UPDATE 2-Bankinter swings to loss, cost of insuring loans rises

* Books net loss of 21 million euros in second quarter

* Sets aside 177 million euros in COVID-19 provisions

* Does not expect further provisions for rest of year

* Raises cost of risk guidance for 2020 to 60-70 bps (Adds breakdowns on figures)

By Jesús Aguado

MADRID, July 23 (Reuters) – Spain’s Bankinter fell to a second quarter loss of 21 million euros ($24 million) due to higher provisions as the COVID-19 pandemic ravaged the economy and forced the bank to increase its guidance for the cost of insuring loans in 2020.

Analysts polled by Reuters had expected a net profit of 54 million euros, but Bankinter had booked relatively fewer coronavirus charges in the first quarter than peers.

The lender made extraordinary provisions of 177 million euros for the quarter to protect its balance sheet and support its customers against the fallout from the pandemic, after just 15 million euros in the previous quarter.

In anticipation of a much bleaker outlook, chief financial officer Jacobo Diaz said the bank’s cost of risk would rise by the end of 2020 to between 60 and 70 basis points, from previous guidance of 50 to 70 basis points.

Diaz said the bank would not set aside more provisions against the impact of the pandemic for the rest of the year.

“With a much better view of the consequences from the economic shutdown, the bank adopted the Bank of Spain’s central scenario in all our internal models,” Diaz said, adding that cost of risk would hover towards the high end of its guidance.

The Bank of Spain has said the Spanish economy could shrink 11.6% this year.

Bankinter shares rose 0.35% as solid core revenues partially offset the large impairments in what Goldman Sachs analysts described as a “good set” of underlying results.

Net interest income (NII), a measure of earnings on loans minus deposit costs, rose 6% year-on-year to 305 million euros.

NII benefited from a state-guaranteed loan programme to the corporate sector, which also led the bank to forecast mid-single growth by the end of 2020.

Against the previous quarter, though, NII was down 1% as European lenders struggle to earn money due to ultra low rates.

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