Banco Santander Posts 5% Decline in First-Quarter Profit to $3.1 Billion
Santander Net Falls as Decline in Spain Offsets Brazil Gain
Simon Dawson/Bloomberg
A pedestrian passes a Banco Santander branch in London.
A pedestrian passes a Banco Santander branch in London. Photographer: Simon Dawson/Bloomberg
Santander First Quarter Net Income Fell 5% to EU2.11 Billion
Simon Dawson/Bloomberg
The headquarters of Banco Santander are seen in London, U.K.
The headquarters of Banco Santander are seen in London, U.K. Photographer: Simon Dawson/Bloomberg
Banco Santander SA (SAN), Spain’s biggest bank, said first-quarter profit declined 5 percent as lower earnings at home offset gains in Latin America.
Net income fell to 2.11 billion euros ($3.13 billion) from 2.22 billion euros a year earlier, the Santander, Spain- registered lender said in a filing today. The mean estimate of seven analysts surveyed by Bloomberg was 2.17 billion euros.
Earnings from Latin America, led by Brazil where it owns the third-biggest non-state-owned bank, are buoying Santander as Spanish divisions suffer losses on real-estate loans and shrinking loan books. Santander, which has so far come through the financial crisis with profit only about 10 percent off its 2007 peak, strengthened its core capital ratio by almost 1 percentage point during the quarter.
“There’s still pressure on Spain, but overall the operating performance of the group is looking good,” said Daragh Quinn, an analyst at Nomura International in Madrid who rates Santander “neutral.” “Despite the miss compared with estimates, the good capital number makes this a reasonable set of results.”
Santander climbed 1.5 percent to 8.60 euros in Madrid, extending this year’s advance to 8.5 percent and valuing the bank at 72.6 billion euros. That compares with a 3.4 percent gain this year for the 48-member Bloomberg Europe Banks and Financial Services Index. Banco Bilbao Vizcaya Argentaria SA, which reports earnings May 5, is up 15 percent.
Capital Position
“These results show the enormous benefits of geographic diversification,” Chairman Emilio Botin, 76, said in a statement.
Santander’s core capital ratio, a measure of financial strength, rose to 9.66 percent from 8.8 percent in December as it reduced risk-weighted assets and sold convertible bonds in Brazil.
It will keep the ratio above 9 percent this year even as the purchase of Poland’s Bank Zachodni WBK SA shaves off about 60 basis points, the bank said. A basis point is one hundredth of a percent.
Santander will press ahead with plans for an initial public offering of its U.K. business in the second half of this year, Chief Executive Officer Alfredo Saenz said on a webcast for analysts.
Bad Loans
Bad loans as a proportion of total lending at Santander rose to 3.61 percent from 3.55 percent in December and 3.34 percent a year earlier. The bad-loan ratio in the bank’s home market, which rose by almost 1 percentage point to 4.57 percent, will probably peak in the third quarter and won’t exceed 5 percent, Saenz told reporters in Madrid.
The bank had 3.1 billion euros of net loans newly classed as in default in the quarter, compared with 3.4 billion euros a year ago. Costs for covering impairments dropped 10 percent to 2.2 billion euros.
Revenue from Spain “reversed their trend” to grow 7 percent from the preceding quarter, the bank said. Lending in the country declined 5 percent from a year earlier.
Santander’s profit from Spain fell 32 percent to 593 million euros from a year earlier. Net interest income dropped 18 percent to 1.34 billion euros.
“We are putting out our photo of Spain at its worst and ugliest moment,” Saenz said. “Spain is a country that must deleverage -- we may not like it but it is necessary.”
Profit from Latin America increased 27 percent to 1.27 billion euros, with a 23 percent gain in Brazil. Lending in Brazil rose an annual 18 percent in local currency terms.
Earnings from the U.K., a business led by Botin’s eldest daughter Ana Patricia, 50, rose 2 percent to 491 million euros, the bank said.
To contact the reporter for this story: Charles Penty in Madrid at cpenty@bloomberg.net
To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net
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