Spain's biggest bank Santander has today posted its first ever annual loss as the pandemic took its toll, while €1.14 billion in restructuring costs overshadowed solid core banking results in the fourth quarter. 

Net profit plunged 90% to €277m in the quarter compared to the same time a year earlier, below the €411m average forecast from analysts polled by Reuters. 

The annual net loss was €8.77 billion after €12.6 billion in one-off charges booked in the second quarter, as the pandemic forced the group to write down acquisitions, mainly in Europe. 

Analysts had expected a net loss of €8.64 billion. 

Banks across Europe are struggling to cope with record low interest rates, and the economic downturn sparked by the Covid-19 pandemic is forcing them to cut costs. 

Santander's Net interest income (NII), a measure of earnings on loans minus deposit costs, fell 9.3% year-on-year to €8.02 billion in the fourth quarter due to the pressure from low interest rates, but rose 3.2% from the previous quarter. 

Analysts had expected NII of €7.79 billion. 

In Spain, Santander booked €700m of charges in the quarter as part of a cost-savings plan to offset the impact of a shift by customers towards online banking.

The euro zone's second-biggest bank by market value has earmarked an extra €1 billion in cost savings in Europe by 2022, and is planning to cut staff in Spain, Portugal, Britain and Poland. 

Santander also said it intended to pay a cash dividend of €0.0275 per share, down from an original plan of €0.1, to bring its payout policy within the limits set by the European Central Bank (ECB) in December. 

The bank added it intended to resume payments closer to previous levels in 2021, once the ECB removes its limitations, and restore a dividend of 40-50% of underlying profit, in cash, in the medium term. 

The limited payout allowed Santander to improve its core tier-1 fully loaded capital ratio, the strictest measure of solvency, to 11.89% from 11.57% in September, taking into account new accounting standards.