Spanish banking giant Banco Santander has announced an €11bn loss in the second quarter, citing Covid-plagued economic environment and sharp exchange rate depreciation that distort the year-on-year comparison.
A major impairment to the group’s bottom line came as a result of the bank adjusting the valuation of its goodwill ascribed to several units and deferred tax assets for a total of €12.6bn.
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These write-offs include €6.1bn for Santander UK and 2.3bn for Santander US, among others.
Loan-loss provisions rose significantly to €7m, driven by lending growth and the expected macro-economic deterioration.
Operating costs amounted to €10.7bn, or 8% lower year on year. Costs fell 2%, if the exchange rate impact is accounted for.
Excluding the above adjustments and restructuring costs, “attributable profit to the parent would have been €1.9bn, with net operating income of EUR 11.9bn or 2% more in constant euros than at the end of the first half of 2019,” the report noted.
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By GlobalDataStrong growth in Corporate and Investment Banking
Revenue totalled €22.3 in the first half, down 9%.
By business, of note was the 20% growth in Santander Corporate and Investment Banking. Wealth Management and Insurance increased by 1%. Overall, together the businesses now account for 47% of the group’s total.
By region, both North and South America declined by 2%. European operations dropped by 8%), with generalised declines due to lower activity volumes, along with regulatory changes affecting net fee income in Santander Consumer Finance and the UK.
On the other hand, “Other Europe”, which includes the wholesale banking business in the region, increased net fee income by 58%.
Overall, the group’s gains on financial transactions, accounted for 5% of total income and stood at €1.1bn, double the figure for the first half of 2019 (+138% excluding the exchange rate effect).
The gains were the results of the favourable impact from foreign currency hedging, portfolio sales and market volatility.
A glimpse of the positive amid the gloom
Excluding the exchange rate impact, the underlying performance of the business was strong, supported by resilient customer revenue, cost reductions and robust credit quality.
In the current environment, digital penetration is accelerating.
Santander reached almost 40 million digital customers (+15% year-on-year), mobile customers exceeded 32 million (+5.8 million in 12 months) and digital sales represented 47% of total sales in the quarter (36% in 2019).
Loyal customers rose nearly 1 million year-on-year, with growth both in individuals and corporates.
