Santander to use quarterly earnings to write off 3.183 billion

Along with many of its competitors, Santander has written off additional debt in anticipation of new capital requirements brought about by imminent financial reforms. The bank will dedicate nearly all of its Q4 2011 earnings to provisions. It will send some to the business fund of its Portuguese branch and 1.812 billion to increase coverage of its real estate assets by between 32% and 50%. In total, the additional deposits have risen to 3.183 billion euros, making Santander's yearly earnings drop by 35% to 5.351 billion euros.

Santander president Emilio Botín, without yet knowing all the details of the upcoming financial reforms, approved calculations from various banks that figure Santander's extra provisions are around 5 billion euros. That said, what Botín has insisted on most is that this reform is only significant if it "goes in the right direction" and is completed as soon as possible.

In Botín's opinion, the provisions "ought to be made up in their totality this year, each lender should raise its own provisions and limit the use of public funds, and unsustainable lenders should be sold." He also assured that Santander will complete all write offs during 2012 no matter what the reforms demand.

Reforms to boost credit opportunities

For president Botín, the reform ought to create lenders that are larger, stronger and more efficient. They will also have fewer branches, adjusting to business demands. "All that would be good for rebuilding credit," he assured.

The Santander Network, which operates in Spain, has reduced its credit volume by 8% during the past year, while Banesto has reduced its by 9%. "We are not loaning more because there is no solvent demand," Botín emphasized in a recent speech. And for there to be any demand, he said, it is critical that we rebuild confidence. For that, financial and labor reforms are necessary.

In regard to labor reforms, Botín said that Spain needs a complete overhaul that gives companies flexibility and the chance to link productivity with salaries. He said that this is the only way to create jobs.

Dividend unchanged

Santander assured that it will still offer a dividend of 0.60 euros per share with a payout less than 50%. That being so, for 2013, the goal is to raise the dividend. "Enough has already happened in the past three months," he explained.