SocGen Chimes In: "Will The Spanish Bank Bailout Immunise Spain? Probably Not"

Tyler Durden's picture

So far we have yet to read even one analyst commentary on the Spanish bailout that sees it as favorable on the margin. The following note from SocGen's Ciaran O'Hagan is no exception: "Will this be good enough to immunise Spain over
the Greek elections and fend off more rating downgrades, on the back of
greater subordination and moral hazard? Probably not."

Are the EU loans for Spanish banks  sufficient to guaranty market access for SPGB funding at attractive
levels? We don’t think so. The initial reaction today will be one of
relief. However like with previous EU loans programmes, we doubt that
relief will last.


That said, the weekend decisions will be seen as bearish Bunds and OATs, in asw, as Aaa credits become ever more exposed to peripheral troubles. All the more so as the weekend press in Germany is saying that the euro high level working group is advancing on plans for euro area collective debt issuance (even if would only apply to new borrowing)


For SPGBs, on the plus side, we see some willingness on behalf of the Spanish authorities to protect Spain before the Greek elections; there is also no issuance pressure coming from bank recapitalisation. .


On the negative side, there is zero conditionality for now (vague talk of some to come for banks, with a Memorandum of Understanding). The loans for Spanish banks raises the sovereign debt/GDP by up to €100bn (if and when the loans are paid to FROB). It is not clear yet who the creditors will be and whether there will be any bond issuance.


- If it is EFSF, we can look forward to national approbation in EA parliaments. Given that the loans are paid to FROB, we expect that Spain’s obligation to the EFSF will continue (almost €95bn), but that is the kind of irksome detail that needs to be ironed out.


- If the loans are paid by the ESM, the loans given to FROB will be more clearly senior to SPGBs, though we expect de facto seniority in any case.


The IMF’s role for now is purely advisory; it will not provide cash (a small plus on seniority worries).


Spain has now set out a 'Roadmap' for the evaluation of its key banks, and hired four accounting firms for a second round of bank audits. The IMF audit just out, the 21 June stress tests will also be scenario-based. Given the long time-line still (out to 31 July for the second audit).


Will this be good enough to immunise Spain over the Greek elections and fend off more rating downgrades, on the back of greater subordination and moral hazard? Probably not.

Oh well, it was worth a try.

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Colombian Gringo's picture

Never mind towels given to customers opening accounts. The new spanish bankster pitch, : Yo Gringo, you want to buy my sister, she is very cheap, virgin many times.

Sudden Debt's picture

The front door is a public entrance, BUT THE BACK DOOR IS HARDLY USED!!


lolmao500's picture

Will SocGen tell the truth when this kind of stuff happens to France? Probably not.

Colombian Gringo's picture

Does SocGen ever tell the truth?  Of course not.  If they did, their management would have an appointment with Monsuier  Guillotine.

Peter K's picture

If I understand the finer points of this weekend's action, we still don't know if Spain will take any funds. I.e., if the Greek election goes well, Spain could say that the the "non-conditional" conitions are not good, and still not accept the "non bailout" bailout? And if the Greek election goes bad, the Spanish side's bargaining position gets better?

asteroids's picture

What deal exactly? Details, details, details. We went through this with Greece. A deal is announced and it took weeks before something was signed. Only then did we figure out the deal wouildn't work in the long run. Why should Spain be any different? This is a suckers rally.

Zola's picture

Just continuing the theft of the future from the young people. Nothing to see here. All these crooks will hang one day

hedgehog9999's picture

What exactly is $100B for Spain:

(back of the towels calculation)


Population 48M.

Estimate of employed people at 50%:24M

Assuming everybody withdraws $4,000 on average as a cash cushion results in $96B. The whole bailout gets sucked out, so back to square 1.

So this bailout money could literally vanish within 3 months assuming $1333/month/emplyed person which isn't nearly enough to stuff my back pocket with a few $100 bills.

So, really it is all about confidence. This money could be siphoned out in no time, this does not include corporations or large investemnt entitities who could also siphon all this cash out.

ParkAveFlasher's picture

The talk of "immunization" now is like resolving to wear a condom six years after contracting herpes.

bunga bunga!!!

Sudden Debt's picture

I read on a african blog that when you fuck a virgin, you're cured!

and if it doesn't...



Sudden Debt's picture

I read a good one! "The market could end the day in green"

That's positive right?


JackT's picture

Spain is absolutely magical