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Bad loan rate hits levels seen before Spanish bank bailout

Non-performing loans rose to a record 11.6 percent in the month of June

Non-performing loans rose once more in June, reaching a record 11.6 percent. The figure is up 0.4 percentage points on the month before, according to provisional data released Monday by the Bank of Spain, and at a level seen just before Spain was granted a bailout to recapitalize its banks.

The default rate of loans granted by banks, savings banks, cooperatives and financial credit establishments (EFCs) to companies and private clients had seen slight falls in November 2012 and January 2013 due to the so-called “bad bank effect,” after toxic real estate assets were transferred from lenders’ balance sheets to Sareb, Spain’s newly created bad bank.

Loan defaults within the financial system at the end of June stood at 176.420 billion euros, above the 170.206 billion euros registered the previous month.

Compared to June 2012, the volume of non-performing loans — which are classed as such after three consecutive months of non-payment — rose by 8.050 billion euros. During that month, the default rate was at 8.97 percent.

The loan default rate for financial credit establishments (EFCs) — institutions that principally grant financing for the purchase of automobiles, furniture, televisions and other such consumer goods — remained at 9.81 percent for the fourth consecutive month, with a volume of unserviced credit of 3.599 billion euros, slightly up from the month before.