Santander Q2 profit up 37%, Popular hits capital

[MADRID] Banco Santander on Friday posted a 37 per cent increase in second-quarter net profit from a year earlier, boosted by its largest market, Brazil, though capital was hit by the acquisition of Banco Popular.

The euro zone's biggest lender by market value - which consolidated Banco Popular in its accounts for the first time since it took over the troubled Spanish lender on June 7 reported net profit of 1.75 billion euros (S$2.782 billion) in the period from April to June.

Net interest income - a measure of earnings on loans minus deposit costs - was 8.6 billion euros in the quarter, up 13.6 per cent from last year and receiving a small boost from Popular.

But Santander also said its core Tier-one fully loaded capital ratio fell to 9.58 per cent at end-June from 10.66 per cent three months earlier as a result of the acquisition.

The bank is expected to quickly revert this situation after completing next week a 7 billion euros capital increase for which it received strong demand.

Without Popular, the ratio would have stood at 10.72 per cent, Santander said.

The Popular deal also increased Santander's bad loan ratio to 5.37 per cent of total loans at end-June from 3.74 per cent at end-March, though this remained below most Spanish peers.

Like domestic and Europe rivals, Santander is struggling to lift earnings from loans as interest rates hover at historic lows, while increasing competition in Spain erodes margins.

The lender however benefited from a buoyant Brazilian business, with quarterly profits jumping 42 per cent from last year and widely outperforming the bank's other geographies, including Britain where a weaker pound sent profits down 18 per cent in the quarter.

REUTERS