MADRID Weaker earnings from Latin America and Spain weighed on Santander (SAN.MC) in the first half of the year, even as the bank's profit jumped 29 percent after it moved past the pain of writedowns on real estate assets in its home market.
In Latin America, a key growth motor for the lender, and where it still makes half its money, net profit fell by more than 16 percent in the six months to June, the bank said in an earnings statement on Tuesday.
Santander's Brazil operation posted a 17.5 percent fall in net interest income - a measure of interest earned on loans minus what is paid out on liabilities such as deposits - to 5.5 billion euros ($7.29 billion).
A shaky economic recovery in Brazil - Santander's biggest Latin American market - has been a top concern for investors and analysts tracking the bank in recent months, although loan delinquencies fell across the sector there in June.
In Europe and Spain, which contributes about 11 percent to profit, net interest income has been squeezed by low interest rates. It fell nearly 17 percent in Santander's home market to 2.2 billion euros in the first half, though improved in the second quarter compared to the January-March period.
Overall at the group, net interest income was up just over 1 percent compared to a year earlier, helped by a second quarter recovery in other European hubs such as Portugal and Britain.
Some Spanish rivals also noted a rise in lending income in the second quarter of 2013, although many of them also face an uphill battle to contain growing bad debts in a deep recession.
Spanish banks booked billions of euros of provisions against losses on soured real estate deals last year, gutting their profits. That set them up for a dramatic turnaround for many in the first half of 2013.
Santander's 2.25 billion euro net profit in the first half of 2013 was almost as much as what the bank made for the whole of 2012, as provisions against loan losses fell sharply.
Its proportion of bad debts to its outstanding loan book rose to 5.18 percent across the group at the end of June compared to 4.76 percent at end-March, after the bank reclassified 2 billion euros of refinanced loans as non-performing ones, under new Bank of Spain rules.
(Reporting by Sarah White; Edited by Fiona Ortiz)