Banco Santander Backs Guidance in Effort to Allay 'Brexit' Concerns -- Update
June 27 2016 - 2:26PM
Dow Jones News
By Jeannette Neumann
MADRID -- Banco Santander SA reiterated its financial targets
for this year to head off deepening investor anxiety about the
effect of "Brexit" on the Spanish bank's profitability.
Santander generates around one-quarter of its net profit in the
U.K. and investors have pummeled its shares since Britons voted to
exit the European Union.
Investors are concerned about how a sustained fall in the pound
will hit Santander's earnings when they are reported in euros and
how Brexit will dampen British economic growth, which could
diminish demand for mortgages and the other products the bank sells
in the U.K.
Despite those concerns, the bank said it does "not anticipate
that recent events will have a material impact on Grupo Santander
accounts in 2016."
Santander reiterated its target of reaching a capital ratio by
December 2018 of more than 11% under international regulations
known as "fully loaded" Basel III criteria and said that earnings
per share this year will be above those of last year.
"All commercial and financial targets for this year are
reiterated," Santander said in a regulatory filing published Monday
evening.
Santander's shares closed down 2.5% on Monday after plummeting
20% on Friday. Banks based in the U.K. have faced sharper
drops.
Even before Brexit woes hit, Santander and other European banks
had several open battle fronts, including low and negative interest
rates and historically sluggish demand for loans.
Santander and other lenders have tried to boost lackluster
profitability by cutting costs. Santander had previously announced
that it would close 450 bank branches in Spain and lay off or
reassign around 1,380 employees.
In the regulatory filing on Monday, Santander said those
restructuring efforts would cost the bank around EUR500 million, or
about $550 million, in the second quarter of this year.
Those costs are offset by a sale of a stake it holds in Visa,
leading to a total charge of EUR250 million in the second quarter,
the bank said.
Santander aims to offset the remainder of the restructuring
costs by the end of 2016.
Write to Jeannette Neumann at jeannette.neumann@wsj.com
(END) Dow Jones Newswires
June 27, 2016 14:11 ET (18:11 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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