Banesto, the retail
lender majority owned by Santander, has kicked off the third
quarter reporting season with a disappointing set of results,
heralding tough times ahead for its Spanish peers.

For the nine months to
30 September, Banesto reported a net profit of €298.4m ($405.9m),
down 33.8% from the same period last year, missing analyst
forecasts in the process.

Net interest income fell by 12% for the
year to date to €1.13bn; bad loans as a percentage of total loans
rose by 85 basis points to 4.65% from 3.8% a year ago.

The only crumb of comfort is that
Banesto’s bad loans ratio remains comfortably ahead of its peer
group; the sector wide average ratio was around 6.6% in

Other negative metrics included a rise of
more than 3 percentage points in Banesto’s cost-income ratio from
39.01% to 42.33%.

Total customer loans fell by 7% from
€74.5bn to €69.4bn; alarmingly, customer deposits fell by 12.6%
year-on-year from €59.6bn to €52.1bn.