MADRID, July 22 (Reuters) - First-half results at Spanish banks Caixabank , Bankinter and Popular showed the sector struggling uphill, squeezed by a property crunch while higher funding costs bite.
Popular, the biggest of Spain's mid-sized banks which only scraped through last week's European stress tests, took a 1.1 billion euros ($1.6 billion) provision while reporting profit which fell 14 percent.
The largest listed savings bank Caixabank , trading on the bourse since the start of the month, announced better results with an 11 percent rise in profit.
Shares in all three rose thanks to relief at a European Union deal on Thursday which should help stem the euro zone debt crisis and reduce funding costs.
"There is nothing really (in results) to change the view of the challenges that Spanish banks face, but they are better than expected," said Daragh Quinn, banks analyst at Nomura in London.
Progress had been made this week with the listing of savings banks Bankia and Civica , but there was still far to go, he said.
"The key issue for banks now is access to the funding market for the next 6 months. It's looking better today than it has been for a while (because of lower bond market rates), but let's see how it pans out."
Provisions for bad debt at Caixabank were up 18.7 percent, and the bank used most of a 463 million euro one-off gain for an extraordinary writedown.
Higher provisioning is likely to continue in the domestic business of Spain's biggest banks, Santander and BBVA , due to report on July 27 and 28 respectively.
Santander, the euro zone's largest bank, now has most of its business outside Spain and has hoovered up weaker banks before and during the crisis. But it still has work to do.
"Loss recognition in Spain is overdue and vital. Both (BBVA and Santander) will have to deal with ... real estate problems in Spain where we consider they should increase their provisioning levels to more realistic levels," analysts at JP Morgan Cazenove said in a July 21 research note.
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