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Spanish Bad Loans Ratio Rises to Record 13.6 Percent

Bad loans as a proportion of total lending in Spain rose to record in December as companies and consumers kept missing payments in an economy that’s still not growing fast enough to create new jobs.

Non-performing loans accounted for 13.6 percent of lending compared with 13.1 percent in November and 10.4 percent a year earlier, the Bank of Spain said on its website today. The stock of bad loans rose to 197 billion euros ($270 billion) as 4.57 billion euros of loans turned sour.

“We are close to the end of this increase,” European Central Bank Governing Council member Luis Maria Linde, also governor of the Bank of Spain, told reporters in Madrid today. Linde said he expects economic growth to pick up enough to create jobs in Spain this year.

Spanish banks rose this year in Madrid trading as lenders including Bankinter SA (BKT) said bad loans may be nearing their peak after the country emerged from two recessions. Even so, the Feb. 13 decision by Standard & Poor’s to cut the debt rating of Banco Popular Espanol SA (POP) served as a reminder to investors that some lenders are still struggling to stem asset losses.

Lending fell 1.6 percent on the month and 9.8 percent from a year earlier, the Bank of Spain said. The shrinking loan book makes the bad loans ratio higher, Economy Minister Luis de Guindos said during a news conference in Brussels today. Guindos last month said there are signs lending is recovering.

“The stock of non-performing loans will continue to go up for some time but the longer-term trend does now look more favorable,” said Carlos Joaquim Peixoto, an analyst at Banco BPI SA in Porto, Portugal, in a phone interview.

To contact the reporters on this story: Charles Penty in Madrid at cpenty@bloomberg.net; Angeline Benoit in Madrid at abenoit4@bloomberg.net

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

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