- Q2 net profit rises to 2.35 bln euros vs forecasts 2.38 bln
- Net loan loss provisions rise almost 50% year-on-year in Q2
- Brazil shows some pressure in lending income in Q2
- Botin warns of difficult environment
MADRID, July 28 (Reuters) - Santander on Thursday said its second quarter net profit rose 14% from the same period a year ago boosted by higher revenues in Europe and the Americas.
But the results also showed some ongoing deterioration in its asset quality, higher costs and higher provisions, especially in Brazil, its main market.
The euro zone second-biggest bank by market value booked a net profit of 2.35 billion euros up from 2.07 billion euros in the same quarter a year ago.
Analysts polled by Reuters expected net profit of 2.38 billion euros.
Overall, net loan loss provisions rose 49.5% in the second quarter compared with the same quarter a year ago, while the cost of risk, which measures the cost of managing credit risks and potential losses for the bank, rose to 83 basis points from a previous 77 points in March.
"Looking ahead, the economic context will likely be difficult for governments, central banks, businesses and individuals," Santander Chairman Ana Botin said in a statement.
Santander's diversification, especially in Latin America, has helped the bank cope with tough conditions for lenders in Europe since the financial crisis, where it has been cutting costs to cope with ultra low interest rates.
The efficiency measures in Europe coupled with ongoing interest rates hikes in its markets in the UK and Poland also buoyed second quarter earnings.
The bank has also benefited from higher interest rates in some areas mainly outside the euro zone and movements in local currencies in Latin America, but results in this region were also marked by rising inflation across emerging markets, especially in Brazil.
Inflationary effects, particularly in South America, led to an increase of 5% year-on-year in costs in constant euros in the first half at a group level.
Net interest income (NII) in Brazil, which accounts for almost a third of the bank's overall underlying profits, rose 18.9% compared with the same quarter a year ago. But at constant euros, NII fell around 4.9% compared with the previous quarter.
Cost of risk rose 32 basis points in Brazil to 426 basis points, while provisions rose more than 70% year-on-year in the quarter.
In the United States, net profit fell 22.6% to 507 million euros from a record 655 million euros recorded in the second quarter last year.
Reporting by Jesús Aguado; additional reporting by Emma Pinedo; editing by Inti Landauro and Jane Merriman
Source: Reuters