Capital disconnect

29 January 2020 By Christopher Thompson Follow @CGAThompson

The Spanish lender’s return on equity fell in 2019 due to one-off costs, but it should do better this year. Still, the bank run by Ana Botin has yet to hit a 12% solvency target, which in turn lags European peers. Until it catches up, its lowly valuation will persist.

This content is for Subscribers only

Context News

Banco Santander on Jan. 29 reported a 11.7% year-on-year fall in pre-tax profit for 2019 to 12.5 billion euros, in part due to higher restructuring costs. Revenue rose by 1.7% to 49.2 billion euros.

Spain’s largest lender said its cost-to-income ratio of 47% was unchanged year-on-year. Its common equity Tier 1 capital ratio rose to 11.65% from 11.3%.

The Madrid-based bank reported a return on tangible equity of 9.3% for the year, compared to 11.7% a year earlier. Excluding one-off costs, the lender said its underlying ROTE was 11.8%, compared to 12% in 2018.

Santander targets a ROTE of between 13% and 15% in the medium term, and said it planned to maintain a CET1 capital ratio of between 11% and 12%.

Santander shares rose by 3.2% as of 0924 GMT on Jan. 29.

Email a friend

Please complete the form below.

Required fields *