MADRID: Banco Santander SA jumped to the highest in four months after first-quarter results beat estimates on lower provisions as the Spanish lender boosted its capital buffer.
Net income fell 5 percent to 1.63 billion euros ($1.84 billion) from 1.72 billion euros a year earlier, the bank said Wednesday. That beat the 1.5 billion-euro average estimate in a Bloomberg survey of seven analysts.
Chairman Ana Botin, 55, is closing branches and steering customers into digital banking to cut costs as subzero interest rates undercut profitability. Spain’s largest lender bank plans to eliminate as many as 1,660 jobs in the country this year and has put acquisitions on hold to concentrate on boosting revenue from existing businesses.
“Overall a good set of results, which beat expectations on a solid performance of costs and provisions and which showed promising trends in core revenues in Spain and Portugal,” Fabio Mostacci, an analyst at Mirabaud Securities who has a buy recommendation on the shares, said in a note to clients.
The shares were up 3 percent to 4.665 euros at 9:18 a.m. in Madrid, the highest since late December. Santander was among the best performers in the benchmark STOXX Europe 600 Banks Price Index, which tracks 47 of the region’s banks.
Income took a hit from exchange rates as the euro strengthened against the pound and against currencies in Argentina, Chile, Brazil and Mexico. Factoring out those effects, profit would have increased 8 percent, the bank said.
Common equity Tier 1, a measure of financial strength, rose to 10.3 percent from 10.1 percent at the end of 2015. Botin has pledged to increase the ratio to more than 11 percent by the end of 2018.
“Santander is well on track to deliver and possibly beat the guidance of 40 basis points capital generation for the year,” Mostacci said.
Earnings fell 10 percent in Spain with net interest income — the difference between what banks charge for loans and pay for funding — declining 14 percent. Profit from the U.K. unit, Santander’s main earnings contributor, declined 4 percent, while dropping 25 percent at the Brazilian business when calculated in euros. It was flat in local currency.
“The Brazilian economy is challenging at the moment,” Santander’s Chief Financial Officer Jose Antonio Garcia Cantera said in a Bloomberg Television interview with Guy Johnson and Hans Nichols Wednesday. “We’re going to see pressures coming from that in the coming quarters. ”
Provisions fell 6 percent from the year earlier. Bad loans as a share of total lending at Santander fell to 4.33 percent from 4.36 percent at the end of December.
