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Bloomberg
Banco Santander SA earnings beat expectations, as rising revenue helped the Spanish retail-banking giant offset the impact of increased costs and surging inflation.
Spain’s biggest lender posted net income of 2.35 billion euros ($2.4 billion) in the second quarter, exceeding the analyst consensus of 2.25 billion euros as net interest income jumped 7.9% from the first three months of the year.
Santander is set to see margins swell, with interest-rate increases from the US to Europe already feeding through to greater revenues on a loan book of more than 1 trillion euros. The downside to rising borrowing costs for customers is the threat of a hit to credit quality, while price gains also drive operating costs higher.
“Our diversification continues to provide a strong and resilient foundation for growth,†Chairman Ana Botin said in a statement.
The lender said cost of credit, which tracks the ratio of provisions to expected loan losses, ticked up to 0.83% from 0.77% in the first quarter. Costs for covering loan losses rose to 2.6 billion euros from 2.2 billion euros in the first quarter, with the increase mainly due to Poland, the US and Brazil.
Santander has been reaping the benefits of an efficiency drive that saw it shed thousands of jobs in Spain and close a swathe of UK branches.
In June, the Madrid-based lender appointed insider Hector Grisi as its first non-Spanish Chief Executive Officer to take over from January next year.
Analysts are monitoring the impact of inflation, with price gains in Spain topping 10% after also jumping in key markets from the UK to the US and Brazil. Operating costs climbed 12% from a year earlier, the lender said.
Meanwhile, the bank was eliminated last week from the bidding process to buy Citigroup Inc.’s Mexican unit, an outcome that frees up capital that might have been deployed for that process. Chief Executive Officer Jose Antonio Alvarez said in April that the bank could look at raising the payout to 50% based on its “very good†capital performance.