Moody’s downbeat on Spanish banks

The ratings agency Moody’s is maintaining its negative outlook on Spanish banks.

It says Spain’s banking system will remain weak for the 12 to 18 months as the Madrid government’s austerity package and a sluggish economy continue to hit bank profits and the value of their assets.

Moody’s estimates the banking system would need to raise an extra 17 billion euros in new capital.

Moody’s expects corporate profits to remain depressed or some time, especially in view of the limited likelihood of an economic stimulus, adding strain on unemployment and contributing to further deterioration in loan quality,” said Jose Alberto Postigo Perez, VP-senior analyst at Moody’s.

Spain’s government has made available 99 billion euros worth of funding to support weaker banks in the system.

That support is needed particularly by the unlisted savings banks, which were particularly badly hit by defaults when Spain’s property bubble burst and recession hit.

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