Santander earns €1,867 million in attributable profit during Q1 2017 (up 14% )

Banco SantanderSantander's CET1 capital ratio stood at 11.58% in the quarter, in line with the medium-term target of 11-12

Banco Santander delivered an attributable profit of €1,867 million during the first quarter of 2017, +14% compared to Q1 2016. Excluding currency movements, profit before tax increased by 17% to €3,311 million . The underlying business performance was strong, with positive trends in all markets and particularly good growth in Latin America, Spain and Santander Consumer Finance. Excluding the impact of currency movements, attributable profits increased in nine of the Group’s ten core markets. Santander’s differential business model continues to provide strong diversification across both mature and developing market s. In the first quarter of 2017 Europe contributed 52% of Group profit and the Americas 48%. The lending book is also well diversified across business segments and geographies .

During the quarter the Group continued to help people and businesses prosper across all its markets . Lending and customer funds increased by 2 % and 7% respectively over the past 12 months while t he number of loyal customers (people who see Santander as their main bank ) increased by 1.5 million to 15.5 million . The Group ’s ongoing investment in technology helped increase the number of digital customers by 4.2 million since Q1 2016 to 22.1 million , while also increasing customer satisfaction . Santander ranks among the top three highest rated banks for customer satisfaction in eight of its nine core geographies. As well as improving customer satisfaction, the progression in digital transformation, combined with strong cost discipline, allowed Santander to further strengthen its position as one of the most efficient banks in the world, with the cost/income ratio improving to 46.1 % from 48.1% during the quarter .

Credit quality also continued to improve with non-performing loans reducing to 3.74% of total lending, from 4.33% at Q 1 2016. The Group’s coverage ratio increased to 75 % from 74% , while the cost of credit reduced to 1.17% from 1.22%. The Group delivered strong growth across its key shareholder measures and continued to meet all strategic targets . Since Q1 2016 return on tangible e quity, a key measure of profitability, has increased by 100 basis points to 12.1%, among the best of our peers. Tangible net asset value per share increased by 5% to €4.26, and earnings per share increased by 14 % to €0. 122. Strong profitability allowed the Group to further strengthen its capital during the quarter with the common equity tier 1 capital ratio increasing by 11 basis points to 10.66 %. This is significantly higher than the Group’s expected minimum regulatory capital requirement for 2019 (9.5%) .

In Brazil attributable profit was €634 million, an increase of 77% compared to Q1 2016 driven in part by a strengthening Brazilian Real but also strong business performance. Excluding the currency impact attributable profits grew by 38% with an increase in loyal customers stimulating strong growth in income, and prudent risk management leading to a reduction in loan loss provisions. The proportion of non-performing loans in Brazil continued to be lower than private sector peers.

In the UK attributable profit reduced by 8 % to €416 million with solid underlying performance, very strong credit quality and disciplined cost control, offset by both the depreciation of the pound against the euro, and one off costs, including an additional provision for PPI claims of £32 million. Excluding the currency impact, attributable profit increased by 3%.

In Santander Spain attributable profit increased to €362 million, up 18% compared to the same period in 2016 as provisions normalised and the cost of credit improved for the 12 th consecutive quarter. The successful delivery of the 1|2|3 strategy led to a significant increase in loyal customers ( +35 0,000 since Q1 2016), while the bank’s leading position in wholesale markets helped drive good growth in fee income.

Santander Consumer Finance (SCF) again delivered strong growth in attributable profit, up 25% compared to the same period last year to €314 million (+23% excluding currency movements) driven by an increase in lending across all markets and historically low non -performing loans.

In Mexico an increase in interest rates coupled with good growth in loans and demand deposits helped drive strong growth in income. Attributable profits increased by 14% to €163 million (+24 % excluding currency movements). Provision s increased due to an increa se in lending and the sale of a non -performing portfolio. The cost of credit remained stable. In Chile an increase in both lending and deposits since Q1 2016, combined with good cost control and improvements across all credit quality metrics helped drive an increase in attributable profit of 21% to €147 million (+9% excluding currency movements ).

In Portugal attributable profit increased by 4% to €125 million compared to Q1 2016 with growth in loyal customers, lower cost of credit and strong cost control offsetting a reduction in revenues due to portfolio sales made in 2016.

In the US attributable profit increased by 16.3% to €95 million compared to Q1 2016 (+ 12% excluding currency impact). Income at Santander Consumer US fell due to a change in customer risk profile, however, this was offset by an increase in net interest income and lower cost of funds at Santander Bank, as well as lower loan loss provisions.

In Argentina attributable profit increased by 61% to €108 million (+69% excluding currency movements) with strong growth in business volumes pushing up net interest income and fee income, combined with a reduction in the cost of credit and non -performing loans. The profit and loss figures do not include the Citi integration which took place on 31 March 2017.

In Poland attributable profit fell 8% during the same period to €59 million ( -9% excluding currency impact) due to higher taxes on profit and the negative imp act of the banking asset tax ( applied from 1 Feb 2016) . Excluding these effects, PBT increased by 20% (+18% excluding currency movements ).

 

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.