Spanish bank Santander reported second-quarter net profit of €1.3 billion ($1.42 billion), down 49.7% from the same period last year as its finance chief told CNBC that the lender was seeing a split in fortunes between developed and emerging economies.
In its second-quarter results announced Wednesday, the bank said that it was affected by restructuring costs and its contribution to Europe’s Single Resolution Fund (a fund that all European banks must pay into that can be used to rescue the region’s ailing banks).
“Without these impacts and on a currency-neutral basis, the first-half underlying profit was €3.28 billion,” the bank said, up 9% year-on-year.
It reported a fully-loaded core equity tier 1 ratio, a key measure of financial strength, of 10.36% at the end of June versus 9.83% last year. The bank said it was on track to end 2018 with a fully-loaded core tier 1 capital ratio above 11%. European banks must hold a certain buffer of cash according to European Central Bank rules which are designed to ensure financial stability in the region.
The bank also said it had reduced the number of non-performing loans on its books at 4.29% at the end of June as opposed to 4.33% at the end of March.
Santander’s Chief Financial Officer Jose Garcia Cantera told CNBC that the bank was seeing a different picture from emerging and developed economies.
“I think the earnings that we just released show the strength of our diversification,” he told CNBC Europe’s “Squawk Box” on Wednesday.
Diversification
“While developed economies, and Europe in particular, are under pressure because of very low interest rates, we’re doing very well in Latin America.
Brazil is doing well despite the macro-economic conditions, we’re doing very well in Chile and Argentina, in Mexico. So clearly a diversification between emerging and developed economies is playing in our favor right now,” he said.
Santander reported a 6.9% drop in first-half net interest income from the year before. Net interest income is the difference between the interest income a bank earns from its lending activities and the interest it pays to depositors. Garcia Cantera said the bank had been hit by currency depreciation but that emerging markets would again mitigate such declines.
“It is true that our net interest income is down 6% year-on-year in the first-half, but if you exclude currency impact, it’s up 3.6,” he said.
