Moral suasion

29 July 2020 By Christopher Thompson Follow @CGAThompson

Impairment charges produced a $12.5 bln first-half loss at the Spanish bank. It paid far too much for UK lender Abbey National back in 2004. The Latin American expansion looks smarter. With limited pandemic damage, boss Ana Botin might close the bank’s hefty 50% discount to book.

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Banco Santander on July 29 reported a 10.8 billion euro loss in the first half following non-cash impairment charges of 12.6 billion euros. Those related to UK and U.S. assets, plus a 2.5 billion euro downwards revaluation of tax credits. Excluding one-off costs, Spain’s largest lender reported a 49% year-on-year decline in pre-tax profit to 3.8 billion euros, mostly due to a 63% increase in bad debt provisions to 7 billion euros.

For the first six months of the year, Spain’s largest lender reported a 49% annual decline in underlying pre-tax profit to 3.8 billion euros, mostly due to a 63% increase in net bad debt provisions to 7 billion euros.

The lender’s fully loaded core common equity Tier 1 capital ratio rose by 26 basis points to 11.84% over the quarter. The bank’s 2020 CET1 target is between 11%-12%.

Santander reported an underlying annualised return on tangible equity of 5.4% for the first-half, excluding exceptional costs, down from 11.68% over the same period last year.

Separately, Santander said it was proposing the payment of a scrip dividend, payable in new shares, equal to 10 cents per share for 2019, to be paid this year.

The bank said it intends to resume paying a cash dividend as "soon as market conditions normalise, subject to regulatory approvals and guidance”.

Santander shares were down by 1% at 2.03 euros by 0832 GMT on July 29.

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