Lenders Refinanced $80 Billion of Mortgages, Spain Says

Spanish banks have refinanced or rescheduled 58 billion euros ($80 billion) of mortgages as borrowers found it harder to keep up payments on their houses during the country’s economic slump, the Bank of Spain said.

Lenders had 211.3 billion euros of refinanced or restructured loans at the end of 2013 and 27 percent of that amount was mortgages, 27 percent was for loans to real estate and construction companies and 39 percent was to other corporations, the Bank of Spain said in its Financial Stability Report for May published today. The balance is for lending to households and the government.

The amount of restructured or refinanced loans is a legacy of a six-year economic slump that drove unemployment to more than 26 percent and caused 184 billion euros of loans to sour since the end of 2006. While banks including CaixaBank SA and Banco Sabadell SA have reported a drop in bad loans ratios, the Bank of Spain’s report today said default indicators will probably keep rising until economic recovery firms up.

The Bank of Spain made banks give more details of the amount of loans they’ve refinanced or restructured as part of terms agreed for the 41 billion-euro European bailout for the banking industry in 2012. The 211.3 billion euros of refinanced or restructured loans amounts to 15 percent of lending and about 70 percent of the amount has been classified by banks as “doubtful” or “sub-standard,” the regulator said.

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

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Steve Bailey, Jon Menon

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