Santander profit beat overshadowed by weak quarter in Brazil

By Jesús Aguado

MADRID (Reuters) - Spain's Santander on Tuesday beat forecasts with a 1% rise in first-quarter net profit as a strong performance in Europe offset weaker trade in Brazil and the United States.

Its net profit rose to 2.57 billion euros helped by higher lending income and despite a hit of 224 million euros from a new tax in Spain.

That topped the 2.45 billion euros expected by analysts polled by Reuters, while excluding the tax, profit rose 10%.

Provisions rose 37% to 2.87 billion euros, in line with expectations.

Santander has relied on Latin America in the past to cope with tough conditions but banks across Europe are now benefiting from higher interest rates.

Santander's underlying net interest income rose 15% to 10.19 billion euros.

However in Brazil, its main market, net profit fell 25% due to a rise in costs driven by inflation and a fall in net interest income.

Spanish brokerage Renta 4 said the bank's overall figures were "good" but highlighted a poor performance in Brazil where operating expenses (excluding exchange rate) rose by 11% and provisions were up 16%.

Underlying net profit in the United States fell 48.5% on higher funding costs in the auto business while provisions more than doubled.

In the UK, net profit rose 5%, while in Spain it rose 28% on higher lending income.

Santander shares were down 4% as of 0737 GMT.

Higher revenue helped Santander's return on tangible equity ratio (ROTE), a measure of profitability, to rise to 14.4% from 13.37% at the end of 2022. It reiterated its ROTE target of more than 15% by the end of 2023.

Overall deposits at Santander rose 6% in constant euros year on year despite the banking turmoil triggered by last month's failure of Silicon Valley Bank.

Some seasonal drawdowns in its investment bank in January led to a 2% fall in deposits versus end-2022 but the bank said deposit volumes started increasing again from February "reflecting positive business trends".

Liquidity coverage ratios remained stable at 152% in March compared to December.

Santander's Tier-1 fully loaded capital ratio, the strictest measure of solvency, rose to 12.2% from 12.04% in December.

($1 = 0.9048 euros)

(Reporting by Jesús Aguado; additional reporting by Emma Pinedo; editing by Inti Landauro and Jason Neely)