Spanish banking giant Santander reported a slump in first-half net profits after setting up a special fund to handle insurance claims in Britain, where a stock flotation was postponed.
Profits tumbled 21.2 per cent from the same period last year to 3.501 billion Euros ($5.075 billion) largely owing to the effect of the 620-million-Euro fund, an element that the market had not expected.
Without this special provision, profits would still have fallen 7.0 per cent to 4.121 billion.
“The fund covers potential claims for payment protection insurance sold in the U.K.,” the group said. Britain’s banks are allocating billions of pounds to compensate clients who were mis-sold credit insurance.
“The whole of the British banking sector made provisions of more than 6.0 billion pounds (6.8 billion Euros),” said managing director Alfredo Saenz. “As we have 10 per cent of the market, we must put aside 10 per cent” of the total. “There will be an avalanche of claims” and “that can have an very strong economic impact.” Saenz also announced that plans for an initial public offering of its British and Argentine units have been suspended, citing difficult market conditions.
“We are going to list on the British stock market, that has not changed,” he said. “In the second half (of the year) we will be ready” and “it will probably be in 2012.”
On the Madrid stock market Santander shares fell by 3.14 per cent to 7.344 Euros following the news, in a market that was down 1.43 per cent. For the second quarter alone, net profits were 1.393 billion Euros, a sharp fall of 37.5 per cent from the figure 12 months earlier.
Net interest income — the difference between interest paid out on deposits and interest earned on lending — was up 3.5 per cent at 7.638 billion in the second quarter, and 4.5 per cent over the six-month period at 15.152 billion Euros. Its bad loans as a proportion of total lending, a key indicator of financial health, climbed 3.78 per cent from 3.37 per cent a year earlier.
“Our strong capacity to generate revenues will enable us to close 2011 with a recurrent profit in line with last years and to keep our dividend at 0.60 Euros per share,” Santander chairman Emilio Botin said in a statement.
Growth continued to be driven by activities in Latin America where net profit for the first half rose by 16.0 per cent to 2.457 billion Euros and accounted for 44 per cent of the overall outcome of which 25 per cent alone came from business in Brazil.
Madrid, July 27, 2011 (AFP)
