There is hope for the banking sector. Banco Santander has managed to reduce the accumulated losses up to June, which were close to 10,800 million euros due to the accounting adjustment of its goodwill, after gaining 1,750 million euros in the third quarter. Thus, in the first nine months of the year, the red numbers remain at 9,048 million euros which, as they recall from the entity, do not affect the cash position or solvency.
On the same day that the entity holds its shareholders’ meeting to approve new dividends, Santander has also sent a clear message to the European Central Bank (ECB) with the evolution of its capital. The entity has added 14 basis points of CET1 capital organically, until the ratio reaches 11.98%, that is, in the upper part of the target of between 11% and 12% marked.
During the year, Santander reserved 19 basis points (bp) of capital, of which 13 basis points correspond to the third quarter, for a cash payment to its shareholders in 2021, subject, among other conditions, to regulatory approvals and the shareholders’ meeting.
Although the pandemic has affected activity, the bank has observed best trends in the third quarter. Not only for the ordinary profit for the third quarter (1,750 million euros, 18% more than from April to June). Behind this improvement is a 7% rise in revenue and lower loan loss provisions, which fell 14%.
Yes. Compared to the third quarter of the previous year, ordinary profit for the quarter was down 4%.
Credit quality remained solid, with a reduction in the NPL ratio of 32 basis points in the last 12 months, to 3.15%. 66% of the moratoriums have already expired and only 2% are in phase 3 (that is, doubtful).
The entity achieved solid growth in customer volumes, with an increase in the credit and deposits of 5% and 9%, respectively. Santander has increased the mortgage loan business, especially in the United Kingdom, while consumer loans returned to pre-covid-19 levels, from the lows marked in April.
Although the financing for SMEs and companies has returned to its usual levels after the abrupt increase that occurred in the early stages of the crisis, Santander continues to provide significant financial support to both SMEs and companies and individuals, with more than 1,000 million euros a day in credits during the pandemic.
Throughout these months, Santander has granted moratoriums on mortgages and other types of loans for more than 114,000 million euros, around 13% of its loan portfolio. As of September 30, 2020, 66% of these moratoriums had expired, with only 2% percent in phase 3 (ie doubtful), which gives the bank greater visibility of the impact.
Santander your forecast of the cost of credit has improved, up to 1.3% for the whole of 2020, compared to the 1.4-1.5% indicated above, due to the positive trends observed in customer behavior and the better macro forecasts. These better prospects, coupled with strong cost control, lead the bank to anticipate a ordinary profit of around 5 billion euros for the year as a whole.
Accelerated cost reduction
The bank’s efficiency plans are progressing faster than expected, with a cost reduction of more than 2% in constant euros. In the first nine months of the year, the European region has achieved cost synergies of € 500 million, a figure above the 2020 target, which is added to the € 200 million in 2019.
In this way, Santander will have met the cost saving target of € 1 billion in Europe that it announced in 2019 by the end of the year and ahead of schedule. next two years in Europe.
Net interest income and customer income remained stable at € 23,975 million and € 31,534 million, respectively, thanks to good quarterly performance in all regions. This, together with cost control, allowed a growth of the net margin of 3%, up to 17,879 million euros.
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