Fears over bad loans hit Spanish banking stocks

FEARS over Spain’s banking system rose yesterday, with growing fears about the extent of the banks’ bad loan portfolios.

Analysts at JP Morgan, Ignacio Cerezo and Andrea Unzueta, warned in a research note there could be some nasty surprises to come.

Commenting on BBVA, which reported a 94 per cent decline in earnings last week, JP Morgan’s note said: “BBVA’s kitchen sinking exercise highlights in our view the large amount of hidden risks embedded in Spanish banks’ property loan books, the result of a desperately slow adjustment in Spain’s housing prices and lack of strong regulatory enforcement.”