Third Update - Santander Bank's third-quarter profit surged, but the good news was overshadowed by weak performance in its Brazil business.

Rewrite to highlight the Brazil business and add more financial report details throughout the article

Jesús Aguado

Reuters, Madrid, October 28 - Weak profitability in the Brazil market and increased provisions weighed on the robust 19% rise in third-quarter core net profit at Spain's Santander Bank SAN.MC — a performance mainly driven by M&A activity in the UK (link) and US markets. (link)

Europe's highest-valued bank by market capitalization achieved a core net profit of €3.85 billion ($4.28 billion) in the quarter, above analysts' average estimate of €3.75 billion.

For decades, Santander's diversified presence in 10 core markets has helped shield it from economic weakness in individual countries, but also exposed it to currency devaluation risks, especially in Latin America.

Recently, the bank sought to strengthen its position in developed markets by acquiring TSB (link) and Webster (link), expecting these moves to drive profit growth of over 40% in the next three years to exceed €20 billion (link).

In Brazil, the bank's second-largest market, net profit fell 15% year-on-year, partly due to a 23% increase in provisions. The risk cost — which measures potential losses — rose by 11 basis points from the previous quarter to 4.25%.

After President Luiz Inácio Lula da Silva's unexpected re-election (link), Citi said that an environment where interest rates are likely to remain elevated for longer would delay Santander Bank's normalization of non-performing loans, while slower economic growth could dampen loan demand.

Because Santander Bank's funding costs are closely linked to benchmark rates, it benefits from falling rates in Brazil.

In contrast, core net profit in the US and UK rose by 48% and 40% respectively, while in Mexico and Spain they increased by 21% and 19% respectively.

JPMorgan stated that performance in the UK and US exceeded expectations, while Brazil lagged behind.

At 09:17 GMT, Santander Bank's share price was down 3.3%. By Tuesday's close, the stock was up about 12% year-to-date.

Reiterates performance targets

The bank reaffirmed its targets for 2026 to 2028, including mid-single-digit revenue growth in 2026, cost reductions at constant exchange rates, profit growth, and maintaining a capital adequacy ratio between 12.8% and 13%. Due to the Webster acquisition, the capital ratio in September fell by 147 basis points, with the indicator then at 12.7%.

After accounting for €416 million in restructuring charges mainly associated with the Webster (link) deal, net profit attributable to shareholders dropped by 2% to €3.43 billion.

Total revenue in the third quarter grew by 12%, outpacing the 5% increase in costs. This improved the efficiency ratio from 42.8% at the end of June to 42.1%, and raised core return on tangible equity (ROTE) from 16.0% in the previous quarter to 16.8%.

Core net interest income (income from lending minus the cost of deposits) rose by 12% to €11.9 billion, while analysts had expected €12 billion. Fee income increased by 11%.

Core net profit at Santander Bank's retail banking division—the largest contributor to profit among its five global business lines—grew by 17%.

(1 US dollar = 0.8993 euro)

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