Spain's Santander bank profit down 4.5 percent

30th July 2009, Comments 0 comments

The eurozone’s largest bank reports profit of EUR 4.5 billion for first half of the year.

Madrid – Spain's Santander, the eurozone's largest bank, on Wednesday reported a first-half net profit of EUR 4.51 billion, down 4.5 percent from last year.

For the three months to June, it had a net profit of EUR 2.42 billion, down 4.0 percent but still the second highest quarterly profit in its history, following that of the same period in 2008.

The second quarter result was above analyst forecasts for EUR 2.18 billion as higher profits from Britain softened the impact of increased loan-loss provisions.

The bank, which avoided investments in products linked to the US subprime mortgage market but has been affected by the economic slowdown and the collapse of a property boom in Spain, said it was sticking to its target of matching last year’s profit of EUR 8.88 billion.

"During the second quarter, the solidity of Santander's business model has been confirmed," Santander's chief executive Alfredo Saenz told a conference call with analysts.

Net interest income – the difference between interest paid out on customer deposits and interest earned on loans – was EUR 6.61 billion in the second quarter, up from EUR 5.25 billion a year earlier.

For the six months, net interest income was EUR 12.65 billion, up 24.2 percent.

Provisions for bad loans climbed to EUR 2.42 billion in the second quarter from EUR 1.6 billion a year ago.

Bad loans as a proportion of total lending climbed to 2.82 percent from 1.43 a year ago and 2.49 percent in the previous quarter.

By comparison BBVA, Spain's second largest bank, said Tuesday that its bad loans ratio climbed to 3.2 percent in the second quarter from 1.3 percent a year ago and 2.8 percent in the previous quarter.

BBVA posted a second quarter profit of EUR 1.56 billion, a 35 percent jump over the same time last year.

Santander said its net profits in Britain rose 41 percent during the first half over the same time last year to EUR 885 million.

The bank bought Alliance & Leicester in October 2008, one month after it acquired the deposits and distribution channels of Bradford & Bingley.

The deals allowed Santander, which bought Britain's Abbey National in 2004, to become the third-biggest bank in Britain.

Profit from South America, which contributes to a third of Santander’s profit, fell 4.0 percent to EUR 1.8 billion.

First-half earnings from Mexico slumped 37 percent to EUR 230 million due to the steep recession in the country and the outbreak of swine flu which has hurt economic activity there, the bank said.

In Brazil, where Santander is the third-biggest non-state bank after buying ABN Amro’s business in the country, net profit rose 12 percent to EUR 961 million.

The bank also announced plans to merge its consumer finance operations in Poland with US insurance giant AIG.

Santander will hold 70 percent of the merged entity with a loan portfolio of EUR 3.5 billion and deposits of EUR 750 million, while AIG will hold the remaining 30 percent.

Shares in Santander closed down Wednesday 1.15 percent at EUR 9.97. The Ibex-35 most-traded share index was virtually unchanged, closing down 0.02 percent.

AFP / Expatica

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