Banesto 9-mths net profit down as provisions rise

 

Spanish bank Banesto posted a less-than-expected 18.6 percent fall in nine-months net profit as it increased provisions against bad loans in a Spanish economy struggling to shake off the recession.

Banco Espanol de Credito (Banesto), the first Spanish bank to report nine-month results, said its ratio of bad loans to total loans rose to 3.8 percent at end-September from 3.48 percent at end-June.

The worsening trend was still below the average bad loans rate for Spanish banks of 5.37 percent, but reflected the difficulties of an economy suffering high unemployment and only tentatively emerging from the worst recession in half a century.

"Banesto has better trends than average in Spain" said analyst Darragh Quinn at Nomura, "But non-performing loans (NPL) are still rising and that's as good an indication as any that things are still complicated from an asset quality perspective."

Banesto Chairwoman Ana Botin, the only Spaniard to appear in Forbes annual listing of the most powerful women in the world, said in July she expected Spanish NPL ratios to peak in 2011.

Banesto, majority owned by Santander, reported net profit for the period of 450.6 million euros, slightly above 441 million euros forecast in a Reuters poll.

Net interest income for the first three quarters was down 1.5 percent on the year-ago period, squeezed by a trend towards lower interest rates on loans and higher rates on deposits.

Banesto put aside a total of 418 million euros against bad debts in the first nine months of the year.

The Bank of Spain has tightened rules on provisions Spanish banks have to make against real estate assets on their balance sheets. The new rules came into effect on Sept. 30. Under the measures, banks must provision 10 percent of the property's value once it takes it onto its balance sheet. After 12 months it must put aside 20 percent and this increases to 30 percent after two years.