Moody's remains pessimistic over future of Spanish banks

21:06, December 13, 2010      

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Credit rating agency Moody's on Monday depicted a negative prospect of Spanish banks, citing difficult access to financing and external pressures on the industry.

In a report titled Banking System Outlook for Spain, Moody's highlighted the continued problems of the Spanish economy and Spain's ongoing fiscal austerity plans.

It estimated that Spain's banks would have to face losses of up to 176 billion euros (232 billion U.S. dollars) as well as a capital deficit of around 17 billion euros (22.4 billion dollars).

"Moody's expects corporate profits to remain depressed for some time, especially in view of the limited likelihood of an additional economic stimulus, adding strain on unemployment and contributing to further deterioration in loan quality," said senior analyst Alberto Postigo, author of the report.

Such a situation would reignite worries that Spain could still need an economic bailout of the kind already given to Greece and Ireland, which would probably lead to tighter austerity measures.

The Moody's report had a negative effect on the Spanish stock market on Monday morning, with the country's most important high-street bank Banco Santander seeing its shares drop by 0.63 percent.

Yet Spanish banks disagreed with the downbeat assessment, saying their losses were half of those stated by the agency.

Source: Xinhua
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