Banks Still Own Problem Assets Amounting To €213,000M

5 May 2016 – Cinco Días

Spain’s banks still have a heavy burden weighing down on them following the burst of the real estate bubble: they now own foreclosed assets worth €84,000 million, taken on since the start of the crisis.

According to the Bank of Spain in its financial stability report, published on Wednesday, that figure “has remained stable since December 2012, always ranging between €75,000 million and €84,000 million”.

Of that amount, 37.6% relates to land, 25% to finished buildings, 22.3% are foreclosed assets resulting from the acquisition of homes, and 5% are buildings under construction.

In the last year, land has decreased by 0.5 points, finished buildings have dropped by 0.43 points, homes have increased by 1.8 points and buildings under construction have remained stable.

But beyond these properties, the banks’ exposure to non-performing assets and problem loans amount to almost €213,000 million in Spain’s financial sector as a holw.

The banks have lots of “non-performing assets on their balance sheets, which do not generate any revenues for the income statement, but which do require financing”, said the financial supervisor, which has published data relating to 2015 year-end.

“A hindrance to solvency”

The Bank of Spain also warns that “although these two indicators have decreased, by 14.5% as a whole, over the last year, they still represent a significant percentage of the total assets of the banks in their business in Spain and they place negative pressure on the income statements of the entities, reducing their profit generation capability and therefore, representing a hindrance to increasing the solvency of the institutions”.

In terms of total loans that have been refinanced or restructured, that balance amounted to €205,000 million at the end of last year, which represents a YoY decrease of 6.4% compared with the end of 2014.

Of the total amount of loans whose initial terms have been adjusted, “51.5% relate to non-financial companies and 46.2% to households”, said the Bank of Spain.

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake

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