Santander CFO Expects ECB to Allow Small Dividend for 2020

by birtanpublished on November 2, 2020

The capital position now and the confidence you have to deploy that dividend well indeed we have uh we've had a uh a very strong quarter um in which uh you know this quarter was much stronger than the second and we are now in a position to give some guidance for the coming quarters uh that show that the um the performance is going to be strong so it's not only the capital that we have at the end of the quarter but is that the near-term outlook but near medium-term outlook for the bank is significantly better than the one

That we had at the beginning of the pandemic jose very good morning to you there is talk though that banks with low capital may still be restricted we're going to get an update from the ecb on this de facto ban in december do you think you're going to be able to actually be able to distribute if they do potentially look at different banks depending on what their capital ratios are well i think i think a general ban on dividends is weighing on the sector and that is

That is very clear the cost of equity for the banking sector in europe has been affected by that decision and i think a general ban on dividends uh is is uh hasn't hasn't has proven to be negative for the sector so i think it's also at the same time very difficult to differentiate amongst banks because you can put an undesired um let's say negative perception or some institutions so what we believe is going to happen is that they will allow for a

Small but a general dividend payment for the sector as a whole jose it's interesting you say that the biggest thing went on a sector right now is what's happening with the dividend when most people would say look at what's happening to the economy at the moment we face potentially a second lockdown rates could be low in europe and elsewhere for a long long time jose and i'm just trying to work out how do you guys start making real money again anytime soon with the prospective rate staying

Where they are for the next five years well uh we've given a guidance for our profits for the year of around five billion recurring profits of around five billion that's a return on tangible equity of seven percent so in the worst crisis in decades or almost in a century we thanks to our diversification thanks to the very good performance of our units in the us and in south america this year we are going to be able to have a profit of five billion uh recurring profit

Of five billion so um i think this shows the strength of uh of the bank is diversification and that the fact that the bank even in this very bad uh situation is able to serve its clients and and and and make money so we we really don't see with this level of capital it is difficult to justify that european banks trade at 0.4.5 times book and i think that's not good for the banking sector in europe jose of course the top story today is the resurgence of cases around europe

People taking to the streets against these lockdown measures in italy are you worried that there's going to be more risk to bad loans can those take another leg lower given the resurgence of the coronavirus and their restrictions we're seeing in spain italy france the uk and so on well like clearly there is still a high degree of uncertainty in how the pandemic will evolve however as every day passes we have more visibility on the impact on our

Customers at the beginning of march at the end of march we gave a cost of risk indication for the year of around 1.4 to 1.5 percent we now think it's going to be in the region of 1.3 percent and although again it's really difficult to predict what will happen uh the reality is that for instance the moratorium is behaving significantly better also than we expected uh two-thirds of the monatoria have expired and only two percent

Are impaired we have seen significantly better behavior of the economy in brazil uh where gdp growth in the imf has improved its outlook from minus nine percent for the year to minus six and local analysts are looking at minus three to minus four better outlook in mexico better outlook in the us better outlook in poland so yes there are a few countries in europe where this might be uh more difficult but when you look at it the diversified group of banks and and units that we have

The outlook is definitely not as bad jose just quickly there's some news out in spain this morning that you're looking to cut 3000 jobs in the country any comment on that this morning well we the customer behavior behaviors are changing when you look at the uk for instance in the quota 80 percent of all transactions of all sales were conducted digitally and for the group as a whole 44 of our sales were digital so we need to clearly accompany our customers in the way they

Want to establish a relationship with the bank and we need to adjust the physical distribution network that however as you may imagine any any adjustment to our um to our personnel has to be negotiated with the unions uh which we haven't yet so that that figure that you are talking about is highly speculative at this moment but clearly we will sit down with the unions over the next few days and start discussing the adjustments the figure's speculative but quite clearly

The effort is not it looks like you're going down that road jose well again as i said i mean we need to adjust the physical distribution network basically to respond to our customer needs

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