[Spanish bank bailout] The €249bn hole
We should remind ourselves that Spain’s banks need bailing out because of rampant property speculation in the past — and the banks’ prior resistance to acknowledging that many of the related loans had already gone bad.
Plenty of estimates on the depth of the resultant black hole are doing the rounds. The external auditors brought in to report on this, Oliver Wyman and Roland Berger, were supposed to produce their own numbers by the end of June, although there are now suggestions they will not do so until the end of July. What’s that old rule about bad numbers taking longer to add up than good ones…?
While we wait, here’s some detailed guesswork from Ignacio Cerezo and team at Credit Suisse: (click to expand)
In their “stressed” scenario, CS have applied an eye-watering provisioning rate of 53 per cent. Santander alone needs to set aside €16bn under this scenario. Total shortfall for the sector: €155bn.
But then there are non-property loans waiting to go (or already gone) sour. Again, click to expand.
Again in a “stress” scenario, applying a provisioning rate of 7.3 per cent across the banking sector produces an aggregate requirement of €94bn. For Santander specifically that means another €13bn. And do remember that Santander is at thequality end of the Spanish financial spectrum…
€155bn + €94bn = €249bn
Lots more on this in the usual place.