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Mixed Messages in Bank Property Debt Data

CaixaBank (1024 x 685)Spain’s five biggest banks have reported decreases in their bad debt, but a closer look at the numbers suggests there has been little progress in clearing their balance sheets of toxic property.

The five banks — Santander, BBVA, La Caixa Sabadell and Popular – lowered their bad property loans by 9.5 per cent in the first half of the year compared to the end of 2013, El Economista reports. Bad debt is defined as loans more than three months behind in payments.

But while that sounds like a significant improvement, the levels are still 2.7 per cent higher than the end of June in 2013, the paper reports.

The balance sheets of the banks is a considered a key variable in any property market rebound. Until the banks are ready to start lending again in a normal fashion, real recovery will be difficult to achieve, especially in the domestic market.

Of the five banks, Banco Popular was the only one not to report a reduction in bad property loans in the first half of the year – the bank’s bad loans actually increased 0.5 per cent, El Economista reports. La Caixa reported the biggest drop – an 18.5 per cent reduction.

The banks have also reduced volume of sub-par loans, which helps diminish their risk, the paper points out.

But the banks have taken over more property, as developers defaulted on debt. The value of homes, land and other property controlled by the banks has actually risen 4 per cent in the first six months, despite a recent increase in sales. This may be a lingering problem for the market, as the type of property controlled by the bank is often not very appealing to the buyers in the market now.


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