Santander sees first-half profit rising as bank sells stock

MILAN: Banco Santander SA said its deal last month to take over failing Banco Popular Espanol SA will have a minimal effect on its previously estimated first-half profit of 3.6 billion euros (US$4.1bil).

Spain’s largest lender also set the price of its 7.07 billion-euro capital increase, saying it will sell about 1.5 billion shares at 4.85 euros each, according to statements issued late Monday.

The Madrid-based bank said last month it would raise funds to shore up its balance sheet after taking over Banco Popular for one euro in a deal brokered by European regulators following a run on deposits.

Before the acquisition, Santander chairman Ana Botin forecast improved performance at the bank, saying she expected to see economic growth in the firm’s 10 main markets, despite the Brexit vote and negative interest rates at home.

The bank estimated profit would rise about 24% in the first six months from a year earlier.

That would give Santander a second-quarter profit of about 1.73 billion euros compared with 1.28 billion euros a year earlier.

“Santander’s estimates for first-half results are pretty positive on the face of it with the bank delivering positive operating jaws and provisions under control,” said Arjun Bowry, a London-based analyst at Bloomberg Intelligence.

“However, the main talking point on the second-quarter call will inevitably be the disposal of Popular’s real estate assets.”

Santander’s stock fell as much as 2% to 5.89 euros and was 0.9% lower at 5.95 euros as of 9:06 am in Madrid trading while the Euro Stoxx bank index was little changed.

Santander bought Popular on June 7 after the Europe’s Single Resolution Board wiped out the failed lender’s shares and junior debt to offset the losses from bad assets.

The acquisition will leave Santander in a leading position in overall lending in Spain, with a market share of about 20%. That could ease pressure on margins from low interest rates and weak demand for credit.

Popular is expected to contribute about 82 billion euros of net loans, or 10% of Santander’s total, and 65 billion euros of deposits, equivalent to 8.5% of the total, Santander said. — Bloomberg