In Q2 2012 profits dropped for Spains largest bank to a meagre .1 bio. EUR. First half year profits were 1.7 bio. EUR – less than half of the first 6 month of 2011.
Santander CEO Emilio Botin sees the bank over the ”hump”: ”Thanks to the now taken precautions can we now leave the domestic real estate subject behind us till the end of the year.”
Comment: This statement should perhaps give reason for more concern than relief:
a) NOW ?? The changed assessment rules for real estate have been known to come for at least half a year. Bankia S.A. EO 2 (FRA:FV0) (PINK:BNKXF) hit the ground – face first – after the first quarter 2012 with a thud that made windowpanes shatter.
b) The confident claims that the 3 largest Spanish banks (Santander, BBVA and Caixa Bank) are in no way in distress and does not need state support seem a little less convincing.
The explanation might very well be at another place:
Up to now Banco Santander, S.A. (ADR) (NYSE:SAN) has managed the Spanish crisis comparatively well due to its strong position abroad; but the country wide recession hits hard. At the same time the credit boom in Brazil has ended. Brazil is Santander’s most important market.
An abrupt halt in Brazil – and other parts of South America – has been on the horizon for quite some time. As a major exporter of raw materials and fodder to China they will inevitably be struck by the merest hint of a slowing economic growth. When and how bad has been a matter for conjecture, partly because official Chinese figures are suspect, partly because Chinese manoeuvres on the currency market might have clouded transparency.
We have seen Chinese discomfort with the raw material prices for all types of raw materials, but until recently without any real sense of magnitude. But when the banks of the exporters to China start moaning then it is worth paying attention.