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Spain’s La Caixa reports profit slump

Spain’s biggest savings bank, La Caixa, announced Friday a 13.4-percent drop in net profit in 2010 as it bolstered its balance sheet before listing its banking activities.

La Caixa said net profit dropped 13.4 percent to 1.307 billion euros ($1.8 billion), largely because it allocated 2.651 billion euros for provisions to confront bad debts on the balance sheet.

“In line with La Caixa’s very cautious strategy we have made allocations for a total of 2.651 billion euros, in large part for credit insolvencies, to strengthen the balance sheet,” it said in a statement.

Net banking income fell 19.8 percent to 3.152 billion euros.

La Caixa said its level of doubtful loans, mostly made before the property bubble collapsed, rose to 3.71 percent of total assets from 3.42 percent a year earlier.

That level is still better than the average in the sector — 5.68 percent in November.

La Caixa’s rock-solid core capital — equity capital and retained income — accounted for 8.6 percent of total assets, just down from 8.7 percent in 2009, it said.

On the eve of the results announcement, La Caixa announced a complex deal to list its 9.48-billion-euro retail banking operations on the market.

The bank said the boards of the firms involved agreed to an outline deal transferring La Caixa’s retail banking business into its listed investment arm, Criteria, which will be known as CaixaBank.

La Caixa, with 27,000 employees, 10.5 million clients and 5,300 branches, is the giant of Spain’s regional savings banks, many of them burdened with loans that turned sour when the housing bubble popped in 2008.

It is also the third largest financial institution in Spain.

Finance Minister Elena Salgado this week announced new rules on the level of core capital that the banks must have on their balance sheets.

All Spanish lenders will have to have a core capital level equal to 8.0 percent of total assets by September, even higher than the 7.0 percent required under tough new, international “Basel III” rules agreed last year.

The government will step in to take temporary stakes in those savings banks that do not meet the new requirements by then.

La Caixa already exceeds those requirements.