Spanish banks on Friday made gains on the Madrid stock exchange, following the release of auditors' reports showing that their recapitalization needs could be met by the eurozone, after weeks of uncertainty.
The audits commissioned by the government put banks'
recapitalization needs at up to 62 billion euros (79 billion dollars)
over three years. The eurozone has pledged up to 100 billion euros in
aid.
Shares of the nationalized bank Bankia, which had suffered heavy
losses recently, went up 7.8 per cent. The top banks Santander and
BBVA rose by more than 1.7 per cent, Banco Popular by 3.8 per cent
and Sabadell by 4.7 per cent by 11 am (0900 GMT).
Spain's borrowing costs remained stable, with the yield on 10-year
bonds rising just slightly.
The government had expected borrowing costs to drop once the
audits clarified Spain's needs.
Spain's eurozone aid request was to be presented "immediately,"
Economy Minister Luis de Guindos said at a European Union meeting in
Luxembourg, indicating he would make the move as soon as he returned
to Madrid.
The possibility of the loan being given straight to Spanish banks,
instead of passing through the government in Madrid, remained on the
table, according to the minister.
The International Monetary Fund (IMF) has slammed plans to rescue
the Spanish banking sector via loans to the government, a method
which would increase the country's debt. IMF chief Christine Lagarde
called for aid to be given directly to banks.
Germany has refused that option in the past. On Friday, German
Finance Minister Wolfgang Schaeuble said in Luxembourg that the IMF's
recommendations were "very helpful" and an "important contribution."
The external assessment on the recapitalization needs of Spanish
banks "helps rebuild credibility somewhat," though "it is clear that
Spain will remain in a perilous situation for the moment," Barclays
Bank's economic research unit said in a note.
The ratings agency Standard & Poor's said the eurozone support
line to Spain would not immediately influence its ratings on Spanish
banks.
"Our outlooks on Spanish banks remain primarily negative," the
agency said. It expressed scepticism "about the bailout being able to
reduce the financial system's funding challenges in the short term as
well as on lending resuming any time soon."
