June 16, 2009

The Spanish banking industry saw its profits drop 21.5 percent in the first quarter due mainly to a big rise in provisions to cover non-performing loans, an industry group said Monday.Profits in the January-March period totaled euro4.05 billion ($5.61 billion), the Spanish Banking Industry's secretary general Pedro Pablo Villasante told a news conference.Provisions for non-performing loans were up 68 percent from a year ago, he said.

Those loans now account for 2.95 percent of banks' total loans, more than double the proportion a year ago, Villasante said.Spanish consumers are struggling to make mortgage payments in an economy saddled with a 17.4 percent unemployment rate.The government said last week that the economy will shrink 3.6 percent this year, two full percentage points more than its previous forecast, and that unemployment will approach 19 percent next year.