Victor Mallet
Net profit at Spain?s Santander, the eurozone?s biggest bank by market capitalisation, fell 35 per cent last year to 5.35bn euros from 8.18bn euros in 2010 as the Spanish property market collapse and the eurozone debt crisis continued to erode earnings.
Santander released results on Tuesday showing it barely made a profit in the final quarter of last year – net profit was 47m euros, compared to 2.10bn euros a year earlier – after it set aside a 1.81bn-euro fourth-quarter gross charge to clean up bad property loans in Spain.
Over the year as a whole, the bank made total net extraordinary provisions of 3.18bn euros, largely because it is anticipating new provisioning rules likely to be announced on Friday by the centre-right government that took power in Spain in December.
Of the total, 1.53bn euros came from realised capital gains, and 1.67bn euros from the fourth-quarter charge on a
net basis.
The Spanish government of Mariano Rajoy, prime minister, has signalled it will increase provisioning requirements for bad and doubtful property assets from 30 per cent of book value to over 50 per cent.
Santander said it had already raised coverage for repossessed property
from 31 per cent to 50 per cent with the latest provisions.
Unlike some smaller Spanish lenders, Santander has remained profitable through more than three years of crisis in Europe because of its exposure to overseas markets.
For the first time, Latin America accounted for more than half of group profits as earnings from Spain, Portugal and the UK fell sharply.
Santander said it had realised capital gains by selling some assets ?in a selective manner? without affecting the generation of pre-provision profit.
Net interest income rose 5.5 per cent to 30.82bn euros.