Santander posts record profit in 2023 after rate hikes

MADRID — Spanish banking giant Santander posted a record 11.1-billion-euro ($12 billion) net profit for 2023 on Wednesday as higher interest rates and a rise in global clients helped to cushion the impact of a windfall tax.

The government of socialist Prime Minister Pedro Sanchez imposed a special tax on banks and energy companies last year to help households cope with soaring consumer prices.

Banco Santander's 2023 net profit was 15 per cent higher than in 2022, when it raked in 9.6 billion euros, and better than the 10.6 billion euros forecast by analysts surveyed by financial data firm FactSet.

The figures came after a very dynamic last quarter with profits of 2.9 billion euros, up 2 per cent year-on-year, despite a difficult context of high international tensions, notably in the Middle East. 

"2023 has been a pivotal year for Santander, in which we delivered record results and met all our targets in the right way," said Executive Chairwoman Ana Botin in a statement.

"I am confident that 2024 will be even better for Santander, with strong momentum across our global businesses, despite heightened geopolitical risks and a slowing global economy," she added. 

Spain was the biggest contributor to group profits with 2.4 billion euros, followed by Brazil (1.9 billion euros) then Mexico (1.6 billion euros) then Britain (1.5 billion euros).

The results also helped to offset a 54-per cent devaluation of the Argentine peso announced last month by the country's new president, Javier Milei.

Banco Santander said it would return 5.5 billion euros to shareholders.

European lenders have reported bumper earnings after central banks worldwide hiked rates in efforts to bring inflation under control. 

Retail banks in turn have raised rates on loans, including mortgages.

A heavyweight in the global financial sector, Santander pointed to dynamic activity in Europe where the sharp rise in interest rates set by the European Central Bank boosted revenues.

Net banking income, the equivalent of turnover, reached an all-time high of 43.3 billion euros last year, which was 12 per cent higher than in 2022 and in line with the expectations of FactSet analysts.

Five million new customers 

Santander also added five million customers last year, notably thanks to its online services, which raised its global total to 165 million.

This allowed the lender to increase its deposits by four per cent which offset the fall in profitability in North America and Brazil, which dropped by 20 per cent and 25 per cent respectively year-on-year, due to the effects of inflation and higher provisions.  Santander's results illustrate the robustness of the Spanish banking sector, which has racked in record profits over the past two years in a buoyant economic climate in Spain where the economy expanded by 2.5 per cent last year.

Also Tuesday, Spain's second-largest bank BBVA posted profits of 8 billion euros in 2023, in a figure 22 higher than a year earlier, which was also a record. 

Caixabank, Spain's third bank, is due to publish its results on Friday. 

2024 revenues seen growing

The results emerged a year after the government introduced a windfall tax on large banking groups that they had fiercely contested as unfair and likely harmful to their profitability. 

The measure, which was affects banks and energy companies, is expected to add nearly three billion euros to the state coffers over two years which goes towards funding a series of measures aimed at helping households cope with soaring prices. 

Last February, Botin said the tax would likely cost the bank between 220 million euros and 230 million euros in 2023, with the lender mulling legal action to challenge it. 

In view of its strong performance, Santander said it expected to see a further increase in revenues this year "despite heightened geopolitical risks and a slowing global economy".