MADRID: Spain's Caixabank and Bankia posted a rise in nine-month profits, as their core banking performance was boosted by lower costs and higher charges to clients.
But, in a sign of Spain's slow-moving recovery, the banks also reported a drop in lending on Friday, as the country's banks cut back on new mortgages given tepid demand from indebted families, even as they seek to increase loans to businesses.
Caixabank boss Gonzalo Gortazar said weaker lending could continue for several months before stabilising next year. Spanish banks are recovering this year from a deep financial crisis.
But they are still lumbered with higher levels of soured loans than before the 2008 property crash, when they were forced to shed assets and shrink their balance sheets.
Caixabank and Bankia, Spain's third- and fourth-biggest banks, saw their net interest income, a measure of earnings on loans minus funding costs, increase both in the nine months to September 30 and in the third quarter of the year.
The performance suggested signs of economic improvements beginning to show through for the country's lenders.
Caixabank's net interest income was up 4.7 percent in the nine months, at 3.07 billion euros, while Bankia's was up 24.7 percent at 2.16 billion euros, both in line with forecasts.
Net profit at Caixabank, held back by lower trading gains, ticked 1.6 percent higher to 466 million euros -- just missing a 474 million euros forecast in a Reuters poll analysts.
But the bottom line almost doubled at Bankia, helped by one-off gains as it sells down shares in Spanish companies, as well as non-core credit portfolios.
Net profit for the bank came in at 698 million euros, beating the 673 million euros forecast. Shares in Bankia were up 1.3 percent at 1.45 euros at around 1000 GMT, topping Spain's blue-chip index Ibex and recovering from an almost 4.7 percent drop over the last month.
Good news for Spain's government, which is considering placing a new stake in the lender by the end of the year.
Caixabank was the top loser in the index with shares falling 2.5 percent at 4.6 euros. Analysts blamed a correction after a gain of almost 13 percent in the last three months.
STRESS TESTS
Solid underlying numbers mirrored a similar performance at other Spanish peers, including Bankinter which reported profit up by almost a third. It also bodes well for the rest of the sector, with leaders Santander and BBVA due to report in the next few days.
Spain's banks, including Bankia and Caixabank, are expected to have done well in the European Central Bank Stress tests due to be made public this weekend.
Caixabank said its core capital under Basel III 'fully-loaded' criteria was 12.7 percent at the end of September, up from 12.4 percent three months earlier.
The improvement was even stronger at Bankia, where this ratio reached 10.51 percent at the end of September from 9.95 percent at end-June.
Both lenders said on Friday they had benefited from higher fees to clients, lower funding costs and also booked lower provisions as bad loans came down.
Yet overall credit was still falling at the two banks, albeit dropping more slowly.
Barcelona-based Caixabank said overall lending went down 6.2 percent in the nine months.
Its bad loan ratio was 10.48 percent at the end of September, below a sector's average of more than 13 percent and down from 10.78 percent at the end of June.
Bankia also saw a 5.4 percent drop in lending so far this year while its bad loan ratio was 13.6 percent, down from 14.0 percent but still at a high level.
That ratio had fallen to 13.1 percent after the sale of credit portfolios worth 880 million euros in October, Chief Financial Officer Leopoldo Alvear said.
The bank, which is heavily weighted towards mortgages, said it saw room for improvement in higher-margin business lending.
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