Thursday, October 25 08:46:10
Santander, the euro zone's biggest bank, said nine-month net profit fell by two thirds, hit by writedowns on bad property investments made during Spain's decade-long housing boom. Santander said today it had completed 90 percent of government-enforced writedowns on repossessed housing and unrecoverable loans to developers after writing off 5 billion euros ($6.5 billion) in losses.
The bank said it had also increased provisions against loan defaults in Spain to 9.5 billion euros during the nine months to end-September, giving it a coverage of 70 percent. Rising bad loans in Spain have spread beyond the real estate sector as more Spaniards default on their debts in a crippling recession, with a quarter of the workforce out of a job. Bad loans hit record highs in August. Spain accounts for just 16 percent of profit at Santander, with half coming from Latin America. Net profit in Brazil, which accounts for over a quarter of total earnings, dropped 14 percent during the nine months.
Brazil has rolled out more than a dozen stimulus measures since a sharp slowdown in late 2011 in an attempt to accelerate a sluggish recovery. Santander has been tarnished by its home country's woes as investors fret about the future of a banking sector which is being recapitalised thanks to a 100 billion euro European credit line. The bank passed an independent audit of the sector with flying colours and a massive capital surplus in September and will not receive funds from the bailout. Yet credit ratings agency Moody's rates the bank just two notches above junk - although one rank higher than the sovereign.
"Short term, the stock's performance continues to be driven by investors' sentiment towards the sovereign," said Antonio Ramirez at broker KBW. Shares have risen around 10.5 percent in the year to date, a strong performance compared with Spanish competitors but below European peers up 15 percent in the same period. ( C) Reuters