Santander Profits Plunge as It Prepares for Coronavirus Hit - Update

--Banco Santander profits fell significantly as the bank booked provisions related to the impact of the coronavirus pandemic

--The bank had set aside more money for potential loan losses

--Net profit for the period fell 82%

By Pietro Lombardi

Banco Santander SA's profits fell sharply as the bank followed U.S. and European peers in preparing for the impact of the coronavirus pandemic.

The Spanish bank, one of Europe's largest, set aside more money to cover potential loan losses and booked exceptional provisions related to the expected economic impact of the pandemic, mirroring steps taken by some of the largest banks in the U.S. and Europe.

Santander's loan-loss provisions stood at 2.31 billion euros ($2.50 billion) in the first quarter, a 6% increase from the same period last year. It also booked EUR1.6 billion in provisions related to the expected economic impact of the pandemic, as well as EUR46 million in restructuring costs.

The higher provisions, coupled with lower revenue, contributed to a 82% decline in net profit to EUR331 million, it said Tuesday.

Excluding the EUR1.65 billion exceptional charges and adjusting for currency effects, underlying profit rose 8%.

"Our underlying quarterly operating performance was strong, with a relatively limited impact from COVID19," Executive Chairman Ana Botin said.

Revenue fell 2% to EUR11.81 billion, as both net interest income and fees declined.

Analysts had expected a net profit of EUR1.75 billion on revenue of EUR11.86 billion, according to a consensus forecast provided by FactSet.

The bank's core tier 1 ratio, a key measure of balance-sheet strength, was 11.58% in March from 11.65% at the end of December.

"While the final and more permanent impact is currently impossible to predict, we are operating from a position of strength," Ms. Botin said.

"We will review our strategic targets once we have a more complete understanding of the full impact of the crisis."

The largest banks in the U.S. have set aside billions of dollars to cover possible soured loans as they brace for a likely tough recession. Italy's largest bank UniCredit SpA said it would book almost $1 billion in provisions for bad loans in the first quarter. Swiss bank Credit Suisse Group AG and Germany's Deutsche Bank AG set aside more than half a billion dollars each to cover potential loan losses.

Write to Pietro Lombardi at [e-mail]

(END) Dow Jones Newswires

April 28, 2020 02:32 ET (06:32 GMT)

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