Spanish Bank Banco Santander saw net losses worth €11.1 billion (S$17.9 billion) in Q2 COVID-19 markdowns, a record dip in its in 160 years of service, and the worst blow to Europe’s banking sector suffering the consequences of the Coronavirus Pandemic.
Santander, Eurozone’s number two in the Banking sector by market value recorded a €12.6 billion loss after the uncertain economic future pushed it to take unprecedented measures.
This is the worst blow for Europe’s banking industry amid a global health crisis that has seen lending firms reserve billions to prepare for bad credit, among other parallel measures to protect their bottom line.
Even pre-pandemic, Banco Santander’s kept the largest reserve to cover risks tied to dealing with developing markets like Mexico & Brazil and its Car Loan offerings in the United States.
The bank has also reserved €2.5 billion to cover the recovery of tax-deferred assets. However, these larger provisions are still balance sheet matters and won’t significantly impact the institutions’ financial reserves or cash flow. The ratio of non-performing loans in the bank has also dropped.
From an underlying perspective, Banco Santander performed better than predictions, leading to an underlying turnover of €1.5 billion to beat analyst estimates of €944 million. Its core revenue matched analyst predictions, whereas expenditures exceeded estimates at €5.1 billion, a drop from €5.8 billion in 2019.
Shares for Santander dipped 2.2% in Madrid Stock Markets. On the whole, 2020 has seen the bank record a 45% dip in market value, placing it in the list of Eurozone’s poorly-performing banks.
Many economies worldwide are yet to feel the real economic repercussions of the global health crisis later in the year when federal relief funds run out.
Over 1/3 of the bad debt provisions at Banco Santander will affect its UK business. It has transformed into a consumer loaning platform by swallowing players like Leicester and Abbey National and Alliance. Its US-based car financing business, funds customers with bad credit backgrounds.
The Spanish bank reserved €1.6 billion in Q1 explicitly for Coronavirus-related losses, increasing the total kitty to a first-time €3.9 billion.
Banco Santander is not the only financial institution soaking away billions in anticipation of loan losses. Large institutions worldwide, and not only the Eurozone, have taken similar steps as the future remains blurry.
Author Bio:- Payment industry guru Taylor Cole is a passionate payments expert who understands the complex world of merchant accounts and helps retailers compare merchant services. He also writes non-fiction, on subjects ranging from personal finance to stocks to cryptopay. He enjoys eating pie on his backyard porch, as should all right-thinking people.