Spain's state-rescued lender Bankia posted a forecast-beating 12.8 per cent rise in first-quarter net profit to €244 million on Monday, though low interest rates weighed on the bank's performance.

Net interest income, the difference between what a bank makes on loans and what it pays out on deposits, came in at €693 million, down 0.6 per cent and missing a €701 million forecast in a Reuters poll of analysts.

The bank, once a symbol of Spain’s financial crisis after receiving a €22 billion bailout, is seeking strong growth this year and last week approved payment of the first dividend in its short but troubled history.

Bankia is targeting group profit of about €1.2 billion in 2015, against €747 million last year, when the bank set aside €312 million to cover compensation claims from investors who bought into its ill-fated 2011 flotation.

The lender, which is still grappling with the fallout from the listing, aims to increase lending to small businesses by 10 per cent this year, looking a return on equity (ROE) profitability ratio of at least 10 per cent.

Its ROE ratio was 8.7 per cent at the end of March, up from 8.6 per cent three months earlier. Lending was slightly down in the quarter as the bank continued to reduce its exposure to the real estate sector, though lending to companies and consumers increased.

Progress was made on bad debt, a key concern for the bank in the past. Its bad loan ratio dropped to 12.6 per cent at the end of March from 12.9 per cent at December 31st, whiel its core capital ratio under full Basel III criteria rose to 11.01 per cent from 10.6 per cent at the end of the previous quarter.

Reuters