Another troublesome development out of Spain today is the acceleration in the number of delinquent loans. This time however it's the corporate loans dominating this increase in delinquencies (09 was driven by consumer loans). Spanish banks are focused on purchasing government debt, where they can now get outsized returns by spreading paper against 1% LTRO financing. And that carry trade is crowding out corporate credit (as predicted back in November). Spanish banks have no incentive to roll corporate debt, making it nearly impossible for many companies to obtain financing. Foreign banks on the other hand often want nothing to do with companies in Spain, as their internal credit risk departments quickly cut Spain country limits. With no ability to refinance maturing loans or obtain new loans to plug holes created by plunging revenues (to pay interest), companies are quickly becoming delinquent.
|Delinquent loans as % of all loans in Spain|