CaixaBank’s Real Estate Provisions Reduce Profit 42%

CaixaBank SA (CABK), Spain’s third-biggest bank after it acquired Banca Civica, said profit slid 42 percent as it pressed ahead with a task of cleaning up real estate losses.

CaixaBank posted net income of 7 million euros ($9.1 million) in the third quarter compared with 12 million euros a year earlier, the Barcelona-based lender said in a filing to regulators today. Earnings compared with the 42.2 million-euro average estimate in a Bloomberg survey of seven analysts.

Spanish banks, including CaixaBank, are under orders from the government to speed up recognition of losses on real estate assets that piled up on their books as the country’s property bubble burst. CaixaBank said it made 4.41 billion euros of provisions in the first nine months of the year to fully cover the 2.44 billion-euro requirements of a property clean-up decree from February and 600 million euros of the 2.1 billion euros in charges it needs to make under another decree from May.

Net interest income jumped to 1.06 billion euros in the third quarter from 777 million euros in the same period a year ago.

The ratio of bad loans to total lending surged to 8.42 percent in September from 5.58 percent in June and 4.9 percent in December, the lender said. Stripping out the impact of the Civica acquisition, the bad loans ratio was 6.14 percent.

CaixaBank agreed to buy Civica, formed from a grouping of former savings banks, in March for 977 million euros as an overhaul of Spain’s financial system gathered pace. The acquisition, completed in the third quarter, gives CaixaBank a business with 344 billion euros in assets, 6,631 branches and 13 million clients.

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net