Spanish banks take further EUR 11b in bad loan provisions

Spain's top banks have unveiled EUR 11 bn of new bad debt provisions to deal with market concerns about the size of the real estate loans on their books.

The move came in response to pressure from the central government in Madrid, which last week said the banking sector as a whole would be forced to take an extra EUR 30 bn in provisions to cover potential losses on the EUR 123 bn of performing real estate loans. This would come on top of EUR 50 bn worth of provisions the banks were ordered to take last February.

However, news about the new buffer failed to dispel market jitters on Monday and listed Spanish banks saw their shares drop about 4% over the day.

Grupo Santander, the country's largest bank, announced it is taking EUR 2.7 bn of pre-tax provisions, while BBVA said it would take EUR 1.8 bn of new provisions.

Caxia, the third largest bank in Spain, is to set aside EUR 2.1 bn. Bankia, which is to receive a EUR 7 bn government bailout, has said it will need to take a provision of EUR 4.7 bn.

Bankia is expected to sell assets, including bank branches and shares in listed Spanish real estate companies Metrovacesa and Realia to help shore up its balance sheet.