Santander profits shines on Spanish markets and solid Brazil

A strong performance in its Spanish domestic market and a solid underlying business in Brazil drove Banco Santander third-quarter net profit up 36 percent from a year earlier while the lender also managed to improve its solvency position.

Shares in Santander, the euro zone's biggest bank by market value, rose 4 percent on Wednesday, against a 1.5 percent rise on the European STOXX banking index.

Santander's diversification overseas, especially in Brazil, has helped the bank cope with tough conditions faced by its European rivals since the onset of the financial crisis.

Santander reported a net profit of 1.99 billion euros ($2.3 billion) in the July-September period. Analysts expected a net profit of 1.92 billion euros.

However, its capital ratio is still below its European peers that are subject to stress tests, the results of which will be released on Friday.

At a time when regulators are demanding banks hold more capital, Santander managed to increase its fully-loaded core capital ratio, a closely watched measure of a bank's strength, by 31 basis points to 11.11 percent, above its own target of 11 percent for the end of the year.

Including, the sale of its Wizink credit business its fully loaded ratio would have finished September at 11.20 percent.

In Brazil, where Santander generates more than a quarter of its income, net profit in the quarter dropped 6.1 percent from a year ago after the country's currency depreciated.

Without the currency impact in Brazil, net profit in the quarter jumped 16.7 percent, boosted by solid growth in business volumes.

In Spain, its second-biggest market, net profit almost tripled partially due to a positive contribution from the Banco Popular acquisition and favourable comparison against the same period last year when it had to book one-off charges.

The bottom line in Spain, where it increased its market share to 17 percent from 15 percent from the second to third quarter, was also underpinned by a 75 percent increase in trading income.

In Britain, its third-largest market, net profit rose 2.1 percent, while profits in the United States rose 34 percent.

The bank also managed to cut its non-performing loan ratio at group level to 3.87 percent from 3.92 percent in a sign that Spanish banks are cleaning up their balance sheets faster than rivals in Italy thanks to Spain's solid economic recovery.

Santander said it remained on track grow earnings per share by double digits in 2018.