Santander quarterly profit jumps on Spain recovery, U.K.

PEDESTRIANS PASS the entrance to a Banco Santander SA branch in Madrid, Spain, in 2012. Banco Santander said third-quarter profit rose 52 percent, beating estimates, as charges for bad loans dropped in Spain and earnings climbed in the U.K. and Brazil. / BLOOMBERG FILE PHOTO/ANGEL NAVARRETE
PEDESTRIANS PASS the entrance to a Banco Santander SA branch in Madrid, Spain, in 2012. Banco Santander said third-quarter profit rose 52 percent, beating estimates, as charges for bad loans dropped in Spain and earnings climbed in the U.K. and Brazil. / BLOOMBERG FILE PHOTO/ANGEL NAVARRETE

MADRID – Banco Santander SA said third-quarter profit rose 52 percent, beating estimates, as charges for bad loans dropped in Spain and earnings climbed in the U.K. and Brazil.

Net income at Spain’s largest lender increased to 1.61 billion euros ($2 billion) from 1.06 billion euros a year earlier, the Santander, Spain-based bank said in a filing to regulators today. That compared with the 1.53 billion-euro average estimate in a Bloomberg survey of 17 analysts.

Under Ana Botin, who became chairman in September after the death of her father, Emilio, Santander is counting on Spain’s economic recovery to boost profit as its U.K. bank continues to drive earnings growth. In his last speech to shareholders in March, Emilio Botin said they should expect Spanish earnings to lift profit back toward pre-crisis levels of about 9 billion euros by 2016.

“The main driver is going to be Spain because of lower provisions and the improvement in margins” Carlos Peixoto, an analyst at Banco BPI SA in Porto, Portugal, said in an interview before the earnings.“The U.K. is on a stronger track.”

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Santander shares fell 0.5 percent to 6.96 euros as of 2:24 p.m. in Madrid, paring the stock’s gain to 6.9 percent this year. The 49-member Stoxx Europe 600 Banks Index is down 1.4 percent this year.

U.K. profit

The bank increased its cost savings target to 1 billion euros in 2014 from a 750 million-euro goal, and now predicts 2 billion euros of savings in 2016 compared with its previous target for that year of 1.5 billion euros.

Net interest income, or the difference between what the bank charges for loans and pays for its funding, rose to 7.47 billion euros from 6.94 billion euros a year earlier.

Bad loans as a share of total lending fell for a third straight quarter, dropping to 5.28 percent from 5.45 percent in June, the bank said. Loans newly classified as in default during the quarter plunged to 1.96 billion euros from 4.72 billion euros a year ago.

Earnings from Santander’s Spanish banking business almost quadrupled to 309 million euros, as loan-loss provisions fell to 429 million euros from 630 million euros a year earlier.

Profit from the U.K. jumped 34 percent to 411 million euros, while profit from Brazil rose 14 percent to 409 million euros.

“The quality of the results is relatively weak, with net interest income in Spain, Brazil and Chile lower than our expectations, something that has been offset by strong trading income,” David Vaamonde, bank analyst from MainFirst Bank, said today by phone.

Trading income increased 86 percent from the previous quarter to 952 million euros.

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