MADRID: Strong underlying profit growth
at Banco Santander in 2016 and a better-than-expected performance in the last
quarter drove its shares higher on Wednesday as it weathered the impact of
falls in the pound and the Mexican peso.
The euro zone's largest bank by market
value kicked off Spain's bank reporting season with a 4 percent rise in 2016
net profit to 6.2 billion euros ($6.65 billion) as results in Brazil improved
for the fourth quarter in a row.
Santander's shares rose 4.5 percent to
a 17-month high and were at the top of Spain's blue-chip Ibex index. They have outperformed
Europe's STOXX banking index over the past year with a 8.3 percent rise.
Fourth quarter net profit was 1.6
billion euros, compared to 25 million euros a year earlier when Santander was
hit by a 600-million-euro mis-selling compensation bill in Britain.
An average of analyst forecasts
calculated by Reuters was for a 2016 profit of 6.1 billion euros, while
analysts said the bank's fourth quarter results were 9 percent ahead of
consensus.
Santander said business in its largest
market Brazil helped it through a squeeze on margins in Europe that is
pressuring its peers, as well as softening the impact of currency devaluations.
"Stripping out the effect of the
currency depreciation in the UK we have seen a recovery in profit and the
market is welcoming that performance," Nuria Alvarez, an analyst at
Madrid-based brokerage Renta 4, said.
In Britain, its second largest market,
Santander's 2016 profit was down almost 15 percent over the year, mainly due to
the fall in sterling, which has sunk to a near three-decade low since Britons
voted to leave the European Union in June.
A slide in the peso to a historic low
meant net profit rose by just 0.1 percent in Mexico, which accounts for 8
percent of Santander's total profit, whereas it would have been up 17.5 percent
without currency fluctuations.
However, net profit in Brazil rose for
the fourth quarter in a row and net interest income for the third consecutive
quarter after a deep recession there caused returns to tumble last year.
VOLATILE BUT PROFITABLE
Santander's Executive Chairman Ana
Botin said she expected a volatile year ahead but that business would be
stronger than in 2016 in key markets and she saw opportunities for profitable
growth.
"In 2016, we have been able to
offset a lot of the unexpected adverse conditions from Brexit, to lower than
anticipated rates, higher taxes and some others," Botin told analysts on a
conference call.
For 2016, Santander's total net
interest income, a measure of earnings on loans minus deposit costs, was 31.1
billion euros, down 3.4 percent from a year ago, mirroring pressure on margins
experienced by other Spanish banks. Analysts had expected NII to come in around
30.8 billion euros.
But unlike most other Spanish banks,
Santander will not be hit by a European court ruling that may force them to
reimburse up to 4 billion euros to mortgage customers.
Santander reaffirmed its 2018 targets
such as boosting its fully-loaded core capital ratio, a closely watched measure
of a bank's strength, to just above 11 percent, after it ended the year with a
ratio of 10.55 percent.
Copyright Reuters, 2017
No comments:
Post a Comment