Spanish Bank Santander Raises 2024 Guidance After Earnings Beat — Update

By Pierre Bertrand and Elena Vardon

Banco Santander raised its revenue and efficiency outlook for the year after good performances in Spain and the U.S. led it to report a better-than-expected second quarter.

The Spanish bank--the country's largest by market capitalization--posted a net profit of 3.21 billion euros ($3.48 billion) for the period--a record high--beating estimates taken from a Visible Alpha poll of a EUR3.16 billion result and last year's print by 20%.

The lender said on Wednesday that it now expects its revenue growth in the high-single digit percentages for 2024, compared with previous guidance of mid-single digit percentage growth. The group surpassed expectations by reporting EUR15.67 billion in revenue for the quarter, slightly ahead of a EUR15.5 billion estimate and a 10% increase compared with the same quarter the previous year.

Revenue dynamics trended well in the period, especially in fees, with its Spain and U.S. markets showing particularly strong performances, Jefferies analysts wrote in a note to clients. Income from fees rose 6% on year to EUR3.24 billion on good commercial dynamics and customer activity, Santander reported.

This partly offset a miss in the income it makes from the difference between what it earns on loans and what it pays clients for deposits, which brings in the bulk of revenue and mostly comes from its retail and consumer business. The bank posted EUR11.47 billion in net interest income--short of expectations of EUR11.91 billion--partly due to an inflation-adjusted foreign-exchange hit in Argentina.

"In the context of a volatile geopolitical environment, we are confident that we will deliver on the more ambitious targets set out today," Chair Ana Botin said.

Return on tangible equity--or RoTE, a key profitability metric--was 16.8% for the quarter, leading it to lift its outlook for the year. It now expects a RoTE of over 16% against previous guidance of 16%.

In terms of expenses, Santander's efficiency ratio fell 2.6 percentage points to 41.6%--its best ratio in 15 years, it said--as it continues to execute on its plan to invest in technology and control costs. It updated its guidance for a ratio of around 42% for the year compared with below 43% previously.

Santander's fully-loaded core equity Tier 1 ratio--a measure of financial strength--stood at 12.5% at the end of June compared with 12.3% at the end of March, in line with its target of a ratio of over 12% for 2024.

Shares in Madrid traded over 1% at around EUR4.6 in morning exchanges. The stock has gained 22% since the start of the year.

Write to Pierre Bertrand at pierre.bertrand@wsj.com and to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

July 24, 2024 06:24 ET (10:24 GMT)

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