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




We are happy to report that our funding target has been reached – once again, a hearty thank you to all contributors, your support is greatly appreciated!

As a result of us having gotten from A to B, the annoying graphic is hereby retired. However, be aware that the donations button continues to exist. It is actually perfectly legitimate to use it during the non-funding season as well; assorted advantages we have listed that often result from doing so are likewise persistent (i.e., increased happiness, children including you in their songs, potential obtaining of privileges in the hereafter, etc., etc.). Unfortunately we can't promise that it will make the gold price go up, but we're working on that.

Thank you for your support!


To donate Bitcoins, use this address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke


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:


      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:

  • underpass-libraryThe Baby Boomer Survival Guide (Part I)
      The Yellow Machines Go Silent PARIS – What should you do if you are running out of time and money? This is the question we get from readers over 50… over 60… and sometimes over 70. We baby boomers were famously “na… na… na… live for today.” Now, it’s tomorrow. And many of us – often through no fault of our own – are having trouble making ends meet. At the Diary, we write about the world of money. About economic policy and how it affects you. But what if,...
  • US-winds-down-quantitativ-012Faith in Central Banks Dwindles
      Even Bloomberg Notices that Something is Amiss As anyone who hasn't been in a coma knows, assorted central bank interventions have failed to achieve their stated goals over the past several years. A recent article at Bloomberg focuses on their failure to reach their “inflation” targets. Of course, this particular failure is actually reason to celebrate, as it means that consumers have at least been spared an even sharper decline in their real incomes than has been underway in spite...
  • 3 EURO FRONTEU Moloch in a Fresh Bid to Inflate
      Brussels Alters Capital Requirements to “Spur Lending” Saints preserve us, the central planners in Brussels are giving birth to new inflationist ideas. Apparently the 2008 crisis wasn't enough of a wake-up call. It should be clear by now even to the densest observers that a fractionally reserved banking system that flagrantly over-trades its capital is prone to collapse when the tide is going out. 2008 was really nothing but a brief reminder of this fact. The political and...
  • U.S. Rep. Ron Paul (R-TX) speaks during the Republican Leadership Conference in New Orleans, Louisiana June 17, 2011.  REUTERS/Sean Gardner (UNITED STATES - Tags: POLITICS)Tell us Ron, What's the Plan, What's the “Austrian” Plan?
      What? No Austrian Prescription? Bloomberg Reporters Cannot Believe It This is truly funny. Ahead of the FOMC decision, Ron Paul, who is well-known as an an implacable critic and enemy of the Fed and a fan of the Austrian School of Economics, was interviewed at Bloomberg as to “what the Fed should do”. What makes it so funny is that the Bloomberg reporters seemingly cannot believe that Austrian economists simply have no “prescriptions” for the Fed. They keep pushing Ron Paul for...
  • Stockholm-Protest-BannerRefugee Crisis Blowback
      A Sharp Turn in Swedish Politics When we recently discussed Europe's refugee crisis, we mentioned that a sizable political backlash was to be expected and that unfortunately, extreme nationalist parties were likely to be among the main beneficiaries. We also mentioned the situation of Sweden, where the mainstream political parties in an ongoing fit of political correctness bordering on lunacy have apparently decided to transform Sweden into a province of Mesopotamia.   Leader of...
  • St._Benedict_delivering_his_rule_to_the_monks_of_his_orderThe Baby Boomer Survival Guide (Part II)
      A Lehman Moment for Commodities? LONDON – Today, we continue our philosophical look at what you should do if you are running out of time and money. (You can catch up on Part I here.) Where do we begin? With how to add wealth? Or how to lose it? The way to lose it is simple. You buy something that is not worth the money you paid for it. You are instantly poorer, whether you know it or not.   The pleasingly plump. Illustration by jdeer69     DJIA, daily...
  • SwanUS Stock Market: A Retest or Worse?
      Gray Swans and Black Swans By Monday's close, the S&P 500 Index was closing in on the low established in the August swoon – such a retest was essentially our minimum expectation, as V-shaped rebounds are very rare. The question is now whether it will only be a retest, or if something worse is in the offing. No-one knows for sure of course, but we'll briefly discuss what we are looking at in this context.   Image via NYTimes   It is interesting that as the market...

Support Acting Man


Own physical gold and silver outside a bank

Realtime Charts


Gold in USD:

[Most Recent Quotes from]



Gold in EUR:

[Most Recent Quotes from]



Silver in USD:

[Most Recent Quotes from]



Platinum in USD:

[Most Recent Quotes from]



USD - Index:

[Most Recent USD from]


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

Buy Silver Now!
Buy Gold Now!