Santander profits down 24 pct in Q1 on bad loans

AP News
Posted: Apr 26, 2012 7:34 AM
Santander profits down 24 pct in Q1 on bad loans

First-quarter profits at Banco Santander fell 24 percent as the amount of money it set aside to cover bad loans rose sharply, particularly in its recession-hit home market of Spain.

The eurozone's largest bank by market capitalization said its net profit in the January-March period was (EURO)1.6 billion ($2.1 billion). Revenue grew by more than 8 percent to (EURO)11.4 billion.

That increase in income, however, was offset by bigger loan losses _ Santander set aside (EURO)3.1 billion in provisions, up 51 percent from the same quarter of 2011.

Spain's banking sector, which is still attempting to recover from the collapse of a real estate bubble in 2008, is a key source of worry that the fourth-largest economy of the 17-country eurozone might join Greece, Ireland and Portugal and ask for a bailout.

Some analysts say that big losses at Spanish banks could overwhelm the country's public finances. Those concerns, however, mostly relate to smaller, regional banks.

Banco Santander SA said non-performing loans amounted to 3.9 percent of its portfolio, an increase of 0.37 percentage points. In rececession-plagued Spain, the ratio rose 1.18 points to 5.75 percent.

Santander, which has diversified its business outside Spain and Europe, added that its capital buffers remained strong, with a core capital ratio _ a key measure of a bank's ability to withstand financial and economic shocks _ of 9.11 percent. European regulators had demanded banks bring this ratio above 9 percent by June.

In early afternoon trading, Santander shares were down 4.7 percent at (EURO)4.69 against a broader 2 percent fall in the country's IBEX stock market.