Banesto net profit down 88%

Banesto announce 88% fall in profits

As the Spanish banks announce their Q1 results Banesto have started the ball rolling with an 88% fall in profit.

The bank, controlled by Santander, reported a fall of 88% to 20.2 million euros in the first quarter of 2012, compared to 170 million in the same period last year.

Banesto said the results could be attributed to extra provisions set aside to cover bad property loans, provisions that were demanded by Mariano Rajoy’s new centre-right government, which took power last year, as part of efforts to clean up the banks’ balance sheets.

Banesto say they have 475 million euros set aside in the first quarter, which amounts to almost 50% of the amount needed to cover the whole year.

The bank have made some 365 million euros partly from the sale of shareholdings and loan assets. Without this the bank would have recorded a loss. A 4 million euro tax credit applied to the banks net profit also helped to prevent a loss.

Spanish banks have been curbing their lending of late and Banesto say their total lending fell 8.3% in Q1, as well as customer deposits which dropped 10%, the bank reported.

“The Spanish economy needs to de-leverage and the de-leveraging needs to be seen in the Spanish banks’ balance sheets,” chief executive José Antonio Garcia Cantera said, adding “We think that is going to continue for quite a while.”

Mr Cantera said the bank had sold more than 1,500 homes in March “… at an average discount that was less than the provisioning rate of 45 per cent applied to the assets.”

“That demonstrates that at a certain price there is significant demand for housing in Spain.”