094) (19,649)
Ope rating profit be fore provis ions 5,443 6,466 5,846 6,128 6,431 8,909 11,369 14,842 19,025 22,960 23,853 24,903 26,419 27,320
Bad debt charge (1,048) (1,586) (1,648) (1,496) (1,586) (1,615) (2,467) (3,470) (6,663) (9,484) (10,258) (10,210) (9,074) (9,048)
Other provisions
A ssociates
Others
Profit be fore tax, gdw and e xce ptionals 4,395 4,880 4,198 4,632 4,845 7,294 8,902 11,372 12,362 13,477 13,595 14,693 17,345 18,272
A mt of goodw ill 0 0 0 0 0 - - - - - - - - -
Exceptional items (1,063) (1,144) (1,090) (845) (322) 776 1,242 600 (573) (1,682) (1,570) (1,437) (1,369) (1,376)
Profit be fore tax 3,332 3,737 3,108 3,787 4,522 8,070 10,144 11,972 11,789 11,795 12,025 13,257 15,976 16,896
Tax (715) (910) (723) (869) (526) (1,320) (1,986) (2,392) (2,440) (2,336) (2,923) (3,182) (3,834) (4,055)
Minorities (359) (340) (138) (307) (390) (530) (562) (520) (473) (516) (921) (1,061) (1,278) (1,352)
Ne t attributable profit (NAP) re porte d 2,258 2,486 2,247 2,611 3,606 6,220 7,596 9,060 8,876 8,943 8,181 9,015 10,864 11,490
Ne t attributable profit adjus te d 1,916 2,351 2,283 2,492 3,225 5,461 6,933 8,544 8,894 9,251 8,418 9,227 11,064 11,690
BALANCE SHEET HIGHLIGHTS (EURm ) De c. 00 De c. 01 De c. 02 De c. 03 De c. 04 De c. 05 De c. 06 De c. 07 De c. 08 De c. 09 De c. 10 De c. 11e De c. 12e De c. 13e
Customer Loans 169,384 173,822 162,973 172,504 346,551 402,918 484,790 533,751 617,231 664,146 715,621 763,409 800,963 835,792
Securities 22,755 24,695 24,989 31,108 156,277 228,153 209,121 203,149 200,737 221,675 242,997 245,975 252,509 259,222
Intangibles 13,849 12,037 11,630 8,903 18,390 17,680 18,279 17,329 21,923 26,397 28,997 29,681 30,170 30,573
Other assets 142,940 147,584 124,617 139,276 143,268 160,357 121,682 158,686 209,740 198,311 229,885 236,566 242,607 247,326
Total assets 348,928 358,138 324,208 351,791 664,486 809,107 833,873 912,915 1,049,632 1,110,529 1,217,501 1,275,631 1,326,249 1,372,914
Customer Deposits 145,551 142,936 130,463 132,748 262,670 291,727 314,377 317,043 406,015 487,681 581,385 665,765 714,979 750,379
Shareholder's funds (excl treasury shares) 20,884 22,847 23,958 25,061 34,415 39,778 44,852 55,200 57,587 68,667 75,018 80,773 87,577 94,654
Tangible Book V alue 7,035 10,810 12,328 16,159 16,025 22,099 26,572 37,871 35,664 42,269 46,021 51,092 57,406 64,080
KEY DATA (EURm ) De c. 00 De c. 01 De c. 02 De c. 03 De c. 04 De c. 05 De c. 06 De c. 07 De c. 08 De c. 09 De c. 10 De c. 11e De c. 12e De c. 13e
Risk w eighted assets (Prevailing regulatory regime) 199,063 204,446 185,290 205,253 340,946 412,734 478,733 515,050 514,003 561,684 604,885 650,572 689,650 727,644
Risk w eighted assets (Basel 3 fully loaded) 727,644
Tier one capital 15,207 17,258 14,834 16,951 24,412 32,523 35,522 39,725 46,894 56,615 60,617 66,404 73,325 80,531
Equity tier 1 capital (Prevailing regulatory regime) 0 0 9,450 12,520 17,218 24,970 28,293 32,191 38,968 48,366 53,205 58,844 65,538 72,510
Equity tier 1 capital (Basel 3 f ully loaded) 67,053
NPL (Non Perf orming Loans) 4,518 3,895 3,700 3,277 4,208 4,356 4,613 6,070 13,968 24,027 27,908 31,908 35,908 38,408
Funds under management 88,648 95,247 93,338 108,903 170,859 197,518 177,828 159,986 131,061 144,313 145,547 155,431 163,863 172,774
Employees (year end) 129,640 115,706 104,178 103,038 128,985 125,367 129,749 131,819 170,961 169,460 178,869 180,658 183,368 187,035
YOY GROWTH (%) De c. 00 De c. 01 De c. 02 De c. 03 De c. 04 De c. 05 De c. 06 De c. 07 De c. 08 De c. 09 De c. 10 De c. 11e De c. 12e De c. 13e
Net interest income NC 23% (8%) (15%) (5%) 44% 17% 23% 45% 22% 11% 4% 5% 3%
Revenues NC 17% (11%) (5%) 3% 38% 17% 20% 27% 15% 7% 3% 5% 3%
Costs NC 16% (12%) (12%) 2% 38% 8% 9% 25% 7% 11% 2% 3% 3%
Operating prof it bef prov. NC 19% (10%) 5% 5% 39% 28% 31% 28% 21% 4% 4% 6% 3%
A djusted net attributable prof it NC 23% (3%) 9% 29% 69% 27% 23% 4% 4% (9%) 10% 20% 6%
Customer Loans NC 3% (6%) 6% 101% 16% 20% 10% 16% 8% 8% 7% 5% 4%
Customer Deposits NC (2%) (9%) 2% 98% 11% 8% 1% 28% 20% 19% 15% 7% 5%
RWA (***) NC 3% (9%) 11% 66% 21% 16% 8% (0%) 9% 8% 8% 6% 6%
FINANCIAL RATIOS (%) De c. 00 De c. 01 De c. 02 De c. 03 De c. 04 De c. 05 De c. 06 De c. 07 De c. 08 De c. 09 De c. 10 De c. 11e De c. 12e De c. 13e
Net interest margin (avg. tang. assets) 2.85% 2.70% 2.29% 1.45% 1.44% 1.50% 1.74% 2.24% 2.49% 2.57% 2.49% 2.51% 2.51%
Cost / Income ratio 60.4% 59.8% 59.1% 54.7% 54.1% 53.9% 49.7% 45.2% 44.6% 41.7% 43.3% 42.8% 42.0% 41.8%
Costs / avg. tang. A ssets NC 2.82% 2.56% 2.26% 1.53% 1.45% 1.40% 1.43% 1.59% 1.56% 1.60% 1.53% 1.50% 1.49%
Bad debt charge / average outstanding loans 1.24% 0.92% 0.98% 0.89% 0.61% 0.43% 0.56% 0.68% 1.16% 1.48% 1.49% 1.38% 1.16% 1.11%
Bad debt charge / RWA (***) 0.79% 0.85% 0.77% 0.58% 0.43% 0.55% 0.70% 1.29% 1.76% 1.76% 1.63% 1.35% 1.28%
Tax rate 21.5% 24.4% 23.3% 23.0% 11.6% 16.4% 19.6% 20.0% 20.7% 19.8% 24.3% 24.0% 24.0% 24.0%
ROE adjusted NC NC 19.1% 10.3% 11.9% 16.3% 17.5% 18.5% 16.7% 15.5% 12.5% 12.3% 13.7% 13.3%
ROTE adjusted 26.3% 19.7% 17.5% 20.0% 28.6% 28.5% 26.5% 24.2% 23.7% 19.1% 19.0% 20.4% 19.2%
RORWA adjusted (***) 1.17% 1.17% 1.28% 1.18% 1.45% 1.56% 1.72% 1.73% 1.72% 1.44% 1.47% 1.65% 1.65%
ROTA 0.69% 0.69% 0.76% 0.65% 0.76% 0.86% 1.00% 0.92% 0.88% 0.74% 0.76% 0.87% 0.89%
Tier one Ratio 7.6% 8.4% 8.0% 8.3% 7.2% 7.9% 7.4% 7.7% 9.1% 10.1% 10.0% 10.2% 10.6% 11.1%
Equity tier 1 ratio (Prevailing regulatory regime) 5.1% 6.1% 5.1% 6.1% 5.9% 6.3% 7.6% 8.6% 8.8% 9.0% 9.5% 10.0%
Equity tier 1 ratio (Basel 3 f ully loaded) 9.2%
Loans / Deposits 116% 122% 125% 130% 132% 138% 154% 168% 152% 136% 123% 115% 112% 111%
RWA (***) / Loans 118% 118% 114% 119% 98% 102% 99% 96% 83% 85% 85% 85% 86% 87%
Loans / A ssets 49% 49% 50% 49% 52% 50% 58% 58% 59% 60% 59% 60% 60% 61%
Deposits / A ssets 42% 40% 40% 38% 40% 36% 38% 35% 39% 44% 48% 52% 54% 55%
NPL / Outstanding loans (Gross) 2.59% 2.18% 2.20% 1.84% 1.19% 1.06% 0.94% 1.12% 2.22% 3.52% 3.80% 4.06% 4.35% 4.46%
NPL coverage Ratio 108% 130% 133% 156% 163% 175% 177% 143% 89% 74% 71% 69% 67% 68%
Latest Model update : 29 Jul. 05 (*) In listing currency, w ith div. reinvested, (**) also adjusted f or am. of intangibles f rom M&A , or f or am. of gw ill f or pre IFRS years, (***) Based on stated RWA
59 Spanish banks
BBVA
Banks Spain
Neutral
Target price EUR10 (+13%)

EUR8.8
41.9/39.8
Neutral on BBVA’s shares
Reuters/Bloomberg BBVA.MC/BBVA SM
Financial data 12/10 12/11e 12/12e 12/13e ► Emerging market bet with high profitability
Adjusted EPS (EUR) 1.12 1.00 1.12 1.20
Reported EPS (EUR) 1.13 1.01 1.14 1.22 We expect the company to deliver EUR16bn in profits in the 2011-
EPS - IBES (EUR) 1.17 1.08 1.29 1.40 2013 period with Spain representing 25%-30% of the bottom line
BVPS (EUR) 7.66 8.28 8.96 9.69
Tangible BVPS (EUR) 5.95 6.59 7.31 8.06 (most of the earnings growth will be related to Mexico and Turkey).
DVPS (EUR) 0.42 0.42 0.47 0.51
Net att. profit rep. (EURm) 4,606 4,769 5,443 5,920 ► Slowdown in NPL formation and comfortable liquidity
Net att. profit adj. (EURm) 4,550 4,705 5,372 5,847
Tangible BV (EUR) 27,912 31,341 35,255 39,511 The stock of NPLs remained virtually unchanged during 2010 and
ROTE adj. (%) 18.2 15.9 16.1 15.6
Equity Tier 1 Ratio (%) 9.6 10.1 10.7 11.6 average medium and long term wholesale maturities of 2.0% of
the liability base p.a. in the 2011-2015 seem manageable.
P/E (x) 8.4 8.8 7.9 7.3
P/BVPS (x) 1.22 1.06 0.98 0.91 ► Capital accumulation
P/Tangible BVPS (x) 1.57 1.34 1.21 1.09
- High (x) 2.12 1.43 - - We believe the bank might be able to accumulate 66bp of core
- Low (x) 1.19 1.05 - -
Net yield (%) 4.5 4.8 5.4 5.8
capital p.a. over the next three years for a core capital ratio
Payout (%) 37.6 42.3 42.3 42.2 approaching 11% by 2013 after Basle 3 has been considered
Performance* (%) 1w 1m 3m 12m ► The story has some negatives, however

Absolute 5 (0) 11 (10) The bank faces declining marginal returns as we believe the
Rel. Banks 6 5 10 (7)
Rel, DJ STOXX50 8 5 13 (12) unusually high returns on tangible equity are unlikely to be
Price relative to DJ STOXX50
replicated in the short to medium term given the enlarged capital
20 base. We are also concerned about the medium term strategy of
the company given that, in our opinion, some of the major strategic
decisions might be questioned and some of the large deals the
15
company has executed have not created value for shareholders.
10
0
Relative to DJ STOXX50 BBVA

(+34)91 114 83 10
60 Spanish banks
EUR8.8 / EUR10 +13% BBVA (Neutral)
Reuters / Bloom berg: BBVA.MC / BBVA SM Analys t: Santiago López Díaz (+34)91 114 83 10 Banks (Neutral) - Spain
20.0
Free float 39,755
3m average volume 391 14.0
Pe rform ance (*) 1m 3m 12m
A bsolute (0%) 11% (10%)
10.0 Target P rice
Rel. Sector 5% 10% (7%)
Rel. DJ STOXX50 5% 13% (12%)
12m Hi/Lo (EUR) : 10.9 -19% / 6.9 +27%
CAGR 2000/2011 2011/2013 6.0
EPS restated (**) 4% 10%
Book value 6% 8%
4.3
Reported EPS 0.7 0.7 0.5 0.7 0.9 1.1 1.4 1.7 1.3 1.1 1.1 1.0 1.1 1.2
A djusted EPS 0.6 0.7 0.6 0.7 0.8 1.1 1.3 1.6 1.2 1.1 1.1 1.0 1.1 1.2
% change 0.0% 15.6% (16.1%) 8.7% 25.0% 33.3% 15.4% 23.6% (21.1%) (7.4%) (2.6%) (10.8%) 12.6% 7.2%
Book value (BV PS) 4.2 4.2 3.9 3.9 3.9 4.8 6.1 7.2 6.8 7.4 7.7 8.3 9.0 9.7
Tangible BV PS 2.9 2.7 2.5 2.7 3.6 4.2 5.1 5.0 4.6 5.6 6.0 6.6 7.3 8.1
Net dividend 0.4 0.4 0.4 0.4 0.4 0.5 0.6 0.7 0.6 0.4 0.4 0.4 0.5 0.5
P / E adjusted 23.6 19.4 17.8 13.3 13.2 11.8 13.0 10.9 9.5 8.1 8.4 8.8 7.9 7.3
P / GOP 9.53 7.50 6.17 5.33 6.53 6.44 6.33 6.54 4.17 2.88 3.19 3.46 3.38 3.37
P / BV PS 3.57 3.38 2.80 2.27 2.82 2.69 2.72 2.37 1.71 1.26 1.22 1.06 0.98 0.91
P / Tangible BV PS 5.15 5.17 4.27 3.23 3.01 3.08 3.21 3.41 2.55 1.67 1.57 1.34 1.21 1.09
High (x) 5.83 6.07 5.39 3.86 3.48 3.47 3.64 3.84 3.47 2.27 2.12 1.43
Low (x) 4.10 3.35 2.75 2.43 2.72 2.73 2.78 2.98 1.50 0.80 1.19 1.05
Net yield (%) 2.5% 2.7% 3.2% 4.4% 4.1% 4.1% 3.9% 4.3% 5.2% 4.5% 4.5% 4.8% 5.4% 5.8%
Payout (%) 59.1% 52.5% 57.6% 58.2% 53.6% 48.3% 50.4% 46.5% 49.3% 36.6% 37.6% 42.3% 42.3% 42.2%
Net f ees and commissions 3,369 4,038 3,668 3,263 3,413 3,940 4,335 4,559 4,527 4,430 4,537 4,684 4,772 4,883
Trading prof it 779 490 765 652 1,060 1,267 2,034 1,956 1,558 1,544 1,894 1,799 1,835 1,872
Other income 589 393 391 847 743 901 1,338 1,128 1,206 810 1,159 1,181 1,202 1,226
Total Re ve nue s 11,732 13,745 12,274 11,039 11,121 13,024 15,701 17,271 18,977 20,666 20,910 21,189 21,859 22,355
Personnel costs (3,774) (4,243) (3,698) (3,263) (3,247) (3,602) (3,989) (4,335) (4,716) (4,651) (4,814) (4,963) (5,117) (5,329)
Other operating costs (2,340) (2,768) (2,335) (1,987) (1,834) (2,150) (2,357) (2,918) (3,040) (3,011) (3,392) (3,408) (3,424) (3,440)
Depreciation and amortisation (excl. goodw ill) (653) (742) (631) (511) (448) (449) (472) (577) (699) (697) (761) (791) (823) (856)
Total cos ts (6,767) (7,753) (6,664) (5,761) (5,529) (6,200) (6,818) (7,830) (8,455) (8,358) (8,967) (9,162) (9,364) (9,625)
Bad debt charge (973) (1,919) (1,743) (1,277) (958) (854) (1,504) (1,904) (2,941) (5,473) (4,718) (4,640) (4,211) (3,769)
Other provisions
A ssociates
Others
Profit be fore tax, gdw and e xce ptionals 3,992 4,073 3,867 4,001 4,633 5,969 7,380 7,538 7,582 6,835 7,225 7,386 8,284 8,961
A mt of goodw ill 0 0 0 0 0 - - - - - - - - -
Exceptional items (116) (439) (748) (189) (496) (377) (349) 957 (656) (1,099) (802) (762) (724) (739)
Profit be fore tax 3,876 3,634 3,119 3,812 4,137 5,592 7,030 8,495 6,926 5,736 6,423 6,624 7,560 8,222
Tax (962) (625) (653) (915) (1,029) (1,521) (2,059) (2,080) (1,541) (1,141) (1,427) (1,457) (1,663) (1,809)
Minorities (682) (646) (747) (670) (186) (264) (235) (289) (365) (385) (389) (397) (454) (493)
Ne t attributable profit (NAP) re porte d 2,232 2,363 1,719 2,227 2,923 3,806 4,736 6,126 5,020 4,210 4,606 4,769 5,443 5,920
Ne t attributable profit adjus te d 2,001 2,313 1,941 2,110 2,772 3,731 4,326 5,657 4,642 4,358 4,550 4,705 5,372 5,847
Customer Loans 137,467 150,220 141,315 148,827 172,083 216,850 256,565 313,178 335,260 323,442 338,857 346,341 354,791 364,714
Securities 72,624 81,816 68,901 71,881 103,319 109,426 100,985 117,519 128,115 141,028 132,460 132,133 132,605 134,787
Intangibles 4,075 4,617 4,257 3,707 821 2,070 3,269 8,244 8,440 7,248 8,007 8,007 8,007 8,007
Other assets 81,979 72,593 65,069 62,735 53,218 64,043 51,097 62,785 70,836 63,347 73,414 76,354 79,187 82,145
Total assets 296,145 309,246 279,542 287,150 329,441 392,389 411,916 501,726 542,650 535,065 552,738 562,835 574,590 589,653
Tier one capital 15,117 14,872 13,680 14,432 14,666 16,279 19,573 19,559 22,364 27,254 33,022 36,451 40,365 44,621
Equity tier 1 capital (Prevailing regulatory regime) 11,111 10,523 9,605 10,541 10,868 12,151 15,548 15,546 17,552 23,191 30,097 33,526 37,440 41,696
NPL (Non Perf orming Loans) 2,799 2,675 3,473 2,673 1,819 2,346 2,491 3,358 8,358 15,136 15,249 17,749 19,749 21,249
Net interest income NC 26% (16%) (16%) (6%) 17% 16% 20% 21% 19% (4%) 2% 4% 2%
Revenues NC 17% (11%) (10%) 1% 17% 21% 10% 10% 9% 1% 1% 3% 2%
Costs NC 15% (14%) (14%) (4%) 12% 10% 15% 8% (1%) 7% 2% 2% 3%
Operating prof it bef prov. NC 21% (6%) (6%) 6% 22% 30% 6% 11% 17% (3%) 1% 4% 2%
A djusted net attributable prof it NC 16% (16%) 9% 31% 35% 16% 31% (18%) (6%) 4% 3% 14% 9%
Customer Loans NC 9% (6%) 5% 16% 26% 18% 22% 7% (4%) 5% 2% 2% 3%
Customer Deposits NC 8% (12%) (4%) 6% 22% 5% 14% 16% (0%) 9% 2% 4% 3%
RWA (***) NC 3% (7%) 4% 7% 20% 16% 6% 6% 3% 8% 6% 6% 3%
Tax rate 24.8% 17.2% 20.9% 24.0% 24.9% 27.2% 29.3% 24.5% 22.3% 19.9% 22.2% 22.0% 22.0% 22.0%
ROE adjusted 30.2% 17.4% 14.9% 16.7% 22.1% 27.2% 25.7% 26.2% 18.3% 16.2% 15.1% 13.4% 13.6% 13.5%
ROTE adjusted 25.9% 23.1% 25.1% 26.5% 28.2% 26.6% 30.5% 25.8% 22.2% 18.2% 15.9% 16.1% 15.6%
RORWA adjusted (***) 1.34% 1.15% 1.27% 1.58% 1.87% 1.84% 2.17% 1.68% 1.52% 1.51% 1.46% 1.57% 1.65%
ROTA 0.78% 0.67% 0.76% 0.91% 1.04% 1.08% 1.25% 0.90% 0.82% 0.85% 0.86% 0.96% 1.02%
Tier one Ratio 8.9% 8.5% 8.4% 8.5% 8.1% 7.5% 7.8% 7.3% 7.9% 9.4% 10.5% 11.0% 11.5% 12.4%
Equity tier 1 ratio (Prevailing regulatory regime) 6.6% 6.0% 5.9% 6.2% 6.0% 5.6% 6.2% 5.8% 6.2% 8.0% 9.6% 10.1% 10.7% 11.6%
Loans / Deposits 89% 90% 96% 106% 115% 119% 133% 143% 131% 127% 123% 123% 121% 121%
RWA (***) / Loans 123% 116% 115% 114% 105% 100% 98% 86% 85% 90% 92% 96% 99% 99%
Loans / A ssets 46% 49% 51% 52% 52% 55% 62% 62% 62% 60% 61% 62% 62% 62%
Deposits / A ssets 52% 54% 52% 49% 45% 47% 47% 44% 47% 48% 50% 50% 51% 51%
Latest Model update : 14 Mar. 11 (*) In listing currency, w ith div. reinvested, (**) also adjusted f or am. of intangibles f rom M&A , or f or am. of gw ill f or pre IFRS years, (***) Based on stated RWA
62 Spanish banks
Popular
Banks Spain
Underperform
Target price EUR4.00 (-8%)

EUR4.33
6.8/4.3
Better solvency but limited profitability
Reuters/Bloomberg POP.MC/POP SM
Financial data 12/10 12/11e 12/12e 12/13e ► Improvement in solvency

Adjusted EPS (EUR) 0.39 0.33 0.40 0.46
Reported EPS (EUR) 0.42 0.34 0.41 0.47 After a series of capital increases the bank has been able to
EPS - IBES (EUR) 0.42 0.38 0.49 0.57 improve its core capital ratio to 9.4% at the end of Dec 2010,
BVPS (EUR) 5.19 5.35 5.53 5.74
Tangible BVPS (EUR) 4.78 4.92 5.10 5.30 which, coupled with internal capital generation should be enough
DVPS (EUR) 0.31 0.22 0.26 0.30
to deal with an expected 19bp impact related to Basle 3 by 2013.
Net att. profit rep. (EURm) 590.2 538.5 641.7 737.7
Net att. profit adj. (EURm) 554 522 625 721
Tangible BV (EUR) 7,514 7,744 8,019 8,337 ► …but at the expense of profitability
ROTE adj. (%) 7.2 6.8 7.9 8.8
Equity Tier 1 Ratio (%) 9.4 9.5 9.5 9.5 We expect the company to deliver an average ROTE of approx.
8% over the next three years, below the company’s cost of capital.
P/E (x) 12.3 13.0 10.9 9.5
P/BVPS (x) 0.93 0.81 0.78 0.75 ► Uncertain environment
P/Tangible BVPS (x) 1.01 0.88 0.85 0.82
- High (x) 1.26 0.94 - - The bank might continue to deliver as efficiently as any bank in the
- Low (x) 0.80 0.72 - -
Net yield (%) 6.4 5.0 5.9 6.8
country but marginal improvements would be difficult to achieve
Payout (%) 79.2 64.9 64.6 64.4 going forward. POP solvency and liquidity position seem
manageable but we expect provisions to remain relatively high to
Performance* (%) 1w 1m 3m 12m deal with losses in the credit portfolio once generic provisions are
Absolute 5 1 5 (18) consumed. In our view, profitability is unlikely to return to the pre
Rel. Banks 5 7 4 (15)
Rel, DJ STOXX50 8 7 6 (20) crisis levels any time soon and a rising interest rate environment
Price relative to DJ STOXX50 might continue to negatively affect results through credit losses
16 and low volume growth.
14
12
10
2
Relative to DJ STOXX50 Popular

(+34)91 114 83 10
63 Spanish banks
EUR4.33 / EUR4.00 -8% POPULAR (Underperform)
Reuters / Bloom berg: POP.MC / POP SM Analys t: Santiago López Díaz (+34)91 114 83 10 Banks (Neutral) - Spain
20.0
Free float 4,307 16.0
12.0
A bsolute 1% 5% (18%)
Rel. Sector 7% 4% (15%) 8.0
Rel. DJ STOXX50 7% 6% (20%)
12m Hi/Lo (EUR) : 6.0 -28% / 3.54 +22%
CAGR 2001/2011 2011/2013
EPS restated (**) (4%) 17% 4.0 Target P rice
Book value 10% 4%
3.2
Reported EPS 0.5 0.5 0.6 0.6 0.6 0.7 0.8 1.0 0.9 0.6 0.4 0.3 0.4 0.5
A djusted EPS 0.5 0.5 0.6 0.6 0.6 0.7 0.8 1.0 0.8 0.6 0.4 0.3 0.4 0.5
% change 0.0% 15.5% 10.6% 9.2% (10.1%) 27.8% 15.2% 22.9% (18.4%) (31.5%) (32.3%) (14.9%) 19.7% 15.3%
Book value (BV PS) 1.9 2.1 2.1 2.9 3.3 4.1 4.6 5.1 5.5 5.9 5.2 5.3 5.5 5.7
Tangible BV PS 1.9 2.1 2.1 2.6 3.0 3.8 4.3 4.7 5.0 5.5 4.8 4.9 5.1 5.3
Net dividend 0.2 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.5 0.4 0.3 0.2 0.3 0.3
P / E adjusted 14.4 14.6 14.3 13.3 16.3 13.8 14.3 13.3 10.4 10.2 12.3 13.0 10.9 9.5
P / GOP 7.00 7.18 6.89 6.26 6.76 6.97 7.25 7.41 4.56 2.71 3.18 3.59 3.58 3.48
P / BV PS 3.45 3.60 3.97 2.92 2.81 2.44 2.63 2.67 1.60 1.00 0.93 0.81 0.78 0.75
P / Tangible BV PS 3.46 3.65 3.98 3.26 3.10 2.63 2.82 2.91 1.75 1.06 1.01 0.88 0.85 0.82
High (x) 4.12 4.02 4.56 3.68 3.33 2.79 3.24 3.41 2.42 1.38 1.26 0.94
Low (x) 2.85 3.07 3.44 2.84 2.87 2.49 2.36 2.43 1.11 0.60 0.80 0.72
Net yield (%) 3.6% 3.5% 3.6% 3.8% 3.5% 3.6% 3.1% 3.2% 5.7% 6.8% 6.4% 5.0% 5.9% 6.8%
Payout (%) 52.6% 51.8% 51.6% 50.7% 57.7% 48.9% 44.8% 42.1% 59.5% 69.7% 79.2% 64.9% 64.6% 64.4%
Net f ees and commissions 537 567 573 608 660 790 881 883 865 763 747 726 722 734
Trading prof it 119 45 29 32 66 58 111 124 129 405 199 189 180 183
Other income 14 15 36 43 34 46 85 112 128 64 64 67 70 72
Total Re ve nue s 1,790 2,019 2,198 2,451 2,522 2,764 3,107 3,403 3,657 4,054 3,462 3,245 3,275 3,358
Personnel costs (477) (539) (552) (597) (639) (665) (706) (756) (818) (792) (784) (807) (815) (823)
Other operating costs (228) (250) (265) (280) (226) (274) (282) (303) (398) (396) (433) (441) (454) (477)
Total cos ts (773) (857) (885) (953) (959) (1,038) (1,091) (1,159) (1,317) (1,293) (1,313) (1,347) (1,369) (1,402)
Bad debt charge (102) (191) (244) (316) (533) (349) (349) (342) (1,112) (2,147) (1,834) (1,388) (1,258) (1,181)
Other provisions
A ssociates
Others
Profit be fore tax, gdw and e xce ptionals 915 971 1,069 1,182 1,030 1,377 1,668 1,903 1,228 615 315 510 647 775
A mt of goodw ill 0 0 0 0 0 - - - - - - - - -
Exceptional items (104) (119) (13) 23 16 38 56 40 273 458 518 233 238 242
Profit be fore tax 811 852 1,055 1,205 1,046 1,415 1,723 1,943 1,501 1,073 833 743 885 1,018
Tax (283) (238) (368) (427) (347) (477) (632) (607) (390) (293) (228) (193) (230) (265)
Minorities (37) (49) (54) (64) (48) (60) (65) (76) (59) (14) (14) (11) (13) (15)
Ne t attributable profit (NAP) re porte d 491 565 633 714 651 878 1,026 1,260 1,052 766 590 538 642 738
Ne t attributable profit adjus te d 494 570 631 705 649 875 1,021 1,254 1,021 732 554 522 625 721
Customer Loans 22,963 27,368 33,711 43,467 53,426 65,011 75,898 86,643 91,523 94,956 96,032 96,380 97,528 99,257
Securities 895 1,119 673 584 1,938 2,587 3,686 5,886 5,466 15,067 18,266 19,153 19,897 20,489
Intangibles 6 34 7 342 356 363 369 525 547 487 657 670 684 697
Other assets 7,492 8,871 7,604 8,146 7,857 9,737 11,697 14,115 12,840 18,779 15,184 15,356 15,537 15,725
Total assets 31,356 37,392 41,996 52,539 63,576 77,698 91,650 107,169 110,376 129,290 130,140 131,559 133,646 136,169
Tier one capital 2,579 3,060 3,683 4,635 4,489 5,692 6,190 7,040 7,476 8,506 9,070 9,317 9,610 9,947
NPL (Non Perf orming Loans) 201 248 345 406 600 581 611 821 2,853 5,334 5,826 6,526 7,026 7,426
Net interest income NC 24% 12% 13% (0%) 6% 9% 12% 11% 11% (13%) (8%) 2% 3%
Revenues NC 13% 9% 12% 3% 10% 12% 10% 7% 11% (15%) (6%) 1% 3%
Costs NC 11% 3% 8% 1% 8% 5% 6% 14% (2%) 2% 3% 2% 2%
Operating prof it bef prov. NC 14% 13% 14% 4% 10% 17% 11% 4% 18% (22%) (12%) 0% 3%
A djusted net attributable prof it NC 15% 11% 12% (8%) 35% 17% 23% (19%) (28%) (24%) (6%) 20% 15%
Customer Loans NC 19% 23% 29% 23% 22% 17% 14% 6% 4% 1% 0% 1% 2%
Customer Deposits NC 11% 5% 5% 26% 11% 6% 15% 21% 15% 33% (12%) 3% 3%
RWA (***) NC 21% 22% 24% 28% 21% 18% 7% 4% 0% 1% 2% 3% 3%
Tax rate 34.9% 27.9% 34.8% 35.5% 33.2% 33.7% 36.7% 31.3% 26.0% 27.3% 27.4% 26.0% 26.0% 26.0%
ROE adjusted 47.8% 26.8% 28.1% 27.8% 20.6% 22.1% 21.1% 22.4% 16.5% 10.4% 7.0% 6.3% 7.4% 8.3%
ROTE adjusted 26.3% 27.7% 27.1% 20.4% 21.7% 20.8% 23.0% 17.1% 10.4% 7.2% 6.8% 7.9% 8.8%
RORWA adjusted (***) 2.10% 1.91% 1.73% 1.26% 1.36% 1.33% 1.46% 1.13% 0.79% 0.59% 0.55% 0.64% 0.72%
ROTA 1.66% 1.59% 1.50% 1.12% 1.24% 1.21% 1.27% 0.94% 0.61% 0.43% 0.40% 0.47% 0.54%
Tier one Ratio 10.5% 10.3% 10.1% 10.2% 7.7% 8.1% 7.5% 7.9% 8.1% 9.2% 9.7% 9.7% 9.7% 9.7%
Loans / Deposits 112% 121% 142% 175% 171% 187% 205% 203% 177% 159% 121% 138% 136% 134%
RWA (***) / Loans 107% 109% 108% 104% 108% 108% 109% 103% 101% 97% 98% 100% 101% 103%
Loans / A ssets 73% 73% 80% 83% 84% 84% 83% 81% 83% 73% 74% 73% 73% 73%
Deposits / A ssets 65% 60% 56% 47% 49% 45% 40% 40% 47% 46% 61% 53% 54% 54%
65 Spanish banks
Banco Sabadell
Banks Spain
Underperform

EUR3.15
5.0/4.0
GUI integration during 2011
Reuters/Bloomberg SABE.MC/SAB SM
Financial data 12/10 12/11e 12/12e 12/13e ► Pending integration of Banco Guipuzcoano
Adjusted EPS (EUR) 0.27 0.19 0.27 0.29
Reported EPS (EUR) 0.28 0.20 0.27 0.30 Banco Sabadell needs to fully integrate the recently acquired
EPS - IBES (EUR) 0.32 0.25 0.32 0.36 Banco Guipuzcoano during 2010, which is likely to significantly
BVPS (EUR) 3.88 3.67 3.80 3.95
Tangible BVPS (EUR) 3.31 3.14 3.27 3.41 affect the EPS evolution going forward given the capital increase
DVPS (EUR) 0.15 0.11 0.16 0.17
to finance the acquisition. We expect a 29% decline in EPS on a
fully diluted basis in 2011.
Tangible BV (EUR) 4,823 4,968 5,173 5,395
ROTE adj. (%) 7.7 6.1 8.3 8.7
Equity Tier 1 Ratio (%) 8.2 8.9 8.8 8.9 ► New CREA plan
The company recently presented its 2011-2103 strategic plan
P/E (x) 14.0 16.5 11.8 10.9
CREA with the aim to leverage its existing franchise and target
P/BVPS (x) 0.96 0.86 0.83 0.80 new clients within its current footprint. The company aims to gain
P/Tangible BVPS (x) 1.12 1.00 0.96 0.92
- High (x) 1.37 1.16 - - market share and attract 1m new clients, growing market share by
- Low (x) 0.89 0.89 - -
Net yield (%) 4.0 3.6 4.9 5.4 more than one percentage point.
Payout (%) 56.4 58.8 58.5 58.3
► Results under pressure
Performance* (%) 1w 1m 3m 12m SAB has successfully integrated several franchises over the past
Absolute 4 3 0 (23) few years but critical mass has been reached in some cases at the
Rel. Banks 5 9 (1) (20)
Rel, DJ STOXX50 7 10 2 (25) expense of shareholder value creation. An economic environment
Price relative to DJ STOXX50 with low volume growth, margin pressure and relatively high
10 provisions (due to the consumption of generics) is likely to add
pressure to the structural generation of results. For 2011 we
expect a more than 70% reduction in SAB’s fully diluted EPS
8
compared with the 2006 numbers. We also expect ROTE of just
8.0% (below the cost of capital) for the next three years.
6
2
Relative to DJ STOXX50 Banco Sabadell

(+34)91 114 83 10
66 Spanish banks
EUR3.15 / EUR2.60 -17% BANCO SABADELL (Underperform)
Reuters / Bloom berg: SABE.MC / SAB SM Analys t: Santiago López Díaz (+34)91 114 83 10 Banks (Neutral) - Spain
10.0
9.0
Free float 3,963
7.0
A bsolute 3% 0% (23%)
Rel. Sector 9% (1%) (20%) 5.0
Rel. DJ STOXX50 10% 2% (25%)
12m Hi/Lo (EUR) : 4.53 -31% / 2.80 +12%
CAGR 2001/2011 2011/2013
EPS restated (**) (2%) 23% 3.0
Book value 3% 4% Target P rice
2.5
Price (yearly avg from Dec. 00 to Dec. 10) 3.8 3.4 3.5 4.1 5.1 6.8 7.9 5.7 4.3 3.7 3.1 3.1 3.1
No of shares year end, basic, (m) 816.01 816.01 816.01 816.01 1,224.01 1,224.01 1,224.01 1,224.01 1,200.00 1,300.34 1,457.25 1,583.55 1,583.55 1,583.55
No of shares (avg), diluted, restated f or treasury stock 816.01 816.01 816.01 816.01 1,224.01 1,224.01 1,224.01 1,224.01 1,212.01 1,274.36 1,357.29 1,573.02 1,583.55 1,583.55
Reported EPS 0.2 0.3 0.3 0.3 0.3 0.4 0.7 0.6 0.6 0.4 0.3 0.2 0.3 0.3
A djusted EPS 0.2 0.2 0.2 0.2 0.2 0.4 0.6 0.6 0.4 0.3 0.3 0.2 0.3 0.3
% change NS 16.7% 1.4% (0.1%) (10.8%) 59.0% 80.5% (8.9%) (28.6%) (16.9%) (22.2%) (28.5%) 39.6% 8.6%
Book value (BV PS) 1.9 2.9 2.5 2.7 2.4 2.9 3.4 3.7 3.7 4.1 3.9 3.7 3.8 3.9
Tangible BV PS 1.5 2.0 2.2 2.4 2.2 2.8 2.9 3.2 3.1 3.5 3.3 3.1 3.3 3.4
Net dividend 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.3 0.3 0.2 0.2 0.1 0.2 0.2
P / E adjusted 15.4 13.8 14.0 18.5 14.4 10.7 13.6 13.7 12.6 14.0 16.5 11.8 10.9
P / E relative to DJ STOXX50 (%) 64% 62% 88% 133% 109% 96% 125% 102% 109% 130% 170% 135% 132%
P / GOP 6.56 8.31 5.50 7.66 8.50 10.20 9.49 6.16 4.14 4.45 4.57 4.56 4.44
P / BV PS 1.32 1.37 1.30 1.69 1.77 1.99 2.11 1.53 1.06 0.96 0.86 0.83 0.80
P / Tangible BV PS 1.91 1.55 1.45 1.83 1.80 2.34 2.50 1.83 1.22 1.12 1.00 0.96 0.92
High (x) 2.23 1.71 1.70 1.95 1.97 2.88 2.90 2.32 1.47 1.37 1.16
Low (x) 1.55 1.31 1.15 1.69 1.49 1.88 2.00 1.48 0.82 0.89 0.89
Net yield (%) 3.3% 3.6% 3.6% 3.0% 3.3% 3.1% 3.6% 4.9% 5.1% 4.0% 3.6% 4.9% 5.4%
Payout (%) 51.2% 51.0% 50.3% 50.4% 56.5% 47.8% 32.8% 48.4% 67.8% 64.2% 56.4% 58.8% 58.5% 58.3%
Net interest income 490 694 694 737 939 960 1,076 1,317 1,453 1,601 1,459 1,558 1,569 1,607
Trading prof it 27 56 9 49 69 107 85 151 119 297 263 210 200 202
Other income 45 44 66 69 107 73 100 83 97 96 93 95 96 98
Total Re ve nue s 813 1,075 1,054 1,149 1,529 1,587 1,811 2,162 2,227 2,505 2,331 2,406 2,418 2,474
Personnel costs (286) (361) (381) (378) (516) (535) (606) (695) (651) (715) (680) (747) (739) (754)
Total cos ts (459) (607) (716) (635) (874) (859) (998) (1,144) (1,112) (1,180) (1,195) (1,323) (1,324) (1,351)
Ope rating profit be fore provis ions 354 468 337 515 655 728 814 1,017 1,115 1,325 1,136 1,083 1,094 1,123
Bad debt charge (56) (73) 24 (154) (193) (172) (240) (206) (879) (838) (968) (841) (673) (648)
Other provisions
A ssociates
Others
Profit be fore tax, gdw and e xce ptionals 298 395 362 360 462 555 573 812 236 488 168 242 422 476
A mt of goodw ill 0 0 0 0 0 - - - - - - - - -
Exceptional items 23 (33) (102) 10 42 77 611 159 452 84 296 148 141 134
Profit be fore tax 321 362 260 371 505 632 1,185 971 688 571 464 390 562 609
Tax (111) (136) (29) (124) (171) (177) (273) (183) (12) (45) (81) (74) (124) (134)
Minorities (10) (9) (11) (11) (8) (2) (3) (5) (2) (4) (3) (4) (6) (6)
Ne t attributable profit (NAP) re porte d 199 217 220 235 326 453 908 782 674 522 380 312 433 469
Ne t attributable profit adjus te d 171 200 203 202 271 430 777 708 500 437 362 300 422 458
Customer Loans 12,808 18,735 20,727 23,757 32,308 40,828 54,557 61,999 63,006 63,233 73,981 74,457 76,089 77,559
Securities 1,296 1,487 1,952 2,099 2,219 3,746 4,225 6,457 7,719 10,022 12,793 13,354 13,953 14,590
Intangibles 330 725 231 220 228 51 627 716 719 670 831 840 848 856
Other assets 4,179 5,599 4,314 4,435 7,539 7,695 13,371 7,604 8,935 8,898 9,494 9,706 9,923 10,145
Total assets 18,613 26,547 27,224 30,512 42,294 52,320 72,780 76,776 80,378 82,823 97,099 98,357 100,812 103,150
Tier one capital 1,619 2,035 2,051 2,167 3,078 3,515 4,171 4,485 4,284 5,371 5,663 6,243 6,474 6,723
Net interest income NC 41% 0% 6% 27% 2% 12% 22% 10% 10% (9%) 7% 1% 2%
Revenues NC 32% (2%) 9% 33% 4% 14% 19% 3% 12% (7%) 3% 1% 2%
Costs NC 32% 18% (11%) 38% (2%) 16% 15% (3%) 6% 1% 11% 0% 2%
Operating prof it bef prov. NC 32% (28%) 52% 27% 11% 12% 25% 10% 19% (14%) (5%) 1% 3%
A djusted net attributable prof it NC 17% 1% (0%) 34% 59% 81% (9%) (29%) (13%) (17%) (17%) 41% 9%
Customer Loans NC 46% 11% 15% 36% 26% 34% 14% 2% 0% 17% 1% 2% 2%
Customer Deposits NC 41% 2% (0%) 37% (2%) 31% 11% 18% (0%) 41% 2% 2% 2%
RWA (***) NC 43% 11% 14% 26% 23% 29% 9% (4%) 0% 3% 2% 6% 2%
Bad debt charge / RWA (***) 0.39% (0.10%) 0.58% 0.60% 0.43% 0.48% 0.35% 1.46% 1.42% 1.62% 1.37% 1.06% 0.98%
Tax rate 34.7% 37.6% 11.2% 33.5% 33.8% 28.0% 23.1% 18.9% 1.8% 7.9% 17.5% 19.0% 22.0% 22.0%
ROE adjusted 11.0% 11.4% 9.8% 9.4% 11.6% 14.8% 22.0% 17.2% 11.3% 9.3% 7.0% 5.4% 7.2% 7.6%
ROTE adjusted 14.1% 11.8% 10.7% 11.5% 13.9% 22.2% 19.1% 13.2% 10.5% 7.7% 6.1% 8.3% 8.7%
RORWA adjusted (***) 1.05% 0.86% 0.76% 0.85% 1.09% 1.56% 1.20% 0.83% 0.74% 0.61% 0.49% 0.66% 0.69%
ROTA 0.91% 0.77% 0.71% 0.75% 0.91% 1.25% 0.95% 0.64% 0.54% 0.41% 0.31% 0.43% 0.45%
Tier one Ratio 10.4% 9.1% 8.3% 7.7% 8.6% 8.0% 7.4% 7.3% 7.3% 9.1% 9.4% 10.1% 9.9% 10.0%
Loans / Deposits 106% 110% 120% 138% 137% 177% 181% 186% 161% 162% 134% 133% 133% 133%
RWA (***) / Loans 122% 119% 119% 119% 110% 107% 103% 99% 93% 93% 82% 83% 86% 86%
Loans / A ssets 69% 71% 76% 78% 76% 78% 75% 81% 78% 76% 76% 76% 75% 75%
Deposits / A ssets 65% 64% 63% 56% 56% 44% 41% 43% 49% 47% 57% 57% 57% 56%
68 Spanish banks
Banesto
Banks Spain
Underperform
Target price EUR6.8 (0%)

EUR6.8
4.6/0.5
Pressure on earnings
Reuters/Bloomberg BTO.MC/BTO SM
Financial data 12/10 12/11e 12/12e 12/13e ► Structural decline in profitability

Adjusted EPS (EUR) 0.66 0.66 0.82 1.00
Reported EPS (EUR) 0.67 0.66 0.82 1.01 Banesto is running out of generic provisions. Once they are
EPS - IBES (EUR) 1.17 0.73 0.89 0.92 consumed the company will need to deal with NPL formation
BVPS (EUR) 7.91 8.24 8.73 9.33
Tangible BVPS (EUR) 7.81 8.14 8.63 9.22 through direct charges in the P&L affecting profitability going
DVPS (EUR) 0.33 0.33 0.41 0.50
forward. We expect EPS to decline for the fourth consecutive year
in 2011 and the company to report a ROTE barely above 8%.
Tangible BV (EUR) 5,365 5,592 5,930 6,340
ROTE adj. (%) 8.5 8.3 9.8 11.2
Equity Tier 1 Ratio (%) 8.3 8.6 9.0 9.3 ► Exposure to the domestic environment
Although Banesto has been aggressively reducing its exposure to
P/E (x) 11.0 10.3 8.3 6.8
real estate developers the company might be affected by a severe
P/BVPS (x) 0.93 0.82 0.77 0.72 correction in the mortgage market. Negative loan growth, relatively
P/Tangible BVPS (x) 0.94 0.83 0.78 0.73
- High (x) 1.18 0.83 - - high provisions, margin pressure and a tough macro environment
- Low (x) 0.76 0.70 - -
Net yield (%) 4.6 4.9 6.1 7.5 are likely to add pressure to the company’s flexibility to accumulate
Payout (%) 50.4 50.4 50.4 50.3 capital.
Performance* (%) 1w 1m 3m 12m ► Capital and liquidity

Absolute 11 10 6 (8) Banesto closed 2010 with an 8.3% core Tier 1 capital ratio. Capital
Rel. Banks 11 17 5 (4)
Rel, DJ STOXX50 14 17 7 (10) accumulation going forward, which we estimate at 90bp over the
Price relative to DJ STOXX50 next three years should help to mitigate the expected impact of
20 Basle 3 (around 80bp) but the company might need to generate
extra capital gains to maintain its solvency (the only company that
has not raised capital in recent times).
15
10
0
Relative to DJ STOXX50 Banesto

(+34)91 114 83 10
69 Spanish banks
EUR6.8 / EUR6.8 0% BANESTO (Underperform)
Reuters / Bloom berg: BTO.MC / BTO SM Analys t: Santiago López Díaz (+34)91 114 83 10 Banks (Neutral) - Spain
20.0
18.0
Free float 465
3m average volume 3 14.0
A bsolute 10% 6% (8%)
Rel. Sector 17% 5% (4%) 10.0
Rel. DJ STOXX50 17% 7% (10%)
12m Hi/Lo (EUR) : 8.5 -21% / 5.7 +19%
CAGR 2001/2011 2011/2013 Target P rice
EPS restated (**) 0% 23% 6.0
Book value 8% 6%
4.7
No of shares year end, basic, (m) 677.67 677.67 684.33 694.23 694.33 694.33 694.33 694.30 687.39 687.39 687.39 687.39 687.39 687.39
No of shares (avg), diluted, restated f or treasury stock 677.67 677.67 681.00 689.28 694.28 694.33 694.33 694.32 690.84 687.39 687.39 687.39 687.39 687.39
Reported EPS 0.6 0.6 0.6 0.6 0.7 0.8 2.1 1.1 1.1 0.8 0.7 0.7 0.8 1.0
A djusted EPS 0.5 0.6 0.6 0.7 0.7 0.8 2.6 1.2 1.0 0.8 0.7 0.7 0.8 1.0
% change NS 22.1% 1.0% 0.9% 3.4% 25.3% 213.0% (56.4%) (9.9%) (23.1%) (16.9%) (0.8%) 24.0% 22.5%
Book value (BV PS) 3.5 3.8 4.2 4.6 4.9 5.0 6.2 6.7 7.4 7.9 7.9 8.2 8.7 9.3
Tangible BV PS 3.5 3.7 4.1 4.5 4.8 4.9 6.1 6.6 7.4 7.8 7.8 8.1 8.6 9.2
Net dividend 0.1 0.1 0.3 0.3 0.3 0.3 0.4 0.6 0.6 0.5 0.3 0.3 0.4 0.5
P / E adjusted 24.7 18.0 17.2 10.7 13.5 13.3 5.3 14.0 9.9 9.9 11.0 10.3 8.3 6.8
P / GOP 15.17 12.21 11.10 6.10 7.30 7.73 8.40 8.51 5.03 3.47 3.36 3.39 3.32 3.23
P / BV PS 3.66 3.02 2.62 1.52 1.88 2.23 2.27 2.42 1.39 1.00 0.93 0.82 0.77 0.72
P / Tangible BV PS 3.70 3.09 2.69 1.55 1.91 2.29 2.30 2.45 1.40 1.01 0.94 0.83 0.78 0.73
High (x) 4.03 3.43 3.02 1.94 2.09 2.50 2.73 2.90 1.79 1.22 1.18 0.83
Low (x) 3.35 2.93 1.57 1.20 1.76 2.06 1.97 1.91 1.08 0.64 0.76 0.70
Net yield (%) 0.8% 1.0% 2.2% 3.7% 3.2% 2.8% 2.6% 3.5% 5.4% 5.8% 4.6% 4.9% 6.1% 7.5%
Payout (%) 19.1% 18.8% 38.7% 39.9% 43.0% 37.9% 14.0% 48.5% 53.8% 57.5% 50.4% 50.4% 50.4% 50.3%
Net interest income 886 970 988 1,046 1,007 1,109 1,235 1,461 1,578 1,731 1,660 1,532 1,539 1,573
Trading prof it 30 41 47 56 88 105 125 138 151 157 151 149 151 152
Other income 92 66 62 80 46 60 77 98 96 67 61 62 63 64
Total Re ve nue s 1,426 1,496 1,529 1,644 1,630 1,789 1,983 2,271 2,445 2,562 2,490 2,353 2,382 2,433
Personnel costs (558) (549) (543) (544) (563) (583) (609) (638) (655) (652) (633) (622) (616) (616)
Total cos ts (849) (858) (847) (855) (761) (778) (814) (951) (1,029) (998) (988) (982) (981) (992)
Ope rating profit be fore provis ions 578 639 683 789 869 1,011 1,169 1,320 1,416 1,564 1,502 1,371 1,401 1,440
Bad debt charge (101) (147) (118) (171) (163) (151) (190) (229) (337) (646) (741) (696) (590) (448)
Other provisions
A ssociates
Others
Profit be fore tax, gdw and e xce ptionals 476 492 564 618 706 860 979 1,091 1,079 918 761 675 811 992
A mt of goodw ill 0 0 0 0 0 - - - - - - - - -
Exceptional items (53) 29 11 22 (16) (10) 948 9 (40) (25) (3) (3) (3) (3)
Profit be fore tax 423 521 575 640 689 850 1,927 1,100 1,039 893 757 672 808 989
Tax (33) (90) (131) (191) (231) (280) (476) (336) (306) (334) (298) (215) (242) (297)
Minorities (11) (9) (8) (7) (0) (0) (0) 0 (0) 0 0 0 0 0
Ne t attributable profit (NAP) re porte d 380 422 436 442 458 570 1,451 765 733 560 460 457 566 693
Ne t attributable profit adjus te d 355 434 440 450 468 587 1,837 801 719 550 457 453 562 688
Customer Loans 20,621 23,597 26,722 31,272 38,185 48,106 61,154 74,201 77,882 75,617 75,744 74,761 75,464 77,842
Securities 10,166 9,328 8,761 8,394 5,993 8,630 8,260 10,230 12,115 16,272 17,651 19,769 20,758 21,173
Intangibles 29 61 69 64 60 80 53 50 57 68 74 74 74 74
Other assets 13,781 11,935 14,159 18,201 22,878 27,637 35,037 25,587 27,132 30,344 23,898 23,748 24,082 24,576
Total assets 44,597 44,921 49,712 57,931 67,116 84,453 104,504 110,068 117,186 122,301 117,368 118,353 120,379 123,666
Risk w eighted assets (Prevailing regulatory regime) 30,854 34,015 39,316 48,571 54,852 64,184 72,516 68,092 68,026 64,955 65,094 66,208 68,016
Tier one capital 2,274 2,616 2,934 3,536 3,873 4,768 5,056 5,246 5,933 6,041 6,270 6,553 6,899
Revenues NC 5% 2% 8% (1%) 10% 11% 15% 8% 5% (3%) (5%) 1% 2%
Costs NC 1% (1%) 1% (11%) 2% 5% 17% 8% (3%) (1%) (1%) (0%) 1%
Operating prof it bef prov. NC 11% 7% 16% 10% 16% 16% 13% 7% 10% (4%) (9%) 2% 3%
A djusted net attributable prof it NC 22% 2% 2% 4% 25% 213% (56%) (10%) (24%) (17%) (1%) 24% 23%
Customer Loans NC 14% 13% 17% 22% 26% 27% 21% 5% (3%) 0% (1%) 1% 3%
Customer Deposits NC 5% 4% 12% 0% 25% 26% 18% 9% (2%) 6% 2% 4% 3%
RWA (***) NC NC 10% 16% 24% 13% 17% 13% (6%) (0%) (5%) 0% 2% 3%
Bad debt charge / RWA (***) 0.36% 0.47% 0.37% 0.29% 0.32% 0.34% 0.48% 0.95% 1.11% 1.07% 0.90% 0.67%
Tax rate 7.8% 17.3% 22.8% 29.8% 33.5% 32.9% 24.7% 30.5% 29.5% 37.4% 39.3% 32.0% 30.0% 30.0%
ROE adjusted 14.8% 17.8% 16.8% 15.5% 14.8% 17.5% 50.0% 19.1% 15.4% 10.8% 8.5% 8.2% 9.9% 11.4%
ROTE adjusted 17.7% 16.4% 15.1% 14.5% 17.4% 47.8% 18.1% 14.9% 10.5% 8.5% 8.3% 9.8% 11.2%
RORWA adjusted (***) 1.36% 1.23% 1.07% 1.14% 3.09% 1.17% 1.02% 0.81% 0.69% 0.70% 0.86% 1.03%
ROTA 0.97% 0.93% 0.84% 0.75% 0.78% 1.95% 0.75% 0.63% 0.46% 0.38% 0.38% 0.47% 0.56%
Tier one Ratio 7.4% 7.7% 7.5% 7.3% 7.1% 7.4% 7.0% 7.7% 8.7% 9.3% 9.6% 9.9% 10.1%
Equity tier 1 ratio (Prevailing regulatory regime) 8.2% 8.3% 8.0% 6.8% 6.2% 6.6% 6.3% 7.4% 7.9% 8.3% 8.6% 9.0% 9.3%
Loans / Deposits 88% 96% 105% 109% 133% 134% 135% 139% 134% 132% 125% 121% 118% 119%
RWA (***) / Loans 131% 127% 126% 127% 114% 105% 98% 87% 90% 86% 87% 88% 87%
Loans / A ssets 46% 53% 54% 54% 57% 57% 59% 67% 66% 62% 65% 63% 63% 63%
Deposits / A ssets 53% 55% 51% 49% 43% 42% 43% 48% 50% 47% 52% 52% 53% 53%
71 Spanish banks
Bankinter
Banks Spain
Underperform

EUR4.88
2.7/1.2
Capital increase
Reuters/Bloomberg BKT.MC/BKT SM
Financial data 12/10 12/11e 12/12e 12/13e ► 18% increase in the share count
Adjusted EPS (EUR) 0.32 0.26 0.29 0.38
Reported EPS (EUR) 0.32 0.26 0.29 0.38 Bankinter closed 2010 with a relatively weak 6.7% core Tier 1
EPS - IBES (EUR) 0.43 0.35 0.43 0.46 capital ratio (in spite of a lower than average risk profile). To
BVPS (EUR) 5.18 5.24 5.39 5.58
Tangible BVPS (EUR) 4.49 4.65 4.78 4.96 reinforce solvency the bank placed a EUR406m mandatory
DVPS (EUR) 0.21 0.15 0.17 0.22
convertible bond during Q1 11 (which implies an 18% increase in
the share count) that would increase the core capital ratio by close
Tangible BV (EUR) 2,127 2,596 2,671 2,770 to 130bp. There are additional options to generate capital like the
ROTE adj. (%) 6.9 5.9 6.2 7.8
Equity Tier 1 Ratio (%) 6.8 8.4 8.5 8.6 repurchase of Tier 2 securities, sale and lease bank of branches or
sale of assets, like its insurance operation Linea Directa
P/E (x) 17.0 18.7 16.7 12.9
Aseguradora (which could generate 300bp of core capital).
P/BVPS (x) 1.05 0.93 0.91 0.87
P/Tangible BVPS (x) 1.21 1.05 1.02 0.98
- High (x) 1.65 1.11 - - ► Good credit quality but low profitability
- Low (x) 0.87 0.80 - -
Net yield (%) 3.9 3.0 3.5 4.6 Bankinter credit quality continues to rank among the best of any
Payout (%) 65.6 56.5 58.8 58.9 Spanish institution, considering its client base and the lowest
exposure to real estate developers of any listed bank we cover.
Performance* (%) 1w 1m 3m 12m NPL formation is slowing down but the bank is heavily biased
Absolute 9 10 13 (23)
Rel. Banks 10 16 12 (20)
towards the mortgage market (70% of its loan book) and a
Rel, DJ STOXX50 12 16 15 (25) sluggish domestic environment is likely to generate topline
Price relative to DJ STOXX50 pressure. We expect the company to continue delivering results
20 below its cost of capital (6.6% on average over the next three
years), particularly after considering the dilution related to the
recent capital increase.
15
► Sensitivity to raising rates

10 The bank might be negatively affected by rising rates because of
the company’s dependence on wholesale funding (220% LTD ratio
should we consider client deposits only), which could continue to
5
negatively affect the evolution of the net interest margin.
0
Relative to DJ STOXX50 Bankinter

(+34)91 114 83 10
72 Spanish banks
EUR4.88 / EUR3.50 -28% BANKINTER (Underperform)
Reuters / Bloom berg: BKT.MC / BKT SM Analys t: Santiago López Díaz (+34)91 114 83 10 Banks (Neutral) - Spain
16.0
Free float 1,199
12.0
A bsolute 10% 13% (23%)
8.0
Rel. Sector 16% 12% (20%)
Rel. DJ STOXX50 16% 15% (25%)
12m Hi/Lo (EUR) : 6.6 -26% / 3.74 +30%
CAGR 2001/2011 2011/2013
EPS restated (**) 0% 20% 4.0
3.3
Reported EPS 0.2 0.3 0.3 0.3 0.5 0.5 0.5 0.9 0.6 0.6 0.3 0.3 0.3 0.4
A djusted EPS 0.2 0.2 0.3 0.4 0.4 0.5 0.5 0.6 0.6 0.6 0.3 0.3 0.3 0.4
% change 0.0% 3.3% 10.4% 28.4% 17.4% 12.9% 0.9% 30.4% (7.2%) 1.5% (44.8%) (18.3%) 12.0% 29.2%
Book value (BV PS) 2.0 2.1 2.1 2.4 3.4 3.7 4.0 4.4 4.8 5.5 5.2 5.2 5.4 5.6
Tangible BV PS 2.0 2.1 2.1 2.4 3.1 3.4 3.7 4.0 4.4 4.7 4.5 4.6 4.8 5.0
Net dividend 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.2 0.1 0.2 0.2
P / E adjusted 40.2 28.5 20.4 15.4 15.0 17.0 21.4 18.5 14.0 13.3 17.0 18.7 16.7 12.9
P / GOP 17.18 10.87 8.12 6.50 7.91 8.33 9.56 10.45 5.97 5.55 5.76 6.43 6.39 6.03
P / BV PS 4.91 3.36 2.64 2.30 1.82 2.13 2.50 2.59 1.66 1.42 1.05 0.93 0.91 0.87
P / Tangible BV PS 4.91 3.36 2.64 2.30 2.01 2.35 2.74 2.83 1.81 1.63 1.21 1.05 1.02 0.98
High (x) 7.03 4.01 3.21 2.60 2.44 2.67 3.10 3.41 2.65 2.04 1.65 1.11
Low (x) 3.47 2.37 1.95 1.72 1.76 2.06 2.37 2.26 1.23 1.18 0.87 0.80
Net yield (%) 1.8% 2.4% 3.2% 3.5% 3.4% 2.9% 2.6% 2.6% 3.7% 3.9% 3.9% 3.0% 3.5% 4.6%
Payout (%) 70.6% 68.3% 65.6% 53.9% 50.7% 49.2% 55.1% 48.8% 52.5% 51.8% 65.6% 56.5% 58.8% 58.9%
Net interest income 281 366 387 402 378 421 457 569 673 793 550 511 525 543
Trading prof it 64 57 20 29 30 86 98 74 103 89 120 108 103 105
Other income 13 17 20 35 31 34 48 63 54 162 236 258 278 292
Total Re ve nue s 499 569 567 618 617 730 820 950 1,056 1,245 1,102 1,080 1,112 1,156
Personnel costs (134) (169) (167) (160) (169) (192) (227) (298) (261) (325) (333) (343) (350) (357)
Depreciation and amortisation (excl. goodw ill)
Total cos ts (289) (324) (306) (300) (317) (360) (408) (519) (517) (632) (656) (672) (685) (704)
Ope rating profit be fore provis ions 211 245 261 318 301 370 412 430 539 613 447 408 426 452
Bad debt charge (46) (69) (66) (76) (42) (87) (103) (64) (187) (250) (217) (189) (176) (135)
Other provisions
A ssociates
Others
Profit be fore tax, gdw and e xce ptionals 165 176 195 242 258 283 310 366 352 363 229 218 251 317
A mt of goodw ill 0 0 0 0 0 - - - - - - - - -
Exceptional items (12) (9) (9) (27) 2 1 7 118 (15) (17) (24) (24) (24) (24)
Profit be fore tax 152 168 186 215 261 284 317 484 337 346 205 194 227 293
Tax (53) (59) (67) (65) (87) (84) (108) (123) (85) (92) (54) (54) (63) (82)
Minorities (10) (10) (9) (17) 0 0 0 0 0 0 0 0 0 0
Ne t attributable profit (NAP) re porte d 89 98 110 133 174 200 209 362 252 254 151 140 163 211
Ne t attributable profit adjus te d 90 93 104 134 159 181 184 243 229 255 151 140 164 211
Customer Loans 13,868 14,691 15,007 16,467 20,182 26,139 31,654 37,580 40,428 39,884 41,771 41,988 42,823 43,712
Securities 1,314 2,218 2,719 3,996 7,860 8,864 7,252 5,417 7,839 8,568 8,072 8,419 8,783 9,163
Intangibles 0 0 0 0 126 131 139 149 164 341 326 332 339 346
Other assets 4,041 4,435 4,819 3,349 3,102 5,652 7,031 6,503 5,040 5,675 3,856 4,139 3,510 3,233
Total assets 19,223 21,344 22,545 23,812 31,270 40,786 46,076 49,649 53,470 54,467 54,025 54,878 55,455 56,455
Shareholder's funds (excl treasury shares) 737 795 805 903 1,315 1,448 1,585 1,745 1,965 2,583 2,453 2,929 3,010 3,116
Tangible Book V alue 737 795 805 903 1,189 1,317 1,446 1,597 1,801 2,242 2,127 2,596 2,671 2,770
Tier one capital 957 990 1,026 1,106 1,402 1,531 1,724 1,901 2,052 2,355 2,301 2,777 2,858 2,964
Equity tier 1 capital (Prevailing regulatory regime) 687 719 755 836 1,054 1,183 1,377 1,552 1,757 2,048 2,094 2,570 2,651 2,757
NPL (Non Perf orming Loans) 48 54 62 62 79 71 92 154 597 1,081 1,317 1,567 1,767 1,917
Revenues NC 14% (0%) 9% (0%) 18% 12% 16% 11% 18% (11%) (2%) 3% 4%
Costs NC 12% (6%) (2%) 6% 14% 13% 27% (1%) 22% 4% 3% 2% 3%
Operating prof it bef prov. NC 16% 7% 22% (6%) 23% 12% 4% 25% 14% (27%) (9%) 5% 6%
A djusted net attributable prof it NC 4% 11% 29% 18% 14% 2% 32% (6%) 11% (41%) (7%) 16% 29%
Customer Loans NC 6% 2% 10% 23% 30% 21% 19% 8% (1%) 5% 1% 2% 2%
Customer Deposits NC 14% (3%) 4% 6% 14% 19% 22% 2% (6%) 6% 3% 3% 3%
RWA (***) NC 4% 6% 8% 18% 29% 20% 20% (8%) 16% (4%) (1%) 2% 2%
Tax rate 35.0% 35.2% 36.0% 30.2% 33.4% 29.7% 34.0% 25.3% 25.1% 26.5% 26.5% 28.0% 28.0% 28.0%
ROE adjusted 24.4% 12.4% 13.3% 16.2% 16.2% 14.6% 12.7% 15.3% 13.0% 12.3% 6.3% 5.4% 5.8% 7.0%
ROTE adjusted 12.2% 13.0% 15.7% 15.2% 14.5% 13.4% 16.0% 13.5% 12.6% 6.9% 5.9% 6.2% 7.8%
RORWA adjusted (***) 0.79% 0.84% 1.01% 1.06% 0.98% 0.80% 0.88% 0.79% 0.85% 0.48% 0.46% 0.53% 0.67%
ROTA 0.46% 0.47% 0.58% 0.58% 0.51% 0.43% 0.51% 0.45% 0.47% 0.28% 0.26% 0.30% 0.38%
Tier one Ratio 8.3% 8.2% 8.1% 8.0% 8.6% 7.3% 6.9% 6.3% 7.4% 7.3% 7.4% 9.1% 9.1% 9.2%
Loans / Deposits 126% 117% 122% 129% 149% 169% 172% 167% 176% 185% 182% 178% 176% 174%
RWA (***) / Loans 83% 82% 85% 84% 81% 80% 79% 80% 69% 81% 74% 73% 73% 73%
Loans / A ssets 72% 69% 67% 69% 65% 64% 69% 76% 76% 73% 77% 77% 77% 77%
Deposits / A ssets 57% 59% 54% 54% 43% 38% 40% 45% 43% 40% 42% 43% 44% 44%
74 Spanish banks
Banco Pastor
Banks Spain
Underperform

EUR3.50
1.2/0.5
Exposure to problematic sectors
Reuters/Bloomberg PAS.MC/PAS SM
Financial data 12/10 12/11e 12/12e 12/13e ► Recent capital increase

Adjusted EPS (EUR) 0.24 0.21 0.33 0.33
Reported EPS (EUR) 0.23 0.21 0.33 0.33 The company announced in early March the placement of a
EPS - IBES (EUR) 0.23 0.32 0.44 0.57 EUR251m mandatory convertible bond maturing in April 2014. The
BVPS (EUR) 5.38 4.77 5.42 6.07
Tangible BVPS (EUR) 5.28 4.70 5.35 6.00 capital increase represents 16% of the reported core capital at
DVPS (EUR) 0.05 0.04 0.07 0.07
year end 2010 and would represent a 140bp increase in the core
capital ratio to 9.8% which should help the company to deal with
Tangible BV (EUR) 1,410 1,592 1,812 2,032 the potential Basle 3 impact (around 90bp)
ROTE adj. (%) 4.5 4.5 6.6 5.9
Equity Tier 1 Ratio (%) 8.5 10.2 10.6 10.9
► Very limited profitability
P/E (x) 16.9 16.7 10.6 10.5
The bank is likely, according to our estimates, to see a 74%
P/BVPS (x) 0.76 0.73 0.65 0.58 decline in profitability (on a fully diluted basis versus the 2007
P/Tangible BVPS (x) 0.77 0.75 0.65 0.58
- High (x) 1.02 0.90 - - levels). Earnings might continue to be under significant pressure
- Low (x) 0.60 0.75 - -
Net yield (%) 1.2 1.2 1.9 1.9 going forward and capital gains to smooth the P&L evolution might
Payout (%) 19.5 19.7 19.8 19.8 be more limited going forward. We expect the bank to deliver just a
5.6% ROTE during a 5 year period (2009-2013), well below the
Performance* (%) 1w 1m 3m 12m cost of capital.
Absolute (0) (9) (4) (22)
Rel. Banks 0 (4) (5) (19)
Rel, MSCI SMID 3 (4) (4) (32) ► More write downs?
Price relative to MSCI SMID We expect provisions to be maintained at relatively high levels,
16 affecting PAS’ ability to improve bottom line growth. The company
has a heavy exposure to the real estate developer segment and to
14
the general mortgage market and we do not discard the possibility
12
of additional mark downs going forward.
10
2
Relative to MSCI SMID Banco Pastor

(+34)91 114 83 10
75 Spanish banks
EUR3.50 / EUR3.00 -14% BANCO PASTOR (Underperform)
Reuters / Bloom berg: PAS.MC / PAS SM Analys t: Santiago López Díaz (+34)91 114 83 10 Banks (Neutral) - Spain
20.0
Free float 517 16.0
3m average volume 0
12.0
A bsolute (9%) (4%) (22%)
Rel. Sector (4%) (5%) (19%) 8.0
Rel. MSCI SMID (4%) (4%) (32%)

12m Hi/Lo (EUR) : 4.61 -24% / 3.15 +11%
CAGR 2001/2011 2011/2013
4.0
EPS restated (**) (4%) 26%
2.9
P rice 1.5*B o o k Val. R elative to M SC I SM ID
Price (yearly avg from Dec. 00 to Dec. 10) 4.2 5.2 5.9 8.0 11.4 14.5 8.2 5.0 4.1 3.5 3.5 3.5
Reported EPS 0.4 0.4 0.4 0.3 0.2 0.5 0.6 0.8 0.6 0.4 0.2 0.2 0.3 0.3
A djusted EPS 0.3 0.3 0.3 0.2 0.2 0.4 0.5 0.8 0.6 0.4 0.2 0.2 0.3 0.3
% change NS 0.9% 3.2% (30.6%) (18.9%) 107.1% 35.3% 39.5% (15.9%) (41.6%) (34.8%) (12.8%) 57.5% 0.8%
Book value (BV PS) 2.5 2.7 2.8 2.9 3.6 4.0 4.9 5.7 5.7 5.5 5.4 4.8 5.4 6.1
Tangible BV PS 2.5 2.7 2.8 2.9 3.6 3.9 4.9 5.6 5.6 5.4 5.3 4.7 5.3 6.0
Net dividend 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.1 0.0 0.0 0.1 0.1
P / E adjusted 12.2 22.0 31.0 20.2 21.2 19.3 13.0 13.6 16.9 16.7 10.6 10.5
P / E relative to DJ Euro STOXX Small (%) 67% 123% 152% 104% 130% 117% 151% 177% 159%
P / GOP 7.46 6.92 9.03 7.93 9.12 8.76 4.06 1.86 2.92 3.24 3.42 3.38
P / BV PS 1.47 1.81 1.64 2.03 2.32 2.54 1.45 0.91 0.76 0.73 0.65 0.58
P / Tangible BV PS 1.51 1.83 1.66 2.05 2.34 2.57 1.47 0.93 0.77 0.75 0.65 0.58
High (x) 1.73 2.26 1.76 2.56 3.45 3.22 2.28 1.14 1.02 0.90
Low (x) 1.31 1.47 1.59 1.53 1.87 1.84 0.89 0.56 0.60 0.75
Net yield (%) 3.1% 2.5% 2.2% 1.6% 1.5% 1.4% 1.9% 1.2% 1.2% 1.2% 1.9% 1.9%
Payout (%) 34.4% 39.3% 38.1% 54.9% 67.7% 32.7% 31.5% 28.0% 25.3% 16.3% 19.5% 19.7% 19.8% 19.8%
Net interest income 224.1 261.5 281.6 298.1 311.9 390.6 441.6 527.3 526.2 537.4 469.4 447.7 450.8 465.0
Net f ees and commissions 73.9 80.7 74.6 88.7 96.8 124.6 143.0 161.1 163.4 151.9 126.8 124.7 124.0 122.7
Trading prof it 20.9 3.7 (6.6) 3.8 10.9 15.7 15.1 57.0 176.9 383.9 148.6 152.3 156.1 159.2
Other income 11.8 11.5 7.8 14.0 13.1 24.5 38.1 23.6 27.3 5.0 7.5 7.6 7.7 7.8
Total Re ve nue s 330.6 357.4 357.5 404.5 432.6 555.4 637.7 769.1 893.8 1,078.3 752.3 732.3 738.6 754.7
Personnel costs (137.9) (144.6) (148.2) (153.5) (170.5) (186.3) (203.8) (223.4) (240.7) (234.3) (233.8) (233.8) (236.0) (243.2)
Other operating costs (58.9) (63.7) (66.7) (62.9) (74.8) (74.7) (77.4) (82.7) (89.9) (108.4) (122.4) (122.9) (127.3) (131.8)
Depreciation and amortisation (excl. goodw ill) (16.6) (18.5) (20.6) (23.9) (29.4) (29.4) (29.0) (29.9) (33.9) (30.1) (28.3) (28.6) (28.9) (29.1)
Total cos ts (213.4) (226.7) (235.5) (240.3) (274.7) (290.4) (310.2) (336.0) (364.6) (372.8) (384.5) (385.3) (392.2) (404.1)
Ope rating profit be fore provis ions 117.3 130.7 122.0 164.3 157.9 265.0 327.5 433.1 529.3 705.4 367.8 347.0 346.5 350.6
Bad debt charge (18.5) (37.9) (49.5) (69.1) (117.0) (118.3) (92.0) (125.6) (245.0) (605.8) (270.1) (211.6) (151.6) (153.8)
Other provisions
A ssociates
Others
Profit be fore tax, gdw and e xce ptionals 98.7 92.8 72.5 95.2 40.9 146.7 235.5 307.5 284.2 99.6 97.7 135.5 194.9 196.8
A mt of goodw ill 0.0 0.0 0.0 0.0 0.0 - - - - - - - - -
Exceptional items 7.4 14.0 11.6 (5.7) 45.0 37.6 15.2 (12.4) (63.3) 28.5 (47.4) (48.1) (48.8) (49.6)
Profit be fore tax 106.1 106.8 84.1 89.5 85.9 184.2 250.7 295.2 220.9 128.1 50.3 87.3 146.0 147.2
Tax (23.8) (23.9) (0.9) (26.1) (23.5) (55.8) (88.8) (86.3) (57.2) (25.5) 12.5 (20.1) (33.6) (33.9)
Minorities (1.1) (0.6) 0.5 (1.8) (3.4) (3.8) (5.8) (6.7) 0.4 (1.5) (0.7) (0.9) (1.5) (1.5)
Ne t attributable profit (NAP) re porte d 81.2 82.4 83.7 61.7 58.9 124.6 156.0 202.1 164.1 101.0 62.1 66.4 111.0 111.9
Ne t attributable profit adjus te d 71.4 72.1 74.4 51.6 46.1 104.0 140.7 196.3 165.0 96.4 63.5 67.3 112.0 112.9
Customer Loans 5,512.4 6,297.6 6,992.9 9,678.0 13,275.0 15,985.5 19,681.6 20,427.9 20,788.0 22,018.0 21,652.1 22,834.2 23,131.2 23,432.7
Securities 1,801.8 1,887.0 904.0 55.6 498.2 768.4 1,481.8 1,638.8 2,336.5 5,868.6 3,988.9 4,017.6 4,053.1 4,082.9
Intangibles 3.5 6.0 14.8 7.4 8.4 9.5 12.5 17.3 18.6 23.4 25.6 25.6 26.0 26.4
Other assets 2,106.4 1,798.0 948.8 2,022.0 2,062.9 2,759.6 2,606.3 3,242.5 3,978.1 4,415.3 5,468.1 3,609.8 3,667.8 3,727.6
Total assets 9,424.1 9,988.5 8,860.5 11,762.9 15,844.5 19,523.0 23,782.2 25,326.5 27,121.3 32,325.2 31,134.7 30,487.2 30,878.1 31,269.6
Customer Deposits 5,622.7 5,875.8 6,049.0 6,888.0 7,805.5 9,188.0 10,966.4 12,956.5 13,330.2 13,683.2 15,029.8 16,377.8 16,999.9 17,646.1
Shareholder's funds (excl treasury shares) 547.4 594.6 619.2 628.9 947.2 1,034.1 1,287.7 1,493.7 1,480.0 1,439.3 1,435.3 1,617.3 1,837.5 2,058.5
Tangible Book V alue 543.9 588.7 604.4 621.6 938.8 1,024.6 1,275.2 1,476.4 1,461.4 1,415.9 1,409.7 1,591.7 1,811.6 2,032.1
Risk w eighted assets (Prevailing regulatory regime) 5,901.0 6,803.0 7,145.0 9,516.0 13,027.5 15,005.6 18,000.3 20,689.3 19,754.7 18,712.1 18,406.7 18,292.3 18,526.9 18,761.8
Risk w eighted assets (Basel 3 fully loaded) 18,761.8
Tier one capital 504.3 563.2 586.2 622.8 901.5 1,149.9 1,306.6 1,484.9 1,474.0 1,974.2 1,957.1 2,271.4 2,373.1 2,475.7
Equity tier 1 capital (Prevailing regulatory regime) 504.3 563.2 586.2 622.8 901.5 977.1 1,110.6 1,262.2 1,243.9 1,546.2 1,557.5 1,863.8 1,957.4 2,051.6
Equity tier 1 capital (Basel 3 f ully loaded) 1,882.8
NPL (Non Perf orming Loans) 1,034.1 1,512.4 1,543.5 1,743.5 1,868.5 1,943.5
Funds under management 1,265.2 1,354.2 1,430.1 1,615.8 1,886.8 2,148.9 2,680.1 2,634.4 1,891.2 2,005.1 2,017.7 2,027.8 2,068.3 2,109.7
Net interest income NC 17% 8% 6% 5% 25% 13% 19% (0%) 2% (13%) (5%) 1% 3%
Revenues NC 8% 0% 13% 7% 28% 15% 21% 16% 21% (30%) (3%) 1% 2%
Costs NC 6% 4% 2% 14% 6% 7% 8% 9% 2% 3% 0% 2% 3%
Operating prof it bef prov. NC 11% (7%) 35% (4%) 68% 24% 32% 22% 33% (48%) (6%) (0%) 1%
A djusted net attributable prof it NC 1% 3% (31%) (11%) 126% 35% 39% (16%) (42%) (34%) 6% 66% 1%
Customer Loans NC 14% 11% 38% 37% 20% 23% 4% 2% 6% (2%) 5% 1% 1%
Customer Deposits NC 5% 3% 14% 13% 18% 19% 18% 3% 3% 10% 9% 4% 4%
RWA (***) NC 15% 5% 33% 37% 15% 20% 15% (5%) (5%) (2%) (1%) 1% 1%
Tax rate 22.5% 22.3% 1.1% 29.1% 27.4% 30.3% 35.4% 29.2% 25.9% 19.9% 24.8% 23.0% 23.0% 23.0%
ROE adjusted 13.0% 12.9% 12.6% 8.4% 6.5% 11.7% 13.1% 15.4% 11.5% 6.5% 4.4% 4.5% 6.9% 6.1%
ROTE adjusted 12.7% 12.5% 8.4% 5.9% 10.6% 12.2% 14.3% 11.2% 6.7% 4.5% 4.5% 6.6% 5.9%
RORWA adjusted (***) 1.13% 1.07% 0.62% 0.41% 0.74% 0.85% 1.01% 0.82% 0.50% 0.34% 0.37% 0.61% 0.61%
ROTA 0.74% 0.79% 0.50% 0.33% 0.59% 0.65% 0.80% 0.63% 0.32% 0.20% 0.22% 0.37% 0.36%
Tier one Ratio 8.5% 8.3% 8.2% 6.5% 6.9% 7.7% 7.3% 7.2% 7.5% 10.6% 10.6% 12.4% 12.8% 13.2%
Loans / Deposits 98% 107% 116% 141% 170% 174% 179% 158% 156% 161% 144% 139% 136% 133%
RWA (***) / Loans 107% 108% 102% 98% 98% 94% 91% 101% 95% 85% 85% 80% 80% 80%
Loans / A ssets 58% 63% 79% 82% 84% 82% 83% 81% 77% 68% 70% 75% 75% 75%
Deposits / A ssets 60% 59% 68% 59% 49% 47% 46% 51% 49% 42% 48% 54% 55% 56%
NPL / Outstanding loans (Gross) NC NC NC NC NC NC NC NC 4.86% 6.62% 6.88% 7.36% 7.77% 7.96%
NPL coverage Ratio NC NC NC NC NC NC NC NC 48% 55% 50% 49% 49% 50%
77 Spanish banks
Analyst location
As per contact details, analysts are based in the following locations: London, UK for telephone numbers commencing +44; Paris, France +33; Brussels, Belgium +32;
Frankfurt, Germany +49; Geneva, Switzerland +41; Madrid, Spain +34; Milan, Italy +39; New York, USA +1; Singapore +65; Stockholm, Sweden +46; Zurich,
Switzerland +41
Rating definitions
Stock Rating (vs Sector)
Outperform: The stock is expected to outperform the industry large-cap coverage universe over a 12-month investment horizon.
Neutral: The stock is expected to perform in line with the industry large-cap coverage universe over a 12-month investment horizon.
Underperform: The stock is expected to underperform the industry large-cap coverage universe over a 12-month investment horizon.
Sector Rating (vs Market)
Outperform: The sector is expected to outperform the DJ STOXX50 over a 12-month investment horizon.
Neutral: The sector is expected to perform in line with the DJ STOXX50 over a 12-month investment horizon.
Underperform: The sector is expected to underperform the DJ STOXX50 over a 12-month investment horizon.
Key ideas
BUY: The stock is expected to deliver an absolute return in excess of 30% over the next two years. Exane BNP Paribas’ Key Ideas Buy List comprises selected stocks that
meet this criterion.
Distribution of Exane BNP Paribas’ equity recommendations

As at 03/01/2011 Exane BNP Paribas covered 589 stocks. The stocks that, for regulatory reasons, are not accorded a rating by Exane BNP Paribas are excluded
from these statistics. For regulatory reasons, our ratings of Outperform, Neutral and Underperform correspond respectively to Buy, Hold and Sell; the underlying
signification is, however, different as our ratings are relative to the sector.
40% of stocks covered by Exane BNP Paribas were rated Outperform. During the last 12 months, Exane acted as distributor for BNP Paribas on the 3% of stocks with
this rating for which BNP Paribas acted as manager or co-manager on a public offering. BNP Paribas provided investment banking services to 6% of the companies
accorded this rating*.
40% of stocks covered by Exane BNP Paribas were rated Neutral. During the last 12 months, Exane acted as distributor for BNP Paribas on the 1% of stocks with this
rating for which BNP Paribas acted as manager or co-manager on a public offering. BNP Paribas provided investment banking services to 5% of the companies
accorded this rating*.
20% of stocks covered by Exane BNP Paribas were rated Underperform. During the last 12 months, Exane acted as distributor for BNP Paribas on the 1% of stocks
with this rating for which BNP Paribas acted as manager or co-manager on a public offering. BNP Paribas provided investment banking services to 5% of the
companies accorded this rating*.
* Exane is independent from BNP Paribas. Nevertheless, in order to maintain absolute transparency, we include in this category transactions carried out by BNP
Paribas independently from Exane. For the purpose of clarity, we have excluded fixed income transactions carried out by BNP Paribas.
Commitment of transparency on potential conflicts of interest

Complete disclosures, please see www.exane.com/compliance
Exane
Pursuant to Directive 2003/125/CE and NASD Rule 2711(h)
Unless specified, Exane is unaware of significant conflicts of interest with companies mentioned in this report.
Source: Exane
See www.exane.com/disclosureequitiesuk for details
BNP Paribas
Exane is independent of BNP Paribas (BNPP) and the agreement between the two companies is structured to guarantee the independence of Exane's research,
published under the brand name “Exane BNP Paribas”. Nevertheless, to respect a principle of transparency, we separately identify potential conflicts of interest with
BNPP regarding the company/(ies) covered by this research document.
Potential conflicts of interest: None.

Source: BNP Paribas
79 Spanish banks
LONDON PARIS BRUSSELS FRANKFURT
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Resumen Spanish Banks

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Resumen Spanish Banks

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Equity Research Spanish banks

Banks: Neutral 17 March 2011

Santiago López Díaz, CFA banks@exanebnpparibas.com

Relative to DJ STOXX50 (rebased) Banks

Please refer to important disclosures

Investment Case _________________________________________ 3

Still a fragile economic environment _________________________ 12

The Investment Case. The Financial system___________________ 20

The large (not so Spanish) banks ___________________________ 37

Cajas. We still have a problem _____________________________ 47

Banco Sabadell _________________________________________ 66

Banco Pastor ___________________________________________ 75

Unemployment remains Spain’s biggest and most intractable problem: The

Figure 2: Something is not adding up

Developer NPL ratio Construction NPL ratio

As a % of total loans (LHS) as a % of equity (RHS)

Source: Bank of Spain

We rate BBVA Neutral. Turkey is quite an interesting medium-term option but it is

Figure 3: Spanish Banks Valuation Table.

Figure 4: SAN's 1yr forward valuation

Implied Value 2013 104,516

Source: Exane BNP Paribas estimates

Figure 5: SAN’s net income estimates by business unit

Latin America 3,609 3,833 4,804 5,657 6,283 6,919

Operating areas 9,523 10,565 11,099 12,116 12,938 13,723

Implied Value 2013 53,023

Source: Exane BNP Paribas estimates

Figure 7: BBVA’s net income estimates by business unit

(EURm) 2008 2009 2010 2011e 2012e 2013e

Group 5,020 4,210 4,606 4,769 5,443 5,920

Source: Exane BNP Paribas estimates

Figure 8: Domestic Banks Valuation

Source: Exane BNP Paribas estimates

Figure 9: Historical P/E and PBV

2.5x 12.0x 2.0x

4.0x 0.0x 6.0x 0.0x

P / BVPS (rhs) P/E (lhs) P / BVPS (rhs) P/E (lhs)

Source: Exane BNP Paribas, Factset

Figure 10: Historical P/E and PBV

12.0x 11.0x 1.0x

7.0x 0.0x 6.0x 0.0x

P / BVPS (rhs) P/E (lhs) P / BVPS (rhs) P/E (lhs)

Source: Exane BNP Paribas, Factset

Figure 11: Historical P/E and PBV

P / BVPS (rhs) P/E (lhs)

Source: Exane BNP Paribas, Factset-consensus

Figure 12: Domestic Spanish Banks Relative Evolution

4.5x 19.0x 4.5x

3.0x 0.0x 3.0x 0.0x

P / BVPS (rhs) P/E (lhs) P / BVPS (rhs) P/E (lhs)

Source: Exane BNP Paribas

SX7P SAN BBVA

Source: Exane BNP Paribas, Bloomberg

Figure 15: EPS estimates versus consensus

Source: Exane BNP Paribas estimates

Figure 16: Spanish banks at a glance

Source: Exane BNP Paribas estimates

Price (14 March 2011)

Relative to DJ STOXX50 Santander

Santiago López Díaz, CFA

Price (14 March 2011)

Performance* (%) 1w 1m 3m 12m ► The story has some negatives, however

Relative to DJ STOXX50 BBVA