The lender Santander announced that its net profit for 2022 increased by 18% to touch a record high of 9.6 billion euros ($10.6 billion) due to increased lending, even though the good financial performance was eclipsed in the last quarter of last year as provisions for made by the bank to hedge for economic uncertainty was increased by more than two folds by the bank. 

The eurozone’s second-largest lender by market capitalization reported a net profit of 2.29 billion euros from October to December, up about 1% year on year and exceeding the 2.07 billion euros forecast by analysts in a Reuters poll.

Higher interest rates and revenues, the addition of 7 million new clients to its global customer base, and a strong performance at its Corporate and Investment Bank unit boosted net profit in 2022, which exceeded the 9.39 billion euros expected by analysts.

However, loan loss provisions increased 106% year on year to 3.02 billion euros in the fourth quarter, primarily in the United States and Brazil, falling slightly short of analysts’ forecast of 3.08 billion euros.

Santander said in a statement that “updated macro assumptions… given the economic uncertainty” was the reason for it allocating  additional provisions in the fourth quarter of last year. 

The bank’s cost of risk – the cost of managing credit risks and potential losses – increased to 99 basis points at the end of September, up from 86 basis points at the end of September, but remained below the 100 basis point target for the year.

The cost of risk is expected to rise but remain below 120 basis points in 2023.

Hector Grisi was appointed CEO of the bank at the beginning of the year to oversee the bank’s digital transformation amid the economic uncertainty that is rattling the entire industry.

Higher borrowing costs are beginning to benefit European banks.

Net interest income – earnings on loans minus deposit costs – increased 17% to 10.2 billion euros in the third quarter, broadly in line with the 10.15 billion euros predicted by analysts. For the entire year, NII increased by 16%.

(Adapted from Investing.com)

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