For the first time in its history, the Santander banking group is recording losses. They amounted to 11.1 billion euros for the second quarter of 2020.
Impairment of goodwill
Even at the height of the financial crisis, the Spanish banking group Santander, led by Ana Botin, had managed to maintain good results. Yet, in the second quarter of 2020, several accounting write-downs linked to the impact of Covid-19 plunged its figures into the red, with a total second-quarter 2020 loss of 11.1 billion euros.
Santander has written down goodwill on past acquisitions to the tune of 10.1 billion euros, and deferred tax assets to the tune of 2.5 billion euros. Several of the Group's subsidiaries are affected by the impairment of goodwill, with the UK subsidiary in first place, devalued by 6.1 billion euros.
The Group's US subsidiary has been written down by 2.3 billion euros, the Polish subsidiary by 1.2 billion and the consumer credit business by 477 million euros. The Santander Group explains that it took these decisions after studying the impact of the economic crisis and growth prospects in the various countries where it operates.
A solid balance sheet despite everything
"This has no impact on the bank's liquidity or credit risk positions, and has no impact on the CET1 capital ratio," said the Spanish banking group in a recent statement. The CET1 capital ratio rose slightly to 11.84% from 11.58% at the end of March.
Without this series of accounting write-downs, the Group would have posted net income of 1.9 billion euros in the first half, albeit down 53% year-on-year.
Ana Botin, the Group's President, is also reassuring. Quoted in Santander's press release, she says: "[The impairment] does not affect the strength of our balance sheet. The foundations of our business are solid, with capital levels at the high end of our targets."
Santander's net banking income was 11.8 billion euros, down 8% year-on-year. The Spanish banking group is also forecasting a cost of risk of between 140 and 150 basis points by the end of 2020.