Santander Tops Forecast As Strong Europe Offsets Weaker US
Q3 profit up 20% to 2.9 bln euros vs forecast 2.77 bln euros
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Net interest income up 11.6% y/y in Q3, above expectations
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Botin confident will meet 2023 targets, positive about 2024
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Improves capital to 12.3% by end-Q3 from 12.2% at end Q2
(Adds details on revenues, provisions in paragraphs 7-9, công ty xây dựng hương trà market reaction in 10-11, breakdown on markets from than onwards)
By Jesús Aguado
MADRID, Oct 25 (Reuters) - Spanish bank Santander beat forecasts on Wednesday with a 20% rise in third quarter net profit as a strong performance in Europe offset weaker trade in the United States and higher provisions.
The euro zone's second-biggest lender by market value booked a net profit of 2.9 billion euros ($3 billion), beating analysts' mean forecast of 2.77 billion euros in a Reuters poll.
Santander has relied on Latin America in the past to cope with tough conditions in Europe, but is now benefiting - like European rivals - from higher interest rates on its home continent.
In Europe, net profit jumped 64% year-on-year in the quarter, while in South America it fell 7%.
"While the external environment is increasingly uncertain, 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 a statement.
Santander's 2023 targets include double-digit income growth and a return on tangible equity ratio (ROTE) - a measure of profitability - of more than 15%.
Revenues rose 10% year-on-year in the quarter, above market forecasts, helping the bank improve its ROTE to 15.49% from 14.61% at the end of the second quarter.
But loan loss provisions jumped 19% to 3.27 billion euros.
While that was only just above expectations, investors are jittery about the impact of a global economic downturn on banks.
JP Morgan welcomed a solid set of results that were "helped by core revenue growth, strong trading income and a low tax rate (of only 28%), while costs and cost of risk missed slightly."
The bank's shares were down 0.8% in morning trade after having risen more than 20% year to date.
Santander's cost of risk, which measures the cost of managing credit risks and potential losses for the bank, rose to 113 basis points (bps) from 108 bps at the end of June, but was still below its 120 bps guidance for the year.
SPAIN DRIVES GROWTH, BRAZIL IMPROVES
Santander's net interest income (NII), or earnings on loans minus deposit costs, rose 11.6% year-on-year in the quarter to 11.22 billion euros, above analysts' estimate of 11 billion.
In Spain, the bank's biggest market, net profit surged almost 60%, while NII jumped 56%. Results at home were boosted by higher returns on loans, driven by predominantly floating rate credit, while deposit costs grew at a slower pace.
Earnings were also lifted by a strong performance in Portugal and Poland. In the UK, net profit rose 5.7% year-on-year in the quarter.
In Brazil, its second-biggest market, net profit fell 8.9%, though NII rose 3.3%, reflecting an improvement in trends.
Net profit in the United States fell 50.4% on higher funding costs in the auto business while provisions rose 49%.
Santander's Tier-1 fully loaded capital ratio, the strictest measure of solvency, rose to 12.3% in September from 12.2% in June, as strong capital generation offset accruals for future cash dividend payments and the current share buyback programme.
($1 = 0.9433 euros) (Reporting by Jesús Aguado Editing by David Holmes and Mark Potter)