MADRID-Banco Santander SA said Wednesday that net profit fell by half in the second quarter from a year earlier, as one of Europe’s largest banks booked an anticipated restructuring charge due to branch closures and employee layoffs and as income from lending declined.
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Santander, the euro zone’s biggest bank by market value, reported net profit of 1.28 billion euros ($1.40 billion), just above analysts’ forecasts of 1.24 billion euros in a Reuters poll.
Net interest income, a key profit driver for banks, fell 8.6% to 7.57 billion euros (£6.35bn). Santander also faces potential repercussions from the U.K.’s vote to leave the European Union, which is expected to slow the economy of the bank’s biggest market this year. Santander said at the end of June that those restructuring costs would be offset in part by the sale of a stake it holds in Visa.
Analysts said a 12 percent decrease in the bank’s provisions on bad loans in the second quarter year-on-year was better than forecast, while non performing loans fell in Spain and Britain.
It was hit by net charges totaling 368 million euros from restructuring costs and a payment to the euro zone’s resolution fund, which was set up to help wind down failed banks.
Low interest rates and aggressive pricing continue to pressure its margins in Spain, mirroring the experience of other Spanish banks.
Net interest income in Spain will remain “flattish” in coming quarters, CEO Alvarez said in a conference call with analysts Wednesday.
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Profit in Brazil, which makes up 19% of its business, rose nearly 20% from the first quarter on signs of a slight recovery after over a year of severe recession. After last month’s referendum, the bank reiterated its financial targets for the year, including capital creation of 10 basis points per quarter and achieving a higher earnings per share than in 2015.
