Sunday, December 5

Banco Santander: the US overtakes Brazil as the engine of profits

The USA they picked up the witness from Brazil as the engine of Banco Santander’s results. The group reported an attributable profit of 5.849 million until September, with a significant contribution from the US division.

Specifically, USA posted a record ordinary profit of 1,788 million euros. The figure supposes multiplying by almost four the 470 million that the entity earned until September of last year.

On the contrary, the ordinary profit of Brazil It was 1,762 million euros, with an increase of 29 percent, thanks to the growth of the income and the stability of the costs.

In this way, the forecast made by the president of Banco Santander is fulfilled, Ana Botín, in an interview with the magazine INVESTMENT. “There is a lot of growth in the United States and it is going to be very profitable”He stressed before the outbreak of the pandemic.

Strategic turn of Banco Santander to boost profitability

At a time when the market was speculating that Banco Santander could sell its US subsidiary, as it did BBVABotín was very clear and redoubled its commitment to the US market.

Convinced of the strengths in the United States, Botín deployed a strategy focused on business areas with more profitable margins. The proof is the purchase of the American broker Amherst Pierpont, which added more than 1,300 institutional clients to the bank.

The Cantabrian group expects this acquisition to increase the entity’s earnings per share by around 1 percent and generate a return on invested capital of approximately 11 percent in the third year.

In addition, the bank made an offer to acquire the 20 percent that it does not yet own from Santander Consumer USA. Again, it is about betting on a business that applies higher interest rates and leaves better margins.

The market was already expecting the strength of the United States

The figures of the USA made sense of this strategy. Revenues increased 14 percent, while net interest income grew 7 percent, as commissions grew 8 percent.

“The work carried out in recent years, the solidity of our main business lines and the strength of our balance sheet have allowed us to place ourselves in a unique position to benefit from current market conditions,” the bank said on Tuesday regarding the subsidiary. of the USA.

The good performance of the US market came as no surprise to analysts. “We were counting on it, it is an economy that has recovered very quickly and is growing at 6.7 percent thanks to strong monetary stimuli,” he said. Joaquin Robles, Analist of XTB.

Precisely, the improvement of the economic prospects in the USA made it possible for the bank to cut provisions, boosting the subsidiary’s profit. In addition, the strength of prices in the second-hand car market boosted the business of Santander Consumer USA.

“It is the biggest jump in growth in many decades, which in the end benefits the banking system, which is one of the sectors that channels the increase in consumption,” said Robles.

Spain holds the rate thanks to cost control

On Spain, the ordinary profit for the first nine months reached 730 million euros, an increase of 47 percent. Competition in the domestic market is increasingly intense, but the bank relied on cost control to maintain profit momentum.

Thus, the figures in Spain “They are positively surprising” because the efficiency gains, with a 7.2 percent drop in costs, “offset the pressure on margins while provisions remain stable,” he said. Rafael Alonso, Analist of Bankinter.

In addition, the bank highlighted the contribution of residential mortgage credit, which once again achieved the highest volume of new monthly activity in the last three years. The truth is that the mortgage war between entities triggered the loan signing to record levels.

The UK also regains momentum

Another important market for Banco Santander is the United Kingdom, where ordinary profit reached 1,145 million euros. This figure means multiplying by five the 220 million euros reported in the same period of the previous year.

Revenues increased 21 percent thanks to the improvement in the interest margin, driven by the repricing of deposits, the increase in mortgage volumes and the business with SMEs.

In the British market, Banco Santander experienced the largest increase in demand for mortgages “in many years”, according to the CFO, Jose Garcia Cantera. According to his forecasts, the demand for mortgages “will continue to be very solid.”

Finally, the ordinary profit in Mexico it increased 1 percent to € 602 million. Revenues fell 5 percent and net interest income fell 4 percent, reflecting lower interest rates.