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January 24, 2013 7:42 pm
A decision by two of Spain’s medium-sized banks to begin repaying emergency European Central Bank loans taken out last year is expected to prelude a wave of similar repayments by the country’s biggest lenders in the coming months.
Both Banco Sabadell and Bankinter said they would begin to repay three-year loans they took out in the ECB’s longer term refinancing operations last year as they became the country’s first lenders to report full-year results for 2012.
Ahead of the country’s larger banks, Santander, BBVA and Caixabank, reporting in the next two weeks, senior executives at other lenders said that others would also begin to repay part of the billions of euros in loans they took out last year as a show of strength.
Banco Sabadell, a Catalonia-based lender, said it would repay €1.5bn of the €24bn it borrowed, while Bankinter said it would pay back €1.4bn of its €9.5bn in loans.
The ECB’s offer to European banks to borrow money for three years at a rate of 1 per cent allowed Spanish lenders to use the money to pile into much higher yielding government bonds, helping them realise large profits to repair balance sheets damaged by the country’s property crisis.
Both Sabadell and Bankinter said that their bad loan ratio, which measures the amount of non-paying loans as a total proportion of their loan book, rose at the end of last year.
Bankinter said its ratio of non-performing loans rose from 4 per cent to 4.3 per cent from the third quarter to the end of the fourth, while a proportion that were covered by provisions fell from 50.6 per cent to 48.3 per cent.
Meanwhile, Sabadell attracted criticism from analysts for not providing detailed information about its bad loans, giving only a bad loan ratio of 9.33 per cent in the fourth quarter, up from 8.4 per cent in the previous three months, for assets not covered by a state provided asset protection scheme granted to the bank when it bought the stricken caja CAM in 2011.
“Detailed asset quality analysis [of Sabadell’s results] is not possible given poor disclosure,” said analysts at Credit Suisse, who described the lender’s loan book, and likely future provisioning needs, as “highly challenging”.
Other analysts observed that the ongoing absorption of CAM was making any year on year comparison for Sabadell difficult.
Sabadell said that in the fourth quarter it made a net loss of €9m, down from €24m in the same period last year as a result of making €384m in new provisions in the period. Net interest income for the fourth quarter was €487m, up 27 per cent year on year. Bankinter said it made €52m in the fourth quarter, down from €34m in the fourth quarter of last year, while net interest income dropped by 1.7 per cent to €146.7m.
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