Santander profit sinks 82% due to strong provisions against COVID-19

MADRID, Apr 28 (Reuters) – The net profit of the Spanish bank Santander plummeted 82% in the first quarter of 2020 to 331 million euros, mainly due to extraordinary provisions of 1,600 million to prepare against the credit default that will result the coronavirus epidemic.

“This charge is based on an anticipated estimate of loan losses due to the pandemic,” Santander said in a press release. Its president, Ana Botín, recalled that it is not yet possible to predict the final impact of the health crisis, adding that the bank is in a solid position to face it.

The provisions against insolvencies, excluding the 1,600 million set aside to cover against COVID-19 -the respiratory disease caused by the new coronavirus that has already killed 23,521 people in Spain- increased by 6.3% year-on-year in the period to 2,309 million euros.

In global terms, provisions are 80% higher than in the first quarter of 2019.

Disregarding extraordinary provisions, first-quarter ordinary profit increased 1% to 1.977 billion euros, compared to the 1.8 billion average expected by analysts polled by Reuters.

Banks around the world are taking contingency measures to offset the risks of the pandemic. Americans have already provisioned billions of dollars to cover possible credit defaults and other European entities such as Credit Suisse and Deutsche Bank have recently done the same on the occasion of the announcement of results.

Santander has also increased its credit power thanks in part to the cancellation of the 2019 complementary dividend after a recommendation from the European Central Bank that allows entities to dedicate more capital to credit.

In terms of solvency, Santander closed March with a tier-1 core capital ratio of 11.58%, compared to 11.65% at the end of December.

The second largest listed bank in the euro zone registered a reduction of 2.2% to 8,487 million euros in the interest margin between January and March (the income that comes from interest for granting credit less the costs of deposits).

(Information from Jesús Aguado, Aida Pelaéz and Andrea Ariet; edited by Jose Elías Rodríguez)