- Banco Santander SA, Spain’s biggest bank, said second-quarter profit fell 4 percent as higher profit from the U.K. cushioned the impact of increased loan provisions.
Net income fell to 2.42 billion euros ($3.42 billion) from 2.52 billion euros a year earlier, the Santander, Spain-based bank said in a filing to regulators today. Earnings exceeded the 2.15 billion-euro median estimate of 11 analysts surveyed by Bloomberg. Profit from Britain rose by 50 percent.
Santander said it’s sticking with a target to match last year’s profit of 8.88 billion euros in 2009, as it integrates purchases in the U.K. and Brazil. Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank, posted a 34 percent jump in net income yesterday. Both are positioned to ride out recessions buffeting their main markets, said Andrea Williams at Royal London Asset Management, which oversees about $63 billion.
“The results look good at first glance, absolutely resilient,” said Williams. “My only worry would be whether they may be deferring some pain for the future.”
Santander fell 11.5 cents, or 1.2 percent, to 9.87 euros in Madrid trading, paring this year’s gain to 46 percent. The 63- member Bloomberg Europe 500 Banks Index advanced 27 percent over the same period, and BBVA 26 percent.
Santander has a market value of about 80 billion euros, the largest in Europe after London-based HSBC Holdings Plc.
Growing Loan Losses
The 152-year-old lender, headed by Chairman Emilio Botin since 1986, dodged most credit-related losses from the U.S. subprime mortgage market collapse and purchased damaged lenders such as Alliance & Leicester in the U.K.
The bank hasn’t been able to sidestep the impact of slumping economies. Bad loans as a proportion of total loans climbed to 2.82 percent from 1.43 percent a year ago and 2.49 percent at the end of March.
The bad-loan ratio will probably end the year at about 3.5 percent for Spain and also at group level, Chief Executive Officer Alfredo Saenz said on a Web cast today. The ratio will probably be 2 percent in the U.K. and may be as high as 6 percent at Santander’s consumer-finance division, Saenz said.
Non-performing loans on Santander’s books leapt to 21.8 billion euros from 9.7 billion euros a year earlier. Provisions for bad loans climbed to 2.42 billion euros in the second quarter from 1.6 billion euros a year before.
Provisions may reach 10 billion euros this year and Spanish default rates probably won’t peak until next year, Saenz said. The bank’s results in the second half of the year will look similar to those in the first, and the pace of provisioning probably wouldn’t ease for a year, he said.
‘Very Resilient’
“We’re pretty confident that they’ll be very resilient,” said Stuart Fraser, who oversees 2 billion pounds ($3.3 billion) as head of European equities at Aegon Asset Management in Edinburgh. As economies stabilize, “one bank that can look to benefit is Santander,” he said.
Santander’s core capital ratio, a gauge of its ability to absorb losses, rose to 7.5 percent from 7.3 percent in March. Santander will seek to raise funds by selling a 15 percent stake in its Brazilian unit through a share sale, Saenz said.
Net interest income rose 26 percent to 6.62 billion euros from a year ago as lending increased 16 percent. Operating costs rose 9.6 percent to 4.09 billion euros.
Spain, U.K.
Second-quarter profit from Santander’s retail banking network in Spain rose 9 percent to 1.07 billion euros, the bank said. Bad loans as a proportion of total lending at the business climbed to 3.5 percent from 1.33 percent a year earlier.
Profit from the U.K. rose to 475 million euros from 316 million. Santander said. Earnings from its consumer-finance business dropped 28 percent to 151 million euros as its bad-loan ratio climbed to 5.14 percent from 3.49 percent a year before.
Profit from Latin America, which contributes about a third of Santander’s earnings, rose 0.8 percent. First-half earnings from Mexico slumped 37 percent to 230 million euros.
Quarterly profit from Brazil, where Santander is the third- biggest non-state bank after buying ABN Amro Holding NV’s business in the country, rose 14 percent to 525 million euros.
Profit from global wholesale banking, a unit that includes the bank’s corporate and investment banking and markets business, almost doubled in the first half to 1.5 billion euros as the bank picked up market share, Santander said.
The bank used a 262 million-euro gain from the sale of a stake in the Brazilian affiliate of Visa Inc. to bolster its balance sheet in the country, Santander said.
Santander will book 555 million euros in gains from a 9.1 billion-euro exchange of European junior debt, funds that will go toward bolstering reserves, Saenz said. The swap had an acceptance rate of 54 percent and an exchange of debt in the U.S. is under way and scheduled to end in August, Saenz said.
A decision by the Bank of Spain to ease provisioning rules for mortgages had a positive impact of 270 million euros for the bank, which also used it to boost loan-loss reserves, he said.
Net income fell to 2.42 billion euros ($3.42 billion) from 2.52 billion euros a year earlier, the Santander, Spain-based bank said in a filing to regulators today. Earnings exceeded the 2.15 billion-euro median estimate of 11 analysts surveyed by Bloomberg. Profit from Britain rose by 50 percent.
Santander said it’s sticking with a target to match last year’s profit of 8.88 billion euros in 2009, as it integrates purchases in the U.K. and Brazil. Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank, posted a 34 percent jump in net income yesterday. Both are positioned to ride out recessions buffeting their main markets, said Andrea Williams at Royal London Asset Management, which oversees about $63 billion.
“The results look good at first glance, absolutely resilient,” said Williams. “My only worry would be whether they may be deferring some pain for the future.”
Santander fell 11.5 cents, or 1.2 percent, to 9.87 euros in Madrid trading, paring this year’s gain to 46 percent. The 63- member Bloomberg Europe 500 Banks Index advanced 27 percent over the same period, and BBVA 26 percent.
Santander has a market value of about 80 billion euros, the largest in Europe after London-based HSBC Holdings Plc.
Growing Loan Losses
The 152-year-old lender, headed by Chairman Emilio Botin since 1986, dodged most credit-related losses from the U.S. subprime mortgage market collapse and purchased damaged lenders such as Alliance & Leicester in the U.K.
The bank hasn’t been able to sidestep the impact of slumping economies. Bad loans as a proportion of total loans climbed to 2.82 percent from 1.43 percent a year ago and 2.49 percent at the end of March.
The bad-loan ratio will probably end the year at about 3.5 percent for Spain and also at group level, Chief Executive Officer Alfredo Saenz said on a Web cast today. The ratio will probably be 2 percent in the U.K. and may be as high as 6 percent at Santander’s consumer-finance division, Saenz said.
Non-performing loans on Santander’s books leapt to 21.8 billion euros from 9.7 billion euros a year earlier. Provisions for bad loans climbed to 2.42 billion euros in the second quarter from 1.6 billion euros a year before.
Provisions may reach 10 billion euros this year and Spanish default rates probably won’t peak until next year, Saenz said. The bank’s results in the second half of the year will look similar to those in the first, and the pace of provisioning probably wouldn’t ease for a year, he said.
‘Very Resilient’
“We’re pretty confident that they’ll be very resilient,” said Stuart Fraser, who oversees 2 billion pounds ($3.3 billion) as head of European equities at Aegon Asset Management in Edinburgh. As economies stabilize, “one bank that can look to benefit is Santander,” he said.
Santander’s core capital ratio, a gauge of its ability to absorb losses, rose to 7.5 percent from 7.3 percent in March. Santander will seek to raise funds by selling a 15 percent stake in its Brazilian unit through a share sale, Saenz said.
Net interest income rose 26 percent to 6.62 billion euros from a year ago as lending increased 16 percent. Operating costs rose 9.6 percent to 4.09 billion euros.
Spain, U.K.
Second-quarter profit from Santander’s retail banking network in Spain rose 9 percent to 1.07 billion euros, the bank said. Bad loans as a proportion of total lending at the business climbed to 3.5 percent from 1.33 percent a year earlier.
Profit from the U.K. rose to 475 million euros from 316 million. Santander said. Earnings from its consumer-finance business dropped 28 percent to 151 million euros as its bad-loan ratio climbed to 5.14 percent from 3.49 percent a year before.
Profit from Latin America, which contributes about a third of Santander’s earnings, rose 0.8 percent. First-half earnings from Mexico slumped 37 percent to 230 million euros.
Quarterly profit from Brazil, where Santander is the third- biggest non-state bank after buying ABN Amro Holding NV’s business in the country, rose 14 percent to 525 million euros.
Profit from global wholesale banking, a unit that includes the bank’s corporate and investment banking and markets business, almost doubled in the first half to 1.5 billion euros as the bank picked up market share, Santander said.
The bank used a 262 million-euro gain from the sale of a stake in the Brazilian affiliate of Visa Inc. to bolster its balance sheet in the country, Santander said.
Santander will book 555 million euros in gains from a 9.1 billion-euro exchange of European junior debt, funds that will go toward bolstering reserves, Saenz said. The swap had an acceptance rate of 54 percent and an exchange of debt in the U.S. is under way and scheduled to end in August, Saenz said.
A decision by the Bank of Spain to ease provisioning rules for mortgages had a positive impact of 270 million euros for the bank, which also used it to boost loan-loss reserves, he said.
