Spain banks bad loans hit new high in October

MADRID Tue Dec 18, 2012 4:14am EST

MADRID (Reuters) - Spanish banks' bad loans rose to 11.2 percent of their outstanding portfolios in October, reaching a fresh record high, Bank of Spain data showed on Tuesday.

Loans that fell into arrears increased by 7.4 billion euros ($9.7 billion) from September, reaching 189.6 billion euros in October. The rate was up from 10.7 percent in September.

Non-performing loans on the books of the country's crippled banks have risen steadily since a decade-long property boom ended four years ago, with the country now in its second recession since 2009 and one in four Spaniards out of work.

($1 = 0.7598 euros)

(Reporting By Jesús Aguado; Editing by Julien Toyer)

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Comments (1)
dareconomics wrote:
Non-performing loans at Spanish banks are increasing at a quickening pace. From September to October, bad loans rose from 10.71% to 11.23% to stand at over €189bn.

As bad as this number seems, it may have been massaged by the Bank of Spain. The lion’s share of bad loans in mortgages, other real estate and commercial lending all increased by more than 10%.

Residential Mortgages 3.16% to 3.49%, a 10.4% increase
Real Estate loans 27.39% to 30.33%, a 10.7% increase
Business loans 14.9% to 16.56%, a 11.1% increase

Yet, total bad loans in the system only increased 4.9%. Something odd is occurring here. Is there another large loan sector doing very well that we are not being told about? More likely, the Bank of Spain is using “dynamic provisioning” to smooth out the numbers.

The most optimistic economists have Spain returning to growth in 2014. At the rate change reported by the Bank of Spain, in fourteen months bad loans would have risen to €369bn. At the rate of change of 10% estimated from the bulleted numbers above, bad loans will reach that same figure in about seven months.

The €100bn bank bailout is only the beginning. Much more will be needed to recapitalize Spain’s banks. Will the Germans pay?

Full post with chart here:

Dec 18, 2012 2:04pm EST  --  Report as abuse
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