Spanish Bank Stress Tests Not So Bad After All (SAN, BBVA)

The Spanish bank stress tests are out and the initial verdict is that the shortfall was just not as bad as expected. In order to encompass about 90% of Spain’s banking system assets, the stress tests evaluated the 14 main Spanish banking group. Today’s total shows that about 59.3 billion in euros is needed for new capital.

All in all that is just not as bad as things could have been and the report showed that 7 banks needed no capital at all. The Bank of Spain said, “Seven banking groups, accounting for more than 62% of the analysed portion of the Spanish banking system’s credit portfolio, do not have additional capital needs.”

Of the 59.3 billion needed for the other banks, this actual amount falls to 53.75 billion euros when the mergers under way and the tax effects are considered.

It is interesting that Banco Santander, S.A. (NYSE: SAN) and Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) are both still down as far as the ADRs in New York trading.  The adverse scenario is on that 53.7 billion euro basis after tax but the baseline scenario comes to almost 26 million euros.

Unfortunately, this is after the close of the European markets and it is a topic very long in the tooth on a Friday afternoon. The iShares MSCI Spain Index (NYSE: EWP) is still down 2.9% at $27.72 today.

FULL BANK OF SPAIN REPORT

JON C. OGG