LAST UPDATE: 25/10/2023 - 15:21
Santander achieved an attributable profit of €8,143 million in the first nine months of 2023, up 11% in current euros versus the same period last year, as strong growth in revenues, particularly in Europe and Mexico, offset the expected year-on-year growth in provisions. In the third quarter, attributable profit increased 26% (+20% in current euros) versus the third quarter of last year to €2,902 million.
The strength of the results was reflected in growing profitability and shareholder value, with a return on tangible equity (RoTE) of 14.8% (+1.3 percentage points); earnings per share (EPS) of 48 euro cents, up 17%, and tangible net asset value (TNAV) per share on 30 September at €4.61. Including the cash dividend paid last May against 2022 earnings and the interim dividend against 2023 earnings to be paid in November, TNAV per share plus cash dividend per share was 12% higher year to date. In the first nine months of the year, the value created for shareholders (TNAV + cash dividend) is equivalent to more than €8 billion.
Don't miss these key takeways
· Net interest income increased 16%, reflecting growth in customer activity with nine million customers added in the past year, and positive balance sheet sensitivity to higher interest rates in Europe and Mexico .
· Net fee income increased 6%, with particularly good performance in CIB (+15%) and PagoNxt (+12%).
· Revenue up 13% supported by income growth in all regions and particularly strong growth in the global businesses: Wealth Management & Insurance (+39%), PagoNxt (+23%) and CIB (+21%).
· Efficiency ratio improved further to 44.0% driven by the group’s transformation towards a simpler, more digital and integrated model.
· Loan-loss provisions continued to normalize as expected due to the higher-rate environment and inflation, the normalization in the US, as well as additional provisions for Swiss franc mortgages in Poland, and rose by 21%.
· Overall credit quality remained robust, with cost of risk below target for the year at 1.13%.
· Third quarter attributable profit was €2,902 million, up 26% (+20% in current euros). Versus the second quarter, profit was up 11%.
· In September, the bank announced an interim cash dividend of 8.10 euro cents per share (+39%) and the first share buyback against 2023 earnings (1). Once completed, Santander will have repurchased 9% of its shares since 2021.
· Santander remains on track to meet its 2023 targets, including double-digit income growth; RoTE above 15%; cost-to-income ratio of 44-45%; fully-loaded CET1 above 12%, and cost of risk below 1.2%.
(1) The target payout will be approximately 50% of the group net attributable profit (excluding the impacts that do not affect cash or capital ratios directly), split approximately 50% in cash dividends and 50% in share buybacks. Implementation of the shareholder remuneration policy is subject to future corporate and regulatory decisions and approvals.
Customer funds grew 5%, with deposits up 4%, supported by both individuals and Corporate and Investment Banking (Santander CIB). Customers continued to utilize excess deposits to pay down debt in the quarter, particularly mortgages. For that reason, as well as a reduction in demand in some markets due to higher interest rates, total loans were down 2%, with consumer lending up 7%. The bank’s loan book and deposits remain well diversified across both business lines and geographies. Deposits maintain a stable structure: approximately 75% are transactional, and more than 80% of retail deposits are insured with deposit guarantee schemes.
In total, income increased 13% to €43,095 million as the bank added nine million customers, taking total customers to 166 million. The rise in both customer activity and interest rates supported a 16% increase in net interest income. Net fee income was up 6% driven by sales of high value products – particularly within the bank’s global businesses. The global businesses represent 38% of total income and 42% of net fee income. Net interest income and net fee income accounted for 96% of the group’s total income, reflecting the quality of the bank’s earnings.
The group continues to make progress in simplifying its product offering and accelerating its digital transformation to provide better services to customers and improve efficiency. As income growth (+13%) outpaced growth in costs (+10%), the efficiency ratio improved by 1.5 percentage points to 44.0%. This was driven by the group’s transformation towards a simpler, more digital and integrated model, as the bank continued to reduce costs in real terms (-0.5%).
Loan-loss provisions were up 21% year-on-year, reflecting an expected increase following higher interest rates and inflation, the normalization in the US, as well as additional provisions to cover the Swiss franc mortgage portfolio in Poland. Overall credit quality remained robust, with cost of risk lower than target for the year at 1.13%, and markets such as Brazil are improving its cost of risk for the second quarter in a row. The non-performing loan (NPL) ratio remained broadly stable at 3.13%.
The group achieved another record quarter with earnings per share up 17% and a return on tangible equity of 14.8%. We have added nine million customers, increased revenues by 13%, and continue to make excellent progress in simplifying the business.