Santander said on Tuesday second-quarter net profit fell 18% from a year earlier, due to one-off restructuring costs from its acquisition of troubled lender Banco Popular and a weak performance in Britain.
The euro zone's largest bank in terms of market cap — which took over Banco Popular in June 2017 — reported a net profit of 1.39 billion euros ($1.56 billion) for the April to June period, topping analysts' expectation of 1.29 billion euros in a Reuters poll.
Steady growth in Latin America business volumes, where it makes 46% of its earnings, was not enough to offset charges of 706 million euros, mainly in Spain.
Like its European rivals, Santander is struggling to lift earnings from loans in its home market with interest rates hovering at historic lows.
"We have delivered the strongest underlying quarterly performance in over 8 years, reflecting the progress that we have made in our commercial and digital transformation," Jose Garcia Cantera, chief financial officer of Santander, told CNBC's "Squawk Box Europe."
"Our businesses in both North and South America continue to perform extremely well and while the charges relating to ongoing infrastructure in Europe have impacted attributable profit — something that we anticipated — we are already starting to see the value that this will create going forward," Cantera said.
Net interest income, a measure of earnings on loans minus deposit costs, was 8.95 billion euros, up 5.6% from the second quarter of last year and 3.1% higher against the previous quarter due to a solid lending growth in Latin America.
Analysts had forecast a NII of 8.76 billion euros.
In Britain, its third-largest region, profit fell 41%, partly due to restructuring costs of 26 million euros and provisions of 80 million euros.
Santander ended the quarter with a core Tier-1 capital ratio, a closely watched measure of a bank's strength, of 11.3%, compared with 11.23% in the previous quarter.
Shares of the bank were up over 2% shortly after the opening bell.