Santander's Profit Slips on Weaker Lending and Fee Income -- Update

By Jeannette Neumann 

MADRID-- Banco Santander SA on Wednesday reported a 5% decline in first-quarter net profit to EUR1.63 billion ($1.84 billion) from the year-earlier period on weaker lending and fee income.

Santander said net interest income--the difference between what lenders pay clients for deposits and charge for loans--was EUR7.62 billion compared with EUR8.04 billion in the first quarter of 2015. Both net profit and net interest income were roughly in line with analysts' expectations, according to a poll by data provider FactSet.

"We continue to deliver on all our commitments," Executive Chairman Ana Botín said in a statement.

The decline in net profit, the bank said, was triggered by the depreciation of various currencies against the euro. Santander has units from Argentina to Poland.

A drop in the value of the Brazilian and Mexican currencies against the euro, for instance, chipped away in the first quarter at Santander's earnings, which are reported in euros.

Fees fell by 5% year-over-year to EUR2.4 billion. They were also down compared with the fourth quarter.

Some analysts had anticipated a decline in commissions at Santander and other Spanish banks due to market turbulence in the first quarter.

"The negative surprise will come from the fee income line, which has been impacted by weak capital markets and asset management," Francisco Riquel, an analyst with Madrid-based financial-services firm N+1 Group, wrote in a report on Spanish banks before Santander's results.

Santander reported a capital ratio of 10.27% as of March 31, under international regulations known as "fully loaded" Basel III criteria. The bank said it was on track for its capital ratio to exceed 11% in 2018.

Investors and analysts have been keeping a close eye on the pace at which Santander is able to generate capital. The lender's financial cushion remains below that of its European banking peers.

Santander's ratio of bad loans to total loans fell slightly to 4.33% in the first quarter of this year. Provisions for bad loans also fell.

Write to Jeannette Neumann at [e-mail]

(END) Dow Jones Newswires

April 27, 2016 02:15 ET (06:15 GMT)

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