Banco Santander, the euro zone's biggest bank, said third-quarter profit rose 52 per cent, beating estimates, as charges for bad loans dropped in Spain and earnings climbed in Britain and Brazil.

However, the bank said it would be cutting costs more aggressively than previously planned to further improve margins.

Net income at Spain’s largest lender increased to €1.61 billion from €1.06 billion a year earlier, the bank said in a filing to regulators. That compared with the €1.53 billion average estimate of analysts.

Under Ana Botin, who became chairwoman in September after the death of her father, Emilio, Santander is counting on Spain’s economic recovery to boost profit as its UK bank continues to drive earnings growth.

In his last speech to shareholders in March, Emilio Botin said they should expect Spanish earnings to lift profit back toward pre-crisis levels of about €9 billion by 2016.

“The main driver is going to be Spain because of lower provisions and the improvement in margins,” said Carlos Peixoto, an analyst at Banco BPI in an interview before the earnings. “The UK is on a stronger track.”

Shares in Santander, which is the euro zone’s largest bank by market value, fell 0.5 per cent to €6.96 in Madrid, paring the stock’s gain to 6.9 per cent this year. The 49-member Stoxx Europe 600 Banks Index is down 1.4 per cent this year.

The bank increased its cost savings target to €1 billion in 2014 from a €750 million goal, and now predicts €2 billion of savings in 2016 compared with its previous target for that year of €1.5 billion.

Net interest income, or the difference between what the bank charges for loans and pays for its funding, rose to €7.47 billion from €6.94 billion a year earlier. Bad loans as a share of total lending fell for a third straight quarter, dropping to 5.28 per cent from 5.45 per cent in June, the bank said. – (Bloomberg)