Bankia turnaround mirrors Spanish recovery

A QUARTERLY rise in lending income showed yesterday that Spain’s Bankia is on the mend a year after its bailout plunged the country into financial crisis, and added to signs of recovery in the Eurozone’s fourth-largest economy.

The news will strengthen the Spanish government’s case that it does not need to extend a €41bn (£35bn) bank bailout deal with European partners which expires at the end of the year, and comes ahead of data tomorrow set to show the country pulled out of a two-year recession in the third quarter.

The bank is still going through a painful restructuring and cutting branches and jobs, while like most Spanish banking peers, its bread and butter lending business has suffered compared with a year ago, as low interest rates ate into margins and demand for credit declined.

But net interest income, a measure of earnings on loans minus deposit and financing costs, rose 1.6 per cent in July-September from the previous three months, marking the second quarter-on-quarter increase in a row.

Bankia and its parent BFA – which houses stakes in Spanish companies that are gradually being sold off – posted a nine-month profit after tax of €648m.

That puts the group on track to meet an €800m profit target for 2013, a key step in its restructuring after it took €18bn of European aid.

Bankia alone beat forecasts with a €362m net profit for the nine-month period, joining the country’s top banks Santander and BBVA in bouncing back thanks to lower provisions for bad loans.

Its bad debts as a percentage of total credit rose 13.6 per cent at end-September versus 13.4 per cent at the end of June – above a sector average in Spain of 12.1 per cent in August – though this was mainly down to the lending drop-off.