Madrid (Business Emerge), July 25: Santander has elevated its profitability targets following a stellar performance in its primary retail operations. The strong growth, particularly in Spain and Brazil, has effectively counterbalanced some setbacks in the UK and the impact of hyperinflation in Argentina.
As the second-largest bank in the Eurozone by market capitalization, Santander has traditionally leaned on its Latin American operations for revenue expansion. Recently, the bank has also reaped benefits from increased European interest rates. Despite some depreciation in Latin American currencies, Santander achieved a 20% year-on-year increase in net profit, reaching a record 3.2 billion euros ($3.47 billion) for the second quarter, aligning with analyst predictions.
Revenue saw a 9.6% increase year-on-year in the second quarter, amounting to 15.67 billion euros, surpassing the expected 15.5 billion euros. Consequently, the bank has adjusted its 2024 growth target to high-single-digit from mid-single-digit growth.
Santander’s stock saw a 1% rise by 0836 GMT, marking a 20% increase in its value this year. Jefferies noted, “Revenue trends are favorable, particularly in fees, with notable strength in Spain and the US.”
The retail segment, which is a major contributor to Santander’s global operations, saw a 49% rise in profit. Additionally, the digital consumer bank experienced a 12% increase, while the wealth and insurance unit grew by 6%. However, the Corporate and Investment Banking sector experienced a 5% decline due to increased costs. The payments unit reported a loss of 89 million euros, attributed to a 170 million euro write-down following the closure of Wirecard’s merchant payments in Germany.
The surge in profits contributed to an increase in Santander’s return on tangible equity (RoTE) ratio, rising to 15.9% in the first half of the year from 14.5% in the same period of 2023. The bank has raised its 2024 RoTE target to above 16%. Additionally, Santander’s efficiency ratio improved to 41.6% from 44.2% year-on-year, reflecting successful efforts to streamline operations and transition to a more digital model. The bank has set a new efficiency target of around 42% for 2024.