Updated Aug 8 at 11:28am ET.
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The Federal Reserve has approved Santander's $12 billion purchase of Webster Financial, the parent company of Webster Bank. This was the final major hurdle for the deal, which is now expected to close on August 20. This acquisition is a central part of the bank's plan to grow its footprint in the United States, making it the 19th-largest bank in the country.
By scaling up in the U.S., Santander can earn higher interest margins, the difference between what it pays depositors and what it charges for loans, than it typically finds in Europe. It also helps the bank rely less on more volatile earnings from emerging markets like Brazil. This deal gives the bank a much larger platform to apply its global technology systems to a new pool of American customers.
Santander Brasil reported a second-quarter profit of 3.01 billion reais, which was about 18 percent lower than the same period last year. This result came in well below the 3.9 billion reais that analysts were expecting. Brazil is one of the bank's most important markets, often providing a large portion of its total global earnings.
While the bank is currently expanding in the U.S. to diversify its income, these results show why that move is necessary. Emerging markets like Brazil can be more volatile and sensitive to local economic shifts. A sharp miss in this region can weigh on the overall group's performance even when other branches are doing well.
Source: Reuters
Santander brought in $17.92 billion in revenue last quarter, slightly ahead of what analysts expected. However, earnings per share of $0.27 missed the $0.29 target. The bank's underlying profit, which strips out one-time costs, rose 15 percent to a record 7.3 billion euros for the first half of the year, driven by its push to unify its global technology systems and use more artificial intelligence.
The headline profit for the quarter was weighed down by restructuring charges, which are the costs of reorganizing staff and systems after buying other banks like TSB in the UK. While these one-time costs make the current numbers look lower, the bank is betting that moving all its 182 million customers onto a single cloud platform will make it much cheaper to run in the long term.
Analysts have issued a series of upgrades for the stock over the past few months. While 16 of 25 analysts rate it a buy, the average price target is far below the current price.
The bank has a reliable habit of meeting or beating expectations, though recent results have been a bit messy due to one-time costs from buying other banks.
| Expectation | |
|---|---|
| EPS | $0.31 |
| Revenue | $18.38B |
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