Iñigo Vega (Jefferies) | Santander 3Q24 First Look – Solid Dynamics Despite Still Ongoing Neg. Argentine Impact
A 4% beat at bottom line, again impacted by negative adjustments in relation to Argentina. Ex-Argentina, net income was a 7% beat (5% beat at PBT). Revenue dynamics trending in line, with strong trading and other income and NII in line. Across the Group, better OpEx and CoR dynamics. Beats coming from key geographies, notably Spain and Poland, with misses in DCB and Corp Center. On track to hit FY guidance, which is maintained.
Santander reported 3Q24 attributable profit of €3,250m, which was 4% above company-compiled consensus of €3,119m. PBT was a 2% beat, with pre-prov profits in line. Revenue was a 1% miss, with NII and trading income a miss, but offset by better other operating income. Costs a 3% beat.
Ex-Argentina, attributable profit was a 7% beat, with PBT a 5% beat. Pre-provision profit was a 2% beat. Revenues were broadly in line and costs were a 2% beat.
- NII was 3% below consensus, down 2% q/q but flat year-on-year. This was negatively impacted by NII sequentially down quarter-on-quarter in Argentina given inflation linked bonds. Ex-Argentina, NII was broadly in line.
- Fee income was in line (slight beat ex-Argentina), with other operating income a beat at €185m versus consensus of €61m (or €295m versus €258m ex-Argentina). Trading income was a slight miss (5% beat ex-Argentina)
- Total costs were a 3% beat (2% beat ex-Argentina).
- Total impairment charge was a 3% beat versus consensus (2% beat ex-Argentina), driven by better asset quality across the key markets.
- Customer loans were 2% below consensus, down 1% quarter-on-quarter but up 1% year-on-year. Customer deposits were in line with consensus, flat quarter-on-quarter and up 1% year-on-year.
- Capital: CET1 ratio of 12.5% was in line with consensus, with CET1 a 1% miss but RWAs 1% better. 18bp of regulatory headwinds in the quarter, out of the 20-30bp guidance for 2H24.
- Guidance maintained: 2024 Revenues expected to grow HSD year-on-year, 2024 efficiency ratio expected to be close to 42% and 2024 RoTE expected > 16%, CoR in 2024 expected c120bp, CET1 ratio expected to be >12%.
Attributable profits by key market:
- Spain: 41% beat (€312m, on strong NII, trading income and asset quality), UK: 7% beat (€24m), Portugal: 10% miss (€26m, on an NII miss versus consensus); Poland: 25% beat (€52m, on strong volume growth and margin management, strong fees and asset quality, with no further provisioning for FX mortgages); Brazil: 1% miss (€7m, with stable top-line growth in local FX, at >12% year-on-year. Slow-down on loan growth in the quarter with cost of risk stable at 4.8% but provisioning down by 8ppt sequentially. Pre-tax up 9% quarter-on-quarter); USA: 6% beat (€12m); Chile: 12% beat (€19m, +10% quarter-on-quarter growth in pre-tax as 6.3% quarter-on-quarter top line growth feeds directly into bottom line on both flattish opex and LLC. Loan book flat year-on-year. Cost of risk stable at c1%); Mexico: 5% beat (€17m, with top line slowing down to +6% year-on-year (from +7.6% in Q2 24); Pre-tax up 1.6% quarter-on-quarter and loan growth stable at 6%. Cost of risk also stable at 2.7%), DCB: 15% miss (€44m, with NII still under pressure and slightly higher provisioning); Corp Center: 70% miss (€166m, on weak trading income (strong 2Q comparison given a €50m positive one-off in 2Q) and higher other losses on opportunistic provisioning and contribution to the Santander Foundation); Other 44% miss (€62m).
