Banco Santander(US:SAN)2023-10-25 17:02Financial Data and Key Metrics Changes - The company reported a record profit of EUR2.9 billion for Q3 2023, a 20% increase compared to Q3 2022, and a profit of EUR8.1 billion for the first nine months of 2023, up 13% in constant euros [41][42] - Net interest income (NII) grew year-on-year by 9.3%, driven by higher rates and strong focus on managing spreads and profitability [7] - The return on tangible equity (RoTE) rose 126 basis points year-on-year to around 15% [48][54] Business Line Data and Key Metrics Changes - The auto business generated a 5% increase across the board, with strong performance in Mexico and the U.S., while Europe faced regulatory impacts [3] - Retail banking saw a year-on-year growth of around 5%, supported by an increase of 2 million active customers [3] - Corporate Investment Banking (CIB) revenue grew by 21% year-on-year, benefiting from a global presence and cross-border services [59] Market Data and Key Metrics Changes - In Spain, loan growth was weak, down 10% year-on-year, with the sector down 3% [102] - In Brazil, the cost of risk decreased for the second consecutive quarter, reflecting improving macro conditions [67] - The NPL ratio remained stable and in line with expected levels, indicating robust credit quality across the company's footprint [66] Company Strategy and Development Direction - The company is focused on its "One Transformation" strategy, aimed at creating a common operating platform to improve customer service, efficiency, and profitability [44][70] - The company expects to achieve a RoTE above 15% by year-end and continue improving significantly in 2024 [72] - The diversification of the business model is seen as a competitive advantage, leading to consistent profitable growth and value creation [48] Management's Comments on Operating Environment and Future Outlook - Management noted that the economic environment remains resilient, with strong labor markets supporting credit quality [66] - The company anticipates further upside potential for NII growth from portfolio repricing and potential interest rate hikes in Europe [71] - Management expressed confidence in achieving 2023 targets, with a focus on profitable growth opportunities [99] Other Important Information - The company has implemented a share buyback program of up to EUR1.3 billion, which will result in a total buyback of 9% of outstanding shares since 2021 [56] - The efficiency ratio improved to 44%, reflecting the benefits of the One Transformation initiative [54] Q&A Session Summary Question: Loan growth in Spain has been weak, can you comment on this? - Management acknowledged that loan growth in Spain is down 10% year-on-year, primarily due to cautious credit demand and significant mortgage prepayments [102][103] Question: What is the profitability outlook for 2024? - Management reiterated guidance for a net profit of around EUR10.9 billion for 2023 and expressed optimism for improved profitability in 2024, particularly in Europe, Brazil, and the U.S. [77][108] Question: Can you provide insights on asset quality in the U.S.? - Management indicated that asset quality remains stable, with improvements in repossession rates and expectations for better performance in the auto loan portfolio [79][130]