Top European lenders post discouraging results

MADRID / LONDON

A woman strolls with an infant near almost empty apartment blocks in the Madrid satellite town of Sesena earlier in Februrary. Santander, which was responsible for the frenzy in Sesena, says its first-quarter profits fell 24 percent. REUTERS photo

A grim economic backdrop and regulatory reforms remain a drag on top European banks, with a number of them posting weak figures for the first quarter of the year.

Spain’s Santander is particularly exposed to the eurozone’s troubles, and its first-quarter results suffer from provisions taken on property loans that have soured during Spain’s property market crash.

Banco Santander said yesterday its first-quarter profits had fallen 24 percent. The eurozone’s largest bank by market capitalization said its net profit in the January-March period was 1.6 billion ($2.1 billion). Revenue grew by more than 8 percent to 11.4 billion euros.

That income gain, however, was offset by bigger loan losses, Santander set aside 3.1 billion euros in provisions, up 51 percent from the same quarter of 2011.

Banco Santander said non-performing loans amounted to 3.9 percent of its portfolio, an increase of 0.37 percentage points. In recession-plagued Spain, the ratio rose 1.18 points to 5.75 percent.

Barclays posts loss

British bank Barclays said yesterday that it suffered a net loss of £337 million ($546 million) in the first quarter, due to a huge accounting charge and compensation claims.

The performance in the three months to March contrasted with profit after taxation of £1.24 billion in the same part of last year, Barclays said in a results statement.

The bank also made a pre-tax loss of £475 million, compared with pre-tax profits of £1.65 billion last time around. Revenues sank 25 percent to £5.52 billion.

The results included a further provision of £300 million, after the bank was forced to compensate clients who were mistakenly sold payment protection insurance in Britain, along with other lenders.
Barclays also took a large accounting charge of £2.62 billion on the value of its outstanding debt.

“Barclays first-quarter results are an encouraging start to the year,” said chief executive Bob Diamond in the earnings release.

“We saw a constructive revenue environment for European investment banks, largely driven by fixed income,” an analyst at Credit Suisse said.

Deutsche Bank gains down

Deutsche Bank, Germany’s biggest lender, said yesterday that its bottom-line profit had been cut by a third in the first three months, as a result of weaker market conditions and exceptional charges.

Deutsche Bank said in a statement that its net profit amounted to 1.381 billion euros ($1.8 billion) in the period from January to March, down 33 percent from a year earlier.

The first quarter net profit figure fell short of the 1.64 billion euros forecasted by analysts in a Dow Jones Newswires poll.

Pre-tax profit fell 38 percent to 1.879 billion euros.

“Against a background of continued caution in global financial markets, we delivered solid
results,” said chief executive Josef Ackermann.

Analysts are watching out for moves by Deutsche Bank to clean up its balance sheet before a new leadership team takes the helm in June.

The first quarter is typically the strongest for investment banks and can set the tone for the year.
U.S. banks and Credit Suisse have said a strong first quarter slowed in April, however, and investors are wary that the eurozone crisis could flare up and dampen activity.