• 1 hour China: The New King Of Caviar
  • 7 hours Gold Mid-Tiers Rally On Fresh Earnings Reports
  • 1 day Can The British Pound Overcome Brexit?
  • 1 day Is A Gold Breakout Near?
  • 2 days Federal Reserve Downgrades U.S. Growth And Cuts Rate Hikes
  • 2 days Disney Beats Out Comcast In $71.3B Mega-Merger
  • 2 days The Feds Continue To Prop Up Equities Markets
  • 2 days Bejing's Sway In South China Sea Is Fading
  • 3 days Saudis Eye Billions As Stocks Get Emerging Market Boost
  • 3 days Airbnb In Acquisition Mode Ahead Of IPO
  • 3 days Gold Hangs At $1,300 Ahead Of Fed Meeting
  • 3 days Champagne Sales Slow As European Economic Worries Grow Louder
  • 4 days Putin Signs “Digital Iron Curtain” Into Law
  • 4 days Russian Metals Magnate Sues U.S. Over Sanctions
  • 4 days Tesla Looks To Jump Into Indian Market
  • 4 days Global Banks Lay Groundwork To Re-Inflate Asset Prices
  • 5 days Homeowners Experiment With Risky New Investment Trend
  • 5 days U.S. Tech Stocks Look Increasingly Vulnerable
  • 5 days De Beers To Expand World’s Most Profitable Diamond Mine
  • 5 days Ford CEO Gets Raise After Massive Layoff Round
The Chatroom Cartel Running Global Bond Markets

The Chatroom Cartel Running Global Bond Markets

Eight major banks have been…

Lending: The Good, Bad, And Ugly

Lending: The Good, Bad, And Ugly

Aristotle said, “The most hated…

  1. Home
  2. Markets
  3. Other

Euro238 Billion Nonperforming Loans at Spanish Banks Despite ECB's Helping Hand

Via translation, El Confidential comments on the Banking Drag of €238 Billion Nonperforming Loans at Spanish Banks.

The profitability of banks has plummeted. And only the loose monetary policy of the ECB has improved the results. That is underscored by a report on the performance of Spanish banks by International Financial Analyst (AFI).

The report estimates the Spanish banking sector accumulated €238 Billion poor credit and foreclosed assets (8.8% of the balance), with coverage average of 44%.

Only the ECB's monetary policy, its strategy of zero interest rates and asset purchase, keeps the banks alive.

The ROE of the banking sector, has been reduced by 6.8 points, reaching levels of 5.3%, mainly due to higher capital requirements.

As the report makes clear, higher capital requirements (to maintain solvency) are here to stay, so it is difficult for the results of the fixed income portfolios in recent years to be repeated in the short term.

In fact, unrealized gains associated with these portfolios have declined more than 50% in 2015. This means that banks are eating the benefits associated with the decline in interest rates.

In the words of AFI, ECB monetary policies have contained the fall in the profitability of the sector in recent years, and this has benefited "substantially" the peripheral countries including the Spanish banking system.

Non-performing assets could be reducing the annual profitability of the sector up by 5.4 percentage points according to the report.

With treasury yields low or negative in Eurozone countries, the recapitalization benefits of ECB policy (banks loading up on their own sovereign bonds) have run their course. In case of another downturn, there will be little else the ECB can do.

 

Back to homepage

Leave a comment

Leave a comment