Santander’s Botín to Spanish banks: it can be done, good results and provisions

By Tania Suárez, in Madrid | Banco Santander’s 4Q11 results are better than expected: it has registered attributable net profit of €5.351 billion, down 35%, after extraordinary provisions of €3.183 billion. According to Sabadell’s analysts, Santander

“has achieved better results in the UK than expected, despite having suffered the negative effects of the new UK liquidity regulation.”

Santander has noted important expenses (€3.180bn) with its property portfolio, with its Portuguese subsidiary and with other assets. Experts from Espirito Santo Bank think that

“costs increased more than anticipated due to Santander’s Brazilian subsidiary.” However, they also say that “current results are relatively high, with a better than expected net interest margin, and with quality assets according to estimations.”

Banco Santander’s chairman Emilio Botín said:

“Banco Santander has shown it is able to generate results and, at the same time, meet the capital requirements set out by the EBA, significantly increase provisions for property exposure and maintain shareholder remuneration at €0.60 per share for the third consecutive year.”

In Nomura, their analysts insist on Santander’s provisions against property exposure, and they believe that

“people want to see those provisions; and the sooner, the better.”

Alberto Cañabate, from Invertia, considers that an

“endogenous resolution is needed; a resolution that would make sound bigger banks to take control of weaker financial institutions.”

These are the key points of Santander’s presentation:

The bank maintained its capacity to generate earnings, with profit before provisions of €24,373 million, a 2% increase.

RECURRENT PROFIT: Amounted to €7,021 million, down 14% from 2010.

CAPITAL: Banco Santander has already achieved the 9% core capital ratio required by the EBA by June 30, 2012. By BIS II criteria, the capital ratio was 10.02%.

EFFICIENCY: Revenue increased by 5% to more than €44,300 million, while costs rose by 9% to €19,900 million, resulting in an efficiency ratio of 44.9%, the best in international banking.

LIQUIDITY: Loans grew 4% to €750,000 million and deposits 3% to EUR 639,000 million. Surplus liquidity is more than sufficient to cover needs in Spain and Portugal without issuing new debt.

NON-PERFORMING LOANS: The Group’s NPL rate came to 3.89%, up 0.34 point on the year. In Spain, the rate rose 1.25 point, to 5.49%, partly driven by the decline in lending, and two points below the average for the sector.

DIVERSIFICATION: Latin America generated 51% of earnings, more than half the Group’s profit for the first time, with Brazil accounting for 28%; Continental Europe 31% (Spain 9%); The U.K. 12% and Sovereign in the U.S. 6%.

Latin America: Attributable profit came to EUR 4,664 million, down 1%. Loans rose by 18% and deposits by 4% in local currencies.

Brazil: Attributable profit was €2,610 million, down 7%. Loans grew by 20% and deposits by 13%.

Continental Europe: Attributable profit fell 15% to €2,849 million. Loans declined by 3%, while deposits were stable.

U.K: Attributable profit was €1,145 million, a decline of 42%. Loans rose by 5% and deposits by 2%.

U.S.: Attributable profit rose 37% to €1,059 million. Sovereign contributed €526 million, up 24%. Loans rose by 6% and deposits by 12%.

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