Tuesday 27 October 2020 8:18 am

Santander rebounds from historic loss as loan repayments pick up

Santander returned to profit in the third quarter following a historic loss, upgrading its full-year forecasts as customers began to recover from the initial impact of Covid-19. 

Net profit at the Spanish lender trebled in the third quarter to €1.75bn compared to 2019, when Santander was hit by a large writedown in the value of its UK business. 

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Underlying profit rose 18 per cent compared to the second quarter, when the bank reported a record net loss of €11.1bn on writedowns related to the pandemic.

“The recovery of our business is progressing well, and the third quarter was significantly stronger than the second,” said executive chair Ana Botin.

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Santander raised its underlying profit forecast to around €5bn for the full-year, citing positive trends in customer behaviour and higher efficiency gains.

The lender set aside €2.5bn to deal with expected loan losses in the third quarter – a 22 per cent increase on the same period last year, but a sharp slowdown compared to the first half of the year. 

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Santander said customers who took out loan repayment holidays earlier in the year had begun repayments sooner than expected, leading it to lower its full-year forecast for loan loss provisions as a proportion of its loan book to 1.3 per cent. The bank had previously forecast a rate of 1.4 to 1.5 per cent. 

The Spanish lender said it was on track to meet its cost-cutting target of €1bn across its European business by the end of 2020, and is now aiming to cut an additional €1bn in the region over the next two years.