--Caixabank, Popular, Banesto hit by real-estate loss
provisions
--All three set aside most of their profit against losses
--Portugal's BCP bank swings to loss, takes EUR502.2 million hit
from Greek operations
--Spain has lifted minimum loss provisions level twice this
year
MADRID--One large and two mid-sized Spanish banks reported
sharply lower second-quarter profits Friday after setting aside
billions of euros to cover real-estate-related losses amid a
deepening economic slump.
In neighboring Portugal, meanwhile, Banco Comercial Portugues SA
(BCP.LB) said it swung to a net loss in the first half of the year
after recording impairment charges for its Greek unit and souring
domestic loan book.
Caixabank SA (CABK.MC), Spain's third-largest lender by market
value, number five bank Banco Popular Espanol SA (POP.MC) and
smaller Banco Espanol de Credito SA (BTO.MC), all said Friday they
had set aside most of their profit to bolster their buffers against
property sector losses, after the government twice this year raised
the minimum required provisioning level for banks.
Caixabank said quarterly net profit tumbled 78% to 118 million
euros ($145.1 million), while Popular's profit fell 37% to EUR75.4
million. Smaller Banesto, which is owned by banking giant Banco
Santander SA (SAN), said quarterly profit sank 97% to EUR14.4
million.
In February Spain told banks they needed to bump up their
provisioning levels on toxic real-estate assets by EUR50 billion,
an attempt to appease investors worried about hidden losses in the
country's banking system. But just three months later it became
clear the market remained sceptical, so the government told banks
to set aside another EUR30 billion to cover potential losses on
developer loans that hadn't yet soured.
"The real-estate crisis is worsening and more developers are
throwing in the towel," Popular's chief financial officer Jacobo
Gonzalez-Robatto said, noting that many developer loans that
earlier had looked doubtful now have gone into default.
In Portugal, souring loans are also increasing amid a deep
economic contraction that began last year. BCP said 7.8% of its
total loans were at risk in June, up from 5% a year earlier. The
bank reported a EUR544.3 million net loss for the six months ended
June 30 compared with a EUR114.3 million net profit a year earlier,
after taking a EUR502.2 million hit from its unit in Greece.
The weakest Spanish banks are retrenching and allowing other
lenders to charge more for loans. As a result, Caixabank and
Popular said lending income grew faster than in recent
quarters.
Banks are having an increasingly difficult time financing
themselves among wary foreign investors, which is one of the
reasons lending volumes in Spain are shrinking at a record pace.
Banks, most of which rely heavily on financing from abroad, are
scrambling to reduce this reliance by increasing deposits and
cutting their exposure to troubled sectors such as the real-estate.
"The country is deleveraging at quite a swift pace," Caixabank
Chief Executive Juan Maria Nin said.
Adding to the problem, some banks see customers moving funds out
of Spain amid worries about the country's increasingly dire
financial situation. Mr. Gonzalez-Robatto said that some large
companies have been doing that at the bank. "Many multinationals
have withdrawn funds," he told reporters.
Cash-strapped Spain is waiting for the first part of a EUR100
billion aid package from the European Union, which will go towards
cleaning up troubled banks. While most of the bailout money will go
to the savings banks that have been nationalized, other large
lenders are now being audited by Oliver Wyman to see just how much
cash each individual lender needs.
Caixabank isn't expected to need additional capital in the test.
Popular, which has a higher exposure to toxic real-estate, is
working to raise money so it can avoid having to ask for bailout
money.
Mr. Gonzalez-Robatto said Popular plans to raise about EUR800
million by selling assets, and another EUR700 million through a
rights issue, which it plans to conduct in the first half of next
year.
Portugal's BCP last month received EUR3 billion from the
Portuguese government in exchange for contingent convertible bonds
to meet capital requirements.
The so-called CoCos are sold as interest-bearing debt that has
to be paid back. But they convert to equity in the event that a
bank's capital ratios fall below certain levels.
Money for the bank was taken out of a EUR12 billion
recapitalization line under Portugal's EUR78 billion bailout
program.
(Patricia Kowsmann in Lisbon, Pablo Dominguez in Madrid
contributed to this article.)
-Write to Christopher Bjork at
christopher.bjork@dowjones.com
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