Spain's Non-Performing Loans

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Includes: EU, EWP
by: Acting Man

While looking around at 'Querschüsse' for their TARGET2 related charts, we noticed another chart we wanted to bring to the attention of our readers. As Spain 'sinks deeper into periphery' according to a recent Bloomberg article, the non-performing loans in Spain's banking system keep piling up:

Spain's NPLs, in billions of euros – so far an unbroken growth trajectory.

(Chart via 'Querschüsse' – click for higher resolution.)

There may not be any economic growth in Spain, but there sure is impressive growth in non-performing loans at its banks. They are now approaching €140 billion, which is a rather significant chunk of money relative to the size of Spain's economy.

As the economy seems about to once again sink into recession (one may be excused for wondering whether it ever got out of recession, but it did at least technically), the problem seems likely to get worse.

Spain's GDP growth has turned negative again

Moreover, as we have previously pointed out in 'The Catalonian Blunder', Spain's banks are close to the end of the rope with regards to their creative accounting. It seems quite possible that we will see another sharp increase in NPL's as time goes on and the previous attempts to sweep problem loans under the rug are thwarted by dint of things not having gotten any better in the meantime.

One wonders where this will leave the government's finances. Unless the government refuses to bail out the banks (fat chance), the costs of keeping the banking system afloat could mount considerably down the road. The recent recovery in Spain's government bond market is likely to prove yet another fleeting affair.

Charts via Querschüsse.de, Tradingeconomics.com