Spanish banks will stay addicted to European Central Bank funding “for years to come” as investors sidestep their bonds, according to analysts at Evolution Securities Ltd.
The CHART OF THE DAY shows borrowing from the ECB by the nation’s lenders since the inception of the euro, based on Bank of Spain figures. They asked for a record 130 billion euros ($166 billion) in July, accounting for 29 percent of total borrowing from the central bank, almost four times their average 8 percent share since 1999, according to London-based Evolution.
“Guaranteed access to cash at 1 percent is a difficult addiction to kick, especially when the market isn’t sure how much it wants to lend,” said Gary Jenkins, Evolution’s head of credit research. “The amount needed is likely to remain elevated for years to come, compared with what it used to be.”
Spanish banks have been all but shunned by international investors since the collapse of a housing boom in 2007 triggered the worst recession in 60 years, with the unemployment rate surging above 20 percent. Bad loans reached 5.5 percent in May from 4.7 percent a year earlier.