Santander profits halve on write-downs
The Spanish bank said it had completed 70 percent of write-downs against repossessed housing
By CFOWorld staff | CFO UK | Published 11:40, 26 July 12
Santander reported a fall in first-half profits following major write-downs stemming from the Spanish property crash, the Spanish bank said on Thursday.
The euro zone's biggest bank said first-half profit halved after it had completed 70 percent of write-downs against repossessed housing and unrecoverable loans to developers demanded by government in an attempt to belatedly recognise losses from a 2008 property crash.
"The provisions we are making will allow us to put real estate write-offs in Spain behind us by the end of this year," said chairman Emilio Botin in a statement.
A funding gap in Spanish banks' balance sheets due to bad property investments, worsened by loan defaults in a recession, has pushed Spain to ask Europe for an up to €100 billion (£78 billion) credit line to prop up lenders.
Santander has suffered less than domestic rivals from a severe Spanish economic downturn and the property crash due to its diversified business in Brazil, Mexico, Poland and Britain. Latin America comprises half of profit.
Analysts pointed to weaker revenues in Latin America and higher credit losses in the quarter, particularly Brazil which is suffering a sharp slowdown in economic growth, pushing up the rate of defaults across the banking sector.
Britain was also a weak spot, where historically low interest rates are eating into margins. Second quarter revenues for the British business were down 21 percent on the year-ago period to €954 million.
Shares were trading 1.5 percent higher at 1000 GMT at 4.4 euros per share, outpacing a steady blue-chip index.
Despite the woes gripping the Spanish banking sector, Santander said deposits in Spain had grown 15 percent, while quarterly revenues were the highest in the last 10 quarters.
The April to June period covers the nationalisation of Bankia, Spain's biggest bank rescue ever, which sent shock waves through the country's financial system.
Santander and smaller rival BBVA often gain clients during times of uncertainty in Spain, as they are seen by Spaniards as strong, stable banks.
The bank reported net profit of €1.7 billion after writing down losses of €2.78 billion on Spanish property assets. Profit for the period before provisioning was €3 billion, in line with analysts' expectations.
Santander is required to write down €8.8 billion by the end of the year following two banking reforms put out by the government in February and May.
photo credit: Reuters
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