Spanish Banks would need up to €59.3 billion in capital injections with 7 banks asking for funds but other 7 don't. Bankia, the so-called big failed Spanish bank, would need 24.7 billion, the half of the total. The results was almost the same the Spanish Kingdom informed as necessities before summer.
Eurogroup official Junker was pleased that the Spanish banking needs were less than 60 billion EUR.
The two largest banks, Santander and BBVA, plus CaixaBank, Banca Civica, Sabadell, CAM and Bankinter (62%) do not need to increase their capital even to face the adverse scenario raised by the consultant.
CatalunyaBank, NovaGalicia Banco, Ibercaja, BMN, Banco de Valencia and Popular would need funds. Interesting that Banco Popular affirmed that they won't request any fund despite they would need as much as 3.2 billion EUR. Popular said to find the funds in its own way. The other banks will need to present its viability plans before the end of October.
The scenario base assumed 1.7% drop in GDP until 2014, the adverse a 6.5% GDP drop. The Stress test asummer a EUR/USD at 1.3400 in 2012 and 1.3300in 2012. Unemployment was posted at 23.5% in 2013. "The base and adverse macroeconomic scenarios were also maintained as specified by the Strategic Coordination Committee, with an adverse case implying a 6.5% cumulative GDP drop, unemployment reaching 27.2% and additional drops in house and land price indices of 25% and 60% respectively, for the 3 year period from 2012 to 2014," affirmend Oliver Wyman's official report.
For the 3-year period (2012-2014) Oliver Wyman estimates that:
- Cumulative credit losses for the in-scope domestic back book of lending assets are approximately €270 BN for the adverse (stress) scenario of which €265 BN correspond to the existing book. This compares with cumulative credit losses amounting to approximately €183 BN under the base scenario.
- Projected losses vary significantly across asset class: losses related to real estate activities – Real Estate Development and foreclosed assets - are significantly higher than for other segments and represent approximately 57% of total estimated losses in the adverse scenario
- Losses for the same segment vary substantially for the different entities, reflecting differences in risk profiles and credit standards
Overview of estimated capital needs at entity level – Spanish Stress test base and Adverse case scenario:
Image from Banco de España.
EUR/USD jumps to 1.2890 after Spain stress test
The Euro reacted up against the Dollar after the stress test results. The EUR/USD was trading at intra-day lows close to 1.2850 just before the releases but after few minutes the pair jumped around 50 pips to 1.2890.
But after the initial happiness, the Euro has come back towards 1.2850 zone. Currently the pair is pricing at 1.2851, 0.49% below opening price action. "Unsurprisingly, Spain test bank come in line with expectation, triggering a bounce in the EUR/USD up to 1.2890 static resistance level," comments Valeria Bednarik from FXstreet.com. "Further advances need to overcome 1.2910, 23.6% retracement of the latest daily bullish run, and past sessions low, to confirm bulls are back in control."
"In that case, resistances come at 1.2960, and 1.3000, not expected for today," points Bednarik. "To the downside, support continues to be at the 1.2830 weekly low, unlikely to give up today. Below that level, 1.2750 area is next."
Fitch affirms UK triple-A, maintains negative outlook
Later on Friday, Fitch Ratings affirmed UK long-term triple-A rating on Friday but kept a negative outlook and said that weaker than expected growth and fiscal outturns in 2012 have increased pressure on the UK's 'AAA' rating, which has been on negative outlook since March 2012.
"The Negative Outlook on the UK rating reflects the very limited fiscal space, at the 'AAA' level, to absorb further adverse economic shocks in light of the UK's elevated debt levels and uncertain growth outlook", Fitch said in a statement.