Outlook for Spanish banks still negative says Moody's

We heard from Ex Premeir Aznar say that the only thing that will get Spain out of their crisis is a new government.  The banks certainly are not in any healthy shape that will help lift themselves out. 

In Ireland, they are cutting everything but taxes.  In Spain, the current government is not really doing any significant measures at all. 

Via Moody's:

The economic downturn of the past three years has led to a 4.9% decline in Spain's gross domestic product (GDP) and a sharp rise in unemployment (19.8% in September 2010 from 8% YE 2007). "Moody's expects corporate profits to remain depressed for some time, especially in view of the limited likelihood of an additional economic stimulus, adding strain on unemployment and contributing to further deterioration in loan quality," says Alberto Postigo, VP-Senior Analyst and author of the new report.

Moody's current base-case scenario anticipates economic lifetime losses for Spanish banks of up to EUR176 billion, of which the banks have so far only recognised half (EUR88 billion) through reported write-downs and reserves. "Moody's estimates the net capital shortfall to be in the range of EUR17 billion for the Spanish banking system as a whole after taking into account already committed funds from the government and other offsetting factors such as tax-effected provisioning," says Mr. Postigo. "The earning generation capacity of banks is unlikely to fully compensate for the need of capital, which will force some banks to raise additional capital externally, possibly via additional capital injections from the government-sponsored FROB program," he continues.

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