Banesto sees profits slump

 
City A.M. Reporter
SPANISH retail bank Banesto’s net profit slumped 20 per cent in the first-quarter, dragged lower by rising bad loans in a stunted economy and as higher funding costs bit into margins on a yearly basis.

Quarterly profit margins improved and the number of loans falling into arrears dropped, providing a bright spot against a background of rising bad loans and disappointing loan growth in a country with the highest unemployment rate in the Eurozone.

Banesto, majority owned by Santander, is the first Spanish bank to report earnings this quarter, giving a flavour of the challenges facing a sector reeling from a property boom and bust that left banks owed billions by bankrupt developers.

Banesto said: “The first quarter of 2011 has developed against a difficult backdrop, with market tension, more intense competition and persistent economic weakness.”