(Bloomberg) -- Brazil just keeps giving for Banco Santander SA.
Spain's largest lender on Wednesday reported a 26 percent jump in fourth-quarter earnings in the country, fueling better-than-expected results and helping Chairman Ana Botin post her third straight year of rising profit since she took over in late 2014.
The results confirm a strategy by Botin, who defended the bank's business in Brazil even as the economy plunged in 2015 and 2016 amid a corruption crisis that engulfed the government of former President Dilma Rousseff. Now, with the economic outlook improving, Latin America's largest economy -- and Santander's single biggest market -- is helping offset ultra-low interest rates in Europe and a drop in U.K. earnings, a key piece in Botin's pledge to raise capital buffers and dividend payouts.
“Throughout the year we have seen strong growth in Latin America, with our businesses in Brazil and Mexico performing exceptionally well,” Botin said in a statement. “I am confident we will deliver on all targets for 2018.”
The Spanish lender is aiming for a return on tangible equity of more than 11.5 percent for 2018, it said in October.
Santander built its presence in Brazil through acquisitions under Botin's late father Emilio, including the purchase of Banespa in Sao Paulo state in 2000 and the takeover of ABN Amro's Banco Real unit in 2007. The unit became the centerpiece of the lender's expansion into Latin American emerging markets and is now Brazil's third-biggest non-government-owned lender.
Boosts Outlook
The International Monetary Fund earlier this month boosted its 2018 growth outlook for Brazil to 1.9 percent as the country prepares for elections later this year. Shares in Santander's Brazilian unit are up almost 50 percent since their low point in April last year.
Attributable profit from Brazil rose to 642 million euros in the fourth quarter, Santander said, beating the 594 million-euro consensus estimate compiled by the bank. The country now accounts for 26 percent of all profit earned in the company's markets.
Banco Popular Espanol SA, the failed lender it acquired in June, generated a profit of 85 million euros in the fourth quarter. Santander said it continues to expect a return on investment of between 13 percent and 14 percent from the deal in 2020.
Other highlights of the report:
- 4Q net income EU1.54 billion, estimate EU1.46 billion (range EU1.34 billion to EU1.54 billion) (Bloomberg data)
- CET1 fully-loaded 10.84%, little changed from 10.8% in Sept.
- 4Q bad loans ratio 4.08%
- Earnings from Spain rose 12% from a year earlier to EU265 million, boosted by higher fee revenue
- Earnings from the U.K. fell 12% from a year earlier to EU297 million
- Santander took EU752 million charge in quarter relating mainly to impairment of goodwill for investment in Santander Consumer USA; charge was partially offset by EU297 million of capital gains from sale of AllFunds Bank and EU73 million gain from U.S. fiscal reforms
- 4Q net interest income rose 6.3% to EU8.61 billion, estimate EU8.59 billion
To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net.
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel, Keith Campbell
©2018 Bloomberg L.P.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
