IMF to report that Spanish banks need 40 billion euros in aid

An International Monetary Fund report on Spanish banks will show the country's troubled lenders need a cash injection of at least 40 billion euros, Reuters on Thursday quoted unnamed sources in the financial sector as saying.

The report, due to be published next Monday, will also outline overall needs of 90 billion euros to clean up Spain's entire banking sector, with healthy lenders covering a big chunk of this sum, one of the sources said.

"The capital shortfall for the Spanish banks will be around 40 billion euros after taking into account the capacity from some of the entities to cover expected losses with their own resources," the source told Reuters.

Government sources declined to confirm the figures and one source who has been briefed on the matter cautioned that the IMF may not have finalized its estimates.

The figure is in line with an estimate by Banco Santander Chairman Emilio Botín, who reckons that 40 billion euros should be enough to cover the needs of nationalized Bankia and its parent Banco Financiero y de Ahorro (BFA), which has asked the government for an additional 19 billion, and those of the three other lenders that have been taken over by the Bank of Spain: CatalunyaCaixa, NovaGalicia and Banco de Valencia.

The deputy governor of the Bank of Spain, Javier Ariztegui, said Thursday CatalunyaCaixa and NovaGalicia need an additional 4.5 billion euros each. The state has already injected 2.465 billion euros into NovaGalicia and 2.968 billion into CatalunyaCaixa.

Reuters also quoted an EU official who said the final bill was still a moving target. "You've got bad property loans that still haven't flowed through the system, and you have a recession. All the banks' balance sheets are going to be under increased pressure in the months ahead as a result," the EU official said.

"When it comes to Spain, there would appear to be two ways to go: a minimalist approach in which only the bare minimum of banks are recapitalized, and a maximalist approach where you try to get ahead of the bad loans in the pipeline and recapitalize all the banks that need it," the official added.