Santander profits buoyed by US cars and UK housing

Banco Santander SA updates

Booming demand for used cars in the US and houses in the UK helped drive a sharp increase in second-quarter profits at Banco Santander, which said it was on track to beat one of its main targets for the year.

The Spanish banking group reported a net profit of €2bn for the three months to June, compared with a loss of more than €11bn in the same period last year when it took substantial writedowns on the value of several businesses.

Ana Botin, executive chair, said on Wednesday the bank had enjoyed “another very strong quarter”, and after a similarly positive first quarter the bank expected to beat its original aim for an annual return on tangible equity of between 9 and 10 per cent. 

Quarterly revenues climbed 6 per cent year on year to €11.3bn. Expenses were affected by higher inflation but still increased more slowly than revenues, growing 4 per cent.

Analysts and investors have long questioned Santander’s commitment to the US market, particularly as European rivals such as BBVA and HSBC scale back their operations there. However, the country generated the largest underlying profit among all of Santander’s key markets in the first half of 2021, and it strengthened its commitment in recent weeks with a series of acquisitions. 

Santander’s US consumer finance arm is one of the country’s top 10 auto lenders, and surging prices for used cars pushed underlying net profit, the company’s preferred measure, up more than fivefold to €1.3bn

Earlier this month the group said it would buy the remaining 20 per cent of the consumer finance business that it does not already own for $2.4bn, and also announced plans to buy to fixed-income broker Amherst Pierpont to strengthen its investment banking division.

The Spanish group, which is traditionally known for retail and business lending, has set its sights on becoming a key player in investment banking to offset pressure from low interest rates and diversify its business.

Besides the US, Santander’s strongest growth in the second quarter came in the UK, where it is one of the country’s largest mortgage lenders, as it benefited from a booming property market. The housing market held up much better than expected throughout the coronavirus pandemic and monthly property transactions hit a record high last month ahead of the end of a temporary stamp duty holiday, according to HMRC data.

The company is seeking a successor to long-serving UK chief Nathan Bostock. Bostock is due to step down towards the end of this year to take on a new role overseeing Santander’s investment platforms, but the group provided no update on his replacement on Wednesday.

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