Spain's Banesto 9-Mth Profit Rises 13 Pct

By Joe Ortiz

MADRID (Reuters) - Spanish bank Banesto (BTO.MC) reported a 13.3 percent rise in nine-month net profit to 584 million euros ($820 million), exactly in line with a Reuters poll forecast.

Chairwoman Ana Patricia Botin said that in the current financial turbulence Banesto enjoyed a strong liquidity position in both the short and medium-term.

Despite the credit crunch set off by sub-prime mortgage problems in the United States, Banesto said its cost of financing rose by about one percentage point -- about the same as Euribor rates over the past year.

Banesto, which is controlled by Spain's largest bank Santander (SAN.MC), said on Wednesday its net interest income reached 1.08 billion euros, up 18.6 percent on the same period last year and also in line with forecasts.

Banesto's operating profit was 1.68 billion euros, up 14.5 percent.

The bank's results were boosted by a good performance in lending, which rose by 24.3 percent, while managed client funds rose by 15.6 percent.

Banesto said bad debts stood at 0.43 percent of lending, the same level as in September 2006 and 365 percent covered by provisions.

"An increase in business with companies, especially small and medium-sized ones, compensated for relatively smaller rise in mortgage business," the bank said in a statement.

Spain's mortgage market has contracted as interest rates have risen, but Spanish banks have tried to diversify their business to make up for the shortfall.

The bank said it had set aside 161.8 million euros in bad debt provisions, 20 percent higher than in the first nine months of last year, but noted that 80 percent of this rise was due to generic provisions linked to the growth in business.

"Provisions were in line with estimates and show that there is no deterioration in the quality of material assets," JP Morgan said in a note to clients.

After opening firmer, Banesto shares were quoted 0.4 percent lower by 0943 GMT at 14.00 euros compared to a rise of 0.1 percent in the Ibex-35 index .IBEX.