Santander net profit rises 20% as interest rates hit record high

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Santander’s net profit rose 20 per cent year on year in the third quarter, as Spain’s biggest lender became the latest European bank to report strong results thanks to record-high interest rates.

The bank said on Wednesday it earned €2.9bn in net profit in the third quarter, beating the €2.8bn expected by analysts. Net interest income, the difference between the money lenders make on loans and pay out on deposits, rose 16 per cent year on year.

Eurozone banks have been boosted by the fast pace of interest rate increases by the European Central Bank, which has raised rates to an all-time high of 4 per cent.

With investors betting European central bank rates have peaked, many regional lenders are warning that net interest income will drop next year.

But Santander said its exposure to Latin American markets meant performance would remain strong into next year.

“While the external environment is increasingly uncertain, it is in these times that the strength of our model and our team is most evident,” said executive chair Ana Botin. “I am confident that we will achieve our 2023 targets given the positive momentum which we also expect to carry into 2024.”

Last month, Santander announced a 39 per cent increase in its dividend and a share buyback based on this year’s earnings. Once completed, the lender will have bought back 9 per cent of its shares since 2021.

Shares in Spanish banks were hit on Tuesday after Yolanda Díaz, who leads the Sumar coalition of leftwing groups, said she would push for an extension of the country’s windfall tax on banks and energy companies as part of negotiations to support acting prime minister Pedro Sánchez’s socialist party.

The tax introduced last year was designed to last for two years, but analysts speculated that a deal among the left-leaning parties would affect banks over several years.

Santander was hit with a €224mn tax bill at the start of the year, equivalent to 10 per cent of its quarterly profits. The next payment is due early next year.

Under Botin, Santander has been trying to capitalise on its global network, growing in areas such as wealth management and payments.

The Financial Times reported this month that it had set aside $250mn to expand its corporate and investment bank, having already hired more than 100 investment bankers this year.

Profits in Santander’s corporate and investment bank rose 22 per cent in the third quarter, while profits in its wealth management and insurance division rose 62 per cent compared with a year earlier.

Santander shares are up 18 per cent this year compared with 7.6 per cent for the European bank sector.