By Xavier Fontdegloria

Banco Santander SA reported its third-quarter results on Wednesday. Here is what you need to know:

NET PROFIT: The Spanish bank posted a net profit of 2.17 billion euros ($2.52 billion) in the July-September period, an increase of 24% compared with the same quarter a year earlier. The lender topped analysts' expectations of a EUR2.03 billion profit, according to a consensus estimate provided by FactSet.

REVENUE: Total income rose to EUR11.93 billion from EUR11.09 billion a year earlier. Net fee income increased 8% on year, recovering to pre-pandemic levels. Performance across all geographies was better than expected, with U.K. and Brazil as the main highlights, UBS said. Revenue was above the EUR11.60 billion consensus forecast by analysts.

WHAT WE WATCHED:

--PROVISIONS: Provisions for credit losses declined 12% on year, broadly in line with expectations, to EUR2.22 billion. The cost of credit--the ratio of provisions to expected loan losses--improved by 37 basis points on-year to 0.90%. The bank announced that it will release in the fourth quarter part of the provisions booked at the height of the Covid-19 pandemic, accounting for an amount between EUR700 million and EUR1 billion. The write-back is due to a better-than-expected macroeconomic outlook, it said.

--CAPITAL: As expected, the lender managed to improve its fully-loaded core tier 1 ratio--the strictest measures of solvency--to 11.85% in September from 11.7% in June, boosted by the cut in the dividend payout accrual to 40% from 50%. The rate is at the top range of the bank's 11% to 12% target.

--OUTLOOK: The bank's underlying return on tangible equity--a key measure of profitability--stood at 12.61% in the first nine months of the year, above the 9% to 10% target set by the lender for 2021. Chairman Ana Botin said that she was "confident" the bank could achieve a 13%-15% profitability target in the medium-term.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

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