Spanish Bad Loans Jump To New Record As Banks Come Clean Over Mortgage Defaults

Tyler Durden's picture

Spanish loan delinquencies as a percentage of the total have risen for the 8th straight month to a new record high of 13.00% (even as sovereign bond spreads continue to plunge to multi-year lows signaling all is well). With unemployment rates stuck stubbornly high, however, reality is starting to dawn in the Spanish banking system as mortgage defaults are rising following the Bank of Spain's order for lenders to review their portfolios. As Bloomberg reports, the default rate for Banco Santander alone jumped to 7% (from 3.1%) following its "reclassification" of loans that it had refinanced (never expecting to be repaid) and with home prices still falling, "there is an urgency to come clean" as regulators see the need for banks to cover a further EUR5 billion shortfall in provisions.


The slow-and-steady rise in deliquencies smacks of an industry that is dripping out there problems - hiding facts from reality and the spike for Banco Santander is merely highlighting the mis-statement...


Via Bloomberg,

With Spain’s persistently high unemployment rate now at 26 percent, the couple is among the 350,000 homeowners who may be foreclosed upon by lenders in the next two years as the housing crisis worsens, according to AFES, a Madrid-based association that advises on restructuring debt. Since 2008, about 150,000 families have been hit with a foreclosure.


“We refinanced three years ago, but now the noose is around our necks,” Males, 42, said. “Not only do we still owe more than the original loan. We’re losing our home as well.”




As mortgage defaults rise, lenders will have to set aside money to cover losses, hurting profits, according to Juan Villen, head of mortgages at Spanish property web site Spanish banks absorbed 87 billion euros ($120 billion) of impairment charges last year after Economy Minister Luis de Guindos forced them to record more defaults on loans to developers. The government took 41 billion euros in European assistance to shore up its failing lenders.




Defaults are rising partly because of changes required by the Bank of Spain that force lenders to book more soured mortgages.


“When the real estate bubble burst in 2008, banks used refinancing en masse to cover up non-performing residential mortgage loans,”

Which led to a broad loan review...

In April, the Bank of Spain ordered lenders to review their portfolios of refinanced loans, including mortgages, to make sure they’re classified in a uniform way. Lenders had 208 billion euros of loans on their books that they’d restructured or refinanced as of the end of 2012, according to the regulator.


The review led the regulator to the preliminary conclusion that classifying all refinanced loans correctly would cause a 21 billion-euro increase in defaults. Lenders would need to generate a further 5 billion euros of provisions to cover the losses.


The default rate for Banco Santander SA (SAN)’s Spanish mortgages jumped to 7 percent in September from 3.1 percent in June as it reclassified loans that it had refinanced.


“As a bank this will be the main focus area, whether you are properly recording your non-performing loans, especially the refinanced ones,” said Alexander Pelteshki, an analyst at ING Financial Markets in Amsterdam. “There is an urgency to come clean.”

But it's not going to get better any time soon...

“Until Spain starts creating jobs and credit starts flowing again, house prices aren’t going to recover,” Beatriz Toribio, head of research at Fotocasa, said. “We expect further price declines, albeit smaller than in previous years, in 2014.”

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LawsofPhysics's picture

Default already and clear the bad debt...

bankrupt the owners and management already...

This is so damn old and stale...

wallstreetaposteriori's picture

Must be all the cryptoanarchists not paying theri bills..... and investing in bitcoin.. lets see how that is working out this week?

disabledvet's picture

I wonder what a denial of service attack looks like when it comes from the NSA?

Headbanger's picture

And I bet the Spanish NAHB confidence index is also hitting new highs!

Oldwood's picture

More positive signs of recovery, no doubt.

Sudden Debt's picture


BandGap's picture

This is what kills me - "defaults rise". No they fucking didn't, they were what they were. The number of fucking REPORTED defaults rose. This is how data is being presented/manipulated.

Why the fuck don't the stockholders in these fucking "institutions" sue the living shit out of these lying fucking banks?

This is a worldwide fucking phenomena - just keep shit hidden until you can't. Spain is in deep shit, WTF do they gain (or lose) by not reporting the TRUTH?

I am so tired of thos bullshit. I used to own stcok in Santader, years ago. Fucking hot to trot stock, looking to expand into South America big time. I sold at a nice profit a while back. If this shit happened and I was still holding I'd be sharpening knife blades.

LetThemEatRand's picture

"there is an urgency to come clean"

Now there are seven words you will never hear from the head of the Squid or the presidential cuff linked one.

skistroni's picture

W.Shakespeare in Macbeth sufficiently explains why some hands cannot be cleaned.

BandGap's picture

People should ask themselves why this is now "urgent". Since when is keeping books clean and urgency?

skistroni's picture

Amateurs... We are already at 29% NPL percentage (official number). Eat our dust. 

wallstreetaposteriori's picture

Your NPL's are even bigger than that.  29% is the official PR number for the world....  I was looking at the loans at alpha bank at the beginning of the year and the chief economist told me the NPL number would continue to fall and I nearly laughed out loud.  

skistroni's picture

I know, that's why I mentioned that this is the official number. At least another 30% (my own conjecture) are officially "performing" meaning that the rearranged minimum payment (which makes the repayment period two to four times as long as the original contract) are not more than 90 days delayed. At the end of these 90 days there is huge pressure on borrowers (calls to home/office/cellphones several times from 7am to 10pm) to deposit even less than the agreed minimum, just so that their loan does not get labeled "non-performing". Hardly a sustainable situation. 

disabledvet's picture

to long telecom stocks apparently.

BandGap's picture

WTF is the tipping point? Are they eating grass over there?

wallstreetaposteriori's picture

All those carry-traders buying all the Euro Periphery debt are sooo screwed.  Do they have any idea just how worthless and not "risk-free" all this paper is?  Dumb asses borrow money and buy worthless shit. 

Oldwood's picture

How much different is their "do what ever it takes" from our "QE forever"?

disabledvet's picture

that's a very good question. I would begin by saying "the dollar is still the world's reserve currency." the next question of course is "will they pay the interest?" in the case of the USA that answer so far is yes (not that GE didn't slash it's dividend to basically zero of course. hahahaha. pathetic.) USA Inc is now RAISING the payouts. and I should be buying sovereign debt here? that's an awful lot of oil coming out of the Permian Basin (so I hear.) the Marcellus Shale is by all accounts a Bonanza...simply Inlimited supplies of natural gas "forever" at ridiculously low start up costs at the well head. (couple of million up front gets you 100 billion in dry gas with almost zero labor costs once done.) needless to say "those drilling rigs are the best money can buy." with any luck the Littoral Fleet will be ported in Philadelphia...but we'll see.

Rip van Wrinkle's picture

41 billion of taxpayers dosh in, and God knows how much more to come, and 'profits' will be hurt.


One question? What fucking profits?

disabledvet's picture

first off "in the USA those are coin operated laundrymats" (see comment below.) Second clearly the State must default. Whether any of us actually see this default is a whole 'nother are these CDS's traded again? Just one brought AIG to its knees. And who is this Edward Snowden kid again?

moriarty's picture

They are going to need a bigger Laundromat

ghostzapper's picture

Nah, no need for a new financial system globally.  Things seem to be working just fine.  I'm sure all of the toxic debt and derivatives nuclear bombs will work themselves out just fine.  

highly debtful's picture

What were all these people thinking? For God's sake, DYODD and make sure that your financial decisions are carefully thought through and prudent. Yes, shit happens and sometimes you need to take financial risks in your personal life, but 13% and counting, that's a lot of lousy decisions.

BandGap's picture

Irrationally exuberant, AKA greed

If it looks too good to be true, it most likely is.

Super Broccoli's picture

so broken people don't pay their debts ? jeez, if only i had known !

frankTHE COIN's picture


hugovanderbubble's picture



Ibex 6.500

B2u's picture

WAIT....didn't Bernanke and Draggy fix this and make it better?

hugovanderbubble's picture

Spain is in default and Precautionary Credit Line has to be used YES OR YES

disabledvet's picture

again I'm not sure how a credit default swap is actually executed upon...but that is a nuclear Navy.

SystemOfaDrown's picture

A little suggestion to those knuckle-head Austerity Goons,

"TRY JOB CREATION IDIOTS!" If people have money they pay bills; they buy things; they keep your loans solvent. 

You know! Capitalist Stuff!

gurusb's picture

13% loan delinquencies rate is the official number. The real loan delinquencies rate is up to 17%. The official number from Spanish Central Bank doesn't count the 51.000 millions euros on assets transfered by the spanish banks to the spanish bad bank known as Sareb. Thats the artificial cause os the decline in the in loan delinquencies rate numbers in December 2012 and February 2013.


NEOSERF's picture

If ye wants the full bailout amount then ye needs to show the Troika how much is really needed, then ye can eat your pudding.