Santander share price up, posts a nearly 70% profit increase

Banco Santander SA reported on Tuesday a 68% increase in profit as Spains largest bank set aside less provisions for bad loans and benefited from increased revenues.

The company reported net income of €1.46 billion for the three months ended December, compared to the €864 million reported in the fourth quarter of 2013. Results mirrored the projections of analysts polled by Bloomberg.

Revenue for the first full quarter under the leadership of Ana Botin was slightly above €11 billion, up from €10 billion of last year.

Fourth quarter provisions intended for non-performing loans dropped to €2.5 billion compared to €2.8 billion in the final three months of 2013. Additionally, bad loans accounted for 5.2% of all lending provided by Santander, an improvement from last year, when unserviced credits represented 5.3%.

Net interest income, an important measurement of profitability, climbed 11% to €7.7 billion.

“As of 2015, we will focus on organic growth by earning the loyalty of our customers,” said Ms. Botin, who was appointed executive chairman in September, after the death of her father Emilio Botin, who was at the helm from 25 years.

Ms. Borin took action almost immediately, in November she appointed José Antonio Álvarez as chief executive as a part of a wider management reshuffle.

Additionally, the largest bank in the Eurozone cut its dividend and raised €7.5 billion via an accelerated placement of shares, which at the time represented 9.9% of the companys capital.

The increase in capital boosted the banks capital ratio, which was welcomed by investors as the measurement was consider weaker compared to most European rivals. In the recent stress test conducted by the European Central Bank, Santander tier one capital ratio came in at 7.3%, but grew to 9.7% after the sale of shares.

Santander, which get around 14% of profit from its domestic market, has bet on Spains recovery to lift overall earnings as its operations in the UK and Brazil remain main drivers of growth for now.

For the full-year of 2014, Santander reported a 39% increase in net profit to €5.8 billion.

Santander lost 0.42% on Monday and closed at €5.94 in Madrid. On Tuesday the stock edged up 4.20% to €6.18 at 14:08 GMT, marking a one-year decrease of 0.90%. The company is valued at €83.45 billion.

According to the Financial Times, the 32 analysts offering 12-month price targets for Santander, have a median target of €6.49, with a high estimate of €8.45 and a low estimate of €5.20. The median estimate represents a 9.32% increase from the last close price.