The euro zone's biggest bank, Santander, said on Thursday first-half profit halved after it took writedowns on deteriorating Spanish real estate assets while deposits in Spain jumped during the quarter. Santander said it had now completed 70 percent of required writedowns against repossessed housing and unrecoverable loans to developers demanded by regulators in an attempt to belatedly recognise losses from a 2008 property crash.
Although in line with the provisions ordered by the Spanish government, traders were surprised the bank was willing to take such a slice of these losses so early in the year. Shares were trading 1.7 percent higher at 1000 GMT at 4.1 euros per share, outpacing a steady blue-chip index. "The provisions we are making will allow us to put real estate write-offs in Spain behind us by the end of this year," said Chairman Emilio Botin in a statement.
Santander said at an analysts' presentation there would be no change to its dividend policy. On Wednesday Spain's Telefonica said it would scrap its dividend for 2012 as it battles to bring down its debt pile in a tough recession. A funding gap in Spanish banks' balance sheets due to bad property investments, worsened by loan defaults in a recession, has pushed Spain to ask Europe for a credit line of up to 100 billion euros ($121 billion) line to prop up lenders.
Spain is not considering seeking immediate help from the European Union to ease tensions on its sovereign debt, two Spanish sources said on Thursday, although the euro zone is eyeing possible action for later this year. Spain's borrowing costs reached this week new record highs since the launch of the euro 13 years ago.
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