Spain’s Santander reported a record net loss of €11.1bn in the second quarter, taking the biggest hit yet for a European bank dealing with the coronavirus crisis which it tried to offset with lower costs.
The eurozone’s second-biggest bank by market value said it had booked one-off charges worth €12.6bn as the economic deterioration caused by the Covid-19 pandemic forced it to writedown previous acquisitions, mainly in Europe.
Santander’s core markets spanning Brazil to Spain have been some of the hardest hit by the pandemic, with weaker emerging market currencies exacerbating the pain.
Of the total impairments, €10.1bn are related to goodwill and €2.5bn in tax breaks.
The bank said impairments would have no impact on its capital levels, which rose to over 11.4% in June from 11.3% in March with the full implementation of new accounting standards.
Excluding one-offs, underlying attributable profit fell 27% to €1.53bn against the same quarter a year ago.
Analysts at UBS said the cost performance was better than expected but called the results “a messy set of numbers”, confirming the negative direction for revenues in most units and the likely rise of loan loss provisions in the second half.
Santander said the group was ahead of its cost-savings plan, with operating expenses down 5% year on year in real terms and the European region achieving more than €300m in costs efficiencies in the first half, 75% of the 2020 target.
Net interest income, a measure of earnings on loans minus deposit costs, fell 14% to €7.72bn due to pressure from low interest rates, while revenues fell 15% to €10.46bn.
Santander chairman Ana Botin said the bank was committed to raising its return on tangible equity to 13%-15% in the medium term and would provide an update on its strategic plans in the coming months.
Santander said it was proposing a scrip dividend, payable in new shares, this year equivalent to 10 cents per share for 2019, after the ECB recommended eurozone banks did not pay cash dividends until the end of 2020.
The bank said its board intended to resume paying a full cash dividend as “soon as market conditions normalise, subject to regulatory approvals and guidance”. Reuters