Savings banks may require as much as 30 billion euros on top of about 15 billion euros provided over the past couple of years, Ignacio Cerezo, Andrea Unzueta and Axel J. Finsterbusch said in a report dated today. Lenders such as Banco Santander SA and Banco Sabadell SA may need as much as 8 billion euros.
Last week, Spanish Finance Minister Elena Salgado announced new rules for the banking industry, saying all lenders would have to reach a minimum core capital requirement of 8 percent, while those that aren’t publicly traded or depend on wholesale debt markets will need core capital levels of as much as 10 percent. Salgado said recapitalizing the industry won’t cost more than 20 billion euros and “all or part” of that amount will come from financial markets.
The JPMorgan analysts said they were basing their estimates on more rigorous stress testing of domestic loans, assuming total expected losses of 7.7 percent for the industry. They also used an average required capital ratio of 9.2 percent, compared with 6 percent in stress tests published last year.
At about 3.5 percent of Spain’s gross domestic product, the industry’s estimated 38 billion-euro capital shortfall is “manageable” and paves the way for “a structural reduction in Spain’s risk premium from recent highs,” the analysts said. Commercial banks would probably be able to raise all of the required capital from private investors, “hence not needing an additional injection from the government,” they said.
JPMorgan estimated capital needs of as much as 4 billion euros for Santander, 1.5 billion euros for Sabadell, 900 million euros for Banco Pastor SA, 750 million euros for Bankinter SA and 400 million euros for Banco Popular Espanol SA.
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