Banesto Touches 2-Decade Low as Crisis Hits Banks: Madrid Mover

Spanish bank stocks fell, with Banco Santander SA (SAN) unit Banco Espanol de Credito SA (BTO) reaching its lowest intraday level since at least 1989, as concern about the government’s ability to rein in its deficit drove up financing costs.

Banesto fell as much as 10 percent, its biggest intraday decline since 2002, before paring losses to close at 2.10 euros, a 0.8 percent drop. Banco Popular Espanol SA (POP) slumped as much as 8.5 percent to a 21-year low before closing down 3.2 percent at 1.32 euros.

Surging sovereign debt costs for Spain are lowering the value of banks’ bond holdings and raising the prospect that their businesses will be damaged if the government is forced to take more austerity measures. The ratio of bad loans to total lending was close to a record high at 8.95 percent in May as loans and deposits at banks also shrank.

“News from Spain keeps getting worse and that affects the banks directly,” said Peter Braendle, who helps manage about $55 billion at Zurich-based Swisscanto Asset Management. “It affects them on the debt side but also because of the impact on their banking business if Spain has to do more on the deficit.”

Spanish banks pared losses after the stock market regulator imposed a short-sale ban today on all shares. Santander, which fell as much as 5.1 percent earlier in the session, closed up 1 percent at 4.23 euros.

The yield on Spanish five-year debt surged to 7.32 percent from 6.80 percent on July 20. The extra yield investors demand to hold Spanish 10-year securities instead of bunds widened to 630.18 basis points from 609.96 on July 20. A basis point is a hundredth of a percentage point.

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.