By Jesús Aguado
MADRID (Reuters) -Santander beat first-quarter forecasts, signalling that the worst of the coronavirus crisis may be over by not adding to provisions for the pandemic and by booking record earnings in the United States.
The euro zone's second-biggest lender by market value reported a net profit of 1.608 billion euros ($1.94 billion) versus 331 million a year earlier.
That beat the 1.38 billion euros expected by analysts polled by Reuters, but was still short of the 1.84 billion recorded in the same quarter in 2019, before the pandemic.
Spain's largest bank's results mirrored solid figures from HSBC Holdings (NYSE:HSBC).
"Business activity (is set) to increase as vaccination progresses at different speeds," Santander (MC:SAN) Chief Executive Jose Antonio Alvarez told a call with analysts.
Santander's loan loss provisions for the quarter were 1.99 billion euros. The bank did not add provisions for pandemic-related losses. In the same quarter last year, provisions were 3.91 billion, almost half of which related to the pandemic.
At end of March, the bank's cost of risk, which measures the premium of managing credit risks and acts as an indicator for potential losses in the future, fell to 108 basis points from 128 points in the quarter.
Shares in Santander were down 0.7% by 0759 GMT after rising 5% on Tuesday ahead of its earnings, while Spain's leading blue-chip index was down 0.17%.
Brokerage Kepler Cheuvreux said the results were solid and said the United States and Britain were the main stars. It said the huge fiscal stimulus was helping the United States, where revenues were up 8% year on year.
Santander's underlying profit from the United States jumped to 616 million euros from 60 million, making it the highest contributor among all markets.
Santander said that in Britain, where net profit rose to 294 million euros from 52 million, it would replace its current Chief Executive Nathan Bostock. He will remain in post until a successor is appointed.
A strong performance at Santander's Corporate and Investment Bank (CIB), with a 64% rise in underlying profit, also helped.
Excluding net restructuring charges of 530 million euros, mainly in Britain and Portugal, the bank increased underlying profit by about 50% compared to the previous quarter, buoyed by faster growing emerging economies such as Brazil.
Santander's diversification overseas, especially in Latin America, has helped it to cope with tough conditions for banks in Europe since the financial crisis.
In Spain, where net profit climbed to 243 million euros from 90 million, the bank said Antonio Simoes, the bank's regional chief for Europe, would replace Rami Aboukhair as country head for Spain.
Overall, net interest income, a measure of earnings on loans minus deposit costs, fell 6.3% against the same quarter last year to 7.956 billion euros, in line with analyst's estimates.
The bank finished March with a fully loaded capital ratio (CET-1), the strictest measure of solvency, of 11.89% under new accounting standards, unchanged from the previous quarter, and within its 11-12% target.
($1 = 0.8282 euros)