Jan. 30 - Spain's Santander, the euro zone's biggest bank, posted lower than expected net lending income in the fourth quarter, though profits more than doubled. Joel Flynn looks at the reasons for their mixed fortunes.
It's a tough time for banks. But Spain's Santander looks like it might finally be turning a corner. It didn't quite meet forecasts but the euro zone's biggest bank nearly doubled annual profit thanks to shrinking costs of bad property loans. Richard Hunter is Head of Equities at Hargreaves Lansdown. SOUNDBITE: Hargreaves Lansdown Head of Equities, Richard Hunter, saying (English): "Quite apart from the fact that the banking landscape is changing, you've got the regulatory overhang, you've got increased capital requirements, and of course in the case of Santander, allied to a fairly weak economy. So in the circumstances it's probably not such a bad result." Net profit for the year grew 90 percent to almost 4.4 billion euros. The bank made more than half its profits last year in emerging markets, offsetting real estate woes at home. And although threats to EM investments have risen, Santander predicts its earnings will grow as Spain's economic recovery gathers pace. Spain's just seen a second quarter of fragile growth and last week there was record demand for 10 billion euros worth of 10-year bonds. SOUNDBITE: Hargreaves Lansdown Head of Equities, Richard Hunter, saying (English): "The fact that Spain's in any sort of positive GDP figure at all has got to be positive in terms of comparing it to just a couple of years ago. But of course one also needs to bear in mind the extraordinarily level of high youth unemployment in particular in Spain. There's a great deal to be done before it can be called anything like a recovering nation, and alongside that of course you may well find that, quite apart from its other issues, Santander struggles to follow as well." Spain's economy has been in and out of recession since a property bubble burst six years ago. But exports and domestic demand are now growing. And even Spain's 27% unemployment rate is falling slightly. Santander is an important part of that recovery - and getting its house in order will be a significant help.