Latin America buoys Santander in Q3
(1 February 2018 – Europe) Santander has reported a healthy rise in underlying profits in the fourth quarter, assisted by strength in Latin America, and ending a good year for the Spanish bank.
Results were boosted by a 26 percent rise in net profits in Brazil, a market which accounts for more than a quarter of the group’s earnings. This helped offset the effect of one-off impairments in its US business.
“Throughout the year we have seen strong growth in Latin America, with our businesses in Brazil and Mexico performing exceptionally well,” said Ana Botín, Santander’s executive chairman.
In the smaller US unit, the bank’s bottom line was hit by impairments of €752m, mainly on its consumer finance group after a review of the bank’s goodwill. The US division lost €5m in the quarter due in part to additional provisions for hurricanes.
Botín said that underlying earnings at the US division, which has faced years of intense regulatory pressure, had improved and were at a “turning point” for the unit.
“We expect 2018 to be better [than 2017],” she said.
She added that the US operation, which accounts for 4 percent of the group’s profit, would be helped by the US tax reform that was signed by President Donald Trump in December.
“The tax reform is a very good thing,” she said.
“We are planning . . . to give back in higher wages a big part of that and [also] in new lending,” she said. “These taxes are actually reverting to the economy.”
Santander reported a nine percent rise in underlying net profit in the three-month period to €1.9 billion. Underlying profit over the full-year 2017 was up 14 percent to €7.5 billion.
Including one-off charges over the year, net profits over the full year were up a more modest seven percent to €6.6 billion. In the fourth quarter, net profit was down four percent to €1.5 billion compared with last year.
A weak spot in the results was the UK, where profits were down 12 percent in the quarter to €297 million. Results were dented by impairments taken by the bank because of the collapse of outsourcing and construction group Carillion.
For the full year, net interest income at a group level, a key measure of profitability, was up 10 percent, while the group’s cost-to-income ratio improved 73 basis points to 47 percent.
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