SANTANDER MEXICO FINANCIAL GROUP, S.A.B. DE C.V. (BSMX) IPO

The selling shareholders will receive all of the net proceeds from the sale of
ADSs and Series B shares. 

Banco Santander Spain is offering up to 1,608,355,340 Series B shares 
(including in the form of ADSs), including up to 138,953,311 Series B shares 
(including in the form of ADSs) pursuant to the underwriters’ option to 
purchase additional Series B shares (including in the form of ADSs), in the 
global offering. Santusa Holding, S.L. is offering up to 81,456,993 Series B 
shares (including in the form of ADSs) pursuant to the underwriters’ option to 
purchase additional Series B shares (including in the form of ADSs) in the 
global offering. 

Santusa Holding, S.L. will only sell Series B shares (including in the form of
ADSs) in this offering if the underwriters exercise their option to purchase 
more than 138,953,311 additional Series B shares (including in the form of 
ADSs), and will not sell any Series B shares in this offering if the 
international underwriters or the Mexican underwriters do not exercise their 
option to purchase additional Series B shares. 

If the international underwriters and the Mexican underwriters exercise their 
option to purchase additional Series B shares (including in the form of ADSs) 
in full in the global offering, Banco Santander Spain will receive net 
proceeds of U.S.$         and Santusa Holding, S.L. will receive net proceeds 
of U.S.$            , for total estimated net proceeds of U.S.$          to 
the selling shareholders, after deducting underwriting discounts and 
commissions. 

We will not receive any of the net proceeds from the sale of ADSs or Series B 
shares offered by the selling shareholders.

We face strong domestic competition in all aspects of our business from other 
Mexican financial groups, commercial banks, insurance companies and securities 
brokerage houses, as well as from non-Mexican banks and international financial
institutions. Banco Santander Mexico competes for both commercial and retail 
customers with other large Mexican banks, including subsidiaries of foreign 
banks, which, like Banco Santander Mexico, are a part of financial groups. In 
some parts of Mexico, Banco Santander Mexico also competes with regional banks.
Banco Santander Mexico also competes with certain non-Mexican banks 
(principally those based in the United States and Spain) for the business of 
the largest Mexican industrial groups and government entities, as well as high 
net worth individuals. 

Banco Santander Mexico’s principal competitors are BBVA Bancomer, S.A., 
Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer; Banco Nacional 
de México, S.A., Integrante del Grupo Financiero Banamex, which is part of 
Citigroup; Banco Mercantil del Norte, S.A., Institución de Banca Múltiple, 
Grupo Financiero Banorte; HSBC México, S.A., Institución de Banca Múltiple, 
Grupo Financiero HSBC; Banco Inbursa, S.A., Institución de Banca Multiple, 
Grupo Financiero Inbursa; and Scotiabank Inverlat, S.A., Institución de Banca 
Múltiple, Grupo Financiero Scotiabank Inverlat. Some of the banks with which 
Banco Santander Mexico competes are significantly larger and have more 
financial resources than Santander Mexico, including a larger asset size and 
capital base. 

The following table shows the rankings and market share of Banco Santander 
Mexico and Grupo Financiero Santander Mexico among the seven largest private 
banks and seven largest private financial groups in terms of total assets in 
Mexico, respectively, as of June 30, 2012, according to the CNBV. 

                                        Mexican Banking GAAP 
                                        As of June 30, 2012 

                                                                   Market Share
                                       Rank of Grupo               of Grupo 
                                       Financiero    Market Share  Financiero 
                       Rank of Banco   Santander     of Banco      Santander 
                       Santander       Mexico among  Santander     Mexico among
Rankings and           Mexico among    Financial     Mexico among  Financial 
Market Share           Banks(1)        Groups(2)     Banks(1)(3)   Groups(2)(3)

Loans                    4             4             13.0  %         14.0  % 
Deposits                 4             4             12.5  %         13.4  %   
Total assets             3             4             14.0  %         14.0  %  
Asset quality(4)         1             1                   —               —
Shareholders’ equity     3             3             15.5  %         13.8  % 
Net income               2             2             23.2  %         19.9  % 
Efficiency(5)            2             2                   —               — 
ROAE(6)                  1             1                   —               — 

Source: CNBV. 

(1)  Among the seven largest private banks in Mexico in terms of total assets: 
     Banco Santander Mexico, BBVA Bancomer, S.A., Institución de Banca 
     Múltiple, Grupo Financiero BBVA Bancomer; Banco Nacional de México, S.A., 
     Integrante del Grupo Financiero Banamex; Banco Mercantil del Norte, S.A., 
     Institución de Banca Múltiple, Grupo Financiero Banorte; HSBC México, 
     S.A., Institución de Banca Múltiple, Grupo Financiero HSBC; Banco Inbursa,
     S.A., Institución de Banca Múltiple, Grupo Financiero Inbursa; and 
     Scotiabank Inverlat, S.A., Institución de Banca Múltiple, Grupo Financiero
     Scotiabank.  

(2)  Among the seven largest private financial groups in Mexico in terms of 
     total assets: Grupo Financiero Santander Mexico, Grupo Financiero BBVA 
     Bancomer, Grupo Financiero Banamex, Grupo Financiero Banorte, Grupo 
     Financiero HSBC, Grupo Financiero Inbursa and Grupo Financiero Scotiabank.

(3)  We calculate market share based on information published by the CNBV.  

(4)  Defined as total non-performing loans as a percentage of total loans.  

(5)  We calculate the efficiency ratio as administrative expenses divided by 
     total income, using information published by the CNBV.  

(6)  We calculate ROAE based on annualized net income for June 30, 2012, and we
     have used an average of shareholders’ equity as of December 31, 2011 and 
     June 30, 2012.  

Our prestige and leadership has been recognized in the Mexican financial 
system, as well as in the broader Mexican business community. Also in 2011, 
América Economía ranked Banco Santander Mexico as the sixth overall best bank 
in Latin America and the first in Mexico, and Global Finance recognized 
Santander as the safest bank in Mexico, in each case based on criteria defined 
in the respective publications. In 2010 and 2012, Euromoney named Banco 
Santander Mexico the overall best bank in Mexico, and in 2012, Euromoney also 
recognized our private banking unit as the best in the “super affluent” 
category, defined as clients worth between U.S.$500,000 and U.S.$1.0 million. 

The banking sector in Mexico can be classified into two groups: the mature, 
established “large banks” and the recently created “new banks.” As of December 
31, 2011, the four largest banks, BBVA Bancomer, Banamex, Banorte and Banco 
Santander Mexico, held in the aggregate 68.4% of the total deposits in Mexico, 
followed by a total of 19.9% held in the aggregate by HSBC, Scotiabank and 
Inbursa, all of which are established large banks. The remaining 11.7% was 
distributed among 35 other banks. 

We also compete with credit unions in Mexico. Credit unions are financial 
institutions that are formed for the purpose of providing access to funding 
and favorable conditions for savings and receipt of loans and financial 
services. Credit unions do not provide services to the public in general, since
they are only authorized to carry out transactions with their members. The 
operation of a credit union is carried out by its own members. In order to be 
a member of a credit union, one must comply with the eligibility requirements 
established for that organization and acquire a certain number of shares of 
the credit union. 

The deposits of members with a credit union are not subject to any form of 
deposit insurance. There are credit unions for many different economic groups,
ranging from fishermen to industrialists, but there are also “mixed” credit 
unions that accept members who perform different economic activities and 
“social sector” credit unions that serve economic sectors that are unable to 
access traditional financial institutions due to social, economic and 
geographic conditions. 

Commercial banks in Mexico also compete in the retail market with non-banking 
institutions known as Sofoles and Sofomes, which focus primarily on offering 
consumer, commercial and mortgage loans to middle- and low-income individuals.
Until recently, the commercial credit market for middle- and low- income 
individual customers has been serviced almost exclusively by non-banking 
institutions. Currently, more than 50 non-banking institutions are licensed to 
operate in Mexico. Mexican non-banking institutions may engage in certain 
specific lending activities, but are prohibited from engaging in many banking 
operations, including receiving deposits, foreign trade financing, offering 
current accounts and engaging in foreign currency operations. Traditional banks
have begun to extend their credit services to the markets previously dominated 
by Sofoles and Sofomes. 

At the beginning of 2008, the Mexican Banking Law (Ley de Instituciones de 
Crédito) was modified to, among other things, grant authority to the CNBV (with
the assistance of other regulators, but having primary responsibility) to 
authorize the creation of banks solely to engage in certain activities (which 
is intended to incentivize competition, reduce required capital considering 
their risk exposure and improve the attention to certain industries and 
regions) as compared to so-called “universal” banks, such as Banco Santander 
Mexico. As a result of the reduced capital requirements and potential reduced 
operational costs that are likely to apply to this type of bank, there could be
increased competition as a result of the creation of more banks to target 
specific market niches. To the best of our knowledge, as of December 31, 2011, 
the CNBV has not granted any authorization for the creation of this kind of 
limited operation bank. 

In addition, commercial banks will probably face increasing competition from 
Sofoles and Sofomes as a result of reforms to several financial laws, which 
have been enacted with the main purpose of deregulating lending activities in 
Mexico, including financial leasing and factoring activities. 

Commercial banks also face increasing competition from securities firms and 
other financial intermediaries that can provide larger companies with access to
domestic and international capital markets as an alternative to bank loans. 

In the brokerage services sector, Casa de Bolsa Santander, our broker-dealer 
subsidiary, competes with 34 other brokerage houses, 18 of which are part of a 
financial group and the rest of which are independent. As of December 31, 2011,
Casa de Bolsa Santander ranked in sixth place in terms of amount traded on the 
Mexican Stock Exchange with a share of 6.38%.