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Santander sees 2010 earnings similar to 2009

Source: Reuters - Sun 13th Jun 2010

Santander, the euro zone's biggest bank, said it expected 2010 earnings to be similar to 2009's strong performance, adding that market uncertainties linked to Spain's economy were overdone, lifting its shares.

Chairman Emilio Botin's upbeat comments to shareholders on Friday were characteristic of the aggressively acquisitive bank which announced a $2.5 billion (1.7 billion pound) buyout of its Mexican division earlier this week.

Santander showed it had benefited from the loss of confidence in Spain's network of over 40 unlisted regional savings banks, or "cajas" and their lack of ability to compete with its high-interest savings accounts by increasing its group deposits by 14.6 percent year to date.

"The fallout from the caja crisis, as well as Santander's aggressive participation in the savings war are obviously the key drivers for this" said Andrew Lim, analyst at Matrix Group.

Also adding to Santander's financial strength was its good debt structure with an average maturity of 4.5 years, Botin said, adding the bank had raised 18 billion euros (15 billion pounds) via new issues so far in 2010, despite market turbulence.

"This funding structure covers us for what may come in the future and compares very favourably with the ratios of our main competitors" he said at the bank's annual shareholder meeting.

Smaller Spanish banks are losing access to money markets due to concerns Spain could be heading for a debt crisis along the lines of Greece and fears that their real estate losses could blow out of control.

The bursting of a decade-long housing bubble has left Spanish banks with over 300 billion euros of debt owed to them by property developers.

Santander's property risk is totally accounted for and covered, Botin said, with loans classed potentially problematic by the Bank of Spain 29 percent covered by specific provisions and 50 percent covered if generic provisions are included.

Santander shares have fallen around 40 percent this year as investors use them as a proxy for Spain. "This performance has undoubtedly been affected by uncertainties about the economy and risk in Spain which, in my judgement, have been blown out of proportion" he said.

Santander shares, which hit a 12-month low on Tuesday, were 7.8 percent higher at 8.66 euros at 1:08 p.m. British time against a 3.9 percent rise in the Spanish blue-chip index.

Botin said the bank would maintain last year's dividend payment.

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