* IMF report-40 billion euros needed for Spanish banks
* IMF report-90 billion needed to clean up entire sector
* Other audit due soon to show higher capital needs
* Group of medium-sized banks in focus as bailout looms
* EU officials caution size of rescue still moving target
By Jesús Aguado and Carlos Ruano
MADRID, June 7 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 ($50
billion), sources in the financial sector said on Thursday.
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 banks 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 finalised its estimates.
The IMF report, along with an audit of the Spanish banking
sector conducted by consulting firms Oliver Wyman and Roland
Berger, will help determine the size of a bailout for Spanish
lenders currently being explored in Madrid, Brussels and Berlin
as a way to restore confidence in Spain and the euro zone.
The country's borrowing costs have soared in recent weeks
over concerns it would not be able to prop up banks hit by a
property crash in 2008, and rein in its public finances.
Spain weathered funding pressures in European credit markets
on Thursday and managed to raise money at an affordable if
Despite a rally in stocks, bonds and the euro owing
partly to expectations of action by central banks to revive
economic growth, the euro zone remains under pressure from
investors and global partners to act decisively and quickly to
resolve its debt crisis.
Economy Minister Luis de Guindos said on Wednesday there
were no immediate plans to apply for a bailout and Spain would
await the results of the Wyman-Berger audit, due by the end of
the month, before taking decisions on how to recapitalise the
The review is likely to show a capital shortfall higher than
in the IMF report and require the banks to set aside capital to
cover potential losses on mortgages and loans to businesses.
This would be in line with prudent recapitalisation plans at
nationalised lender Bankia as well as with recent
recommendations from the European Commission in its annual
assessment of the Spanish economy.
Two EU officials said the final bill was still a moving
"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," one 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 recapitalised, and a maximalist approach where you try
to get ahead of the bad loans in the pipeline and recapitalise
all the banks that need it," he added.
With unemployment at more than 24 percent, and the economy
in its second recession in quick succession, there are concerns
that the rate of non-performing loans could rise.
A group of medium-sized banks, such as Unicaja, Banco Mare
Nostrum, Bankinter as well as the merger of Liberbank, Ibercaja
and Caja Tres, are especially in focus as they may not be able
to meet stringent new capital demands.
There are also doubts in the sector about Sabadell
as well as Popular, which said on Wednesday it would
set aside more capital than currently needed to ensure potential
losses on mortgages and loans to businesses are covered.
Senior Spanish officials have insisted in recent days that
the IMF report would show 70 percent of the banking sector is
sound and can cope on its own with the current financial storm
while the government had the capacity to deal with the rest.
Prime Minister Mariano Rajoy said on Saturday that
nationalised lender Bankia, which has requested a
19-billion-euro rescue by the state, represented the bulk of the
remaining 30 percent.
Three smaller lenders, CatalunyaCaixa, NovaGalicia and Banco
de Valencia, have also been rescued by the state but financial
and government sources said they were likely to need less money.