Half a billion property hit to Banesto profits

SPANISH retail bank Banesto was hit by a €475m (£392m) provision for bad real estate loans, it reported in its first-quarter results yesterday.

Banesto, which is mostly owned by Santander and is one of Spain’s biggest high street lenders, reported a halving in pre-tax profits to €126m. That was above expectations despite the massive property hit and a further €366m writedown from other bad loans.

The bad loans will stoke fears that Spain’s housing crisis is still crippling its banks as stricter regulations force them to take further and further writedowns on their toxic property books.

Banesto warned that there is more to come: it said that it has now taken half of the property writedowns required of it this year by new Spanish regulations, suggesting that further losses to the tune of half a billion are in the pipeline.

Along with the losses from its property book, Banesto’s overall loan book deteriorated in quality compared to the last quarter of 2011, with non-performing loans (NPL) growing from 4.68 per cent to 4.93 per cent. However, the bank said the outlook for the industry is worse still, with an average NPL rate of 7.91 per cent.