Santander boosts focus on Latin America

Bloomberg

Banco Santander SA relied on its increasing commitment to fast-growing Latin American markets to make up for sluggish European units that weighed on first-quarter profit.
Net income fell 10 percent, hit by a charge of 108 million euros ($121 million) for restructuring in the UK and Poland as well as an inflation-adjustment expense in Argentina. That slightly beat analyst estimates. The Americas, including the US, contributed 52 percent of underlying profit, the most since 2013.
The shift towards the Americas is likely to continue, with Santander announcing earlier this month that it will boost investment in Latin American businesses to offset a weak economy in Europe. Among its targets is Mexico, where it plans to buy back the remainder of its unit in the country.
The bank also said it will increase investment in its Latin America business to 30 percent of risk weighted assets from 27 percent, reflecting the diverging fortunes of its global divisions. “We’re going to see that tendency increasing for a while,” said Nicolas Lopez, an analyst at M&G Valores in Madrid.

MEXICO EXPANSION
Growing in Latin America doesn’t come without risks. Brazil’s real is the second-worst performer in a basket of major currencies tracked by Bloomberg, falling 4.2 percent against the euro over the last 12 months. In Argentina, Santander’s profit fell 84 percent excluding the sale of a stake in payments company Prisma Medios de Pago.
The bank is seeing strong interest in a planned capital increase to pay for the Mexico acquisition, but Santander doesn’t currently have plans to buy out the rest of its stake in its Brazilian unit or elsewhere in Latin America, CFO Jose Garcia Cantera said in a Bloomberg TV interview.
With relief from negative interest rates postponed yet again, the focus in Europe is on finding ways to reduce spending. Earlier this month, Santander pledged to cut 1.2 billion euros ($1.4 billion) of annual costs, the bulk of
which are concentrated in its European business.