Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Banco Santander SA (SAN, Financial) reported a record profit of EUR 3.3 billion for Q3 2024, a 12% increase compared to Q3 2023.
- The company achieved a 14% increase in profit for the first nine months of 2024, reaching EUR 9.3 billion, supported by strong customer revenue growth across regions.
- Efficiency improved by 229 basis points, with a RoTE increase to 16.2%, indicating better operational performance.
- The balance sheet remains solid with a CET1 ratio of 12.5%, comfortably above the 12% target, even after Basel III implementation.
- Banco Santander SA (SAN) continues to enhance its digital platforms, improving customer experience and operational efficiency, as seen in the successful deployment of its global app in multiple countries.
Negative Points
- Loan loss provisions grew in line with average lending, indicating potential concerns about credit quality.
- The company faces challenges in managing interest rate sensitivity, particularly in Europe and Brazil, which could impact future NII.
- There is uncertainty regarding the financial impact of a recent UK motor finance ruling, which could affect future financial results.
- The NII in current euros is expected to decrease slightly in 2024, reflecting challenges in managing currency fluctuations and interest rate environments.
- The trading income in Brazil has been weak, impacted by market volatility, which could affect overall revenue performance.
Q & A Highlights
Q: Can you provide more details on the NII performance and expectations for the coming quarters?
A: Hector Grisi Checa, CEO, explained that NII in constant euros is up 1%, with the impact of Argentina affecting current euros. The sensitivity of the balance sheet to rate changes is mainly in retail and commercial business, with proactive management to reduce sensitivity. Jose Cantera, CFO, added that Argentina's exchange rate adjustments significantly impacted NII, but measures have been taken to mitigate rate sensitivity, expecting NII to rise in constant euros in 2025.
Q: What is the outlook for cost performance and efficiency improvements?
A: Hector Grisi Checa emphasized that the focus is on changing the operating model rather than cost-cutting. The One Transformation initiative is driving structural efficiency gains, with costs growing less than half of revenue growth. The efficiency ratio is expected to improve further, with a target of maintaining cost to income around 42% in 2024.
Q: Can you provide insights into the potential financial impact of the UK motor finance ruling?
A: Hector Grisi Checa stated that it is currently not possible to predict the financial impact reliably, but it is not expected to be material for the group's financial position or affect the 2024 financial targets. The guidance of above 16% RoTE for 2024 remains unchanged.
Q: What are the expectations for loan growth in Brazil and its impact on NII?
A: Hector Grisi Checa explained that the focus in Brazil is on profitability, changing the mix, and increasing the number of clients. NII is expected to grow around mid-teens by the end of 2024, with further growth in 2025. The strategy includes improving funding through increased deposits and maintaining a stable cost of risk.
Q: How is Banco Santander managing capital generation and potential excess capital?
A: Hector Grisi Checa highlighted the shift towards a model that uses less capital to generate profits, focusing on becoming the number one bank for clients. This approach is expected to lead to better capital generation, with the potential to accumulate more capital. Jose Cantera added that the bank is not affected by the output floor and expects to mobilize EUR35 billion to EUR55 billion in risk-weighted assets annually.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
