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The Hypocrisy that is Known as the Spanish Banking System
CNBC runs as a headline the usual contradictory nonsense that we come
to expect from certain heads of state. It would be funny if it didn’t
portend such dire consequences. The Spanish banks, just last week, were
declared to be some of the healthiest in Europe (spoken with my
fingers crossed behind my back, wry smile and spittle dripping from the
side of my mouth). Of course, Banco Santadar and BBVA shares rocketed
on the news that they are no longer insolvent and that the Spanish
housing market pauses no threat.
CNBC
Trader Talk Blog — Pisani: Spain Bank Aces Stress Test
— CNBC …
Europe mostly flat (Greece up 2.3
percent), euro behaving, U.S. futures were calm ahead
of the quadruple witching expiration. Spanish bank Banco
Santander is up 1 percent on several pieces of news:
1) a spokesman for Spain’s Prime
Minister remarked that the Spanish bank performed strongly during the
recent stress tests, saying the bank had “one of the best” results. The
Committee of European Banking Supervisors is expected to provide
details of the results in the coming weeks.they have the best ranking
so far in a European bank stress tests, according to a Spanish
government source; not clear when the full results of those tests will
be published.
2) the bank also confirmed they have
made an offer for 318 British branches of Royal Bank of
Scotland.
They already have a strong presence
in the UK. Santander’s vice-chairman caused a small stir yesterday when
he said they were talking with M&T Bank, based in
Buffalo, NY, about possibly merging its U.S. operations with them.
But all of a sudden the banks in Spain get pissed off when the ECB
declares it no longer wants to play the Pan-European subprime lender
role: Spanish Banks Rage at
End of ECB Offer
Spanish banks have been lobbying the
European Central Bank to act to ease the systemic fallout from the
expiry of a 442 billion euros ($542 billion) funding program this week,
accusing the central bank of “absurd” behavior in not renewing the
scheme. On Thursday, the clock runs out on the ECB financing program –
the largest amount ever lent in a single liquidity operation by the
central bank – under the terms of the one-year special liquidity
facility launched last summer. One senior bank executive said: “Any
central bank has to have the obligation to supply liquidity. But this
is not the policy
of the ECB. We are fighting them every day on this. It’s
absurd.”
Another top director said: “The
ECB’s policy is that they don’t want to provide maturity of more than
three months. But they have to adapt.” Banks across the euro zone, but in Spain in
particular, have found it hard in recent weeks to secure
liquid funding in the commercial markets, with inter-bank funding
virtually non-existent. The 442 billion euro ECB facility, which
charges interest at a rate of 1 percent, is not set to be renewed,
something that banks in Spain and elsewhere in Europe say ignores
current commercial realities. A special offer of six-day liquidity will
tide banks over until the following week’s regular offer of seven-day
funds. On Wednesday, the ECB will also be offering unlimited three
month liquidity, and further offers of three-month liquidity will keep
banks going until at least the end of the year. “The system is just
not working,” agrees Simon Samuels, banks analyst at Barclays Capital
in London. “We’re approaching the third year of liquidity support and
still the market cannot survive unaided.”
BarCap estimates that at least 150
billion euros of the ECB funding that is maturing will not be rolled
over into shorter-term three-month schemes, forcing banks to shrink
their own lending. Spain’s banks have been among the hardest hit by the
faltering confidence
in the euro zone economies in recent months following
problems with the country’s smaller savings banks, or cajas.
The bigger commercial banks, led by Santander and BBVA, feel unfairly
tarred.
Yeah, right. “Unfairly Tarred”!!! I’ve been warning about the Spanish
Banks since January or 2009. Now that the chickens have come home to
roost, they are screaming “unfairly tarred”??? How about (chicken
roosting) feathered and tarred!
As
We Have Warned, the Fissures Are Widening in the Spanish Banking
System Monday, May 24th, 2010
I have made our position on Spain
clear through a complete forensic review of the state’s finances for
subscribers:
Spain public finances projections_033010. An excerpt from
this subscription document (subscribers, reference page 2)
shows the euphoric, yet highly unrealistic optimism upon which Spain
has built its fiscal austerity projections.
As suggested in the document,
if one refers to the blog post Lies, Damn Lies, and Sovereign Truths: Why the Euro is
Destined to Collapse!, you will find that not only has Spain
apparently fabricated a fairy tale of potential prosperity based upon
the projections of the IMF and EC, but the IMF and EC have been nothing
but fairy tale projections themselves.
I have been bearish on the Spanish
banking system since January of 2009 (reference
Reggie Middleton begin_of_the_skype_highlighting end_of_the_skype_highlighting
begin_of_the_skype_highlighting end_of_the_skype_highlighting on
the New Global Macro – the Forensic Analysis of a Spanish Bank ),
and after a trip to the Costa del Sol by
way of Málaga
during the boom times are shortly thereafter, the reasons should be
most obvious.
We now have a rash of new Spanish
bank and sovereign research which has returned between 300% and 400%
over the last few months.
Needless to say, as the situation in
the EU deteriorates upon the widespread dissemination of the knowledge
that BoomBustBloggers have been trading off of for quarters now, I feel
the options will spike in value significantly!
I invite those who don’t
subscribe to BoomBustBlog to please be sure to peruse our entire
collection of free analysis on the Pan-European Sovereign Debt Crisis.
Subscribers should review the ample
Spanish research we have amassed on the crisis, its origins and
opportunities avaiable:
Sovereign Debt Exposure of European
Insurers and Reinsurers- Euro Bank Soveregn Debt Exposure Final –
Pro & Institutional - Euro Bank Soveregn Debt Exposure Final
-Retail -
Sovereign Contagion Model – Pro &
Institutional (1003.48 kB 2010-05-04 12:30:48) – this is an original
tour-de-force, a proprietary model incorporating social
unrest/socio-economic stratification, cross border economic contagion,
financial contagion transmitted through the banking system, and foreign
claims of the myriad players in question in order to ascertain who is
at most risk and what order said players may fall, if they will at all. -
Sovereign Contagion Model – Retail (961.43 kB
2010-05-04 12:32:46) -
Banco Bilbao Vizcaya Argentaria SA (BBVA)
Addendum – Pro (569.55 kB 2010-01-27 16:52:36) -
Euro Bank Soveregn Debt Exposure Final – Pro
& Institutional (934.65 kB 2010-05-13 00:11:32) -
Euro Bank Soveregn Debt Exposure Final -Retail
(641.14 kB 2010-05-13 00:10:33) -
Spanish Banking Macro Discussion Note (519.4 kB
2010-02-09 02:48:06)
Please be sure to peruse our entire
collection of free analysis on the Pan-European Sovereign Debt Crisis.
<!–
About
two weeks ago, I queried…
Why Does Everyone Believe Spain Is About To Run To the EU/IMF For
Help? It’s Math, Not Speculation! Wednesday, June 16th, 2010
The EU Denies Planning Spain
Credit Line with IMF, US, although rumors and leaks are propping in
more places that a Swiss damn being plugged with a bunch of slender,
fair fingers of those many blond maidens – after all, Greece did not
want and was not looking for aid either. That trillion dollar bailout
fund was the result of a bunch of politicians with too much money on
their hands having absolutely nothing else to do with their time.
Cliff Wachtel gathers much of the evidence:
After 2 German newspapers reported
that Spain
was seeking aid, now add a Spanish newspaper, El
Economista, as the third to report a coming aid package for
Spain, after 2 German papers reported this last week. All reports have
been denied by the Spanish Government, which is rapidly losing
credibility as the reports build. See details here
from Bloomberg.
Yesterday, the German newspaper
Frankfurter Allgemeine, citing an unnamed source in Berlin, reported
that Spain was discussing a bailout with EU officials following last
week’s freeze in interbank lending as markets have lost confidence in
the Spanish banking sector. Spain denied the report, did Greece had done the same thing earlier, so EU
credibility isn’t what it once was. If the allegations prove true, look
for A LOT more downside in risk markets. This was the second such
report, the first was last week from from FT Deutschland
Remember that just last week Spain
had a 3 year bond sale at an average yield of 3.32%, roughly double
the yield needed to sell 3 year bonds as recently as April, an ominous
sign given that Spain needs to sell about € 25 bln in bonds in July.
It is unclear how long Spain can continue to withstand a doubling of
its borrowing costs, which will counteract efforts to cut its deficit.
Cliff provides significantly more
anecdotal evidence of an impending Spanish bailout in the link above. I harped on the increase in expenses yesterday:
And for those of you who favor a little tabloid style drama in our
lives, I bring you the European Octopus known as Banco Santadar, the
cousin of the America Squid…
Throw
a Little Conspiracy Theory into the Pan-European Sovereign Debt Crisis
and an Impending Spanish Bank Collapse and Who Needs TV For
Entertainment?
For good measure, a quick review of nasty haircuts…
Introducing
the Not So Stylish Portuguese Haircut Analysis Wednesday, June
2nd, 2010
For those who feel that the simple
application of arithmetic and math amounts to “Doomsday Scenarios”,
Fear-mongering, and vultures in the market place, I present to you
BoomBustBlog’s scenario analysis of the Portuguese Haircut.
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You think those are ugly? You ain’t
seen nothing yet!
The Mathematical Truth
Concerning Portugal’s Debt Situation
Before I start, any individual or entity
that disagrees with the information below is quite welcome to dispute
it. I simply ask that you com with facts and analysis and have them
grounded in reality so I cannot right another “Lies,
Damn Lies, and Sovereign Truths: Why the Euro is Destined to
Collapse!“. In other words, come with the truth, or at lease your
closest simulacrum of it.
- advertisements -
Is there anything to make of the tie ins between Spanish banking, and the Inter Alpha banking network?
http://www.inter-alpha.com/
Yeah, doesn't that give you a warm feeling inside...
good guys always win at the end right?
Looks like we're losing boys... so who are we.
yeah this is about to get very ugly (or very beautiful if you are positioned for it as you should be).
US back in recession, china bubble burst confirmed today, european debt crisis about to move into full swing.
but dont worry, the recovery is on track.
good work Reggie. I hope your subscription numbers are the only thing going up today!
Way to go, Reggie. Superb and timely call on the excrescence of the Spanish banking "system". You deserve to have made a fortune on this.
The Spanish banks, just last week, were declared to be some of the healthiest in Europe
And compared to f.ex. the Danish Banks they probably ARE:
http://ftalphaville.ft.com/blog/2009/09/25/74046/something-is-rotten-in-...
This fits nicely in with that Denmark has set aside an impressive 593 Billion EUR - more than 4 years taxation - an amount only surpassed by the UK to "rescue" the banking sector. The funds are presumable managed by the privately held (by the state and the banks) "Financiel Stabilitet A/S" to keep everything quiet.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aI.TvvSBYXBM
in the lepra colony, father Damien was also the healthiest on the island! When he died of lepra, he still had his nose!
Futures looking mean and ugly this AM. Ride 'em, cowboy.
Great work, Reggie. May you profit massively.