B2B Payments

Santander Earnings Hit By Carillion Collapse

Despite a 10 percent increase in overall earnings, Spanish bank Santander endured an earnings drop on Tuesday (April 24) following the release of its first quarter financial data.

Shares in the financial institution (FI) dropped 23 percent in the U.K., though Bloomberg reports highlighted the bank’s recorded strength in Latin America, particularly in Brazil. Santander saw a 26 percent profit increase in Spain following the acquisition of Banco Popular Español, while in Brazil — the bank’s largest market — earnings increased 7 percent in Q1, reports said.

But the U.K. is dragging down Santander’s performance, analysts warned.

“The U.K. poses the biggest threat to Santander’s goal of achieving double-digit EPS [earnings-per-share] growth in 2018,” said Bloomberg Intelligence analysts Arjun Bowry and Scott Mc Evatt, according to reports.

Corporate lending at its U.K. operations declined 4 percent year over year, totaling about $38 billion in the first quarter, according to Verdict reports, though its commercial banking unit saw an 11 percent operating income increase and a 15 percent pretax profit increase.

Santander global corporate banking operations dropped by 15 percent, with an 86 percent drop in profits; the bank linked this result to “an unnamed single-name impairment charge,” the publication said, as well as drawdowns linked to the collapse of U.K. construction contractor Carillion. Santander posted a $65.6 million increase in loan writedowns year over year in Q1.

Reports noted that Santander was part of a banking syndicate for Carillion that has been faced with criticism following the company’s downfall. Reports in March from The Guardian said lenders of the government contractor had known for months that the company was in trouble.

Santander, along with RBS, Barclays, HSB and Lloyds, reportedly commissioned FTI Consulting to examine Carillion’s financials, then approved of a nearly $200 million loan to the company. FTI reportedly found an “overstatement” of contract profits and highlighted significant losses on those projects.

In its earnings announcement, Santander U.K. said its corporate lending performance this year is expected “to be broadly consistent with growth in the corporate borrowing market.”

“Our lending growth to trading business customers will remain strong, with controlled growth in corporate real estate exposure,” it added, noting that corporate lending will likely continue to slow this year.

——————————

PYMNTS LIVE ROUNDTABLE: TUESDAY, JULY 14, 2020 AT 12:00 PM (ET)

Digital transformation has been forcefully accelerated, but how does that agility translate into the fight against COVID-era attacks and sophisticated identity threats? As millions embrace online everything, preserving digital trust now falls mostly on banks and FIs. Now, advances in identity data and using different weights on the payment mix afford new opportunities to arm organizations and their customers against cyberthreats. From the latest in machine learning for fraud and risk, to corporate treasury teams working in new ways with new datasets, learn from experts how digital identity, together with advances like real-time payments, combine to engender trust and enrich relationships.

TRENDING RIGHT NOW