The lower provisions to face losses, the growth of the business and the lower taxes explain the improvement in the result
The Santander won 8,124 million euros in 2021, its highest profit since 2011 and that contrasts with the losses of 8,771 million that it suffered in 2020 after the pandemic forced it to lower the valuation of several subsidiaries and reduce their rights to lower tax payments (deferred tax assets) at a cost of 12,500 million. The number has been above expectations of analysts, who forecast profits of just under 8,000 million. Excluding the extraordinary impacts (those mentioned and the provisions to be made in 2020 and 2021), the result would have been 8,654 million, compared to 5,081 million in 2020 and 8,252 million in 2019.
The main driver of the profit improvement has been the sharp drops in provisions to face future losses in value and non-payment of assets (-37%, up to 7,436 million), after the extraordinary effort made by all banks in 2020 to protect themselves against the uncertainty about the impact that covid would have. In fact, the group chaired by Ana Botín has allocated 750 million of the 2,500 million that it had reserved in that anticovid piggy bank to improve the result of 2021, since the economies where they operate have grown more than expected.
The other fundamental factor that has caused the improvement in results is the increased activitywith more than five million new customers (up to 152 million), a growth of 4% credit and 6% deposits. This allowed the income grow a 4.8%, up to 46,404 millionwhich was consistent with a smaller increase in expenses (1.3%, to 21,415 million).
The third item was lower payment of corporate tax (4,894 million, -13.1%) Despite the increase in profit, a relative year-on-year drop caused by the extraordinary tax payment of 2,500 million that it had to make in 2020 by recognizing that it would not be able to take advantage of part of its rights to lower tax payments in the future. The entity, in any case, has ensured that its effective tax rate is 33%.
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The delinquency, for its part, remained stable last year: it stood at 3.16%, 0.05 points below the level of the previous year. The capital has risen in twelve months from 11.89% to 12.12%, in line with the bank’s target of around 12%, while the cost effectiveness on capital stood at 9.66% (11.96% on tangible capital, ROTE).
South America contributed 31% of ordinary profit, North America 29%, Europe 28% and Digital Consumer Bank 12%. The countries that contributed the most benefit to the group were U.S (2,326 million) and Brazil (2,325 million), ahead of United Kingdom (1,570 million). Spain It was in fourth place, with 957 million euros, 85% more than in 2020.