June data shows fallout from the country's property crash is still ongoing as bad loans as a proportion of total credit hit 11.6%
Spain's bad bank loans hit a fresh high in June, according to Bank of Spain figures that underscore the continued fallout from the country's property crash.
Bad loans as a proportion of total credit rose to a record 11.6% or €176.4bn (£150.5bn) in June, Bank of Spain data showed on Monday.
That was a rise from 11.2% in May as more households and smaller companies struggled with debt, and exceeded a previous peak of 11.4% in November.
Spain's banks have been hit particularly hard by bad property loans and the country is battling high unemployment, with a jobless rate of 26.3%.
There had been a slight fall in the bad debt ratio at the end of last year, when the country's so-called "bad bank" swallowed up large amounts of the toxic real estate that had brought down several Spanish banks.
The bad bank was set up by the government to fulfil one of the demands made by the eurozone countries providing a loan facility to Spain's banks. It deals with property left over from the housing construction bubble that burst in 2008, just as the credit crunch hit, and that lies at the root of Spain's protracted recession and high unemployment.
The bad bank receives building plots and unfinished developments from developers and will be expected to sell this stock at a profit over the next 10 to 15 years.
Spanish lenders' earnings were gutted last year by steep government-enforced provisions on properties and loans to developers in the wake of the crash. Those unable to cope were bailed out with European funds.
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| November 2012: A banner advertises houses for sale in Estepona, Spain at the time that a 'bad bank' was opened to purge the country of toxic property assets. Some top lenders, including healthy ones such as BBVA, have said that bad debts with property-related businesses in particular could keep rising into the first quarter of 2014. |
While the wider eurozone was confirmed as having emerged from its long recession last week, Spain's economy has continued to contract in recent months. But some economists believe the country could return to growth before the end of the year.
Germany, credited with providing much of the momentum for the single-currency bloc to exit from six quarters of recession, is expected to see a return to "normal and steady" growth rates in the second half of this year, according to an update from the Bundesbank on Monday. That follows the strongest growth in more than a year for Europe's largest economy in the second quarter, when GDP rose 0.7% compared with the first three months of the year.
The Bundesbank said in its latest monthly report that Germany, along with other eurozone member states, would benefit from record low interest rates set by policymakers at the European Central Bank. However, it noted that the ECB's forward guidance indicating rates would remain low did not preclude a rate hike should inflationary pressures build.
Article Source : http://www.guardian.co.uk
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