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.

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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.

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%.

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.

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