Interim Results

Banco Santander Central Hispano SA
29 July 2002


                 SANTANDER CENTRAL HISPANO FIRST HALF NET
                ATTRIBUTABLE INCOME 1,196.6 MILLION EUROS
                  (-13.4%), WITH ZERO CONTRIBUTION FROM
                                 ARGENTINA 

• Effective cost cutting: efficiency ratio improved 340 bp to 50.6%
 
• Operating income rose 2.26%, excluding Argentina by 11.9%
 
• Improved results in more recurrent income items
 
• High asset quality and provision cover: NPL ratio 1.85% (-28bp) and cover of
  142.6% (+550bp)
 
• Lower net attributable income reflects fall in trading gains, mainly in Latin
  America, and extraordinary provisions for Internet investments
 
• 2002 net attributable income now projected at 2.25 billion euros (-10%)
 
Madrid, July 29, 2002 - Santander Central Hispano recorded a consolidated net
attributable income of 1,196.6 million euros in the first half of 2002, a
decline of 13.4% over the same period last year but 8.3% higher than in the
second half of 2001.
 
Excluding Argentina, which made a zero contribution to net attributable income,
the bottom line figure would have declined 4.2% over the first half of 2001.
 
Performance during the period was otherwise notable for a strong pickup in
business activity in Europe. In this regard, the Group has taken steps to
increase revenues, as well as continue with cost reduction and enhance business
expansion through revised priorities:
 
- Accelerate business activity and increase revenue generation with special
  emphasis on Spain
 
- Make optimum use of the value of the customer base
 
- Reduce costs beyond initial targets
 
- Achieve competitive advantage through technology 
 
Santander Central Hispano has accordingly launched Revenue Plan 2003 (i-03), a
business plan aimed at taking effective advantage of organic growth with
ambitious targets for next year. This plan identifies 101 projects and
improvements, with a total commitment from all business areas. 

Results
 
First half results were marked by higher revenues on the commercial banking
side, as well as effective cost control and a conservative policy on
provisioning and setasides for possible future writeoffs. Net interest income
showed a slight 2.3% decline to 5,035.8 million euros, though if Argentina is
excluded there is a rise of 2.5%.
 
Fees and commissions, which declined 4%, nevertheless displayed a positive trend
in the second quarter, being 4.5% higher than the first three months of the year
and 10.6% above the fourth quarter of 2001. Excluding the Argentina effect,
revenues from commissions rose 5.6%, with a 5% rise in mutual and pension funds,
15.8% in managed portfolios and 47.1% in insurance.
 
Trading gains declined 43.3% due to recent interest rate increases in Latin
America and the effect of the fall in portfolio values. Excluding Argentina
there was a negative figure of 10 million euros in the second quarter compared
with an average of 205 million in the previous five quarters. Net operating
revenues were 5.1% below the first half of 2001 at 7,538.3 million although 0.9%
higher if excluding Argentina. Nearly 87% of net operating revenues came from
retail banking (in Spain and abroad), and 97% from net interest income plus
commissions. 

A 11.1% fall in administrative expenses placed Group efficiency ratio at 50.6%,
an improvement of 3.4 percentage points over June 2001. Specifically, personnel
costs fell 10.9% and other costs, such as property and systems, by 11.4%.
 
Cost and revenue performance produced a 2.3% rise in operating income to 3,131
million euros, and an improvement in the return on average total assets to 1.76%
from 1.72%. Again, excluding Argentina, operating income is 11.9% higher,
driven principally by Retail Banking in Europe which rose 22.4%.
 
The strong performance of more recurrent items is reflected in a 13.8% rise in
operating income, excluding dividends and trading gains, which would translate
to an increase of 27.3% if excluding Argentina.
 
The Group has assigned 982.7 million euros to loan loss provisions and 377.7
million euros to goodwill amortization, as well as additional provisions for the
entire amount of intra-group cross-border risk with Argentina.
 
Net attributable income thus came to 1,196.6 million euros, down 13.4% on the
same period last year but only 4.2% lower if Argentina is excluded. Retail
banking activities contributed 75% to this result (42% from Europe and 33%
from Latin America), Asset Management and Private Banking 9%, Global Wholesale
Banking 7%, Financial Stakes in Europe 4% and the Industrial Portfolio 5%. 

In Latin America, Group results were affected by negative market trends and by
currency depreciation with respect to the euro, in part compensated by
successful cost control and a focus on commission earning business. Net
attributable income from the area came to US$718.4 million, with particularly
strong performances from Brazil (+54.4%), Mexico (+36.3%) and Chile +17.6%).
 
In Argentina, the Group has provisioned the entire investment (including
goodwill), intra-group cross border exposure and cross-border risk with third
parties as required by the regulatory authorities. The Group continues to
condition its presence in this country to the maintenance of a viable and stable
financial system, noting that steps have been taken in this direction that it
hopes will be accelerated in the next few days.
 
In Brazil, marked financial market volatility has had a negative impact on
results in terms of trading gains. Retail and core business has performed more
favourably, as reflected in the 511,000 new customers won since the acquisition
of Banespa, as well as an increased ratio of commissions to expenses (nearly
64%), and continuing efficiency gains that have placed cost-income ratio below
48%, Net attributable income for the period was US$305,5 million.
 
Banesto performed in line with expectations for the year, maintaining a
progression both in terms of business expansion and improved results. The loan
portfolio grew 14% and on balance sheet customer funds by 6.4%. The bank
continued to place emphasis on asset quality, holding its NPL ratio at 0.84%
with a provision cover of 256%. Pre-tax income rose 16.4% to 306.3 million euros
while the efficiency ratio improved to 49.5%.
 
Balance Sheet
 
There have been three factors impacting on these aggregates: Argentina,
depreciation of Latin American currencies against the dollar and the strong rise
of the euro. This has obscured a favourable trend in retail banking in Spain,
where notable increases were seen in balances of commercial credit, double-digit
rises in mortgage loans (14.4%) and Banesto (above 20%).

Making a strong contribution was a significant increase in term deposits as a
result of the launch of the Supersatisfaccion Deposit (+11.8% higher than in
December 2001). Mutual funds and individual pension plans also performed well.
This was reflected in increased market share in the category 'other resident
sector deposits', mutual funds and individual pension plans.

Portugal achieved significant growth in balance sheet funds, loans and mutual
funds. However, Latin America was affected by Argentina and the negative impact
of exchange rates, with increases focussed on new funds (mainly mutual and
pension funds) and a conservative policy on lending. 

Total Group managed customer funds declined 6.9% to 308,946.8 million euros, but
without Argentina the figure is 3.04% less at 304,644.8 million (eliminating the
exchange rate factor they rose 6.6%). Loans were 5.1% lower at 171,970 million
and -2.5% excluding Argentina. 

In the context of slower economic growth and large-scale international corporate
failures, the Group has exercised prudent credit risk control, as reflected in
the high quality and provision cover of its portfolio. Group NPL ratio stood at
1.85% (0.98% in Spain and 3.01% in Latin America) with a reduction of 28 basis
points over the past 12 months, while cover has risen 5.5 percentage points to
142.6%, with an especially favourable trend in Latin America.
 
Reinforcing this prudent policy on asset quality, Santander Central Hispano is
well diversified, with 76.1% of credit risk located in Europe, 21.3% in
Latin America and 2.6% elsewhere. 

The exchange impact on Group reserves translated into a drop of 1.18 points in
BIS ratio to 10.86%, with Tier I at 7.36%. Eligible capital came to 21,703
million euros, with a surplus over minimum required levels of 5,712 million. The
Group's balance sheet strength is further reflected in the 5 billion euros of
unrealised capital gains that, net of taxes, would bring BIS ratio to above 16%.

2002 profit review 

In the light of first half results, of the possible impact of recent
depreciation of Latin American currencies against the dollar, and the strength
of the euro, as well as ongoing measures to strengthen the balance sheet, the
Group has decided to revise its net attributable income projection for 2002 from
2.7 billion euros (+10%) to 2.25 billion, which would represent a 10% decline on
2001. 

Dividends 

Santander Central Hispano paid a fourth and final dividend for 2001 on April 30,
the 0.0631 euro per share payment bringing total dividend for the year to
0.2885, an increase of 5.5%. On August 1, a first interim dividend for 2002 of
0.0775 will be paid. an increase of 3.2% over the equivalent payment last year. 
 
 
Consolidated income statement             Jan-Jun 2002     Jan-Jun 2001    02/01
                                             min euros        min euros      %

NET INTEREST REVENUE                           5,035.8          5,152.5   (2.27)
                                                           
Net fees and commissions                       2,249.2          2,341.8   (3.95)
 
BASIC REVENUE                                  7,285.0          7,494.3   (2.79)
 
Trading gains                                    253.3            446.9  (43.33)
 
Net operating revenues                         7,538.3          7,941.2   (5.07)
 
Personnel and general expenses                (3,813.5)        (4,287.9) (11.06)
 
a) Personnel                                  (2,392.6)        (2,684.9) (10.89)

b) General expenses                           (1,490.9)        (1,603.1) (11.37)
 
Depreciation and other results                  (593.6)          (591.4)   0.37
 
NET OPERATING INCOME                           3,131.2          3,061.9    2.26
 
Income from equity accounted holdings            135.6            209.5  (35.25)
 
Earnings from Group transactions                 191.4            333.0  (42.52)
 
Net provisions for loan losses                  (982.7)          (835.1)  17.68
 
Writedown of investment securities                (2.1)             1.3
            
Goodwill amortization                           (377.7)        (1.303.1) (71.01)
 
Other income                                    (171.3)           907.7       -
 
Income before taxes                            1,924.5          2,375.3  (18.98)
 
Corporate Tax                                   (433.9)          (509.7) (14.86)
 
Net consolidated income                        1,490.5          1,865.6  (20.11)
 
Minority interests                                82.5            223.1  (63.00)
 
Dividend - preferred shareholders                211.4            260.7  (18.90)
 
NET ATTRIBUTABLE INCOME                        1,196.6          1,381.9  (13.41)
 
Data excluding Argentina
 
Basic revenue                                  7,089.4          6,854.0    3.43

Net operating revenues                         7,315.5          7,254.0    0.85

Net operating income                           3,048.0          2,723.8    11.9

Net attributable income                        1,196.6          1,248.4   (4.16)

Customer funds 

                                       Jan-Jun 2002       Jan-Jun 2001        02/01        31/12/01
                                          min euros          min euros          %         min euros

Public sector                               7,813.7            4,629.1        68.80        14,466.9
 
Private sector                             75,806.2           71,417.8         6.14        71.891.3 

  Demand deposits                          21,496.6           20,612.6         4.29        21,252.2
 
  Savings accounts                         15,796.1           14,602.3         8.18        15,472.4
 
  Time deposits                            21,410.6           23,154.3        (7.53)       19,155.9
 
  REPOS                                    16,967.4           12,951.5        31.01        15,928.3
 
  Other accounts                              135.4               97.0        39.56            82.6
 
Non-resident sector                        82,542.7           97,477.6       (15.32)       90,923.7 

  Deposits                                 71,905.4           84,440.1       (14.84)       80,656.0
 
  REPOS                                    10,637.3           13,037.4       (18.41)       10,267.7
 
Total customer deposits                   166,162.6          173,524.4        (4.24)      177,281.9
 
Debt securities                            34,923.8           38,157.4        (8.47)       40,376.0
 
Subordinated debt                          13,227.0           12,806.6         3.28        12,996.0
 
Total customer funds on-balance sheet     214,313.4          224,488.4        (4.53)      230,653.8
 
Total managed funds (off-balance sheet)    90,331.4           89,698.1         0.71        91,716.2
 
  Mutual funds                             67,999.5           67,225.5         1.15        68,227.0
 
    Spain                                  50,972.8           49,436.5         3.11        49,487.6
 
    Abroad                                 17,026.7           17,789.0        (4.29)       18,739.5
 
  Pension funds                            14,544.6           14,393.7         1.05        15,619.6
 
    Spain                                   5,312.4            5,018.6         5.85         5,443.8
 
      Individuals                           4,581.2            4,286.2         6.88         4,698.0
 
    Abroad                                  9,232.2            9,375.1        (1.52)       10,175.8
 
  Managed portfolios                        7,787.3            8,078.9        (3.61)        7,869.6
 
    Spain                                   2,454,8            2,337.9         5.00         2,432.0
 
    Abroad                                  5,332.5            5,741.0        (7.12)        5,437.6
 
Total customer funds - excl. Argentina    304,644.8          314,186.5        (3.04)      322,370.0
 
Total customer funds - Argentina            4,302.0           17,684.5       (75.67)        9,008.9
 
Total customer funds on-balance sheet     308,946.8          331,871.1        (6.91)      331,378.9 
 
 
Loans

                                       Jan-Jun 2002       Jan-Jun 2001        02/01        31/12/01
                                          min euros          min euros          %         min euros

Public sector                               4,819.6             4,214.3       14.36         4,249.7
 
Private sector                             86,174.1            81,593.1        5.61        84,721.7
 
  Secured loans                            34,927.3            30,526.2       14.42        33,028.3
 
  Other loans                              51,246.8            51,066.9        0.35        51,693.4
 
Non-resident sector                        77,848.5            87,428.5      (10.96)       85,799.7
 
  Secured loans                            20,983.8            22,774.7       (7.86)       23,308.7
 
  Other loans                              56,864.7            64,653.9      (12.05)       62,491.0
 
Gross loans (ex-Argentina)                168,842.2           173,236.0       (2.54)      174,771.1
 
Less: net allowance for loan
losses (ex-Argentina)                       4,923.1             5,357.4       (8.11)        5,068.7 

Net loans - ex-Argentina                  163,919.1           167,878.6       (2.36)      169,702.4
 
Net loans - Argentina                       2,950.1             7,717.9      (61.78)        4,119.7
 
Net loans - total                         166,869.1           175,596.5       (4.97)      173,822.0
 
Note: doubtful loans                        3,766.2             4,477.5      (15.89)        3,894.5
 
  Public sector                                 3.9                 3.8        3.01             4.5
 
  Private sector                            1,069.3               820.7       30.28           931.0
 
  Non-resident sector                       2,693.1             3.653.0      (26.28)        2,959.0 
 
 
Shareholders' equity
and capital ratios*

                                       Jan-Jun 2002       Jan-Jun 2001        02/01        31/12/01
                                          min euros          min euros          %         min euros
 
Subscribed capital stock                    2,384.2            2,280.8         4.53         2,329.7
 
Paid-in surplus                             9,685.6            8,080.4        19.86         8,651.0
 
Reserves                                    5,458.9            5,433.8         0.46         5,466.4 

Reserves at consolidated companies (net)      466.5            2,448.1       (80.95)        1,545.9 

Total primary capital                      17,995.2           18,243.1        (1.36)       17,993.0 

Net attributable income                     1,196.6            1,381.9       (13.41)        2,486.3 

Treasury stock                                (19.2)             (25.9)      (25.76)          (21.4) 

Distributed interim dividend                      -                  -            -          (685.4)
 
Shareholders' equity at period end         19,172.5           19,599.1        (2.18)       19,772.5 

Interim dividend pending distribution             -                  -            -          (350.0)
 
Final dividend                                    -                  -            -          (294.0)
 
Shareholders' equity after
allocation of period end results           19,172.5           19,599.1        (2.18)       19,128.4

Preferred shares                            5,802.1            7,314.1       (20.67)        5,979.0
 
Minority interests                            884.1            1,534.4       (42.38)        1,394.9 

Shareholders' equity & minority
interests                                  25,858.7           28,447.5        (9.10)       26,502.4 

Basic Capital (Tier 1)                     14,707.5           16,669.1       (11.77)       16,357.9 

Supplementary Capital                       6,995.6            7,425.1        (5.78)        8,239.1 

Eligible capital                           21,703.1           24,094.2        (9.92)       24,597.0
 
Risk-weighted assets (BIS criteria)       199,893.1          206,783.2        (3.33)      204,310.5
 
BIS ratio*                                    10.86              11.65                        12.04
 
  Tier 1                                       7.36               8.06                         8.01
 
Excess (amount)                             5,711.7            7,551.6       (24.36)        8,252.2 
                                                                                                                      
* The impact of amortization in 2002 of preferred stock is reflected in 2001
  end year accounts. 
 

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