1st Quarter Results
Banco Santander Central Hispano SA
27 April 2007
Press release
Santander's attributable profit rose 21% to EUR 1.802 billion in the first
quarter of 2007
• Revenue rose by 18%, more than double the increase in costs, which
grew by 7%, allowing operating income to rise by almost 30%.
• Revenue growth was supported by strong activity in all businesses in
Europe as well as in Latin America. Loans grew by 17% and customer funds 15%.
• In Continental Europe, profit grew by 47% to EUR 1.317 billion, owing
to growth in loans of 24% and in customer funds of 15%.
• In Latin America, attributable profit increased by 20% in dollar terms to
US $892 million, with growth of 21% in loans and in customer funds. In
euros, attributable profit was EUR 681 million, up 10%.
• Abbey's attributable profit rose 20% to £201 million, with growth of
8% in loans and 1% in deposits in pounds sterling. In euros, attributable
profit amounted to EUR 300 million, up 23%.
• The 11 points difference between revenue and cost growth enabled
efficiency to improve by 4.6 percentage points to 46.3%
• The non-performing loan rate was 0.82%, a decline of 0.04 point.
Coverage was 177%, eight points less than a year earlier.
• All capital ratios improved in the first quarter. BIS Ratio was 13.22% and
Tier I 7.64%.
• In the last twelve months, the Group invested to grow its commercial
capacities, with 652 new branches (up 6%) and 1,314 new ATMs (up 6%).
Madrid, April 27th, 2007 - Grupo Santander registered attributable profit of EUR
1,802 million in the first quarter of 2007, an increase of 21% from EUR 1,493
million a year earlier. This result is a record for Santander, which this year
celebrates the 150th anniversary of its founding.
Earnings in the first quarter of 2007 were underpinned by strong growth in all
business units, which enabled an increase of the customer base and an
improvement in business margins. At the same time, the Group continued to invest
in its commercial capacities, growing the branch network by 652 offices and
1,314 ATMs. The customer base grew by 8.2% and linked customers by 10.4%.
Distribution of attributable profit
Mill. euros
EUR Mill. % of operating areas
Continental Europe 1,317 57%
UK 300 13%
Latin America 681 30%
Group results Q1'07
Mill. euros
TOTAL GROUP - EUR Million Q1'07 Change o/ Q1'06
Amount %
Gross operating income 6,243 +968 +18.3
Operating expenses -2,950 -206 +7.5
Net operating income 3,275 +742 +29.3
Loan-loss provisions -670 -169 +33.8
Profit before tax 2,503 +494 +24.6
Net profit from ordinary 1,927 +351 +22.3
activity
Attributable profit 1,802 +309 +20.7
Earnings
The key factor in first quarter of 2007 results is the strong growth in business
activity and the growing gap between the loan yield and the cost of funds, which
enabled revenues to rise 11 points ahead of operating costs, 18% versus 7%. As a
result, net operating income increased almost 30%. The limited growth in costs
is especially noteworthy when considering the Group's investments in new
projects and in its retail networks. Santander's global network now includes
10,978 branches, making it the largest retail bank distribution franchise in the
world.
Insolvency provisions, which are in line with the two previous quarters, grew by
34% compared to the same period of last year, whilst tax provisions rose 33%. As
a result, profit from ordinary activity was EUR 1,927 million, 22% higher.
Businesses in Continental Europe registered an operating margin growth of 41%,
with an increase of 29% in revenue and of 12% in costs. Attributable profit for
the quarter reached EUR 1,317 million, a record, up 47%. The greatest
contribution came from the Santander branch network in Spain, with EUR 460
million, up 38%, followed by Santander Consumer Finance, with EUR 166 million,
32% higher, Banesto with EUR 163 million (up 25%, excluding the capital gains
from the sale of Urbis) and Portugal with EUR 132 million, up 16%.
The Santander branch network in Spain focused on profitable growth, which
enabled it to continue to improve its rates of growth in net interest income,
which increased by 21%, three times the rise in costs (+6%). Moreover, the
Santander branch network was able to bear the costs of eliminating income from
fees on services to all linked customers, as well as the new groups included
this year (self-employed customers, stores, students and immigrants). This
performance enabled Santander branch network's efficiency ratio to improve by
4.4 points, to 39.1%.
Continental Europe: Main units Q1'07
EUR Mill. and % o/ Q1'06
Strong growth in net operating income over 2006 produces record profit in all
units
Gross operating income: 3,300 mill.; +29%
Santander Branch Network 1,147 +19%
Banesto 554 +15%
Santander Consumer Finance** 620 +45%
Portugal 308 +12%
Rest*** 671 (GWB: 511) +66%
Net operating income: 2,098 mill.; +41%
Santander Branch Network 691 +30%
Banesto 311 +21%
Santander Consumer Finance** 440 +55%
Portugal 174 +16%
Rest*** 483 (GWB: 398) +82%
Attributable profit: 1,317 million; +47%
Santander Branch Network 460 +38%
Banesto 163 +11%*
Santander Consumer Finance** 166 +32%
Portugal 132 +16%
Rest*** 396 (GWB: 356) +125%
(*) Profit from ordinary activity: +25%
(**) Including Drive in Q1'07. Excluding Drive: gross operating income +11%; net
operating income +11% and attributable profit +15%
(***) Banif, Asset Management and Insurance and Global Wholesale Banking
Latin America: Main countries Q1'07
US$ Mill. and % o/ Q1'06
Strong growth of revenues in all countries with costs in line with projects.
Increased LLPs due to greater lending and change of mix
Gross operating income: 3,203 mill.; +27%
Brazil 1,260 +30%
Mexico 805 +31%
Chile 463 +16%
Other countries 577 +28%
Santander Private Banking 98 +24%
Net operating income: 1,775 mill.; +38%
Brazil 717 +46%
Mexico 477 +49%
Chile 275 +18%
Other countries 244 +25%
Santander Private Banking 61 +25%
Attributable profit: 892 mill.; +20%
Brazil 294 +24%
Mexico 204 +20%*
Chile 171 +25%**
Other countries 168 +12%
Santander Private Banking 54 +24%
(*) Impact from normalisation of tax regulation. PBT: +31%
(**) Net profit (before minority interests): +32%
In Latin America, costs grew by 16%, due principally to investment being carried
out in new projects and the branch networks in the main countries, but were
still half the rate of growth in revenues of 27%, so that net operating income
grew by 38% (all changes are in dollars, the operating currency). Attributable
profit from the region grew by 20% to US $892 million, or by 10% in euros to EUR
681 million. Brazil made the largest contribution, with profit of $294 million,
an increase of 24%, followed by Mexico, $204 million, up 20% and Chile, $171
million, up 25%.
Abbey's results are in line with the framework laid out in its strategic plan,
with growth of 7% in revenue and a reduction of 4% in costs, resulting in growth
of 21% in net operating income and of 20% in attributable profit, measured in
pounds. In euros, attributable profit for the quarter increased 23% to EUR 300
million, in line with the annual target of EUR 1,200 million.
By businesses, retail banking pretax profit increased 27% to EUR 2,334 million;
Global Wholesale Banking rose 68% to EUR 795 million and Asset Management and
Insurance increased 6% to EUR 167 million.
Global Wholesale Banking registered a sharp increase in activity, with revenues
rising by 38% and costs by 11%. 75% of revenues stemmed from customer activity.
Generic provisions in the business fell sharply in the first quarter, as a
result of distributing part of the risk. Thus, gross profit grew by 68% with net
operating income increasing 49%.
Business
El Santander closed the first quarter with EUR 1,024,629 million in funds under
management, an increase of 5%. Of this total, EUR 844,240 million is on the
balance sheet, which grew by 4%. The rest were off-balance sheet customer funds,
such as mutual funds and pensions.
Group gross lending was EUR 539,108 million at the close of the first quarter,
up 17%. Continental Europe accounted for 52% of this lending, the United Kingdom
(Abbey) 36% and Latin America the remaining 12%.
Loans to customers (gross)
EUR billion
Mar 06 459
Jun 06 484
Sep 06 505
Dec 06 532
Mar 07 539(*)
(*)+17.4% as compared to Mar 06. The increase is of 17.5%
excluding the effect of exchange rate
Loans to customers: March 2007
% o/ operating areas
Latin America 12%
Continental Europe 52%
UK - Abbey 36%
In Continental Europe, lending grew by 24% to EUR 278,028 million, with
increases in all countries and units. The Santander branch network in Spain
increased lending by 16%, Banesto 28%, Portugal 6% and Santander Consumer
Finance 26%. The Santander branch network in Spain registered growth in volumes
as well as improved business margins. The success of the 'We want to be your
bank' programme, launched in 2006, has resulted in a 7% increase in linked
customers in 12 months. Lending volume to individuals grew by 14% and to
companies by 23%, with mortgage lending increasing at a rate of 15%.
Banesto lending to individuals grew by 18%, to companies by 31% and mortgage
business by 18%. Santander Consumer incorporated Drive, the finance company
acquired in the U.S., during the quarter. Without Drive's figures, new lending
at Santander Consumer Finance grew by 12%, with growth of 23% in the Nordic
countries, 17% in Spain and 2% in Germany. The low growth in Germany is due to
the one-time effect of the increase in VAT this year, which led to high consumer
lending in the fourth quarter. In Portugal, Santander Totta registered growth of
24% in lending to SMEs and 10% to individuals.
Loan volume in Latin America came to EUR 59,399 million, an increase of 11% in
euros and 21% in local currencies. Brasil, which opened 167 branches in the last
12 months and installed 350 automatic tellers, increased lending by 34%, with
growth of 27% in lending to individuals, 34% to SMEs and companies. Mexico grew
by 36%, with increases of 64% in lending to individuals, and 46% to SMEs and
companies. In Chile, lending increased by 14%, with increases of 19% to
individuals and 24% to SMEs.
Abbey continues to mark progress, closing the first quarter with laon volume of
EUR 192,666 million, which represents growth of 11% in euros and 8% in pounds.
Net mortgage production came to 1,400 million pounds, unchanged form the
year-earlier period. Market share in new mortgage production is 9.4%.
Total customer funds under management came to EUR 770,679 million at the end of
March 2007, an increase of 15% from a year earlier. Balance sheet resources rose
18% to EUR 582,907 million. Mutual funds increased by 15%. Pension funds grew by
just 3%, owing to the sale in 2006 of the pension fund manager in Peru, without
which they would have grown by 17%.
Managed customer funds
EUR billion
Mar 06 699
Jun 06 709
Sep 06 720
Dec 06 744
Mar 07 771(*)
(*)+15.2% as compared to Mar 06. The increase is of 16.3%
excluding the effect of exchange rate
Managed customer funds: March 2007
% o/ operating areas
Latin America 21%
Continental Europe 46%
UK - Abbey 33%
In Continental Europe, total customer funds under management were EUR 306,442
million, up 15%. In Spain, which represents about 80% of the total, customer
funds grew by 8% in the Santander branch network, by 18% at Banesto and 30% at
Santander Consumer. In Portugal customer funds grew by 35%.
In Latin America, customer funds came to EUR 144,534 million, with growth of 13%
en euros and 21% in local currency. Deposits grew by 11% and investment funds by
39% in local currency. By country, savings increased by 25% in Brazil, 8% in
Mexico and 19% in Chile.
Abbey closed the first quarter with EUR 217,675 million in customer funds, an
increase of 10% in euros and 8% in pounds. Total deposits grew by 4% and stock
at the end of the quarter was 3% higher, accompanied by a significant
improvement in margins. The mutual fund business grew by 27%.
Management and capital ratios
Efficiency: Revenue grew by 11 percentage points more than costs, driving
improvement in the efficiency ratio. Costs and amortizations as a percentage of
revenues were 46.3% at the end of the first quarter of 2007, compared to 50.9% a
year earlier. Abbey registered the greatest improvement within the group, with
the efficiency ratio improving to 50.8% at the end of the quarter from 56.8% a
year earlier. In Continental Europe, the efficiency ratio was 35.9%, a 5.3-point
improvement. In Latin American, efficiency was 42.1%, an improvement of 4.3
points.
NPLs: Non-performing loan criteria in Portugal were aligned with those of the
rest of the Group during this quarter, which has had an impact on the final
total ratios. The coverage ratio fell to 177% from 185% for the Group; without
the effect of the Portugal alignment, it would have been 184%. The Group NPL
rate fell to 0.82% from 0.86%, and would have been 0.79% on a like-for-like
basis. The Group's generic funds, which can be considered reserves for the
future, came to EUR 5,778 million.
Maintaining 'wide open jaws'
Revenues and Costs - Base 100: Q1'06
Revenues Costs Difference Revenues -
Costs
Q1'06 100 100 0
Q2 105 99 +6
Q3 111 101 +10
Q4 112 107 +5
Q1'07 118 107 +11
Group's efficiency ratio (%)
%
Q1'06 50.9
Q1'07 46.3(**)
(**) -4.6 p.p. as compared to Q1'06
Efficiency ratio* principal segments (%)
(*) Including amortisations
Continental Europe
%
Q1'06 41.2
Q1'07 35.9
Abbey
%
Q1'06 56.8
Q1'07 50.8
Latin America
%
Q1'06 46.4
Q1'07 42.1
NPLs and coverage ratios
Mar'06 Mar'07*
Coverage 185% 177%
NPL 0.86% 0.82%
High allowances (66% generic)
NPLs 4,936
Allowance 8,722*
(*) 5,778 Generic and 2,944 Specific
Capital ratios
Dec'06 Mar'07
BIS Ratio 12.49% 13.22%
Tier I 7.42% 7.64%
Core Capital 5.91% 5.97%*
(*) Impact from criteria change in Portugal. In like-for-like terms: NPL ratio
march'07: 0.79% and coverage: 184%.
Capital: The Group's eligible capital came to EUR 62,510 million at the end of
the quarter, with a surplus of EUR 24,675 million above the required minimum.
With this capital base, the BIS ratio came to 13.22%, Tier I capital to 7.64%
and core capital to 5.97%.
The Share and dividend
The Santander share ended the first quarter at EUR 13.36, up 10.9% from a year
earlier. Santander's market capitalisation came to EUR 83,557 million at the end
of the quarter. Santander is the largest company in Spain and the leading bank
in the euro zone in terms of market value.
On May 1st the fourth and final dividend (of EUR 0.199913 a share) charged
against 2006 earnings will be paid, with which the total dividend for the year
comes to EUR 0.520625, an increase of 25% for the second consecutive year.
Return per share by dividend was 4.27%. In the last ten years, the dividend per
share has grown by an accumulated annual 13%. In 2006, profit distributed to
shareholders came to EUR 3,256 million, or 49.47% of ordinary attributable
profit, a record for Santander and for Spain.
Santander has 2,312,076 shareholders. 134,638 persons work in the Group, serving
69 million customers in 10,978 branches.
More information: www.santander.com
Income statement
Million euros
Variation
Q1 '07 Q1 '06 Amount %
Net interest income (w/o dividends) 3,460 2,883 577 20.0
Dividends 48 50 (2) (3.1)
Net interest income 3,509 2,933 576 19.6
Income from companies accounted for by the 60 131 (70) (53.9)
equity method
Net fees 2,087 1,738 350 20.1
Insurance activity 95 66 29 43.4
Commercial revenue 5,751 4,867 884 18.2
Gains (losses) on financial transactions 492 408 84 20.5
Gross operating income 6,243 5,276 968 18.3
Income from non-financial services 34 38 (3) (8.8)
Non-financial expenses (18) (15) (3) 19.0
Other operating income (34) (21) (13) 63.6
Operating expenses (2,950) (2,744) (206) 7.5
General administrative expenses (2,642) (2,464) (179) 7.2
Personnel (1,551) (1,483) (68) 4.6
Other administrative expenses (1,092) (981) (111) 11.3
Depreciation and amortisation (308) (280) (28) 9.8
Net operating income 3,275 2,533 742 29.3
Impairment loss on assets (683) (512) (171) 33.4
Loans (670) (501) (169) 33.8
Goodwill - - - -
Other assets (13) (11) (2) 16.3
Other income (90) (12) (78) 653.3
Profit before taxes 2,503 2,009 494 24.6
Tax on profit (576) (433) (142) 32.9
Net profit from ordinary activity 1,927 1,576 351 22.3
Net profit from discontinued operations - 79 (79) (100.0)
Net consolidated profit 1,927 1,655 272 16.4
Minority interests 125 162 (37) (22.6)
Attributable profit to the Group 1,802 1,493 309 20.7
Customer loans
Million euros
Variation
31.03.07 31.03.06 Amount % 31.12.06
Public sector 5,604 5,465 139 2.5 5,329
Other residents 204,943 162,722 42,222 25.9 199,994
Commercial bills 16,173 14,372 1,801 12.5 17,276
Secured loans 114,888 89,385 25,503 28.5 110,863
Other loans 73,882 58,964 14,918 25.3 71,854
Non-resident sector 328,561 290,952 37,609 12.9 326,187
Secured loans 192,452 175,682 16,770 9.5 191,724
Other loans 136,109 115,270 20,838 18.1 134,463
Gross loans and credits 539,108 459,139 79,969 17.4 531,509
Loan-loss allowances 8,297 7,742 556 7.2 8,163
Net loans and credits 530,811 451,397 79,414 17.6 523,346
Pro memoria: Doubtful loans 4,910 4,362 549 12.6 4,613
Public sector 1 7 (7) (90.7) 18
Other residents 1,264 1,033 231 22.3 1,212
Non-resident sector 3,646 3,321 324 9.8 3,383
Customer funds under management
Million euros
Variation
31.03.07 31.03.06 Amount % 31.12.06
Public sector 16,012 15,121 891 5.9 15,266
Other residents 92,958 83,179 9,779 11.8 94,750
Demand deposits 52,000 49,120 2,880 5.9 55,050
Time deposits 26,013 18,460 7,553 40.9 24,670
REPOs 14,945 15,600 (655) (4.2) 15,030
Non-resident sector 218,140 205,954 12,186 5.9 221,206
Demand deposits 118,573 115,499 3,074 2.7 119,861
Time deposits 71,171 71,255 (84) (0.1) 72,258
REPOs 26,377 16,365 10,012 61.2 26,343
Public Sector 2,021 2,835 (815) (28.7) 2,744
Customer deposits 327,111 304,255 22,856 7.5 331,223
Debt securities 222,441 160,700 61,741 38.4 204,069
Subordinated debt 33,355 28,984 4,371 15.1 30,423
On-balance-sheet customer funds 582,907 493,938 88,968 18.0 565,715
Mutual funds 131,147 114,174 16,974 14.9 119,838
Pension funds 29,996 29,190 806 2.8 29,450
Managed portfolios 19,245 16,781 2,464 14.7 17,835
Savings-insurance policies 7,383 14,632 (7,249) (49.5) 6,385
Other customer funds under management 187,772 174,776 12,996 7.4 173,509
Customer funds under management 770,679 668,715 101,964 15.2 739,223
Shareholders' equity and minority interests
Million euros
Variation
31.03.07 31.03.06 Amount % 31.12.06
Capital stock 3,127 3,127 - - 3,127
Additional paid-in surplus 20,370 20,370 - - 20,370
Reserves 20,124 14,976 5,148 34.4 12,352
Treasury stock (102) (67) (35) 52.8 (127)
On-balance-sheet shareholders' equity 43,520 38,407 5,113 13.3 35,722
Attributable profit 1,802 1,493 309 20.7 7,596
Interim dividend distributed (2,006) (1,744) (262) 15.0 (1,337)
Shareholders' equity at period-end 43,316 38,156 5,160 13.5 41,981
Interim dividend not distributed (1,250) (861) (390) 45.3 (1,919)
Shareholders' equity 42,066 37,295 4,771 12.8 40,062
Valuation adjustments 2,384 3,191 (807) (25.3) 2,871
Minority interests 2,055 2,944 (889) (30.2) 2,221
Preferred securities 670 1,293 (623) (48.2) 668
Preferred securities in subordinated debt 7,483 6,469 1,013 15.7 6,837
Shareholders' equity and
minority interests 54,658 51,193 3,465 6.8 52,658
Computable capital and BIS ratio
Million euros
Variation
31.03.07 31.03.06 Amount % 31.12.06
Computable basic capital 36,141 32,909 3,232 9.8 35,539
Computable supplementary capital 26,369 21,978 4,391 20.0 24,237
Computable capital 62,510 54,886 7,623 13.9 59,776
Risk-weighted assets 472,937 427,607 45,330 10.6 478,733
BIS ratio 13.22 12.84 0.38 12.49
Tier 1 7.64 7.70 (0.06) 7.42
Core capital 5.97 5.96 0.01 5.91
Shareholders' equity surplus 24,675 20,678 3,997 19.3 21,478
This information is provided by RNS
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