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Spanish banks still adrift on a sea of toxic property assets

NEWS UPDATE | Spanish banks, who thought it was going to be plain sailing for ever as they funded the property sector boom, hit the rocky shores of their country’s recession in 2007 – and still remain adrift in a sea of debt.

Scores of hard-up banks have been in forced mergers, producing ever bigger groups in the hope there would be more strength in numbers.

One of the biggest casualties is Bankia, a new made-up umbrella name to cover multiple savings banks that spent a decade pouring money into the Spanish property industry. It’s been bailed out to the tune of billions of euros, but with shares near worthless, it’s corporate and individual investors have been wiped out.

Thousands of toxic property assets from Bankia and other troubled banks have been dumped into Spain’s new “Bad Bank”, at valuations discounted by up to 65%.

Currently, it looks like 500,000 new and key ready apartments in second home locations across Spain are being retained by the banks for sale to international bargain hunting investors.

The banks are in a dash for cash to comply with the new EU fiscal rules and demands of their regulator, the Bank of Spain. Property prices have been discounted by up to 70%, mortgages of up to 110% are on offer to tempt overseas investors.

However, the banking armada remains shipwrecked in a sea of toxic property assets incapable of offloading their property bargains.

Because now, having sacked 1,000s of staff, the banks can’t handle the new rush to buy, leaving many buyers in limbo over prices, mortgages, availability and legal paperwork. New captains at the helm might be needed?

Author | Kevin Barnett, Walker Property News

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