LONDON - Banco Santander said Tuesday that its second quarter profit jumped to 1.1 billion euros, as the Spanish bank benefited from a fall in charges connected to delinquent loans.
Santander, which is one of Europe’s largest banks by market capitalization, wrote off billions of dollars in faulty real estate loans last year, primarily in its home market where record levels of unemployment and weak domestic growth continue to plague the economy.
The drop in impairment charges allowed the Spanish bank to post an almost eight-fold increase in its second quarter earnings, compared to a 123 million euros in the same period last year. The results were slightly below analysts’ estimates.
Despite the gradual turnaround in its loan book, Santander suffered a setback in its Latin American business, which now represents more than half of its quarterly income.
The firm’s Brazilian operations, in particular, suffered from a weak quarter after reporting a 10 percent fall, to $558 million, in net profit compared to the same period in 2012. The fall comes as the large Latin American economy is faltering amid the ongoing global financial crisis.
“The core Brazilian franchise is weaker than expected,†Citigroup analysts said in a note to investors on Tuesday.
In Spain, the bank’s profit fell 57 percent, to 86 million euros, as the indebted European country continued to suffer from weak economic growth.
Santander said that the percentage of delinquent Spanish loans on its balance sheet rose 0.64 percentage points, to 4.76 percent, although the figure increased to 5.75 percent because of changes to how Spanish authorities calculate the overall figure.
“Profits rose after more than two years of high levels of write-offs and reinforcement of capital,†Santander’s chairman, Emilio BotÃn, said in a statement. “We are preparing for a new period of profit growth.â€
Shares in the Spanish bank fell less than 1 percent in morning trading in Madrid on Tuesday.
Santander added that its core Tier 1 capital ratio, a measure of a bank’s ability to weather financial shocks, rose to 11.1 percent by the end of the second quarter, under the industry regulations known as Basel II.
