BBVA BBVA Bilbao Vizcaya Argentaria SA

Banco Santander SA (STD) will Thursday likely report a strong set of quarterly results, but it may tidy up its loan book ahead of another challenging year in its Spanish home market and abroad, analysts say.

The second-largest bank in Europe by market value, behind HSBC Holdings PLC (HBC), will report a 9.8% increase in fourth-quarter net profit, to EUR2.13 billion from EUR1.94 billion a year earlier, according to a Dow Jones Newswires average of eight analysts' estimates.

The commercial bank from Santander, northern Spain, had reiterated its target of reaching an annual net profit of EUR8.88 billion on Oct. 28 as it reported a net profit of EUR6.74 billion for the first nine months.

However, speculation that it may not reach that target rose last week when Spanish rival Banco Bilbao Vizcaya Argentaria SA (BBVA) reported results below expectations after it wrote down the value of some of its loans in Spain, the U.S. and in Mexico.

"We do not expect such a large spring cleaning of the loan book at Santander as we saw at BBVA last week, though we would not rule some out," said UniCredit analyst Tania Gold, who rates the stock at buy.

Gold said she expects Santander's developer non-performing loans to increase in Spain from the 8% it reported at the end of the third quarter, though it likely won't go as high as the 17% developer NPL's that BBVA recognized in the fourth quarter.

Santander will also have a gain of EUR1.42 billion in the quarter from the stock offering of part of its Brazilian unit; however, it has said that the proceeds will be used to strengthen its capital reserves and won't be booked as profit.

Earnings will be driven by growth at Santander's U.K. and Brazilian businesses, said Ahorro Corporacion analyst Irma Garrido, adding that she expects a drop in profits in Continental Europe.

Analysts on average expect net interest income at Santander to rise 25% in the fourth quarter, to EUR6.78 billion from EUR5.44 billion a year earlier, with growth expected all of the bank's major divisions.

At 1434 GMT, Santander was up EUR0.22, or 2.2%, at EUR10.60. The stock is down 7.2% since the beginning of the year, a slightly better performance than rival BBVA, which is down 12%.

Company Web site: www.santander.com

-By Christopher Bjork, Dow Jones Newswires, +34 91 395 81 23, christopher.bjork@dowjones.com

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