Santander retains swagger with record annual profits

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Investors give bank cool response after fourth-quarter dip

8 February 2008

MADRID - Santander, Spain's biggest bank, on Thursday posted a 2007 net profit of EUR 9.06 billion, 19.3 percent more than in 2006. But the record annual earnings figures masked a poor fourth quarter, write-downs on US assets and a higher ratio of non-performing loans.

Santander, like most of Spain's other banks, has had little direct exposure to the subprime lending crisis in the United States, having steered clear of the mortgage-backed debt products that have caused banks around the world to swallow multibillion-euro writedowns in recent weeks. "We don't have any of those weird things," Chairman Emilio Botín affirmed unequivocally in a Madrid news conference.

However, Botín acknowledged that Santander is feeling the indirect consequences of the financial crisis, not least in a more than 20-percent fall in its share price. "We're being realistic, but also optimistic about the future," he told reporters. "And you can rest assured that [investing] in Santander's shares is a safe option."

The bank's shares closed flat at EUR 11.60 yesterday, however, despite full-year earnings breaking all records and coming in above most analysts' estimates. Instead, investors were focusing on Santander's lacklustre fourth quarter during which net profit fell 6 percent to EUR 2.49 billion as the bank wrote down EUR 737 million on its main US investment, a 25-percent stake in Sovereign Bancorp. The value of the US lender has plunged by half over the past year, leaving Santander sitting on a huge paper loss.

In addition, Santander was also forced to provision 41 percent more than in 2006 to cover for loan delinquencies at its local consumer finance unit Drive. It noted that overall loan growth was up 12 percent from a year earlier, while the bank's non-performing loan ratio rose to 0.95 percent from 0.82 percent in 2006.


Subject: Spanish news

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