Spain's biggest lender posted a $2.83 billion net profit in the first three months of the year
Spain's biggest lender posted a $2.83 billion net profit in the first three months of the year AFP

Spanish banking giant Santander saw its first quarter net profits rise thanks to strong business activity that offset a windfall tax imposed by Spain's leftwing government, results showed Tuesday.

Spain's biggest lender, which has a strong presence in Europe and Latin America, posted a 2.57-billion-euro ($2.83 billion) net profit in the first three months of the year.

The result outstripped the expectations of analysts at financial data firm Factset, who had expected a figure of 2.45 billion euros.

"It has been a strong start for the year with income 13 percent higher than last year driven by growth in customers and volumes, with lending and deposits up 3 percent and 6 percent, respectively," said chief executive Ana Botin in a statement.

The robust start offset the impact of a temporary windfall tax on big banks imposed by Spain's government in January to fund measures to help households cope with higher prices.

In February, Botin said the tax would likely cost Santander between 220 million euros and 230 million euros this year, with the bank mulling legal action to challenge the measure.

Spain's banks have been fighting tooth and nail against the tax which will be in place throughout 2023-2024 and is expected to add 1.5 billion euros to the state coffers this year.

Without the tax, which was accounted for in full during the first quarter, Santander would have posted profits of 2.795 billion euros, an increase of 10 percent, the bank said.

Santander said the results were due to strong commercial activity in its main markets, with profits in Spain up 28 percent year-on-year and 11 percent in the UK.

In 2022, Santander posted record profits of 9.6 billion euros, up 18 percent from the year before -- one of a string of European lenders to get a boost from higher interest rates.

The bank, which counts 161 million customers worldwide, said it remained on track to meet its annual targets including double-digit income growth.