Virus Pushes Santander Into First Annual Loss

Spanish banking giant Santander posted its first ever annual loss in 2020 due to restructuring costs and provisions to cope with the coronavirus crisis

Madrid, (APP - UrduPoint / Pakistan Point News - 3rd Feb, 2021 ):Spanish banking giant Santander posted its first ever annual loss in 2020 due to restructuring costs and provisions to cope with the coronavirus crisis.

The bank reported a net loss of 8.77 billion euros ($10.57 billion), in line with forecasts for a loss of around 8.65 billion euros from analysts polled by Factset.

"This year has been without a doubt one of the most difficult in Santander's history," executive chairman Ana Botin told a news conference.

In the fourth quarter however, the bank achieved a profit of 277 million euros, though that was well below the profit of 526 million euros expected by analysts.

Banks across Europe are struggling to cope with record low interest rates, a shift towards online banking and an economic downturn sparked by the pandemic that has forced them to cut costs.

Dire global economic conditions forced the bank to downgrade the value of several subsidiaries, particularly in the United Kingdom.

In addition, Santander set aside more than 12 billion euros in provisions to cover the risk of unpaid loans, up by 47 percent from the previous year.

The results were also exacerbated by costs stemming from the restructuring of its Spanish operations.

Santander reached an agreement with unions in December to cut almost 3,600 jobs and close more than 1,000 branches in its home market. It had already cut 3,200 Spanish jobs in 2019.

Santander's Latin American business showed the strongest performance, offsetting weakness in Spain and Britain.

"South America remains our growth engine, driven by Brazil," said Botin.

The region accounted for 42 percent of its operating profit, with Brazil alone representing 30 percent, while Europe contributed 27 percent and North America 21 percent.

While Brazil has been hit hard by the pandemic, with the world's second-highest death toll after the United States, Santander said it was "optimistic" about its performance there in 2021.

"It is a very big country, certain areas are in a better situation than others. Brazil is also in the process of getting vaccinated," Botin noted.

Vaccination was "the most important economic policy for 2021", she said earlier in a statement.

"We will not let down our guard, but I define my view as one of realistic optimism. A successful roll out of the vaccine will act as a strong catalyst for economic recovery." Santander said it had seen signs of recovery during the second half of 2020, when restrictions put in place to try to curb the spread of the virus were less strict in many nations.

Meanwhile, Botin ruled out any mergers or acquisitions, as Spain's third-largest lender, Caixabank, merges with number four Bankia.

"We don't have any consolidation plans in Europe or elsewhere," she said.