Santander, the euro zone's biggest bank by market value, reported net profit of 1.87 billion euros ($2.05 billion) in the first three months of the year, well ahead of analysts' forecasts for 1.77 billion euros in a Reuters poll. In Brazil, whose share of the bank's profits has jumped from 21 percent to 26 percent since the end of 2016, net profit rose for the fifth quarter in a row, up by almost 80 percent on underlying growth and the appreciation of the real.
Net interest income, a measure of earnings on loans minus deposit costs and a key driver of the bank's returns, improved for the fourth consecutive quarter in Brazil after earnings there tumbled in 2015 due to a deep recession. Strength in Brazil has helped it through a squeeze on lending margins in Europe that is pressuring its peers, and a slip in profit in its second-largest market Britain due to the depreciation of the sterling since the Brexit vote.
Santander boss Ana Botin on Wednesday struck an optimistic note and said the bank expected growth in all of its principal markets this year. "The environment keeps offering challenges for the financial sector, but the perspectives for Santander are positive," Botin said in a statement.
Overall, Santander's NII improved for the third quarter in a row after rising 10 percent to 8.4 billion euros on still lower funding costs, Santander said on Wednesday as it opened Spain's bank reporting season. Analysts had expected NII of 8.17 billion euros for the quarter. Santander shares have outperformed Europe's STOXX banking index over the past year with a 40 percent rise. In Britain, Santander's profit fell 8 percent over the quarter but the bank said it would have risen by 3 percent without taking into account the currency swing.
Profit from its banking activity in Spain, its third largest market, rose 18 percent thanks to greater fees from its high-yielding flagship 1-2-3 current account. Santander reaffirmed its 2018 targets such as boosting its fully-loaded core capital ratio, a closely watched measure of a bank's strength, to just above 11 percent, after it ended the quarter with a ratio of 10.66 percent.