Banco Popular, a mid-sized Spanish bank, suffered a 21 per cent rise in bad loans in the 12 months to September 2007 - a trend likely to be repeated throughout the banking sector as funding costs rise and the Spanish economy slows, dragged down by a troubled real estate sector.
"We are reducing our exposure to the real estate sector," José María Lucía, Popular's chief executive, said on Wednesday as he reviewed the bank's third-quarter results. "We haven't closed the credit tap for real estate developers, but we are being more prudent and selective in whom we finance," he said. "It is inevitable that bad loans will rise as the economy slows, but we will do everything to maintain loan defaults within reasonable levels," Mr Lucía said.
