Aug
Banco Santander (SAN) experienced a 3.03% increase in its share price following an impressive second-quarter performance that led the bank to revise its revenue and efficiency forecasts for 2024. As Spain’s largest bank by market capitalization, Santander reported a record net profit of €3.21 billion ($3.48 billion) for the quarter. The reported net profit of €3.21 billion exceeded the €3.16 billion forecast from a Visible Alpha poll. Additionally, it represents a 20% increase from the previous year.
Revised Revenue Outlook
The bank now expects high-single-digit revenue growth for 2024, a notable upgrade from its previous mid-single-digit forecast. A strong quarter fueled this optimistic outlook, as Santander reported revenue of €15.67 billion. Surpassing the €15.5 billion estimate and representing a 10% increase compared to the same period last year. The positive revenue dynamics were largely driven by robust performance in the bank’s Spain and U.S. markets.
Fee Income and Commercial Activity
Jefferies analysts highlighted that revenue dynamics, particularly in fees, were a significant factor in Santander’s strong results. The bank’s fee income increased by 6% year-over-year to €3.24 billion, reflecting solid commercial activities and heightened customer engagement. The growth in fee income helped offset a shortfall in net interest income. Net interest income plays a critical role in revenue, as it comes from the difference between earnings on loans and payments on deposits.
US Economy Slows Down After 2023 Boom
After an impressive surge through 2023, the US economy is now transitioning to a more subdued pace. Companies are hiring fewer employees
Challenges and Adjustments
Despite the overall positive performance, Banco Santander faced challenges in its net interest income, which fell short of expectations. The bank reported €11.47 billion in net interest income, missing the anticipated €11.91 billion, partly due to inflation-adjusted foreign-exchange losses in Argentina. Nevertheless, Chair Ana Botin expressed confidence in achieving the bank’s updated targets amid a volatile geopolitical environment.
Improved Efficiency and Financial Strength
Santander also reported an improvement in its efficiency ratio, which fell by 2.6 percentage points to 41.6%, its best ratio in 15 years. This progress is attributed to the bank’s ongoing investments in technology and cost-control measures. The updated guidance now projects an efficiency ratio of around 42% for the year, up from below 43% previously.
The bank’s fully-loaded core equity Tier 1 ratio, a measure of financial strength, increased to 12.5% at the end of June, up from 12.3% in March. This aligns with Santander’s target of maintaining a ratio above 12% for 2024. Shares in Madrid rose over 1% to around €4.6 in morning trading. Reflecting a 22% gain since the start of the year.
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