That is a shocking increase for bank stocks to deal with, considering the economy is still in decline. The eurozone itself is experiencing massive economic hurdles, and there appears to be little relief for bank stocks in the near term.
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New York, NY (PRWEB) October 30, 2012
Investment Contrarians, an e-letter of Lombardi Publishing Corporation, a 26-year-old consumer publisher that has served over one million customers in 141 countries, recently warned investors that ongoing weakness within the eurozone is putting continued pressure on bank stocks. One of the biggest concerns, according to the e-letter, is Spain’s banking system.
Spanish bank stocks have seen their bad loans increase as a percentage of total lending for 17 straight months. Bad loans went up 0.72% in 2006, and stood at a massive 10.5% in August.
In a recent article, Senior Editor Sasha Cekerevac notes: “That is a shocking increase for bank stocks to deal with, considering the economy is still in decline. The eurozone itself is experiencing massive economic hurdles, and there appears to be little relief for bank stocks in the near term.”
According to the Investment Contrarians article, CaixaBank SA, Spain’s third-largest bank, said third-quarter profit dropped 42% year-over-year to 7.0 million euros (USD$9.0 million). Its bad loans ratio climbed to 8.42% from 5.58% in June. Banco Popular Espanol SA said that profit fell 23% to 75.6 million euros during the same period. (Source: Benoit, A., “Spain’s Unemployment Reaches Record as Bailout Looms,” Bloomberg October 26, 2012.)
“One of the problems facing the Spanish banks is their under-performing assets. This creates a reduced incentive to increase lending and transactions that are desperately needed to grow an economy,” Cekerevac says.
According to Cekerevac, joblessness in Spain has nearly tripled since 2007. Further, he says, the Bank of Spain recently forecast that the euro region’s fourth-largest economy will continue to slump following a fifth straight quarter of contraction.
The Investment Contrarians editor adds, “Bank stocks are an integral part of any economy, and if they are undercapitalized, this reduces their willingness to lend and help businesses grow. The eurozone has several structural issues, with Spanish banking stocks being especially crucial.”
Cekerevac advises that investors interested in banking stocks focus on regions that have little or no exposure to the eurozone. At some point, he feels that the eurozone crisis will hit bottom; judging by the forecasts that could still be a number of years away. Until then, Cekerevac suggests avoiding Spanish bank stocks and others that are heavily leveraged in the eurozone.
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, and to get their popular Investment Contrarian e-letter sent to you daily, visit http://www.investmentcontrarians.com. Or visit http://www.lombardipublishing.com/customer-service.html.