Santander, BBVA Make $9.1 Billion in Provisions for Property

Spain’s biggest lenders, Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA, will take a combined 6.9 billion euros ($9.1 billion) in provisions after the government ordered banks to recognize more property losses.

The rules will generate 4.1 billion euros of gross additional provisions for Santander, the bank said today in an e-mailed statement. BBVA said in a filing that its gross new provisions will be 2.8 billion euros.

Spain is forcing banks to adjust for the loss of value in the real estate they piled up on their balance sheets as a result of the nation’s property crash. The government announced on Feb. 2 new rules on banks, imposing 50 billion euros of charges in the form of provisions and capital.

“We consider these haircuts on the portfolio to be extremely tough and extremely painful, and really the doubts about the adequate valuation of these assets on the balance sheet should be substantially diminished,” BBVA Chief Financial Officer Manuel Gonzalez Cid said on a webcast for analysts today. “Everyone has the recognition of this problem and the pain of this problem on the balance sheet.”

Santander said it had already charged 1.8 billion euros in provisions against 2011 earnings. The bank will book another 900 million euros in gains from the sale of its bank in Colombia, bringing the final amount it will charge against other capital gains and provisions in 2012 down to 1.4 billion euros.

2012 Earnings

BBVA said the final amount it would charge against 2012 earnings would be 1.36 billion euros, accounting for existing reserve buffers and tax effects. The rules won’t affect the bank’s dividend policy or ability to meet capital requirements set by the European Banking Authority, the lender said.

CaixaBank SA, Spain’s fourth-biggest lender, today said the new rules would generate 2.44 billion euros in provisions. The Barcelona-based bank, which earned 3 billion euros in pre-provision profits in 2011, also has an extra provisioning buffer of 1.84 billion euros that will allow it to “comfortably absorb” the provisions, CaixaBank said.

Banco Popular Espanol SA, Spain’s fifth-biggest bank, said it will make provisions of 2.6 billion euros under the rules. The Madrid-based bank, which is merging with Banco Pastor SA, plans to take the charge in 2012, according to a filing today. Popular said it would comply with European Banking Authority and Spanish capital requirements without resorting to state aid.

The bank said it expects operating profit of 2 billion euros this year and has a “very positive” outlook for 2013.

Banco Sabadell SA said it would have to make 1.61 billion euros in provisions and expected to be able cover most of the amount this year with operating profit. The bank will cover 410 million euros through other transactions, the Sabadell, Spain-based bank said in a filing to regulators today.

Bankinter SA, a mortgage lender, said in a filing to regulators it would have to have make provisions of 146 million euros to be covered through earnings this year.

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