Spanish Banks Bleeding Cash
Yes, the IBEX has rallied since early this summer, but unfortunately, the Spaniards continue withdrawing funds from the banks. Banks can take this for some time, but will eventually need to cut back on the loans to deposit ratios. This is not what the SPanish economy needs. From Bloomberg.
Spanish banks, already hooked on cheap European Central Bank loans, are haemorrhagingdeposits as the government debates whether to seek a bailout.
Households and companies drained 26 billion euros ($34 billion) from Spanish bank accounts in July, driving the ratio of loans to deposits among lenders to 187 percent from 183 percent in December and 182 percent a year earlier, according to data compiled by the Bank of Spain. Shrinking deposits undermine the ability of banks to support economic growth by lending to companies and consumers.
“There are significant outflows of deposits now in Spain and they won’t start coming back until people are sure they’re safe and that Spain is secure,” said Simon Maughan, a financial strategist at Olivetree Securities Ltd. in London.
Spain’s financial industry is already backstopped by Europe to the tune of 100 billion euros, and is reliant on 412 billion euros of gross borrowings from the ECB. Investors demand 423 basis points more to own CaixaBank SA bonds maturing in 2015 than German bunds of similar maturity, up from a premium of about 384 when the bonds were sold in January.
Full article here.