Spanish Banks Hiding Over $70 Billion In Bad Real Estate, El Confidencial Finds

Tyler Durden's picture

That the Spanish savings banks, or cajas, have long been a source of instability is well-known to everyone with more than a passing knowledge of the pitfalls of the Spanish economy. Last year, in "The Ticking Time Bomb That Are The Spanish Cajas", we said "Cajas are likely hiding losses on home loans by taking non-performing mortgages out of securitized pools. Absent this unsymmetrical onboarding of risk, the overall deterioration of the broader pool would have become ineligible as collateral in ECB refi operations." We also noted that at 264 bps, Spain CDS "is cheaper than a deserted Salamanca hotel." (it is 320 bps today and soon going much wider). So now that Ireland (of all bankrupt countries) is slinging feces in a desperate attempt at distraction and pointing fingers at Spain, it is logical that the mainstream media would once again remind the world that Spain's financial system is effectively hollow, and that the greatest mystery in the financial world continues to be that Spanish CDS is not trading 2 or 3 times wider than where it is now. As Bloomberg says "Spanish banks have 50 billion euros ($70.7 billion) in unrecognised problematic real estate assets, El Confidencial reported, citing a report by the Boston Consulting Group. The consulting group estimates that Spanish banks need between 20 billion euros and 30 billion euros in additional capital and that Spain’s bank rescue fund, known as the FROB, could end up taking over 20 percent of the banking industry, El Confidencial added." But not before the second European Stress Test finds that all Cajas, just like last year, are perfectly capitalized, in what will be the latest daily lie out of Europe.

From El Confidencial (google translated):

The Spanish financial sector has a real estate problem "unrecognized" of 50,000 million euros, which must be added to the 180,000 reported to the Bank of Spain, according to a report by Boston Colsulting Group (BCG). In this situation, the consultant estimated that the actual capital requirements are between 20,000 and 35,000 million, and that could be made ??up to FROB 20% of the sector.

Among the toxic assets include land and homes foreclosed, developer and builder credit delinquent or substandard, and delinquent mortgages. This increase will require additional provisions providing for 30,000 million , as all banks and only 50,000 million has accrued to date (27% of the troubled assets recognized). With these estimated 80,000 million, would cover 35% of the total toxic assets, which would be the expected loss due to BCG.

The study, conducted for the AEB, a scenario 'healthy' for the sector in 2015 in which all institutions are sound and privatized by then, and have returned to levels of efficiency and profitability similar to those before the crisis. In this scenario, provides a credit line with the new rules, which require between 20,000 and 35,000 million of additional capital , based on the performance of the economy.

The reason is that "we think the provisions already made ??by entities in late 2010 will not be enough to cover all future losses on the assets, "the report said. He adds that "the development of business not in all cases will generate positive results enough to offset these declines."

And what is more striking still, BCG estimates that not all entities generally achieve sufficient capital to repay the FROB 1 , ie, public injections given in the form of loan, share, last year. And that the percentage increase in state hands in 2015, the deadline to repay the aid.

What's more, it also provides that "new institutions, including banks , may enter into equity gap "in the coming years as it expects two to three years over credit crunch and margins under pressure, than the effort on provisions already mentioned.

At that juncture, the big question is whether banks will be able to capture private money or not, which depends on the price transparency, the "equity story" and possible guarantees to provide the state (active protection scheme or ' bad bank ').

Otherwise, the FROB can be up to 20% of capital in the sector in 2015. The final amount will depend on whether the entities that have announced they will go public or attract private capital (especially Bankia) are successful.

All in a day's work for the Ponz.


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King_of_simpletons's picture

What's new with the banks ?

TheFourthStooge-ing's picture

Bend over, German taxpayers, here it comes again.


oh_bama's picture

only 70B? That is less than one day of POMO!


Ahmeexnal's picture

Massive bust in Spain will be the catalyst for disaster:

jkruffin's picture

Gold 1300 soon it seems........

Yen Cross's picture

 Go Jerry Maguire on me! 2T Itallion style! SP? sorry...


  Italy is 2 Trillion in debt and over 100% GDP!  Anyone want to discuss that with me?



Widowmaker's picture

Truth is the last thing one would find on a banker's job description, or a corporation's charter.

It's ALL lies.    

The only cure is 1oz silver bullets.

the not so mighty maximiza's picture  ..coming soon/under construction.


The Axe's picture

if you can always rollover you bad won't matter...until you can't!!!

Jim in MN's picture

You're always perfectly capitalized...if you have more guns on your side.

Bend over.

Yen Cross's picture

 Jim, that was a good post.    YEN

MFL8240's picture

Take out country Spain and put in USA, run the same story just adjust the dollar number higher.  

johnnymustardseed's picture

US banks hiding trillions...big deal

oogs66's picture

did they call Germany yet for money?

White.Star.Line's picture

Fractional reserve banking is the shadow slowly creeping over all the land.

denarii's picture

this is only 5% of gdp, sounds woefully optimistic to me

lizzy36's picture

But no worries, Spain is not Greece, which is not Lehman, which was most certainly NOT Bear Stearn's.

One wonders which one is AIG?

Yen Cross's picture

 I own this 'ghost signing' CO.   LLP.

Curtis LeMay's picture

Not only in Espana...Italy too.

Monday, 27 June 2011

Spreads between Italian and German 10-year bonds hit the highest level since the creation of the euro, while banking shares suffered a shock plunge following market rumours of an imminent downgrade of Italy's sovereign rating.

Gandalf6900's picture


What are you talking about, here in Italy we are all swimming in gold, fancy silk robes and soft bunny fur slippers....NOT

Gandalf6900's picture


Yeppa Yeppa andale andale muchacho

Yen Cross's picture

 Your honesty is (XAU).  Yen...

True.North's picture

Now if we could just cast James Woods as Miguel Blesa de la Parra...

Reptil's picture

The spanish themselves are STILL counting real estate in Pesetas. (that'd be a huuuuuuuge number ;-)

Joshua Falken's picture

The Spanish have systematically avoided tackling their bad debt problem since 2008.

If you have a country with 46% of pre-credit crunch GDP coming from property and construction, why would anyone be surprised they have been hiding a problem (unless you are an investment bank research analyst).

The problem may be a whole lot bigger than 50 billion Euros as the collateral value of the underlying real estate is worth nothing like that now.

The banks in Spain are also responsible for valuing property and may not be marking the real value to market.

The Spanish banks are also not repossessing defaulted properties, but they are counting the delinquent and defaulted money owed as new loans.  This supports property prices and shows strong loan growth, all with tacit government approval.

There are more new homes for sale in Spain than in the USA with vast ghost towns (ciudades fantasma) finding no buyers.  see Ciudad Valdeluz and Sesena.

All the countries with historically poor fiscal management and high interest rates before joining the Euro (Greece, Portugal, Ireland, Spain and Italy) are avoiding the hangover now the cheap money party has ended.

Not one of their politicians wants to be held responsible, so they continue to kick the can down the road until the game is up, which might be quite soon.


For the future, look to the past.  See the Nikkei 225 since December 1989.

sumosamurai's picture

This is news? The US has been doing this since at least 2008. Mark-to-fantasy prevails.


Feel the flow's picture

I'm currently living in Mallorca, Spain and yes it's true.  Protests are becoming more and more commonplace.  20 and 30 somethings are living back home with Madre and Padre.  After Greece, Spain is next.  The Gold and Silver coin shops are experiencing record sales here.  As my local shop owner says, "Who wants their money in the bank?"  Let alone in a dying political experiement: the EURO. 

Feel The Flow: