As we draw ever closer to Europe's date with disaster and the inevitable lifting of the kimono that Draghi's supervision-driven stress tests appear to be, European banks are being forced to finally 'fess up to the real state of their balance sheets. Confused at how bad macro data can be in Spain and yet banks have been 'surviving' or 'thriving' - simply put, they lied (and are now being forced to un-lie)
Spain's Banco Popular just released earnings showing a 19.6% rise in non-performing loans at EUR21.2 billion driven by a surge in "doubtful loans for subjective reasons" that almost tripled QoQ. This is the highest bad loan ratio on record at 14.27% - but have no fear, their CEO says "loan defaults are nearing their peak," because he would know...
From the Banco Popular earnings report...
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and in context!!
[4]
It seems we have reached the point where some "honesty" is the best policy as if they want to raise capital and be "saved" by the ECB, they need to show just how bad it all is - together. Expect more of the same from Spanish (and Italian) banks...
The European bank ETF EUFN is down over 7% from its Jan highs in the last few days and while somewhat illiquid remains the cleanest way for US retail to trade any follow-through from European banking system exuberance fading.
Charts: Bloomberg