Spain's Santander on Tuesday forecast an improvement of core profits for 2020, citing better customer behavior in expired loan payments and more cost savings in Europe after it swung back to the black in the third quarter.
While statutory net profit trebled in the third quarter compared to a year ago, however, on underlying terms the bank's profit fell 18% in the same period to 1.75 billion euros ($2.07 billion) due to more coronavirus related provisions.
Analysts polled by Reuters expected an operating profit of 1.06 billion euro.
Banks across Europe are struggling to cope with record low interest rates and the economic downturn sparked by the coronavirus pandemic is forcing lenders to focus on further cutting costs.
Higher efficiency gains and better customer behavior however led the bank to forecast an underlying profit of around 5 billion euros for this year.
Santander's Chief Financial Officer Jose Garcia Cantera told CNBC on Tuesday that the bank had seen "encouraging signs of recovery" in a third quarter, which was "significantly stronger" than the second.
"We actually booked the highest net interest income of the last seven quarters this time, and the main profit for the quarter was in line with the average of last year, which is a very strong performance in this environment," he said.
In the second quarter, the euro zone's third-biggest lender in terms of market value had reported a record net loss of 11.1 billion euros on Covid-19 related write downs.
Cantera told CNBC's "Squawk Box Europe" that this quarter's resilient net interest income — revenue that banks get from collecting loan payments, minus the interest it pays to depositors — came on the back of strong performance in South and North America.
"It is true that low interest rates put pressure on margins but for many countries, this very low level of interest rates is allowing new businesses to be developed," Cantera said, citing the Brazilian mortgage market as an example.
CNBC's Elliot Smith contributed to this story.