BANKING

Sovereign’s profits rise 38% in 2012

BLOOMBERG FILE PHOTO/MIKE MERGEN
SOVEREIGN BANK saw its profits rise 38.3 percent year over year in 2012, despite a 76.4 percent quarter-to-quarter drop in fourth quarter profits.
Posted 2/4/13

BOSTON – Sovereign Bank N.A. – a subsidiary of Banco Santander S.A. – saw its third consecutive year of profitability, with net income of $438.1 million in 2012, the bank announced Monday.

For the year, Sovereign’s bottom line grew 38.3 percent from the $316.9 million reported for 2011.

Although the bank’s net income grew for the fiscal year, during the fourth quarter, Sovereign reported net income of $69.7 million, a decrease of 76.4 percent from the $123 million reported during the three months ended Sept. 30, 2012. That earnings drop had put an end to 11 consecutive months of quarterly profitability increases.

“As we close 2012, we reflect the many milestones the bank has achieved this year, beginning with our conversion to a national charter last January,” Jorge Moran, Sovereign’s president and CEO, said in prepared remarks.

“This change enabled the bank to expand its retail and commercial capabilities to better meet the needs of clients. This new charter has enabled Sovereign to expand its wholesale banking transactions,” said Moran. “We continued investing strongly in the franchise and showed double-digit growth in profits.”

Moran added that Sovereign grew its staff during the year, with 340 new team members. Sovereign-Santander has roughly 8,900 employees, according to the release.

During 2012, lending to commercial and industrial businesses grew 23 percent. The release called this growth “significantly higher than the industry,” in which growth averaged 13 percent.

Net interest income was described as stable, at $1.8 billion, and fees and other income grew by 14.6 percent year over year to $611.5 million in 2012.

The bank’s total loan production was $20.5 billion for the year, a 28.3 percent increase over the figures reported during 2011. Additionally, outstanding total loan balances grew 3.1 percent to $53.2 billion for the year. Residential mortgage production increased 37 percent year over year.

“Sovereign Bank’s commitment to invest in small businesses is a key component of the bank’s strategy to support growth within our communities and generate economic activity and employment,” said a bank release. Lending to small businesses grew 10 percent in 2012, said the release, outpacing the industry average of 2 percent annual growth.

In 2012, revenue for Sovereign’s corporate banking business grew 8 percent.

Non-accrual loans decreased from $1.36 billion at Dec. 31, 2011 to $1.17 billion at Dec. 31, 2012, a decrease the bank attributed to continued improvement in the overall quality of its loan portfolio.

Sovereign continues to have one of the highest capital ratios in the United States, according to its release. At the end of 2012, the bank’s total equity was $12.8 billion, and it is characterized as a “well-capitalized” institution. The bank’s Tier I common capital ratio and Tier I risk-based capital ratio were 12.86 percent at year end.

The bank’s total assets were $83.1 billion at the end of 2012, a 6.4 percent increase over year end 2011. Total deposits were $51.1 billion as of Dec. 31, 2012, a 6.3 percent year-over-year increase.

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