SPANISH BANKS: Slog vindicated as Santander releases disastrous results.

Five weeks ago The Slog opined that ‘Spain’s banking instability is as important as its poor sovereign access to the bond markets’. Over the last ten days, rumours have been circulating about the fortunes (or more accurately, misfortunes) of the giant Santander Bank. I have to date been unable to stand any of them up, but this morning around 6 am, Banco Santander SA’s third-quarter results displayed a 94% profits tumblefor all to see.

Santander is the eurozone’s biggest bank by some distance.  It’s Q3 net profit picture, however, is grisly in the extreme: it was decomated from €1.8 billion a year ago to €100 million now. As I also pointed out in September, it is the Caja (property) disaster in Spain that remains hidden, fudged or just plain misreported: Santander blamed higher than expected property provision in the home country.

Analysts were projecting results of around €1.23 billion, which just goes to show how much notice one should take of the average analyst. Certainly, the Slog’s two main Madrid sources saw this coming a mile off.

So, I might add, did Berlin….whose exposure to all this is also rather more than Geli and Wolfie are suggesting. Stay tuned, this is a building story that will accelerate before too long.

PS After a small ten bucks rally, gold is levelling out again at $1714.30 this morning. Keep an eye on it’s progress below $1700.

28 thoughts on “SPANISH BANKS: Slog vindicated as Santander releases disastrous results.

    • As I posted a few weeks ago……..my interest rate (with Santander) is being increased “because they can no longer borrow at a lower rate” which I took as an indicator that they were possibly in trouble or about to fleece their UK customers with higher interest in order to cover their spanish sinkhole.

  1. Pingback: John Ward – Spanish Banks : Slog Vindicated As Santander Releases Disastrous Results – 25 October 2012 | Lucas 2012 Infos

  2. “Analysts were projecting results of around €1.23 billion, which just goes to show how much notice one should take of the average analyst. Certainly, the Slog’s two main Madrid sources saw this coming a mile off.”

    The results for the quarter are, surely, quite significantly dependent upon the level of provisions for losses on the property book. And where the accounting convention in place prevents banks from making full provision for losses, what they actually disclose in any particular quarter is rather too subjectively determined to read much into it, I should have thought. There are zillions of bank assets which are trapped in a loop of confidence/house of cards that requires every single one of them to be valued at a level which doesn’t disturb the valuation of any of the others. What is to be the gust of wind that brings the whole edifice tumbling down?

  3. Santander: took me about 3 weeks to rumble these legalised con men. ££s disappearing with snotty and contentious reasons attached. “Stay well clear” is my only comment. I walked away without looking back or contending their five fingered discounts.

      • it is not a comment or something else but wordpress.com that puts this every time i reblog your post.I only put some words of your post in my blog in order more people to read interesting views.The readers come to your blog for reading the whole post.Thats all. Thanks.

  4. O/T but there`s an article about Bichard in the Indy today. I tried to post a link from the relevant article here but it was `moderated` out of existence.
    I guess the Indy aint so indy.
    Still…..always good for a limerick……

    Reading the Indy one day
    I found it had nothing to say
    The Left… it was Right
    Black… it was white
    With freethinkers kept strictly at bay

  5. I have just returned from walking from Salamanca to Santiago de Compostela. Very positive experience but I was struck by the fact that there were demonstrations in all of the cities that I walked through and bridges to nowhere and abandoned highways between the cities. The situation appears far worse than when I walked from Seville to Salamanca in April 2011.

    • @Jaime: Valuable first hand reportage; it’s too easy to be fooled by the cosy pretence of the MSM here in the relative tranquility of la-la land UK. Perhaps we will also have to demonstrate our disappointment before too long.

  6. The only comment I could make on the situation is this …

    Consider the banking industry if you want to call it that for the last couple of decades as a global entity. You can look at indiviudal nations if you want but they are all a microcosm of a far bigger thing. All the deals, bonuses, back handers etc. or an equivalent monetary value. If it was not like this then any bank not offering the same deal long ago would have gone bust.

    “The money moves for best return, always has and always will.”

    Suggests to me that many of the wonderful financial instituitions will be in a very similar position. Now apply the principle across the board, take say Santander as an example. Do you really think that RBS, Barclays and any other financial institution in another country is not in exactly the same position?

    How big is the black hole? A leap of faith on that, about the size of the total derivatives and bond markets because any cash value and measure of worth like debt came from somewhere with all the nice fiscal tools we have.

    Not the slow motion train wreck. The aftermath of the crash and literally nobody is prepared to peer into twisted and mangled carriages because of the bodies in there.

  7. Not only, but also:

    “Economic crisis reaches Switzerland Credit Suisse profits collapse around 60 percent

    Collapse of profits at Credit Suisse: The Swiss bank has reported a net profit of only 212 million euro – even though revenue grew strongly in the investment sector. Yet their austerity measures will hit precisely this division.

    Due to a profits collapse the banking giant Credit Suisse is to intensify its austerity measures. In the years 2014 and 2015 the operating costs are to be reduced by a half billion CHFrancs, said the Swiss bank on Thursday. The hitherto until 2013 targeted costd reduction of three billion francs should be surpassed in the next year, announced CEO Brady Dougan.

    Above all, these measures will primarily hit investment banking, where some 20 000 of the total 48 400 staff are employed. Chief Financial Officer David Mathers declined to elucidate further on how many jobs could be lost there. “It would be unrealistic to say, there are to be no redundancies,” he said. A reduction in costs at the targeted amount cannot be made without redundancies. In addition, jobs would also be relocated.

    If your understanding of financial reports in German is up to it, the full story here:

    http://www.focus.de/finanzen/banken/gewinn-um-60-prozent-eingebrochen-credit-suisse-streicht-jobs-im-investmentbanking_aid_846214.html

  8. The problem with banks is that they run entirely on confidence. To maintain that in difficult times (and it’s hard to imagine times more difficult than the situation surrounding the Spanish real estate market), they don’t reveal all that they should. Obviously both the banks and the government are hoping that the situation will blow over, a hope that sadly seems totally unjustified. Rather substantial growth would be needed for that, or at least considerable inflation. We might see the second.

    At one time the informal banking rule was that overt provisions would not be needed until 6 years of non-disclosure had passed. Is that why Santander has decided to make such huge provisions now? And how does this square with the infamous stress(free) tests and the so-called independent audit of Spanish banks? Murky is too good a word to describe the Spanish banking and real estate ‘conjunto’. There is a cliff edge on the way that can only be dealt with by massive injections of German money into the banks. After all, why should the Spanish pay for their own self-inflicted problems? That is what the EZ is for, isn’t it?

  9. Folks, great news. ‘Britain moves out of recession ‘ is the headline on the FT (interesting that it takes two quarters of contraction to make a recession, but only one of growth to move out). Even more good news over at the FT, ‘Bank deposits rise in Spain and Greece ‘.

    So interesting that the explanation of the next article on the FT frontpage, entitled ‘Santander profits plummet 94%’, is ‘Sour property loans and slowing UK and Latin America drag’. Slowing UK…. ??? Erm, pardon ????

    I just plain give up on the statistics these days. As the comments above point out, until a proper shake down of the assets side of banks takes place we dwell in a fantasy world. Japan had a lost decade, how long are we going to have to live with a zombie banking sector I wonder.

    • @DL: I think it’s all designed to hide the truth, in fact hide it in plain sight, for there is so much conflicting information no one knows what to believe anymore.

    • About two generations David if we were to cease taking on more national debt from today. However, as that isn’t very likely and as we still have the great unravelling of the ‘mystery that is derivatives’ to contend with, then I’d say probably until the end of time.

      Unless Uncle Mario et al come up with some kind ‘re-set’ button, that is.

    • The recession is dead! Long live the recession! It is a riddle, wrapped in a puzzle, inside an enigma shrouded in a mystery which defies understanding – it’s far safer that way, allegedly.

  10. This might seem like a stupid question, but here goes anyway….
    I live in France, but have a Santander current account in England into which goes a small monthly income – we are talking 200 pounds here.
    It is useful to me to have an english account for when I visit there.
    Should I change bank accounts?
    (I did not choose Santander, my account was with Giro which became Alliance and Leicester followed by Santander)
    I would be very grateful for any advice, or should we only worry if we have huge sums in deposit accounts (which I dont!)

    • Bellevue
      All UK-regulated accounts in banks, building societies and credit unions are covered by the Government-backed Financial Services Compensation Scheme (FSCS) to the tune of £85,000 per person, per financial institution. That should include Santander.

    • @Bellevue: FWIW I also have business and personal current accounts with Santander (previously Alliance & Leicester); the personal a/c gets cleaned out every month and the business a/c never has more than a few grand in it. If you do internet banking I would have an escape route in place – a sound B.S. perhaps. At the end of the day, in a major melt down, which has to be a real possibility at some point, any fiat will lose value wherever it is and regardless of ‘government guarantees’. The only way to get around that is to acquire other assets which represent an alternative store of value such as precious metal etc. but I don’t think that was your question.

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