INVESTORS’ FAITH in the profit outlook for Spain’s banks took another knock yesterday following poor quarterly results from Banesto – the bank part-owned by Spain’s biggest lender, Santander.
Net profits slumped 88 per cent to €20 million in the first quarter as the lender implemented tough new requirements imposed by the government to better reflect deteriorating real estate prices.
“We expect profitability at the Spanish banks to remain under pressure as asset quality and loan-loss provisions remain the dominant feature of results,” said Daragh Quinn, Nomura analyst.
Portuguese bank investors have also been jittery. Yesterday, shares in Banco Espirito Santo, the country’s largest bank by market value, fell more than 10 per cent after it unveiled a deeply discounted rights issue to raise €1 billion.
The cash call is the third substantial capital raising by a euro zone bank this year, following the €7.5 billion issue by Italy’s UniCredit in January and last month’s €1 billion offering from Spain’s Sabadell.
Pressure also mounted on sovereigns, with 10-year Spanish government debt yielding 5.82 per cent.
“Clearly, the risk that looms largest is that sovereign and financial stresses return with renewed force in Europe,” said IMF chief Christine Lagarde, ahead of the IMF’s annual spring meeting.
Ms Lagarde said the IMF now expected to raise less than its original target of $500 billion in new funding as part of global efforts to build a “firewall” around the euro zone.– (Copyright The Financial Times Limited 2012)
