Santander 2016 Net Profit Up 4% At €6.204 Bn: Best Results Since 2010

Banco SantanderBanco Santander CEO Ana Botín

Banco Santander posted net profit of 6.204 billion euros en 2016, up 4% from a year earlier and its best results since 2010, supported by a decline in provisions.

The bank attributed these results to the “strong” growth in commission revenues and improved credit quality. These factors were contrasted by some currencies’ weakness against the euro and increases in taxes in Poland and the UK.

Santander said this morning that pretax profit rose 12% to 11.288 billion euros, excluding non-recurrent results and the exchange rate effect. In the fourth quarter, net profit reached 1.598 billion euros compared with 25 million a year earlier. This was the due to various one-off operations, including restructuring linked to the deterioration of intangible assets and a provision for PPI in the UK.

The group registered “important” advances with respect to its main financial goals and met the targets set for 2016 at its 2015 Investor Day. As a result, the net tangible book value per share rose 3.7% to 4,22 euros; the cash dividend per share grew 8% to 0,17 euros; and EPS rose 1% to 0,41 euros.

At end-2016, Santander’s NPL ratio was 3.93% versus 4.36% a year earlier, while its coverage rate rose to 74% from 73%.

In addition, the bank has accumulated over 3 billion euros of capital, which has raised its CET1 to 10.55%, beating its target. The CET1 ratio grew 50 basis points and is already substantially higher than the regulatory minimim estimated for 2019 (9.5%).

The number of clients rose by 1.4 million to 15.2 million, while lending and funds rose 2% and 5% respectively, excluding the exchange rate effect. Gross margin fell 3.1% to 43.853 billion euros in 2016, while the net margin dropped 3.9% to 22.766 billion and the interest margin fell 3.4% to 31.089 billion.

Banco Santander’s geographical diversification remains balanced between mature and emerging markets. Pretax profits excluding the exchange rate effect rose in nine of the ten markets where the group operates, despite the difficult environment.

Europe contributed 55% of the results (UK, 20%; Spain, 12%; Santander Consumer Finance, 13% and others, 10%) and America the remaining 45% (Brazil, 21%; Mexico, 8%; Chile, 6%; US, 5% and others, 5%).

Net profit at Santander Spain rose 4.6% to 1.022 billion euros.

Analysts expect a positive reaction to Santander’s results. “They have surprised favourably in practically all business areas,” says Bankinter. And in fact Santander’s share price rose over 4% in the early part of the session, pushing the Ibex 35 to 9,500.

Bankinter analysts are reiterating their buy recommendation on the stock and revising their target price upwards “after the bank’s share price met our price expectations.”