Santander Profits Plunge as It Prepares for Coronavirus Hit - Update
April 28 2020 - 2:47AM
Dow Jones News
--Banco Santander profits fell significantly as the bank booked
provisions related to the impact of the coronavirus pandemic
--The bank had set aside more money for potential loan
losses
--Net profit for the period fell 82%
By Pietro Lombardi
Banco Santander SA's profits fell sharply as the bank followed
U.S. and European peers in preparing for the impact of the
coronavirus pandemic.
The Spanish bank, one of Europe's largest, set aside more money
to cover potential loan losses and booked exceptional provisions
related to the expected economic impact of the pandemic, mirroring
steps taken by some of the largest banks in the U.S. and
Europe.
Santander's loan-loss provisions stood at 2.31 billion euros
($2.50 billion) in the first quarter, a 6% increase from the same
period last year. It also booked EUR1.6 billion in provisions
related to the expected economic impact of the pandemic, as well as
EUR46 million in restructuring costs.
The higher provisions, coupled with lower revenue, contributed
to a 82% decline in net profit to EUR331 million, it said
Tuesday.
Excluding the EUR1.65 billion exceptional charges and adjusting
for currency effects, underlying profit rose 8%.
"Our underlying quarterly operating performance was strong, with
a relatively limited impact from COVID19," Executive Chairman Ana
Botin said.
Revenue fell 2% to EUR11.81 billion, as both net interest income
and fees declined.
Analysts had expected a net profit of EUR1.75 billion on revenue
of EUR11.86 billion, according to a consensus forecast provided by
FactSet.
The bank's core tier 1 ratio, a key measure of balance-sheet
strength, was 11.58% in March from 11.65% at the end of
December.
"While the final and more permanent impact is currently
impossible to predict, we are operating from a position of
strength," Ms. Botin said.
"We will review our strategic targets once we have a more
complete understanding of the full impact of the crisis."
The largest banks in the U.S. have set aside billions of dollars
to cover possible soured loans as they brace for a likely tough
recession. Italy's largest bank UniCredit SpA said it would book
almost $1 billion in provisions for bad loans in the first quarter.
Swiss bank Credit Suisse Group AG and Germany's Deutsche Bank AG
set aside more than half a billion dollars each to cover potential
loan losses.
Write to Pietro Lombardi at pietro.lombardi@dowjones.com
(END) Dow Jones Newswires
April 28, 2020 02:32 ET (06:32 GMT)
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