Ana Botin goes against the market and forecasts record profits

Banco Santander doesn’t see it peaking its profits. Ana Botín, the group’s president, made it clear: “If 2023 was a good year, then 2024 will be better” This is how clearly Botin expressed himself during the presentation of the company’s results for 2023. Although they do not name forecast figures, they did not say that next year profits will start “from 12”. Everything indicates that this figure will exceed 12 billion euros. In 2023, the company’s profit amounted to 11,076 million euros.

With this statement, Ana Botin goes against the market. Analysts estimate Spanish banks will perform worse in 2024, especially because they will have no push to raise rates as the European Central Bank is forecast to cut the price of money this year. The President of Banco Santander recognizes that 2024 will be “difficult” year because they see the economic downturn and geopolitical risks, but they are confident that the group’s numbers will improve. “This is an ambitious plan, but we are confident that we will implement it,” he said.

“We don’t give a number, but we give the ingredients so that everyone can cook paella the way they like best, with meat or fish,” he emphasized. To achieve this goal, the provided targets rotate around four axes. One of the main focuses is to improve post-closing profitability with an ROE of 12% and ROTE of over 15.1%. In turn, according to the president, efficiency will fall below 43%.

This improvement in earnings will occur despite lower rates due to geographic diversification of the business. In fact, the markets in which Santander is present are not in the same economic cycle as Europe. “We have markets that tend to have different cycles. This is diversification, which is very positive from a capital perspective,” said Botin, who estimates that in 2024, “Europe will throw less and America will throw more.” The president sees Mexico, Brazil and the United States as markets with “great potential and growth prospects.”

Botin isn’t the only one who believes in these historic benefits for 2024. Hector Grisi, indicates that the financial institution does not expect “any signs of deterioration in credit quality in any of the business units.” “It is important to emphasize that credit quality is diversified across segments, products and countries.”

In the case of Spain, Ana Botín also does not believe that the maximum has been reached. In fact, Grisi assured that commercial and mortgage lending to households was resumed in January this year, so they expect 2024 to be positive in this regard. “The last quarter of 2023 for mortgages in Spain was better than expected. There is net growth in mortgages, and in 2024 we will have a positive balance sheet. In addition, the commercial dynamics are positive,” the CEO noted, adding that corporate companies need more time to improve.

“Our goal is to create the best bank in Europe, where customers and our teams feel connected to Santander and create value for our shareholders and society in a sustainable way,” the bank said in its results. To this end, they are focused on improving the customer experience, developing an omnichannel strategy and increasing the value of our interactions towards a shared vision of a digital bank with branches; expand its activities by building on the Group’s best assets and leveraging its unique position resulting from its scale and geographic diversification.

Likewise, they are also looking to improve efficiency by introducing a common operating model based on simplification, which leverages the Group’s global scale by moving towards common platforms and services and becoming a more agile organization.

Worst results

Javier CabreraAn XTB analyst says Banco Santander’s results were better than expected, which “gives the Spanish banking sector some breathing room.” The company managed to improve its performance compared to the same quarter of the previous year, but investors are worried about the deterioration compared to the third quarter of 2023. However, the company also managed to improve its performance compared to the previous quarter, which gives peace of mind to the market and confidence in the sector.

XTB’s analyst team sees more solid results than expected, but “with some numbers that make us think 2024 will be much more challenging than 2023.” In particular, the reduction in net interest margin (it increased from 2.82% in the third quarter to 2.76% in the fourth) and net profit in Europe lower than expected, “these are signs of weakness in one of its core markets, reflecting that falling interest rates will weaken growth this year, despite the company’s estimates.” It also benefited from tax incentives for leasing electric vehicles in the US, and without them it would have suffered losses in the country.

However, they expect rates to remain at relatively higher levels in the coming years than in the previous decade, so “the outlook for the sector over the next 3-5 years is good.” Santander shares remain down more than 4% in 2024 despite today’s gains.