Spain’s biggest international bank Santander signalled higher profitability this year as growth in lending income, particularly in its home market, helped drive first-quarter earnings higher.

The bank’s revenue rose 10% to a record high 15.38 billion euro, above the 15.06 billion analysts had expected.

The euro zone’s second-biggest bank by market value relied in the past on Latin America for revenue growth, but has recently also benefited from higher European interest rates.

“It has been a very strong start to the year… supported by good growth in net interest income in Europe and the Americas,” Executive Chair Ana Botin said in a statement.

The bank is “well on track” to meet its targets for the year, including a return on tangible equity (ROTE) of 16%, she added.

Chief Financial Officer Jose Garcia Cantera told analysts on call that would imply ending 2024 with a net profit above 12 billion euros.

Including the 335 million euro impact of the Spanish banking levy in Spain, ROTE already stood at 16.2%, compared with 14.9% reported in the quarter.

Net profit jumped to 2.85 billion euros in January to March, just short of the 2.87 billion expect by analysts.

Overall net loan provisions rose 9% while the cost of risk, which measures potential losses, rose 2 basis points to 120 bps.

LENDING BOOST IN SPAIN

At a group level, net interest income (NII) – earnings on loans minus deposit costs – rose 17.7% to 11.98 billion euros, above the 11.5 billion that analysts expected.

Against the previous quarter, NII rose 7.7% as euro zone interest rates remained higher for longer than expected, helping its Spanish business, which has been charging more on loans while keeping a lid on rates paid to savers.

Net profit in Spain rose 66%, while NII was up 24%.

In Brazil, net profit rose almost 20% despite higher provisions as net interest income increased by 25%.

The U.S. and the UK were weak spots, with net profit in the U.S. falling 6.8% due to higher investment costs and NII down 4.7% due to higher funding costs. In the UK net profit fell 22.8%.

Santander’s Tier-1 fully loaded capital ratio, the strictest measure of solvency, rose to 12.28% from 12.26% in the previous quarter.

Original Story: Reuters | Author: Jesus Aguado
Edition: Prime Yield