Santander’s earnings fall as margins weaken

The net profit of Banco Santander, Spain’s leading bank, fell 25.9 percent in the first quarter from a year earlier to 1.205 billion euros due to a general erosion in the lender’s margins, which offset the positive impact of lower provisions for potential losses.

Earnings fell across the board, with the biggest deterioration suffered in Latin America and Britain, where attributable profit declined 18 percent to 988 million euros and 23 percent to 224 million respectively. In the case of Brazil, which accounted for 26 percent of attributable profit, earnings declined 22.3 percent from a year earlier to 499 million euros.

Revenues fell nine percent to 10.290 billion euros, while net interest income declined 6.3 percent to 6.652 billion euros. Provisions decreased six percent from a year earlier to 2.919 billion euros, the lowest amount in the past five quarters.

“This looks like a weak set of results with the key area of disappointment being Brazil, where people will be looking at the weak lending, revenue and provisioning results,” Bloomberg quoted Benjie Creelan-Sandford, an analyst at Macquarie Bank in London, as saying. “The group trend on net interest income was significantly below our expectations,” the analyst added.

In afternoon trade, Santander’s shares were down 3.13 percent at 5.446 euros, while the blue-chip Ibex 35 index was down 0.57 percent .

Despite the downturn, Santander remained upbeat, pointing out that earnings in the quarter came to 53 percent of full-year profit in 2012, and was nearly triple the 423 million booked in the final quarter of last year.

“Profit in 2013 will be significantly higher than the 2.295 billion euros registered in 2012. This comes after four years in which we set aside 60 billion euros for bad loans, added 20 billion to our capital and strengthened deposits by 223 billion,” Chairman Emilio Botín said.

Elsewhere in the sector, Caixabank reported that its net income increased to 335 million euros in the first quarter from 48 million a year earlier, with earnings boosted by the favorable accounting impact of its absorption of Banco Valencia. The group said it made provisions of 902 million euros in the period for possible losses on its real estate assets. Net interest income increased 12.3 percent to 992 million euros.

Meanwhile, Banco Sabadell’s earnings fell 36.1 percent from a year earlier to 51.1 million euros after making provisions of 324.9 million.