State-owned lender Bankia on Monday reported a 31.6 per cent fall in second-quarter net profit from a year earlier due to lower trading income although income from loans showed some signs of stability.

Like many other European banks, Spanish lenders are struggling to increase earnings from lending because of ultra-low interest rates and tough competition.

To offset the impact of increasing competition on financial margins, Bankia is shifting its focus from its mostly-mortgage loan book towards a more profitable consumer and enterprise business. Bankia’s net profit for the quarter came in at 195 million euros ($217 million), above an average forecast of 185 million euros in a Reuters poll.

Bankia’s gross loan book expanded 1.3 per cent.

Net interest income, a measure of earnings on loans minus deposit costs, remained under pressure relative to the same quarter last year, but showed some improvement from the previous quarter, the bank said.

Net interest income was 516 million euros, down 1 per cent from a year earlier but 2.9 per cent higher than the previous quarter. Analysts had forecast a net interest income of 512 million euros.

“NII for once showed a positive trend and was better than expected, although the downturn in euribor is likely to generate additional headwinds over the coming 12 months,” broker Keefe, Bruyette&Woods said in a note.

In early trading on Monday, shares in Bankia rose 1.5 per cent, after falling 4.7 per cent on Friday after Caixabank and Sabadell revised downw their income forecasts for 2019.

Although Bankia has stuck so far to its net profit target of 1.3 billion euros for 2020, analysts have been questioning the target as too ambitious given the ultra-low interest rate environment.

Reuters