Spanish banks sidestep global debt crisis

7th February 2008, Comments 0 comments

Santander results expected to confirm overall health of sector

7 February 2008

MADRID - Banco Santander, Spain's largest bank, is due to release full-year earnings results today that analysts expect will serve to confirm the health of the Spanish financial sector, showing it to be largely free of the infectious bad debt products that have caused banks from New York to Zurich to write off multibillion euro losses in recent weeks.

Santander, like most other Spanish banks and savings banks, has consistently assured regulators, investors and savers that it did not buy into the mortgage-backed collateralised debt obligations (CDOs) that have caused so much financial turmoil since the subprime lending crisis erupted in the United States last year. Conversely, banks in other countries are expected to have to write down USD  146 billion in bad debts, causing many, particularly in the United States, to post hefty losses for last year.

However, though the Spanish financial sector at large may have steered clear of risky debt products and dubious lending practices - in part because of stricter regulatory controls and its limited investment banking experience - it cannot escape the fallout from the crisis.

Santander, for example, is expected to provision funds to cover the recent plunge in the share value of Sovereign, a US bank in which it has a 24.9-percent stake, while on the domestic stock market banking shares as a whole have taken a hit.

In addition, Spanish banks are facing acute liquidity problems due in part to investors' reluctance to lend to them because of their exposure, not to US subprime mortgages, but to Spain's flagging real estate market and over-indebted home buyers.

[Copyright EL PAÍS / ÍÑIGO DE BARRÓN 2008]

Subject: Spanish news

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