Bloomberg News

Popular Net Income Drops 46% as Bank Provisions for Real Estate

April 27, 2012

Banco Popular Espanol SA (POP), Spain’s fifth-biggest bank, said first-quarter profit fell 46 percent as it booked provisions to cover real estate losses and costs rose.

Net income dropped to 100.2 million euros ($132 million) from 185.7 million euros a year earlier, the Madrid-based bank said in a filing to regulators today. Earnings were higher than the 63.7 million-euro average estimate in a Bloomberg survey of 12 analysts.

Spanish banks, including Popular, are responding to an order handed down by the government in February to book more losses on real estate as unemployment at an 18-year high also threatens to drive up loan defaults. While bad loans continued to mount at Popular, the bank said it boosted revenue by raising lending margins as the cost of deposits fell, helped in part by the impact of three-year cheap funding provided by the European Central Bank.

Bad loans as a proportion of total loans rose to 6.35 percent from 5.99 percent in December and 5.44 percent in the same period a year earlier, Popular said.

Loans newly classified as in default rose to 623 million euros from 570 million euros in the fourth quarter and 515 million euros a year earlier, the bank said. Costs for covering impaired assets fell 24 percent to 310.3 million euros from 408.6 million euros.

Net interest income jumped 34 percent to 692.9 million euros. Excluding the impact of Popular’s acquisition of Banco Pastor SA, which was partly consolidated into the earnings, the increase would have been 25 percent, the bank said.

Administrative costs jumped to 365.5 million euros from 297.7 million euros a year earlier. Earnings a year ago were boosted by almost 500 million euros of one-time gains from deals including a joint venture with Allianz SE (ALV) that weren’t repeated this year.

Popular shares fell 1.4 percent to 2.30 euros at 9:20 a.m. in Madrid, extending declines this year to 34 percent.

To contact the reporter on this story: Charles Penty in Madrid at

To contact the editor responsible for this story: Frank Connelly at

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