Santander seeks to buyout Brazil unit as bank reports 8% rise in profits

Banco Santander has offered €4.7bn in shares for a 25% stake in its Brazil unit, in a bid to complete a buyback of the South American business.

In back-to-back filings, Spain’s biggest bank also reported that first-quarter profit rose 8% to €1.3bn from a year earlier.

Profits rose in Spain and the UK while earnings from Brazil fell. Faltering growth in Brazil has put pressure on profits from South America as Spain climbs out of a six-year economic slump and the UK economy outshines other G7 industrialised countries. Britain now contributes as much to Santander’s earnings as Brazil, about 20%.

“Everybody shares the view that there are some short-term headwinds in Brazil, but we are certainly confident about the long-term prospects,” chief executive Javier Marin said. “Financially it’s very attractive.”

The bank proposed to issue up to 665m shares to buy about 25% of its Brazilian unit that it doesn’t already own, paying a 20% premium. The offer is equivalent to 15.31 reais (€4.98) per Santander Brazil unit and the transaction would conclude in October.

Earnings from the UK, a division run by Ana Patricia Botin, daughter of chairman Emilio Botin, rose 68% from a year earlier to €376bn. Lower funding costs and efforts to win market share in higher-yielding loans to small and mid-sized companies have helped Santander increase net interest income in the UK.

Profit from Spain rose 24% to €251m from a year ago on improved net interest income, which climbed 4% from the fourth quarter, the bank said.

Lending in Spain fell 11% from a year ago as the bad-loans ratio there rose to 7.6% from 7.5% in December.

“The results look fine and they are doing a good deal in Brazil — so everything adds up for Santander today,” said Daragh Quinn, an analyst at Nomura International, said.

- Bloomberg