By Jesús Aguado
MADRID – Spain’s Santander on Friday said it was on track to meet its 2022 profitability target and maintained its mid-term goals thanks to solid performance in the Americas and a recovery in Europe.
The lender reiterated its target of more than 13% for underlying return on tangible equity (ROTE) up from 12.73% in 2021 despite soaring energy prices felt predominantly in Europe due to Russia’s invasion of Ukraine.
Santander for 2022 also maintained its target of around 12% core tier-1 fully loaded capital ratio, kept its dividend pay-out target at 40% and its cost-income ratio, a measure of efficiency, at 45% versus 46.2% at end-December.
Santander’s diversification, especially in Latin America, has helped the bank cope with tough conditions for lenders in Europe since the financial crisis.
Its underlying profit in North America more than doubled in to a record 3.05 billion euros boosted by a more than a threefold increase in the United States, while in South America it rose by 24% to 3.33 billion euros.
The two regions accounted for around 60% of the group’s underlying profit in 2021, while Europe represented 28%.
“In the first quarter of 2022, the commercial activity has remained strong with revenues in line with the last quarter and new lending returning to prepandemic levels, increasing by an estimated 8% year on year,” Santander Chairman Ana Botin said in a statement ahead of the bank’s general shareholders meeting.
Shares in Santander were up 2% to 3.16 euros at 0717 GMT, outpacing Spain’s leading blue-chip index Ibex-35 which was up 0.4%.
Santander helped by lower loan loss provisions booked a net profit of 2.28 billion in the October to December quarter, up 4.6% from the third quarter.
It reported a net profit of 8.12 billion euros in 2021 after losing 8.77 billion euros in 2020.
Santander does not have a presence in Russia or Ukraine, limiting its direct exposure to 80 million euros, though the conflict could have an indirect impact, especially through high energy prices for some of its customers.
Santander said that Botin would reassure shareholders that in the medium term, the bank aimed to achieve an underlying return on tangible equity and cost-to-income ratio of around 15% and 40%, respectively, and maintain a capital ratio of 12%.
The bank’s shareholders on Friday are expected to approve a final cash dividend of 5.15 euro cents per share, on top of an already paid 4.85 euro cents per share.
With a shares buyback of 841 million euros and an additional buyback of 865 million euros being implemented, the capital distributed against 2021 results would be 3.4 billion euros.
Shareholders will also be asked to approve a reduction of the group’s outstanding share capital of up to 10% by cancelling shares it may acquire, including under potential repurchase programmes in the future.
(Reporting by Jesús Aguado; editing by Inti Landauro and Jason Neely)
