Santander's Q1 profits jump as Spanish economy recovers

28th April 2015, Comments 0 comments

Spain's Santander, the eurozone's biggest bank, said Tuesday its first quarter net profit jumped 32 percent as strengthening economic recovery in its home market boosted revenue.

The bank reported a net profit of 1.72 billion euros ($1.87 billion) in the first three months of the year, up from 1.3 billion euros during the same period last year, in line with analysts' expectations.

The bank's net profit in Spain -- which posted its first full year of economic growth in 2014 since the bursting of the property bubble in 2008 -- surged 42 percent in the first quarter to 357 million euros.

Santander said its bottom line in Spain was boosted by better lending income and fewer provisions against losses on bad loans.

The Spanish economy, the eurozone's fourth-largest, fell into a prolonged slump when the property bubble burst in 2008, leaving thousands of labourers out of work and creating an aftershock that claimed millions more jobs across the country.

But the economy is in the midst of an accelerating economic recovery due to a rise in private consumption and higher business investment.

Prime Minister Mariano Rajoy on Monday said the government expects the country's economy to expand by 2.9 percent this year, up from a previous estimate of 2.4 percent growth.

Spain's economy grew by 1.4 percent in 2014.

Among Santander's main banking units, only Chile posted lower first quarter net profit, dropping 11 percent to 109 million euros.

In Britain, where Santander is one of the leading finance groups, profits rose 14 percent over the year to 477 million euros.

In key emerging market Brazil, profits rose by 41 percent to 516 million euros.

- Loans rise -

Overall the bank's loan portfolio rose 14 percent in the first quarter from a year earlier to 813.3 billion euros.

New loans to businesses in Spain increased 24 percent in the first quarter, while new loans to individuals rose 36 percent.

The growth in the bank's loan volume is part of a push by Santander's new executive chairman Ana Botin to turn billions of euros in capital the group raised in January into lending for firms and individuals

Botin, who took the helm of Santander in September after the death of her father, said earlier this year that the bank would target new loan issuance to expand its balance sheet instead of pursuing major acquisitions.

The policy marks a shift for the bank, which under the helm of her father Emilio Botin snatched up lenders in Spain and abroad to turn Santander from a small regional lender to a global leader.

"Santander's strong increase in lending reflects our commitment to helping our customers grow. When we raised capital in January, we said our goal was to target organic growth in our core markets forecasted to achieve strong economic recovery," Botin said in a statement.

Santander's bad loan ratio fell to 4.85 percent at the end of March from 5.19 percent at the end of December.

Santander, which reports its results in euros, benefited from a weaker euro as its profit in countries outside of the eurozone was boosted by the exchange rate.

Without the impact of the exchange rates, profits would have risen 22 percent, the bank said.

Santander said its capital ratio under Basel III "fully loaded" criteria was 9.7 percent at the end of the first quarter, the same as at the end of December.

This was a "weak point" in otherwise good results, Deutsche Bank analysts said in a research note.

Shares in Santander closed up 1.18 percent at 6.85 euros on a day which saw Spain's benchmark Ibex-35 most-traded share index close down 0.28 percent.


© 2015 AFP

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