Banco Popular says profits slump on bad-loan provisions

, Comments 0 comments

Banco Popular, the fifth-biggest Spanish bank, reported on Friday that first-half net profits were down 13.9 percent to 305 million euros ($439 million) owing to hefty provisions against bad loans.

In the second quarter alone, its net profits slumped 20.5 percent to 119.7 million euros, while its net interest income -- the difference between interest paid out on deposits and interest earned on lending -- fell 13.6 percent to 529.5 million euros.

Over the six-month period, the net interest income was up 2.7 percent at 1.045 billion euros.

On the Madrid stock market, Banco Popular stock rose 3.37 percent to 3.87 euros at the opening in a market that was up 1.37 percent on the eurozone debt deal reached in Brussels on Thursday.

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.

Banco Popular said it had put aside provisions of 1.1 billion euros during the six-month period.

It had already made provisions of 1.834 billion euros in 2010, leading to a 23 percent fall in profits for the year.

Under new regulations requiring more robust balance sheets in order to convince nervous markets, the banks must raise the proportion of core capital they hold to 8.0 percent of total assets from 6.0 percent -- or to 10 percent if they are unlisted.

Banco Popular said it is "one of the most solvent Spanish financial institutions, with core capital of 9.84 percent," up from 8.58 percent a year earlier.

Its bad loans as a proportion of total lending, a key indicator of financial health, climbed 5.58 percent from 5.04 percent a year earlier.

But the bank said the rate remains "clearly below that of the sector as a whole, which was 6.50 percent in May."

© 2011 AFP

0 Comments To This Article