We have been insisting for months that the books of some Savings Banks are worrisome, and that the real default is far superior to the apparent one. Now the CNMV is starting to make public the annual reports of the Savings Banks (during tomorrow, the majority will leave), and we can try to do some detective work, I hope that together, to try to evaluate the problems of the most concrete way possible.
The main place where many problems are hidden is a balance account called “Non-current assets for sale”. For example, most of the 2,5000m Euros of Popular’s assets, or 4bn Santander’s are there (certainly these numbers do not match the total given by the Bank of Spain of only € 11.6bn for the entire system maybe some reader can explain it to me). These are assets whose value is intended to be recovered through sale.
Let’s see now a concrete example: The CAM (it is neither worse nor better: this is the only report that I have read with care, the others can be worse or better, we will see it from these days). According to its recently published annual report for 2009 these “non-current assets for sale” (page 6 of the PDF) have passed this year from 443m Euros to 1,375m Euros. How big is this number? Quite:
CAM has € 2,500m of doubtful assets (page 57 of the pdf), that is, 50% of this amount; c As a percentage of total assets, this operation accounts for 2%. The default is 5%, that is, the 1,300m are another 2.6% of the total credits (1376/52429).
The result of the exercise has been (page 8 of the PDF) of 276m. If instead of recognizing losses due to deterioration of financial assets (page 8 of the pdf) of 861m Euros (lower than those of the previous year!) It would be necessary to recognize for example 270m more, the benefits of the year would have disappeared. Instead, losses on these non-current assets for sale of € 90m are recognized (the item “Gains (losses) on non-current assets for sale not classified as discontinued operations”).
This supposes I imagine, that 10% of the average assets of the year are being provisioned, according to the minimum required by the supervisor for the first year. The second year, if not sold, will have to provide 20%, that is, between 138-275 million Euros before taxes. It is easy to imagine that the CAM will not give benefits in 2011.
Meanwhile, the credits granted by the CAM in 2009 have fallen by 10%: from 57,000m to 52,000m (Customer Loan, page 6 of the PDF). As always, we do not know if this is a supply or demand problem, but the result is a significant drop in the amount of financing.
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