Santander net profit falls 10 percent, hit by restructuring costs

By Jesús Aguado

MADRID (Reuters) - Santander reported a 10 percent fall in first-quarter net profit on Tuesday as restructuring costs in Britain and Poland hurt the bank's results.

The euro zone's biggest bank by market value reported net profit of 1.84 billion euros (£1.6 billion) against forecasts of 1.88 billion euros in a Reuters poll.

Steady growth in Latin America business volumes, where it makes 45 percent of its earnings, was not enough to offset charges of 108 million euros in Britain and Poland and other costs related to asset sales and disposals.

Charges in Britain and Poland were due to ongoing cost cuts involving branch closures in those countries

Shares in Santander fell around 1 percent. Analysts said results were broadly in line though Goldman Sachs highlighted worse than expected earnings in Britain, the bank's third-biggest market where it is facing fierce competition for lending, higher costs and uncertainty over Brexit.

Net profit there fell 36 percent following a 66 million euro charge for restructuring costs. Excluding this impact, underlying profit fell by 15 percent, the bank said.

Earlier in April, Santander offered to take full control of its Mexican business as Spanish banks chase potentially higher returns in Latin America.

The move is part of efforts to focus on emerging economies to boost profitability while cutting costs to counter squeezed margins in mature European markets.

In Mexico, where it aims to make around a tenth of its profits after the transaction, net profit rose 18 percent.

While record-low interest rates have prevailed across the euro zone for the past 10 years, benchmark rates in Mexico stand at 8.25 percent, the highest since the 2008 crisis.

BRAZIL GROWTH DRIVER

In the United States, where it makes 7 percent of its earnings, net profit rose 46 percent thanks to higher lending and leasing volumes at its consumer business.

In contrast, its Spanish rival BBVA on Monday said net profit fell 35 percent due to extraordinary impairments due to slower growth expectations.

Net profit in Brazil, where it makes 29 percent of earnings, improved 7 percent on the year thanks to steady loan growth despite some pressure on prices.

Overall, net interest income, the profit a bank makes on its core lending activities, was 8.68 billion euros, up around 3 percent from a year ago but down 4 percent against the previous quarter. Analysts expected NII to come in at 8.77 billion.

In Spain, the bank's second-biggest market, net profit fell 11 percent, while separately, Caixabank reported a 24 percent decline on lower trading income.

Santander finished the quarter with a core tier-1 capital ratio of 11.25 percent compared to 11.3 percent at end-December. Taking into account regulatory impact of 23 basis points with the full implementation of the new accounting standard IFRS-9, capital ratio stood at 11.02 percent.

(Reporting By Jesús Aguado; Editing by Paul Day/Kim Coghill and Emelia Sithole-Matarise)