Spain's Banco Popular posts lower net profit on provisions

27th July 2010, Comments 0 comments

Banco Popular, Spain's third-largest listed bank, on Tuesday reported a first-half net profit of 354.6 million euros, a 19.9 percent drop over the same time last year due to higher provisions against bad loans.

During the first six months of the year the bank made provisions worth 830 million euros (1.1 billion dollars), it said in a statement.

Excluding special items, the bank's net profit during the period would have risen by 12 percent, it added.

Banco Popular, which passed stress tests to see how European banks would cope with worsened economic conditions, recorded a net profit in the second quarter of 150.5 million euros, a 30.9 percent drop over last year.

A survey of analysts polled by Dow Jones Newswires had expected an average second-quarter net profit of 158.8 million euros.

The bank recorded a non-performing loan ratio in June of 5.04 percent and its financial director, Jacobo Gonzalez Robatto, said he expected the ratio would peak below 5.5 percent.

"The crisis has not yet ended but the tendency, when it comes to non-performing loans, is improving," he told a conference call with analysts.

Robatto said the publication of the bank stres tests was "an exercise needed to restore credibility to the financial system, especially the Spanish financial system."

He said the interbank lending market remained closed but he added "we are seeing good signs that the market is reopening. We predict that in September-October the market will be better."

Last month the Bank of Spain's deputy governor Javier Ariztegui told a parliamentary commission that since Easter Spanish banks had been forced to seek financing from the European Central Bank because of lack of market confidence in Spain.

All major Spanish banks passed the stress tests but five of the 19 regional savings banks that were analyzed were to have core capital levels too weak to get them through another financial crisis, according to the results published on Friday.

Only two other banks --- one in Germany and the other in Greece -- out of the 91 that were put to the test across Europe failed the exercise.

© 2010 AFP

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