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Bankia Leads Spanish Lenders Boosting Second-Quarter Profit

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July 25 (Bloomberg) -- Bankia SA was among the Spanish lenders to report higher second-quarter profit after the Valencia-based company’s real-estate losses pushed the government to seek a bailout for its banking system last year.

Net income of 126 million euros ($166 million) compared with 74 million euros in the first quarter, the bank said in a regulatory filing today, without providing year-earlier figures. That missed the average 163.2 million-euro estimate of five analysts surveyed by Bloomberg. Banco Sabadell SA and Bankinter SA also reported earnings gains.

Bankia needed about half of the 41 billion euros in European funds sought by Spain last year to support its banking industry as property-linked losses threatened to overwhelm some lenders and pile up costs for the government. Spain’s fourth-largest lender is seeking to increase annual profit to 1.2 billion euros by 2015 after passing 22.3 billion euros of soured real estate assets to a government bad bank in December.

“We are content with the results of the second but as we also said three months ago, this game still has a long way to go,” Jose Sevilla, Bankia’s general director, said in a webcast news conference from Valencia.

The BFA-Bankia group, which includes Bankia’s parent, posted after-tax profit of 428 million euros, putting it on course to meet its full-year target of 800 million euros, the lender said.

Bad Loans

Net interest income, excluding the impact of a subordinated loan from its parent, rose to 633 million euros in the second quarter from 601 million euros in the preceding three months. Operating costs fell 1.2 percent to 488 million euros over that period.

Bad loans as a proportion of total lending rose to 13.36 percent from 12.99 percent in December, the bank said, adding that 44 percent of its 22.1 billion-euro stock of refinanced loans has been classified as “doubtful.”

Second-quarter net income was calculated by subtracting first-quarter profit from the first-half figure of 200 million euros published by Bankia today.

Sabadell, Spain’s fifth-biggest lender, said second-quarter net income jumped sevenfold to 72.3 million euros from a year ago. Profit beat the 39.7 million-euro average estimate in a survey of seven analysts as the bank as trading revenue increased to 738 million euros and bad-loan provisions fell by half to 748.3 million euros.

Bankinter, a Madrid-based lender, posted a second-quarter profit of 51.9 million euros after a year-earlier loss of 26.8 million euros.

“It’s too early really to talk about a recovery in the banking industry in Spain with the economy as it is,” Fernando Pascual, an analyst at Espirito Santo Investment Bank in Madrid, said by phone. “It’s nowhere near business as normal.”

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

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