Banco Popular Q1 Profits hit by Spain property losses

 

Spanish lender Banco Popular reported a 46% drop in Q1 profit, hit by provisions to cover losses in property investments.

Popular was the latest Spanish bank to belatedly tally losses related to a decade-long property boom which crashed in 2008, as part of government demands to recognise bad investments and reassure international investors.

Investors fret that lenders, under pressure to raise capital and recognise real estate losses, will not be able to deal with rising loan defaults in recessionary Spain.

Credit rating agency Standard & Poor's cut its credit rating on Spain by two notches on Thursday, saying there was a likelihood the government would have to provide further fiscal support for the banking sector.

Popular said on Friday it had set aside 60% of the required amount in provisions against toxic real estate assets, and would write down the rest of its losses in coming quarters.

Its shares were down 2.6% in early trading.

Spain's 2 biggest banks - Santander and BBVA - said earlier this week they would write down losses on real estate assets later this year.

Popular's net interest income rose 32% to €693 million during the quarter. Bad loans as a percentage of total loans rose to 6.03% at end-March, up from 5.99% at end-December.