Santander Quarterly Profit Rises 68% Amid Recovery in Spain

by Macarena Munoz

Photographer: Angel Navarrete/Bloomberg

(Bloomberg) -- Banco Santander SA, Spain’s largest lender, said profit rose 68 percent in the fourth quarter as the bank set aside fewer provisions for bad loans and revenue increased.
Net income rose to 1.46 billion euros ($1.7 billion) in the fourth quarter from 864 million euros a year earlier, the lender said in a statement Tuesday. The results were in line with the average of 12 analyst estimates compiled by Bloomberg.
The bank, which makes 14 percent of profit in its home market, tapped shareholders for 7.5 billion euros last month and cut its dividend, seeking to allay investor concerns about the strength of its balance sheet. Santander has counted on Spain’s economic recovery to
boost profit as its U.K. bank continues to drive earnings growth while faltering growth in Brazil threatens to erode profit.

“We will focus on organic growth,” Chairman Ana Botin, who took over in September from her late father, Emilio Botin, said in the statement.
Santander shares rose as much as 2 percent as of 9:12 a.m. in Madrid trading, paring the year’s decline to 14 percent, while the benchmark STOXX Europe 600 Banks Price Index is up 0.5 percent in the same period.

Spain, Brazil

There were “some positives that were to be expected, such us the improvement of the loan book in Spain, and others that have surprised us, such as the better evolution of the loan book and non-performing-loan ratio in Brazil,” David Vaamonde, bank analyst with MainFirst Bank AG said by telephone.
In the fourth quarter, provisions for non-performing loans fell to 2.5 billion euros from 2.8 billion euros from a year earlier, Santander said. Bad loans as a proportion of total lending at Santander fell to 5.2 percent from 5.3 percent at the end of September.
Net income from the Brazilian unit, that accounts for 19 percent of the group’s profit, rose 30 percent in the fourth quarter, compared with the year-earlier period.
The trend in the Spanish and U.K. units was weaker than expected, Benjie Creelan-Sandford, banks analyst at Macquarie Group Ltd., said by telephone. Profit in Santander’s home market tripled in the quarter and in the U.K. rose 9.5 percent.
Net interest income, or revenue generated from the difference between what banks charge for loans and pay for funding, rose to 7.7 billion euros from 6.9 billion euros a year ago.
In her first four months on the job, Botin, 54, has overhauled the bank’s management, appointing Jose Antonio Alvarez as chief executive officer. Tuesday’s earnings are the first presented by the new team.