Santander profit hit by integration costs, forex

Market trading boards are seen at the Australian Securities Exchange in Sydney, Friday, February 9, 2018. ( AAP Image/Ben Rushton) NO ARCHIVING

Adds detail, information on delistings

Banco Santander SA SAN, +0.91% said Wednesday that its geographical diversity helped deliver a strong underlying profit rise in the second quarter, although it was hit by integration costs and currency headwinds.

The Spanish bank, one of Europe’s largest lenders, said its second-quarter net profit was 1.70 billion euros ($1.99 billion), down 3% from the year-earlier quarter.

Santander said the fall was due to EUR300 million in planned costs related to the integration of Banco Popular, which it acquired in 2017. Santander said when it made the acquisition that it expected an equal charge each year until 2019.

However, on an underlying basis profit rose 14% to EUR2.00 billion, Santander said. Excluding foreign-exchange effects, underlying profit rose 28%.

"During the second quarter we have delivered strong growth in underlying revenue and improving credit quality, despite strong currency headwinds," Executive Chairman Ana Botin said.

"During the quarter we have seen particularly strong growth in Brazil, Spain, Mexico and the U.S. and this has more than offset a more-challenging environment in other markets," Ms. Botin said.

Net interest income–the difference between what the lender earns from loans and pays out on deposits–was EUR8.48 billion, as gross income remained flat at EUR12.01 billion.

Net loan-loss provisions fell 12% from the year-earlier quarter to EUR2.02 billion, a 1% fall excluding currency effects.

Santander’s Common Equity Tier 1 ratio, a key measure of balance-sheet strength, stood at 10.80% at the end of the quarter, down from 11.00% at the end of the prior quarter. The bank said that it continued to organically generate capital, and that it remains on track to meet its capital target and grow earnings per share by double digits in 2018.

In a separate statement on Wednesday, Santander said it intends to delist from stock exchanges in Argentina, Brazil, Portugal, and Italy. The bank also intends to consolidate its Mexican listing in the system for shares of foreign companies. Santander said the change is due to the small volume of its shares traded in those markets.

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