“Inflation is hard to fight with taxes. Sudden changes in the rules of the game always increase costs. The more predictable the economy is, the more capacity it has to create wealth and jobs.” That’s how strenuous José Antonio Álvarez, CEO of Banco Santander, has been in expressing his opposition to the state tax, which aims to tax bank profits and reduce the reduce the effects of hyperinflation.
In a press conference on the occasion of the presentation of the half-year results, the manager put the decline in the banks’ creditworthiness at 50 billion euros after the tax came into force. Álvarez made the calculation considering the forecast of raising around €3,000 million over a two-year period. In his opinion, a disproportionate amount, since the bank already pays too much money to the treasury: corporate income tax of over 30%, deposit tax, documented legal acts, VAT… “Banking is stigmatized in this country,” concluded the director, who refrained to say whether the company will launch a lawsuit against the executive branch over the tax.
“Inflation is difficult to fight with taxes, and sudden changes in regulations increase costs,” says Álvarez
The reaction followed the release of enviable half-year results given the macroeconomic turmoil. From January to June, profits at Spain’s largest financial institution shot up 33% to €4,894 million, beating the €4,700 million forecast by analysts. Excluding the impact of €530 million in restructuring charges, earnings rose 16%. In Spain, the profit was 652 million euros, up 86%.
In a statement, President Ana Botín said that “we have achieved good results with a return on tangible capital of over 13%”. During the press conference, held at Boadilla del Monte’s headquarters in Madrid, Álvarez explained that the increase in profits was due in particular to the reduction in provisions that the company had taken last year to face possible bankruptcies due to the pandemic. He also pointed out that the profit increase was due to cost cutting. Last year the company closed a thousand offices in Spain and applied an ERE that involved cutting more than 3,550 jobs. And this year, the company is already showing improvements in the efficiency of its operations. Excluding the impact of inflation, the company’s costs fell 4% in real terms.
In addition, sales also contributed to the increase in profits. In the group as a whole, they grew by 4% to 25,120 million euros, in Spain by 1%. The settlement progress is explained in particular by the margin that the company earned from interest and commission income, which together amounted to 97%.
Despite the current situation, Santander is confident that the good business development will continue until the end of the year and that it will achieve a record profit of 9,000 million euros. As a result, the company plans to maintain its shareholder compensation plans and distribute 40% of ordinary earnings equally between cash dividends and share buybacks.
The US and Brazil pull the deal
Almost a third of Banco Santander’s profits come from Brazil and a quarter from the United States, its two most important markets geographically. In Brazil, the company made 1,365 million euros in profit, down 1% due to an increase in provisions, while in the United States the bank earned 1,090 million euros, down 21% after an exceptional period in 2021. The third market was the United Kingdom with one Profit of 736 million euros, up 6%, driven by the rise in interest rates in the country. After Spain with 652 million euros profit, Mexico recorded a strong upward trend with a profit increase of 32% up to 546 million euros profit due to higher interest rates and a larger customer volume.