Santander witnesses first-half profit rising

Bloomberg

Banco Santander SA said its takeover of failing Banco Popular Espanol SA will have a minimal impact on first half earnings, with the bank set to post a profit of 3.6 billion euros ($4.1 billion).
Spain’s largest lender also set the price of its 7.07 billion-euro capital increase, saying it will sell about 1.5 billion shares at 4.85 euros each, according to statements. The Madrid-based bank said last month it would raise funds to shore up its balance sheet after taking over Banco Popular for 1 euro in a deal brokered by European regulators following a run on deposits.
Before the acquisition, Santander Chairman Ana Botin forecast improved performance at the bank, saying she expected to see economic growth in the firm’s 10 main markets, despite the Brexit vote and negative interest rates at home. The bank estimated profit would rise about 24 percent in the first six months from a year earlier. That would give Santander a second-quarter profit of about 1.73 billion euros compared with 1.28 billion euros a year earlier.
“Santander’s estimates for first-half results are pretty positive on the face of it with the bank delivering positive operating jaws and provisions under control,” said Arjun Bowry, a London-based analyst at Bloomberg Intelligence. “However, the main talking point on the second-quarter call will inevitably be the disposal of Popular’s real estate assets.”
Santander’s stock fell as much as 2 percent to 5.89 euros and was 0.9 percent lower at 5.95 euros as of 9:06 am in Madrid trading while the Euro Stoxx bank index was little changed.
Santander bought Popular on June 7 after the Europe’s Single Resolution Board wiped out the failed lender’s shares and junior debt to offset the losses from bad assets. The acquisition will leave Santander in a leading position in overall lending in Spain, with a market share of about 20 percent. That could ease pressure on margins from low interest rates and weak demand for credit.
Popular is expected to contribute about 82 billion euros of net loans, or 10 percent of Santander’s total, and 65 billion euros of deposits, equivalent to 8.5 percent of the total, Santander said. That gives the bank a bad-loan ratio of about 5.4 percent in the second quarter, compared with 3.9 percent in first quarter before the deal was announced.
The bank’s fully load common equity Tier 1 ratio, a measure of financial strength, will be about 10.7 percent as of June 30, assuming the share sale is fully sold, the lender said. That compares with 10.55 percent in the first quarter before Popular deal.
Santander said in a filing that the rights to subscribe to the new shares will trade between July 6 and July 20. Citigroup Inc., UBS Group AG and Santander will be joint global coordinators of the sale.
The new stock will start trading July 31 and will be issued at a price 19 percent below Monday’s close of 6.002 euros. Santander shares have surged 21 percent this year.
Separately, Banco Popular hired Morgan Stanley to help it find partners for a portfolio of repossessed real estate assets and delinquent loans. Those assets have a gross book value of 30 billion euros, it said in a filing Friday.