A MASSIVE write-down on its Spanish property portfolio wiped out Santander’s profits in the fourth quarter of last year, the bank revealed in full-year results yesterday.
The lender was forced to make a net provision of €1.67bn due to the plunging value of its assets, mostly in Spanish real estate.
That took its bottom line profit figure for the fourth quarter down to just €47m – 98 per cent down from the same quarter in 2012. And the numbers would have been even worse were it not for one-off gains from the sale of assets in Latin America and the US, which brought in €1.5bn.
The write-down illustrates how the large stock of real estate assets still languishing on banks’ books from the property bubble threatens their capital bases, making it difficult for lenders to sell the unwanted loans without crystallises massive losses.
The bank also indicated there could be more to come: its group non-performing loan (NPL) ratio – the proportion of bad loans to total assets – rose last year from 3.55 per cent to 3.89 per cent. But its provision for covering losses on those loans declined.
The NPL coverage ratio dropped from 73 per cent at the end of 2010 to 60 per cent at the end of last year. For foreclosed Spanish real estate, the provision is thinner, at 50 per cent, although that is an increase on 2010.
That means that although its total Spanish loan book shrank in size, from €236bn to €225bn, during last year, the cost of bad credit is on the rise. The bank’s NPL ratio in Spain is 5.5 per cent – and among general purpose real estate, excluding household mortgages, it shot up from 17 to 28.6 per cent last year.
In the UK, net profits plunged 42 per cent last year to €1.15bn, but that did not stop the bank boosting its payroll in Britain by over a tenth to 26,295. Its drop in profitability makes the float of Santander UK an increasingly distant prospect, however.
