Banco Santander SA’s earnings beat estimates as higher interest rates in Europe and Mexico continued to boost revenue and offset a rise in loan loss charges.
The Madrid-based lender posted net income of €2.9 billion ($3.1 billion) in the third quarter, according to a regulatory filing Wednesday. This exceeded the €2.79 billion forecast by 10 analysts and compiled by Bloomberg. Net interest income rose 6.6% from the previous quarter to €11.2 billion.
Santander, like other banks, has improved its margins after the European Central Bank’s biggest ever series of rate hikes. It’s also feeling the benefits of higher rates in Mexico, where it is catering to growing activity from corporations relocating production to the country.
Net loan loss provisions were €3.3 billion for the quarter, up about a fifth compared to the same period in 2022, reflecting the higher-rate environment and inflation.
“I am confident that we will achieve our 2023 targets given the positive momentum which we also expect to carry into 2024,” Chair Ana Botin said in the statement.
Yet the bank also stands to profit from dropping rates in Brazil, one of its largest markets, where it can cut payments on deposits faster than lending costs.
In Spain, which in July became the bank’s largest market for the first time since 2009, Santander and other lenders have faced government criticism for not raising deposit interest in line with rates. Executives have argued that clients have different options for their savings.
Wednesday’s earnings come as the company settles into a new corporate structure, announced last month, which created five global business groups and replaced the previous geographical structure.
Santander has been on a hiring spree this year as it seeks to add investment bankers, mostly from Credit Suisse, to bulk up its operations in the business, mainly in the US. Botin told investors in September that the lender has hired hundreds of bankers in the last few years.
Key Metrics from Earnings
- Fully-loaded CET1 ratio: 12.3%
- Return on tangible equity: 14.8%, in line with full-year target
- Cost of risk for the year was 1.13%