Santander reaffirms mid-term goals after second-quarter net profit climbs

By Jesús Aguado

MADRID, July 22 (Reuters) - Spain's Santander on Wednesday reaffirmed its mid-term and 2026 goals after second-quarter net profit rose due to a solid performance in Spain, Britain and its main global business units, which offset higher provisions.

The bank booked higher impairments in Argentina and Brazil, one of its main markets, partly overshadowing a 17% quarterly rise in underlying net profit to €3.77 billion, marginally above forecasts of €3.75 billion.

After restructuring charges of €250 million related to its acquisition of TSB in Britain, which closed at the end of April, the euro zone's largest lender by market value reported a 3% rise in attributable net profit to €3.52 billion.

Santander's diversification across 10 markets cushions local downturns, but exposes it to Latin American currency swings.

It recently expanded with the acquisitions of TSB in Britain and Webster in the U.S., which it hopes will boost profits by more than 40% in the next three years to above €20 billion.

Shares in Santander were up 1% by 0844 GMT, having risen 18% in the year to date.

LENDER REAFFIRMS TARGETS

The bank reaffirmed its medium-term targets, which for 2026 include mid-single-digit revenue growth and lower costs, higher profits and a capital ratio of 12.8-13%, compared to 14% at end June.

Its net interest income — a measure of earnings on loans minus deposit costs — rose 10% in the second quarter to €11.69 billion, against €11.47 billion expected by analysts, while fees rose 12%.

"NII dynamics look strong, and so do costs," brokers Jefferies said, adding that key market Spain, Britain and the U.S. were performing well, while Brazil was lagging.

Revenues rose 9% in the second quarter, outstripping a 2% rise in total costs and allowing the bank to maintain its efficiency ratio at 42.8% from the previous quarter.

Provisions rose 13% to €3.35 billion, also partly due to additional impairments of €39 million in compensation for mis-sold motor finance in the UK.

SPAIN AS DRIVER FOR GROWTH

In Spain, Santander's main market, underlying net profit rose 12% year-on-year in the second quarter, helped by a rise in lending supported by solid economic growth. In the UK, profit also rose 47%, thanks to two months' contribution from TSB.

In the U.S. and Mexico, underlying net profit rose 33% and 19% respectively in the quarter, while in Brazil profit was up 13% in the same period on higher loans.

Underlying net profit at its retail business, the main contributor to earnings of its five global units, rose 17% in the quarter, while corporate and investment banking business was up 22% and its wealth management unit rose 29%. Openbank fell 3% on higher provisions.

($1 = 0.7475 pounds)

(Reporting by Jesús Aguado; additional reporting by Emma Pinedo; Editing by David Latona and Jan Harvey)