MADRID (Reuters) - Spain's state-owned lender Bankia <BKIA.MC> on Monday posted a 23% drop in third-quarter net profit from a year earlier due to higher loan loss provisions, while margins remained under pressure in a low interest rate environment.
Like many other European banks, Spanish lenders are struggling to increase earnings from lending because of ultra-low interest rates.
In this context, Bankia said in July, even before the European Central Bank (ECB) cut rates deeper into negative territory in September, that it would be unable to meet its 1.3 billion euros ($1.44 billion) net profit target in 2020.
The lender's net profit for the quarter came in at 176 million euros, slightly above an average of 173 million euros forecast by a Reuters poll.
Net interest income (NII), a measure of earnings on loans minus deposit costs, rose 1.4% to 502 million euros, in line with analysts forecasts. However, NII was down 2.7% against the previous quarter.
In an attempt to offset the impact of increasing competition on financial margins, Spanish banks are focusing on cutting costs.
Bankia is shifting its focus from a mostly mortgage loan book to a more profitable consumer and enterprise business. It expanded its net loan book by 0.4% in the first nine months.
At the end of September, Bankia's core Tier-1 capital ratio, the strictest measure of solvency, was 13% compared to 12.91% at the end of June.
($1 = 0.9019 euros)
(Reporting By Jesús Aguado; editing by Jose Elías Rodríguez and Aditya Soni)
