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US impairments hit Santander's Q4'17 profit

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US impairments hit Santander's Q4'17 profit

Banco Santander SA saw its fourth-quarter 2017 net profit fall 4% year over year as it booked a goodwill impairment charge resulting from its investment in U.S. unit Santander Consumer USA Holdings Inc.

Spain's largest lender reported fourth-quarter 2017 profit attributable to the group of €1.54 billion, compared to €1.60 billion in the year-ago period. EPS for the period, adjusted for the bank's capital increase in July 2017, was 8.7 cents, compared to the year-ago 10.3 cents.

Net interest income for the quarter rose year over year to €8.61 billion from €8.10 billion, while net fee income increased to €2.95 billion from €2.64 billion.

Net loan-loss provisions amounted to €2.18 billion in the period, down from the year-ago €2.41 billion. Impairment losses on other assets widened year over year to €230 million from €159 million.

Gains on financial transactions increased on a yearly basis to €421 million from €412 million.

For full year 2017, Santander's attributable profit amounted to €6.62 billion, up 6.7% from €6.20 billion a year earlier. EPS for the year was 40.3 cents, up from 39.9 cents in 2016.

Banco Santander noted that it took a €752 million charge in the fourth quarter of 2017 relating primarily to the impairment of goodwill for the group's investment in its U.S. unit. This was, however, partially offset by €297 million of capital gains from the disposal of the stake in Allfunds Bank SAU and a €73 million gain relating to U.S. fiscal reforms, resulting in an overall net charge for the quarter of €382 million for capital gains and provisions and €897 million for the full year.

In the U.K., attributable profit for 2017 decreased 9% to €1.50 billion, partly due to extraordinary gains made in 2016 from the disposal of its stake in Visa Europe. Santander UK Group Holdings Plc said its profitability was impacted by the losses incurred on its exposure to construction and engineering company Carillion plc. The British unit's impairment losses on loans and advances increased on a yearly basis to £203 million from £67 million, primarily relating to Carillion exposures.

Meanwhile, the group's attributable profit in Brazil rose by 42% to €2.54 billion, primarily driven by greater customer activity and improved operational efficiency.

The group's full-year 2017 return on equity was 7.14%, compared to 6.99% in 2016.

The bank's fully loaded common equity Tier 1 ratio stood at 10.84% at Dec. 31, 2017, compared to 10.80% at the end of September 2017. The phased-in CET1 ratio stood at 12.26% at the end of 2017, compared to 12.18% at the end of September 2017.

The figures include Banco Popular Español SA, which Banco Santander acquired in June 2017.

Banco Santander said it has delivered on all strategic targets for 2017 and remains confident that it will achieve all targets for 2018.

"Throughout the year we have seen strong growth in Latin America, with our businesses in Brazil and Mexico performing exceptionally well. But it has also been a year of great progress in Europe, and particularly in Spain, where the acquisition of Popular has helped accelerate our strategy while providing important certainty and stability for Popular's customers," Banco Santander Group Executive Chairman Ana Botín said.