A buoyant Brazilian business and a revenue boost from the integration of Banco Popular helped Banco Santander post a 37% rise in second-quarter net profit, though the bank’s capital and bad loan ratios were hit by the acquisition.
The eurozone’s biggest lender by market value—which consolidated Banco Popular in its accounts for the first time since it took over the troubled Spanish lender on June 7—reported net profit of €1.75 billion ($2.05 billion) in the period from April to June, beating analysts’ forecast, Reuters reported.
Net interest income—a measure of earnings on loans minus deposit costs—was €8.6 billion ($10.1 billion) in the quarter, up 13.6% from last year.
This was mostly underpinned by a 42% jump of quarterly profits in Brazil, which comfortably outperformed the bank’s other units, including Britain where a weaker pound sent profits down 18% in the quarter.
Like European rivals, Santander is struggling however to lift earnings from loans in Spain as interest rates hover at historic lows, while increasing competition erodes margins. In the Spanish home market, NII was down 4% from last year.
Chief Financial Officer Jose Garcia Cantera told a conference call with analysts it would be back on the rise in the next quarters, especially as the revenue and profit boost expected from the Popular acquisition materializes.
When taking into account Popular, NII was up 9.6% from last year and 15% from the previous quarter.
The downside was a hit on the bank’s core Tier-1 fully loaded capital ratio, which fell to 9.58% at end-June from 10.66% in March as a result of the integration.
Santander is expected to quickly address this situation after completing next week a €7 billion capital increase for which it received strong demand. Without Popular, the ratio would have stood at 10.72%.
Santander said it provided €13 billion of liquidity on June 7 to stabilize Popular and that deposits at the lender had rebounded by €6.5 billion to date.
Chief Executive Officer Jose Antonio Alvarez also said the bank hoped to quickly sell a majority stake in a €30 billion property portfolio inherited from Popular which increased Santander’s bad loan ratio to 5.37% of total loans at end-June from 3.74% in March.
