Banco Santander 2012 H1 Results

Banco Santander registered net attributable profit of EUR 1,704 million in the first half of the year, a fall of 51% compared with the same period last year. The decline is a result of setting aside EUR 1,304 million for provisions for real estate exposure in Spain of the second quarter ordinary profit of EUR 1,404 million. That resulted in an accounting profit of just EUR 100 million for the quarter. Banco Santander Chairman Emilio Botín said: “The first half results make us one of the most solid and efficient banks in the world and show we are able to increase revenues and keep costs under control even in a difficult environment. The provisions we are making will allow us to put real estate write-offs in Spain behind us by the end of this year.”

Results
In the first half of 2012, Banco Santander’s group revenues rose 5.3% to EUR 22,544 million and absorbed costs of EUR 10,041 million, up 5.1% compared with the same period last year. Latin America and Continental Europe produced strong revenue growth and the performance in Spain stood out. The Santander branch network achieved revenues of EUR 1,217 million between April and June, the highest figure of the last ten quarters. The difference between revenues and costs produced net operating income of EUR 12,503 million, 5.5% more than the same period last year and 10.2% more than the second half of 2011. The performance of revenues and costs resulted in an improvement of 20 basis points in the efficiency ratio to 44.5%, which makes Santander the most efficient international bank in the world.

Pre-provision profit of EUR 12,503 million (EUR 25,000 million in annualised terms) shows Santander’s capacity to generate earnings and make provisions when the economic situation requires. EUR 6,540 million (+42%) was allocated to provisions for non-performing loans and a further EUR 1,896 million (EUR 1,304 million in net terms) was assigned to cover real estate exposure in Spain. The bank also assigned EUR 884 million from the sale of the Colombian business to real estate provisions.

The NPL coverage ratio rose for the second quarter running, both for the group and the Spanish business, whose coverage ratios were 65% and 53%, respectively. Without these extraordinary write-offs, ordinary attributable profit (before capital gains) would have been EUR 3,008 million, a fall of 14%.

Banco Santander’s diversification is the main reason group results have held up so well against such a difficult backdrop in Europe, where it carries out a large part of its business. Latin America contributes 50% of profits – Brazil makes up 26%, Mexico 12% and Chile 6%. Continental Europe accounts for 27%, of which Spain represents 14%, Germany 5% and Poland 4%, while the U.K. brings in 13% and the U.S. 10%.

Source: Banco Santander 2012 H1 Results – Press Release.