Santander’s profits surged 249% in the last quarter

Business

Santander thundered back into profit in the last quarter as it reaped the whirlwind from high cost-cutting measures and lower goodwill impairments.

The Spanish banking giant’s attributable profit skyrocketed by almost 250 per cent to €1.75billion compared to the same period in 2019 and a gigantic €10.8billion loss in the previous six months when it recorded the biggest loss in its 163-year history.

In the UK, the slashing of perks on its 123 current account portfolio in May and August boosted its net interest income and contributed to underlying profits in the country shooting up 229 per cent from the second quarter.

Santander’s attributable profit rose by almost 250 per cent to €1.75billion compared to the same period in 2019 and a gigantic €10.8billion loss in the previous six months

It said it is ‘ahead’ of its plan to make €1billion worth of cost savings this year, with half of that total coming from Europe, alongside €5billion in underlying profits.

This is significantly smaller than what it made in 2019, however, which the group blames on massive loan-loss provisions arising from the coronavirus pandemic.

Customer lending in its European market grew a modest 3 per cent during the quarter, though it had a better relative performance in North America and a substantial showing in South America.

Provisions did fall by €573million between the second and third quarter, but at €9.56billion, they remain far greater than last year. Nonetheless, the company forecasts an improvement in their future results.

Executive chairman Ana Botin remarked: ‘The recovery of our business is progressing well, and the third quarter was significantly stronger than the second.

She added: ‘These results speak to the strength and breadth of our customer relationships and the resilience of our diversified business and markets in which we operate.

‘This diversification has been a key driver of our recovery, with South America performing well and the UK recovering strongly in the third quarter.’

The bank has successfully attracted five million more digital customers to its services since September last year, and online sales now make up 44 per cent of all its revenues.

Santander said it is ‘ahead’ of its plan to make €1billion worth of cost savings this year

Broker Jefferies said key countries like Brazil, the bank’s consumer business and the UK all came in ahead of expectations though Spain was a 3 per cent miss in terms of net profit.

But the bank will be unable to finish 2020 with a statutory profit after writedowns on previous acquisitions of more than €12billion booked in the second quarter.

This did not have an impact on capital, which rose to 11.57 per cent from 11.46 per cent in June, taking into account new accounting standards.

Spanish newspaper Expansion reported on Tuesday that Santander was planning around 3,000 job cuts due to the economic impact from the Covid-19 and a customer shift towards digital channels.

Comming on Santander’s results, executive chairman Ana Botin said: ‘The recovery of our business is progressing well, and the third quarter was significantly stronger than the second’

Botin said at the bank’s shareholder meeting on Tuesday that it would discuss with unions first any potential measures affecting the bank’s staff without giving any details.

Among the efficiency gains, Botin said Santander would build a global digital consumer lending business on the back of Santander Consumer Finance and its online digital platform Openbank, while also combining the bank’s different payments business into a single autonomous company.

Santander’s core markets, spanning Brazil to Spain, have been some of the hardest hit by the pandemic, with weaker emerging market currencies exacerbating the pain. But an improvement in loan payments by customers led the bank to estimate a lower cost of insuring its loans for 2020.