Spanish banks' bad loan ratio rises to record in June

MADRID Mon Aug 19, 2013 5:12am EDT

People use an ATM machine at a branch of Spain's nationalized lender Bankia in the Andalusian capital of Seville, southern Spain, June 24, 2013. REUTERS/Marcelo del Pozo

People use an ATM machine at a branch of Spain's nationalized lender Bankia in the Andalusian capital of Seville, southern Spain, June 24, 2013.

Credit: Reuters/Marcelo del Pozo

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MADRID (Reuters) - Spanish banks' bad loans as a percentage of total credit rose to a fresh high of 11.6 percent in June, Bank of Spain data showed on Monday, as more households and small companies, particularly those from the property sector, struggle with debts.

The rise in loans in arrears has dragged on Spanish banks' earnings in the first half of 2013, even though in the second quarter some reported a slower rate of increase in bad loans.

The overall bad debt ratio for Spanish banks was up from 11.2 percent in May and has been steadily increasing since a drop-off at the end of last year when rescued lenders transferred toxic property assets to Spain's so-called bad bank.

The Bank of Spain had previously put the bad debt ratio at 11.6 percent last November, using provisional data, though this was later revised to 11.4 percent.

Spanish lenders' earnings were gutted last year by steep government-enforced provisions on properties and loans to developers, in the wake of a 2008 real estate crash.

Those unable to cope were bailed-out with European funds, and most of their real estate loans were transferred to a government-backed bad bank.

Some top lenders, including healthy ones such as BBVA (BBVA.MC), have said that bad debts with property-related businesses in particular could keep rising into the first quarter of 2014.

Many economists believe Spain could return to growth later this year from its deep recession, though the country is still fighting high unemployment.

(Reporting by Sarah Morris and Sarah White; Writing by Clare Kane; Editing by Greg Mahlich)

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Comments (1)
dareconomics wrote:
Spanish NPL’s continue their inexorable march upward. As long as Spain’s property market deteriorates, NPL ratios will rise. The rate recently topped 11.6% in June, and this number underestimates the true number of NPLs. Moving some of the bad loans into SAREB excludes them from the final ratio. According to this article,

Spain’s ‘Real’ Non-Performing Loans (NPL) Approach 17%: Exane

bad loans are actually about 17% of total outstanding. This figure represents 25% of Spanish GDP.

Full post with charts, links and images:

http://dareconomics.wordpress.com/2013/08/19/around-the-globe-08-19-2013/ ‎

Aug 19, 2013 2:08pm EDT  --  Report as abuse
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