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Santander profits tumble 94%

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25/10/2012
Spanish banking giant Santander has seen its profits tumble by more than 90% in the third quarter after bad property loans in Spain battered its books.

The group’s net income fell to €100m (£81m) in the third quarter, well below consensus and down from €1.8bn in 2011.

In the UK, where the bank has replaced Abbey National, profits also dropped sharply, down 21% to €337m in the three months to end of September.

The bank said it has now fulfilled 95% of the real estate provisions imposed upon it by the Spanish government after an additional €5bn provision this quarter.

The bursting of the Spanish property bubble is still taking its toll in a country struggling with a shrinking economy and 25% unemployment.

The bank’s shares dipped 1% to €465 today after the results announcement , but the group’s chairman said its ability to generate profits elsewhere had helped it remain financially sound.

Emilio Botín said: “The bank’s capacity to generate profit enables us to set aside hefty real estate provisions in Spain in 2012 and significantly increase non-performing loan coverage. In the first nine months we generated pre-provision profit of €18.2bn.”

Spain’s banks will need an injection of €59.3bn to survive a serious downturn, an independent audit recently calculated. However, Santander – along with six other banks – was not among those lenders in need of support.

The Spanish government is still hoping to avoid being bailed out by eurozone authorities, prime minister Mariano Rajoy saying earlier this month that a request is “not imminent”.

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