Santander Q1 net profit up on Europe, offsetting weaker Brazil

By Jesús Aguado

MADRID (Reuters) – Spain’s Santander (BME:) on Tuesday reported a 1% rise in first-quarter net profit on higher lending income, especially in Europe, which offset a weaker performance in Brazil.

The euro zone’s second-biggest lender by market value booked a net profit of 2.57 billion euros ($2.84 billion) despite a hit of 224 million euros from a new tax on banks in Spain.

That topped the 2.45 billion euros expected by analysts polled by Reuters while excluding the new tax, profit rose 10%.

Santander in the past has relied on Latin America to cope with tough conditions but banks across Europe are benefiting from higher interest rates.

Net profit in Europe rose 16.8%, while in Brazil, its main market, it fell to 25.2% due to a rise in costs driven by inflation and a fall in net interest income.

Higher revenue also helped Santander’s return on tangible equity ratio (ROTE), a measure of profitability, which rose to 14.4% from 13.37% at the end of 2022.

In a higher interest rates environment, the bank repeated its ROTE target of above 15% by the end of 2023.

The bank’s underlying net interest income – earnings on loans minus deposit costs – rose 15% to 10.185 billion euros, in line with analysts’ expectations.

Last month’s failure of Silicon Valley Bank along with the forced takeover of Credit Suisse by UBS sent bank shares tumbling, but markets have since calmed down.

Despite that context, overall deposits were up 6% from a year earlier.

Seasonal drawdowns in Santander’s corporate and investment bank in January led to a 2% decrease in deposits versus end-2022. Volumes started increasing again from February “reflecting positive business trends”, the bank said.

As of end-March the bank’s coverage liquidity ratio stood at 152%, unchanged from end-2022.

($1 = 0.9048 euros)