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Spain's Banesto H1 profit down 25 pct

Source: Reuters - Tue 12th Jul 2011

Spanish retail bank Banesto reported a 25% drop in net profit earlier today, hurt by higher funding costs and rising provisions against bad loans.

Banesto, majority owned by Santander, is the first Spanish bank to report first half earnings, giving an indication of conditions for a sector fighting rising borrowing costs in line with the battered sovereign.

Spanish stocks and bonds suffered another big selloff on Monday as investors fretted over a European Union deadlock on how to involve private bondholders in a second rescue package for Greece. Spain's borrowing costs hit a euro-era high.

Bad loans rose to 4.39% of the total loan book at end-June against 4.15% at end-March, but still below the end-March sector average of 6.11%.

Banesto said its bad loan ratio was stabilizing. Parent Santander has said bad loans have peaked in Spain, where high unemployment and a collapse in the housing market has pushed up the number of people and companies unable to repay debt.

Net interest income, broadly the difference between what a bank earns on loans and what it pays for deposits, fell 11% to 769 million euros although it rose slightly on a quarterly level for the second quarter in a row.

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