Breaking News
Investing Pro 0
🚨 Our Pro Data Reveals the True Winner of Earnings Season Access Data

Santander's higher provisions and costs overshadow Q3 beat

Stock Markets Oct 26, 2022 04:26AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A man uses an ATM machine at a Santander bank branch in Ronda, Spain, October 25, 2022. REUTERS/Jon Nazca
 
SAN
-0.89%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Jesús Aguado

MADRID (Reuters) - Higher loan loss provisions in some of Santander (BME:SAN)'s key markets, such as Brazil and the United States, and a rise in costs overshadowed better than expected third-quarter earnings at the Spanish bank, knocking its shares on Wednesday.

Strong profitability in the Americas still helped the bank, the euro zone's second-biggest by market value, to deliver a 11% rise in quarterly net profit to 2.42 billion euros ($2.43 billion), beating analysts' mean forecast of 2.19 billion euros.

But loan loss provisions jumped 24% to 2.76 billion euros.

While that was in line with expectations, investors are jittery about the impact of a global economic downturn on banks, with several U.S. lenders recently setting aside more money in anticipation of tougher times.

"We expect the macroeconomic environment to remain challenging as markets across Europe and North America adapt to levels of inflation not experienced in decades," Santander's Chairman Ana Botin said in a statement.

The bank's shares were 4.8% down in morning trade, lagging Spain's blue-chip index, which fell 0.21%.

Santander's cost of risk, which measures the cost of managing credit risks and potential losses for the bank, rose to 86 basis points from 83 at the end of June, but was still below the 100 basis points it has set as a guidance for the year.

In its U.S. unit, underlying net profit fell 17.5% against the same quarter last year as impairments rose more than 74%.

"While it is true that the deterioration in Brazil and the United States were in line with the bank's guidance, the doubts about their performance might not please the market," Nuria Alvarez, analyst at Madrid-based brokerage Renta 4, said.

COSTS

Revenues rose 13% in the third quarter against the same quarter last year, while net interest income (NII), a measure of earnings on loans minus deposit costs, rose 19% year-on-year to 10.05 billion euros, beating forecasts for 9.78 billion euros on the back of higher interest rates.

Inflationary effects, particularly in South America, led to an increase of 8.5% year-on-year in costs in constant currencies in the third quarter at a group level.

In Brazil, which accounts for more than quarter of group earnings, underlying net profit rose 14% year-on-year, but NII fell 1.2% against the previous quarter.

Cost of risk in Brazil rose to 446 basis points from 426 points in the previous quarter, while provisions rose more than 50% year-on-year.

In Britain, which accounts for 17% of group earnings, underlying net profit fell 9.3% on higher impairments, in contrast to Spain, where net profit more than doubled on lower provisions.

In terms of solvency, Santander's tier-1 fully loaded capital ratio, the strictest measure of solvency, rose to 12.10% at the end of September, above the group's target of 12%.

Santander said it was on track to meet the 2022 targets, such as mid-single digit revenue growth and an underlying return on tangible shareholders' equity of above 13%.

Regarding its cost-to-income ratio, Santander said it was close to its target of 45% despite inflationary pressures after it finished September at 45.6%.

($1 = 0.9972 euros)

Santander's higher provisions and costs overshadow Q3 beat
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email