Spain’s banks to face fur­ther pres­sure in 2011

The Pak Banker - - Front Page -

MADRID: Spain's banks, bur­dened this year by ris­ing de­faults and flag­ging credit de­mand, will face fur­ther pres­sure in 2011 as fund­ing costs eat away at the re­turns on their stock of home loans.

The squeeze may be worst for len­ders with the great­est pro­por­tion of mort­gages be­cause they have less scope to pass on the fi­nanc­ing costs to cus­tomers, said Claire Kane, an an­a­lyst at MF Global in London. Iber­caja, a Zaragoz­abased sav­ings bank, has 53 per­cent of its loans in mort­gages, while Bank­in­ter SA, based in Madrid, has 46 per­cent, Bank of Spain data show.

"The amount of mort­gages a bank has gives an in­di­ca­tion of who is go­ing to face the most pres­sure on rev­enues," said Daragh Quinn, an an­a­lyst at No­mura In­ter­na­tional in Madrid. "The more re­tail mort­gages you have, the more dif­fi­cult it will be to re-price your loan book." Con­cern that Spain won't be able to re­duce the euro re­gion's third-high­est bud­get deficit and avoid a Euro­pean Union bailout has driven up fi­nanc­ing costs for the banks. The nation's Aa1 credit rat­ing may be low­ered, Moody's In­vestors Ser­vice said on Dec. 15, blam­ing bank­ing losses, re­gional pub­lic deficits and mount­ing bor­row­ing costs as the govern­ment and len­ders seek to re­fi­nance 260 bil­lion eu­ros ($345 bil­lion) of debt. The cost to in­sure the se­nior debt of Bank­in­ter for five years has al­most dou­bled since April, to about 330 ba­sis points, data com­piled by Bloomberg show. That's al­most twice the cost of in­sur­ing the debt of Bel­gium's KBC Groep NV, which has the same A1 rat­ing from Moody's as Bank­in­ter. -PB News

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