Santander’s profits dented by €224mn hit from windfall tax

Santander said it paid a €224mn windfall tax bill as a controversial levy introduced by the Spanish government cost the country’s largest bank a sum equal to nearly 10 per cent of its first-quarter profits.

The payment left the Spanish bank with net profits that rose just 1 per cent year on year to €2.57bn in the first three months of the year. Rising interest rates boosted its income in Europe but also pushed up loan loss provisions in the US and South America.

The figures were better than expected by analysts, who had forecast a drop in earnings. But without the windfall tax bill, which covered the whole of 2023, Santander said its net profit would have risen by 8 per cent.

Spain’s Socialist-led government imposed a 4.8 per cent levy on banks’ income from interest and commissions for two years, arguing that rising interest rates have led to “extraordinary” profits to the sector. Spanish banks are challenging the temporary tax in the courts.

In the US market, which analysts are watching closely, Santander reported a 49 per cent drop in net profit to €300mn as it had to set more money aside for potential defaults on consumer car loans, a key pillar of its business. Profit in Brazil fell by 25 per cent due to higher loan loss provisions.

But the bank’s performance was better in its home market Spain, where profits increased by 28 per cent to €466mn thanks to rising interest income. In the UK, where consumer loans and customer deposits fell, profit edged up 5 per cent to €395mn.

Ana Botín, Santander’s executive chair, hailed “a strong start for the year” and highlighted how rising interest rates, new customers and more loans had driven a 13 per cent rise in income worldwide. The bank said its return on tangible equity, a key metric, had climbed to 14.4 per cent from 13.4 per cent in 2022.

Bankinter became the first Spanish lender to report the cost of the windfall tax last week when it said it paid €77mn for the full year. The temporary tax is due for 2023 and 2024.

María Dolores Dancausa, Bankinter’s chief executive, said: “If we had not had to pay the extraordinary tax, profit would have been . . . 60 per cent higher instead of 20 per cent, compared to the same quarter in 2022.”