Santander Profit Up Slightly
January 27 2016 - 1:41AM
Dow Jones News
By Jeannette Neumann
MADRID-- Banco Santander SA said Wednesday that fourth-quarter
net profit rose 0.3% from a year earlier.
Net profit for the three months to the end of December, was
EUR1.46 billion ($1.59 billion). Analysts had forecast EUR1.29
billion, according to a poll by data provider FactSet.
The Spanish bank reported net interest income of EUR7.89 billion
against EUR7.71 billion a year earlier and forecasts of EUR7.88
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.
Investors and analysts are closely watching the pace at which
Santander is able to generate capital given concerns that the bank
is one of the most weakly capitalized European lenders.
Santander Executive Chairman Ana Botín had tried to quell those
concerns by issuing EUR7.5 billion in shares in January 2015. But
she hasn't made as much progress boosting capital since then and
that weakness continues to vex investors and analysts.
"Capital is the biggest risk to Santander's share price," Exane
BNP Analyst Santiago López Díaz wrote in a research report ahead of
the results. "While capital ratios are not fully comparable across
the board in Europe (due, among other things, to differences in
balance sheet compositions), Santander's level stands well below
the ratio we expect for the European sector as a whole at the end
of 2015."
Capital concerns have heightened as the recession deepens in
Brazil, which generates around one-fifth of Santander's net
profit.
Brazil's currency had fallen 26% against the euro as of December
2015 from a year earlier, which will chip away at Santander's
revenue in the South American country when it is converted into
euros on the lender's financial statements.
More individuals and businesses will struggle to pay their debts
on time amid Brazil's recession.
Francisco Riquel, an analyst with Madrid-based
financial-services firm N+1 Group, estimates that Santander's
nonperforming loans in Brazil will more than double by 2017 from
2014.
A weak capital ratio, currency problems in the bank's Latin
American units and an overall bleak, low-interest rate outlook for
European banks, have combined to slash Santander's market value to
around EUR59 billion from around EUR86 billion before the bank
raised capital in early January 2014.
Despite the plummet, Santander remains the eurozone's largest
bank by market value.
Write to Jeannette Neumann at jeannette.neumann@wsj.com
(END) Dow Jones Newswires
January 27, 2016 01:26 ET (06:26 GMT)
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