MADRID Spain's banks would need 51-62 billion euros ($64-78 billion) in extra capital to weather a serious downturn in the economy, less than a 100-billion-euro aid package offered by the euro zone, independent audits showed on Thursday.
The Spanish government will use the reports by consultancies Roland Berger and Oliver Wyman to determine how much aid it will take to recapitalize its ailing lenders.
Spain said it will make a formal request in the next few days but details on how much each bank will need won't be known until September, leaving analysts with mixed feelings about the capacity of the audit to restore confidence in a sector shut out of international markets.
Doubts about the economy and the banks have moved Spain to the center of a long-running euro zone debt crisis, forcing the Treasury to pay its highest yield since 1997 to sell less than a billion euros of 5-year debt on Thursday.
"The (capital needs) are lower than the amount agreed on with the Eurogroup to give security and confidence to markets, with enough room to carry out the restructuring," Fernando Restoy, deputy governor of the Bank of Spain and head of bank restructuring fund FROB, told a news conference.
The audit said Spain's three biggest banks - Banco Santander, BBVA and Caixabank - would not need extra capital even in a stressed scenario. It said the problems were limited to a small group of Spanish banks on which the state has already started to act.
"Everything seems to indicate that additional capital needs will be concentrated in banks that have already been taken over by the FROB," Restoy said.
Four banks are currently nationalized - Bankia, CatalunyaCaixa, NovaGalicia and Banco de Valencia. Bankia has requested a capital injection from the state of 19 billion euros, while financial sources told Reuters the needs for the three others would top 20 billion euros.
The government said it did not expect to shut down any bank and preferred to restructure those in difficulty. It called off the planned auctions of CatalunyaCaixa and Banco de Valencia and insisted it would inject the capital needed to keep the lenders' operations running.
However, European Competition Commission Joaquin Almunia, who has to authorize state aid to business under EU competition law, has said at least one bank may have to be wound down.
The economy ministry said the audit was the first step in evaluating the banks.
A second and more detailed audit of the sector, conducted by the 'Big Four' accountants -- KPMG, Deloitte, Ernst & Young and Price Waterhouse Coopers, is also under way.
This will involve an inspection of each bank, an assessment of the banks' risk control processes and a more exhaustive valuation of their assets.
It will be published in September and will enable the government to determine more precisely how much each bank need and whether this should be injected through equity stakes or loans.
The banks will then have nine months to raise the capital and will be able to include in their calculations up to 15 billion euros in capital already foreseen by the first of two banking reforms put forward this year by the government.
Under the two reforms, the banks had to set aside 82 billion euros in capital to cover potential losses on soured and sound real estate assets, 15 billions of which were specifically in core capital.
They will now also be asked to cover losses on their portfolios of mortgages and loans to businesses.
"We miss the second part of the audit to complete the map of the financial sector," said Jose Carlos Diez, chief economist at Intermoney Valores. "The fact that no specific needs were given, entity by entity, won't help international bondholders to know what is the situation in a specific bank."
However, other analysts welcomed the audit.
"It's a positive set of data, taking into account that one auditor showed needs in the lower range of what was expected while the other one showed much lower needs," said Daniel Pingarrón, analyst at IG Markets.
The auditors' findings were based on an adverse economic scenario which set a core tier one capital requirement for banks at 6 percent if gross domestic product shrank by 4.1 percent this year and 2.1 percent next year.
This scenario was in line with the one used earlier this month by the International Monetary Fund.
The IMF said Spain's banking sector, battered by a four-year property slump and a deep recession, with one in four Spanish workers out of a job, would need between 40 billion to 80 billion euros to resist a severe downturn in 2012 and 2013.
Credit ratings agency Standard & Poor's said in a report on Thursday that the facility to support the Spanish financial system is enough to cover potential capital needs for 2012-2013, but uncertainty remains over the details.
($1 = 0.7933 euros)
(Editing by Paul Taylor/Mike Peacock)