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Santander UK: Spanish bank's crown jewel loses shine
(WebFG News) - Banco Santander started off the banking sector's results in Spain, with a strong profit of 2.05bn up 10% undermined by a 23% decline in earnings from the UK business.
The greater competition and the costs have caused its profits to fall 23.2% in a yearThe UK business, the 'crown jewel' of Ana Botín, president of Banco Santander, tanked in the first quarter. Botín was Santander UK's CEO from 2010 until the death of her father, Emilio Botín, in July 2015, when she became president of the group.
Santander UK, Britain's fifth-largest bank, has been the second most important business of the group in recent years, just behind Brazil. In fact, Ana Botín 'exported' Santander's flagship 123 account from the British business to Spain and brought many members of her team with her.
Analysts at Autonomous pointed out that Santander UK's interest margin is expected to be flat, although interest rates in the UK are expected to rise 25 points this year. "The problem that the British subsidiary has is the costs, although quarter-on-quarter growth will moderate from 8% in this first quarter to 5% in the whole year," they explained.
Daragh Quinn, an analyst at Keefe, Bruyete & Woods, said: "The results in Europe and the United States were better than expected, countering the weaker results in the UK. In the UK, although credit growth was stronger than estimated, margins remained under pressure and the growth in costs and provisions was higher than expected."
Deutsche Bank analysts, on the other hand, point out that Brazil continues to be Santander's 'strong point' and also underscore the weakness in the UK and Spain. "In general, the results support our thesis that Brazil is the growth engine for the bank, more than offsetting the pressures observed elsewhere, such as Spain and the United Kingdom," they said in a note.
Despite increasing its profit by 10%, Banco Santander was penalized on the stock exchange and fell 3.2% after the presentation of results on Tuesday. "I guess the investors' expectations were higher and that there are many technical factors. But the capital ratio is not a concerning issue at this time, since it has no relevant weight," explained José Antonio Álvarez.