Spain Banks Hold $243 Billion in ‘Troubled’ Property Risk
November 03, 2011, 4:17 AM EDTBy Charles Penty
(Updates with more information on defaults, loans from second paragraph.)
Nov. 2 (Bloomberg) -- Spanish banks, saddled with 176 billion euros ($243 billion) in “troubled” holdings in the real-estate industry, face an “uncertain setting” because of a weak economy that may mean their bad loans will rise, the Bank of Spain said.
“In the next few quarters, the volume of asset-impairment losses can be expected to remain high,” the regulator said in its twice-yearly financial stability report, published today. “This, along with the foreseeable adverse trend in net interest income, constitutes a difficult scenario for the income statement of Spanish banks.”
Spanish lenders face higher costs for funding after their access to wholesale debt markets all but closed as the country’s weakening economy saps demand for lending and threatens to drive up an industry loan default rate that’s already at its highest level since 1994. Lending fell “across the board” as access to funding from the bond markets “remained practically closed,” the Bank of Spain said.
The regulator said Spanish banks have 176 billion euros in “troubled exposure” to real estate, a figure that includes doubtful assets, foreclosures and “standard loans under surveillance.”
That equates to 52 percent of total lending to Spanish property developers and 11.4 percent of the industry’s loan book, the Bank of Spain said. Provisions had been set aside to cover 33 percent of the “troubled exposure” as of June, the regulator said.
For Spanish bad loans data: ALLX SPLO <GO> For news on Spanish banks: TNI SPAIN BNK <GO> For Banco Santander SA analysis: SAN SM <Equity> FA BANK <GO>
--Editors: Steve Bailey, Keith Campbell
To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net
To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net
