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BBVA says Spain bank capital shortfall manageable

Source: Reuters - Mon 14th Mar 2011

The capital needs of Spain's banks are manageable and lower than those of Ireland's, the chairman of Spain's second largest bank said on Friday.

"The results of the Bank of Spain's exercise confirms our financial system is solvent. The combined capital shorftall for some of the banks is manageable, lower than that of Ireland's banks," Chairman Francisco Gonzalez told shareholders on Friday.

The Bank of Spain on Thursday published the capital needs of the country's banks and savings banks to show whether they met stringent new government capital requirements. The savings banks, or cajas, are considered the weak link in Spain's fiscal landscape.

The Bank of Spain numbers for the individual banks added up to total capitalisation needs of 15 billion euros ($20.7 billion), within the official estimate of a maximum of 20 billion euros, but well below many private estimates.

Moody's debt rating agency downgraded Spain's sovereign debt by one notch on Thursday, warning that bank restructuring would cost more than twice what the government expects.

Ireland has poured 46 billion euros into its banks and may have to put in even more after the results of stress tests at the end of March.

Gonzalez called for a quick and rigorous restructuring of the savings banks to revive market confidence in Spain's banking sector.

While predicting 2011 will be another difficult year for Spain's banks, BBVA is well placed to gain market share from the sector restructuring, CEO Angel Cano said. Spanish banks are grappling with the knock-on effects of an ailing economy and unemployment of more than 20 percent, leading to higher bad loan provisions and higher rates paid on deposits as they compete to secure funding.

BBVA, along with mid-sized retail banks Popular and Sabadell, has been tipped as likely to acquire some of the branches of the smaller, weaker savings banks. It is targeting a 50% rise in market share over the next 3 years.

The restructuring of Spain's financial system is an urgent priority, but there are bigger problems including insufficient economic growth and high unemployment, Gonzalez said.

"Our country does not grow enough. And we can't continue with 4.7 million people out of work and a youth unemployment rate of nearly 43 percent," he said.

economy grew by 0.2% in the final three months of 2011 on a quarterly basis and is expected to grow at similar weak levels through 2011.

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