Business

Santander profit falls on Spanish property provisions

Santander branch
Image caption Santander is the eurozone's biggest bank

Santander has revealed a 35% fall in annual profits after the group took extra provisions for deteriorating real estate assets in Spain.

The bank announced a net profit of 5.35bn euros ($7.05bn; £4.48bn) for 2011, down from 8.18bn euros in 2010.

It said it had made a 1.8bn euro provision against property exposure in Spain and had written off 600m euros relating to its businesses in Portugal.

Spain has struggled since its property bubble burst in 2008.

Banks took on land holdings from bankrupt developers, but have struggled to offload most of their property assets.

Economy minister Luis de Guindos has said new provisions to cover losses on real estate assets could cost Spanish banks up to 50bn euros.

Santander is better-placed than other Spanish banks to absorb greater provisions as it has thriving businesses outside its home market.

Group revenues increased by 5% to 44.3bn euros.

Santander also reiterated that it had already achieved the 9% core capital ratio required by the European Banking Authority, six months ahead of schedule.

The provisions were made in the fourth quarter, meaning that its profit for the last three months of 2011 fell 98% to 47m euros from 2.1bn euros in the last quarter of 2010.

In the UK, pre-tax profit for the year fell 42% to 1.57bn euros (£1.32bn), after the bank put aside £538m post-tax for compensating customers who were mis-sold payment protection insurance (PPI).

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