Bloomberg News

Sabadell to Take Real Estate Charges Within a Year, Oliu Says

January 26, 2012

Jan. 26 (Bloomberg) -- Banco Sabadell SA will anticipate a government order to banks to clean up real estate on their balance sheets by completing the job this year, Chairman Josep Oliu said.

“We have in our plan to do it all in 2012,” Oliu said in a news conference in Barcelona today. “I don’t know if they’re going to give us two, three or four years, but to be sure our plan is to do it in one year.”

Spain’s government is pushing banks to recognize losses on real estate assets amid a property-market crash, while coaxing stronger lenders into mergers with weaker companies. Sabadell said in December it would buy Caja de Ahorros del Mediterraneo, a failed lender seized by the Bank of Spain, for 1 euro in a deal financed and guaranteed by other commercial lenders. The merger will create the country’s fifth-largest bank.

Sabadell has 7.8 billion euros ($10.3 billion) of what it terms “potentially problematic” assets linked to real estate on its books with provisions set aside to cover 36 percent of that amount, the bank said today in an earnings presentation. The number includes 4 billion euros of foreclosed or acquired real estate and 1.16 billion euros to cover those assets, Sabadell said.

Spanish Prime Minister Mariano Rajoy has pledged to enforce a cleanup of the balance sheets of the country’s banks and also wants more of them to merge to cut capacity in Spain’s financial system. Banco Espanol de Credito SA, a Spanish retail banking unit of Banco Santander SA, posted a 173.3 million-euro fourth- quarter loss on Jan. 12 after taking a 280 million-euro charge for souring real estate.

Net Income Declines

Sabadell said today fourth-quarter net income fell 38 percent from a year earlier as it booked more charges to cover the declining value of real estate.

Profit dropped to 24.47 million euros, the bank said in a filing to regulators. Earnings compared with the average 21.97 million-euro estimate in a Bloomberg survey of 10 analysts.

Bad loans as a proportion of total loans climbed to 5.95 percent in December from 5.72 percent in September, the bank said in the filing to regulators.

Provisioning costs for bad loans and assets rose to 281.6 million euros from 154.2 million euros a year earlier. Of that, 106 million euros was for real estate, up from 41.2 million in the third quarter, and 32 million euros was for its stake in Banco Comercial Portugues SA, a Portuguese lender.

Net interest income rose 15 percent to 384.1 million euros from 332.8 million euros in the same period a year earlier, Sabadell said. Gross lending increased by 0.8 percent from a year earlier as deposits rose 6.1 percent.

Sabadell shares fell 0.1 percent to 2.93 euros at 12:17 p.m. in Madrid, valuing the bank at 4.73 billion euros.

--Editors: Steve Bailey, Stephen Taylor

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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