Santander Profit Seen Rising on Boost From U.K., Spain

Banco Santander SA, Spain’s biggest bank, will probably report an increase in second-quarter earnings, helped by gains at its U.K. unit and an improvement in its home market.

Net income likely rose to 1.43 billion euros ($1.92 billion) from 1.05 billion euros in the same period a year earlier, according to the average estimate in a survey of 10 analysts. The Santander, Spain-based lender is due to publish earnings tomorrow before the stock market opens in Madrid.

Chairman Emilio Botin, 79, told shareholders in March that the bank is primed to deliver improved profitability as economic growth picks up in Spain, and that annual earnings will reach “pre-crisis” levels approaching 9 billion euros by 2016. For now, the U.K. unit led by Botin’s daughter, Ana Patricia, is leading the earnings momentum, helping offset profit declines in Latin America and losses from real estate.

“With Santander, we are in a phase now where investors are now focusing on future profitability rather than issues in Spain,” said Josep Prats, a fund manager at Abante Asesores in Madrid who oversees about 1.3 billion euros in stocks and bonds, including Santander shares. “The U.K. is an important test for how they replicate their model in other markets.”

Santander shares have gained 19 percent this year, outpacing the 1.7 percent advance in the 43-member Bloomberg Europe Banks and Financial Services Index. Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, has risen 6 percent. The lender announced a 39 percent drop in second-quarter net income today.

U.K., Spain

At Santander, earnings from the U.K. may rise 50 percent from a year earlier to 395 million euros, according to Daragh Quinn, an analyst at Nomura International in Madrid. Lower funding costs and efforts to win market share in higher-yielding loans to small- and mid-sized companies helped Santander increase net interest income in the U.K. this year.

Earnings from Santander’s Spanish business may have jumped almost four-fold to 320 million euros, even as its real-estate unit in the country continued to generate losses, estimated at 116 million euros in the quarter, Marta Sanchez, an analyst at Keefe, Bruyette & Woods in London, said in a July 23 report.

Spain’s recovery accelerated in the second-quarter as the economy expanded 0.5 percent from the first quarter, when it grew 0.4 percent, the Bank of Spain said last week.

Profit from Brazil may have dropped 9 percent to 380 million euros as earnings from Latin America declined 11 percent, according to KBW. Santander said in April it would offer to buy back about 25 percent of its Brazilian unit in a share transaction valued at 4.7 billion euros.

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