MADRID – Banco Santander SA (NYSE: STD) “has a more than comfortable capital position,” even after announcing three acquisitions in as many months, CEO and Second Vice Chairman Alfredo Sáenz Abad told a news conference in Madrid, according to Bloomberg News. But the Spanish-based banking group’s pending acquisition of Philadelphia-based Sovereign Bancorp Inc. (NYSE: SOV) will keep it busy for the next two or three years, Sáenz said, adding that Santander considers it better to be “protected in its winter quarters” than continue to look for buyout bargains.
Santander yesterday posted a third-quarter profit of 2.21 billion euros ($2.77 billion), an increase of 4.7 percent from the year-ago period, on gross operating income that grew 13 percent to 22.53 million euros. The actual profit was just short of the 2.23 billion euro median forecast of seven analysts polled by Bloomberg News. The company credited higher profits on its loan portfolio and its recent takeover of the Brazilian Banco Real.
A modernized health plan: Supporting cost management and the employee experience.
The Surest health plan came from a group of innovators wondering: What if health care…
Learn More
Diluted earnings per share dipped slightly to 0.3287 euros from 0.3375 a year ago, the company said. The results exclude the September sale and lease-back of the company’s Santander Financial City headquarters Madrid, for 1.9 billion euros; the resulting capital gain of 586 million euros “did not feed through to the third quarter’s profit,” Santander said.
Its third-quarter profit “underlines the group’s capacity to generate earnings in a very complex environment of global economic slowdown, dislocations in the equity and fixed-income markets, liquidity tensions and the worsening of the financial crisis,” Santander said in its report. Investors apparently agree: so far this year, Santander shares have fallen 55 percent, while the Bloomberg Europe Banks and Financial Services Index has fallen 62 percent, Bloomberg said.
Among business areas, Santander’s retail network in Spain posted a third-quarter profit of 470 million euros, an increase of 2.6 percent; the company’s U.K. profit rose 3.9 percent to 317 million euros; and its Latin American profit rose 9.2 percent to 748 million euros, the company said.
Commercial revenue rose for the 16th straight quarter, Santander said. But credit growth slowed to 3.5 percent per year, from 10.9 percent a year ago, as the global financial crisis continued to spread.
Meanwhile, “dubious” loans increased 83 percent to 10.4 billion euros – and loan arrears as a percentage of total lending rose to 1.63 percent, from 0.89 percent a year ago – spurring the company to increase its net provision against loan losses by 1.60 billion euros, or 67.2 percent, compared with a year ago.
Recent highlights include:
• The acquisition by Santander’s U.K.-based Abbey division of Bradford & Bingley’s retail deposits (20 billion pounds) and direct-distribution channels, in a deal that closed on Sept. 29. B&B “has been integrated into the balance sheet of the group and of the U.K. up to September, with no impact on earnings,” the company said.
Santander also has given Abbey a cash infusion of 1 billion pounds, “to enhance its strength,” but does not plan to take part in the British government’s bank bailout scheme, it said in its report.
• The acquisition of U.K.-based Alliance & Leicester, which closed ahead of schedule on Oct. 10. A&L earnings will be incorporated into Santander’s fourth-quarter report.
• The Oct. 13 agreement to acquire the remainder of Philadelphia-based Sovereign Bancorp Inc. (NYSE: SOV), the parent of Sovereign Bank, in which Santander currently holds a 24.35-percent stake. (READ MORE) The Spanish bank plans to acquire the remaining 75.65 percent of Sovereign shares in a stock swap valued at about $1.9 billion, under the agreement approved by Santander’s executive committee and unanimously approved by the non-Santander members of Sovereign’s board of directors.
“The transaction meets Santander’s criteria for acquisitions both strategically, by significantly enhancing the geographical diversification of the group, and financially, with a projected net profit for Sovereign of $750 million in 2011,” the company said in its report. Banco Santander said it will ask shareholders, at an Extraordinary General Meeting, to approve the issuance of about 147 million new shares, or about 2 percent of Santander’s capital, as well as a capital increase.
The deal – subject to the approval of Santander and Sovereign shareholders, U.S. and Spanish regulatory approvals and other customary conditions – is expected to close in the first quarter.
Despite its third-quarter purchases, the company’s Tier 1 capital ratio – a measure of solvency – was 7.89 percent at the quarter’s end, essentially unchanged from the 7.88 percent at the end of June. Its core capital ratio was 6.31 percent, compared with June’s 6.31 percent.
The company’s full-year profit target of 10 billion euros ($12.5 billion) – reaffirmed last month by Chairman Emilio Botin – remains “reachable,” despite the economic slump in its core Spanish and U.K. markets and looming loan losses, said Sáenz, Santander’s CEO.
Banco Santander SA (NYSE: STD) is an international banking group with total assets of more than 953 billioneuros. Based in Madrid, it has 11,685 branches and more than 132,000 employees in continental Europe, the United Kingdom and Latin America. Additional information is available at www.santander.com.
Sovereign Bancorp, the Philadelphia-based holding company for Sovereign Bank, is an $85 billion financial institution with 750 community banking offices, more than 2,300 ATMs and about 12,000 employees, mostly in the Northeast. For additional information, visit www.sovereignbank.com.
