Botin’s commitment to Brazil pays off for Banco Santander

BANCO SANTANDER recorded a net income of 1.7 billion euros ($1.85 billion) in the third quarter, an increase of 0.9 percent from 1.68 billion euros a year earlier.  / BLOOMBERG NEWS
BANCO SANTANDER recorded a net income of 1.7 billion euros ($1.85 billion) in the third quarter, an increase of 0.9 percent from 1.68 billion euros a year earlier. / BLOOMBERG NEWS

Since taking over as executive chairman two years ago, Ana Botin has defended Banco Santander SA’s business in Brazil, even as it weighed on shares. Her strategy paid off in the third quarter.

The Brazil unit generated higher income from loans, fees and trades in the three months through September, that in a country mired in recession. The performance helped Spain’s biggest bank offset pressures at home and in Brexit-battered Britain to beat analyst estimates of a drop in group profit.

“Results were better than expected on Brazil business and less provisions on Spain,” said Daragh Quinn, an analyst at Keefe Bruyette & Woods with an under-perform recommendation on the shares. “However, negatives for the group include net interest income in Spain and provisions in Brazil.”

Chairman Ana Botin is counting on Santander’s business in emerging markets to help the lender weather diminished growth expectations in the U.K. and other countries where it has a large presence. Santander lowered its profitability target for 2018 last month, citing record-low interest rates, higher regulatory costs and weak demand for credit in mature markets.

- Advertisement -

Brazil overtook Britain as Santander’s largest unit during the quarter, while the U.K. business wound up being a drag on the group. Profit from the U.K. declined 24 percent when reported in euros, reflecting weakness in the pound surrounding the vote to leave the European Union. In Brazil, profit rose 27 percent when calculated in euros from a year earlier, although higher provisions took some of the shine off the performance.

“The worst in Brazil is clearly over, the prospects for Brazil look better,” Chief Financial Officer Jose Antonio Garcia Cantera said in a Bloomberg TV interview. The higher provisions in the quarter were due to a single client, Garcia Cantera said in a conference call with analysts. He didn’t elaborate.

After a two-year slump, Brazil is expected to return to growth in 2017, and President Michel Temer is trying to win back investors. Earlier this year, Botin reaffirmed her confidence in Latin America’s largest economy, saying the long-term story of Brazil is growth.

The U.K., meanwhile, faces tougher times, according to Nathan Bostock, head of Santander’s British unit. “Although we have not seen an immediate impact following the EU referendum, we do expect a more challenging macroeconomic environment ahead,” he said after the bank published results Wednesday.

Santander’s shares dropped 35 percent last year as Brazil wrestled with a selloff in the real. They are down 2.2 percent this year compared with a 17 percent decline in the benchmark STOXX Europe 600 Banks Price Index, which tracks 44 of the region’s lenders.

The bank recorded a net income of 1.7 billion euros ($1.85 billion) in the third quarter, an increase of 0.9 percent from 1.68 billion euros a year earlier. Analysts surveyed by Bloomberg estimated 1.54 billion euros on average.

No posts to display