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Santander expects its profitability to improve this year despite concerns about the health of the global economy, as the Spanish bank’s latest quarterly earnings were helped by a strong performance in Europe.
Ana Botín, Santander’s executive chair, said that “despite heightened geopolitical risks and a slowing global economy” the lender expected its return on tangible equity — a key measure of profitability — to rise to 16 per cent this year from 15.1 per cent in 2023.
The forecast came as Santander said net profit rose 28 per cent to €2.9bn in the final quarter of 2023 — €200mn ahead of analyst forecasts.
The UK, Spain and Portugal drove its performance in Europe — a region that contributed €1.3bn to net profit — thanks to strong net interest income, the difference between lending and deposit rates.
But the US, where Santander has a big car loan business, performed poorly. Profit dropped 77 per cent to €67mn as the bank was forced to increase loan loss provisions.
Analysts have downgraded forecasts for profits at European lenders in 2024 as expectations grow that central banks will begin to cut interest rates.
But at Santander, where the logic of its broad geographical spread has long been questioned by some investors, the bank’s presence in Latin America — most notably Brazil — is expected to support profits.
Botín championed the benefits of a change to Santander’s structure designed to address some market doubts: its activities will now be divided into five global businesses, including retail and commercial banking, consumer finance and investment banking.
“The countries, of course, will remain accountable, but they will all work towards a common business model,” she said.
The bank said it was targeting “mid-single digit” growth in revenue for 2024.
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