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Santander Brasil Patience Pays off as Rebound Lifts Profit

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Banco Santander SA’s commitment to stick with Brazil even through recession is paying off as the country’s recovering economy and rising currency fuels a jump in the Spanish lender’s profit.

Net income from Brazil, Santander’s biggest market, jumped 77 percent from a year earlier after President Michel Temer’s efforts to boost the economy following the impeachment of Dilma Rousseff helped drive a rise in the currency.

Santander Chairman Ana Botin has defended the company’s business in Brazil over the last two years even as recession and political scandal weighed on the bank’s shares. Income generated by the South American also climbed a year earlier, even before the economic rebound started, helped by a rise in loans, fees and trades. Brazil now accounts for 26 percent of the group’s profit.

Botin said she expects to see economic growth in all of the bank’s 10 main markets, despite the Brexit vote and the effect of negative interest rates at home. The bank said earlier this month it plans to raise its dividend for a second straight year as it aims to do more business from its main retail banking activity.

Santander is expecting Brazil economy to grow this year and “the financial sector should do very well given that the financial penetration in Brazil is stil very low compared with more developed economies,” Chief Financial Officer Jose Antonio Garcia Cantera said in an interview with Bloomberg TV Wednesday.

Net income rose to 1.87 billion euros ($2 billion) in the first quarter from 1.63 billion euros a year earlier, the bank said in an emailed statement on Wednesday. That beat the 1.7 billion-euro average estimate in a Bloomberg survey of 10 analysts. Excluding the rising currency, net income from Brazil climbed 38 percent on customer growth and falling loan-loss provisions, the company said. The real is the world’s best performing currency over the last 12 months despite a recent decline driven by a graft probe.

“Good set of results for Banco Santander,” said Daragh Quinn, an analyst at Keefe Bruyette & Woods with an under-perform recommendation on the stock. “The Brazilian business has improved with strong margins, improved asset quality and lower provisions in local currency.”

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