Santander profit beats forecasts on strong U.S. and UK markets

MADRID (Reuters) – Spain’s Santander on Wednesday beat forecasts with a 35% rise in second-quarter underlying profit, which nearly returned to pre-pandemic levels on the back of fast economic recovery in its U.S. and UK markets.

FILE PHOTO: Banco Santander’s boss Ana Patricia Botin speaks during the annual results presentation at the bank’s headquarters in Boadilla del Monte, outside Madrid, Spain January 29, 2020. REUTERS/Susana Vera

The euro zone’s second-biggest lender in terms of market value reported a net profit of 2.07 billion euros ($2.45 billion). The result topped the 1.76 billion euros forecast by analysts polled by Reuters and almost matched the 2.1 billion euros recorded in the second quarter in 2019, before the outbreak of the coronavirus pandemic.

Last quarter’s net and underlying profit remained the same as the bank did not book any one-off gains or charges. A year ago, pandemic-related writedowns led to a record net loss of

11.1 billion euros.

“We are on track to outperform our profitability target for the year,” Santander boss Ana Botin said in a statement.

Its return on tangible equity ratio (ROTE) – a measure of profitability – rose to 12.29% at the end of June from 12.16% in March. Santander had previously said it aimed to hit a ratio of around 10% by the end of 2021.

The bank also said it planned to return to its dividend payout ratio of 40% to 50% of ordinary earnings, following the lifting the cap on dividend payments by the ECB last week.

Even though Santander did not set aside set aside specific COVID-19 provisions in the quarter, its solvency dipped after accruing 18 basis points for shareholder remuneration.

The lender’s core tier-1 fully loaded capital ratio fell to 11.7% at the end of June from 11.89% three months earlier, but remained within its 11-12% target.

At end of June, the bank’s cost of risk, which measures the premium of managing credit risks and acts as an indicator for potential losses in the future, fell to 94 basis points from 108 points in the previous quarter.

($1 = 0.8460 euros)

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