It expects to close the year close to its objective despite inflationary pressures

Banco Santander obtained an attributable profit of 7,316 million euros in the first nine months of 2022, which represents 25% more in current euros compared to the same period of the previous year, as reported by the entity on Wednesday.

Excluding the extraordinary charge of 530 million euros in the same period of 2021, ordinary profit grew by 15% in current euros.

In the third quarter, the attributable profit was 2,422 million euros, 2% more (11% in current euros), after incorporating a net charge of 181 million euros due to the new moratorium regulations in Poland.

Likewise, profit before taxes reached 11,761 million euros, 6% less (3% in current euros), while taxes on profits were 3,538 million euros, which places the effective tax rate at 30%. .

The president of Banco Santander, Patricia Botín, has highlighted that the entity has achieved "good" results, with an increase in income and profitability above the target (RoTE of 13.6%), supported by a "solid" balance sheet ".

"We remain focused on supporting our clients and transforming the business by increasing the connectivity of the group and maintaining an efficient allocation of capital. This will allow us to continue improving profitability and return to shareholders", he stated.

"The macroeconomic environment will continue to be challenging, with Europe and North America adjusting to levels of inflation not seen in decades, but our teams have extensive experience successfully managing such situations and we are confident that the increase in revenues will offset the increase in profits." costs and risk", he stressed.

"We are convinced that our track record of constantly improving profitability, with 31% year-on-year growth in earnings per share, will allow us to continue increasing TNAV plus cash dividend per share and creating value for shareholders," he added.

ROAD TO REACHING OBJECTIVES

Santander has underlined that it is on track to meet its targets for the year for revenues (growth of around 5%), profitability (RoTE above 13%) and capital (12%), while it expects to improve the efficiency ratio of 2021 and close the year close to its objective (45%) despite inflationary pressures.

The board of directors also maintains its commitment to generating returns for shareholders, among which there are almost four million minority shareholders in Spain, the United Kingdom and other countries, and its dividend policy for 2022, according to which it intends to distribute approximately 40% of ordinary profit, distributed approximately equally between cash dividends and share buybacks.

The bank has highlighted that the diversification of the group continues to be a "great lever for growth".

Thus, ordinary profit for the period grew by 32% in Europe, to 2,837 million euros, and 6% in South America, to 2,884 million, while it fell by 9% in North America (2% in current euros), up to 2,271 million, due to the expected normalization of loan-loss provisions. Digital Consumer Bank's ordinary profit increased by 11% to €908 million.

The strong activity, as well as the increase in interest rates in the United Kingdom, the eurozone, Poland and other places favored an increase of 8% in the net interest income (15% in current euros due to the revaluation of most of the currencies), with especially high growth in the United Kingdom (12%), Poland (104%), Mexico (12%) and Argentina (142%).

Fee income increased by 7% (14% in current euros), thanks, according to the entity, to higher volumes and improved activity.

As a consequence, total income grew by 5% (12% in current euros), to 38,629 million euros, with net interest income and commission income providing 97% of group income, reflecting, according to the entity, "the quality of the results".

Specifically, the interest margin grew by 15.4%, to 28,460 million euros, while the gross margin increased by 11.5%, to 38,594 million euros.

The bank has pointed out that the sharp rise in inflation caused a general increase in costs (6%), although, in real terms, that is, discounting inflation, they fell by 5% thanks to the improvement in productivity and the connectivity between the different markets.

Thus, the group's efficiency ratio closed at 45.5% in the first nine months of the year (improves 0.1 percentage points compared to the same period in 2021), which places Santander "among the most efficient entities of its comparable".

These results have allowed, according to the bank, to improve profitability metrics, with a return on tangible capital (RoTE) of 13.6%, well above the cost of capital, and an earnings per share (EPS) of 0.409 euros , 31% more. For the whole of 2022, the objective is to obtain an ordinary RoTE above 13%.

The tangible book value (TNAV) per share in September 2022 stood at 4.31 euros.

The TNAV per share plus the cash dividend per share paid in May 2022 and the one announced for November 2022 grew by 11% in the last twelve months.

NPL RATIO OF 3.08%

The entity has highlighted that the group's balance sheet remained "solid", with a non-performing loan ratio of 3.08%, 10 basis points less compared to the previous year thanks to the good performance of Europe and Digital Consumer Bank, with a coverage ratio of 70%.

The cost of risk increased three basis points in the quarter, to 0.86%, due to the increase in provisions, which include charges for macroeconomic uncertainties.

Santander also maintained a "strong" organic generation of capital in the quarter and the 'fully loaded' CET1 capital ratio stood at 12.10%. Looking to the future, the group plans to maintain this ratio at 12%.

The bank also continued with "strong" trading activity in the quarter despite the uncertainty in the markets.

Customer funds reached their highest figure (1.13 trillion euros, 4% more) thanks to growth in deposits (6%), while loans increased by 7%, to 1.04 trillion, with mortgages and consumer credit growing 7% and credit to companies, 6%.

SPAIN.

In Spain, ordinary profit amounted to 1,104 million euros in the first nine months of the year, which represents an increase of 99%, motivated by a reduction in loan-loss provisions (-27%) and costs (-2 %).

In addition, the improvement in the bank's risk profile has allowed it to maintain a stable NPL ratio (3.69%, after falling 118 basis points compared to the same period in 2021), with which the cost of risk stood at 0. 71%.

Revenues grew by 3%, thanks to higher commissions (6%), both in retail banking and in Santander CIB.