Santander profit hit by slump at home; currency weakness abroad

Bloomberg

Banco Santander SA, Spain’s biggest bank, reported lower first-quarter profit as revenue slumped in its home market and operations aboard were hit by currency effects.
Net income fell 5 percent to 1.63 billion euros ($1.84 billion) from 1.72 billion euros a year earlier, the bank said on Wednesday. That beat the 1.5 billion-euro average estimate in a Bloomberg survey of seven analysts. Earnings fell 10 percent at the Spanish unit with net interest income there declining 14 percent.
Chairman Ana Botin is closing branches and steering customers into digital banking to cut costs as low interest rates chip away at profitability. The bank plans to eliminate as many as 1,660 jobs in Spain this year and has put acquisitions on hold to concentrate on boosting revenue from existing businesses.
Income took a hit from exchange rates as the euro strengthened against the pound and against Argentina, Chile, Brazil and Mexico. Factoring out currency effects, profit would have increased 8 percent, the bank said.
Profit from the British unit, the main contributor, dropped 4 percent, while the Brazilian business dropped 25 percent in euros and was flat in local currency.
On the whole, revenue from fees and net interest income, generated from the difference between what banks charge for loans and pay for funding, fell 5 percent.
Santander’s shares are down 0.7 percent this year, after declining 35 percent last year when the bank tapped shareholders for 7.5 billion euros. That compares with a 14 percent drop this year in the benchmark STOXX Europe 600 Banks Price Index, which tracks 47 of the region’s banks.
Common equity Tier 1, a measure of financial strength, rose to 10.27 percent from 10.05 percent at the end of December.
Bad loans as a share of total lending at Santander fell to 4.33 percent from 4.36 percent at the end of December.
The Santander Group is a Spanish banking group centered on Banco Santander, SA and is the largest bank in the eurozone by market value. It is one of the largest banks in the world in terms of market capitalisation.
The group has expanded since 2000 through a number of acquisitions, with operations across Europe, Latin America, North America and Asia.