Santander reports record first-quarter profit as provisions rise
First-Quarter Financial Performance and Strategic Outlook
By Jesús Aguado
MADRID, April 29 (Reuters) - Santander on Wednesday reaffirmed its mid-term and 2026 goals after reporting a record first-quarter net profit thanks to a solid performance in Spain and Mexico which offset a weaker showing in Portugal and Argentina.
The Spanish bank's diversification, spanning 10 core markets, has insulated it from economic downturns in some regions but also exposed it to currency volatility in Latin America.
Recent Acquisitions and Growth Strategy
It recently expanded with the purchase of TSB in Britain and Webster in the U.S., acquisitions that it hopes will help to increase profit in the next three years to more than 20 billion euros.
Provisions and Profitability
The bank reported higher provisions relating to Argentina and motor compensations in the UK, which partly overshadowed a 12.5% quarterly rise in underlying net profit to a record 3.56 billion euros, in line with analysts' forecasts.
Taking into account capital gains, the bank's net profit rose 60% in the quarter to 5.46 billion euros.
Additional Provisions and Market Reactions
The bank set aside 207 million euros in additional provisions at its digital consumer Openbank unit to compensate motorists for mis-sold motor finance in the UK. It had already set aside 461 million pounds.
Barclays welcomed a "solid" set of results thanks to "revenue beat and stronger efficiency drive" though highlighted higher provisions.
Outlook and Targets
Santander reaffirmed its 2026-28 targets, which for 2026 include mid-single-digit revenue growth, higher profits and a capital ratio of 12.8-13%, after finishing March with core tier-1 capital ratio of 14.4%.
Impairments and Group Performance
Overall provisions rose 4.6% after a more than fourfold rise in impairments in Argentina to reflect sector wide trends in a less favourable economic context which drove profit down 60% in the quarter in this market.
At group level, net interest income, a measure of earnings on loans minus deposit costs, rose 3.6% year-on-year on an underlying basis to 11.02 billion euros, compared with 10.91 billion euros expected by analysts.
Regional and Business Segment Highlights
Spain as Growth Driver
SPAIN AS GROWTH DRIVER
In Spain, net profit rose 12%, helped by a rise in lending supported by solid economic growth, while in the UK net profit also rose 12% thanks to a rise in fee income.
Latin America and Other Markets
In Mexico and Brazil, net profit rose 6.9% and 6.4% respectively, while net profit in Portugal fell 10% against the first quarter of 2025 when the lender released provisions.
Efficiency and Digital Transformation
The bank's efficiency ratio improved by three percentage points over the last year to 42.8% by end of March, driven by the bank's digital transformation.
Retail and Corporate Banking Performance
Profit at its retail business, the main contributor to earnings of its five global units, rose 9%, while the corporate and investment banking business was up 15% in current euros, despite higher loan-loss provisions, partly driven by credit portfolio growth and some specific single names in Europe and Brazil.
Market Reaction
At 1035 GMT, shares in Santander rose around 1% compared to 0.7% decline in Spain's leading blue-chip index Ibex-35.
Additional Information
($1 = 0.8546 euros)
(Reporting by Jesús Aguado; editing by Jane Merriman, Aislinn Laing and Shri Navaratnam)
