Jefferies | 4Q2 First Look -New Guidance Supportive to Earnings and Buybacks: A 4% PBT beat, positively impacted by an FX adjustment in Argentina, with PBT ex-Argentina in line. Beats come from ‘core’ geos such as Spain, Mexico and Brazil, with softer prints in rest of Europe. New guidance implies c1-1.5bn EUR upside to ’25 cons profits (+10% at the mid-point) and c4bn EUR upside to cons buybacks in ’25-26.
Santander reported 4Q24 attributable profit of 3,265m EUR, which was 13% above company-compiled consensus of 2,888m EUR. PBT was a 4% beat, with pre-prov profits a 7% beat. Revenue was a 5% beat, with NII a 6% beat. Costs were 2% heavier than consensus. Again, the print is impacted by Argentina, given the hyperinflation accounting, with the 4Q24 FX assumption changed to 1,232 compared to 1,618 in 3Q24. This had a 700m EUR positive impact on NII, o/w 40% was offset in other income, and a negative 250m EUR impact on costs.
Ex-Argentina, attributable profit was a 18% beat, with PBT in line. Pre-provision profit was a 3% beat. Revenues were a 2% beat and costs were in line.
1.6bn EUR buyback announced, in line with remuneration policy. New guidance suggests 1-1.5bn EUR upside to 2025 consensus profits and c4bn EUR upside to consensus buybacks over 2025-2026.
- NII was 6% above consensus, up 7% q/q and up 8% y/y. This was impacted by a positive adjustment in relation to the FX rate assumption in Argentina in 4Q vs 3Q. Ex-Argentina, NII was a 1% beat.
- Fee income was a 4% beat (2% miss ex-Argentina). Trading income was a 17% beat (18% ex-Argentina). Other operating income loss of 84m EUR compares to consensus of +91m EUR (or 372m EUR vs cons. 230m EUR ex-Argentina).
- Total costs were a 2% miss (but in line ex-Argentina).
- LLP were a 3% beat versus consensus (or 7% beat ex-Argentina).
- Customer loans were a 3% miss versus consensus, down 1% q/q and flat y/y. Customer deposits were a 1% beat versus consensus, up 2% q/q and up 2% y/y.
- Capital: CET1 ratio of 12.8% was 30bp better than consensus, with CET1 in line but RWAs 2% lower due to asset mobilizations carried out in 4Q (22bn EUR of RWA mobilizations vs 11bn EUR RWA inflation). 17bp of regulatory headwinds in the quarter.
- New 2025 Guidance: 2025 Revenues expected to be c62bn EUR (cons. at 61.5bn EUR), with fees growing mid to high single digit y/y (cons has 2% y/y growth), costs (in EUR) to be down y/y (cons. has costs up 1% y/y), CoR in 2025 expected to be c115bp (vs cons c120bp), 2025 RoTE (post AT1) expected 16.5%, CET1 ratio expected to be 13% (cons. 12.7%). Expect to return 10bn EUR to shareholders through share buybacks (this includes buybacks done as part of the ordinary remuneration, i.e 25% of profits and any extraordinary buybacks)
Attributable profits by key market:
Spain: 17% beat (133m EUR, on resilient NII, flat q/q), UK: 41% beat (96m EUR, likely because consensus was modelling the announced 350m EUR UK motor finance provision here, but it has been booked in DCB), Portugal: 6% miss (14m EUR, with NII down 11% q/q on the lower rate environment, and seasonality in costs); Poland: 17% miss (32m EUR, impacted by further CHF provisioning 4Q); Brazil: 12% beat (72m EUR, on strong fees and gains on financial transactions, plus low effective tax rate in 4Q. FY24 loan growth of 9.5% y/y in constant EUR); USA: 22% beat (41m EUR, on strong fees and a low effective tax rate related to EVs); Chile: 4% beat (8m EUR on strong NII, albeit fees soft); Mexico: 26% beat (89m EUR, on strong top line and healthy asset quality. FY24 loan growth of 6% y/y in constant EUR), DCB: 267m EUR miss (with the UK motor finance provision booked here, whereas consensus was most likely modelling it in the UK); Corp Center: 30% miss (60m EUR); Other: 191m EUR beat.
