3rd Quarter Results

RNS Number : 4887B

Banco Santander S.A.

28 October 2009

 

Press Release

Banco Santander's net attributable profit, 

with no extraordinary items, declines 3%  

to EUR 6.740 billion in the first nine months

The Bank reinforces  its balance sheet by assigning net capital gains of EUR 2,247 million to generic provisions (EUR 1,400 million ), to provisions for acquired properties (EUR 600 million) and to other provisions. 

Santander maintains its dividend policy and sticks to its commitment of distributing EUR 4,812 million to shareholders.

• Profit was driven by growth in revenues (up 16%) double that of costs (up 8%). Excluding acquisitions and exchange rate effects, revenues were up 11% and costs flat. 

• Loans rose by 11% and deposits by 21%. Continental Europe contributed 49% of Group profit, Brazil 20%, the rest of Latin America 15% and the U.K. 16%.   

• Continental Europe registered attributable profit of EUR 3,986 million, an increase of 16%. Loans grew by 1% and deposits by 14%. 

• In Latin America, attributable profit stood at $3,816 million (+6%) or EUR 2,798 million (down 2%), with loans falling 4% and deposits growing by 3%, excluding the sale of Banco de Venezuela and the exchange rate effect. 

• Attributable profit in the U.K. totalled £1,164 million (up 58%) or EUR 1,314 million, up 39%. Loans grew by 43% and deposits by 46% in pounds following the integration of Alliance & Leicester. 

• The non-performing loan ratio was 3.03% and the coverage rate was 73%. NPLs in Spain stood at 2.98% and is expected to end the year below 3.5%. Growth in the non-performing loan ratio slowed down for a second consecutive quarter, while the coverage rate increased for the first time since 2006.

• The Bank has made provisions of EUR 7,200 million, an increase of +54%, against the earnings of the first nine months. Generic loan-loss reserves come to EUR 7,469 million. 

• The efficiency ratio stands at 41.3%, improving three points from the year before, despite the integrations of A&L, B&B and Sovereign, with higher costs than the Group average.  

• The capital ratios underline Banco Santander's solvency, with a BIS ratio of 14.3% and core capital of 8.4% following the capital increase in Brazil. 

• Banco Santander expects to match in 2009 the ordinary net profit of EUR 8,876 million registered in 2008 and to maintain shareholder remuneration at EUR 4,812 million.

Madrid, October 28th, 2009 - Banco Santander registered net attributable profit of EUR 6,740 million in the first nine months of 2009, a decline of 3% from a year earlier. Third quarter profit amounted to EUR 2,221 million, slightly above the same quarter of 2008 (EUR 2,205 million), which hadn't been the case in the first two quarters of the year. This performance allows Banco Santander to maintain its goal of matching 2008's net attributable profit (EUR 8,876 million) and to maintain shareholder remuneration at EUR 4,812 million. 

Against a difficult market backdrop, Banco Santander was able to continue generating high recurrent results - approximately EUR 2,200 million of ordinary profit every quarter - and to strengthen its balance sheet and capital base. Results are not driven by capital gains, which will be fully used for extraordinary provisions which will allow the Bank to strengthen its balance sheet. Moreover, organic capital generation and the Bank's capital increase in Brazil place core capital at 8.4%, the highest level in the Group's history, and among the highest in international banking, achieved through the full support of shareholders.

In the third quarter, capital gains amounted to EUR 823 million through the debt exchange offers, the buyback of securitised bonds plus EUR 1,424 million realized in October through the capital increase in Brazil. Capital gains are being used for generic provisioning (EUR 987 million), provisions for acquired real estate (EUR 420 million) and the remaining 840 million to pre-retirements, amortisation of restructuring costs and other funds. 

Against a complicated market backdrop, Santander was able to…

1. … generate high recurring profit … -Management of the basic drivers -Support from operating areas -Countries / business diversification resulting in: Ordinary attributable profit *: Q3'09: €2,221 mill.; 9M'09: €6,740 mill. (*) Excluding capital gains and extraordinary allowances	2. … strengthen balance sheet and capital … -Issues exchange -Securitisations purchase -Positive impact from IPO Brazil resulting in: Sep. 09 proforma **: Generic provisions: € 7.5 Bill. Core capital: 8.4% (*) After allocation of projected capital gains in Q3'09 and Q4'09
3.  … and maintain the dividend policy

Results 

The nine-month results show qualitative improvements. For a third consecutive quarter, basic revenues grew 11% year-on-year, excluding acquisitions and exchange rate effects, while cost growth slowed to 0% in the third quarter. At the same time, the growth in provisions for non-performing loans decelerated from 68% in the first quarter to 47% for the first nine months of the year.

Performance in costs and revenues allowed Banco Santander's efficiency ratio to improve 3 points from a year earlier to 41.3%, positioning the Bank among the best in the world. The improvement in efficiency was possible despite the integration this year of A&L, B&B and Sovereign, where the cost structure was worse than the Group's average. The efficiency ratio of the units within Continental Europe was 35.4%, improving 2.9 points from a year earlier. Latin America's stood at 37%, improving 6.3 points since September 2008, and the U.K. progressed 5.5 points, to 40.7%. Sovereign has the worst efficiency ratio, standing at 62.8%, but showed the best progress. In the first quarter the efficiency ratio stood at 74.5%.  

The slowdown in provisions for insolvencies also reflects slower growth in non-performing loans, with a ratio of 3.03% at the close of September, 0.21 point higher than the previous quarter. This increase is the lowest in the last five quarters. At the same time, the coverage rate stands at 73%, one point higher than the previous quarter, marking a change in recent trends as coverage had fallen every quarter since September 2006. 

The P&L highlights the resilience of the underlying business and the management focus for the year…

Group ordinary* results
			Var. 9M´09/9M´08
EUR Mill	9M´09	9M´08	%		% excl. forex and perimeter
Net Interest income	19,478	15,674	+24.3		+17.6	A: Soundness of most basic revenues
Fees	6,828	6,885	-0.8		-5.7
Trading gains; other**	3,065	2,842	+7.8		+16.2
Gross income	29,371	25,401	+15.6		+11.1	B: Managing costs
Operating expenses	-12,139	-11,242	+8.0		+0.0
Net operating income	17,232	14,159	+21.7		+19.9
Loan-loss provisions	-7,200	-4,667	+54.3		+44.6	C: More LLPs but decelerating
Net op. Income after loan-loss provisions	10,032	9,492	+5.7		+7.8
Ordinary* attrib. Profit	6,740	6,935	-2.8		-1.6
Basic EPS (in euro)	0.7907	0.9695	-18.4		n.s.

(*) With no impact from extraordinary capital gains, assigned to strengthening the balance sheet

(**) Including dividends, equity method and other results. Trading gains change o/9M´08: +21.6%

Grupo Santander's NPL and coverage rates are significantly better than its competitors' in all markets. In Spain, Santander's NPL rate amounted to 2.98%, below the 4.9% average of banks and savings banks in August. The same applies to the U.K. and Latin America. The Group has reserves for loan losses of EUR 16,619 million, of which EUR 10,550 million are specific provisions and EUR 6,069 million are generic provisions. Following the use of capital gains generated by the Brazilian unit's capital increase, these generic provisions will amount to EUR 7,469 million. 

Increasing revenues together with a slowdown in growth of costs and provisions is reflected in earnings, which fell 5% in the first quarter, by 4% in the first half and by less than 3% in the first nine months of the year.  

By geographical areas, Continental Europe recorded attributable profit of EUR 3,986 million (up 16%), while Santander's branch network, the main unit, registered EUR 1,541 million (up 10%.) U.K. profit grew 58% in pounds sterling, to £1,164 million (EUR 1,314 million, up 39%.) In Latin America, attributable profit stood at $3,816 million in dollars, its operating currency. In euros, attributable profit was EUR 2,798 million, down 2%. The greatest contribution came from Brazil, which generated a profit of EUR 1,589 million, followed by Chile, which contributed EUR 391 million and Mexico, with EUR 352 million. 

These results highlight the advantages of geographical and business diversification, the recurrence of revenues and profit and their contribution to the strength of the balance sheet, anticipating provisions. This was accomplished in a very difficult environment in international banking, owing to economic contraction and market volatility. 

Continental Europe accounts for 49% of Grupo Santander's profits, Latin America 35% (20% Brazil and 15% the rest of the region) and U.K. 16%. The Group has two units (Santander branch network and Brazil) which are generating profits of EUR 500 million a quarter, while the U.K. is coming close to this amount. 

Business

Growth continued to be more focused on deposits than loans, whose growth was affected by lower demand resulting from the global crisis. Deposits grew by 21% and loans by 11%, driven by the incorporation of A&L and Sovereign and not including the Banco de Venezuela portfolio, which was sold in early July. 

Santander ended September, 2009, with managed funds of EUR 1.211 trillion, an increase of 6%. Of this amount, EUR 1.082 trillion are on the balance sheet, an increase of 8%.

Santander net lending came to EUR 670,059 million at the end of the third quarter, an increase of 11% in euros. In Continental Europe, lending to customers increased 1% to EUR 324,563 million. In Spain, lending by the Santander branch network and Banesto declined slightly. In Portugal, Santander Totta rose by nearly 2%. Santander Consumer increased lending by 6%.

In Latin America, loan volume was EUR 93,885 million, a decrease of 9% in euros. The impact of the sale of Banco de Venezuela and the exchange rate effect, the decline would have been 4%. In local currencies, Brazil rose 2%, Chile fell by 2% and Mexico by 13%, affected by the decline in credit cards. 

The U.K. closed the quarter with loan volume of EUR  215,569 million, an increase of 24% in euros and 43% in pounds. Mortgage lending rose by 2%, bringing the portfolio to £164,300 million. The Group's market share was 18% of gross new mortgage lending.

Gross customer loans. September 2009

% over operating areas

Spain	36%
United Kingdom	32%
Other Europe	13%
Brazil	8%
Other Latam	6%
Sovereign	5%

Customer funds under management. September 2009

% over operating areas

Spain	32%
United Kingdom	31%
Brazil	13%
Other Latam	10%
Other Europe	8%
Sovereign	6%

In savings, customer funds under management rose by 5% in euros to EUR 866,879 million at the end of September, 2009. Customer deposits, excluding repos, grew by 9%, while the decline in mutual funds and pensions began to level off, even as savings and investment insurance grew by 37%.

Customer deposits in Continental Europe rose 12% to EUR 174,208 million. In Spain, the Santander branch network increased deposits by 20% and Banesto by 1%. In Portugal, deposits grew by 3%. Santander Consumer Finance increased deposits by 34%. 

Deposits in Latin America fell by 10% to EUR 105,246 million, affected by the sales of Banco de Venezuela and the depreciation of local currencies against the euro. Without these factors, deposits net of repos rose by 3%, with an increase in Brazil of 2%, in Mexico of 6% and in Chile a decline of 6%, in local currencies. 

In the United Kingdom, deposits rose by 24% (43% in pounds) to EUR 159,094 million. Without A&L, whose balance sheet was consolidated this year, growth in deposits, net of repos, was 19%. 

At the close of September, Continental Europe accounted for 49% of lending and 40% of funds; the U.K. 32% and 31%, respectively, Latin America 14% of lending and 23% of funds and Sovereign (U.S.A) 5% and 6%, respectively. 

The share and the dividend

Banco Santander's eligible capital at the close of the third quarter came to EUR 74,737 million, with a surplus of EUR 30,765 million above the required regulatory minimum. With this capital base, the BIS ratio, using Basel II criteria, comes to 13.6%, Tier I to 9.2% and core capital 7.7%. In the quarter, the Group generated organically 0.2 point of core capital. However, the Bank's current core capital is 8.4%, due to the completion in October of the capital increase of the unit in Brazil, which added 0.6 point to core capital, and to the completion of the scrip dividend program, which added around 0.1 point to basic capital.

This program allowed Banco shareholders to receive in cash or in shares an amount equivalent to the second dividend against 2009 earnings, EUR 0.12 per share.  

  Strong generation of organic capital (10/15 bp quarterly), enhanced by the latest operations brings core capital to 8.4%*

Core capital
2005	6.1%
2006	5.9%
2007	6.3%
Dec'08	7.5%
Mar'09	7.3%
Jun'09	7.5%
Sep'09	7.7%
Sep'09 Proforma	8.4% (**)
Note: 2008 and 2009 according to BIS II, previous data according to BIS I

(*) Including capital increase in Brazil (before green shoe) and the capital increase for the payment of Santander Dividendo Elección, to be done Q4´09.

(**)   - IPO Brazil: +60 bp

  - Scrip dividend (e):approx.10 bp

The Santander share ended September at EUR 11, up 63% during the year. At this level, Santander's market value exceeds EUR 90,000 million, placing it among the eight top banks in the world and making it the largest company in Spain.  

At the close of the third quarter, Santander had 3,079,125 shareholders. During the third quarter, Banco de Venezuela, with 5,600 employees and 285 branches, left the Group. Total employment in the Group at the end of September was 170,156, serving around 90 million customers in 13,696 branches, making Santander the international financial group with the most shareholders and the largest branch network. 

Más información en:  www.santander.com

Income statement
Million euros
			Variation
	9M '09	9M' 08	Amount	%
Net interest income	19,478	15,674	3,804	24.3
Dividends	335	402	(67)	(16.8)
Income from equity-accounted method	(2)	96	(98)	-
Net fees	6,828	6,885	(57)	(0.8)
Gains (losses) on financial transactions	2,617	2,153	464	21.6
Other operating income/expense	115	191	(76)	(39.9)
Gross income	29,371	25,401	3,970	15.6
Operating expenses	(12,139)	(11,242)	(897)	8.0
General administrative expenses	(10,948)	(10,209)	(738)	7.2
Personnel	(6,260)	(5,901)	(359)	6.1
Other administrative expenses	(4,688)	(4,308)	(380)	8.8
Depreciation and amortisation	(1,192)	(1,033)	(159)	15.4
Net operating income	17,232	14,159	3,073	21.7
Net loan-loss provisions	(7,200)	(4,667)	(2,533)	54.3
Impairment losses on other assets	(307)	(41)	(266)	646.3
Other income	(929)	(314)	(615)	195.9
Profit before taxes (w/o capital gains)	8,796	9,137	(341)	(3.7)
Tax on profit	(1,801)	(1,974)	173	(8.8)
Profit from continuing operations (w/o capital gains)	6,995	7,163	(168)	(2.3)
Net profit from discontinued operations	53	174	(120)	(69.2)
Consolidated profit (w/o capital gains)	7,049	7,337	(288)	(3.9)
Minority interests	309	402	(93)	(23.2)
Attributable profit to the Group (w/o capital gains)	6,740	6,935	(195)	(2.8)
Net extraordinary capital gains and allowances*	-	-	-	-
Attributable profit to the Group	6,740	6,935	(195)	(2.8)
EPS (euros) (1)	0.7907	0.9695	(0.1789)	(18.4)
Diluted EPS (euros) (1)	0.7875	0.9654	(0.1780)	(18.4)
Pro memoria:
Average total assets	1,098,907	950,688	148,219	15.6
Average shareholders' equity	64,169	51,051	13,117	25.7

(1).- 9M'08 data have been adjusted to the capital increase with preemptive rights at the end of 2008.

(*).- In 9M'09 extraordinary capital gains and extraordinary allowance for the same amount are included, and thus amount is zero.

Customer loans
Million euros
			Variation
	30.09.09	30.09.08	Amount	%	31.12.08
Public sector	9,118	6,073	3,045	50.1	7,668
Other residents	224,904	229,545	(4,641)	(2.0)	230,783
Commercial bills	9,884	14,733	(4,849)	(32.9)	14,874
Secured loans	124,104	124,274	(170)	(0.1)	123,566
Other loans	90,917	90,538	378	0.4	92,343
Non-resident sector	452,200	380,469	71,731	18.9	400,903
Secured loans	274,599	209,833	64,766	30.9	229,761
Other loans	177,601	170,636	6,965	4.1	171,142
Gross customer loans	686,223	616,088	70,135	11.4	639,354
Loan-loss allowances	16,163	11,615	4,548	39.2	12,466
Net customer loans	670,059	604,473	65,587	10.9	626,888
Pro memoria: Doubtful loans	22,349	11,470	10,880	94.9	13,968
Public sector	40	1	40	-	1
Other residents	8,986	4,636	4,350	93.8	6,208
Non-resident sector	13,323	6,833	6,490	95.0	7,759

Customer funds under management
Million euros
			Variation
	30.09.09	30.09.08	Amount	%	31.12.08
Public sector	14,917	15,016	(99)	(0.7)	13,720
Other residents	116,180	110,205	5,975	5.4	117,776
Demand deposits	57,689	51,016	6,673	13.1	51,300
Time deposits	43,842	43,404	438	1.0	46,783
REPOs	14,649	15,785	(1,136)	(7.2)	19,693
Non-resident sector	340,165	278,688	61,478	22.1	288,734
Demand deposits	181,906	135,827	46,079	33.9	151,774
Time deposits	137,136	115,549	21,587	18.7	115,620
REPOs	16,556	24,482	(7,927)	(32.4)	17,187
Public Sector	4,567	2,829	1,738	61.4	4,153
Customer deposits	471,263	403,909	67,354	16.7	420,229
Debt securities	213,566	238,488	(24,922)	(10.4)	236,403
Subordinated debt	37,752	36,345	1,406	3.9	38,873
On-balance sheet customer funds	722,581	678,742	43,839	6.5	695,506
Mutual funds	100,265	109,880	(9,615)	(8.8)	90,306
Pension funds	11,081	11,172	(92)	(0.8)	11,128
Managed portfolios	17,426	18,260	(833)	(4.6)	17,289
Savings-insurance policies	15,526	11,260	4,266	37.9	12,338
Other customer funds under management	144,298	150,572	(6,274)	(4.2)	131,061
Customer funds under management	866,879	829,314	37,564	4.5	826,567

Shareholders' equity and minority interests
Million euros
			Variation
	30.09.09	30.09.08	Amount	%	31.12.08
Capital stock	4,078	3,127	951	30.4	3,997
Additional paid-in surplus	29,309	20,370	8,939	43.9	28,104
Reserves	31,868	28,069	3,799	13.5	28,024
Treasury stock	(360)	(77)	(283)	369.0	(421)
Shareholders' equity (before profit and dividends)	64,895	51,490	13,406	26.0	59,704
Attributable profit	6,740	6,935	(195)	(2.8)	8,876
Interim dividend distributed	(1,103)	(846)	(257)	30.4	(1,711)
Interim dividend not distributed	--	--	--	--	(3,102)
Shareholders' equity (after retained profit)	70,533	57,579	12,954	22.5	63,768
Valuation adjustments	(3,575)	(3,779)	205	(5.4)	(8,300)
Minority interests	2,628	2,637	(9)	(0.4)	2,415
Total equity (after retained profit)	69,586	56,436	13,149	23.3	57,883
Preferred shares and securities in subordinated debt	7,668	7,649	19	0.2	8,673
Total equity and capital with the nature of financial liabilities	72,254	64,085	13,168	20.5	66,555

Computable capital and BIS II ratio
Million euros
	30.09.09	31.12.08
Core capital	42,387	38,968
Basic capital	50,568	46,894
Supplementary capital	26,041	25,225
Deductions	(1,872)	(3,816)
Computable capital	74,737	68,302
Risk-weighted assets	549,647	514,003
BIS II ratio	13.6	13.3
Tier I (before deductions)	9.2	9.1
Core capital	7.7	7.5
Shareholders' equity surplus (BIS II ratio)	30,765	27,182

 

END

 

 

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