UPDATE: Spain Banks May See Losses In 2010 - Indus Assoc
June 17 2009 - 12:10PM
Dow Jones News
Some Spanish banks are likely to report operating losses next
year as loan losses mount and revenues slump in a deep economic
recession, the head of Spain's savings bank association CECA said
Wednesday.
Juan Ramon Quintas also said Spanish policymakers need to make
the right decisions on economic stimulus, a planned bank rescue
package, and need to make loan-loss provisioning rules more
flexible in order to prevent bank failures.
"If these three things are done badly, we need to be prepared
for a flood [of failures]," Quintas said at a financial sector
conference in Santander, northern Spain.
If done well, he added, "you'll likely be able to count the
number [of failures] on the fingers of your hand."
The CECA, the mouthpiece for Spain's 45 unlisted savings banks,
expects bad loans in the country's overall banking system - savings
banks plus listed banks - to rise to 9% next year from 4.27% in
March, as the recession drags on and unemployment continues to
spiral.
Credit losses in the Spanish banking system could reach EUR28.9
billion next year, while revenue may fall to EUR36.8 billion next
year from EUR46.3 billion this year, Quintas said.
As a result, "some banks will report [operating] losses, others
won't," Quintas said.
Quintas said 20% of Spain's lenders would see their Tier 1
capital ratios fall below the regulatory minimum of 8%, and would
need to boost capital.
He welcomed the Spanish government's planned EUR9 billion aid
package - expandable to EUR99 billion - which would allow banks to
strengthen their capital bases and to survive a deepening economic
downturn.
Spain's gross domestic product fell 3% on year in the first
quarter, while unemployment has doubled in slightly more than a
year to above 17%.
Analysts at PricewaterhouseCoopers estimate that Spanish banks
could need between EUR25 billion and EUR70 billion in new capital
this year.
La Caixa, Spain's largest savings bank by assets, estimates that
the Spanish banking sector must cut costs by between 20% and 25% to
keep banks profitable enough so that they don't have to rein in
lending.
Juan Maria Nin, La Caixa's managing director, speaking at the
same conference, said some Spanish banks are likely to suffer
losses, but he doesn't see a risk of widespread losses that could
cause a systemic crisis.
-By Christopher Bjork, Dow Jones Newswires; +34 606396093;
christopher.bjork@dowjones.com
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