Santander warns over profit margin

MADRID // Santander, the euro zone's biggest bank, says profit for this year will fall short of forecasts as it takes a bigger charge than expected for bad Spanish assets under new Bank of Spain accounting rules.

The aggressively acquisitive bank said it did not expect to make any further purchases and would work to consolidate recent buys after a multibillion-euro spending spree since the start of the summer.

The bank reported a 9.8 per cent fall in nine-month net profit after a one-off hit of €472 million (Dh2.4 billion) for the provisions.

The move complies with Spanish rules enforced after a property crash and the nation's worst recession in half a century, but the provision was greater than Santander's estimate at the end of July of about €400m.

Shares fell 0.8 per cent against a little-changed Spanish blue chip index and a 0.6 per cent rise in the SX7P index of European banks. The stock fell as low as €8.985, its lowest in almost a month.

Santander had previously said it expected net profit for this year to be in line with the €8.9bn it achieved last year.

"Underlying trends are quite solid but the numbers look weak at first glance and are not a positive catalyst," said Arturo de Frias, an analyst at Evolution Securities, who rates the stock "buy".

Net interest income of €21.9bn was in line with estimates.

Under new rules that came into effect on September 30, the Bank of Spain has cut the time over which banks can fully provide for estimated losses on non-performing loans. It has also required a further 10 per cent write-down on properties held for more than two years.

The home market in Spain, including the contribution from the majority-owned unit Banesto, now accounts for 23 per cent of Santander's net profit, less than the 25 per cent brought in by Britain and 34 per cent from Brazil.