Banco Santander

[JonoP]

I am hearing a lot of ‘noise’ about Santander. A couple of press articles have stated that Santander are in effect ignoring any decrease in property prices when it comes to valuing their assets. Thus, any non performing loans or repossessions they hold are not being marked to market. Santander are (apparently) valuing the asset at the same value as the loan outstanding on it. Thus, if they have reposed at house, rather than saying, ‘OK, we have reposed this house that was purchased for £200K in 2004, and as prices have gone down 10%, it is now worth £180K’ they are saying ‘OK, we have reposed this house that was purchased for £200K in 2004, and as we lent £200K against it then, it must be worth £200K today’. Reports also say they have been (and still are) lending freely in the Spanish market to try to underpin prices.

This may be why they have seemed to sail through the credit crunch almost untouched whilst at the same time having a huge exposure to the Spanish property market/disaster.

At the same time, I have also heard that the Spanish banking system forced them to build greater reserves as they leant more, thus this may be a more positive and justified reason why they report such rude financial health.

If they are ‘glossing over’ their losses as per my first paragraph, it is possible that they may be at the centre of the next wave of disaster to hit the banking sector.

The question is, should I short them.....

[interestrateripoff]

Do the reserves cover the losses?

It appears enron style accounting is fast becoming the rage to stay healthy.

Don't worry too much it's too big to fail as Ponzi Brown has made sure of that, we'll get to bailout spanish banks next on our mission to save the world.

[interestrateripoff]

http://spaineconomy.blogspot.com/2009/08/m...ing-system.html

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Tuesday, August 25, 2009

More Comedy From The Spanish Banking System

Going through the Variant Perception report on the parlous state of Spain's banking system, I couldn't help stopping and thinking hard about this point from the Spanish newspaper Expansion.

The valuation of the guarantees of the mortgage book of the cajas and banks and of its real estate gains importance. The thirteen companies tied to financial entities represented 47% of all real estate appraisals in 2007. The valuation of these real estate assets has taken on new importance for banks in the context of the current economic recession. The valuation of the mortgage guarantees and of the real estate assets they are taking on through the courts and debt for equity swaps is key to calibrate the solvency of the financial system. This situation has placed the focus once again on the links between banks and the real estate appraisers that goes beyond in many cases a mere commercial relationship.

And then scratching my head, and scratching my head.

Now to put all this in plain English, we are talking here about the valuation of properties that are repossesed by the banks, and that the banks then have as part of their asset side, as goods awaiting sale. Now, Expansion raises the question: "how can we know that these assets are being fairly valued (that is how can we assess the quality of part of the asset side in the bank balance sheet) when the banks themselves own (directly or indirectly) nearly half of the companies doing the valuing.

Well, this is an issue, but in fact the problem is much worse than the Expansion writer seems to realise, since there is a technical (matter of fact detail) that they seem to miss here, and that is how the valuation of property which is repossed by the bank actually takes place.

More at the link.

This was posted yesterday.

[yellerkat]

FT Alphaville 40 minutes ago:

Also out on Thursday was Moody’s annual sovereign debt report on Spain. And apparently, the ratings agency thinks everything is a-ok (our emphasis):

But the kicker:

Elsewhere in Moody’s, however, Lisa Hintz of their Capital Markets Research Group, wrote that:

As Spain continues to weaken, we believe there is a non-trivial possibility of a systemic shock to the Spanish banking market.

[interestrateripoff]

FT Alphaville 40 minutes ago:

But the kicker:

That's doublethink.

[JonoP]

Apparently, Spain has the same number of unsold houses as the US does, but only a 1/7th of the population. And property prices climbed far, far higher in Spain during the bubble than they did in the US.

Hmmmmmmmm.

If Santander goes tits up (which will mean Abbey & Bradford & Bingley going tits up as Santander own them), we would have another LIBOR shock and credit availabilty would be decreased yet further.....

Plus, as Santander are in the Eurozone the Spanish do not have the flexibility to drop their pants on IRs like the yanks.

[interestrateripoff]

Apparently, Spain has the same number of unsold houses as the US does, but only a 1/7th of the population. And property prices climbed far, far higher in Spain during the bubble than they did in the US.

Hmmmmmmmm.

If Santander goes tits up (which will mean Abbey & Bradford & Bingley going tits up as Santander own them), we would have another LIBOR shock and credit availabilty would be decreased yet further.....

Plus, as Santander are in the Eurozone the Spanish do not have the flexibility to drop their pants on IRs like the yanks.

I thought banks had stopped using Libor which is why it was dropping?

[Skirmish]

So how safe is someone's money in one of the Santander Group's banks? Is it time to move somewhere safer?

[moonriver]

So how safe is someone's money in one of the Santander Group's banks? Is it time to move somewhere safer?

That is just what I was wondering.

Only yesterday I was reading a thread here giving a link to a list of the top 50 "Safest Banks", and from what I remember only 2 UK banks made the list, HSBC, and Natiionwide, but Sandtander was ranked higher up the "safety chart" than either of these.

[JonoP]

That is just what I was wondering.

Only yesterday I was reading a thread here giving a link to a list of the top 50 "Safest Banks", and from what I remember only 2 UK banks made the list, HSBC, and Natiionwide, but Sandtander was ranked higher up the "safety chart" than either of these.

I am sure that Santander is 'too big to fail' and deposits would be protected under the UK financial compensation scheme anyway. So I would not panic and start a run on the bank . That said, I would not personally chose to bank with them having been at the receiving end of their laughably named 'customer service' of the course of the last few years.

[R K]

It has the smell of Iceland just before things when TU.

I wouldn't want any cash there although I'm sure Gordon would bail everybody out if needs be. He has a taste for it now. Like a serial killer that won't stop until he's behind bars.

[Gigantic Purple Slug]

Recently a bank had some sort of ratings agency downgrade (it was reported on here) but there was little or no media reporting.

Methinks there might be an attempt at news blackout.

Expect that guy who alludes to legal action to pop up (seems to when a certain banks name is mentioned).

[JonoP]

http://ftalphaville.ft.com/blog/2009/08/21...g-their-losses/

[Nationalist]

I am sure that Santander is 'too big to fail' and deposits would be protected under the UK financial compensation scheme anyway. So I would not panic and start a run on the bank . That said, I would not personally chose to bank with them having been at the receiving end of their laughably named 'customer service' of the course of the last few years.

Santander isn't British so counting on HMG to bail it out is unwise. I know AD compensated the personal account holders of the Icelandic banks but Santander is orders of magnitude bigger. If Santander fails it will be dramatic - a Europe-wide causus beli.

[JonoP]

Santander isn't British so counting on HMG to bail it out is unwise. I know AD compensated the personal account holders of the Icelandic banks but Santander is orders of magnitude bigger. If Santander fails it will be dramatic - a Europe-wide causus beli.

Yup, but B&B and A&L are all parented under Abbey and Abbey is covered by the FSCS so you (in theory) get your money back:

http://www.moneymadeclear.fsa.gov.uk/about.../uk_groups.html

[brianc_li]

These rumours appear to have stemmed from Variant Perception´s report published last week. the arguments are all pretty well thrashed out there.

Santander is, IMO, in the ´too big to fail´category. Certainly their UK depositors will be protected.

[interestrateripoff]

It has the smell of Iceland just before things when TU.

I wouldn't want any cash there although I'm sure Gordon would bail everybody out if needs be. He has a taste for it now. Like a serial killer that won't stop until he's behind bars.

Gordon is the saviour of the known universe, no problem is too big for him to throw billions of taxpayer money into. In fact even if there isn't a problem Gordon will throw billions of taxpayer money at it because it's the right thing to do.

Santander isn't British so counting on HMG to bail it out is unwise. I know AD compensated the personal account holders of the Icelandic banks but Santander is orders of magnitude bigger. If Santander fails it will be dramatic - a Europe-wide causus beli.

Santander going tits up will be interesting, this is like a game of chicken no one wants to play but everyone is forced to.

[catara]

These rumours appear to have stemmed from Variant Perception´s report published last week. the arguments are all pretty well thrashed out there.

Thrashed out by whom? By Peter Good and Claire?

[brianc_li]

Thrashed out by whom? By Peter Good and Claire?

Don´t you just love estate agents!

[catara]

Don´t you just love estate agents!

Well, when there is nothing to complain about, the agents resort to complaining about grammar and putting their heads into sand.

[R K]

They're already back to within 10% of their all time highs.

Seems rather bullish given the state of the Spanish economy in general and property market in particular.

http://www.iii.co.uk/investment/detail?typ...;chartwidth=500

[LiveAndLetBuy]

These rumours appear to have stemmed from Variant Perception´s report published last week. the arguments are all pretty well thrashed out there.

Santander is, IMO, in the ´too big to fail´category. Certainly their UK depositors will be protected.

These rumours have been going around for a lot longer than that report - however that report sums things up well, and might have drawn more people's attention to the rumours.

My main concern is whether the Spanish government would have enough money to bail out Santander. They've already been downgraded by S&P, so I'm not sure they could sell the necessary debt in order to raise the money, and they can't really raise taxes when their economy is already phacked.

[leicestersq]

These rumours appear to have stemmed from Variant Perception´s report published last week. the arguments are all pretty well thrashed out there.

Santander is, IMO, in the ´too big to fail´category. Certainly their UK depositors will be protected.

In my opinion, it isnt too big to fail, but too big to bail.

[RufflesTheGuineaPig]

The spanish government can't save satander... they don't print their own money the ECB does, so they can't print money to save it like the British government did with our banks.

This is why Satander has been buying up british banks... by making itself too big (in the British market) to be allowed to fail, it's forced the British government to pick up the tab and bail it out. Satander holds tens of BILLIONS of pounds of British savers money... when it bought B&B for example, it only bought the deposits and the VERY good loans, none of the crap! Note that they bought Abbey and A&L using their own newly issued shares!!! The British finacial protection sceme would only cover the first £50,000 per person... the British government would have no choice but to bail out Satander and, effectively, the entire Spanish banking system.

Basically we will have to print pounds and sell them for Euros to give to Satander to keep it afloat, trashing the value of the pound in the process... seriously... this years holiday in spain will be your last, after this the pound will be worth so little you wont be able to afford to eat in europe.

Put simply, Satander buying Abbey, A&L and B&B was a setup by the Spanish government.

Edited August 27, 2009 by TaxAbuserOfTheWeek

[Trampa501]

Banco Santander SA joined other Spanish banks in reporting relatively strong earnings, as the banking giant benefited from sharply higher lending income to offset higher loan-loss obligations.

The bank also said it expects second-half earnings to be broadly in line with the first half and reiterated its full-year target of repeating last year's net profit of €8.88 billion, or about $12.6 billion at current rates, in 2009.

Wall Street Jnl Article July 09

I think some of the posters here suffer from cultural arrogance. They can't seem to accept that a bank from Spain has been far more successful and secure than the British equivalents (which have had to be bailed out). In 2008 they were "at it", claiming the hedge fund s were going to topple Santander, in January again they were "at it" claiming that the Madoff was going to topple Santander etc etc.

If you need a target in Spain, direct your gaze to the smaller "caja" savings banks - the ones who are liable for the worst property lending decisions.