CaixaBank, Popular suffer Spanish property losses

 

CaixaBank and Banco Popular reported sharply lower first-half profits on Friday after absorbing losses against bad real estate investments, and insisted they would not need any aid to weather the financial storm.

Spain has forced banks to write down €80 billion of losses on bad property investments by the end of the year in a move aimed belatedly at recognizing the effects of a 2008 property crash.

Since then, the country has asked for a credit lifeline of up to €100 billion from Europe in order to patch up losses in its banking system stemming from the housing crash and exacerbated by a severe economic downturn.

CaixaBank, Spain's third-biggest bank and a former unlisted savings bank or 'caja', reported first-half net profit of €166 million, an 80% drop from the year-ago period after taking €2.7 billion in writedowns out of the €4.5 billion it needs to set aside by the end of the year.

It said its core tier one capital as calculated by the European Banking Authority was now 11.1%, well above the 9% minimum level, while its liquidity buffer ascended to €40 billion.

The Catalonia-based lender was one of 3 banks alongside Santander and BBVA judged by an independent audit in June not to need rescue funds, even in a stressed scenario of a 6.5% fall in Spanish economic activity and house prices dropping 60% from their peak.

Mid-sized Popular reported first-half net profit down 42.5% to €176 million and reiterated it had no need for state aid.

The bank said it did not expect additional capital needs resulting from a second wide-ranging independent audit being carried out on Spanish banks, the results of which are expected in September or October and will help decide which lenders will receive European aid.

GAINING CLIENTS

Popular, with heavy exposure to Spain's collapsed property sector, wrote down €3.4 billion of losses on bad real estate investments. It has to set aside €6 billion in total to meet stringent requirements.

It said its business plan for 2012 and 2013, which includes €11 billion in provisions, would enable it to make a net profit of €325 to €360 million in 2012, €580 to €654 million in 2013 and €1.4 billion euros in 2014.

The bank said its EBA core tier one capital was now 10.3% and that it had a liquidity buffer of €10 billion.

Popular's stock rose 2.9%, while CaixaBank was 0.8% higher, extending Thursday's gains.

Spanish banking stocks surged higher on Thursday, with sector leaders Santander and BBVA up over 10%, after the ECB President Mario Draghi said the bank would do whatever it took to save the euro.

The health of Spanish banks and the sovereign are tightly interwoven, given lenders' high holdings of public debt.

Both banks said they were gaining clients as Spaniards, worried about the state of their lenders, tended to move their savings to bigger, stronger banks.

But both banks also reported an increase in bad loans as a percentage of total loans from the year-ago period, continuing a trend amongst Spanish banks as more customers default on debt payments in a shrinking economy blighted with the highest unemployment rate in the EU.

Spain's unemployment rate hit its highest since 1976 in Q2, data showed on Friday.

Spain's biggest bank Santander reported a halving of first half net profit on Thursday after it wrote down €2.7 billion in losses against foreclosed property and souring loans to housebuilders.

Its majority owned subsidiary Banesto on Friday reported net profit of €34.6 million, down 88%, after making €663 million euros of writedowns on toxic real estate.