Banco Espanol de Credito SA, a retail-banking unit of Banco Santander SA, said it has 10.4 billion euros ($13.7 billion) of risk linked to Spain’s real estate and construction industry.
The disclosure came as full-year profit fell 18 percent to 460.1 million euros, the Madrid-based lender said in a filing to regulators today. The bank set aside 1 billion euros in loan- loss provisions in 2010.
Banesto published the property-risk information as lenders and government officials seek to shore up confidence in a financial system pummeled by the country’s real estate crash and rising financing costs. While defaults and the amount of property taken onto the lender’s books increased, interest margins were squeezed.
“Giving more information on real estate risk is a fundamental exercise for the Spanish banks,” said Juan Pablo Lopez, an analyst at Banco Espirito Santo SA in Madrid, who rates Banesto “buy.” “The overall impression is negative because of the decline in margins while the asset quality decline continues.”
Banesto rose less than 0.1 percent to 6.14 euros as of 11:26 a.m. in Madrid trading, giving the bank a market value of 4.22 billion euros. The stock has declined 30 percent over the past 12 months.
‘Troubled Exposure’
Banesto’s disclosures come as government and central bank officials try to make lenders give more information about the quality of their lending to developers and homebuyers. Spanish banks have “troubled exposure” to construction and real estate of 181 billion euros, according to the Bank of Spain.
Because Banesto is the first Spanish bank to report earnings, it tends to “set a reference” for the rest, said Lopez.
Bad loans as a proportion of total lending climbed to 4.08 percent from 3.80 percent in September and 2.94 percent a year ago, Banesto said.
Real estate and construction risk dropped to 13 percent of loans at the end of last year from 17 percent in 2009. The lender said past-due and so-called substandard loans for real estate and construction made up 27 percent of the 10.4 billion- euro total.
The proportion of Banesto’s 5.45 billion euros of lending to developers that has turned bad jumped to 24 percent from 14.5 percent a year earlier. That increase partly reflected a decline in that type of lending from 6.96 billion euros at the end of 2009, the bank said. Foreclosed or acquired real estate assets on its books rose to 2.95 billion euros at the end of 2010 from 2.3 billion a year earlier.
Meeting Expectations
The bank’s fourth-quarter earnings rose to 9.46 million euros from 6.2 million euros, in line with the 9 million-euro median estimate of five analysts surveyed by Bloomberg.
Fourth-quarter net interest income fell 12 percent to 375 million euros as funding costs rose, the bank said. Its net interest margin dropped to 1.43 percent from 1.57 percent in the third quarter, Banesto said.
Source: Bloomberg