Santander, the euro zone's biggest bank, has trumpeted a turnaround in lending in 2014 after two years of shrinkage, paving the way for a loan drive by new boss Ana Botin.
Santander is betting on an economic recovery in its Spanish home market and hubs such as Britain to raise earnings and lend more, as losses on property loans in Spain fade and it emerges from a management overhaul.
Its shares were up 2.9 per cent at €6.10 in early trade on Tuesday, outperforming other European banks but still not far from a more than 12-month low hit last month after its surprise €7.5 billion share sale and dividend cut, measures also designed to support its lending push.
Like peers, however, the bank will have to contend with record low interest rates in some of the regions it operates in, including the euro zone. There the European Central Bank is also set to buy government bonds in a stimulus plan that could help local economies but also squeeze banks’ margins.
So far, Santander’s lending business has recovered as some of its key markets such as Spain emerge from a deep downturn.
Group net interest income (NII), a closely-watched measure of earnings from loans minus deposit costs, was higher than expected in the fourth quarter, rising 11 per cent from a year earlier, the bank said on Tuesday.
That was encouraging, several analysts said, even though Santander’s net profit in October-December, the first three months of Ana Botin’s turn at the helm after she took over from her late father, slightly missed expectations.
"We see the reduced dependence on trading gains for revenues as a positive, with the main source of income coming from NII and fees," Nuria Alvarez, an analyst at brokerage Renta 4, said in a note.
Santander’s fourth-quarter net profit jumped nearly 70 per cent from a year earlier to €1.46 billion, also helped by falling charges against soured debts.
It did, however, set aside an extra £70 million in Britain to cover misconduct charges on the way it sold some products, with Santander’s total bill to compensate UK customers miss-sold loan insurance reaching £846 million.
Botin, who took over last September, last month bolstered Santander’s capital levels via the share sale, also aimed at backing the bank’s lending push. Her growth plan marks a shift from the serial acquisitions of her late father Emilio.
“We will be stricter in our acquisitions criteria, though let me be clear, are not currently considering this a priority and we are not considering any acquisitions,” she said on a conference call.
Santander said lending rose 5 per cent last year, with a 2 per cent jump in Spain, one of the countries worst affected by a credit crunch during a long recession. Including assets held temporarily, credit grew by an even higher 7 per cent across the group, though by this measure customer loans in Spain were down 1.7 per cent year on year.
The bank said in a presentation it wanted to grow lending at a faster pace than major international rivals in the next two years. It also aims to bring its ratio of costs to income below 45 per cent from over 47 per cent now by 2017.
Santander said it had increased lending in most of its core markets, including Britain and Brazil, which it has been trying to turn around. But NII in Brazil fell in 2014 from a year earlier, and Santander's Latin American earnings, which make up nearly 40 per cent of profits, were also penalised by unfavourable exchange rates and were down 1 per cent. – Reuters
