Santander today proved currency swings can be the undoing of even the best intentions, as it reported a drop in profits and income for its first half of the year.
Attributable profits for the group were less than glowing, down 31.7 per cent at €2.9bn (£2.4m), from €4.3bn in the first half of the year before, thanks to some hefty one-off restructuring charges counterbalanced by the reversal of tax charges in Brazil creating a €835m gain in 2015.
The bank revealed underlying profits before tax for the group of €5.7bn for the first half of the year, down 5.1 per cent on a reported basis from just short of €6bn the year before. Gross income also fell, dropping 6.1 per cent to €21.7bn from €23.1bn.
But it could have been a different story. Adjusting the figures to be currency neutral, Santander's profits grew 6.5 per cent while gross income increased 3.6 per cent.
Turning attention to the UK – a market which accounts for around a fifth of Santander's underlying profits – the bank reported attributable profits for the first half of the year of £656m. But, again, this was subdued by a rise in corporation tax surcharge for banks.
Santander's shares in Madrid were trading up almost one per cent at €3.79 at time of writing.
Why it's important
The economy has dealt the banking sector a bit of a difficult hand in recent years. Low interest rates, which show little sign of picking up any time soon, have put pressure on the amount of revenue lenders can hope to draw in. The uncertainty surrounding the EU referendum has also done little to boost confidence in the sector.
Santander seems to be doing well in the UK market, reporting today that the number of customers signing up for its popular 1,2,3 account have remained strong. However, the Daily Mail reported this morning that the bank was planning to slash the account's interest rate.
Santander said in a statement: "We don’t comment on speculation. If we were to make a change to any of our banking products, including the 1,2,3 Current Account, we would write to customers providing them with 60 days’ notice."
What Santander said
"Banking activity continued to be affected by interest rates still at historic lows in most developed economies, tougher competition in some markets, mainly for lending, and a more demanding regulatory environment," Santander said in its results statement.
Referring to the business environment in the UK in particular, the statement continued: " After the referendum, the economy continued to slow down and it is very likely the Bank of England will take measures to support growth."
A bit of a sorry state compared to what could have been