Which banking system will implode first, Italy’s or Spain’s? Here’s a look at the Spanish banking system, with a particular emphasis on their exposure to emerging markets, from Don Quijones at wolfstreet.com:
Big Trouble in Emerging Markets.
Banking stocks in Europe continue to benefit from the gravitational pull exerted by the so-called Trump effect. But the effects have not been felt universally. Monte dei Paschi di Siena, which is at the center of Italy’s banking crisis, has been reduced to a penny stock. The shares of Italy’s other large banks continue to trend downwards. And the problems in other national banking sectors have not gone away; they’ve just been consigned to the background. Such is the case in Spain, where the risks and challenges in the country’s banking system continue to bloom.
Spain’s Very Own Homegrown Monte dei Paschi.
The multiyear decline of Banco Popular, Spain’s fourth biggest bank, has been no less spectacular than Monte dei Paschi’s, having lost 98% of its stock value in the last nine years. The shares are now worth just €0.85 (compared to over €15 in 2007) and continue to shed value. Over 7% of its shares are being shorted by London and Connecticut-based hedge funds.
The biggest cause of concern is Popular’s plan to spin off €6 billion of impaired property assets into a vehicle optimistically christened “Sunrise,” which might not go far enough given the bank is estimated to have €30 billion of toxic assets festering on its balance sheets. In its latest report, S&P declined to downgrade Popular’s rating, though its choice of words at times, including “moderate solvency” and “ambitious plan” (to describe Sunrise), hardly inspire confidence.
To continue reading: Hit by Global Turmoil, Banks in Spain Get Jittery (Again)
