By Jesús Aguado
MADRID (Reuters) - Banco Santander's (MC:SAN) net profit fell 14 percent in the third quarter after being hit by one-off restructuring costs largely related to the acquisition and integration of the rescued lender Banco Popular.
The euro zone's biggest lender by market value - which consolidated Banco Popular into its accounts for the entire third quarter after taking over the troubled lender in June - reported a net profit of 1.46 billion euros ($1.73 billion).
Analysts, who on an average had forecast a net profit of 1.85 billion euros, had expected the lender to begin booking costs related to Popular in the last quarter of 2017.
Santander has said it expects total restructuring costs of around 1.3 billion euros related to the Banco Popular deal. In the third quarter, the absorption of the lender hit Santander's net profit by 122 million euros.
Santander took over Popular for a nominal one euro after European authorities stepped in to avert a collapse of the lender following a run on the bank.
Excluding extraordinary charges, Santander's underlying net profit rose 17 percent, boosted by its main market, Brazil.
As with its recent positive strategy update - when it slightly lifted its 2018 profitability targets - the bank's quarterly results are expected to be partially overshadowed by Catalonia's independence drive.
Santander's net interest income - a measure of earnings on loans minus deposit costs - was 8.7 billion euros in the quarter, up 11.3 percent from last year but up just 0.9 percent against the previous quarter.
Like European rivals, Santander is struggling to lift earnings from loans in Spain as interest rates hover at historic lows and rising competition erodes margins.
Investors are expected to focus on management comments regarding Santander's business in Catalonia, which accounts for around 13 percent of its market share in Spain.
In an attempt to calm deposit holders following a banned Oct. 1 vote for independence in the region, Caixabank (MC:CABK) and Banco Sabadell (MC:SABE), the most exposed to Catalonia, moved their legal headquarters out of the region
Banco Santander ended September with a core tier-1 fully loaded ratio of 10.80 percent, compared to 10.72 percent in July after including the 7 billion euros capital increase for the acquisition of Popular.
It also reiterated it was on track to meet all financial targets, including delivering double digit earnings per share growth by 2018.
($1 = 0.8451 euros)