The Brexit referendum came and went, leaving behind a wave of uncertainty amidst growing concerns over the health of the global economy. Banco Santander, S.A. (ADR) (NYSE:SAN) is one of the financial institution feeling the consequences of the Brexit Vote, as currency volatility continues to cause havoc.
Analysts Warn of Earnings Miss
Santander is facing major uncertainties especially in the UK market, which has over the years acted as a safe-haven for offsetting weakness in other regions. Given that the UK generates a quarter of the bank’s profits, investors could be subjected to a big earning miss this quarter.
The effects of currency fluctuations should become real this quarter the Pound having crushed to multi-year lows. The bank’s revenue from the mortgage selling business and other products is expected to take a hit given the expected slowdown in the British economy.
Analysts have already cut their expectations on Banco Santander earnings amidst growing concerns of slowdown in economies the bank currently operates. There is also growing concerns among analysts and investors that the turmoil in the UK and Europe at large will force Central banks to keep interest rates lower for longer. This is the last thing the likes Banco Santander need, given that it goes a long way in squeezing the amount of money they make from loans.
Headwinds Facing Banco Santander
Brexit is not the only headwind facing Banco Santander is facing now. A prolonged recession in Latin America, especially in Brazil, all but continues to deal the bank’s prospects a big blow. Regulatory failings in the US compounded by slow loans growth and negative interest rates in Spain has cast further doubts on the bank’s prospects
Amidst the hurdles, Banco Santander, S.A. (ADR) (NYSE:SAN) is remaining firm on its ability to achieve profitability targets. In the wake of the Brexit vote, the bank issued a statement assuring investors of its ability to post a capital ratio of 11% by 2018.