Banco Santander, Spain's biggest lender, said fourth-quarter profit plunged as it anticipated tougher rules on recognising property losses at home and earnings declined in the UK and Brazil.

Net income fell to €47 million from €2.1 billion a year earlier, the bank said in a filing to regulators today. That compared with the average €1.78 billion forecast in a Bloomberg survey of 10 analysts.

Santander and other Spanish banks are under pressure from prime minister Mariano Rajoy's new government to recognise more losses on building land and apartments that have piled up on their balance sheets as a result of the country's property crash. The lender booked €1.81 billion in charges for Spanish property provisions and a €600 million goodwill charge at its Portuguese unit as profit sagged in its biggest markets.

“People do want to see these risks provisioned for properly and the sooner the better," said Daragh Quinn, an analyst at Nomura International in Madrid, referring to the bank's Spanish real-estate assets.

Full-year net profit fell to €5.35 billion from €8.18 billion and profit excluding one-time items was €7.02 billion.

The bank fell short of a pledge by chairman Emilio Botin last June to report earnings "in line" with the €8.18 billion posted in 2010.

The Santander group’s lending increased 3.6 per cent from a year ago as customer deposits rose 2.6 per cent. Bad loans as a proportion of total lending reached 3.89 per cent in December from 3.86 per cent in September, Santander said. Net loans newly classified as in default were €4.05 billion compared with €4.21 billion in the third quarter.

Bloomberg