Rising bad loans at Bankinter and Sabadell point to more pain for Spanish banks as they near the end of a deep clean of rotten property assets that hammered profits last year, Reuters reported.
Though Sabadell and Bankinter are among Spain’s healthier lenders which did not need rescue funds from Europe, both have been hit by big writedowns on soured real estate assets in the wake of the country’s property market crash.
The drive to mark down toxic assets pushed Spain to take around 40 billion euros ($53bn) in aid from Europe in 2012 for banks in need of capital and unable to cope.
Most banks in Spain will take the last hit from property-related writedowns in fourth-quarter 2012 results. But a deep recession is still hurting their loan books.
Mid-sized Bankinter warned on Thursday its bad loans could hit 5 percent of total loans this year, up from 4.28 percent at the end of 2012, given Spain’s weak economy and rising unemployment, even though January had been a good month.
Spain’s unemployment rate hit a record high of 26 per cent in the fourth quarter, figures showed on Thursday.
“If the employment data continues to be like what we saw (on Thursday), we cannot be optimistic,” said Maria Dolores Dancausa, chief executive of Bankinter.
Barcelona-based Sabadell, meanwhile, said its bad loan ratio jumped to 9.33 per cent of total loans at the end of December from 8.46 per cent in September, largely because of the integration of its 2011 purchase of stricken savings bank CAM.
“It’s a level implying a fourth-quarter rise far above our expectations,” said Nuria Alvarez, analyst at Madrid broker Renta4. She added the bad loan ratio was an area to watch at Sabadell even though the lender has a state-backed scheme in place to protect it against future losses after it bought CAM.
Spanish banks’ bad loan rate reached a new high in November of 11.4 per cent of the outstanding portfolio, and the country is predicting its economy will only really improve in 2014. Still, banks are now hoping their earnings will get better.
“The writedowns were very harsh last year and it’s possible they were not the last, but they were enough to situate us at the beginning of the end of the crisis that began in 2007,” said Sabadell chairman Josep Oliu.