Santander details provisions in bid to reassure shareholders over €0.6 dividend

MADRID | Banco Santander on Monday announced that the banking group in Spain, including Banesto, will require €2.7 billion before taxes to comply with the new legislation passed last May 11 on real estate asset provisions.

These charges are in addition to the reserves already made compulsory by a decree-law in February, of which €2.3 billion before taxes are still pending, as stated in a filing sent to the Spanish regulator CNMV on February 7. The total volume  of provisions amount to €5 billion before tax.

Santander confirmed that this sum will be fully covered in 2012 and charged against capital gains and profits this year.

Analysts at Ahorro Corporación Financiera in Madrid said the impact of the new rules on Grupo Santander had surpassed initial estimations but a higher than 10 percent core capital ratio could be within reach. Experts pointed at a possible sale of the bank’s assets in Mexico.

Banesto welcomed the latest policy from the Mariano Rajoy’s government as

“it is the right step in the right direction. Spain’s banking sector is today stronger than yesterday. Although markets will tell whether confidence in our entities recovers, we believe the stock price should gain partially some of the course lost until now.”

In a public note, the Santander said that last December it agreed to sell its Colombian unit, and the capital gains generated by this sale will allow making provisions amounting to €900 million.

“Moreover, after taking into account the tax impact of the charges, net outstanding provisions pending against the P&L account are €2.9 billion. These charges will not affect the group’s current capital ratios.”

Santander assured that the entity maintains its commitment to remunerate shareholders €0.6 a share for 2012. Santander registered attributable net profit of €1.604 billion in the first quarter of the year, down 24%, after provisions for non-performing loans rose by 51% to €3.127 billion.