Banesto profits fall in "difficult conditions" Banesto, the Spanish domestic bank controlled by Santander, on Thursday said "difficult" business conditions had led to a loss in the fourth quarter of last year and a 73 per cent fall in net profit in 2011 to €125m from €460m in 2010. Banesto Q4 results - up to December 31 2011 Sales Net profit Earnings per share Dividend As the first Spanish bank to report results each quarter, Banesto is closely watched by investors in Spanish stocks and in the European financial sector. In the fourth quarter, Banesto recorded a net loss of €173m - compared with net profit of €12m in the previous three months and €9m in the fourth quarter of 2010 - after making a "special and voluntary" €400m bad loan provision against problems in the Spanish property market. Net of tax, the provision amounted to €280m. Quarterly figures can be an unreliable guide to a bank's performance because directors often make drastic adjustments to the accounts through provisions and extraordinary items, especially in the final quarter, to smooth results. In 2011 as a whole, Banesto's net interest income fell 12 per cent to €1.45bn from €1.66bn the previous year. Lending and deposits declined over the year, with private sector credit down 9.2 per cent as the Spanish economy suffered its third year of crisis. "Economic weakness was persistent throughout the year, and in the second half new uncertainties gave rise to a scenario of high tensions and great volatility in the markets," Banesto said in a statement. The bank said its core capital had reached the level of 9 per cent of assets required by regulators. Spain's new centre-right government has vowed to clean up the country's financial sector without a publicly financed "bad bank," and says lenders must find €50bn of extra provisions to cover bad property loans from their own resources. Iñigo Vega, bank analyst at CA Cheuvreux, said: "The more aggressive clean-up reflects the need to start provisioning as soon as possible, given the impending new provision requirements to be imposed by the new government."