Santander hit by rise in bad Spanish loans

Tim Wallace
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PROFITS plunged at Santander as ever more Spanish loans turned bad in the country’s ongoing recession, the bank’s third quarter results showed yesterday.

The Spanish bank’s UK arm performed more strongly, though it too was slowed by shipping loan problems, increased provisions against corporate debt it bought in the credit crunch, and a cost from its abandoned bid to buy hundreds of branches from RBS.

The group’s profits plunged 66 per cent on the year, falling from €5.3bn (£4.3bn) in the first nine months of 2011 to €1.8bn in the same period of this year.

Provisions for bad loans jumped 30.2 per cent, from €7.3bn a year ago to €9.5bn so far this year, with weak performance in Spain, Brazil and Chile particularly weighing on the group.

In the UK, pre-tax profits increased four per cent to £1.1bn in the first nine months of the year.

Small business lending increased 20 per cent, first time buyer mortgages rose 22 per cent and current account balances jumped 20 per cent, while the bank’s core tier one capital ratio hit 12.8 per cent.

But the unit struggled in some other areas.

It had to make provisions of £335m this quarter on corporate loans it acquired from Alliance and Leicester in the financial crisis, on top of the £368m provision in the first half of this year.

And the dropped bid to buy 316 RBS branches – negotiations had been running for years before Santander pulled out of the deal this month – cost £52m.

The group’s shares dipped 0.59 per cent yesterday, slipping to €5.74.