Banco Popular profits slump on bad-loan risks

4th May 2011, Comments 0 comments

Banco Popular, the third-biggest Spanish bank, reported on Wednesday that first-quarter profits dropped 9.0 percent to 185.7 million euros ($275.5 million) on hefty provisions against bad loans.

But the figure was above market expectations, with analysts consulted by Dow Jones Newswires forecasting profits of 154 million euros.

Like other Spanish banks, Banco Popular is struggling with an economic downturn, brought about by a collapse of the country's once booming property market in 2008 which has led them to increase provisioning against bad loans.

In the January to March period, the bank said it put aside 836 million euros.

Bad loans as a proportion of total lending, a key indicator of financial health, climbed 5.44 percent from 4.91 percent a year earlier.

Net interest income -- the difference between interest paid out on deposits and interest earned on lending -- was down 22.3 percent at 515.5 million euros.

Core capital was 9.33 percent of all capital, up from 8.74 percent a year earlier, and above the minimum level set by the Bank of Spain of 8.0 percent this year in a bid to revive market confidence.

The bank had already put aside provisions of 1.834 billion euros in 2010, leading to a 23-percent drop in net profits for the year.

© 2011 AFP

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