Bad loans as a proportion of total lending in Spain rose to a record in June as the country’s weak economy spurred a jump in missed payments. Bank shares fell.
Bad loans accounted for 11.61 percent of lending in Spain in June compared with 11.21 percent in May and 9.65 percent in the same month a year earlier, the Bank of Spain in Madrid said on its website today. That’s the highest level since the regulator started compiling the data in 1962. The stock of “doubtful” loans in the economy rose to 176.4 billion euros ($235.1 billion) as 6.21 billion euros of credit soured during June, the regulator said.
A Spanish economic slump now in its sixth year continues to drive up non-payment of loans by companies and consumers, hurting profits at lenders as they set aside provisions to cover losses. Banco Santander SA, the nation’s biggest bank, said last month its bad loans ratio climbed to 5.18 percent from 4.76 percent in March as the bank booked 2 billion euros of loans as doubtful to comply with new Bank of Spain criteria for classifying 208 billion euros of loans in the industry that have been refinanced or restructured.
“Bad loans in Spain are going to keep rising for 18 months after any recovery starts,” Simon Maughan, head of research at Olivetree Financial Group in London, said in a phone interview. “If you are waiting to buy Spain when the bad-loans data starts to recover, you’re going to miss the turn by months.”
Spanish bank stocks, which have rallied over the past six weeks on signs that the country’s recession is bottoming out, plunged today. CaixaBank SA, the country’s third-biggest lender, fell as much as 5.6 percent as Banco Sabadell SA dropped as much as 6.2 percent and Santander declined as much as 3.1 percent.
Lending fell to 1.52 trillion euros from 1.74 trillion euros a year earlier and rose less than 0.1 percent from May, the Bank of Spain said. Transfers of assets from banks including the Bankia group that have taken state aid to a bad bank helped reduce the defaults ratio in December and February.