Santander 4Q Profits Lower on US Impairments

Banco Santander reported on Wednesday that its 4th quarter net profit from the previous year was lower, hit by extraordinary impairments in its US unit.

Santander reported a 9% gain in underlying net profit in the quarter to €1.9 billion, boosted by a strong performance in the bank’s Brazilian unit.

However, net profits dropped 4% compared with the same period last year to €1.54 billion ($1.91 billion), according to Santander’s quarterly report. The drop was due to Santander taking an impairment of €752 million, mainly on its US consumer finance group, that was not entirely offset by a capital gain of €297 million on the sale of its platform Allfunds.

“The group took a further €752 million charge in the 4th quarter relating primarily to the impairment of goodwill for the group’s investment in Santander Consumer USA,” Santander said.

On a net level, taking into account gains and provisions, Santander posted €382 million net charges in the quarter. The full-year charge for capital gains and provision was €897 million, more than double the 2016 figure.

For the full year, net profit was €6.62 billion, up from €6.2 billion, while gross income added 10% to €48.39 billion.

Stripping out special items, 4th-quarter underlying profit jumped €1.92 billion, up around 9%. Gross income gained 6.9% to €12.06 billion, driven by higher net interest income and fee income.

Being a key measure of profitability, net interest income grew 10.3% to €34.3 billion in 2017 from the previous year.

Despite the fall in profits, Executive Chairman Ana Botín said that it had been a “very strong year” that demonstrated “the strength of our scale and diversification.”

“The Group continued to see positive trends across its businesses, with revenues increasing in 8 of its 10 core markets,” Santander said. “Santander continues to expect the acquisition to generate a return on investment of 13%-14% from 10.80% in September.”

Botín told sources that she was “very pleased” with the year as a whole, saying that Brazil, Mexico, the US, and Spain did well.

“2017 was a very important year for the US and I really think we have turned the corner, so if you look at the underlying growth in the US for 2017 is up 5% - that’s the first time this happens, we paid the first dividend since 2011, which means we are on the right track with the regulators,” Botín said.

In pre-market trading, Santander shares rose 0.27% to $7.37. Its shares were down 0.51% to end at $7.35 in the last trading session.

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