GRUPO Santander saw its quarterly pre-tax profits rise by nine per cent yesterday, despite failing to significantly reduce its impairments.
The bank’s shares were also boosted by its assurance that it will overshoot European authorities’ nine per cent capital ratio target by 100 basis points “without the need to issue new capital” while also paying out a dividend of 60 euro cents per share.
From a base of 8.3 per cent core tier one capital at the moment, Santander vowed to reach 10 per cent by June next year – the EU deadline.
While large portions will come from earnings and bonds due to convert to equity next year, the bank said that about 0.7 per cent of its new capital will stem from “other measures” – in other words, large-scale disposals of its non-core portfolio, in large part made up of real estate assets.
However, it could find it difficult to reach its desired sale price for some of the assets due to a large overhang of similar portfolios on the continent.
Santander should be able to rely on increasing revenues, however. Its quarterly earnings came in at €2.77bn for the third quarter of this year while net loan loss provisions edged down only marginally to €2.91bn versus €2.94bn last year. Other impairments more than doubled from €41m to €84m.
The overall quality of its loan book was little changed, however, and the bank warned that it expects conditions to continue on a downward trend in its home market, Spain, where the proportion of non-performing loans increased to 5.15 per cent.
Nine-month earnings were also down by over six per cent as a solid third quarter failed to make up for previous under-performance.
And results deteriorated for its UK business, where pre-tax profits dropped 19 per cent to £496m, in part due to a £547m provision for compensation those mis-sold payment protection insurance.
Its stock closed up 7.5 per cent, buoyed by market exuberance over the euro bailout accord.