Thursday, January 31 08:58:30
Spain's Santander has sharply raised provisions against bad loans after defaults rose in its home market and key earnings-driver Brazil, while writedowns on rotten Spanish real estate also contributed to a 59pc drop in yearly net profit.
Santander - the largest lender in the euro zone - said it had now taken the worst pain from Spain's real estate crash five years ago, as it finished booking all of its government-enforced provisions last year.
"In 2013, once we have finished special provisioning, we will see strong growth in results, supported by recurring income and cost control," Santander Chairman Emilio Botin said in a statement.
The bank also said it had repaid more than two-thirds of the 35 billion euros in long-term loans it took from the European Central Bank, adding that liquidity conditions had eased.
Santander missed earnings forecasts by analysts in a Reuters poll, as it posted net profit of 2.21 billion euros ($3.0 billion) for 2012. Its total provisions rose to 18.8 billion, with a 28 percent rise in provisions against bad loans across the group.
Its Spanish bad loan ratio rose to 6.74 percent from 6.38 percent at the end of September, pointing to more pain ahead as unemployment rises in its home market, even if Spain only makes up 15 percent of profits.
Bad loans also rose in Latin America and particularly Brazil, which generates 26 percent of Santander's profit, but where the economy is slowing. That has pushed some analysts to prefer the stock of BBVA, a bank more exposed to Mexico. BBVA reports 2012 earnings on Friday. ( C) Reuters