Europe News

Euro zone woes keep banks wary after Q1 bounce

(Reuters) – Quarterly reports from some of Europe’s top banks showed the scars of the euro zone

crisis on Thursday, with big losses on Spanish property, and fragile markets casting a shadow over the rest of the year

despite an early investment banking rebound.

The logo of Spanish bank Santander is seen outside a building in Madrid October 27, 2011. REUTERS/Andrea Comas

Spanish bank Santander said first quarter net profit dropped 24 percent

after it took a 3.1 billion euro ($4.1 billion) provision to cover rising loan defaults, as the effects of Spain’s property

market crash were compounded by economic recession and joblessness afflicting nearly one in four workers.

Although

results from Barclays and Deutsche Bank showed investment banking income bounced back strongly after a torrid end to last

year, the sickly euro zone economy continues to dog the industry.

Barclays beat analysts’ forecasts with a 22 percent

rise in underlying first-quarter profit to 2.45 billion pounds, as revenues at Barclays Capital, the investment bank that

provides the bulk of its profit, rose to 3.5 billion pounds, up 91 percent on a weak fourth quarter and up 3 percent from a

year ago.

Losses on bad debts dipped 16 percent from a year ago, but the bank warned the backdrop remained

difficult.

“The environment remains challenging and volatile,” Barclays Chief Executive Bob Diamond said. “It’s still

slow economic growth around the world. It’s still a zero interest rate policy in developed economies. This is not a robust

environment.”

He echoed comments from other banks that market activity had slowed in April. “Most people would say

April was a bit sluggish compared to the first three months,” he said.

By 0849 GMT the European bank index was down

0.6 percent. Santander shares had dropped 3.4 percent, and Deutsche Bank was down 3.3 percent. Only Barclays shares were in

positive territory, up 0.9 percent.

APRIL SLOWDOWN

Revenues from Deutsche Bank’s corporate banking and

securities division hit 6.2 billion euros, up over 80 percent from the fourth quarter, but down 8 percent from a year

ago.

Group pretax profit fell to 1.9 billion euros ($2.5 billion), down from 3 billion a year ago and missing

analysts’ forecasts.

“Against this backdrop financial markets remain cautious as we have seen in April, with investor

risk appetite markedly lower,” Deutsche Chief Executive Josef Ackermann said.

Deutsche Bank’s bottom line was hit by

litigation charges and a writedown on its investment in generic drug compan

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Euro zone woes keep banks wary after Q1 bounce