Santander benefits during first six months as provisioning burden eases

Leading Spanish bank Banco Santander saw its earnings climb by 29 percent in the first half of this year after the heavy provisions it made last year to cover for potential losses deriving from its exposure to the moribund real estate sector.

In a statement Tuesday to the National Securities Commission (CNMV), Santander said its net attributable profit in the first half came in at 2.255 billion euros, practically the same as the result for the whole of last year.

“Profits rose after more than two years of high levels of write-offs and reinforcement of capital. We are preparing for a new period of profit growth,” Chairman Emilio Botín said.

Despite the improvement in the bottom line, Santander’s core banking business suffered deterioration, with gross income down 4 percent at 20.61 billion euros.

New criteria issued by the Bank of Spain on refinanced loans led Santander to reclassify 2 billion euros’ worth of credit granted as doubtful. The group had already made provisions for this of 340 million euros. This resulted in an increase in the bank’s non-performing loan ratio in Spain by almost one percentage point to 5.75 percent, while the impact for the group as a whole was 0.26 percent, pushing the default rate to 5.18 percent.

Latin America accounted for 51 percent of group earnings, Europe 37 percent and the United States the rest.