Spain's biggest bank Santander posted its first ever annual loss on Wednesday as the pandemic took its toll, while 1.14 billion euros ($1.37 billion) in restructuring costs overshadowed solid core banking results in the fourth quarter.
Net profit plunged 90% to 277 million euros in the quarter versus the same period a year earlier, below the 411 million euro average forecast from analysts polled by Reuters.
The annual net loss was 8.77 billion euros after 12.6 billion in one-off charges booked in the second quarter, as the pandemic forced the group to write down acquisitions, mainly in Europe. Analysts had expected a net loss of 8.64 billion euros.
Banks across Europe are struggling to cope with record low interest rates, and the economic downturn sparked by the COVID-19 pandemic is forcing them to cut costs.
Net interest income (NII), a measure of earnings on loans minus deposit costs, fell 9.3% year-on-year to 8.02 billion euros in the fourth quarter due to the pressure from low interest rates, but rose 3.2% from the previous quarter. Analysts had expected NII of 7.79 billion euros.
In Spain, Santander booked 700 million euros of charges in the quarter as part of a cost-savings plan to offset the impact of a shift by customers towards online banking.
The euro zone's second-biggest bank by market value has earmarked an extra 1 billion euros in cost savings in Europe by 2022, and is planning to cut staff in Spain, Portugal, Britain and Poland.
On Wednesday, Santander also said it intended to pay a cash dividend of 0.0275 euros per share, down from an original plan of 0.1 euros, to bring its payout policy within the limits set by the European Central Bank (ECB) in December.
The bank added it intended to resume payments closer to previous levels in 2021, once the ECB removes its limitations, and restore a dividend of 40-50% of underlying profit, in cash, in the medium term.
The limited payout allowed Santander to improve its core tier-1 fully loaded capital ratio, the strictest measure of solvency, to 11.89% from 11.57% in September, taking into account new accounting standards.