REFILE-UPDATE 1-Spain's banks stress test to show up to 60 bln euros needed

Fri Sep 21, 2012 3:49am EDT

* Capital needs of Spanish banks match preliminary estimates

* Stress test results to be published on Sept 28

* BBVA says open to participate in "bad bank"

By Jesús Aguado and Julien Toyer

MADRID, Sept 20 (Reuters) - An independent stress test of Spain's banking sector will likely reveal capital needs of 50 billion to 60 billion euros ($77.7 billion), the country's second biggest lender and the government said on Thursday.

Spain became the latest focus point earlier this year of the euro zone debt crisis after it became clear its banks would need financial support to clean up their balance sheets of around 185 billion euros of toxic real estate assets.

Sources told Reuters the Bank of Spain had started to communicate to the banks the results of the stress tests earlier on Thursday and that all of them would be informed by Monday.

This latest figure, which is in line with preliminary estimates released in June, will now be used to determine how much of the 100 billion-euros euro zone credit line available to Spain is needed to recapitalise its lenders.

The results of the tests will be published on Sept 28.

The country, which sought the euro zone lifeline for its lenders in June, is now hesitating to request an aid programme which would trigger a bond-buying programme from the European Central Bank.

"We'll know in the next few days, in a week. We'll get a figure of around 70, 75 or 80 billion euros," BBVA's Chairman Francisco Gonzalez said at an event in Madrid.

Gonzalez explained the 80 billion figure included around 20 billion euros already allocated to troubled banks, meaning the final figure would be between 50 billion and 60 billion euros.

A spokeswoman for the economy ministry said such a figure would be in line with Economy Minister Luis de Guindos' own expectations, although she said the amount Spain taps from EU funds would be lower.

She explained that the final bill would be reduced because some lenders would manage to find capital on their own on the market, holders of hybrid capital instruments would have to take a haircut on their investments and assets would be transferred to the so-called "bad bank" the government is setting up to park and later sell off toxic assets.

BAD BANK

Gonzalez also said his bank was considering transferring assets to the new structure as well as taking a stake but had not made a final decision on both issues.

He also said that foreign investors would not rush into investing in the "bad bank".

"We're open to transferring assets or injecting capital (in the asset management company), do whatever is good for our country," Gonzalez told a group of business leaders. "But we need to be realistic. Today, international investors will not participate easily."

Banking sources expect the result of the stress test to trigger a new round of takeovers and mergers in Spain's banking sector, which shrank from more than 40 banks before the crisis to just 14 today.

Gonzalez said he expected this number to fall to 10 within a year and that BBVA stood ready to buy other smaller lenders.

"In a first phase, there will be 10 entities, two big banks, two or three medium-sized and 4 or 5 small ones," he said.

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