European banks report modest Q2, despite increased provisioning

Top Spanish, German and Swiss banks have reported modest gains in the second quarter, although their profits have been constrained by an increase in non-performing loans and loan loss provisioning.

On July 29, Spanish bank Grupo Santander reported Q2 profits of €2.42 billion, up marginally from €2.1 billion in Q1, with provisioning also increasing from €2.21 billion in Q1 to €2.42 billion in Q2. The bank has seen a rise in non-performing loans during the first half of 2009, nearly doubling on the same period last year from €2.71 billion to €4.73 billion.

Rival Banco Bilbao Vizcaya Argentaria (BBVA) also saw a rise both in domestic and international non-performing loans, but cut its provisions from €104 million in Q1 to €48 million in Q2. BBVA reported quarterly profits of €1.56 billion on July 28, up from €1.24 billion in Q1.

Deutsche Bank also reported on July 28, announcing profits of €1.07 billion in Q2, down marginally from €1.18 billion in Q1 but up from €645 million in Q2 2008. The modest performance was partly due to increased provision for credit losses, which nearly doubled from €526 million in Q1 to €1 billion in Q2, eating significantly into the bank's profits.

Credit Suisse reported a Q2 profit of Sfr1.55 billion ($1.42 billion) on July 23, up from Sfr554 million in Q1. Its provisions have also climbed, from Sfr183 million in Q1 to Sfr310 million in Q2.

Despite modest quarterly profits at most US and European banks, Morgan Stanley bucked the trend and reported a $159 million loss on July 22 – its third consecutive quarterly loss.

More quarterly results are due next week, with UBS and BNP Paribas on August 4, Société Générale and Lloyds Banking Group on August 5 and the Royal Bank of Scotland on August 7.

See also: Trading and one-off gains lift bank profits