STD Banco Santander, S.A. Sponsored Adr (Spain)

By Jeannette Neumann 

MADRID-- Banco Santander SA said fourth-quarter net profit tumbled from a year earlier as the bank set aside millions to cover claims for the mis-selling of payment protection insurance in the lender's U.K. unit.

Santander posted net profit of EUR25 million ($27.12 million) in the fourth quarter, a dive from the EUR1.46 billion the bank reported a year earlier. Analysts had anticipated net profit of EUR1.29 billion, according to a poll by data provider FactSet.

Santander said it had set aside EUR600 million to address potential claims by clients who were missold payment protection insurance. The net profit was also hit by a EUR683 million charge the bank said was used to cover the declining value of software and some other assets. Without the charges, the bank said it would have reported a fourth-quarter net profit roughly flat compared with the previous year.

The Spanish bank reported net interest income that was also roughly in line with what it had reported a year earlier. Santander posted net interest income of EUR7.89 billion, versus EUR7.71 billion a year ago. Analysts had estimated Santander would report a net interest income of EUR7.88 billion in the fourth quarter, according to FactSet.

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.

Santander reported a "fully loaded" capital ratio of 10.05% compared with 9.85% as of September of last year. Investors and analysts will welcome that slight climb upward as they 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.

Fees at Santander fell slightly in the fourth quarter compared with a year earlier.

Net interest income in Santander's Spanish banking unit fell 16% in the fourth quarter of 2015 from a year earlier. Total loans fell. While Spain's economy is recovering after a deep recession, many individuals, businesses and public institutions in the country are prioritizing paying off their existing debts rather than taking out new loans. Rock-bottom interest rates have hurt profitability. Net profit in the Spanish unit fell to EUR94 million in the fourth quarter from EUR289 million a year earlier.

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

Corrections & Amplifications

Santander posted net profit of EUR25 million ($27.12 million) in the fourth quarter, a dive from the EUR1.46 billion the bank reported a year earlier. An earlier version of this article misstated the net profit figure.

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

(END) Dow Jones Newswires

January 27, 2016 03:12 ET (08:12 GMT)

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