Up to a third of the loans to Spanish property developers could go bad before the end of the financial crisis, according to a report in the Financial Times. At the end of June, total bank credit for Spanish property developers reached a new peak of EUR 313 bn while loans to construction companies stood at EUR256 bn, according to the Bank of Spain.
Up to a third of the loans to Spanish property developers could go bad before the end of the financial crisis, according to a report in the Financial Times. At the end of June, total bank credit for Spanish property developers reached a new peak of EUR 313 bn while loans to construction companies stood at EUR256 bn, according to the Bank of Spain.
Many of these loans are turning bad at an 'alarming rate', FT said, citing Madrid bankers. Market watchers estimate that the volume of bad loans could range between EUR 40bn and EUR 90 bn. The issue of bad real estate debt is the biggest threat to the Spanish banking system, according to senior bankers and retailers. Aside from the 15 leading developers, Spain also has some 50,000 small, speculative developers whose creditworthiness is now under scrutiny. Spain's residential housing bubble burst last year, paralysing homebuilders and leaving nearly one million new houses and flats unsold. Now the crisis is spreading to commercial property and public works.
Caja Madrid, one of the strongest unlisted savings banks, reported a sharp rise in its non-performing loan ratio to 3.57% in the third quarter. Metrovacesa, a leading Spanish property group, has started to spin off assets in a bid to raise cash to finance its loans. The company is considering selling back to HSBC the UK bank's London headquarters for up GBP 300 mln (EUR 373 mln) less than it paid for the office tower last year.
