Historic loss at Santander as UK arm takes £5.5bn write-down

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2-min read
Ana Patricia Botin, daughter of Emilio Botin former president of the spanish Santander Bank, who died on last September 10, takes part on a extraordinary assembly of stockholders at Spanish Santander Bank, in Santander, northern Spain, Monday, Sept. 15, 2014. Ana Patricia Botin is the new president of Santander Bank. (AP Photo/Alvaro Barrientos)
Santander executive chair Ana Botin. Photo: Alvaro Barrientos/AP

Spanish banking giant Santander (SAN.MC) has slumped to a historic loss after writing off billions of euros on the value of its operations in the UK and US.

Santander said on Wednesday it lost €11.1bn (£10bn, $13bn) in the second quarter, the biggest quarterly loss in its history.

The historic loss was driven by increased provisions for loan losses, write-downs in deferred tax assets, and a write-down in the value of some past acquisitions.

“The past six months have been among the most challenging in our history,” Santander’s executive chairman Ana Botin said.

“The impact of the pandemic has tested us all and I am proud of how Santander has responded.”

Santander booked €12.6bn (£11.4bn) in write-offs in the second quarter, blaming “the deterioration in economic outlook due to covid-19”.

The bulk of the charge was linked to Santander’s UK business. The bank wrote down the value of its UK franchise by €6.1bn (£5.5bn). Santander did not specify what acquisitions were being devalued but its biggest deal in the UK was the 2004 purchase of Abbey National for £9bn. Santander also wrote down the value of its US business by €2.3bn (£2bn).

READ MORE: Barclays profit halves as it sets aside another £1.6bn to cover COVID-19 losses

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Botin said the write-offs had ”no impact on the group’s balance sheet strength” and said the “foundations of our business remain extremely strong, with capital at the top end of our target range.”

Santander’s balance sheet grew by 4% to €1.57tn. Income in the second quarter fell 13% to €10.7bn.

In line with other European lenders, Santander set aside billions to cover an expected surge in losses, which weighed on earnings. The bank set aside €7bn over the last six months to cover an expected spike in bad debt driven by the COVID-19 pandemic — €430m of that covers the UK.

Santander’s loss provisions are among the highest disclosed by a European bank so far. The group set aside €3.1bn in the second quarter alone.

That compares to a second quarter provision of £1.6bn at Barclays (BARC.L) and Deutsche Bank (DBK.DE) allocating credit loss provisions of €761m.

Shares in Santander dropped almost 5% in Madrid before recovering to trade down 3.1% by late morning. Santander proposed a scrip dividend, which may appease investors.