Spain's Santander bank says 2010 net profit falls 8.5 pct

3rd February 2011, Comments 0 comments

Spanish titan Banco Santander reported Thursday an 8.5-percent dip in 2010 net profits, hammered by a troubled economy and new rules forcing it to make hefty provisions for bad loans.

The biggest bank in the eurozone in terms of market value, Banco Santander said net profit dropped to 8.181 billion euros ($11.3 billion) in 2010.

New Bank of Spain rules had obliged the 154-year-old institution to put aside a 487-million-euro precautionary reserve in the third quarter for loans that might not be recovered, it said.

Without these new rules, net profit would have slipped by only three percent.

In early afternoon trade, Banco Santander shares had dropped 1.57 percent to 9.00 euros.

Spain's government is fighting to dispel market fears over the bad debts that piled up in its banking industry, which loaned heavily in the now-collapsed housing boom.

The government has announced new rules requiring stronger balance sheets for the entire industry but particularly for regional savings banks, many of which are being pushed into listing on the market.

Santander, which boasts 90 million clients and 13,660 offices, said the industry shakeup could be an opportunity.

"We think this will clear give opportunities for investors," chief executive Alfredo Saenz told a news conference after the results announcement.

But "it is still too early to make an announcement about whether the group will take an active part in the process," he said, adding that the group's priority was "organic growth."

Confirming months of speculation, Saenz confirmed the group would list its British subsidiary Santander UK on the stock market in the second quarter of this year.

But he declined to give further details.

Banco Santander said its net profits had now exceeded eight billion euros for four years running.

A breakdown of its worldwide operations in 2010 showed that while suffering a 23-percent drop in net profit in continental Europe, the bank enjoyed major profit gains elsewhere:

-- A 25-percent profit surge in Latin America, with a 31-percent leap in Brazil.

-- A turnaround at Santander's US subsidiary, Sovereign, which turned a loss of $35 million in 2009 into a net profit of $561 million (424 million euros) in 2010.

-- And a 15-percent gain in profits in euro currency terms in Britain.

Worldwide, net banking income rose 11.1 percent to 29.224 billion euros, said the bank.

Banco Santander said it strengthened its balance sheet by making total provisions for possible insolvencies of 10.258 billion euros, despite the number of delinquencies declining.

The ratio of non-performing loan to total assets rose from 3.24 percent to 3.55 percent, it said, but 73 percent of these loans were covered by money set aside in provisions.

The level of core capital -- equity capital and retained earnings -- rose to 8.8 percent of total assets from 8.6 percent in 2009, the bank said.

Spain now requires listed banks to have a core capital level equal to 8.0 percent of total assets, even stricter than the 7.0 percent required under tough new, international "Basel III" rules agreed last year.

For the fourth quarter of 2010 alone, Banco Santander outperformed market expectations.

Net profits dipped 4.6 percent from a year earlier to 2.101 billion euros in the final quarter, it said. Among 11 analysts polled by Dow Jones Newswires, the consensus forecast had been for a profit of 1.96 billion euros.

Net banking income climbed 7.5 percent to 7.329 billion euros over the same period, beating the consensus forecast of 7.25 billion euros.

© 2011 AFP

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