Spanish Bad Loans Soar By Most Ever In Past Quarter To All-Time Highs

Tyler Durden's picture

A month ago we warned that loan delinquencies in Spain were bad and getting worse at a concerning rate. The most recent data update, which revised that 'bad' print to absolutely dismal, has broken records for just how ugly things are for Rajoy and his fellow countrymen. Spanish bank loan delinquencies rose to an all-time (50-year) record 9.86% with the last four months seeing simply unprecedented acceleration in the rate of bad loans. Numerically, this means that an absolutely whopping €172 billion of the €1.7 trillion in Spanish financial assets is now money bad, and will no longer  generate cash flows. This amounts to about 17% of total Spanish GDP. In GDP-equivalent terms, this would be equivalent to $2.5 trillion in US bank loans being "bad." Which, when one cuts all the prevarication and lies, is probably what the true status of the US financial system is. Add to this the now relentless deposit flight which is depleting Spanish bank coffers and one can see why the European credit death spiral is very aptly named.

Spanish bank bad-loan percentage...

Elsewhere, as Bloomberg calculated, the full impact of the European crunch is most evident when observing deposit outflows, which now amount to a stunning $425 billion out of Spain, Portugal, Ireland and Greece in the past 12 months. The fragmentation of credit and a two-tiered banking system continues to block any hopes of growth as companies' funding costs in peripheral nations suffer contagiously from their sovereigns' deterioration.

The Deposit Flight That Could Undermine The Euro...

Via Bloomberg:

Financial disintegration along national lines “caps the benefits from economic and financial integration” that underlie the common currency, the IMF wrote in an April report. The disintegration can fuel a cycle of deteriorating economic conditions and weakening banks, said David Powell, a Bloomberg LP economist based in London.


"The financial divergence is a symptom of the underlying economic divergence, but they feed on each other, making it harder to break out of,” Powell said. “Until companies and individuals are convinced that the euro will survive, they won’t invest in the periphery, and that will keep funds away."




Spanish bank deposits fell 7 percent from the beginning of January through the end of July, compared with a 4 percent drop the previous six months. The decline in Portuguese savings accelerated to 6 percent from 1 percent, while Irish deposits fell 10 percent compared with almost no change in the last six months of 2011.




"We’re still left with very big political questions about who pays for all this, how the backstops work and so on," JPMorgan noted, "The proposals are going to be quite difficult for quite a lot of member states. It’s going to be a difficult road ahead."

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
GetZeeGold's picture



Finally....something that makes sense.


LULZBank's picture

Algos will only read "Spain" and "soar."

JPM Hater001's picture

The company I used to work for has a credit card payment protection division in Europe.  I asked the CFO at our January 2012 meeting if we had a plan for debt defaults driven by a credit crisis in Europe.

An associate in the room: "Who asks questions like that."

"I do"

There was no curve of understanding in the room.  There was me and there was them.

I was laid off in May.  I dont think he liked my question.

LULZBank's picture

You should have asked "how do we intend to issue more credit cards due debt defaults driven by a credit crisis in Europe, as there will definitely be shortage of new debt."

JPM Hater001's picture

What I should have asked was what there plan was for the Australian Housing bubble...They are the largest Mortgage Insurance company.

economics9698's picture

Fuck, would someone tell Paul Krugman his services are needed ASAP.

Sauk Leader's picture

This is a liquidity problem right?

persu's picture

Why did Spanish banks rally??

Debtonation's picture

And the hits keep coming

scatterbrains's picture

BernanQE can buy all this bad debt up what's the big deal ?

Zero Govt's picture

no problem buying it, the problem is selling it

Blankfein & Dimons second hand toxic cast-offs anyone?

Abraxas's picture

"We’re still left with very big political questions about who pays for all this, how the backstops work and so on," JPMorgan noted"

Yeah, like they don't know ... Bloody criminals!

Cognitive Dissonance's picture

Nothing a whole lot of fiat printing won't solve.


otto skorzeny's picture

that's actually a "green shoot" growing thanks to the fertilizer of "animal spirits' " shit

eigenvalue's picture

The only thing that the Spaniards are good at is football.

By the way, I always wonder why the Germans don't cap the TARGET-2 balance. They would be screwed hard one day if they didn't  cap it.

Treason Season's picture

The Spanish make excellent cheese, wine,excel in rail technology, the arts such as movie making, painting etc so fuck you and the racist horse you hump.

Shevva's picture

Spains problems solved. I'd pay you 2 euros to see a racist horse.

I'll give you 5 if you've got racist, sexist and ageist horses

fonzannoon's picture

only obummer and the bernak can printo infinity and get a 10 dollar drop in crude and a treasury rally as a response. magicians they are...

doomandbloom's picture

....not as high as Uganda...oh wait.

Jason T's picture

Spain's GDP is only $1.49 trillion!!

They are done for!  Where is the market crash????

Thought criminal's picture

What crash? It's bullish cause it means they will have to ask for that bailout soon...

BliptoP3's picture

OT: What the hell is up (down?) with oil?

fonzannoon's picture

it's sheer brilliance and magic by tptb. thats whats up.

Mr Lennon Hendrix's picture

Nevermind what the press says about how Berlin is bailing everyone out.  French and German banks are making out like bandits. 

The austerity is on the poeple of the periferary and the inner States of France and Germany are benifitting by having a weaker currency (to increase exports) and the above mentioned capital flow.

LongSoupLine's picture



Ok, I've an idea so stick with me...

We can take all those bad loans, bundle them into "investment packages"...

Abraxas's picture

Brilliant idea! We'll just have to give them some kind of a name that will make people buy them. Something to do with security, trust, etc.

Robot Traders Mom's picture

Just wait until they actually have to cut.


Spaniards should all be familiar with the acronym SHTF...

Schmuck Raker's picture

"Bail-out? We don' need no stinking bail-out!"

supermaxedout's picture

80 % of the deposits leaving Spain are reaching the coast of Ameriga, following the old Columbus route but the other way round.

The deposits are badly needed in the US in order to forward (borrow) it to the US government, via treasuries etc.  If this drawn down in Spain would not take place the US banks would have not enough money to lend it  to the US government. Then Bernanke would have to print even more. 

debtor of last resort's picture

We don't want quicksand financial integration. Pay off your own debt.

Snakeeyes's picture

Let's see. 25% unemployment, collapsin house prices. Not all that unreasonable to have all time high deliquency rates. Pity for Spain.

Txo's picture

2013 worse than 2012.  Spain has not hit bottom just yet

Trying to Understand's picture

Wow... When they decided to stop supporting the system that is destroying their country they really did it ~ this is more effective than all the protests put together! Looks like "if" they could pay, they aren't.

americanspirit's picture

Txo - not only has Spain not hit bottom yet, it is nowhere near the bottom yet. People still have food, the municipalities are still collecting the trash, and the utilities are still providing water and electricity. You are right about 2013. I am very surprised that the Spanish ( or the Greek) military isn't making restless noises yet. Probably has something to do with NATO keeping the lid on as tightly as possible. However, when enough pressure builds that lid is gonna blow.

Of course if those terrorist Muslims can just be persuaded to "attack" both Europe and the US then universal martial law can be declared and everything will be good to go.

Dareconomics's picture
Big Picture in Spain

EU Riddle: Will Spain Seek a Bailout? –

The riddle is not if Spain will request a bailout but when it will do so. Ignore all of the europhoria and political machinations and pay attention to the math. Spain just reported that its banks have €172bn in bad loans and they  have experienced €224bn in deposit flight year to date. Furthermore, the government needs at least €86bn to finance its deficit and maturing debt by the end of 2012.

These numbers indicate a vast funding hole in Spain, but the picture is actually more grim than what the mainstream media is reporting.

During a banking crisis, bad loans are always under-reported by the banks. Remember that during the American subprime crisis all of the banks kept increasing their bad loan provisions. You can double the number above to €340bn and still be conservative.

Spain is also claiming €224bn in deposit flight from its banks, but the number is certainly higher. As of September 10, Spain’s Target2 liability was the highest in the eurozone, €415bn. This number more accurately reflects the hole in the balance sheet caused by deposit flight of all kinds.

I have been saying that the Spanish government’s fiscal condition is much worse than anyone is letting on. I researched Spain’s bond sales, its maturing debt and estimated its budget deficit based on its own projections. My work is here:

Based on a conservative budget deficit of 8.1% of GDP, Spain needs €86bn to finance itself for the rest of the year. If Spain follows the trajectory of the other austerity nations, then tax revenues have dropped more than they are projecting. Based on the situations in Greece, Ireland and Portugal, a 10% deficit is probably more accurate. This means that Spain will need €130bn to finance itself this year.

Adding these numbers together, 340 + 415 + 130 = 845, gives us the amount this bailout will cost initially. Remember another rule from the Eurocrisis: the cost of the bailout always rises due to austerity.

Now, Europe does not have this much money, so don’t expect Spain to receive a €845bn package. The troika will make fantastic projections of all of these cost inputs to get the package down to a number that it can afford, just like they did in Greece. Then, Spain will continue its depression indefinitely while it struggles to rebuild during austerity hamstrung by all of this debt.

While it is obvious to anyone doing the math that Spain must request a bailout, it has the ability to delay the inevitable for quite some time. The ECB is allowing the Bank of Spain to accept practically anything from Spanish banks in exchange for loans under the ELA. This means that the banks can stay afloat for a few more months until their collateral runs out.

These same banks are also the best (and perhaps only) customers for Spanish debt. As long as they are alive, they will continue financing the Spanish government by buying up all of the debt auctions. The government and the banks are like two drunks holding each other up as they stumble home.

Rajoy is fully aware that each government that has requested a bailout has not survived.  As a matter of survival, he will hold off as long as possible. His party is facing regional elections on October 21, so there will not be a request before this date.

The most important part of the equation is that Spain cannot be allowed to fail, so none of the eurocrats or politicians are going to call Spain out on its dodgy accounting. They will not do anything that may precipitate a market panic, so they do not have the leverage to force Spain to act.

The end result of the math and the political calculus is that Spain will continue the present status quo until it runs out of money. I think that it can make it into the first quarter of next year operating in this fashion.

People of Spain, I have a better idea. Revert bank to the peseta. If you wish to see how awesome it is to have your own currency, check out Iceland. Your northern friends experienced a depression, but that is behind them now. Their country is growing nicely, and it is all thanks to the retention of their national currency which the market devalued allowing the Icelanders to pay off their debts and export their way out of trouble.

If you wish to remain in the Eurozone, then look at Greece, because the cradle of democracy is your future. Expect an indefinite depression caused by the straitjacket of the euro.

Of course, if you drop the euro, you lose all of its benefits, which are what exactly? Oh right, it’s good for business. Except with a 24% unemployment rate and a cratering GDP, is it really good for business? It’s definitely good for German business as it gets a weaker currency to pad its exports.

A bailout would also be great news for the German banks that hold Spanish debt and loans, and they should be paid in full at the the expense of the Spanish taxpayer; it is only fair, right?

What is best for Spain? Adopt the peseta and you’ll be out of the depression within two years. Within five years, you will be borrowing on international markets again. Or you can let your politicians continue to put Germany’s interests ahead of yours.  It’s up to you.

Grand Supercycle's picture

Due to QE3 and short covering spikes, all these daily charts are extremely overextended & significant correction expected very soon ~ SPX, NZDUSD, GBPUSD, AUDUSD, COPPER, CRUDE, GOLD, SILVER.

rjs's picture

over 11% of US mortgages are either delinquent or in foreclosure...