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Santander Latam’s profits insufficient to compensate EU poor performance

Thursday, July 28th 2011 - 11:21 UTC
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Chief Executive Alfredo Saenz presents the company's results at a news conference Chief Executive Alfredo Saenz presents the company's results at a news conference

Spain's Banco Santander CEO Alfredo Saenz announced Wednesday its second-quarter net profit fell 38% as growth in Latin America was offset by weaker results in crisis-hit Europe and a one-time charge in Britain

The Euro zone's largest bank by market capitalization said its net profit dropped to Euro1.39 billion between April and June, compared with 2.23 billion Euros for the same period last year.

This was largely due to provisions of 620 million Euros it had to set aside in Britain to refund clients for personal loan insurance that a court this year ruled had been mis-sold by banks in the country.

Net interest income for the quarter rose 3.5% to 7.64 billion Euros while gross revenue was up 6.3% to 11.28 billion Euros. Loan-loss provisions were up 8.1% at 2.68bn Euos.

Investors appeared disappointed with the figures and sent Santander's shares down 2.2% 7.4 Euros in mid-morning trading in Madrid.

Net profit for the entire first half of the year was down 21% to 3.5 billion Euros.

By region, profit jumped 16% in Latin America to 2.46 billion Euros in the first six months whereas it fell 17% in continental Europe to 1.87 billion Euros.

Santander said the non-performing loan rate was 3.78% for the first half, up from 3.37% in 2010

CEO Saenz also revealed that the bank postponed the initial public offering of its British unit, which incorporates the former Abbey National and Alliance & Leicester businesses, amid a rout in U.K. bank stocks.

Santander won’t carry out the IPO this year because of “uncertainties” over the right timing, CEO Saenz said on a web-cast. Saenz said last month it was a “priority” for the bank to hold the offering in the second half after delaying the sale from the first six months of this year.

Santander is the UK second-largest mortgage lender behind Lloyds Banking Group Plc following its purchase of Abbey National, Alliance & Leicester and parts of Bradford & Bingley Plc.

The Spanish lender may seek to sell as much as 25% of its UK division in the IPO, a person with knowledge of the matter said in January. The offering was delayed earlier this year after the former British-unit’s CEO Antonio Horta-Osorio moved to Lloyds.

The outlook for Santander’s planned IPO of its Argentina unit is still unclear and the bank will press ahead with it when market conditions are right, Saenz

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