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Spain: Loan Defaults Soar As Credit Plunges

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    December 21, 2012

    Via Google translate El Blog Salmon reports Delinquencies expose the shame of Spanish banks

     How could it be otherwise, the delinquency has grown back no more and no less than 11.23% during the month of October. The figure represents a new record, exposing the shame of Spanish banks.

    The figures from the Bank of Spain dating 189.618 billion euros in loans considered doubtful of Spanish credit institutions. Obviously, the construction sector is the hardest hit of all the arrears of the companies related to fire brick defaults in its sector to 26.4%.

    The worst part is that nothing suggests that delinquencies have peaked, rather the opposite. In the coming months the arrears continue to set new records because it is now that the financial sector of our country is teaching the true reality of credit in Spain. Refinancing only served to prolong the agony and convey a false sense of calm in the sector. The brick has done too much damage to our country and now we are suffering the effects of the bursting of a housing bubble along with the historical financial deleveraging of Spanish banks.

    Also via Google translate from Spanish, the Guru’s Blog provides interesting charts and commentary in Banking delinquency rises to 11.23% in October. New record

     We began to enter the area of record breaking month after month. In October defaults on loans to financial institutions and businesses in October amounted to 11.23% , which marks a new record.

    Thus, the default rate of the Spanish financial system accumulates sixteen consecutive monthly increases since the last run monthly reference dates back to June 2011, when delinquencies fell to 6.41%, from 6.48% May 2011.

    Graph via ZeroHedge

    Delinquency Figures

    Non-performing loans amounted to 189.618 billion euros in October on a total loan portfolio of 1,688 trillion euros, which fell by just over 1 billion compared with the previous month.

    Specifically, the overall financial system credit has plummeted by 5% in the last twelve months, which translates to 90.009 billion euros less, while the doubters have climbed in the same period by 43.7%, with a jump of 57.651 billion.

    Quick Conclusions

    1) Remember, 2008, 2009, 2010, 2011 and 2012. Each new cut, each new aid to banks, even changing the Constitution, was justified as a measure that would allow banks to return and give credit to companies. Well or lied or failed miserably, because since 2008 the credit companies has done more to diminish. And forget to increase again in the next two years.

    2) Although small personal experiences can not be extrapolated, if there is somewhere in the balance sheet of banks which is hiding dwells, is in credit to businesses, industry and services. More or less has risen carpet property loans, although the bulk of the dirt just past a carpet to another, but where would the hand in the fire that is hiding a lot of provisioning is in default without the credit to industrial and service companies.

    The dismal results and conclusions speak for themselves.

    Does anyone doubt the situation in Spain would be better if Spain had only taken the “Iceland Solution”, letting the failed banks fail rather than bailing them out at taxpayer expense?

    Thanks to El Blog Salmon, Gurus Blog, and Zero Hedge.

    Mike “Mish” Shedlock
    http://globaleconomicanalysis.blogspot.com

    Read more at http://globaleconomicanalysis.blogspot.com/2012/12/loan-default-rate-hits-1123-in-spain.html#5H36q40tO5lgDs0W.99

    Images: Flickr (licence attribution)

    About The Author

    Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.  Visit Sitka Pacific’s Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

    You are currently viewing my global economics blog which typically has commentary every day of the week. I am also a contributing “professor” on Minyanville, a community site focused on economic and financial education.  Every Thursday I do a podcast on HoweStreet and on an ad hoc basis contribute to many other sites.

    When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.
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