Santander Profit Up Slightly
January 27 2016 - 2:30AM
Dow Jones News
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
€1.46 billion ($1.59 billion). Analysts had forecast €1.29 billion,
according to a poll by data provider FactSet.
The Spanish bank reported net interest income of €7.89 billion
against €7.71 billion a year earlier and forecasts of €7.88
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 Botí n had tried to quell those
concerns by issuing â,¬7.5 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 Ló pez Dí az 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 €59 billion from around €86 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 02:15 ET (07:15 GMT)
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