Why Banco Santander Is Up 7% This Year

LONDON -- Banco Santander (ISE: BNC.L) (NYS: SAN) has advanced 7% to 467 pence so far during 2012, making the share one of this year's better performers in the London market.

Santander, which is Spain's largest bank and has acquired Abbey National, Bradford & Bingley, and Alliance & Leicester during the last 10 years, seems to have impressed investors with a series of mixed statements.

During January, Santander announced 2011 results that showed revenues up 5% to 44 billion euros, net profit down 35% to 5.4 billion euros, and a dividend sustained at 0.60 euros per share. Blighting the figures were net insolvency provisions of 10 billion euros and a further 3 billion euros of "extraordinary" provisions relating to Spanish properties.

During April, Santander's first-quarter statement revealed revenue up 8% to 11.3 billion euros and profits falling 24% to 1.6 billion euros. The bank explained that the shortfall was due to a significant increase in provisions for bad loans, which jumped 51% to 3.1 billion euros. However, Santander also declared a 0.15 euro per-share dividend to keep the annual payout running at 0.60 euros per share.

Then, in July, Santander disclosed half-year results that saw profits slump 51% after further write-offs relating to Spanish properties left second-quarter earnings at just 100 million euros. Santander also suggested that a further 2 billion euros of Spanish property writedowns would be incurred during the second half of 2012.

Nonetheless, Santander highlighted "pre-provision" profits up 6% to 12 billion euros for the half, with chairman Emilio Botin commenting: "The first-half results make us one of the most solid and efficient banks in the world and show we are able to increase revenues and keep costs under control even in a difficult environment. The provisions we are making will allow us to put real estate write-offs in Spain behind us by the end of the year."

Santander's next trading update will be published this week on Thursday, and shareholders hope it will reveal encouraging news.

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