Spain Banks Post Record Losses in First Half, Central Bank Says

Spanish banks’ losses increased in the first half to the highest on record as provisions to offset non-performing assets jumped, Bank of Spain said.

Deposit-taking companies had a net loss in the first six months of 10.66 billion euros ($13.18 billion), the largest since the central bank started compiling the data in December 1970, the Bank of Spain reported on its website today. That compares with net income of 4.7 billion euros a year earlier.

Banks’ losses swelled as the government increased provisions lenders have to put aside to offset non-performing assets in an attempt to boost investors’ confidence. Lenders’ bad debts climbed to 9.42 percent of total lending in June, the highest since at least 1962, from a revised 8.96 percent in May, a separate report from the Bank of Spain showed today.

Provisions to cover deteriorating assets jumped to a record 145.2 billion euros as of June from 123.6 billion euros in May, when the government announced new rules for banks to cover their risks linked to property loans.

Economy Minister Luis De Guindos said on May 11 banks would have to increase provisions against real estate loans by about 30 billion euros in the fourth attempt in three years to clean up the industry.

In June, Spain secured 100 billion euros of European bailout loans for its banks to boost capital of lenders unable to attract investors, sell assets or generate enough earnings to offset losses.

Spain is about to receive an emergency disbursement from the bank bailout, a person with knowledge of the matter said on Aug. 15. The first funds will go to banks including the Bankia group (BKIA) that are already under state control, the government said.

To contact the reporter on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net

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