Santander Profit Buoyed by Fees, Lending -- 3rd Update
January 25 2017 - 4:58AM
Dow Jones News
By Jeannette Neumann
MADRID--Banco Santander SA said Wednesday that net profit rose
in the fourth quarter from a year earlier on higher fees and
stronger-than-expected lending income, as one of Europe's largest
lenders kicks off the region's annual bank earnings season.
The Spanish lender's Executive Chairman Ana BotÃn said this year
might be challenging but should be better than last: "Going
forward, we have many opportunities for profitable growth in Europe
and the Americas, in an environment we anticipate will be volatile
but generally better than 2016."
Fourth-quarter net profit rose to EUR1.60 billion ($1.72
billion) from EUR25 million a year earlier, beating analysts'
forecasts of EUR1.42 billion, according to a FactSet poll. The
results lifted Santander's shares, which were up 4% in early
trading in Madrid.
The year-earlier figure was dragged down by EUR1.7 billion in
charges to cover software write-downs and potential legal claims in
the U.K.
Net interest income, which measures the difference between what
banks earn from loans and pay for funding, increased to EUR8.1
billion from EUR7.89 billion a year earlier, while fees rose 7.7%
to EUR2.6 billion.
Net profit in Santander's U.K. business, where the bank
generates around one-fifth of its earnings, was flat year-over-year
at EUR474 million in euros but rose 19% when calculated in
pounds.
In Brazil, which also accounts for a fifth of Santander's
earnings, net profit rose 61% to EUR510 million. The increase was
more moderate when calculated in reais, Brazil's currency.
At Santander's Spanish banking unit net profit rose to EUR237
million from EUR94 million.
It booked EUR467 million in losses at its corporate center,
which included EUR137 million for potential claims by clients for
inappropriately sold payment protection insurance, or PPI, in the
U.K. The bank had booked EUR600 million for PPI claims a year
earlier.
Santander executives have said the majority of wrongful PPI
sales were made by U.K. lender Abbey National, which Santander
bought in 2004.
The corporate center losses also include EUR32 million to
restate the accounts of Santander Consumer USA Holdings Inc. The
bank's consumer-lending unit in the U.S. had repeatedly delayed
filing its 2015 annual accounts because of what it said were
discrepancies over how its current and former accountants booked
fees charged to car dealers and how the unit accounted for loan
losses.
A corporate center is a vaguely defined area set up by some
banks as a catch-all for costs such as headquarters staff and
losses related to everything from bad acquisitions to penalties for
wayward business practices.
Santander capital ratio was 10.55% in December 2016 compared
with 10.47% in September under international regulations known as
"fully loaded" Basel III criteria.
Santander's results will help set the tone for other banks
reporting earnings over the next two months.
In the U.S., bank stocks have rallied because investors say they
are expecting loosened financial regulation, lower taxes and
infrastructure spending under President Donald Trump. Such policies
might help to boost economic growth and inflation, encouraging the
Federal Reserve to raise interest rates.
Expectations of U.S. interest rate increases have also buoyed
bank shares in Europe, although some analysts say that rally might
not have much further to run.
Write to Jeannette Neumann at jeannette.neumann@wsj.com
(END) Dow Jones Newswires
January 25, 2017 04:43 ET (09:43 GMT)
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