(Bloomberg) -- Banco Santander SA’s third-quarter earnings showed further signs of a decline in interest income amid a global shift to lower rates, weighing on an otherwise solid quarter.
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The Madrid-based bank posted net income of €3.25 billion ($3.5 billion) in the three months to September. While that was better than analyst estimates, it came with a quarterly drop in interest and fee income.
The announcement late Monday that the bank would delay release of its UK earnings following the recent court ruling on banks’ compensation to customers of car loans also overshadowed the results. Santander shares were down 2.4% at 9:47 a.m. Madrid time.
The retail-focused bank is among European firms potentially most affected by declining central-bank interest rates, after two years of hikes helped bring record profits. Executives are seeking to soften that blow with higher prices for services, as well as turning to job cuts and risk transfers in a bid to control costs.
“We remain very constructive about the future of our operating income and our profits next year,” Chief Financial Officer Jose Garcia Cantera said in a interview with Bloomberg TV on Tuesday. The UK motor finance ruling would not be material for the group, Cantera said.
Earnings were affected by a “notable impact from currency depreciation,” the bank said in its report. “The headline net interest-income miss is attributable to Argentina, given the weaker exchange rate used as part of the hyperinflation accounting adjustments” Goldman Sachs Group Inc. analysts including Chris Hallam said in a note.
Confirmed Targets
In a statement, Chairwoman Ana Botin said the bank would maintain its momentum for the rest of the year and into 2025. The bank confirmed its previous targets and capital return policy. The lender is targeting net income this year of more than €12 billion.
Cantera said the impact of the UK motor finance ruling would be lower than €600 million in net income. Royal Bank of Canada estimated an impact of £1.1 billion (€1.3 billion).
The biggest contributors to net income were the Spanish and Brazilian units, with €1.1 billion and €630 million respectively. Profit was down quarter on quarter in countries including the US, Mexico and Portugal. Profit in the US was 44% lower due to higher costs and provisions.
Santander is making a major bet on the US market, through the recent launch of its digital branch Openbank and the hiring of hundreds investment bankers.
--With assistance from Macarena Muñoz.
(Updates with further details including shares performance in third paragraph. A previous version corrected the day in the second paragraph.)
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