Sabadell, Bankinter Start Repaying ECB Loans as Investors Return

Banco Sabadell SA (SAB) and Bankinter SA, the first two Spanish banks to publish full-year earnings, committed to starting to repay emergency loans from the European Central Bank as investor confidence improves.

Sabadell plans to return 1.5 billion euros ($2 billion) of 24 billion euros in three-year money the bank borrowed under the ECB’s Longer-Term Refinancing Operations, Chairman Josep Oliu told reporters in Barcelona today. Bankinter plans to repay 15 percent of its 9.5 billion euros of LTRO loans this year, Chief Financial Officer Gloria Ortiz said on a webcast today.

The pledges to return ECB loans come as Spanish banks seek to persuade investors that a cleanup of soured property assets and easier access to funding means they have turned the corner. Still, weak credit demand and low interest rates are putting pressure on margins while loan defaults continue to mount as Spain’s economy shrinks.

“Wholesale markets are beginning to open, international investors are showing interest in Spain, exports are doing well,” Bankinter (BKT) Chief Executive Officer Maria Dolores Dancausa told reporters in Madrid. “There are aspects of the economy that are doing badly but I want to underline the positive.”

Banks can start paying back this week more than 1 trillion euros of three-year money they borrowed in two portions during 2012.

ECB Finance

“At the moment, the ECB doesn’t finance any part of the structural balance sheet of the bank, something we couldn’t say a year ago,” Oliu said.

Sabadell earlier reported an 8.73 million-euro fourth- quarter loss compared with profit of 24.47 million euros in the same period a year earlier as it boosted provisions to cover real estate losses. Bad loans as a proportion of total lending jumped to 9.33 percent from 8.46 percent in September.

Fourth-quarter net interest income rose 27 percent to 487.3 million euros from a year earlier. That was a 7.4 percent decline from the third quarter.

Bankinter’s fourth-quarter net income climbed to 52.36 million euros from 34.22 million euros a year earlier, the Madrid-based bank said in a filing to regulators today. Net interest income fell 1.7 percent from a year earlier and 16 percent from the third quarter to 146.7 million euros.

Bad loans as a proportion of total lending at Bankinter rose to 4.28 percent from 3.24 percent a year ago, the lender said. The ratio will probably increase by another percentage point over the next year before peaking, Dancausa said.

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net Sharon Smyth at ssmyth2@bloomberg.net

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

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