Santander exceeds third quarter expectations due to growth in the US

Santander Reports Strong Q3 Profit Amid Mixed Regional Results

MADRID, Oct 29 – Santander announced that its third-quarter net profit reached 3.5 billion euros, marking an 8% increase compared to the previous year. This exceeded expectations, largely due to improved lending in the U.S. and operational efficiencies that helped mitigate some challenges in Brazil.

Banco Santander’s Executive Chairman, Ana Botín, emphasized that the bank’s diverse operations across ten major markets offer a stabilizing effect in an increasingly unpredictable global landscape.

In the U.S., net profit surged by 64%, driven by enhanced lending income resulting from lower funding costs from its digital unit, Open Bank. Additionally, corporate and investment banking also contributed positively with increased fees. However, the situation in Brazil was less favorable, where net income dipped by 6% due to currency depreciation.

In Argentina, things were tougher, with a significant 26% drop in net profit, primarily attributed to risks posed by the peso.

Mixed Results from Spain and Unreleased UK Figures

In Spain, Santander recorded a 10% decline in underlying net profit, despite a slight rise in lending income. Interestingly, profits from financial transactions took a hit, dropping €125 million. The bank’s Chief Financial Officer, José García Cantera, suggested that Spain’s net interest income might stabilize or even slightly decrease by 2025, which is an adjustment from a previously projected drop of 4-6%.

On a more positive note, the UK market, the bank’s fourth-largest, saw a 15% increase in net profit, aided by lower provisions. However, full results for this region were not released as Santander awaits more information on compensation proposals related to the car finance mis-selling issue from the British financial regulator.

Overall, the increase in fees by 4% and a 1% rise in revenue puts Santander on track to meet its annual target of a 16.5% return on tangible equity (ROTE) and sales of roughly 62 billion euros. Following these results, Santander shares rose by 3.4%, continuing a remarkable increase of over 90% since the start of the year.

Analysts from Barclays described the results as “overall positive”, while Jefferies noted that most developments are progressing as expected. The efficiency ratio for the bank improved slightly to 41.1%, reflecting its transition to a more digital and integrated model. Meanwhile, net interest income for the quarter came in at 11.1 billion euros, just below analyst expectations.