Santander Profit Beats Forecasts -- Update
October 26 2016 - 3:35AM
Dow Jones News
By Jeannette Neumann
MADRID-- Banco Santander SA said third-quarter net profit inched
higher, as the Spanish lender's business in Brazil benefited from a
brightening outlook for the local economy and currency while the
slump in the pound knocked returns from its U.K. unit lower.
Santander, one of Europe's largest lenders, said on Wednesday
that net profit rose by less than 1% to EUR1.70 billion ($1.85
billion) in the three months to end-September from EUR1.68 billion
in the same period last year. That beat analysts estimates of
EUR1.55 billion, according to a poll by data provider FactSet.
Santander's third-quarter results come less than a month after
bank executives presented investors with a three-year profitability
outlook that was more downbeat than previous projections, but more
in line with analysts' expectations.
The bank, run by Executive Chairman Ana Botín, said net interest
income in the third quarter fell 2.4% to EUR7.80 billion from
EUR7.98 billion a year earlier, also ahead of analysts'
estimates.
"The low interest rate environment within developed economies
remains a challenge for parts of our business," Ms. Botín said. The
bank's " Latin American and consumer finance franchises [are]
growing particularly well," she said.
Santander increased its capital ratio slightly to 10.47% as of
Sept. 30, under international regulations known as "fully loaded"
Basel III criteria. The bank reiterated it was on track to reach a
capital ratio of 11% 2018, a level that would be below its
peers.
The bank's ratio of bad loans to total loans fell slightly to
4.15% in the third quarter.
At Santander's Spanish banking unit, net profit fell 13% to
EUR270 million on weaker lending income as banks in the country
battle historically slack demand for loans and downward pressure on
lending yields amid low interest rates and stiff competition. Fees,
however, were up nearly 10% year-over-year.
In the U.K., net profit fell by nearly one quarter to EUR364
million, weighed down by a drop in net interest income and the
impact of sterling's loss in value since the country's vote in June
to leave the European Union. The fall in net profit was more
moderate when calculated in pounds. Santander generates around
one-fifth of net profit in the U.K.
In Brazil, where Santander also generates around one-fifth of
net profit, the economy is starting to show signs of recovery.
Santander's net profit in Brazil rose 27% in the quarter to EUR488
million on stronger lending income, when calculated in euros, and
on higher fees. The country is still in a deep recession and
Santander's provisions for bad debts rose in the quarter.
In the U.S., where Santander has been mired in regulatory
problems, net profit fell 24% year-over-year on higher costs and
provisions and weaker net interest income.
Separately, Bankia SA, Santander's local competitor which is
majority-owned by the Spanish government, sad that third-quarter
net profit fell 17% amid weak domestic demand for loans,
rock-bottom interest rates and downward pressure on lending yields
in Spain's competitive banking sector.
Write to Jeannette Neumann at jeannette.neumann@wsj.com
(END) Dow Jones Newswires
October 26, 2016 03:20 ET (07:20 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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