MADRID - Banco Santander reported a 93 percent drop in its second-quarter profit on Thursday as the Spanish bank was forced to set aside more money to cover bad loans in its home market.
The announcement follows the collapse of the Spanish real estate market that has forced the country's government to request up to 100 billion euros, or $121 billion, in European rescue aid for its most troubled banks.
Santander, the largest bank in the euro zone by market capitalization, said it had set aside 2.78 billion euros in the three months through June 30 to cover its exposure to bad Spanish property loans.
The bank's loans in the country that are in or near default also rose more than 1 percentage point to 5.98 percent, according to a company statement.
‘‘The provisions we are making will allow us to put real estate write-offs in Spain behind us by the end of this year,'' Santander's chairman, Emilio BotÃn, said in a statement.
The extra costs as sociated with bad real estate loans weighed on the bank's performance. Net income totaled 100 million euros for the second quarter, compared to 1.39 billion in the similar period last year.
Investors, however, reacted positively to the news on Thursday, pushing up the bank's share price as much as 3 percent in early morning trading in Madrid.
Santander has been reducing its exposure to the Spanish real estate market in the wake of the country's financial crisis. In the last three years, the bank has cut its domestic property loans by 33 percent, to 28.3 billion euros, according to a company statement.
