Friday, May 25, 2012

Spain pain - afternoon update and closer look at the Regions problwm ( how close to being dropped to junk is Spain ) , Bankia......

http://globaleconomicanalysis.blogspot.com/2012/05/spains-bankrupt-catalonia-region.html


Friday, May 25, 2012 2:15 PM


Spain's Bankrupt Catalonia Region "Running Out of Options" to Refinance €13 Billion; Total Regional Needs are €50.7 Billion; Regions Want "Open Bar" with Central Bank Guarantees


The crisis in Spain is rapidly coming to a head. This crisis has nothing to do with Greek "contagion" as is widely believed. Spain dug this hole by itself. Spain's immediate unsolvable problems are a bankrupt banking system coupled with bankrupt regions that have no way to pay bills. Spain's regional governments need to roll €35.7 billion and there is current deficit of €15 billion.

The president of Spain's Catalonia Region said it faces refinancing needs of needs of €13 billion and is "running out of options refinance its debt".

Catalonia accounts for about one fifth of the Spanish economy.

Moreover, Spain's Valencia region set off alarm bells on a six-month €19 billion bond issue because it may be forced to pay a 7% return, more than two points above what Greece is paying for their junk bonds.Regions Want "Open Bar" with Central Bank Guarantees

Let's not mince words. Spanish regional governments are clearly and undeniably bankrupt. It should come as no surprise that the regional governments have asked the central government for "an open bar, meaning that the state allows the joint issuance of debt with the guarantee explicit regional treasury, and without demand conditions change, allowing them access to cheaper financing. The matter was discussed again at the Council of Fiscal and Financial Policy last Thursday.

The above story was pieced together with help of Google translate and the following articles:

The rescue of Catalonia and market nerves about Spain

In Guindos wants to keep money in advance to the CCAA

The problem for Spain is if guarantees regional debt (the term used for this is "Hispabonos") then the credit rating of Spain will drop and all of Spain's borrowing costs will rise.

Bankruptcy, default, and an exit of the eurozone coupled with work-rule and pension reform is the only realistic solution.


and....

http://www.telegraph.co.uk/finance/debt-crisis-live/9289109/Debt-crisis-as-it-happened-May-25-2012.html


20.11 Bankia also revealed that it had made a loss of €2.979bn for 2011 after restating its accounts. The bank previously reported in February that it had made a profit of €309m.
19.25 Bankia says it needs the cash injection to cover its exposures to its ailing property market, bad loans and accounting discrepancies.
Spanish banks have an estimated €184bn of what the Bank of Spain describes as “problematic” real estate-linked assets.
The funds will be in addition to the €4.5bn already injected into the bank, bringing the total cost for the government to €23.5bn.
19.11 BREAKING
Bankia has officially confirmed that it has asked for €19bn in state aid.
18.40 The ratings of Banco Financiero, Banca Civica, Banco Popular, and Bankinter were also cut.
Banco Financiero and Banca Civica are already rated below investment grade by S&P. Banco Popular and Bankinter were cut to junk today.
18.20 The bad news just keeps on coming. Standard & Poor's, the rating agency, has cut Bankia's long-term credit rating to "junk". The bank was cut one notch to "BB+," from "BBB-". 
and.....



http://www.zerohedge.com/news/about-european-stress-test-2011-edition-and-where-pain-spain-raining-next


About That European Stress Test, 2011 Edition... And Where The Pain In Spain Is Raining Next

Tyler Durden's picture
Submitted by Tyler Durden on 05/25/2012 15:42 -0400




Back when Dexia was nationalized in the fall of 2011, one of the running jokes was that it was the bank that had one of the highest grades in the European Stress Test conducted just months prior. Here is another joke: we now know that Spain's Bankia is the next major financial institution which is being nationalized, and whose bailout costs are literally growing by the hour. Was Bankia one of the Stress Test 2011 failures? Why of course not...  But 5 other Spanish banks were.
Source: EBA
As a reminder:
Greece’s EFG Eurobank Ergasias SA (EUROB) and Agricultural Bank of Greece (ATE) SA, Austria’s Oesterreichische Volksbanken AG (VBPS) and Spain’s Banco Pastor SA (PAS), Caja de Ahorros del Mediterraneo (CAM), Banco Grupo Caja3, CatalunyaCaixa and Unnim failed. They were found to have insufficientreserves to maintain a core Tier 1 capital ratio of 5 percent in the event of an economic slowdown. All banks examined in Italy, Germany, France, the U.K. and Ireland passed.

“The problem children are going to be the 16 banks between 5 and 6 percent, and what happens to those,” said Joseph Dickerson, a banking analyst at Espirito Santo Investment Bank in London. “The market will put substantial pressure on those banks to raise capital.”

Those banks include Banco Comercial Portugues SA (BCP), Espirito Santo Financial Group SA (ESF), Germany’s HSH Nordbank AG and Norddeutsche Landesbank. BCP and Espirito Santo will bolster capital or sell assets in the next three months, the Bank of Portugal said yesterday.

In other words, if the bank that passed the stress test has now failed less than a year later, we would be very curious what the true state of the other 5 Spanish banks that did fail the stress test is currently. Again, these are Pastor SA (PAS), Caja de Ahorros del Mediterraneo (CAM), Banco Grupo Caja3, CatalunyaCaixa and Unnim. And that excludes all the non-Hispanic banks that also failed or were on the endangered species list.
Finally, if anyone is still confused where the pain is headed next, here is a list from Morgan Stanley of all Euro banks with a Core Tier 1 ratio that is so low, that the banks will soon regret not raising more capital in the period of calm that the ECB's LTRO bought them.


Hint: CASA is Credit Agricole...
Also, one bank is missing from the list above: Deutsche Bank. CT1/TA: 1.68%.Oops.

and.....

http://www.zerohedge.com/news/mark-grant-and-rick-santelli-europes-bond-turned-bank-run

Mark Grant And Rick Santelli On Europe's 'Bond-Turned-Bank'-Run

Tyler Durden's picture
Submitted by Tyler Durden on 05/25/2012 15:13 -0400




We have discussed the realities of Spanish (and Italian and Portuguese and Greek) debt to GDP data relative to the official estimates a number of times over the past few months and just as Mark Grant tells Rick Santelli today, the sugar buzz of self-financed sovereign bond buying hides the truth - until now when that liquidity is fading. From inaccurate data to LTRO ineffectiveness, 'Grantelli' sum it up nicely as  the 'Bond Run' we have seen over the past few months (as professionals flee European banks and sovereigns) has now trickled down to the man-in-the-street and their equivalent - the bank-run.



and......

http://www.zerohedge.com/news/sp-junks-nationalized-bankia-downgrades-various-other-banks

S&P Junks Nationalized Bankia, Downgrades Various Other Banks

Tyler Durden's picture
Submitted by Tyler Durden on 05/25/2012 13:14 -0400




If according to S&P recently nationalized Bankia is junk, what does that imply about Spain?
S&P takes various rating actions on Spanish banks
Standard & Poor's Ratings Services today said it has lowered its ratings on five Spain-based financial institutions, affirmed the ratings on nine, and maintained the ratings on five on CreditWatch with negative implications (see Ratings List).   
    
We have also revised down our assessments of the stand-alone credit profiles (SACPs) of six financial institutions, with revisions ranging from one to three notches.     With the exception of two financial institutions, all ratings either carry a negative outlook or remain on CreditWatch negative.     
 
The rating actions follow our review of the wider implications for economic and industry risks in the Spanish banking sector after our two-notch downgrade of the Kingdom of Spain (BBB+/Negative/A-2) on April 26, 2012. As a result of the review, we have maintained our Banking Industry Country Risk Assessment (BICRA) on Spain at group '5', but revised our economic risk score, a component of the BICRA, to '6' from '5' (see "BICRA On Spain Maintained At Group 5, Economic Risk Score Revised To '6' Following Sovereign Downgrade," published May 25, 2012, on RatingsDirect on the Global Credit Portal). 
 
We lowered our long-term counterparty credit ratings on five financial institutions--Bankia S.A., Banco Financiero y de Ahorros S.A., Banca Civica  
S.A. (Civica), Banco Popular Espanol S.A. (Popular), and Bankinter
S.A.--based on our lowering of our assessments of their SACPs. We revised the SACPs following our review of the Spanish banking industry's economic risk, owing to the impact we see on the capital positions of the first four institutions and on the business model of the fifth one. Under our criteria, we use the economic risk score to calibrate the risk weights used for our capital      calculations in several asset classes (see "Banks: Rating Methodology And Assumptions" for definition). As a result of our calculations, the capital positions of the institutions are immediately affected by a revision of the economic risk score.  
 
We are now for the first time incorporating into the long-term ratings on two financial institutions--Popular, and Bankia, and indirectly its parent BFA--one and two notches respectively of uplift above their SACPs to reflect potential short-term extraordinary support from the Spanish government. We believe that the Spanish government would likely provide short-term support to back any potential capital shortfall at these two institutions if necessary. In addition, our long-term ratings on these two institutions and on Banco de Sabadell S.A. (Sabadell) and Civica benefit from one notch of uplift over  their SACPs for potential extraordinary government support.     
The outlooks on the long-term ratings on six financial institutions--Banco Santander S.A. (and its subsidiaries), Banco Bilbao Vizcaya Argentaria S.A. (BBVA), Popular, Sabadell, Kutxabank S.A., and Bankinter--are negative. They generally reflect the possibility that we could lower the ratings if we perceived increasing pressure on the banks' financial strength in the context of Spain's weakening economic conditions. For Santander (and its subsidiaries) and BBVA, the negative outlooks also reflect the negative outlook on Spain.    

One financial institution, Confederacion Espanola de Cajas de Ahorros, carries a stable outlook, which factors in our view that we are currently unlikely to change our ratings or stand-alone credit profile on CECA in the next few years, under our base-case scenario.  
     
The ratings on five financial institutions--CaixaBank S.A. and its parent Caja de Ahorros y Pensiones de Barcelona (la caixa), Ibercaja Banco S.A., and Bankia and parent BFA remain on CreditWatch negative. The CreditWatch placements of the ratings on the first three reflect our view that pending acquisitions and their integration could have a negative impact on each entity's creditworthiness. In the case of Bankia and its parent BFA, the CreditWatch listing reflects uncertainties surrounding Bankia's restructuring and recapitalization plan, as well as the implementation risks it may entail.     Conversely, we kept the ratings on Civica on CreditWatch positive based on our view that its creditworthiness may potentially benefit from its integration into Caixabank, a financially stronger group.    
 
At the same time, we have also taken negative actions on various hybrid capital instruments issued by several financial institutions. These actions reflect our view of the increased vulnerability to nonpayment of dividends or coupons of the hybrid capital instruments that we see in each particular bank. Currently, we only rate preference shares issued or guaranteed by Santander and its core subsidiary Banco Espanol de Credito S.A. in investment-grade categories. We rate all the other hybrid instruments issued by other Spanish financial institutions in the noninvestment-grade categories. However, we think vulnerability to nonpayment of the dividends or coupons varies between the institutions, which is reflected in the wide range of our ratings, from our 'BB+' issue rating on BBVA and Caixabank's hybrid debt to our 'CCC-' issue rating on BFA's hybrid debt.    We will publish individual research updates on the banks identified below, including a list of ratings on affiliated entities, as well as the ratings by debt type--senior, subordinated, junior subordinated, and preferred stock. 
 
RATINGS LIST 
The ratings below are counterparty credit ratings. 
 
Downgraded; CreditWatch Action  
                               To                   From 
Banco Popular Espanol S.A.     BB+/Negative/B       BBB-/Watch Neg/A-3 
 
Bankinter S.A.                 BB+/Negative/B       BBB-/Watch Neg/A-3 
 
Downgraded; Remain On CreditWatch 
                               To                   From 
Banca Civica S.A.               
 Long-Term Counterparty Credit Rating 
                               BB/Watch Pos         BB+/Watch Pos 
 
Bankia S.A.                    BB+/Watch Neg/B      BBB-/Watch Neg/A-3    Banco Financiero y de Ahorros S.A.                  
 Long-Term Counterparty Credit Rating 
 
                               B+/Watch Neg         BB-/Watch Neg 
 
Affirmed; CreditWatch/Outlook Action 
                               To                   From 
Banco Financiero y de Ahorros S.A.                  
 Short-Term Counterparty Credit Rating 
                               B                    B/Watch Neg 
 
Banco de Sabadell S.A.         BB+/Negative/B       BB+/Watch Neg/B 
 
CaixaBank S.A.  
 Short-Term Counterparty Credit Rating 
                               A-2                  A-2/Watch Neg 
 
Confederacion Espanola de Cajas de Ahorros                                      
        
                               BBB-/Stable/A-3      BBB-/Watch Neg/A-3    Kutxabank S.A.                 BBB-/Negative/A-3    BBB-/Watch Neg/A-3 
 
Affirmed 
                               To                   From 
Banco Santander S.A.           A-/Negative/A-2      A-/Negative/A-2 
 
  Banco Espanol de Credito S.A. 
                               A-/Negative/A-2      A-/Negative/A-2 
 
  Santander Consumer Finance, S.A.                        
                               BBB+/Negative/A-2    BBB+/Negative/A-2 
 
Banco Bilbao Vizcaya Argentaria S.A.  
                               BBB+/Negative/A-2    BBB+/Negative/A-2 
 
Remain On CreditWatch 
                               To                   From 
Banca Civica S.A.               
 Short-Term Counterparty Credit Rating 
                               B/Watch Pos          B/Watch Pos    
CaixaBank S.A.  
 Long-Term Counterparty Credit Rating 
                               BBB+/Watch Neg       BBB+/Watch Neg 
 
Caja de Ahorros y Pensiones de Barcelona                         
                               BBB-/Watch Neg/A-3   BBB-/Watch Neg/A-3 
 
Ibercaja Banco S.A.            BBB-/Watch Neg/A-3   BBB-/Watch Neg/A-3 
 
NB. This list does not include all ratings affected.

and.....

http://www.zerohedge.com/news/bankia-bailout-costs-rise-again-now-%E2%82%AC19-billion-%E2%82%AC4-billion-increase-overnight

Bankia Bailout Costs Rise Again, Now At €19 Billion, €4 Billion Increase Overnight

Tyler Durden's picture
Submitted by Tyler Durden on 05/25/2012 12:06 -0400




Well under 24 hours ago we wrote, "As Bankia Bailout Costs Grow Exponentially, Is A Stealth Bank Run Taking Place" in which among other things, we listed the chronology of the Bankia bailout. To wit: "Note the following sequence of events, bolded numbers, and dates:
  • Bank Of Spain Formally Nationalizes Bankia, Says Insolvent Bank Is "Solvent", Adds There Is No Cause For Concern, Zero Hedge, May 9
  • Spain is taking over Bankia by converting its 4.5 billion euros of preferred shares in the group’s parent company into ordinary shares,BusinessWeek, May 21
    • Spain said on Wednesday its rescue of problem lender Bankia would cost at least 9 billion euros ($11 billion), as the government tries to clean up a banking system that threatens  to drag the country deeper into the euro zone crisis, Reuters, May 23   
    • Bankia SA will have to ask the Spanish government for more than 15 billion euros as part of its effort to restore its financial health, state-owned news agency EFE reported Thursday, citing financial sources, Dow Jones, May 24
    Hopefully we aren't the only ones to notice how the bailout cost has oddly doubled almost on a daily basis."  We concluded: "It is a virtual certainty that in the next few days we will see total Bankia "bailout costs" rise more and more, until the truth becomes self-evident to even the most financially unsophisticated soon to be ex-depositor. Sadly, we are also fairly confident this is not limited to Bankia as more of the harebrained Cajas consolidation schemes from 2010 blow up one by one."
    Sure enough, courtesy of Spanish dailyEuropa Press:


    Or translated:
    BANKIA NEEDS EU19 BLN IN STATE SUPPORT, EUROPA PRESS SAYS
    What does this mean? Again, from yesterday: "Sadly, what the Spanish government and the Bank of Spain have demonstrated, is that despite all the rhetoric, capital flight has not only stopped, it is accelerating."
    In other words, since the bailout total yesterday, which was €15 billion, through today, another €4 billion in cash has left the bank.
    Yes: you won't hear the words "Bank Run" uttered in the media, as that would imply panic. Unfortunately, that is the only explanation for a €4 billion capital (i.e. cash) deficiency overnight.
    Things in Spain are getting worse by the minute, which sadly is becoming more predictable by the day.

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