Santander Seen Posting Profit Increase on Lower Spain Provisions

Banco Santander SA (SAN), Spain’s biggest bank, will probably report higher third-quarter profit on lower charges for covering losses on Spanish real estate, even as earnings fell in Brazil (SANB11) and Britain.

Profit likely rose to 1.08 billion euros ($1.49 billion) from 122 million euros a year earlier, when Santander took a 1.14 billion-euro net provisioning charge, based on the average estimate in a Bloomberg survey of four analysts. Santander, based in the northern Spanish city of the same name, publishes earnings tomorrow before the stock market opens in Madrid.

Chief Executive Officer Javier Marin, 46, is rebuilding earnings after 67 billion euros of provisioning charges since 2008 by targeting lower costs and boosting more profitable business with corporate customers in Spain, Brazil and the U.K. The decision last week by Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest lender, to cut its stake in China Citic Bank Corp. may also put pressure on Santander to bolster capital levels, said Benjie Creelan-Sandford, a banking analyst at Macquarie Ltd. in London.

“The big question for Santander is still capital,” Creelan-Sandford, who has an underperform rating on the bank, said in a phone interview. “Any signs of recovery in Spain are also going to be a focus.”

Santander rose 6.8 percent in Madrid trading this year, valuing the bank, run by Chairman Emilio Botin, at 72.3 billion euros. BBVA, which reports earnings Oct. 25, rose 30 percent.

Brazil, U.K.

Santander may say profit from Brazil, its highest-earning market, fell 17 percent from a year ago to 442 million euros as lower net interest income outweighed a drop in loan-loss provisions, according to Banco BPI SA. Earnings in Brazil are also under pressure from an 11 percent quarter-on-quarter decline in the country’s currency, Keefe, Bruyette & Woods analysts Antonio Ramirez and Marta Sanchez wrote in a report dated Oct. 22.

Earnings from the U.K. may show a decline of 22 percent from a year ago, according to BPI estimates. Profit from the Spanish banking business may have dropped 72 percent to 95 million euros, while losses at its Spanish real estate division may have shrunk to 168 million euros from 1.63 billion euros in the same period of 2012, according to KBW.

To contact the reporter on 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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