Leading banks see profits plummet on provisioning

The banking sector has been going downhill for the last five years. If lenders were posting record profits in 2007, in 2012 Spain’s six largest banks (not counting the nationalized and de-listed Bankia) posted joint profits of 1.86 billion euros, an 81-percent drop from 2011.

Provisioning requirements to cover bad loans and real estate losses were behind the falls in the year which saw the European bailout for the sector. BBVA, Spain’s second-largest bank by assets, saw its net profit fall by 44.2 percent from 2011 to 1.67 billion euros.

Santander saw its profits dip by 59 percent on 2011.

CaixaBank said it earned 230 million euros in 2012, a 78.2-percent fall from the previous year, after reserving 10.3 billion euros to cover real estate risks. Last year, CaixaBank sold real estate assets worth 1.58 million euros through its branches Building Center and Servihabitat. “2013 will probably be better than the year we just left behind,” said Isidre Fainé, chairman of the Catalan bank under La Caixa’s control.

Meanwhile, the medium-sized Banco Popular announced losses of 2.46 billion euros in 2012 due to its own provisioning efforts and lack of other sources of income to offset the losses. Had it not been for this, the lender said it would have posted profits of 520 million euros. Popular set aside 9.6 billion euros to cover property risks, it told the CNMV securities commission.