UPDATE 2-Banesto profit grows but crisis yet to hit
(adds comments from conference call, analyst comments, share price, recasts lead)
MADRID, Oct 7 (Reuters) - Spanish retail bank Banesto (BTO.MC) posted double-digit growth across all divisions in the first nine months of the year on Tuesday but it warned that bad loans will rise as Spain's economy slows.
Spain's fourth-largest bank, 88-percent owned by the euro zone's number one bank Banco Santander (SAN.MC), was the first major European bank to announce third-quarter results.
With net profit of 653.9 million euros ($888.7 million), up 12 percent from a year earlier, Banesto just beat analysts' forecasts but the period was too early for effects to be apparent from the brutal economic slowdown now biting Spain.
Speaking to analysts, Chief Executive Officer Jose Garcia Cantera said: "The trend in bad loans we have seen in the last quarters will continue over the next few."
Banesto's non-performing ratio increased by nearly 50 percent in the third quarter from three months earlier but was still low at 1.17 percent.
Loan defaults in Spain have risen as a decade-long property boom imploded and a senior banking source warned last week that the rate of bad loans across all Spanish banks could rise to 7-8 percent over the next two years.
While Spanish banks have not invested in instruments linked to the U.S. subprime mortgage crisis, they are exposed to a massive property bubble which is now deflating. Economy Minister Pedro Solbes said this month Spain could still be affected the global turbulence.
Banesto is less exposed to the property developers now struggling to pay off debts across the country than other banks. Only about 1 percent of its non-performing loans are to developers and Garcia Cantera said he expects the level of NPLs to developers to remain stable to year-end.
Banesto's total provisions rose 9.6 percent in the first nine months to 1.446 billion euros from a year earlier.
SOLID EARNINGS GROWTH
It said it posted solid growth across all its business lines despite a difficult operating environment, and said it has already met its full-year targets for return on equity and cost-income ratio.
The bank said net interest income rose 13.9 percent to 1.226 billion euros, also beating forecasts.
Renta 4 analyst Nuria Alvarez said the results were "positive, given that the bank has posted double-digit profit growth across all its business lines, against a worsening economic backdrop compared to the first six months of the year." Continued...
