Santander signals worst may be over after solid third quarter

MADRID (Reuters) - Santander SAN.MC rebounded strongly in the third quarter from a record second-quarter loss and tentatively signalled that the worst of the crisis may be over as loan repayment rates improved and cost cuts took effect.

FILE PHOTO: The logo of Santander bank is seen at a branch in Mexico City, Mexico April 12, 2019.REUTERS/Edgard Garrido/File Photo

Spain’s largest bank said it now expects to book an underlying profit of around 5 billion euros ($5.9 billion) for 2020, sending its shares up more than 4% in early trade. By 1335 GMT they were still 1.8% higher versus a broader fall in the Madrid index.

“Despite the uncertainty of the ‘second wave’, today we have better visibility than we did back in April,” Chairman Ana Botin said.

Banks across Europe are struggling to cope with record low interest rates, and the economic downturn sparked by the coronavirus pandemic is forcing a focus on further cost cuts, including through tie-ups.

But Santander’s Chief Executive Jose Antonio Alvarez told analysts that the bank was not interested in acquisitions.

The lender said cost savings still had some way to go, pencilling in an extra 1 billion euros of cuts in Europe by 2022 which could include thousands of job losses.

That is on top of 1 billion euros in savings the group was planning in Europe by 2020, a target initially set out for the mid-term.

Broker Jefferies said key countries like Brazil, the bank’s consumer business and the UK all came in ahead of expectations, though Spain was a 3% miss in terms of net profit.

Santander’s statutory net profit trebled in the period from a year ago, but on an underlying basis profit fell 18% to 1.75 billion euros due to coronavirus-related provisions. That was still well above analysts’ estimates of 1.06 billion euros

The bank will however not be able to finish 2020 with a statutory profit after 12 billion euros in writedowns on previous acquisitions in the second quarter.

This did not have an impact on capital, which rose to 11.57% from 11.46% in June, taking into account new accounting standards.


Spanish newspaper Expansion reported on Tuesday that Santander was planning around 3,000 job cuts, around 11% of its workforce in Spain, due to the impact of the virus and a customer shift towards digital channels.

CEO Alvarez said there would be job losses in Spain, Portugal, Britain and Poland. He added that he would not talk about staff cut numbers before discussing this with unions.

Among the efficiency gains, Botin said Santander would build a global digital consumer lending business on the back of Santander Consumer Finance and its online digital platform Openbank, while also combining the bank’s different payments businesses into a single autonomous company.

Santander’s core markets, spanning Brazil to Spain, have been some of the hardest hit by the pandemic, with weaker emerging market currencies exacerbating the pain.

But an improvement in loan payments by customers led the bank to estimate a lower cost of insuring its loans for 2020.

Santander lowered its guidance for cost of risk, which measures the cost of managing credit risks and potential losses, to 130 basis points by the end of 2020 from between 140 bps and 150 bps previously, implying lower loan-loss provisions in the future.

Botin also said the cost of risk could stabilise or even fall next year.

Shareholders on Tuesday approved a scrip dividend payable in new shares equivalent to 10 cents per share for 2019, and signed off on a 0.10 euros per share cash dividend to be paid in 2021, pending a green light from the European Central Bank.

Reporting by Jesús Aguado; Additional reporting by Emma Pinedo; Editing by Jane Merriman, Ingrid Melander and Jan Harvey