Banco Santander SA on Tuesday said its fourth-quarter net profit plummeted 98% after the Spanish banking giant took a €1.81 billion ($2.38 billion) charge on its Spanish real estate holdings and wrote down goodwill on its Portuguese unit by €600 million.
Net profit in the quarter fell to €47 million from €2.10 billion a year earlier, the bank said, sharply undershooting analyst expectations for €1.7 billion.
The miss was a result of the hefty provisioning Santander did in the fourth quarter, of €3.18 billion in total, covering real estate, Portugal, its investment portfolio and amortization of intangibles and contributions to pensions.
"It makes sense to do a big clean-up now," said Juan Pablo Lopez, a banking analyst with Espirito Santo Investment. Spain's banks this quarter have front-loaded provisioning as they prepare for new regulation that will force them to sharply increase the percentage of loss coverage on foreclosed properties and loans to ailing home developers. The government plans to introduce the new banking rules this Friday.
Mr. Lopez said that investors now prefer banks to focus on bolstering their capital base instead of profits, so Santander had little incentive to meet expectations. "You eliminate doubts related to their real estate holdings, while the reduction of goodwill in Portugal has a positive impact on capital," he added.
Net interest income—the bank's main income stream—grew to €7.97 billion, at a faster pace than in recent quarters, and also ahead of analyst expectations for €7.72 billion. Costs rose 9.9%.
Full-year profit fell 35% to €5.35 billion. Santander said that for the first time in its history, the bank earned more profit from Latin America than from the rest of the world, some 51%.
During 2011, the euro zone's largest bank by market value grew lending by 4%, as growing demand for credit in Latin America offset a shrinking loan book in Europe. Net lending in Spain fell by 7%, the bank said, while it grew by 8% outside Spain. Overall deposits rose 3%, Santander said.
In the European morning, Santander was up 0.2% at €5.99. The shares are down 26% over the past year, hurt by a drawn-out sovereign debt crisis in Europe that has pushed European banking stocks sharply lower. Early Tuesday, European banking shares were mostly higher.
read more: Olympus Wealth Management
No comments:
Post a Comment