Santander, the euro-zone's largest bank by market value, posted a small drop in nine-month net profit as it boosted provisions for an expected rise in bad debts from Spain's housing boom hangover.
Diversification away from a tough domestic market to expand in fast-growing markets such as Brazil is helping the bank stem the effects of the turndown, and underpinned a 21.7 per cent rise in operating income.
Net profit fell 2.8 per cent to €6.74 billion, in line with the €6.72 billion forecast by several experts, while operating income was also in line.
Santander set aside €6.07 billion to soften the blow from potential bad debts, currently at 3.03 per cent of total loans and expected to rise, especially in its home base of Spain, which provides more than one quarter of group profit but is currently in the grip of a housing market crash.
In spite of the need for increased provisions, Santander has been one of the winners in the sector shake-out triggered by the global financial crisis, emerging with acquisitions, no need for state aid and an enhanced reputation.
Shares were down 3.35 per cent at €10.97 versus a 1.9 per cent decline in the DJ Stoxx European banking sector, having risen 70 per cent this year versus a 51 per cent rise in the DJ Stoxx banks index.