By Jeannette Neumann
MADRID--Banco Santander SA Executive Chairman Ana Botín struck a
sanguine note on Wednesday about how Mexico will fare with Donald
Trump as U.S. president and about the impact of Britons' vote to
leave the European Union on the bank's U.K. unit.
Santander, one of the world's largest retail banks, generates
around 8% of its net profit in Mexico and 20% in the U.K.
"We expect to continue to do well in Mexico despite a more
challenging environment," Ms. Botín told analysts during a
fourth-quarter earnings presentation. The election of Mr. Trump,
who has promised more protectionist measures that could hurt
Mexico's economy, has sent the peso tumbling against the U.S.
dollar.
"There is no question there will be an impact and that there
already has been an impact on the peso in Mexico," Ms. Botín
said.
The Latin American country's economy, however, is doing well,
she added, and Santander plans to continue apace with billions of
pesos of investments there.
Santander's fourth-quarter net profit in Mexico fell 2.3% from a
year earlier when measured in euros. In pesos, net profit rose 14%
year-over-year.
In the U.K., where Britons' vote in June to exit from the EU has
sent sterling down versus the euro, Ms. Botín reiterated that
Santander had no plans to reallocate its British unit.
In September, Santander lowered some of its previous financial
targets for the U.K., saying it expected lower economic growth,
higher unemployment and a drop in housing prices compared with what
executives had expected pre-Brexit.
Ms. Botín said on Wednesday the bank didn't plan to revise its
U.K. targets downward again. The bank expects growth in secured and
commercial lending, she added.
Net profit in Santander's U.K. business, where the bank
generates around one-fifth of its earnings, was flat year-over-year
in euros, at EUR474 million ($509 million), but rose 19% when
calculated in pounds.
"Going forward, we have many opportunities for profitable growth
in Europe and the Americas, in an environment we anticipate will be
volatile but generally better than 2016," Ms. Botín said in a
statement.
Last year was worse for banks than had been expected,
Santander's executive chairman said, because of Brexit,
lower-than-anticipated rates, higher taxes and other factors.
"We have delivered strong results in a challenging environment,"
Ms. Botín told analysts. Santander shares were up 3.4% in
late-morning trading in Madrid.
The results reported Wednesday by Santander, one of Europe's
largest banks by market value, will help set the tone for other
banks reporting earnings over the next two months.
Santander's fourth-quarter net profit rose to EUR1.60 billion
($1.72 billion) from EUR25 million a year earlier, beating
analysts' forecasts.
The year-earlier figure was dragged down by EUR1.7 billion in
charges to cover software write-downs and potential legal claims in
the U.K.
Net interest income, which measures the difference between what
banks earn from loans and pay for funding, increased to EUR8.1
billion from EUR7.89 billion a year earlier. Fees rose 7.7% to
EUR2.6 billion.
In Brazil, which also accounts for a fifth of Santander's
earnings, net profit rose 61% to EUR510 million. The increase was
more moderate when calculated in reais, Brazil's currency.
At Santander's Spanish banking unit, net profit rose to EUR237
million from EUR94 million.
The lender booked EUR467 million in losses at its corporate
center, which included EUR137 million for potential claims by
clients for inappropriately sold payment protection insurance, or
PPI, in the U.K. The bank had booked EUR600 million for PPI claims
a year earlier.
Santander executives have said the majority of wrongful PPI
sales were made by U.K. lender Abbey National, which Santander
bought in 2004.
The corporate center losses also include EUR32 million to
restate the accounts of Santander Consumer USA Holdings Inc. The
bank's consumer-lending unit in the U.S. had repeatedly delayed
filing its 2015 annual accounts because of what it said were
discrepancies over how its current and former accountants booked
fees charged to car dealers and how the unit accounted for loan
losses.
A corporate center is a vaguely defined area set up by some
banks as a catchall for costs such as headquarters staff and losses
related to everything from bad acquisitions to penalties for
wayward business practices.
Santander capital ratio was 10.55% in December 2016 compared
with 10.47% in September under international regulations known as
"fully loaded" Basel III criteria.
Write to Jeannette Neumann at jeannette.neumann@wsj.com
(END) Dow Jones Newswires
January 25, 2017 06:52 ET (11:52 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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