Big banks to "comfortably" meet new provision rules

Santander, BBVA, Caixabank to set aside combined 12.7 billion euros to cover potential losses from their exposure to real-estate sector

Just days after the government approved its third reform of the financial sector in a little less than three years, three of Spain's largest lenders on Tuesday unveiled their plans for complying with the requirement of increasing coverage for potential losses in the value of their real estate assets.

Banco Santander, the country's biggest bank, BBVA, the number two, and CaixaBank, the commercial banking arm of the savings bank La Caixa, said they would set aside a combined 12.771 billion euros in provisions and capital buffer for the new requirements.

That is about a quarter of the 50 billion euros the Economy Minister said the sector needs to cover for losses in loans to the property sector, as well as physical assets such as foreclosures and other real estate assets acquired in the form of payments for loans that were granted.

Santander said it and its Spanish unit Banesto needed 6.1 billion euros to meet the new requirements. However, the bank already took a charge of 1.8 billion euros in the fourth quarter of last year in anticipation of the restructuring imposed by the government. A further 2 billion will take the form of a capital buffer. This is already covered by capital held by the bank. Of the remaining 2.3 billion, 900 million euros will be charged against capital gains from the sale of the bank's Santander Colombia unit, while 1.4 billion will be taken against other capital gains and ordinary provisions for this year.

At a presentation, BBVA's chief financial officer, Manuel González Cid, said the bank would set aside 2.2 billion euros to write down the value on its books of problematic real estate assets and a further 600 million to increase generic provisions.

"We are going to comply with the new provisions for real estate assets, as well as the capital requirements of the Bank of Spain and the European banking Authority, while maintaining our dividend policy and without having to [offload] assets," González Cid said.

Meanwhile, CaixaBank calculated the new provisions it needs to make at 2.436 billion euros. The bank said its earnings capacity as well as 1.835 billion in generic provisions it had at the end of 2011 would "comfortably" allow it meet the new requirements.

"Obviously, we are talking about banks known as the strongest in the Spanish financial system, and it is no surprise that the impact [of extra coverage for losses] will be assumable as a result of the availability of general provisions in some cases or write-downs that that have been anticipated," BBVA's González Cid said.

Smaller player Unicaja said the new regulations would have a gross cost of 691 million euros, of which 264 million would be covered by a capital buffer and the remaining 427 million from earnings and already existing provisions.

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