By Jeannette Neumann
MADRID--Banco Santander SA said Tuesday that first-quarter net
profit rose 32% from the year before, lifted by higher fees and
stronger lending in the bank's European consumer finance and Latin
American units.
The Spanish lender, the eurozone's largest by market value, said
net profit for the period was EUR1.72 billion ($1.87 billion), up
from EUR1.3 billion a year earlier and beating analysts' estimates
of EUR1.69 billion.
It reported net interest income of EUR8.04 billion, up 15% from
a year earlier, also beating forecasts of EUR7.83 billion.
Net interest income, a key driver of profit for retail banks
such as Santander, is the difference between what lenders pay
clients for deposits and charge for loans.
Net loans to customers were up 14% in the first quarter,
bolstered by strong lending in Santander's Latin American units,
its European consumer finance unit and more moderate growth in the
U.K. and the U.S. Loans to customers were up in each of the bank's
10 key markets apart from Portugal.
The economies of the U.S., Mexico and Poland are expected to
grow by more than 3% in 2015, while Spain, the U.K. and Chile
should grow more than 2.5%, Santander said Tuesday. In Brazil and
Argentina, on the other hand, it expects economic output to
decline.
Santander touts its geographical diversity as a competitive
advantage that allows strong growth in some countries to
counterbalance weakness in others where the bank has major
units.
A strengthening Spanish economic recovery has helped to buoy
revenue growth in Santander's home market in recent quarters. The
Spanish Prime Minister Mariano Rajoy said Monday that the
government expects the country's economy to expand by 2.9% this
year, up from the previous target of 2.4%.
Despite that, many individuals and businesses in Spain remain
focused on paying down existing loans, eschewing new ones. The
deleveraging process is an uphill battle for Executive Chairman Ana
Botín as she seeks to grow Santander's loan book in Spain to
further boost profitability.
Santander said gross loans in Spain were up 1.3% year-over-year,
but were down 0.8% from the fourth quarter last year. Deleveraging
in the first quarter was particularly acute in mortgage loans,
Santander said, meaning more customers were paying off their home
loans than taking out new ones. New businesses and consumer loans
in the first quarter, in contrast, outpaced the rate at which old
loans were being paid off, lifting the total loan volume to such
borrowers.
Institutional investors in January welcomed Santander's sale of
EUR7.5 billion in new shares, a move meant to quiet perennial
concerns that the lender's balance sheet was weaker than its
peers.
The bank should strengthen its capital cushion even more,
Barclays PLC analysts wrote in a research report last month.
"Although Santander's capital position is now much improved, we
don't think it is yet in quite the right place," the analysts
said.
Santander said Tuesday that its capital ratio under Basel III
"fully loaded" criteria was 9.7% at the end of the first
quarter.
"When we raised capital in January, we said our goal was to
target organic growth in our core markets forecast to achieve
strong economic recovery," Ms. Botín, who took the helm of
Santander following her father's death in September, said
Tuesday.
Write to Jeannette Neumann at jeannette.neumann@wsj.com
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