Santander, BBVA and Caixabank need €13.28 in extra provisions

By Julia Pastor, in Madrid | Last week, Rajoy’s government passed a Royal Decree, which forced all the Spanish financial entities to provision a total amount of €50bn to cover the losses coming from the property boom effect. But banks had not yet calculated their corresponding piece of the cake. On Tuesday, the three biggest Spanish entities, Santander, BBVA and Caixabank, communicated to the supervisor body –the Spanish Securities Market Commission– the provisions they will have to contribute to this year’s balance sheets in order to definitely reorganise their accountability, and to comply with the newly approved rule. These three banks will assume €13.28bn of the financial reform cost, which means a 26.5% of the overall figure.

Santander, BBVA and Caixabank had already charged part of these provisions to last year’s results. The remaining sums will be paid according to these specifications.

The total amount to cover for Santander Group including Banesto stands at €6.1bn. Having the bank charged part of the provisions to its 4Q’11results, the buffer capital required by the rule will be covered by the own bank’s capital surplus. The remaining €2.3bn will be paid through the gains obtained during this year, of which €0.9mn have already come from the sale of Santander Colombia as well as from ordinary contributions for 2012 year’s provisions.

For BBVA the additional effort in gross provisions will be of €4bn, 8% of the €50bn estimated impact on the whole of the sector. Of the €4bn, €1.2bn correspond to the capital buffer required and, according to BBVA, they are already covered by excess equity that the group holds based on the Bank of Spain measuring criteria. The remaining €2.8bn are provisions that will have to come against the results. BBVA could mitigate this impact by applying part of the generic provision that it has for Spain: about €460mn. Once the fiscal effect is discounted, the bank’s results shall be affected in the amount of €1.36bn.

Meanwhile, Caixabank has calculated that the provisions it will have to gather to comply with the new norm recently adopted by the government amounts to €2.436bn. The entity assures that this amount corresponds entirely to greater provisions for its credit portfolio. Of these, €955mn derive from the 7% of the generic provisions for assets classified as normal. According to the Catalan entity, the ability to generate recurrent exploitation earnings (€3,040bn in 2011) and the existing, as of last 31 December, generic provision of €1,835mn will allow Caixabank to ‘comfortably absorb the new provision requirements.’