Banco Santander SA, the biggest Spanish bank, faces increased investor scrutiny over lending to property developers after Banco Bilbao Vizcaya Argentaria SA said its doubtful loans in Spain almost doubled.

“It’s all to do with real estate and developers, and I don’t think Santander is any different,” said Helmut Hipper, a fund manager at Union Investment in Frankfurt, which oversees about 93 billion euros ($130 billion). “There was the perception that there was outstanding quality in BBVA’s loan book, but now it’s back to reality.”

BBVA fell the most in 10 months on Jan. 27 after fourth- quarter profit was almost wiped out as it made writedowns in the U.S. and reassessed its Spanish property holdings. Bad loans as a proportion of lending in Spain and Portugal leapt to 5.1 percent in December from 2.6 percent three months earlier, as the bank reclassified 1.82 billion euros of property and consumer loans as doubtful. Santander Chief Executive Officer Alfredo Saenz said in October he expects a default rate of 3.3 percent on Spanish loans by year-end.

Investors will compare Santander’s provisioning to BBVA’s when it reports earnings tomorrow, said Andrea Williams, who helps manage about 1.2 billion pounds ($1.91 billion) at Royal London Asset Management in London and described the plunge in profit at BBVA as a “shock.”

‘Out in the Open’

“The big question is whether they’re being realistic,” Williams said of Santander. “My message would be to get it all out in the open.”

Rising earnings in Brazil and Britain, as well as the sale of shares in its Brazilian unit, probably underpinned fourth- quarter profit at Santander, analysts said. The bank, based in the northern Spanish town of the same name, may say net income rose 9.2 percent to 2.12 billion euros, based on the median estimate of 10 analysts in a Bloomberg survey.

“They could do some cleaning up without wiping out profit for the quarter,” said Arturo de Frias, an analyst at Evolution Securities in London. “I’m not against kitchen-sinking, but not at the expense of all your earnings.”

Santander has fallen 8 percent in Madrid trading so far this year, compared with a 12 percent drop at BBVA, which is based in Bilbao, Spain. The 52-company Bloomberg Europe Banks and Financial Services Index has declined 3.3 percent.

A spokesman for Santander, who asked not to be identified in line with company policy, declined to comment on its provisioning plans.

Read more at Santander Faces Scrutiny on Property, Loans After BBVA ‘Shock’ – BusinessWeek.