Spain data on doubtful loans for June 2012 – Deposit statistics

BdE released data on doubtful loans for June 2012. They posted a very large increase of €8.4bn to €164.4bn (9,42% of total loans). Total loans increased by about €3bn, driven by repos (+€7.2bn) and ‘Debts repayable on demand’ (+€7.55bn). Mortgage loans decreased significantly by €11.4bn (more than 1% of GDP) to €948.3bn while other fixed-term loans by about €1bn to €480.34bn. Deleveraging (especially in the housing sector) now appears to be going full speed with the results visible on bank balance sheets.

Taking a look at the equity side of credit institutions, we see that net profits were an impressive -€10.54bn in June, while impairment allowances increased by €21.68bn to €148.75bn. The ‘capital and endowment fund’ increased by €3.51bn to €59.24bn while reserves stayed roughly steady at €170.62bn. The troubled state of the Spanish banking sector is clearly visible and the path of the doubtful loans figures is worrying.

The central bank also provided statistics on bank deposits. Overall, they maintained their general level although there were some interesting developments. RoW continued its exodus with balances dropping €22.93bn to €406.59bn. The outflow was more than matched by domestic lending (‘Credit system’) which grew by €59.77bn to €614.67bn (balances were lower than €320bn up until November 2011 when RoW deposits were €508.6bn, an outflow of more than €100bn). The move to domestic financing of the banking sector (financed by BdE lending) is quite evident. ‘Securities other than shares’ decreased further by €13.2bn to €410.7bn, a path they ‘ve maintained throughout 2012.

What is worrying is the fact that government deposits dropped €11.5bn to €68.6bn. Coupled with the lower government deposit balance at the BdE, total government deposits were €75.9bn in June, a figure not seen since December 2011. Based on these figures i maintain my projection that the Spanish government will be able to cover its financing needs until the next round of large bond issuance in October. Nevertheless, the current financial position makes an official bailout more likely since the government is running low in liquid financial assets.