I just read that Caja Madrid – Spain’s second biggest savings bank after La Caixa – now has 9,000 homes on its books, 24% more than December 2009. Are they a bank or a property company? The properties come repos and debt-for-property swaps, and they think the whole lot is worth 2.4 billion Euros, or around 265,000 Euros per property. Looks to me like they are over-valuing their residential real estate portfolio. I’m sure they are not alone.

How are they going to get rid of all these properties unless they reduce prices significantly, which means recognising big losses? They aren’t.

Time for creative solutions. They have reached an agreement with the regional government in Madrid to provide rental accommodation. So Caja Madrid are now in the residential rental business, which, let’s face it, they wouldn’t be in if they had done a better job of banking.