The red numbers begin to soften. Banco Santander has lost 9,048 million euros until September. A very large figure that is understood by the adjustment in the second quarter of goodwill of its historical investments and deferred tax assets, which gave rise to an extraordinary charge without cash effect of 12,600 million. But that period is beginning to fall behind, but its effects are felt in the last sections of the year. The ordinary profit, that is, without extraordinary benefits, amounts to 3,658 million at the end of the third quarter, 33% less than a year earlier due to provisions.
The good news came in the last three months with an attributable profit of 1,750 million. The entity already perceives an improvement in the bank’s returns and thus transfers it in its results. “Activity is recovering strongly, so the third quarter was much better than the second. Revenues grew 18% in constant euros as activity returned to almost pre-pandemic levels, provisions fell 14% and we continue to reduce costs above expectations ”, he explained Ana Botín, president of Santander, in a statement. In this sense, the bank expects to close the year with an ordinary profit of 5,000 million euros.
Thus, the entity continued to generate capital organically, adding 14 basis points to its solvency ratio, which now stands at 11.98%, “at the top of the 11-12% target.” Today he plans to approve two dividends; for which it translates into a cash payment in 2021, it has reserved 19 basis points of capital. Both notices to the ECB that they can and want to remunerate the shareholder.
In terms of efficiency, the bank has highlighted that it has made progress in reducing costs of more than 2%. Europe, for its part, has achieved cost synergies of 500 million. In this sense, the forecast is to have achieved by the end of 2020 the cost savings objective of 1,000 million in the Old Continent, and reduce that identical amount again in the same territory in the next two years.
Regarding non-performing loans, the rate improved in year-on-year terms by 32 basis points to 3.15%. The cost of credit, that is, what the bank provisions based on the expected loss of the portfolio, increased by 27 basis points in the year, to 1.27%, due to the increase in provisions, which grew by 58%, up to 9,562 million euros, due to the impact of the crisis.
By regions, those that pulled the results of the entity were the different regions of the Old Continent. The ordinary profit of Europe has fallen in the first nine months by 44% due to lower income from clients, the increase in provisions and the economic slowdown, as reported by the bank. Although profits increased 50% in the third quarter compared to the second due to cost savings. In Spain, meanwhile, ordinary earnings were 58% less until September.
America was a relief this time for Santander. The ordinary benefit of the northern area, USA and Mexico, it only fell 12% year-on-year until the third quarter; in the southern zone (Brazil, Chile, Argentina …) it was 10%. These two regions already account for 61% of profits, compared to 39% in Europe. All this even after the Bank of Spain has alerted both Santander and BBVA about their international exposure.