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Popular Quarterly Profit Climbs 4% After Gains From Asset Sales

Banco Popular Espanol SA, a Spanish lender forced to sell shares last year to cover a capital shortfall, said first-quarter profit increased 4 percent after asset sales countered a decline in interest income.

Net income rose to 104.2 million euros ($136.2 million) from 100.2 million euros a year earlier, the Madrid-based lender said in a filing to regulators today. The average estimate of eight analysts surveyed by Bloomberg was 90.5 million euros.

Popular is targeting earnings of 1.4 billion euros by 2014 after a balance-sheet cleanup yielded a 2.46 billion-euro loss last year. While the lender completed a 2.5 billion-euro share sale in November to help plug a capital shortfall uncovered in Spanish stress tests, it still faces rising bad loans and margin pressure caused by low interest rates and weak credit demand.

Popular shares fell 1.7 percent to 60 euro-cents at 10:07 a.m. in Madrid, paring this year’s gain to 1.9 percent and valuing the lender at 5.1 billion euros.

Bad loans as a proportion of total lending climbed to 9.94 percent from 6.35 percent a year earlier, Popular said. Net interest income, or the revenue generated from interest earned on assets after payments to depositors, fell 15 percent to 592.6 million euros.

Gross lending to clients declined 1.6 percent from a year ago, Popular said. Quarterly earnings were buoyed by one-time gains of 236 million euros from the sale of debt recovery and cash machine businesses and by recovering written-off loans.

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