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The Spanish Banks Start to Unload
From the WSJ:
Spanish
savings banks have begun selling off the large property portfolios they
acquired as collateral from loan defaults, in an effort to improve
solvency ratios, a move that risks further falls in property values
that could impair the value of their asset books.In Spain, the
global financial crisis that erupted in 2007 ended a real-estate and
construction-based asset boom, plunging the country into a recession
that has yet to end, even as many other European economies have
returned to growth.As the unemployment rate has soared to more
than 19%, residential-property buyers have defaulted on loans in
massive numbers, as have property developers, overleveraged in a
moribund market. As lenders have assumed the collateral on defaulted
loans, local financial institutions—particularly unlisted savings
banks—have collected properties valued at about €8.5 billion ($12.2
billion) over the past 12 months.
I was fairly confident this would come to pass. Readers should reference this post from January: "Reggie Middleton on the New Global Macro - the Forensic Analysis of a Spanish Bank ". The
first quarter was profitable, but that big bear rally really threw
this off. The investment thesis is still sound, though. I may update
this if the opportunity presents itself.
In
Spain, BBVA, the second largest domestic bank, could see a massive
deterioration in its real estate and consumer loan portfolio. The
Spanish real estate sector is making a high horsepower a U-turn after
years of a massive housing bubble that has burst - culminating in an
unemployment rate that has risen to an outrageous 13.4% level. The
power skid is showing no signs of reaching an inflection point, and we
believe is only in the beginning throes of a sharp downturn. In
addition, the banks'
other key growth areas including Mexico, the U.S and South America are
witnessing a slowdown in economic activity, restricting BBVA's growth
prospectus amid the current turbulent environment. With increasingly
challenging economic conditions in each of these economies, BBVA's
asset quality has deteriorated sharply with non-performing loans rising
to 36% of its tangible equity without corresponding (equal) increase in
provisions. As the bank deals with these tough times ahead, we expect
BBVA's bottom line growth to remain subdued due to a slower credit
off-take and higher provisions in the coming quarters.
Silly question: If the credit problems in the USA caused the USD to rally in 2008, why would credit problems in Europe cause the Euro to sink in 2010??? Would not the same effect happen as in the US last year??? I must be stupid since everyone assumes that the Euro will be dumped during a credit crises. Why was the USD not dumped when the USA had its credit crises???
yes everyone in the world made bad calls lots of them. The US made a few less bad calls than other nations.
Nope - The US made the worst calls by many orders of magnitude but has just been more desperate and mendacious in hiding them.
http://www.leap2020.eu/GEAB-N-40-is-available!-Spring-2010-A-new-tipping-point-of-the-global-systemic-crisis-When-the-slip-knot-around-public_a4093.html
Nope - The US made the worst calls by many orders of magnitude but have just been more desperate and mendacious in hiding them.
http://www.leap2020.eu/GEAB-N-40-is-available!-Spring-2010-A-new-tipping-point-of-the-global-systemic-crisis-When-the-slip-knot-around-public_a4093.html
Nope - The US made the worst calls by many orders of magnitude but is just more desperate and mendacious in hiding them.
http://www.leap2020.eu/GEAB-N-40-is-available!-Spring-2010-A-new-tipping-point-of-the-global-systemic-crisis-When-the-slip-knot-around-public_a4093.html
It appears we can expect even more major currencies to be devalued worldwide more in 2010. These devaluations will be a bit uneven due to timing, yet when averaged they will be devalued nearly the same amount. Gold price is of course telling the truth.
Have an account at Compass Bank, recently
bought by BBVA. Time to move it.
Reggie,
Thanks for consistently good information and analysis.
so the dollar rise as a consequence of other currencies falling. For how long? We have our own indebtedness still, so the dollar will drop again! All this volatility sucks for business. Correction, main street business. Wall street no doubt will have fun with this.
Reggie: The only question I have is would you prefer being relevant, ie someone with gravitas, or would you prefer to simply continue patting yourself on the back and saying "see, I told you so!" Shit, you're starting to sound like Denninger, you know, the guy who thinks that every original idea in the world is his and his alone.
You have to choose, my friend. Choose wisely.
Dos Equis!
catalonia / barca, spain are the epicenter of continental shelf housing izzues. a fantastic tulip-esque bubble (2009's bulb bubble is apparently garlic in china) of crudely 'washed' vig / blood monies much like palm island / duh-bye-bye. and while the CAC retains the NDX / RUT-esque animal spirits of european bourses, the MIB remains the literal tip of the collective european equity sphere spear much like the BKX / XBD contingent does / will within the US equity mkts.
Reggie: would love to see you delve into the actual books of a BB or their brazilian counterparts to garner a true feel for us non-analysts of what their ledgers might actually look like as per guesses at possible swaptions/ synthetic gambles if not simple solo directional currency / interest liabilities centered around E. europe and the oinkers, which remain woefully, woefully unhedged for the possibility of a rising DX / $USD. 81 daily hurts em badly. 84 on the weekly DX/ $USD effectively kills lithuania, estonia, latvia, all the -ias of e. europe and will much more than just possibly kickoff the domino topple effect of everyone who isn't the int'l lender of resort named uncle buck only followed by a very, very distant papa yen.
thanks for sharing your work with us, Reggie. enjoy sifting through your analyses and trying to see through your eyes. thanks again.
wait, why does a strengthening dollar hurt E. Europe....?
You're welcome. I working on a big pan-European project now, and will post some info when available.
Nice article Reggie.
A big pan-European project would be very welcome. We need more international threads.