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Santander to Complete Real Estate Cleanup in 2012, Botin Says

Banco Santander SA Chairman Emilio Botin
Banco Santander SA Chairman Emilio Botin gestures whilst speaking during a news conference in Madrid. Photographer: Denis Doyle/Bloomberg

Banco Santander SA, Spain’s biggest lender, will fully comply this year with government-imposed provisioning requirements on real estate, Chairman Emilio Botin said.

The Spanish administration’s plan to make banks acknowledge higher losses on real estate assets “goes in the right direction” and “these provisions must be fully made this year,” Botin said during a speech to reporters today in Madrid. Any lender that can’t show it’s viable “should be sold,” he said.

Santander, which earned 24.4 billion euros ($32 billion) in net operating income in 2011, was able to deploy 1.81 billion euros in the fourth quarter to boost provisions to cover the 8.6 billion euros of property assets accumulated on its balance sheet during Spain’s property crash. The new government of Mariano Rajoy is preparing to announce a plan for restructuring Spain’s banking system and Botin said he expected the new rules to be made public on Feb. 3.

Rajoy has so far given few details about his plan, except to say that he wants banks to value real estate more realistically and also reduce the number of banks in Spain by encouraging mergers.

“If your piece of land is worth 100, it can’t say on your balance sheet that it’s worth 1,000,” he said in a Jan. 14 speech in Malaga, Spain. Spanish banks have about 176 billion euros of what the Bank of Spain terms “troubled” assets linked to real estate and have set aside provisions to cover about a third of that amount, according to the regulator.

Santander bolstered the provisioning level for acquired real estate assets to 50 percent of their value in the fourth quarter from 32 percent previously. The bank cut its lending to developers to 23.4 billion euros in December from 27.3 billion euros a year earlier, the bank said.

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