July 26, 2012 / 7:23 AM / in 6 years

Santander profit halves on property writedowns

MADRID (Reuters) - The eurozone’s biggest bank, Santander (SAN.MC), reported a 51 percent drop in first-half net profit on Thursday as it took writedowns on deteriorating Spanish real estate assets sooner than expected.

Santander had been expected to take the hit on repossessed housing and unrecoverable loans to developers in the second half of the year. The government has demanded banks recognize more than 80 billion euros ($97 billion) in losses from a 2008 property crash.

The bank reported net profit of 1.7 billion euros after writing down losses of 2.78 billion euros on Spanish property assets. Profit for the period before provisioning was 3 billion euros, in line with analysts’ expectations.

Santander has suffered less than domestic rivals from a severe Spanish economic downturn and property crash due to its diversified business in Brazil, Mexico, Poland and Britain. Latin America accounts for half of profit.

Funding holes in Spanish banks’ balance sheets due to unrecognized losses from the bursting of a housing bubble, worsened by loan defaults in a recession, has pushed Spain to ask Europe for an up to 100 billion euros ($121 billion) credit line to prop up lenders.

In a recent external audit of Spain’s banks, Santander was one of three judged not to need capital even in a stressed scenario, alongside BBVA (BBVA.MC) and CaixaBank (CABK.MC).

Santander said the provisions taken this quarter meant it had accounted for 70 percent of government demands regarding property writedowns.

“The provisions we are making will allow us to put real estate write-offs in Spain behind us by the end of this year,” said Chairman Emilio Botin in a statement.

Santander said deposits in Spain had grown 15 percent, while quarterly revenues were the highest in the last 10 quarters.

The April to June period covers the nationalization of Bankia, Spain’s biggest bank rescue ever, which sent shock waves through the country’s financial system.

Santander and smaller rival BBVA often gain clients during times of uncertainty in Spain, as they are seen by Spaniards as strong, stable banks.

Mid-sized Spanish banks Bankinter (BKT.MC) and Sabadell (SABE.MC) have both reported first half results brought low by writedowns against toxic property assets.

($1 = 0.8248 euros)

Editing by Julien Toyer and Mark Potter

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