Banco Santander, Spain's largest bank in terms of assets and revenue, reported Wednesday a net profit of $7.3 billion (€7.3 billion) for the first nine months of the year, marking a 25% increase year-on-year (YoY), buoyed by solid customer activity and revenue growth.
Santander's net profit hiked by 11% YoY to $2.4 billion in the third quarter, exceeding the analyst forecast of $2.2 billion cited by AFP. This increase was supported by strong commercial performance in Poland and Argentina, including a net charge of $181.15 million due to the new Polish mortgage payment holiday regulations.
The bank's total revenue rose 12% YoY to $38.7 billion for the first nine months of the year, led by net interest income and net fee income, which together accounted for 97% of the bank's revenue. Net interest income jumped 15.4% to $28.5 billion in the year to date due to an increase in central bank interest rates, with robust growth in the UK (+12%), Poland (+104%), Mexico (+12%), and Argentina (+142%).
Typically, higher interest rates benefit banks because they increase consumer returns, although the risk of an economic slowdown and higher cost of borrowing presents a challenge to future earnings.
Customer activity saw significant growth in the third quarter as customer funds reached a new high of $1.1 trillion, up 4% YoY, buoyed by a 6% growth in deposits. Total loans grew 7% to $1.04 trillion, with mortgages and consumer lending up 7%, and commercial lending up 6%.
The bank added $7.5 billion to its loan-loss reserves in the first nine months of the year, with a 25% increase YoY, amid fears of an economic headwind stoked by the recent Federal Reserve's interest rate hikes followed by major world central banks. It also increased its loan-loss reserves by 24% quarter-on-quarter in the third quarter.
As inflation grew more hawkish, Santander's cost-to-income ratio stood at 45.5% in the year to date, placing the bank among the most efficient banks in its peer group
