SAN Banco Santander SA

By Jeannette Neumann 

MADRID-- Banco Santander SA said Wednesday that net profit rose in the third quarter from a year earlier as the bank confronts turmoil in the British pound but a brightening outlook for Brazil's economy and currency.

Santander, one of Europe's largest lenders, said net profit was EUR1.70 billion ($1.85 billion) in the third quarter of this year compared with EUR1.68 billion reported a year earlier.

Analysts had anticipated that slightly lower lending income and weaker returns from its bond portfolio would lead Santander to report a net profit of EUR1.55 billion in the third quarter, according to a poll by data provider FactSet.

In the U.K., where Santander generates around one-fifth of its net profit, investors' concerns about the impact of Britain's exit from the European Union has battered the British pound, chipping away at Santander's earnings when reported in euros. In Brazil, on the other hand, where Santander also generates around one-fifth of its net profit, the economy is starting to show signs of recovery from a devastating downturn.

The Spanish lender, run by Executive Chairwoman Ana Botín, said net interest income in the third quarter was EUR7.80 billion compared with EUR7.98 billion a year earlier.

Net interest income, a key profit driver for retail banks, is the difference between what lenders earn from loans and pay for deposits. Analysts had anticipated net interest income of EUR7.72 billion, according to FactSet.

Santander's third-quarter results come less than a month after bank executives presented investors with a profitability outlook that was more downbeat than previous projections, but more in line with analysts' expectations for the lender.

Santander lowered the target for its return on tangible equity, a measure of profitability, to above 11% by 2018 from a previous target of around 13% because of scaled-back expectations in Britain and Spain.

The bank also raised the target range for its cost-to-income ratio--a key measure of efficiency--to 45%-47% by 2018. The bank had said last year it aimed for a cost-to-income ratio of below 45%. The lower the figure the better.

Santander executives pledged to increase the bank's dividend per share and earnings per share during the next three years.

Write to Jeannette Neumann at jeannette.neumann@wsj.com

(END) Dow Jones Newswires

October 26, 2016 01:28 ET (05:28 GMT)

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