July 26, 2017 / 8:18 AM / 3 years ago

UPDATE 1-Spain's Bankia, Bankinter beat forecasts despite margin squeeze

(Adds details, Bankinter results)

By Jesús Aguado

MADRID, July 26 (Reuters) - Spanish banks Bankia and Bankinter exceeded second quarter forecasts on Wednesday, although their lending business remained under pressure from low interest rates.

A solid economic recovery in Spain and a property rebound has allowed most of the country’s banks to tackle toxic balance sheets faster than peers in Italy, boosting investor confidence.

But the dramatic rescue of Banco Popular by Banco Santander in June showed that despite the improvement in Spain, some of its banks remain vulnerable.

Bankia’s net profit was 210 million euros ($244 million) for the period from April to June, compared with a 188 million euros forecast in a Reuters poll of analysts.

However, profit at the bank was down 14.3 percent from last year, while net interest income, a measure of earnings on loans minus deposit costs, fell 10 percent to 491 million euros.

Net profit at Bankinter fell by 36 percent, although this was partly because of one-off accounting gains in 2016 after it bought Barclays’ retail business in Portugal.

But Bankinter’s net interest income (NII), a measure of earnings on loans minus deposit costs, rose 3.7 percent in the period, helped by its Portuguese unit. The bank said NII growth was expected to accelerate in the second part of the year.

Analysts said both sets of earnings were solid, although the performance was already reflected in the share prices of both banks, which have risen at by around 13 percent this year.

Bankia stock was flat at 0730 GMT and shares in Bankinter were down 1.2 percent at 8.2 euros, underperforming Spain’s blue-chip index Ibex which rose 0.23 percent.

In a bid to boost its earnings, Bankia agreed in June to acquire smaller lender BMN to create the country’s fourth-biggest bank following a quick recovery from its 2012 bailout.

Bankia’s bad loans fell to 9.1 percent at end-June compared to 9.5 percent three months before, while the bank’s fully-loaded capital ratio rose to 13.82 percent, compared to 13.37 percent in the first quarter.

The Spanish government, which owns 66 percent of Bankia, said last week it could sell a 7 percent stake after the summer as it seeks to recoup part of the 22 billion euros it injected in rescuing the lender in 2012. ($1 = 0.8595 euros) (Editing by Julien Toyer and Alexander Smith)

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