By Jeannette Neumann
MADRID-- Banco Santander SA said Tuesday that it will offer to
buy out the 25% of its Brazil unit that it doesn't currently own,
in a deal that could be worth up to EUR4.7 billion ($6.5
billion).
Spain's biggest bank and the euro zone's biggest lender by
market value said it would offer a 20% premium over the last
closing market price and expects to close the deal by October.
Santander said in a statement that the offer reflects the bank's
"confidence in Brazil and its Brazilian subsidiary as well as the
latter's long-term growth potential."
The news came shortly before Santander said that first-quarter
net profit rose 8.1% to EUR1.3 billion, slightly above analysts'
expectations. But total lending was down amid what Santander said
was weak demand in Europe, particularly in Spain and Portugal.
Brazil and Mexico, which account for more than a quarter of
Santander's net profit, experienced big declines. Santander's
Brazil unit saw net profit fall 27% compared with a year earlier,
while its Mexican unit posted a 43% drop. Net profit from its U.K.
unit, which accounts for around one-fifth of the bank's profit, was
up 68%.
Also, the bank said commissions and trading income were down
overall.
Santander posted a EUR1.2 billion net profit for the first
quarter of 2013. Analysts polled by data provider FactSet forecast
net profit of EUR1.2 billion for the first three months of this
year.
Santander also posted a better-than-expected first-quarter net
interest income of EUR6.99 billion, a 3% decrease from the previous
year. Analysts polled by FactSet anticipated net interest income of
EUR6.6 billion this quarter.
The lender's rate of bad loans--those that were more than 90
days overdue--as a portion of total loans fell to 5.52% from 5.61%
in the fourth quarter of last year. Santander said that was the
first decline in the rate since 2007. In Spain as a whole, the
bad-loan ratio notched up slightly to 7.61% from 7.49% in the
fourth quarter of last year.
But Spanish lenders Caixabank SA, Banco de Sabadell SA and
Bankia SA said in recent days that they had also seen a small
decrease in their bad-loan ratios in the first quarter of this year
compared with the fourth quarter of 2013.
Investors and analysts have been keeping close tabs on Spanish
banks' bad-loan figures to test their progress in shedding
liabilities that accumulated on their balance sheets during the
financial crisis.
Mounting defaults by homeowners and companies forced Spain to
request a bailout in 2012 and inject EUR41 billion of European
Union funds into its most troubled lenders.
Still, Santander's bad-loan ratio for the first quarter of 2014
is above the 4.75% the bank reported for the same period a year
earlier.
In Spain, the bank said total loans dropped from the previous
year. But there was a slight increase in lending from the previous
quarter, the first rise in five years, Santander said.
Write to Jeannette Neumann at jeannette.neumann@wsj.com
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