Spanish Lenders’ Bad-Loan Ratio Resumed Increase in January

Bad loans as a proportion of lending at Spanish banks resumed their increase in January in a sign that asset quality remains under pressure after state-aided lenders transferred soured real estate risk to a bad bank.

Non-performing loans as a proportion of total lending climbed to 10.8 percent in January from 10.4 percent in the previous month as 3.2 billion euros ($4.1 billion) of loans soured, the Bank of Spain in Madrid said on its website today. That’s up from 8.1 percent a year ago.

Bad loans continue to rise in Spain as the International Monetary Fund predicts the economy will shrink 1.5 percent this year and the unemployment rate will hit 27 percent, making it harder for borrowers to keep up credit payments. The bad-loans ratio dipped in December from a record of 11.4 percent in November as lenders, including Bankia group, that have taken state aid transferred soured real estate assets to a bad bank.

The shrinking loan books of Spanish banks are also contributing to a higher bad-loans ratio. Lending fell 1.3 percent in January from December and 11 percent from a year ago, according to the Bank of Spain.

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

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