Thursday, May 17, 2012

Spanish Bank Bankia ( proving cobbling together 7 insolvent cajas doesn't magically create a healthy Bankia ) hits sentiment in Europe

Nationalized Spanish Bank Plummets On News Of Bank Run

Tyler Durden's picture

The problem with bank runs is that once they start, they don't stop. And while the world was conveniently distracted by events in Greece, debating whether or not people were withdrawing money in droves (they were), the real bank run happened elsewhere, namely in Spain, where just nationalized bank Bankia moments ago plunged 30% and was halted following an El Mundo report that "customers had withdrawn €1 billion over the past week." In other words -  a bank run (but whatever you do, don't call it that - it's not the politically correct and accepted nomenclature) which has sent shockwaves through Europe, pushed the EURUSD under 1.27, and bond yields in their traditional "Europe is open" direction - wider.
From FT:
Shares in Bankia, the Spanish bank which was part-nationalised last week, plunged by over a quarter on Thursday morning, after a report that customers had withdrawn €1bn from the bank over the past week.

Shares fell 27 per cent to €1.21 after El Mundo, a national Spanish newspaper, reported customers had withdrawn €1bn from the bank over the past week, citing information from a recent board meeting.

The self-styled “the leader of the new banks” was formed from seven cajas last year and has now shed nearly 70 per cent of its market capitalisation since its shares were listed in July of last year.
The fall helped to drive the broader IBEX 35 index down 2 per cent to 6,480.7.
The news has started to spill over to other PIIGS banks, and very soon all Italian banks will resume being suspended limit down on fear that the bank run contagion, pardon, the withdrawal meme (h/t William Banzai), because in this fake, artificially supported world, one is never allowed to call a spade a spade, has commenced.
In th meantime don't panic: after all, just recall the Bank of Spain statement which promised that despite the Bankia nationalization, that "BFA-Bankia is a solvent entity that continues to function quite normally and customers anddepositors should have no concern."
Turns out depositors had a few concerns...


Moody's Warns Spain It Will Downgrade "More Than 21" Spanish Banks - Expansion

Tyler Durden's picture

It was such a promising morning for Spain which sold some €2.5 billion in 2015 and 2016 bonds earlier in yet another meaningless and symbolic LTRO-covered exercise, when things went from bad (bank run, pardon, withdrawal meme) to worse, as local Expansion newspaper says Spanish bank ratings will be downgraded in a few hours.
The rating agency Moody's announced this morning that the Spanish bank announced in the next 12 hours, as by law, a reduction in its credit rating could affect more than 21 entities. According to several sources, the statement will be released expected at nine in the evening.
As Standard & Poor's for two weeks, the reduction occurs automatically as a result of the downgrading of the debt of the Kingdom of Spain and not motivated by the dynamics of each of the entities. It is a performance similar to that made ??Moody's with Italian banks .

Among the arguments of the cut score are the adverse conditions facing the banking business in a macroeconomic environment of recession and the rapid deterioration that is suffering the delay.

Furthermore, for months are not entities access to capital markets, although they have settled their funding through the open bar of liquidity.

The action by Moody's is the result of a process initiated in February 2012 when he decided to check the creditworthiness of all European banks to "the adverse and prolonged effect of the crisis in the euro area and the deterioration in the rating of several European governments ". On Tuesday, Moody's downgraded the rating to 26 Italian banks , a move not sitting very well in the sector and have described as "irresponsible" given the current situation.
The decrease in the rating of Spanish banks comes at a delicate moment, just after the Government has announced the partial nationalization of Bankia and a new decree to require institutions increased provisions for possible losses in real estate.

In addition, Standard & Poor's and dealt a blow to Spanish banks two weeks ago and left several of them in junk bond levels. And back again threatens to rule later this month.

Analysts at Moody's published this week a report indicating that Spanish banks "are vulnerable to the recession and the continuing housing crisis. The problem loans and losses will continue to grow, including categories such as residential mortgage loans, loans SMEs and consumer finance segments not covered by the recent royal decree. The vulnerability of banks to these adverse conditions is a factor in revising the rating of many Spanish banks. "