Spain’s bailout of regional bank CajaSur could get much worse as the company has much more bad debt on its books than €530 million.
According to Expansion.com, the amount of bad debt on the books of CajaSur, that being debts which are unlikely to be paid back to the bank, could eventually rise to €2.7 billion. Many of these problem loans are associated with real estate projects gone wrong, as Spain’s real estate boom left many developers with assets they could not sell.
Right now, according to the bank ING via FT Alphaville, prices have only fallen on Spanish real estate by 10%. That may only be 20% of how far prices have to fall to make sense, according to ING, and even a doubling of provisions would see Spanish banks lose 23% of overall capital.
Now analysts across Europe are cutting their targets for Spanish banks, assuming that the problems of CajaSur are not the exception, but the norm.
This could be just the beginning of the process where the national government of Spain takes on the debt of its banking system, leaving it even more indebted than it already is.