Interim Results
Banco Santander Central Hispano SA
26 July 2007
Press release
Banco Santander's attributable profit rose 39%
to EUR 4.458 billion in the first half of 2007
Attributable profit excluding capital gains amounted to EUR 3,892 million, up
21% from the same period of last year and in line to reach
EUR 8 billion for the year.
- Revenue rose by 22%, more than double the increase in costs, which
grew by 10%, allowing operating income to rise by 34%.
- Revenue growth was supported by strong activity in all businesses in
Europe as well as in Latin America. Loans grew by 16% and customer funds 17%.
- In Continental Europe, attributable profit grew by 45% to EUR 2,468
million, with growth in loans of 20% and in customer funds of 16%.
- In Latin America, attributable profit increased by 28% in dollar
terms to US $1,807 million, with growth of 20% in loans and 23% in customer
funds. In euros, attributable profit was EUR 1,360 million, up 19%.
- Abbey's attributable profit rose 20% to £406 million, with growth of
8% in loans and 5% in deposits in pounds sterling. In euros, attributable profit
amounted to EUR 602 million, up 22%.
- The 12 points difference between revenue and cost growth enabled
Group efficiency to improve by 4.9 percentage points to 44.4%.
- The non-performing loan rate was 0.83%, a decline of 0.05 point.
Coverage was 169%, eight points less than a year earlier.
- In the first half of the year, Santander sold its 1.79% stake in
Intesa Sanpaolo with a capital gain of EUR 566 million.
- The first dividend charged against 2007 results, amounting to EUR
0.12294, up 15%, will be paid from 1st August.
Madrid, July 26th, 2007 - Grupo Santander registered attributable profit of EUR
4,458 million in the first half of 2007, an increase of 39% from a year earlier.
This result includes EUR 566 million in capital gains from the sale of the 1.79%
stake the Group had in Intesa Sanpaolo. Excluding this transaction, attributable
profit amounted to EUR 3,892 million, up 21%. These results are in line with the
goal of ending the year with attributable profit of EUR 8,000 million, excluding
extraordinary items, announced at the Shareholders' Meeting of June 23rd. Second
quarter profit was EUR 2,090 million, exceeding EUR 2,000 million in one quarter
for the first time.
Results
The key factor in first half 2007 results is strong growth in business activity,
which rose by 16%, and the growing gap between the loan yield and the cost of
funds. This has enabled revenues to grow more than double the increase in costs,
22% versus 10%, allowing net operating income to rise 34%.
Distribution of attributable profit (w/o capital gains)
EUR Mill.
Europe contributes 69% of attributable profit, with EUR 3,070 million
EUR Mill. % of operating areas
Continental Europe 2,468 56%
UK 602 13%
Latin America 1,360 31%
Group results H1'07
EUR Mill.
TOTAL GROUP - EUR Million H1'07 Change o/ H1'06
Amount %
Gross operating income 13,207 +2,367 +21.6
Operating expenses -5,980 -531 +9.7
Net operating income 7,193 +1,828 +34.1
Loan-loss provisions -1,511 -410 +37.3
PBT (w/o capital gains) 5,395 +1,151 +27.1
Net profit from ordinary 4,161 +809 +24.1
activity
Attributable profit (w/o 3,892 +676 +21.0
capital gains)
Attributable profit 4,458 +1,242 +38.6
Insolvency provisions grew by 37%, in line with growth in net operating income.
Increase in provisions is due basically to Latin America, where the change in
business mix to more profitable products involves assuming higher risk premiums,
and the inclusion in 2007 of Drive, the consumer finance business acquired in
the US. As a result of this, together with taxes growing 38%, profit from
ordinary activity was EUR 4,161 million, 24% higher.
Businesses in Continental Europe registered an operating margin growth of 41%,
with an increase of 29% in revenue and of 13% in costs. Attributable profit for
the first half reached EUR 2,468 million, up 45%. The greatest contribution came
from the Santander branch network in Spain, with EUR 899 million, up 34%,
followed by Santander Consumer Finance, with EUR 352 million, 25% higher,
Banesto with EUR 338 million (up 22%, excluding the capital gains from the sale
of Urbis in 2006) and Portugal with EUR 276 million, up 28%.
The Santander branch network in Spain focused on profitable growth, which
enabled it to continue to improve its growth rates in net interest income, which
increased by 21%, three times the rise in costs (+7%). 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 reach a record low at
38.8%, improving 3.2 points, despite the expansion of the branch network, which
grew by 151 branches in a year.
Europe: Main units H1'07
EUR Mill. and % o/ H1'06
Solid and diversified growth: net operating income and attributable profit
around 25% or above in all units
Gross operating income: 6,567 mill.; +29%
SAN Branch Network 2,348 +17%
Banesto 1,112 +14%
Santander Consumer Finance** 1,295 +48%
Portugal 696 +26%
Rest*** 1,115 (GWB: 802) +61%
Net operating income: 4,120 mill.; +41%
SAN Branch Network 1,418 +23%
Banesto 633 +26%
Santander Consumer Finance** 921 +62%
Portugal 425 +43%
Rest*** 723 (GWB: 571) +76%
Attributable profit: 2,468 million; +45%
SAN Branch Network 899 +34%
Banesto 338 +12% (+22%)*
Santander Consumer Finance** 352 +25%
Portugal 276 +28%
Rest*** 603 (GWB: 525) +163%
(*) Net profit from ordinary activity
(**) Including Drive. Excluding Drive: gross operating income +12%; net
operating income +13% and attributable profit +8%
(***) Banif, Asset Management and Insurance and Global Wholesale Banking
Latin America: Main countries H1'07
US$ Mill. and % o/ H1'06
Strong growth of revenues in all countries with costs under control.
Increased LLPs due to greater lending and change of mix
Gross operating income: 6,750 mill.; +32%
Brazil 2,740 +40%
Mexico 1,640 +35%
Chile 979 +14%
Other countries 1,188 +31%
Santander Private Banking 204 +24%
Net operating income: 3,798 mill.; +46%
Brazil 1,610 +63%
Mexico 985 +57%
Chile 579 +15%
Other countries 503 +31%
Santander Private Banking 122 +22%
Attributable income: 1,807 mill.; +28%
Brazil 604 +38%
Mexico 428 +26%*
Chile 368 +27%**
Other countries 297 +17%
Santander Private Banking 109 +23%
(*) Impact from normalisation of tax regulation. PBT: +35%
(**) Net profile (before minority interests): +35%
In Latin America, costs grew by 17%, due principally to investment being carried
out in new projects and the branch networks in the main countries, whilst
revenues grew by 29%, so that net operating income rose 46% (all changes are in
dollars, the operating currency). Attributable profit from the region grew by
28% to US $1,807 million, or by 19% in euros to EUR 1,360 million. Brazil made
the largest contribution, with profit of $604 million, an increase of 38%,
followed by Mexico, $428 million, up 26% and Chile, $368 million, up 27%.
Abbey's results are in line with the framework laid out in its strategic plan,
with growth of 8% in revenue and a reduction of 3% in costs, resulting in growth
of 22% in net operating income and of 20% in attributable profit, measured in
pounds. In euros, attributable profit for the quarter increased 22% to EUR 602
million, in line with the annual target of EUR 1,200 million.
By businesses, retail banking pretax profit increased 30% to EUR 4,637 million;
Global Wholesale Banking rose 85% to EUR 1,303 million and Asset Management and
Insurance increased 15% to EUR 355 million. Retail banking contributes around
73% to Grupo Santander's profit, Global Wholesale Banking 21% and Asset
Management and Insurance 6%.
Global Wholesale Banking registered a sharp increase in activity, with revenues
rising by 47% and costs by 16%, resulting in net operating income growing 62%.
Generic provisions in the business fell sharply in the first half, as a result
of distributing part of the risk taken in large customer transactions. Thus,
gross profit grew by 85%. Revenues in Asset Management grew 13% and costs 10%,
enabling both net operating income and pretax profit to increase 15%.
Business
Santander ended the first half with EUR 1,071.815 billion in funds under
management, an increase of 10%. Of these, EUR 885,603 million are on the balance
sheet, an increase of 8%, and the rest off-balance mutual funds, pensions and
other customer funds.
Group gross lending was EUR 561,295 million at the close of the first half, up
16%. Some Continental Europe accounted for 53% of this lending, the United
Kingdom (Abbey) for 36% and Latin America the remaining 11%.
Loans to customers (gross)
EUR billion
Jun 06 484
Sep 06 505
Dec 06 532
Mar 07 539
Jun 07 561(*)
(*)+15.9% as compared to Jun 06. The increase is of 14.9%
excluding the effect of exchange rate
Loans to customers. June 2007
% o/ operating areas
Latin America 11%
Continental Europe 53%
UK - Abbey 36%
In Continental Europe, lending grew by 21% to EUR 290,506 million, with
increases in all countries and units. The Santander branch network in Spain
increased lending by 13%, Banesto by 27%, Portugal by 4% and Santander Consumer
Finance by 24%. The Santander branch network in Spain increased business volumen
and imporved its margins. The success of the 'We want to be your bank'
programme, launched in 2006, has resulted in a 6% increase in linked customers
in the last 12 months. Lending volume to individuals grew by 12% and to
companies by 16%, with growth in mortgage lending slowing to 12%.
Banesto lending to individuals grew by 19%, to companies by 31% and mortgage
business by 19%. Santander Consumer this year incorporated Drive, the finance
company acquired in the U.S. Without Drive's figures, new lending at Santander
Consumer Finance grew by 8%, with growth of 16% in the Nordic countries and
Eastern Europe and 15% in Spain, with a decline of 1% in Germany. The
performance in Germany is related to an increase in the VAT rate this year,
which drove a wave of purchases in the fourth quarter of 2006, which has since
resulted in a 1% drop in the core auto financing business. In Portugal,
Santander Totta grew by 20% in SME financing and 10% in loans to individuals.
Loan volume in Latin America came to EUR 63,689 million, an increase of 20% in
local currencies. Brazil, which opened 157 branches in the last 12 months and
installed 195 automatic tellers, increased lending by 27%, with growth of 31% in
lending to individuals, 21% to SMEs and companies. Mexico grew by 34%, with
increases of 50% in lending to individuals, and 39% to SMEs and companies. In
Chile, lending increased by 8%, with increases of 20% to individuals and SMEs
and a decrease in corporate lending.
Abbey continues to mark progress, closing the first quarter with loan volume of
EUR 197,474 million, which represents growth of 8% in euros and 5% in pounds.
The balance of mortgage loans came to £105,300 million at the end of the half,
up 7% from a year earlier. Market share in new mortgage production is 9.6%.
Managed customer funds
EUR billion
Jun 06 682
Sep 06 715
Dec 06 739
Mar 07 771
Jun 07 800(*)
(*)+17.2% as compared to Jun 06. The increase is of 16.6%
excluding the effect of exchange rate
Managed customer funds. June 2007
% o/ operating areas
Latin America 22%
Continental Europe 46%
UK - Abbey 32%
Total customer funds under management came to EUR 799,685 million at the end of
June 2007, an increase of 17% from a year earlier. Balance sheet resources rose
19% to EUR 604,954 million. Mutual funds increased by 18%.
In Continental Europe, total customer funds under management were EUR 313,997
million, up 16%. In Spain, which represents about 80% of the total, customer
funds grew by 7% in the Santander branch network, by 18% at Banesto and 47% at
Santander Consumer. In Portugal customer funds grew by 22%.
In Latin America, customer funds came to EUR 154,323 million, with growth of 23%
in local currency. Deposits grew by 12% and investment funds by 43% in local
currency. By country, savings increased by 29% in Brazil, 5% in Mexico and 15%
in Chile.
Abbey closed the first half with EUR 222,951 million in customer funds, an
increase of 7% in pounds. Total deposits grew by 4% and investment funds by 10%,
both in pounds. Abbey is attracting new business, reflected in the opening of
217,000 new accounts during the first half.
Management and capital ratios
Efficiency: Revenue grew by 12 percentage points more than costs, driving
improvement in the efficiency ratio. Costs and amortizations as a percentage of
revenues were 44.4% at the end of the first half of 2007, compared to 49.3% a
year earlier. Abbey registered the greatest improvement within the group, with
the efficiency ratio improving to 50.4% at the end of the half from 56.3% a year
earlier. In Continental Europe, the efficiency ratio was 36.7%, a 5.1-point
improvement. In Latin American, efficiency was 41.3%, an improvement of 5.2
points.
H1'07 Results. Efficiency
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
Q2 132 110 +22
Group's efficiency ratio (%)
%
H1'06 49.3
H1'07 44.4(**)
(**) -4.9 p.p. as compared to H1'06
Efficiency ratio* principal segments (%)
(*) Including amortisations
Continental Europe
%
H1'06 41.8
H1'07 36.7
Abbey
%
H1'06 56.3
H1'07 50.4
Latin America
%
H1'06 46.5
H1'07 41.3
H1'07 Results. NPLs and Capital
NPLs and coverage ratios
Jun'06* Jun'07
Coverage 177% 169%
NPL 0.88% 0.83%
High allowances (65% generic)
NPLs 5,354
Allowance 9,056*
(*) 5,920 Generic and 3,136 Specific
Capital ratios
Dec'06 Mar'07 Jun'07
BIS Ratio 12.49% 13.22% 13.09%
Tier I 7.42% 7.64% 7.90%
Core Capital 5.91% 5.97% 6.27%
(*) In like-for-like basis with 2007 (criteria change in Portugal in Q1'07).
Published NPL ratio in June'06: 0.83% and coverage: 186%.
NPLs: The Group's non-performing loan rate remains at historic lows, falling to
0.83% from 0.88%. The Group's coverage ratio fell to 169% at the end of the
half from 177% a year earlier. The NPL rate is below year-earlier levels in key
Group markets such as Spain, the U.K., Brazil, Chile and Portugal. The Group's
generic funds come to EUR 5,920 million.
Capital: The Group's eligible capital came to EUR 63,667 million at the end of
the half, with a surplus of EUR 24,756 million above the required minimum. With
this capital base, the BIS ratio came to 13.09%, Tier I capital to 7.90% and
core capital to 6.27%.
The Share and dividend
The Santander share ended the first half at EUR 13.69 euros, up 19.9% from a
year earlier. At the end of June, Santander's market capitalization came to EUR
85,621 million. Santander is the largest company in Spain and the leading bank
in the euro zone in terms of market value. On August 1, the first dividend
against 2007 earnings of EUR 0.12294 will be paid, an increase of 15% from the
year-earlier dividend.
Santander has 2,315,649 shareholders. 135,922 persons work in the Group, serving
69 million customers in 11,092 branches.
More information at: www.santander.com
Income statement
Million euros
Variation
H1 '07 H1 '06 Amount %
Net interest income (w/o dividends) 7.133 5.804 1.329 22,9
Dividends 284 237 47 19,8
Net interest income 7.417 6.041 1.375 22,8
Income from companies accounted for by the 160 241 (81) (33,7)
equity method
Net fees 4.154 3.494 660 18,9
Insurance activity 189 148 42 28,1
Commercial revenue 11.919 9.924 1.996 20,1
Gains (losses) on financial transactions 1.288 917 371 40,5
Gross operating income 13.207 10.840 2.367 21,8
Income from non-financial services 77 47 30 62,6
Non-financial expenses (41) (33) (8) 25,2
Other operating income (70) (40) (30) 76,4
Operating expenses (5.980) (5.450) (531) 9,7
General administrative expenses (5.356) (4.893) (463) 9,5
Personnel (3.169) (2.949) (220) 7,5
Other administrative expenses (2.187) (1.944) (243) 12,5
Depreciation and amortisation (624) (557) (68) 12,1
Net operating income 7.193 5.366 1.828 34,1
Impairment loss on assets (1.545) (1.133) (412) 36,4
Loans (1.511) (1.100) (410) 37,3
Goodwill - (5) 5 (100,0)
Other assets (34) (28) (7) 24,6
Other income (254) 11 (264) -
Profit before taxes (w/o capital gains) 5.395 4.244 1.151 27,1
Tax on profit (1.234) (892) (342) 38,4
Net profit from ordinary activity 4.161 3.352 809 24,1
Net profit from discontinued operations - 194 (194) (100,0)
Net consolidated profit (w/o capital gains) 4.161 3.546 614 17,3
Minority interests 268 330 (62) (18,7)
Attributable profit to the Group (w/o 3.892 3.216 676 21,0
capital gains)
Extraordinary capital-gains 566 - 566 -
Attributable profit to the Group 4.458 3.216 1.242 38,6
Customer loans
Million euros
Variation
30.06.07 30.06.06 Amount % 31.12.06
Public sector 5.640 5.628 12 0,2 5.329
Other residents 213.526 175.294 38.233 21,8 199.994
Commercial bills 17.423 14.911 2.512 16,8 17.276
Secured loans 118.639 96.576 22.063 22,8 110.863
Other loans 77.464 63.806 13.658 21,4 71.854
Non-resident sector 342.129 303.520 38.608 12,7 326.187
Secured loans 198.927 179.598 19.329 10,8 191.724
Other loans 143.201 123.922 19.279 15,6 134.463
Gross loans and credits 561.295 484.442 76.853 15,9 531.509
Loan-loss allowances 8.610 7.852 758 9,7 8.163
Net loans and credits 552.686 476.591 76.095 16,0 523.346
Pro memoria: Doubtful loans 5.320 4.470 850 19,0 4.613
Public sector 1 19 (18) (97,1) 18
Other residents 1.374 1.096 278 25,4 1.212
Non-resident sector 3.945 3.355 590 17,6 3.383
Customer funds under management
Million euros
Variation
30.06.07 30.06.06 Amount % 31.12.06
Public sector 12.509 11.156 1.353 12,1 15.266
Other residents 96.497 87.421 9.076 10,4 94.750
Demand deposits 53.284 52.008 1.276 2,5 55.050
Time deposits 26.973 20.194 6.778 33,6 24.670
REPOs 16.241 15.219 1.022 6,7 15.030
Non-resident sector 224.971 207.205 17.766 8,6 221.206
Demand deposits 121.699 116.192 5.507 4,7 119.861
Time deposits 73.479 70.939 2.540 3,6 72.258
REPOs 27.675 17.405 10.270 59,0 26.343
Public Sector 2.117 2.669 (551) (20,7) 2.744
Customer deposits 333.977 305.782 28.195 9,2 331.223
Debt securities 239.149 172.323 66.826 38,8 204.069
Subordinated debt 31.828 30.240 1.588 5,3 30.423
On-balance-sheet customer funds 604.954 508.344 96.610 19,0 565.715
Mutual funds 133.774 113.618 20.156 17,7 119.838
Pension funds 31.629 27.709 3.920 14,1 29.450
Managed portfolios 20.809 17.088 3.721 21,8 17.835
Savings-insurance policies 8.520 15.377 (6.857) (44,6) 6.385
Other customer funds under management 194.731 173.791 20.940 12,0 173.509
Customer funds under management 799.685 682.135 117.550 17,2 739.223
Shareholders' equity and minority interests
Million euros
Variation
30.06.07 30.06.06 Amount % 31.12.06
Capital stock 3.127 3.127 - - 3.127
Additional paid-in surplus 20.370 20.370 - - 20.370
Reserves 16.879 12.389 4.490 36,2 12.352
Treasury stock (109) (22) (87) 387,3 (127)
On-balance-sheet shareholders' equity 40.267 35.864 4.403 12,3 35.722
Attributable profit 4.458 3.216 1.242 38,6 7.596
Interim dividend distributed - - - - (1.337)
Shareholders' equity at period-end 44.725 39.080 5.645 14,4 41.981
Interim dividend not distributed (769) (669) (100) 15,0 (1.919)
Shareholders' equity 43.956 38.411 5.545 14,4 40.062
Valuation adjustments 1.886 2.406 (519) (21,6) 2.871
Minority interests 2.304 2.898 (594) (20,5) 2.221
Preferred securities 664 1.257 (593) (47,2) 668
Preferred securities in subordinated debt 7.365 6.286 1.078 17,2 6.837
Shareholders' equity and
minority interests 56.175 51.258 4.917 9,6 52.658
Computable capital and BIS ratio
Million euros
Variation
30.06.07 30.06.06 Amount % 31.12.06
Computable basic capital 38.411 32.928 5.483 16,7 35.539
Computable supplementary capital 25.256 22.180 3.076 13,9 24.237
Computable capital 63.667 55.107 8.560 15,5 59.776
Risk-weighted assets 486.391 444.420 41.971 9,4 478.733
BIS ratio 13,09 12,40 0,69 12,49
Tier 1 7,90 7,41 0,49 7,42
Core capital 6,27 5,75 0,52 5,91
Shareholders' equity surplus 24.756 19.554 5.202 26,6 21.478
This information is provided by RNS
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