By Jesús Aguado
MADRID, Oct 28 (Reuters) - Spain's Bankia BKIA.MC said on Wednesday its third quarter net profit fell 79% from the same period a year ago after it set aside 155 million euros in extraordinary provisions to cover the potential impact of the COVID-19 pandemic on its books.
The state-owned lender, which has agreed a merger with its biggest peer Caixabank CABK.MC to create the country's biggest lender in terms of total assets, reported a net profit of 37 million euros in the July to September period. Analysts polled by Reuters a expected a net profit of 46 million euros.
European banks are under growing pressure to join forces to deal with rising bad debts and record-low interest rates as they battle the fallout from the novel coronavirus pandemic.
Bankia's net interest income, a measure of earnings on loans minus deposit costs, fell 2.6% from the same quarter a year ago to 489 million euros pressured by the low interest rates environment. Analysts had expected a NII of 483 million euros.
But compared to the previous quarter, net interest income rose 5.3% as the bank benefited from cheap European Central Bank funding lines and a recovery in banking activity, both in consumer and mortgage lending.
($1 = 0.8461 euros)
(Reporting by Jesús Aguado, Editing by Inti Landauro)
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