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Name | Symbol | Market | Type |
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Banco Santander SA | NYSE:SAN | NYSE | Depository Receipt |
Price Change | % Change | Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.04 | -0.82% | 4.83 | 4.86 | 4.81 | 4.85 | 1,502,812 | 22:32:53 |
By Jeannette Neumann
MADRID-- Banco Santander SA said first-quarter net profit rose 32% from a year earlier on higher fees and stronger lending in the bank's European consumer finance and Latin American units.
The increase, along with a 15% boost in net interest income, beat analysts' estimates despite weak growth in the bank's lending in Spain. Release of the figures Tuesday lifted Santander's shares 1.2% in early afternoon trading in Madrid.
The Spanish lender, the eurozone's largest by market value, posted first quarter net profit of EUR1.72 billion ($1.87 billion), up from EUR1.3 billion a year earlier. Its net interest income, a key driver of profit for retail banks, was EUR8.04 billion in the first quarter. Net interest income is the difference between what lenders pay clients for deposits and what they charge for loans.
Net loans to customers were up 14% in the first quarter from a year earlier. Among its main units, Santander posted a decline in lending only in Portugal. But the Portuguese unit gained market share, Chief Financial Officer José García Cantera told analysts, and Santander remains interested in making a bid for small Portuguese lender Novo Banco SA.
The growth in Santander's loan volume comes amid a push by Executive Chairman Ana Botín to turn billions of euros in capital the bank raised in January into new loans for individuals and businesses.
"When we raised capital in January, we said our goal was to target organic growth in our core markets forecast to achieve strong economic recovery," Ms. Botín said Tuesday.
Ms. Botín, who took the helm of the bank in September after the death of her father, said earlier this year that Santander would forgo major acquisitions to expand its balance sheet, targeting new loan issuance instead.
Her strategy is a shift from the modus operandi under her father, Emilio Botín, who voraciously snatched up lenders across the globe during his three decades as chairman, expanding Santander from a small, regional Spanish lender into the eurozone's largest bank.
In Santander's main banking units, only Chile posted lower first-quarter net profit, which dropped 11% to EUR109 million, driven by inflation, executives said. In Spain, by contrast, net profit jumped 42% year-over-year to EUR357 million on better lending income and fewer provisions against losses on bad loans.
A strengthening Spanish economic recovery has helped buoy revenue growth in Santander's home market over the past year. Still, many individuals and businesses in Spain remain focused on paying down existing loans, eschewing new ones.
The deleveraging is a struggle for Ms. Botín as she seeks to expand Santander's loan book in Spain and boost profitability.
Santander said net loans in Spain were up 0.2% year-over-year. Loans also increased slightly from the fourth quarter of last year to the first quarter of 2015.
Deleveraging in the first quarter was particularly acute in mortgage loans, Santander said, meaning more customers were paying off their home loans than taking out new ones, contracting total mortgage volume. New businesses and consumer loans in the first quarter, by contrast, outpaced the rate at which old loans were being paid off, increasing the total loan volume to such borrowers.
"One basically balances out the other," Mr. Cantera said. "New production of loans is clearly positive in the quarter."
Santander executives, however, cautioned about lending profitability in coming quarters, as strong competition pushes down the rates Santander and other banks charge borrowers for new loans. "The pressure in terms of margins is going to mount," Mr. Cantera said.
Lending income is already weaker than some analysts had expected. Net interest income in Spain fell 4.6% in the first quarter of this year, compared with the fourth quarter of last year.
"Spain was the weakest link, especially in revenue terms, with net interest income progression faring badly against domestic peers due to increased loan pricing competition," Credit Suisse Group AG analysts said in a research note Tuesday. Citigroup Inc. analysts wrote: "Weaker Spain is a negative surprise which may carry over to other banks reporting this week."
Still, lending income was higher year-over -year.
Santander said its capital ratio under Basel III "fully loaded" criteria was 9.7% at the end of the first quarter, in line with what the bank had said after its capital increase.
Institutional investors in January welcomed Santander's sale of EUR7.5 billion in new shares, a move intended to calm perennial concerns that the lender's balance sheet was weaker than its peers.
In the U.S., Santander Holdings USA Inc. in March failed the qualitative part of the Federal Reserve's stress test for the second year in a row because of weak internal procedures for managing through a stressed economic scenario.
Santander Chief Executive José Antonio Álvarez didn't rule out a failure next year. "It depends a bit on the regulator's vision, if it focuses on whether we've made progress or whether we've arrived" at specific goals, Mr. Álvarez said Tuesday at a news conference.. "If [the Fed] focuses on whether we've arrived, we might not pass."
Write to Jeannette Neumann at jeannette.neumann@wsj.com
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