Spanish bank results hit by provisions

 

First-half results at Spanish banks Caixabank , Bankinter and Popular showed the sector struggling uphill, provisioning for a property crunch while higher funding costs bite. Popular, the biggest of Spain's mid-sized banks which only scraped through last week's European stress tests, took a 1.1 billion euro provision while reporting profit which fell 14%.

The largest listed savings bank Caixabank trading on the bourse since the start of the month, announced better results with an 11% rise in profit.

Shares in all three were higher thanks to relief at a European Union deal on Thursday which should help stem the euro zone debt crisis .

Provisions for bad debt at Caixabank were up 18.7%, and the bank used most of a 463 million euro one-off gain for an extraordinary writedown.

Bad loans at Barcelona-based Caixabank rose to 4.3% of total assets versus 3.65% one year ago.

"The environment has been marked by the gradual rise in market interest rates, limited growth of business volumes, strong competition for retail deposits and and rise in wholesale issue costs," the Catalan bank said in a statement.

Bankinter profit fell nearly 5%, beating analyst expectations , but with net interest income down 19% due to higher interest rates.

The trend is likely to continue in the domestic business of Spain's biggest banks, BBVA and Santander , due to report next week.

Santander, the euro zone's largest bank, now has most of its business outside Spain and has hoovered up weaker banks before and during the crisis.

The end of Spain's real estate boom three years ago has left a huge overhang of expensive property assets and, with more than one in five unemployed, many are having difficulty paying off debts and making ends meet.

Banks' bad debt rates are still rising, with the sector ratio hitting a 16-year high in May at 6.5%.

Balance sheets are, in turn, weighed down with property that is difficult to sell and there was an overhang of 700,000 empty homes at end 2010, according to official data.

Many banks have been obliged to shore up their balance sheets through mergers or public share offerings, or both.

But a lack of confidence in the Spanish banking system has obliged savings banks to offer steep discounts to their book values in recent public share offerings such at Bankia's on Wednesday and Banca Civica's on Thursday.

Nevertheless, the fact that the share offerings have gone ahead at all has been viewed as a positive in Spain, underpinned by retail investor demand.