Banco Santander profit up

 

Weaker earnings from Latin America and Spain weighed on Santander in the first half of the year, even as the bank's profit jumped 29% after it moved past the pain of writedowns on real estate assets in its home market.

In Latin America, a key growth motor for the lender, and where it still makes half its money, net profit fell by more than 16% in the 6 months to June, the bank said in an earnings statement on Tuesday.

Santander's Brazil operation posted a 17.5% fall in net interest income - a measure of interest earned on loans minus what is paid out on liabilities such as deposits - to €5.5 billion.

A shaky economic recovery in Brazil - Santander's biggest Latin American market - has been a top concern for investors and analysts tracking the bank in recent months, although loan delinquencies fell across the sector there in June.

In Europe and Spain, which contributes about 11% to profit, net interest income has been squeezed by low interest rates. It fell nearly 17% in Santander's home market to €2.2 billion in the first half, though improved in Q2 compared to the January-March period.

Overall at the group, net interest income was up just over 1% compared to a year earlier, helped by Q2 recovery in other European hubs such as Portugal and Britain.

Some Spanish rivals also noted a rise in lending income in Q2 of 2013, although many of them also face an uphill battle to contain growing bad debts in a deep recession.

Spanish banks booked billions of euros of provisions against losses on soured real estate deals last year, gutting their profits. That set them up for a dramatic turnaround for many in the first half of 2013.

Santander's €2.25 billion net profit in the first half of 2013 was almost as much as what the bank made for the whole of 2012, as provisions against loan losses fell sharply.

Its proportion of bad debts to its outstanding loan book rose to 5.18% across the group at the end of June compared to 4.76% at end-March, after the bank reclassified €2 billion of refinanced loans as non-performing ones, under new Bank of Spain rules.