Pontevedra Pensées: 3.12.16

SPANISH LIFE/CULTURE

Valencia's Fallas: I really must get to see these someday soon. Meanwhile UNESCO has placed them on its list of items of Intangible Cultural Heritage of Humanity. See here in El Pais, in Spanish, and here in English.

Talking of big attractions . . .

The Next EuroDisney?: As you might recall, a few years ago there was proposal to build a vast pleasure complex outside Madrid. It came to nothing but now we have another one, planned for Torres de la Alameda, near Alcalá de Henares. El País provides details here, in English. I heard the local mayor on the radio yesterday, naturally sounding happy and optimistic. Possibly because he anticipates a sizeable increase in his net worth.

About to Give Birth Here?: If so, this is what The Local thinks you need to know. Good luck, by the way.

TV: Finland, Denmark and Sweden are the EU countries where viewers are most likely to trust the news they get from the box. In Greece it's only 16% but Spain manages 31%. Rather more surprising is that France is at only 41%. 

SPANISH POLITICS

The Pension Fund: As elsewhere, Spain has a Reserve Fund for this, though possibly not for much longer. Its latest dip into it is for purposes of Xmas bonuses to lucky pensioners. Pessimists predict the fund could be exhausted within a year. Economists probably differ on the significance of this.

THE SPANISH ECONOMY

Unemployment: The bad news is that this rose in November, for the first time in 3 years. The good news is that the government has promised to create 1.4m jobs during the next 3 years. Though El País seems more than a tad sceptical here, in Spanish.

The Minimum Wage: There's possibly more grounds for optimism that, under pressure from the opposition parties, the PP minority government will deliver on a commitment to give this a considerable hike. At least for those workers to whom this applies.

Banks: Amidst all the fears about Italian banks, Spain's problems have rather dropped out of sight. But the Wall Street Journal has redressed the situation in an article either here or at the end of this post on my own (current) bank, Banco Popular/Pastor

THE EU

Italexit?: Big day tomorrow, when we find out if the Italian prime minister will resign or not. And, if he does, whether this will take Spain down a road some see as inevitable - to the sunny uplands outside the EU. Interesting times indeed.

LOCAL STUFF

Wine Tours: I had a wonderful lunch in Vigo yesterday, with two lovely young women. The albariño and godello white wines flowed freely and, as a result, we decided to set up a company offering tours of the region's numerous wine bodegas. Anyone with in-principle interest can contact me here and sign up for the initial - heavily discounted - tour. You never know. It might well happen. The offer, by the way, is not open to anyone called Mittington.

THE GALLERY

FINALLY

Castellano: More than once over the years I've admitted to being unfamiliar with the 2nd person plural of Spanish verbs - essentially because I very rarely address more than one person. This was brought home to me yesterday when I invented comparteis for the present tense of compartir. Which is really compartís. And then I had to check later with venir and subir. To find venís and subís, of course. Hope this helps someone.

ARTICLE

Banco Popular Faces Threat as Spain’s ‘Most Italian Bank’

Spain’s Banco Popular Español SA might be the test. Spain moved to clean up its banking system after a 2008 real-estate bust, but the Madrid-based bank is still struggling with around €32 billion ($33.8 billion) in bad loans and other nonperforming assets. Its stock price has collapsed. Its executive chairman is resisting calls to step down.

Italy’s constitutional referendum on Dec. 4, if it empowers euroskeptic parties, could sour investors on anemic banks across the Continent—not just in Italy. How Banco Popular and other weaklings handle the stress will test Europe’s efforts to gird its fragile financial system from contagion.

Like Italy’s banks, Banco Popular lent aggressively, with lax standards, and borrowers stopped repaying loans when recession hit. Unable to afford big losses, it bet that real-estate prices would rise enough to boost the value of its unfinished apartment complexes and empty plots. They haven’t.

Other major Spanish lenders that helped to fuel the country’s lending and building binge have been quicker to sell soured property assets at a loss and move on.

A spokesman for Banco Popular said it has accelerated property asset sales since 2012.

But investor concern about the bank, Spain’s No. 7 by market value, rose last month after it reported a second consecutive quarter of profit close to zero and delayed plans to create a “bad bank” unit to manage and accelerate the sale of delinquent property loans.

Ángel Ron, who has seen the bank’s market value decline 96% through Wednesday since becoming its chairman in 2004, is facing calls to step down, bankers and investors say. The bank spokesman said the board supports Mr. Ron.

Banco Popular, which analysts often call Spain’s “most Italian bank,” has raised €6.1 billion from investors since 2009 to appease concerns. The latest capital raise, a rights issue in May to boost provisions for loan losses, brought in €2.5 billion. Shares were offered to existing shareholders, many of whom are individual investors.

The share price has since plummeted 63% through Wednesday.

The bank’s spokesman said the capital raise was sufficient.

But institutional investors are divided about whether the fresh funds will put the bank on the path of its recovering Spanish banking competitors or keep it on the floundering track of its Italian peers.

Naysayers argue that the lender faces a dilemma: Its real-estate assets are of such poor quality that it would have to divert revenue toward more provisions to cover loan losses. Alternatively, it could sell some property assets at a loss. Either way, profits would take a hit.

“Popular’s balance-sheet cleanup continues to drag,” Berenberg Bank analyst Andrew Lowe wrote on Nov. 2. “Its capital position is again in doubt.”

Twenty-eight percent of Banco Popular’s loans and property assets on Sept. 30 were classified as nonperforming, compared with 15.5% for Spanish banks as a whole, S&P Global Ratings analysts said.

Investors with a more positive view say the new capital will boost coverage of Banco Popular’s nonperforming assets to 50%, although that is below that of peers. The bank said this month it would lay off 2,600 employees to cut costs.

Such moves make Banco Popular an appetizing takeover target, potentially by Spanish lenders Banco Santander SA or Banco Bilbao Vizcaya Argentaria SA, investors and bankers say.

But there are obstacles to a sale: Mr. Ron, the bank’s chairman, is reluctant to agree. And questions about how much more loan-loss provisions are needed cast doubt on its attractiveness to would-be suitors.

At least one potential buyer, Spain’s Banco de Sabadell SA, has walked away.

These are bits extracted from this article about other troubled European banks:

How Italian are Europe’s banks?

Other troubled banks are scattered around Europe. Portugal’s state-owned Caixa Geral de Depósitos SA recently received approval from the European Commission for a recapitalization plan to make headway on tackling bad loans.

Banco Comercial Português SA, which recently sold a 16.7% stake to China’s Fosun Industrial Holdings Ltd., might also need to strengthen its capital levels, analysts say.

Investors and analysts expect Deutsche Bank AG will need more capital in coming months, although the German lender’s troubles are less about bad loans than about anticipated legal fines, a costly and difficult restructuring, and derivative holdings that complicate investors’ views of the bank’s riskiness. Deutsche Bank executives have said they have no immediate plans to raise capital.

Italy’s UniCredit SpA and Banca Monte dei Paschi di Siena SpA plan to recapitalize, in part by selling new shares after the referendum, to reassure investors.

But raising capital could be harder for Europe’s weak banks, analysts say, if Italian voters reject Prime Minister Matteo Renzi ’s proposed constitutional changes. A defeat for Mr. Renzi could force an early parliamentary election and strengthen the 5 Star Movement, which questions the benefits of the euro currency. That, on the heels of Britons’ vote to quit the European Union, would heighten uncertainty about the strength of the union, weighing on regional investment and growth.