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Santander 9-month net profit falls on provisioning

Source: Reuters - Thu 28th Oct 2010

The euro zone's biggest bank Santander reported on Thursday its nine-month net profit fell 9.8 percent, hurt by provisions taken against Spanish assets as dictated by new Bank of Spain regulations.

Net profit for the nine months to the end of September came in at 6.08 billion euros ($8.4 billion), missing analysts' expectations of 6.42 billion euros. Net interest income came in at 21.896 billion euros, in line with the average estimate in a Reuters poll.

The Bank of Spain has cut the time needed to fully provide for the estimated loss on non-performing loans. It has also required a further 10 percent writedown on properties held for more than two years. The new rules came into effect on Sept. 30.

Santander estimated at the end of July the impact of the new regulations would be around 400 million euros but the results showed it had put aside a greater-than-expected 472 million euros under the new rules.

Shares closed on Wednesday at 9.18 euros, down 19 percent from the beginning of the year. Hedge funds used Spanish banking shares as proxies for Spain earlier this year when investors fretted the country faced a Greek-style bail-out.

The bank has underperformed European peers .SX7P by around 16 percent since the beginning of the year.

Bad loans as a percentage of total loans at a group level rose to 3.42 percent, from 3.37 percent at the end of June .

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