Santander profit sinks on UK and Polish weakness

Eurozone's biggest bank by market value reported net profit of €1.84 billion against forecasts of €1.88bn

Santander has posted a fall in earnings for the first quarter. Reuters

Santander reported on Tuesday a 10 per cent fall in first-quarter net profit from a year earlier as a solid performance in Latin America failed to offset weakness in Britain and Poland.

The eurozone's biggest bank by market value reported net profit of €1.84 billion (Dh7.55bn) against forecasts of €1.88bn in a Reuters poll.

Steady growth in Latin America business volumes, where it makes 45 of its earnings, was not enough to offset charges of €108 million in Britain and Poland as part of its ongoing cost cuts involving branch closures in those countries.

In the UK, first quarter attributable profit was €205m, which includes a charge of EUR 66 million for restructuring costs, the bank said in its financial report. Excluding this, underlying attributable profit of €271m, 16 per cent lower year-on-year.

"These results reflect the tougher competition, market uncertainties and the costs related to projects and technology. The underlying profit was 7 per cent lower than in the fourth quarter of 2018, with the same factors that conditioned the year-on-year change," it said.

Earlier in April, Santander offered to take full control of its Mexican business as Spanish banks chase potentially higher returns in Latin America.

The move is part of efforts to focus on emerging economies while cutting costs to counter squeezed margins in mature European markets.

Overall, net interest income, a measure of earnings on loans minus deposit costs, was €8.68bn, up around 3 per cent from a year ago but down 4 per cent against the previous quarter. Analysts expected NII to come in at €8.77bn.

Santander finished the first quarter with core tier-1 capital ratio of 11.25 per cent compared to 11.3 per cent at end-December.

"In a complicated market environment, we maintained a solid trend: underlying profits have increased in seven of our ten core markets, while organically generating 20 basis points of capital," Santander said in its financial report.