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Its share price was up 4 percent at 6.83 euros by 0738 GMT after the bank said its net profit in the quarter fell to 2.096 billion euros ($2.73 billion), well above the average forecast of 1.865 billion euros given in a Reuters poll of analysts.
“In Spain loans are repriced only once a year, giving banks plenty of time to play with interest rates in between times and make money on them,” a London-based analyst said, explaining the higher than expected revenues.
Interest income rose 22.2 percent to 6.23 billion euros while operating profit rose 12 percent to 9.454 billion euros, which compared with an average forecast of 8.63 billion euros.
“They (the figures) look very strong. The net interest income line is up 22 percent year on year. This was clearly not expected,” said Alberto Cordara, analyst at ABN Amro in London.
Bad loans as a percentage of total lending rose to 2.49 percent, as expected, at the end of the first quarter from 2.04 percent at the end of 2008 and 1.24 percent a year ago.
Provisions rose 73 percent to 2.23 billion euros.
Sovereign, which Santander acquired in the United States in the wake of the subprime crisis, contributed a net loss of $25 million after being incorporated into results for two months.
The bad loans ratio at Sovereign was 3.98 percent of total loans, and is expected to increase.
“In general, the new business is starting to recover, although it has yet to benefit fully from the organisational changes that are being implemented,” Santander said in a statement.
Results were presented in accordance with new Bank of Spain guidelines, which meant 2008 figures were restated.
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