Spanish banks and property struggle as bad loans hit high
As Spain prepares for the approval of the second tranche of its financial rescue package and the arrival of an IMF delegation to oversee the sector’s restructure, new figures show how banks and property are struggling to emerge from a crippling crisis.
On January 28th the EU is expected to sign off on the release of €1.9 billion for Spain’s banks, following an injection of €37 billion in December. In theory this will complete a rescue for the sector that Spain originally requested in June, as many of its lenders struggled under the weight of toxic real-estate assets.
Figures released by the Bank of Spain yesterday showed how those assets are still burdening lenders. Bad loans reached 11.4 per cent of debts in November, a new record high, although the month-on-month increase had slowed. Bad loans have been increasing monthly since June 2011 and total €192 billion.
“Until Spain starts creating employment it’s hard to see how it will start reducing that number [of bad loans],” said Javier Díaz-Giménez of IESE business school, pointing to a jobless rate of more than 25 per cent.
The part-nationalisation of the country’s fourth-largest lender Bankia in May 2012 sparked a crisis in the financial sector which it is hoped the EU funds will help resolve.
Four of Spain’s banks have been nationalised and their exposure to the property sector, which crashed in 2008 after a decade-long bubble, has shouldered much of the blame.
Figures released on Thursday showing cement sales fell 34 per cent in 2012 – the steepest drop since 1936 – highlighting the housing sector’s difficulties in recovering.