The US, Brazil and Mexico save a bad exercise of Santander in Europe

Banco Santander's commitment to digital transformation. Image: Santander marketing kit
Banco Santander's commitment to digital transformation. Image: Santander marketing kit

Santander earns 1,840 million euros in the first quarter of 2019, 10% less than in the same period of 2018. While the benefit in the US, Brazil, and Mexico maintain the positive momentum, restructuring costs in the United Kingdom and Poland, and the sale of assets in Spain slow down the positive evolution of the bank.

"Ordinary profit grew in seven of our ten main markets. The United States was once again the fastest growing, with attributable profit up 46% compared to the same period in 2018, while Brazil and Mexico maintain the positive momentum of recent years. These results have been achieved in a difficult operational context, especially in the United Kingdom and Europe." - Ana Botín, president of Santander.

Bad exercise in Europe 

In Spain, profits fell 11% to 403 million euros. Here the market loses by the annual comparison. And it is that in the first quarter of 2018 the benefit was favored by debt sales and more favorable capital markets. The reduction in wholesale banking activity led to a drop in fee income of 8.7%, despite a favorable evolution of the business in general.

In the United Kingdom, where Brexit has been affecting business for a while, the bad news continues. The profit fell 36%, to 205 million euros, after endowing 66 million euros for restructuring costs.

The good news in America

In Brazil, the main market of Santander, the profit continues to grow consistently, with an increase of 7%, to 724 million euros. As he explains, "thanks to the focus that the bank maintained on customer bonding and satisfaction, in addition to controlling costs".

In Mexico, the benefit was 206 million euros, 18% more than a year ago. There the bank increased the customers linked 28% and digital customers, 57%. It should be recalled that on April 12, the group announced the intention to acquire the 25% stake in Santander Mexico that was held by minority shareholders through a share exchange offer.

The United States was the big winner of the quarter. In these three months, Santander registered "a very positive year", with an increase in attributable profit of 46%, to 182 million euros, thanks to "a positive evolution of the main lines of business".

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This is how Banco Santander commits to digital transformation

One of the pillars of the new Strategic Plan of Banco Santander is the digital transformation, with the aim of strengthening the confidence of the clients by offering them the best experience at any time and through any channel, at competitive prices.

In this sense, the president of Banco Santander, Ana Botín, assured that "we want to be the best global and open platform of financial services. We are working on two parallel and coordinated paths: On the one hand, transform our banks (supertankers) by digitizing and automating all our processes and integrating new technologies. Relying on our global scale and sharing investments to foster cooperation."

In the framework of the Bank's recent General Shareholders' Meeting, Ana Botín stated that "investing in digital transformation in a global manner has already reported savings of 680 million euros in 2018. In the medium term, the goal is to generate savings Additional recurring costs of close to 1,200 million euros, of which 1,000 million will be generated in Europe and are net savings compared to the end of 2018."

Launch of Santander Global Payments Businesses

Banco Santander indicated that in order to generate even more value as a Group, they have launched Santander Global Payments Businesses, a new global business unit that will manage the payment services of the Santander Group, Global Trade Services, and Global Merchant Services.

In this sense, Ana Botín explained that "payments are the basis of our linking strategy. A market that is expected to grow 9% annually. Today we already have more than 80 million active credit cards worldwide and manage 500 billion euros of transfers and payments per year. Even more important, we have 4 million SMEs and 1.2 million businesses as customers."

In parallel, Banco Santander continues developing new high potential businesses (Speedboats) that share their experiences with the Group's banks, and also compete in new markets.

The most striking example is Openbank, the 100% digital entity of Banco Santander, which was re-launched in Spain in 2017, has almost 1.2 million customers and 38% of active clients are linked. In the medium term, Openbank has plans to extend to a total of 10 countries.

"Another example of success is Superdigital, the financial solution for the unbanked population in Latin America. A business that already has 500 thousand clients in Brazil, Mexico, and Chile and that allows us to profitably serve this segment. Superdigital aims to reach 5 million customers in Latin America in the medium term." concluded Ana Botín

Banco Santander recorded an attributed profit of 7,810 million euros in 2018, which represents an increase of 18% over the previous year (+ 32% in constant euros), driven by Brazil and Spain, as reported by the entity on Wednesday.

The bank has indicated that the increase in customer revenues in several markets, such as Brazil, Spain, Mexico and the United States, and improvements in credit quality "more than" offset the impact of the depreciation of some currencies against the euro, as the Argentine peso.

The ordinary profit increased by 18% in the year in constant euros, to 8,064 million euros: while in the fourth quarter, attributable profit reached 2,068 million euros, 34% more than in the same quarter of 2017. Profit before taxes between September and December increased by 12% in constant euros with respect to the same period of the previous year.

The president of Banco Santander, Ana Botín, has stated that 2018 has been an "excellent" year for the group, which has "successfully" completed its strategic plan for three years, for which its focus on gaining trust has been key. of customers and in the digital transformation. "Thanks to this, we continue as one of the most profitable and efficient banks in the world among our competitors", highlighted Botín, who added that next April, the bank will announce its new strategic plan.

"Latin America continues to be an important driver of the group's growth, with good progress especially in Brazil and Mexico, and in Spain, the integration of Popular is progressing faster than expected and the transformation of our business in the United States is progressing at a good pace".

During 2018, Europe contributed 52% to the group's result and America contributed 48%. Brazil was the country that contributed most to the results, with 26% of the ordinary profit, followed by Spain, with 17%, and the United Kingdom and Santander Consumer Finance (SCF), with 13% in both cases.

Thus, the annual attributable profit increased in eight of the ten main markets in constant euros (excluding the impact of the exchange rate) with notable increases in the United States (+ 74%), Spain (+ 28%), Brazil (+ 22%) ) and Mexico (+ 14%). Specifically, the attributable profit in Spain stood at 1,458 million euros, 28% more. The integration of Popular has been accompanied by an increase in revenues (+ 15% year-on-year).

The new production of credit to SMEs in Spain increased by 17% and 30% in private banking, while the credit quality also improved, with a decrease in the NPL ratio of 13 basis points with respect to December 2017, to the 6.19% During the year as a whole, the group's total revenues increased 9% in constant euros, to 48,424 million euros, the highest level in its history, with an increase of 4% in both credit and customer funds, at the same time that the net margin was 25,645 million euros, 1% more (+ 11% in constant euros).

The number of linked clients, those who consider Santander their main bank, increased by 2.6 million, to 19.9 million. The number of total customers increased by 11 million in the year, to 144 million. In addition, credit quality continued to improve throughout the year, reflecting the strength of the group's credit portfolio.

The default ratio now stands at 3.73%, with a drop of 35 basis points compared to December 31, 2017, while the cost of credit fell seven basis points, to 1%, the lowest annual level since 2008

In the last twelve months, the return on tangible capital (RoTE) has increased 129 basis points, to 11.7%, while ordinary RoTE increased 26 basis points, to 12.1%, among the best in the sector ; while the capital ratio CET1 'fully loaded' reached 11.30% on December 31, 2018, compared to 10.84% ​​on December 31, 2017, which exceeds the target of 11% set for 2018, thanks to the "strong" organic generation of capital.

Finally, the group has achieved its goal of achieving double-digit growth in earnings per share (EPS) in 2018, with an increase of 11.2% to 0.449 euros. The tangible net value per share increased by 1% in 2018 to 4.19 euros, while the cash dividend per share increases by 9% to 20 cents (subject to the approval of the board of directors and the shareholders' meeting 2019).