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Moody's outlook on Spanish banks still negative

Source: AFP - Mon 13th Dec 2010

The ratings agency Moody's said Monday it had maintained its negative outlook on the Spanish banking sector because of "weak" capitalisation levels that are likely to persist for the next 12-18 months.

"The outlook for the Spanish banking system remains negative because banks' capitalisation, profitability and access to market funding are expected to remain weak" the agency said in a statement.

Moody's attributed the sector's problems to Spain's overall economic difficulties along with "continued asset deterioration and the Spanish government's fiscal austerity plans."

The agency estimated that losses sustained by Spanish banks will total 176 billion euros (232 billion dollars), of which lenders have covered only half - 88 billion euros - through asset writedowns and reserves.

Spain at the start of 2010 emerged from a 12-month recession, brought on by the global finance crisis and the collapse of the country's housing market, where banks had been heavily exposed.

Continued weak growth this year - momentum was stagnant in the third quarter - and the country's large public deficit have unsettled financial markets, which have not been reassured by the Socialist government's austerity measures.

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