Oct. 18 (Bloomberg) -- Spanish defaults as a proportion of total lending climbed to a record in August as companies and consumers struggled to make loan payments in an economy with an unemployment rate that’s still above 26 percent.
Non-performing loans accounted for 12.1 percent of lending in August, compared with 12 percent in July and 10.5 percent in the same month a year earlier, the Bank of Spain said on its website today. The stock of bad loans rose to 180.7 billion euros ($247.2 billion) during the month as 2 billion euros of lending turned sour.
Signs that Spain’s economy has stabilized after nine successive quarters of contraction have eased borrowing costs for the government and sparked a rally in banking stocks including Banco Popular Espanol SA, up more than 70 percent since the end of June. As lenders shrink their balance sheets, any sustained recovery will struggle to take hold, said Neil Smith, a banks analyst at Bankhaus Lampe in Bielefeld, Germany.
“We may see false starts in this recovery, but for the banks there is still a very long way to go,” Smith said in a phone interview.
The International Monetary Fund predicts unemployment in Spain won’t fall below 25 percent until 2018. Spain’s economy may shrink 1.4 percent this year before growing 0.5 percent in 2014, according to the mean estimate in a Bloomberg survey of 43 economists.
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