Santander's Latin American Jan-Sep profits up 3%, dragged by high costs in Brazil

Thursday, October 27, 2011

Spanish bank Santander (NYSE: STD) saw January-September earnings in Latin America increase 3% year-on-year to 3.52bn euros, as disappointing results from its Brazilian unit offset Santander México's good performance.

Santander Brasil's (NYSE: BSBR) revenues were offset by higher costs due to rising inflation as well as more provisions and taxes, the parent's CFO, José Antonio Álvarez, said during its results presentation.

This led the Brazilian subsidiary to post a 1.97bn-euro profit in the nine-month period, down 4.4% compared to January-September 2010. However, business volume was good, with lending growing 19% as of end-September compared to the same time in 2010, led by loans to individuals, which expanded by 25%.

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Santander México, the country's third largest player, grew earnings 26% to 731mn euros thanks to growth in net interest income and fee income and lower provisions.

Lending rose 32% year-on-year, partly spurred by the purchase of the Mexican unit of GE Finance's mortgage portfolio. Excluding that, loans expanded 24%, leading the bank to gain market share in virtually all segments, the executive said.


"The rest of Latin America kept the same trends. There is strong activity in loans and deposits, with virtually every country growing at double digits, favored by good macroeconomic conditions," Álvarez said.

Excluding Brazil, the region's earnings expanded 17% to 1.56bn euros in January-September compared to the same period 2010, as business volume is gaining pace.

Net loans in Latin America were up 19% at the end of September compared to the same time in 2010, thanks to 26% growth in credit cards and 21% expansion in corporate credit.

The region's nonperforming loan ratio improved to 4.10% as of September 30 compared to 4.15% at the same time in 2010.

Santander Chile's (NYSE: SAN) profits fell 3.4% to 466mn euros due to "significant" margin compression caused by low inflation, as well as higher interest rates and provisions due to more conservative lending policies, the executive said.

Globally, Santander's January-September profits came in below estimates, falling 13% to 5.3bn euros due to extraordinary provisions made in the second quarter related to Payment Protection Insurance (PPI) in the UK as well as higher taxes.

To read Santander's full earnings release in English, go to this link

To read the full earnings release in Spanish, go to this link