Transfer of NPLs to Sareb Lowers NPLs in Spain's Banking System

If one were to merely cursorily glance at the headlines, one would be under the impression that NPLs in Spain have finally begin to decline. For instance, the WSJ entitled its article on the topic “Spain's Bad Loans Drop Sharply”. Only if one bothers to actually look at the article itself does it become clear that NPLs have not really dropped, but have merely been shifted to the 'bad bank' set up by Spain's government.

 

“The Bank of Spain said Monday that bad debts held by the country's banks dropped sharply in December from November because of the transfer of lower-quality credit portfolios to the so-called bad bank that started operations that month.

Nonperforming loans fell by €24.1 billion ($32.20 billion) to €167.4 billion, or 10.4% of total outstanding loans, in December, preliminary data from the central bank showed. That compares with a bad-loan ratio of 11.4% in November, the highest ever recorded.

At the same time, total loans shrank to €1.604 trillion from €1.683 trillion, largely the result of loan reclassifications after the lower-quality loans were passed on to SAREB, as the bad bank is known, the Spanish central bank said in a statement.

Spanish banks, reeling from the crash of a decadelong housing boom, are expected to transfer around €60 billion worth of impaired assets to the bad bank. This was created as part of a deal to receive €39 billion worth of European Union aid for the country's troubled banking sector.

Until November, bad loans had risen for 20 months in a row as a result of soaring defaults by home builders and fast-rising unemployment. Eight banks are due to receive €38.87 billion through a European Union credit line that was extended to the Spanish government last year to bail out the country's troubled banks.”

 

(emphasis added)

However, does this mean that there has actually been a genuine reduction in bad loans? After all, the figure cited above – namely that bad loans fell by € 24.1 billion – doesn't tell us how many loans were actually transferred. In order to find this out, one has to consult a recent Exane research report on Spain's banks. It contains the following table and chart. Note that the table sums up the bad loans transferred by the end of 2012.

 


 

Assets to Sareb

 

NPLs transferred by Spain's banks to Sareb in late 2012.

 


 

As the chart of the NPL percentage indicates, this should lead to an equivalent drop in the percentage, ceteris paribus:

 


 

NPL ratio

Spain's NPL ratio, before and after the transfer of bad loan assets to Sareb – click for better resolution.

 


 

If we interpret all the above data points correctly, the only conclusion one can come to is that bad loans in the Spanish banking system have not declined, but have actually increased further – namely by about €12.5 billion.

€36.695 billion in loans were transferred, but the overall decline in bad loans amounted only to € 24.1 billion. It follows logically that the difference between these two numbers represents the actual increase in bad loans in the system.

Of course one may well regard the assets now held by Sareb as being 'outside' of the system. However, the point remains that these are bad loans, regardless of who holds them. Thus the increase in NPLs in Spain apparently continues unabated.

 

 

Charts by: BNP-Paribas / Exane



 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

3 Responses to “Bad Loans Drop in Spain – Seemingly”

  • mc:

    Unfortunately, as in just about every bubble, the rush of cheap money is so great that anything and anywhere ends up with a building on it regardless of the suitability. The reason so many of these loans are bad is that so many of the assets backing them are junk. Many of the failed projects were maintenance intensive and thus rapidly degrade, such as golf courses, airports, apartment complexes, and tourism projects. The big Spanish banks sitting on this pile of now-dubious assets went international, sloshing their money around where they had never been before. Santander was buying small regional mortgage lenders in the US and Japanese retail banks.

  • I have heard some of Spain is pretty nice. They giving good deals on homes yet?

    • jimmyjames:

      mann–

      I’ve just recently read “somewhere” from a Spaniard that seemed to have a good handle on it–most of the houses built in Spain during the mania have a high ask and no bid-because they are falling apart because of no building code enforcement-
      If I can remember where–I will post the link-

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • America Goes Full Imbecile
      Credit has a wicked way of magnifying a person’s defects.  Even the most cautious man, with unlimited credit, can make mistakes that in retrospect seem absurd.  But an average man, with unlimited credit, is preeminently disposed to going full imbecile.   Let us not forget about this important skill...  [PT]   Several weeks ago we came across a woeful tale of Mike Meru.  Somehow, this special fellow, while of apparent sound mine and worthy intent, racked up...
  • In Gold We Trust, 2018
      The New In Gold We Trust Report is Here! As announced in our latest gold market update last week, this year's In Gold We Trust report by our good friends Ronald Stoeferle and Mark Valek has just been released. This is the biggest and most comprehensive gold research report in the world, and as always contains a wealth of interesting new material, as well as the traditional large collection of charts and data that makes it such a valuable reference work for gold...
  • “Sell in May” Chart Update - The Impressive Market Weakness in the Summer Half-Year All Over the World
      The Details Plotted In the last issue of Seasonal Insights I showed you the statistics associated with the popular truism “sell in May and go away” in the countries with the eleven largest stock markets. The comparison divided the calendar year into a summer half-year from May to October and a winter half-year from November to April. In all eleven countries, the winter half-year outperformed the summer half-year. As announced on that occasion, here are the details for all countries...
  • Who’s That Ringing the Korean Bell of Friendship?
      Friends and Enemies Do citizens of the United States trust their government will do what’s right?  It depends who you ask. By and large, the esteem the American populace holds its government in is likely a small fraction of what it was roughly 65 years ago.  That was when Lieutenant General William Kelly Harrison Jr. signed the Korean Armistice Agreement.  Certainly, in days gone by representatives of other nations held the U.S. government in higher regard.   The most...
  • Credit Spreads: Polly is Twitching Again - in Europe
      Junk Bond Spread Breakout The famous dead parrot is coming back to life... in an unexpected place. With its QE operations, which included inter alia corporate bonds, the ECB has managed to suppress credit spreads in Europe to truly ludicrous levels. From there, the effect propagated through arbitrage to other developed markets. And yes, this does “support the economy” - mainly by triggering an avalanche of capital malinvestment and creating the associated boom conditions, while...
  • Retail Capitulation – Precious Metals Supply and Demand
      Small Crowds, Shrinking Premiums The prices of gold and silver rose five bucks and 37 cents respectively last week. Is this the blast off to da moon for the silver rocket of halcyon days, in other words 2010-2011?   Various gold bars. Coin and bar premiums have been shrinking steadily (as have coin sales of the US Mint by the way), a sign that retail investors have lost interest in gold. There are even more signs of this actually, and this loss of interest stands in stark...
  • Wild Speculation in Crude Oil - Precious Metals Supply and Demand
      Crude Oil Market Structure – Extremes in Speculative Net Long Positions On May 28, markets were closed so this Report is coming out a day later than normal. The price of gold rose nine bucks, and the price of silver 4 pennies. With little action here, we thought we would write 1,000 words’ worth about oil. Here is a chart showing oil prices and open interest in crude oil futures.   WTIC (West Texas Intermediate crude) price and futures open interest – the vast increase...
  • Industrial Commodities vs. Gold - Precious Metals Supply and Demand
      Oil is Different Last week, we showed a graph of rising open interest in crude oil futures. From this, we inferred — incorrectly as it turns out — that the basis must be rising. Why else, we asked, would market makers carry more and more oil?   Crude oil acts differently from gold – and so do all other industrial commodities. What makes them different is that the supply of industrial commodities held in storage as a rule suffices to satisfy industrial demand only for a...
  • Gold Divergences Emerge
      Bad Hair Day Produces Positive Divergences On Friday the ongoing trade dispute between the US and China was apparently escalated by a notch to the next level, at least verbally. The Trump administration announced a list of tariffs that are supposed to come into force in three week's time and China clicked back by announcing retaliatory action. In effect, the US government said: take that China, we will now really hurt our own consumers!  - and China's mandarins replied: just you wait, we...
  • Chasing the Wind
      Futility with Purpose Plebeians generally ignore the tact of their economic central planners.  They care more that their meatloaf is hot and their suds are cold, than about any plans being hatched in the capital city.  Nonetheless, the central planners know an angry mob, with torches and pitchforks, are only a few empty bellies away.  Hence, they must always stay on point.   Watch for those pitchfork bearers – they can get real nasty and then heads often roll quite literally....
  • Lift-Off Not (Yet) - Precious Metals Supply and Demand
      Wrong-Way Event Last week we said something that turned out to be prescient:   This is not an environment for a Lift Off Event.   An unfortunate technical mishap interrupted the latest moon-flight of the gold rocket. Fear not true believers, a few positive tracks were left behind. [PT]   The price of gold didn’t move much Mon-Thu last week, though the price of silver did seem to be blasting off. Then on Friday, it reversed hard. We will provide a forensic...

Support Acting Man

Item Guides

TechyBeasts
j9TJzzN

The Review Insider

Dog Blow

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com