December 5, 2020

Spains Santander posts near-300% rise in 3rd-quarter net profit as consumers and businesses recover from the COVID-19 pandemic

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FILE PHOTO: Banco Santander's chairwoman Ana Patricia Botin attends the annual results presentation at bank's headquarters in Boadilla del Monte, outside Madrid, Spain January 30, 2019. REUTERS/Sergio Perez
Banco Santander’s chairwoman Botin attends the annual results presentation at bank’s headquarters in Boadilla del Monte

  • Santander reported 3rd quarter net profit of €1.750 billion ($2.07 billion), up from €501 million ($597 million) in the same quarter last year, beating expectations for a profit of €1.004 billion ($1.187 billion).
  • Growth in consumer lending in the UK and South America in particular helped the company’s bottom line.
  • “These results speak to the strength and breadth of our customer relationships and the resilience of our diversified business and markets in which we operate,” Santander chief executive Ana Botin said in a statement. 
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Santander, Spain’s largest lender, delivered a near-300% increase in net profit in the third quarter, driven by an overall improvement in business conditions, although it increased its cash buffers to deal with bad loans as the coronavirus pandemic continues to impact households and businesses.

The bank reported net profit of €1.750 billion ($2.07 billion) in the third quarter of the year on Tuesday, up from €501 million ($597 million) in the same quarter last year and comfortably above expectations for a profit of €1.004 billion ($1.187 billion), based on a Bloomberg survey of analysts.

“These results speak to the strength and breadth of our customer relationships and the resilience of our diversified business and markets in which we operate,” Santander chief executive Ana Botin said in a statement. 

“This diversification has been a key driver of our recovery, with South America performing well and the UK recovering strongly in the third quarter.”

Santander shares rallied sharply in early trade, rising by more than 4%, which helped lift Madrid’s IBEX 35 by 0.4%.

The company said it would seek approval for the payment of a €0.10 dividend ($0.11) in 2021.

Here the key numbers:

Net profit: €1.750 billion ($2.07 billion), up from €501 million ($597 million) in the same quarter last year, and versus expectations for a profit of €1.004 billion ($1.187 billion).

Pre-tax profit: €3.139 billion ($3.71 billion), from €2.181 billion ($2.58 billion) in the third quarter of 2019.

EPS: €0.097 ($0.114) compared with expectations for €0.056 ($0.066) compared with €0.084 ($0.099) in Q2.

Read more: How a Biden win would jolt the US economy out of sluggish growth. Ronald Temple of Lazard Asset Management unpacks this, and pinpoints 3 sectors to target in a stock-pickers’ market.

Lending grew strongly across all the company’s key markets, up 5% year-on-year, and most notably in the UK, where Santander said new mortgage lending in particular had helped drive overall consumer loans activity above pre-pandemic levels.

Lending rose 17% in South America, where Santander has a huge footprint. 

In the second quarter of the year, Santander reported a record €11.1 billion loss, as the coronavirus pandemic devastated its consumer business, both at home and abroad. At the time, the bank wrote down nearly €13 billion relating to past acquisitions by its UK business.

Santander said that provisions for loan losses had risen by 58% to €9.6 billion in the third quarter, reflecting the ongoing impact of the coronavirus crisis. 

Spain suffered more economic damage from the pandemic, when the crisis was at its height in the second quarter of the year, than any other European country, with a drop of 21.5% in economic activity.

However, Santander said that improvement in that time, and positive trends in customer behavior, meant the cost of credit – or how much it costs to insure its loans book against losses – had dropped to 1.3% from its guidance of 1.4-1.5%.

“This better outlook, paired with strong cost control, give the bank reason to expect an underlying profit of around €5 billion for the year,” it said.