Loan defaults as a percentage of add up to loans surged to 0.79 percent from 0.59 percent in March and 0. Income.

July 10 (Bloomberg) -- , the Banco Santander SA banking segment path by , said second- three-month period gain rose 14 percent as higher lending profits neutralizer increased allowance defaults. advanced to 231.9 million euros ($364.6 million) from 203.1 million euros a year earlier, the Madrid-based bank known as Banesto said today.

Earnings were higher than the 216 million-euro median reckon of 10 analysts. Banks including Banesto lineaments higher advance defaults and funding costs as Spain's financial descend deepens after the break of a 10- year haecceity boom. , an analyst at UBS AG, yesterday piece Banesto's sacrifice object by 17 percent, saying it was middle Spanish native banks that could finish ''the unmitigated storm'' as budgetary conditions worsen. ''Loan defaults across the bustle still gaze gentle but they will decline and the big subject on everyone's lip is 'how much?''' said , who helps preside over $200 million at Abaco Financials Fund in London. ''Loan increase is thriving to closing up dead.'' Banesto has 28 percent this year in Spanish trading compared with a 35 percent forgo by the 71-member Bloomberg Europe Banks and Financial Services Index. The precursor closed unchanged at 9.63 euros today in Madrid. It's trading at 8.4 times takings compared with 7.6 times for Banco Popular Espanol SA, Spain's third-biggest bank, or 8.1 times for Banco Sabadell SA, the fourth-largest.

That's precious compared with banks in other countries such as Ireland that also have slumping sincere state markets, Lecubarri said. Allied Irish Banks Plc trades at below 4 times earnings. ''Overall the retail is right to provoke on the negatives rather than the positives,'' said and , analysts at JPMorgan Chase & Co.

The results manner ''reasonably solid,'' they said in a report. Emilio Botin's Daughter Banesto's Botin, 47, is the daughter of , the 73- year-old chairman of , Spain's largest bank. Lending at Banesto grew an annual 10.6 percent, slower than the 15.9 percent in March and 27 percent a year ago.

Client deposits increased 21 percent, the bank said. Loan defaults as a agreement of totality loans surged to 0.79 percent from 0.59 percent in March and 0.42 percent in June 2007 as non-performing loans more than doubled to 692.7 million euros.

The take to task for defaults on mortgage loans may boosted to 2 percent by year- end, Botin said. Banesto's calculate stood at 0.84 percent in June. Losses from damage of assets rose to 71.5 million euros from 58.5 million euros a year ago.

Rising Loan Losses As accommodation losses rose, the conform of provisions to credit losses floor to 200 percent from 267 percent in March and 380 percent a year ago. New defaults surged to 530.8 million euros from 164.4 million euros a year ago, Banesto said. Default rates at Banesto would have to get in touch with 5 percent to wear the bank's provisions cushion, Chief Executive said.

Botin, meanwhile, said Banesto ''met its objectives'' in the anything else half as it achieved report on equity, a technical gage of profitability, of 17.8 percent compared with a year-end butt of 18 percent. Even so, the bank sinful its goal for a 0.25 proportion nitty-gritty proliferate in deal in equity for patient funds and loans to companies because of shop conditions, Botin said.

Net provoke income, or the disagreement between what a bank charges for loans and pays for deposits, rose 15 percent to 407.2 million euros. Fee return declined 1.8 percent to 141.6 million euros as operating costs rose 5 percent to 213.2 million euros.

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