Spanish bank Santander beat forecasts on Wednesday with a 20% rise in third-quarter net profit, as strong results in Europe offset weaker activity in the United States and the increase in provisions.
The euro zone’s second-largest bank by market value posted a net profit of 2.9 billion euros ($3 billion), beating the 2.77 billion euros expected by analysts polled by Reuters. .
Santander has relied on Latin America in the past to cope with the more complex business conditions in Europe, although it has already benefited, like its European competitors, from higher interest rates.
In Europe, net profit increased 64% year-on-year in the quarter, while in South America it fell 7%.
“In an increasingly uncertain environment, the strength of our model and our teams is even more visible. I have full confidence that we will achieve our goals in 2023 based on the positive momentum that we have and that we hope to continue in 2024,” said the president of the bank, Ana Botín, in a statement.
Santander’s targets for 2023 include double-digit revenue growth and a return on tangible equity (ROTE) ratio – one of the main profitability measures in the sector – above 15%.
Revenue rose 10% year-on-year in the quarter, above market forecasts, helping the bank improve its ROTE to 15.49% from 14.61% at the end of the second quarter.
But provisions for bad debts increased by 19%, to 3,270 million euros.
Although this number barely exceeded expectations, investors are worried about the impact of the global economic downturn on banks.
JP Morgan welcomed the strong results, “enhanced by growth in core earnings, strong trading results and a low tax rate (28%), while costs and expenses at a slightly lower risk.” of predictions”.
Santander’s cost of risk, which measures the bank’s cost of managing credit risks and potential losses, rose to 113 basis points (bps) from 108 bps at the end of June, but remained below the he forecast 120 bp for the year.
Santander’s interest margin, or income from loans minus deposit costs, rose 11.6% year-on-year in the quarter to 11.22 billion euros, above analysts’ estimates of 11 billion.
In Spain, the bank’s largest market, net profit increased by almost 60%, while the interest margin increased by 56%. Spain’s results were supported by higher loan profits, mainly on variable rate loans, while deposit costs grew at a slower pace.
The results were also helped by the favorable evolution of Portugal and Poland. In the United Kingdom, net profit rose 5.7% year over year in the quarter.
In Brazil, its second-largest market, net profit fell 8.9%, although the interest margin increased to 3.3%, as a result of improving trends.
In the United States, net profit fell by 50.4% due to increased financing costs in the auto business, while provisions rose by 49%.